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TABLE OF CONTENTS
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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VIVUS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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VIVUS, INC.
900 E. Hamilton Avenue, Suite 550
Campbell, CA 95008
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on June 5, 2019
TO
OUR STOCKHOLDERS:
NOTICE
IS HEREBY GIVEN that the Annual Meeting of Stockholders of VIVUS, Inc., a Delaware corporation, (sometimes referred to herein as the Company), will be held on Wednesday,
June 5, 2019, at 8:00 a.m., local time, at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153 for the following
purposes:
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1.
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To
elect nine directors to serve until the next annual meeting of stockholders or until their successors are duly elected and qualified.
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2.
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To
approve, on a non-binding advisory basis, the compensation of our named executive officers.
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3.
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To
ratify the appointment of OUM & Co. LLP as our independent registered public accounting firm for the fiscal year ending December 31,
2019.
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4.
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To
approve an amendment to the 2018 Equity Incentive Plan to increase the number of shares of Common Stock reserved for issuance thereunder by 600,000 shares.
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5.
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To
approve an amendment to the 1994 Employee Stock Purchase Plan to increase the number of shares of Common Stock reserved for issuance thereunder by 400,000 shares.
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6.
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To
transact such other business as may properly come before the meeting or any adjournment or postponement thereof.
The
foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. To help conserve resources and reduce printing and distribution costs, we will
be mailing a Notice of Internet Availability of Proxy Materials to our stockholders, with instructions on how to access our Proxy Materials over the Internet, including this Notice, the Proxy
Statement and our 2018 Annual Report. The Notice of Internet Availability of Proxy Materials will also contain instructions on how each of those stockholders can receive a paper copy of our Proxy
Materials. We expect to mail the Notice of Internet Availability of Proxy Materials on or about April 23, 2019. We intend to mail this Notice, the Proxy Statement and our 2018 Annual Report,
together with a Proxy Card, to those stockholders entitled to vote at the Annual Meeting who have properly requested paper copies of such materials, within three business days of such request. Brokers
and other nominees who hold shares on behalf of beneficial owners will be sending their own similar Notice of Internet Availability of Proxy Materials. Only stockholders of record at the close of
business on April 10, 2019 are entitled to notice of and to vote at the Annual Meeting.
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By order of the Board of Directors
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John P. Amos
Chief Executive Officer
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Campbell, California
April 17, 2019
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YOUR VOTE IS IMPORTANT
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT
THE ANNUAL MEETING, YOU ARE URGED TO VOTE BY TELEPHONE, BY THE INTERNET OR IF YOU RECEIVED PER YOUR REQUEST A PRINTED SET OF THE PROXY MATERIALS, BY COMPLETING, SIGNING, DATING AND RETURNING THE
ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. ANY STOCKHOLDER ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF SUCH STOCKHOLDER HAS RETURNED A PROXY. PLEASE NOTE, HOWEVER, THAT
IF YOUR SHARES ARE HELD OF RECORD BY A BANK, BROKER OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN A PROXY ISSUED IN YOUR NAME FROM THAT RECORD HOLDER.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on June 5, 2019.
The Notice
of Annual Meeting of Stockholders, the Proxy Statement and our 2018 Annual Report are available electronically at www.edocumentview.com/VVUS. You are encouraged to access and review all of the
important information contained in the Proxy Materials before voting.
References
throughout the Proxy Materials to the number of shares and per share price of our Common Stock have been adjusted for the 1-for-10 reverse stock split effected on
September 10, 2018.
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VIVUS, INC.
PROXY STATEMENT FOR THE 2019
ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION CONCERNING THE ANNUAL MEETING
The enclosed Proxy is solicited on behalf of the Board of Directors (the "
Board
") of
VIVUS, Inc., a Delaware corporation (the "
Company
"), for use at our Annual Meeting of Stockholders (the "
Annual
Meeting
") to be held on June 5, 2019, at 8:00 a.m. (local time), or at any adjournment or postponement thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153.
We
have elected to provide access to the Notice of Annual Meeting of Stockholders, this Proxy Statement and our 2018 Annual Report (collectively, the "
Proxy
Materials
") over the Internet. Accordingly, we will be mailing a Notice of Internet Availability of Proxy Materials, as applicable, to our stockholders, with instructions on
how to access our Proxy Materials over the Internet. The Notice of Internet Availability of Proxy Materials will also contain instructions on how each of those stockholders can receive a paper copy of
our Proxy Materials. We expect to mail the Notice of Internet Availability of Proxy Materials on or about April 23, 2019. We intend to mail the Proxy Materials, together with a Proxy Card, to
those stockholders entitled to vote at the Annual Meeting who have properly requested paper copies of such materials, within three business days of such request. Brokers and other nominees who hold
shares on behalf of beneficial owners will be sending their own similar Notice of Internet Availability of Proxy Materials.
Our
principal executive office is located at 900 E. Hamilton Avenue, Suite 550, Campbell, CA 95008. Our telephone number is (650) 934-5200. Our website is
www.vivus.com. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, proxy statements and other
information filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "
Exchange Act
"), with
the Securities and Exchange Commission (the "
SEC
"), available, free of charge, on our website as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the SEC.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND
OUR 2019 ANNUAL MEETING OF STOCKHOLDERS
Q: Why am I receiving these materials?
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A:
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The
Board is providing these Proxy Materials to you in connection with our Annual Meeting, which will take place on June 5, 2019. As a stockholder of record or
beneficial holder as of the close of business on April 10, 2019 (the "
Record Date
"), you are invited to attend the Annual Meeting and are
entitled to, and requested to, vote your shares on the proposals described in this Proxy Statement.
Q: What information is contained in these materials?
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A:
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The
information included in this Proxy Statement relates to the proposals to be voted on at the Annual Meeting, the voting process, the compensation of our named
executive officers and our directors, and certain other required information. The Proxy Materials include our 2018 Annual Report, which includes our audited consolidated financial statements.
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Q: What proposals will be voted on at the Annual Meeting?
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A:
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There
will be five proposals presented to the stockholders for consideration at the Annual Meeting:
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the election to the Board of nine director nominees (Proposal No. 1);
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the approval of a non-binding advisory resolution on the compensation of our named executive officers (Proposal No. 2);
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the ratification of the appointment of OUM & Co. LLP ("
OUM
") as the
independent registered public accounting firm of the Company for the fiscal year ending December 31, 2019 (Proposal No. 3);
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the approval of an amendment to the 2018 Equity Incentive Plan to increase the number of shares of Common Stock reserved for issuance
thereunder by 600,000 shares (Proposal No. 4); and
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the approval of an amendment to the 1994 Employee Stock Purchase Plan to increase the number of shares of Common Stock reserved for issuance
thereunder by 400,000 shares (Proposal No. 5).
Q: How does the Board recommend I vote on these proposals?
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A:
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Our
Board recommends that you vote your shares:
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"
FOR
" all nine of the Board's director nominees named in this Proxy Statement (Proposal
No. 1);
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"
FOR
" the proposal regarding the non-binding advisory approval of the compensation of our named
executive officers (Proposal No. 2);
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"
FOR
" the ratification of the appointment of OUM as our independent registered public
accounting firm (Proposal No. 3);
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"
FOR
" the approval of an amendment to the 2018 Equity Incentive Plan to increase the number of
shares of Common Stock reserved for issuance thereunder by 600,000 shares (Proposal No. 4); and
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"
FOR
" the approval of an amendment to the 1994 Employee Stock Purchase Plan to increase the
number of shares of Common Stock reserved for issuance thereunder by 400,000 shares (Proposal No. 5).
Q: Who is entitled to vote?
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A:
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Stockholders
of record at the close of business on April 10, 2019, the Record Date, are entitled to notice of and to vote at the Annual Meeting.
Q: How many shares can vote?
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A:
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At
the Record Date, approximately 10,637,164 shares of our Common Stock were issued and outstanding and held of record by approximately 2,350 stockholders. At the
Record Date, we did not have any shares of Preferred Stock outstanding.
Q: What shares can I vote?
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A:
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You
may vote all of the VIVUS shares owned by you as of the close of business on the Record Date. Each stockholder is entitled to one vote for each share held as of
the Record Date on all
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matters
presented at the Annual Meeting. Stockholders will not be entitled to cumulate their votes in the election of directors.
A
list of stockholders entitled to vote at the Annual Meeting will be available during ordinary business hours at 900 E. Hamilton Avenue, Suite 550, Campbell, CA 95008 for a period of at least
10 days prior to the Annual Meeting.
Q: What is the difference between a "beneficial holder" and a "stockholder of record"?
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A:
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Whether
you are a "beneficial holder" or a "stockholder of record" with respect to your shares depends on how you hold your shares:
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Beneficial Holders:
Most
stockholders hold their shares through a broker, bank or other nominee (that is, in "street name") rather than directly in their own names. If you hold shares in street name, you are a "beneficial
holder" of those shares, and the Notice of Internet Availability of Proxy Materials or a printed set of the Proxy Materials, as applicable, will be forwarded to you by your broker, bank or other
nominee. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your
broker or other agent regarding how to vote the shares in your account.
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-
Stockholders of Record:
If you
hold shares directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the "stockholder of record" with respect to those shares, and the Notice of Internet
Availability of Proxy Materials or a printed set of the Proxy Materials, as applicable, will be sent directly to you by us.
Q: Can I attend the Annual Meeting? What do I need for admission?
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A:
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You
are entitled to attend the Annual Meeting if you were a stockholder of record or a beneficial holder as of the close of business on the Record Date, or if you
hold a valid legal proxy for the Annual Meeting.
If you are a stockholder of record, your name will be verified against the list of stockholders of record prior to your being admitted to the Annual Meeting. You should be
prepared to present government-issued photo identification for admission. If you are a beneficial holder, you will need to provide proof of beneficial ownership on the Record Date, such as a brokerage
account statement showing that you owned our stock as of the Record Date, a copy of the Voting Instruction Form provided by your broker, bank or other nominee, a legal proxy or other similar evidence
of ownership as of the Record Date, as well as your government-issued photo identification, for admission.
If you do not provide proper photo identification or comply with the
other procedures outlined above upon request, you may not be admitted to the Annual Meeting.
You
may obtain directions to the Annual Meeting by contacting our Corporate Secretary via email at corporatesecretary@vivus.com, via telephone at 650-934-5200, via fax at 650-934-5389 or via mail to
VIVUS, Inc., 900 E. Hamilton Avenue, Suite 550, Campbell, CA 95008, Attention: Corporate Secretary.
Q: How can I vote my shares in person at the Annual Meeting?
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A:
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If
you are a stockholder of record, you have the right to vote your shares in person at the Annual Meeting. If you choose to do so, you can vote using the ballot
provided at the meeting or by submitting at the meeting the Proxy Card enclosed with the Proxy Materials you received. If you are a beneficial holder of our shares, and therefore not the stockholder
of record, you may not vote those shares in person at the Annual Meeting unless you obtain a "legal proxy" from the
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broker,
bank or other nominee that holds your shares, giving you the right to vote the shares at the meeting using the ballot provided at the meeting.
Even if you plan to attend the Annual Meeting, we recommend that you vote your shares in advance as described in the answer to the question immediately below so that your vote
will be counted if you later decide not to attend the Annual Meeting.
-
Q:
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If I am a stockholder of record on the Record Date, how can I vote my shares without attending the Annual
Meeting?
-
A:
-
Even
if you plan to attend the Annual Meeting, we recommend that you vote in advance of the Annual Meeting. You may vote in advance of the Annual Meeting by any of
the following methods:
-
-
Vote by Mail.
If you are a stockholder of record (that is, if you hold our shares
in your own name) and requested a paper set of the Proxy Materials, you may vote by completing, signing and dating the Proxy Card where indicated and by mailing or otherwise returning the Proxy Card
in the envelope provided to you. You should sign your name exactly as it appears on the Proxy Card. If you are signing in a representative capacity (for example, as a guardian, executor, trustee,
custodian, attorney or officer of a corporation), indicate your name and title or capacity. The Proxy Card should be returned in the envelope provided to you and
should be
received by the Company before Wednesday, June 5, 2019.
-
-
Vote by Internet or Telephone.
If you are a stockholder of record (that is, if you
hold your shares in your own name), you may vote by the Internet by logging on to the website listed on the Notice of Internet Availability of Proxy Materials or the Proxy Card, entering your control
number located on the Notice of Internet Availability of Proxy Materials or the Proxy Card and voting by following the on-screen prompts. You may also vote by telephone by calling the toll-free
touchtone voting number listed on the Notice of Internet Availability of Proxy Materials or the Proxy Card, entering your control number located on the Notice of Internet Availability of Proxy
Materials or the Proxy Card and following the touchtone prompts. If you vote by the Internet or by telephone, you do not need to return your Proxy Card to the Company.
Internet
and telephone voting facilities will close at 11:59 p.m. (Eastern Time) on Tuesday, June 4, 2019 for the voting of shares held by stockholders of record.
Your vote is important and we strongly encourage you to vote your shares by following the instructions provided on the Notice of Internet Availability of Proxy Materials or the
Proxy Card. Please vote promptly.
Q: If my shares are registered in the name of a broker or other agent on the Record Date, how can I vote my shares without attending the Annual Meeting?
-
A:
-
As
a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. If you requested a paper set of the
Proxy Materials, you should have received a Voting Instruction Form with these Proxy Materials from that organization rather than from us. Simply complete and mail the Voting Instruction Form to
ensure that your vote is counted. Alternatively, you may vote by telephone or over the Internet as instructed by your broker or bank, if applicable. To vote in person at the Annual Meeting, you must
obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker or bank included with these Proxy Materials, or contact your broker or bank to request a proxy
form.
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Q: What does it mean if I receive more than one Notice of Internet Availability of Proxy Materials, Proxy Card or Voting Instruction Form?
-
A:
-
If
you received more than one Notice of Internet Availability of Proxy Materials, Proxy Card or Voting Instruction Form, your shares are registered in more than one
name or are registered in different accounts. Please follow the voting instructions included with
each
Notice of Internet Availability of Proxy
Materials, Proxy Card and Voting Instruction Form to ensure that all of your shares are voted.
Q: How will my shares be voted if I do not provide specific voting instructions in the Proxy Card or Voting Instruction Form that I submit?
-
A:
-
If
you, as the stockholder of record, submit a Proxy Card without giving specific voting instructions on one or more matters listed in the Notice of Annual Meeting of
Stockholders, then John P. Amos and John L. Slebir, the proxy holders designated by our Board (the "
Proxy Holders
"), who are executive officers of our
Company, will vote your shares "
FOR
" the election of each of the director nominees in Proposal 1, "
FOR
"
the advisory approval of our named executive officers' compensation, "
FOR
" the ratification of the selection of OUM as our independent registered public
accounting firm for fiscal year 2019, "
FOR
" the approval of an amendment to the 2018 Equity Incentive Plan to increase the number of shares of Common
Stock reserved for issuance thereunder by 600,000 shares and "
FOR
" the approval of an amendment to the 1994 Employee Stock Purchase Plan to increase the
number of shares of Common Stock reserved for issuance thereunder by 400,000 shares, all as recommended by our Board on such matters.
If
you, as the beneficial owner, mail in your Voting Instruction Form, but do not provide voting instructions, the broker or nominee may vote the shares with respect to matters that are considered to
be "routine," but may not vote the shares with respect to "non-routine" matters. See "What effect do withheld votes, abstentions and broker non-votes have on the proposals?" below for more information
concerning the effect of withheld votes, abstentions and broker non-votes.
Q: Can I change my vote or revoke my Proxy?
-
A:
-
You
may change your vote or revoke your Proxy at any time before your Proxy is voted at the Annual Meeting.
-
-
If you are a stockholder of record, you may change your vote or revoke your Proxy by: (1) delivering to VIVUS, Inc., 900 E.
Hamilton Avenue, Suite 550, Campbell, CA 95008, Attention: Corporate Secretary, a written notice of revocation of your Proxy; (2) submitting an authorized Proxy bearing a later date
using one of the alternatives described above under "If I am a stockholder of record on the Record Date, how can I vote my shares without attending the Annual Meeting?"; or (3) attending the
Annual Meeting and voting in person. Attendance at the meeting in and of itself, without voting in person at the meeting, will not cause your previously granted Proxy to be revoked.
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-
If you are a beneficial holder, you may change your vote by submitting new voting instructions to your broker, bank or other nominee or, if you
have obtained a legal proxy from your broker, bank or other nominee giving you the right to vote your shares at the Annual Meeting, by attending the meeting and voting in person.
-
-
Please
note that the submission of a later dated Proxy Card or Voting Instruction Form will revoke any Proxy or voting instructions you may have
previously submitted by telephone, over the Internet or by mail.
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Q: How many shares must be present or represented to conduct business at the Annual Meeting?
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A:
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Holders
of a majority of the outstanding shares entitled to vote must be present, in person or by Proxy, at the Annual Meeting in order to have the required quorum
for the transaction of business. Votes cast by Proxy or in person at the Annual Meeting will be tabulated by the Inspector of Election, who will be a representative of Computershare Trust Company,
N.A., to determine whether or not a quorum is present. Both abstentions and broker non-votes are counted for the purpose of determining the presence of a quorum. See "What effect do withheld votes,
abstentions and broker non-votes have on the proposals?" below for more information concerning the effect of withheld votes, abstentions and broker non-votes.
Q: What if a quorum is not present at the Annual Meeting?
-
A:
-
If
the shares present, in person and by Proxy, at the Annual Meeting do not constitute the required quorum, the Annual Meeting may be adjourned to a subsequent date
for the purpose of obtaining a quorum. If a quorum is initially present, the stockholders may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum.
Q: What vote is required to approve each of the proposals?
-
A:
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Election of Directors
. Directors are elected by a plurality of the votes cast at the Annual Meeting
(Proposal No. 1), meaning that the nine nominees receiving the most votes will be elected. Only votes cast "
FOR
" a nominee will be counted.
-
-
Other Proposals.
The proposals regarding the non-binding advisory approval of the
compensation of our named executive officers (Proposal No. 2), the ratification of the appointment of OUM as our independent registered public accounting firm (Proposal No. 3), the
approval of an amendment to the 2018 Equity Incentive Plan to increase the number of shares of Common Stock reserved for issuance thereunder by 600,000 shares (Proposal No. 4) and the approval
of an amendment to the 1994 Employee Stock Purchase Plan to increase the number of shares of Common Stock reserved for issuance thereunder by 400,000 shares (Proposal No. 5) each requires the
affirmative vote of a majority of the shares present in person or represented by Proxy and entitled to vote on that proposal. Please note, however, that the proposals regarding the non-binding
advisory approval of the compensation of our named executive officers and the ratification of the appointment of OUM are advisory only and will not be binding on the Company, the Board or any
committee of the Board. The results of the votes on these two advisory proposals will be taken into consideration by the Company, the Board or the appropriate committee of the Board, as applicable,
when making future decisions regarding these matters.
Q: What effect do withheld votes, abstentions and broker non-votes have on the proposals?
-
A:
-
Withheld Votes
. The nine nominees receiving the most
"
FOR
" votes will be elected as directors. Withheld votes will be counted as present and entitled to vote for purposes of determining the presence of a
quorum at the Annual Meeting, but will not be counted in determining the outcome of the election of directors.
-
-
Abstentions.
Pursuant to Delaware law, abstentions are counted for purposes of determining
both (i) the presence or absence of a quorum for the transaction of business and (ii) the total number of votes cast with respect to a proposal, other than the election of directors. We
intend to treat abstentions in this manner. For all proposals other than the election of directors (Proposal No. 1), abstentions will have the same effect as a vote against the proposal.
Abstentions will be counted as present and entitled to vote for purposes of determining the presence of a quorum at the Annual Meeting.
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Broker Non-Votes.
A broker is entitled to vote shares held for a beneficial holder on
routine matters, such as the ratification of the appointment of OUM as the Company's independent registered public accounting firm for fiscal year 2019 (Proposal No. 3), without instructions
from the beneficial holder of those shares. On the other hand, a broker is not entitled to vote shares held for a beneficial holder on certain non-routine items, such as the election of directors
(Proposal No. 1), the non-binding advisory approval of the compensation of our named executive officers (Proposal No. 2), the approval of an amendment to the 2018 Equity Incentive Plan
to increase the number of shares of Common Stock reserved for issuance thereunder by 600,000 shares (Proposal No. 4) or the approval of an amendment to the 1994 Employee Stock Purchase Plan to
increase the number of shares of Common Stock reserved for issuance thereunder by 400,000 shares (Proposal No. 5).
If you are a beneficial holder and want your vote to
count on these non-routine proposals, it is critical that you instruct your broker how to vote your shares on these non-routine proposals.
Consequently, if you do not submit
any voting instructions to your broker, your broker may exercise its discretion to vote your shares only on the proposal to ratify the appointment of OUM as our independent registered public
accounting firm for fiscal 2019 (Proposal No. 3); your shares will constitute "broker non-votes" on each of the non-routine items; and your shares will not be counted in determining the number
of shares necessary for approval of the non-routine items, although they will be counted for purposes of determining whether a quorum exists.
Q: What happens if additional matters are presented at the Annual Meeting?
-
A:
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If
you grant a proxy, the Proxy Holders will have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting.
Other
than matters and proposals described in this Proxy Statement, we have not received valid notice of any other business to be acted upon at the Annual Meeting.
Q: Who will count the votes?
-
A:
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The
Inspector of Election appointed for the Annual Meeting, who will be a representative of Computershare Trust Company, N.A., will separately tabulate the votes, as
well as any abstentions and broker non-votes.
Q: Where can I find the voting results of the Annual Meeting?
-
A:
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We
will report voting results by filing a Current Report on Form 8-K within three business days following the date of the Annual Meeting. If final voting
results are not known when such report is filed, they will be announced in an amendment to such report within four business days after the final results become known.
Q: Who will bear the cost of soliciting votes for the Annual Meeting?
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A:
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Our
Board is soliciting Proxies for the Annual Meeting from our stockholders. We will bear the entire cost of soliciting Proxies, including the preparation, assembly,
printing, and mailing of the Proxy Materials, and any additional solicitation material furnished to our stockholders. Copies of solicitation materials will be furnished to brokerage houses,
fiduciaries and custodians holding shares in their names that are beneficially owned by others so that they may forward the solicitation materials to such beneficial owners, and we expect to reimburse
the corresponding forwarding expenses. We have retained the services of Georgeson LLC to solicit Proxies, for which we estimate that we will pay a fee not to exceed $15,000, plus reimbursement
for out-of-pocket expenses. Proxies may also be solicited by certain of our directors, officers and regular employees, without additional compensation, by mail, facsimile, telephone, telegraph,
Internet, in person and by advertisement.
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Q: Are Proxy Materials for the 2019 Annual Meeting available electronically?
-
A:
-
Yes.
This Proxy Statement and our Annual Report on Form 10-K for fiscal year 2018 are available electronically at www.edocumentview.com/VVUS.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
Overview of Election of Directors
Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, as further amended, currently state that the number of
directors that shall constitute the Board will be determined from time to time by resolution of the Board, but in no event shall the number be less than three. The Board has currently set the number
of directors on the Board at nine. On the recommendation of our Nominating and Governance Committee, the Board has nominated the following nine directors: John P. Amos, Karen Ferrell, Edward A.
Kangas, Thomas B. King, David Y. Norton, Jorge Plutzky, M.D., Eric W. Roberts, Herman Rosenman, and Allan L. Shaw for election as directors. All nine of the nominees are currently
members of the Board.
Unless
otherwise instructed, the Proxy Holders will vote the Proxies received by them for the nine nominees named above. In the event that any of our nominees is unable or declines to
serve as a director at the time of the Annual Meeting, the persons named in this Proxy reserve the right, in their discretion, to vote for a substitute nominee designated by the Board. It is not
expected that any of the nominees will be unable or will decline to serve as a director. In the event that additional persons are nominated for election as directors, the Proxy Holders intend to vote
all Proxies received by them in such a manner as will assure the election of as many of the nominees listed below as possible.
All
directors will hold office until the next annual meeting of stockholders or until their successors have been elected and qualified. There are no family relationships between any of
our directors or executive officers.
Background to the Board's Recommendation in Favor of Our Nominees
We believe that each of our nine nominees has professional experience in areas relevant to our strategy and operations and offers experience,
leadership and continuity at a critical time for our future. We also believe that our nominees have other attributes necessary to create an effective board of directors: high personal and professional
ethics, integrity and values; vision and strategic perspective; experience with regulatory and government processes; practical judgment and excellent decision-making skills; the ability to devote the
necessary time to serve on our Board and its committees and to work in a collaborative manner with other Board members; and a commitment to representing the interests of all our stockholders.
In
addition, our seven independent directors, who comprise the majority of our Board, bring valuable experience and leadership in critical areas. Our independent directors serve
significant roles on our Board committees. In light of their complementary experience, relevant expertise and diverse industry and educational backgrounds, these nominees provide the Board with the
executive leadership necessary to lead us into the future.
More
information regarding our Board nominees is set forth below.
Required Vote
Directors are elected by a plurality of votes cast at the election. This means that the nine nominees who receive the highest number of votes
will be selected as directors. Brokers do not have discretionary authority to vote shares on this proposal without direction from the beneficial owner.
8
Table of Contents
Therefore,
broker non-votes will have no effect on the vote. You may not vote your shares cumulatively in the election of directors.
Board Recommendation
OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ALL OF THE BOARD'S NINE NOMINEES FOR DIRECTOR ON THE ENCLOSED PROXY CARD OR VOTING INSTRUCTION
FORM.
Biographical Information for Nominees
The nominees, and certain information about them as of April 1, 2019, are set forth below.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position Held with the Company
|
|
First
Became a
Director
|
John P. Amos
|
|
52
|
|
Chief Executive Officer and Director
|
|
2018
|
Karen Ferrell(1)
|
|
61
|
|
Director
|
|
2018
|
Edward A. Kangas(2)
|
|
74
|
|
Director
|
|
2018
|
Thomas B. King(1)(3)(4)
|
|
64
|
|
Director
|
|
2017
|
David Y. Norton(1)(2)(3)(4)
|
|
67
|
|
Chairman of the Board of Directors and Director
|
|
2013
|
Jorge Plutzky, M.D.(4)
|
|
60
|
|
Director
|
|
2013
|
Eric W. Roberts(3)(4)
|
|
55
|
|
Director
|
|
2015
|
Herman Rosenman(1)(2)(4)
|
|
71
|
|
Director
|
|
2013
|
Allan L. Shaw(4)
|
|
55
|
|
Director
|
|
2015
|
-
(1)
-
Member
of the Audit Committee of the Board
-
(2)
-
Member
of the Compensation Committee of the Board
-
(3)
-
Member
of the Nominating and Governance Committee of the Board
-
(4)
-
Member
of the Corporate Development Committee of the Board
John P. Amos
has served as the Chief Executive Officer and as a director of the Company since April 30, 2018. Mr. Amos
served as the Executive Chairman of Willow Biopharma Inc., a biopharmaceutical company, from May 2017 to April 2018 when it was acquired by us. He served as the Chief Executive Officer of ORIX
Healthcare Capital LLC, a private equity and venture capital investment company, from October 2012 to April 2017. Mr. Amos served as the Operating Partner and Portfolio Company Board
Member of BioVeda China Fund, a financial investment company, from February 2008 to October 2012. He served as the Chief Executive Officer and President of the Oncology Therapeutics Network (acquired
by McKesson Corporation in November 2007), a physician services company, from June 2005 to November 2007 and was a special advisor to McKesson Corporation, a public healthcare services company, from
November 2007 to May 2008. Mr. Amos served as the President of Oncology Therapeutics Network of Bristol Myers Squibb, a publicly traded biopharmaceutical company, from June 2003 to May 2005. He
held executive roles in finance and technology in McKesson Corporation from March 1995 to April 2003. From 1991 to 2003, he served in the United States Air Force and the California Air National Guard
in Tactical Fighter Operations. Mr. Amos has previously served on the board of directors of TD2, Navigating Cancer, CITIC Pharmaceuticals, Aesyntix Health, Prodigy Health, Apollo Health Street,
Quinian Health, Oncology Therapeutics Network and Matawan Pharmaceuticals. Mr. Amos served as a member of the Scientific Advisory Board at MD Anderson Cancer Center Institute for Applied Cancer
Science (IACS) and was
a health policy advisor to Governor Jeb Bush's 2016 Presidential Campaign. He has been appointed as a Trustee of the Global Leadership Council of the University of California, Davis Foundation.
9
Table of Contents
Mr. Amos
has been named to the Information Week Top 500 CIO's twice and won the Frost and Sullivan Award for Corporate Innovation. He studied Economics at the University of California, Davis
and has a B.S. in General Business from the University of the State of New York.
Mr. Amos'
prior extensive executive level experience and his experience serving on several boards of directors brings essential experience to the Board needed for strategic
planning, product development and commercialization and operations.
Karen Ferrell
has served as a director of the Company since October 26, 2018. Ms. Ferrell has served as the Executive
Chairman and Chief Executive Officer of Glenridge HealthCare Solutions, a national tech-enabled network solutions company, since December 2015. From November 2014 to November 2015, Ms. Ferrell
served as an independent healthcare consultant and advisor. She served as Chief Executive Officer of Zest Health, a digital consumer healthcare company, from September 2013 to October 2014.
Ms. Ferrell served as President and Chief Executive Officer of Apollo Health Street, a healthcare solutions company, from May 2010 to March 2013. An involuntary bankruptcy petition was filed
against Apollo Health Street in 2012; the petition was determined to be filed without merit and was subsequently dismissed. She served as Senior Vice President of Provider Contracting and Medical
Management of CIGNA Healthcare, a worldwide health services organization, from November 2003 to March 2009. Ms. Ferrell served as a Senior Manager at Deloitte Consulting, a global consulting
firm, from February 2000 to November 2003. Prior to this, Ms. Ferrell held leadership positions including President of Aetna Healthplans of Florida, Executive Director at Scripps Health and
Vice President of Provider Contracting at Prudential HealthCare. Ms. Ferrell also serves as a director of Alacura, a medical transportation benefit management company, Advantum, a healthcare
solutions company, and Glenridge HealthCare Solutions. Ms. Ferrell received an M.B.A. from Pepperdine University.
Ms. Ferrell's
qualifications as a director include her senior executive level healthcare services experience and her experience serving on several boards of directors.
Edward A. Kangas
has served as a director of the Company since October 26, 2018. Mr. Kangas served as Global Chairman and
Chief Executive Officer of Deloitte, an international public accounting and consulting firm, from 1989 until his retirement in 2000. He also served as the Managing Partner of Deloitte & Touche
(USA) from 1989 to 1994. He was elected Managing Partner and Chief Executive Officer of Touche Ross in 1985, a position he held through 1989. Mr. Kangas began his career as a staff accountant
at Touche Ross in 1967, where he became a Partner in 1975. Since 2003, he has served as a director of Hovnanian Enterprises, Inc., a publicly traded real estate company, and Tenet Healthcare
Corporation, a publicly traded healthcare services company. Since 2013, he has served as a director of Intelsat S.A., a satellite service provider and a foreign private issuer with the
Securities and Exchange Commission. He has served as Chairman of the Board of Deutsche Bank USA Corp., a privately held subsidiary of Deutsche Bank AG, since 2016. He formerly served as a director of
Electronic Data Systems (2004 to 2009), Allscripts Healthcare Solutions, Inc. (2009 to 2011), Eclipsys Corporation (2005 to 2009), Intuit Inc. (2007 to 2016) and United Technologies
Corporation (2009 to 2018). In addition, he is a past Chairman of the Board of the National Multiple Sclerosis Society. He is also a member of Beta Gamma Sigma Directors' Table and a life trustee of
the board of trustees of the Kansas University Endowment Association. In 2010, Mr. Kangas was named by the National Association of Corporate Directors (NACD) to its Directors Hall of Fame.
Mr. Kangas received a B.A. in business administration and an M.B.A. from the University of Kansas. Mr. Kangas is a Certified Public Accountant.
Mr. Kangas'
qualifications as a director include his extensive leadership experience, including as Chairman and Chief Executive Officer of an international public accounting and
consulting firm, and his experience serving on several boards of directors.
Thomas B. King
has served as a director of the Company since May 24, 2017. Mr. King served as the interim Chief Executive
Officer of the Company from December 31, 2017 to April 30, 2018 and as
10
Table of Contents
interim
President of the Company from April 30, 2018 to May 30, 2018. He has served as an independent biotechnology consultant and advisor since August 2016. Previously, Mr. King
served as President, Chief Executive Officer and a member of the board of directors of Alexza Pharmaceuticals, Inc., a publicly traded pharmaceutical company, from June 2003 to August 2016.
From October 2015 to August 2016, Mr. King also served as Chief Financial Officer and Chief Accounting Officer of Alexza Pharmaceuticals, Inc. From September 2002 to April 2003,
Mr. King served as President, Chief Executive Officer and a member of the board of directors of Cognetix, Inc., a privately held biopharmaceutical development stage company. From January
1994 to February 2001, Mr. King held various senior executive positions at Anesta Corporation, a publicly traded pharmaceutical company, including President and Chief Operating Officer from
January 1995 to January 1997 and President and Chief Executive Officer from January 1997 to October 2000, and was a member of the board of directors from January 1995 until it was acquired by
Cephalon, Inc., a publicly traded biopharmaceutical company. Mr. King currently serves on the board of directors of Concentric Analgesics, Inc., Faraday
Pharmaceuticals, Inc. and Satsuma Pharmaceuticals, Inc., all privately held biotechnology companies. Mr. King also serves as a mentor at SPIRE Bioventures, a multi-disciplinary
international consortium aiding biotechnology entrepreneurs, and as an Advisory Board Member of the University of Colorado BioFrontiers Institute. Mr. King received a B.A. in chemistry from
McPherson College and an M.B.A. from the University of Kansas Graduate School of Business.
Mr. King's
qualifications as a director include his extensive leadership experience in the pharmaceutical and biopharmaceutical industry, including experience with small and large
development stage pharmaceutical companies, and his experience serving on several boards of directors of both public and private companies.
David Y. Norton
has served as a director of the Company since July 19, 2013 and as Chairman of the Board of Directors since
September 12, 2014. From February 2012 until July 2012, Mr. Norton served as Interim CEO of Savient Pharmaceuticals Inc., a pharmaceutical company that filed for Chapter 11
bankruptcy in October 2013. Until his retirement in September 2011, Mr. Norton was Company Group Chairman, Global Pharmaceuticals for Johnson & Johnson, a public healthcare company. In
this position he was responsible for leading and developing the strategic growth agenda, including the strategy for licensing, acquisitions and divestments, and ensuring alignment with its global
strategic functions, research and development and commercial organizations. Mr. Norton began his Johnson & Johnson career in 1979, and held a number of positions at the company,
including Company Group Chairman, Worldwide Commercial and Operations for the CNS, Internal Medicine franchise from 2006 to 2009, Company Group Chairman for the pharmaceutical businesses in Europe,
the Middle East and Africa from 2004 to 2006, and Company Group Chairman for the pharmaceutical businesses in North America from 2003 to 2004. He also serves as a director of the Global Alliance for
TB Drug Development, a non-profit organization dedicated to the discovery and development of new, faster-acting and affordable tuberculosis medicines, and as a director of Mallinckrodt plc, a
specialty pharmaceutical company. Mr. Norton previously served as a director of INC Research Holdings, Inc., a public global contract research organization, from February 2015 to August
2017 and as Chairman of the Board from May 2016 to August 2017. He also previously served as a director of Savient Pharmaceuticals Inc. from October 2011 until December 2013, a Senior Advisor
to Tapestry Networks, a member of the board of directors of the Alliance for Aging Research, a member of the board of directors of the Pharmaceutical Research and Manufacturers of America, a committee
member of the Australian Pharmaceutical Manufacturers Association, and a member and previous Chairman of the board of directors of the American Foundation for Suicide Prevention. Mr. Norton is
a graduate of Control Data Institute, Australia and the College of Distributive Trades, United Kingdom.
Mr. Norton's
qualifications as a director include his extensive global commercial experience at the executive level in the pharmaceutical and biotechnology industry and his
experience serving on several boards of directors, including as Chairman of the board of a public pharmaceutical company.
11
Table of Contents
Jorge Plutzky, M.D.
has served as a director of the Company since May 9, 2013. Since 1996, Dr. Plutzky has served as the
Director of The Vascular Disease Prevention Program, which includes the Lipid/Prevention Clinic, in the Cardiovascular Medicine Division at Brigham and Women's Hospital, where he is also Director of
Preventive Cardiology. Since 1995, he has been on the faculty at Harvard Medical School and has directed a basic science laboratory focused on transcriptional mechanisms involved in adipogenesis,
lipid metabolism, and diabetes, and their relationship to inflammation and atherosclerosis. Throughout his career, Dr. Plutzky has also been involved in translational clinical studies
investigating links between metabolic disorders and cardiovascular disease. Dr. Plutzky has been a member of the scientific advisory boards of the Sarnoff Cardiovascular Research Foundation
since 2009 and Ember Therapeutics since 2012. Dr. Plutzky has been elected to the American Society for Clinical Investigation and is a Fellow of the American College of Cardiology.
Dr. Plutzky's papers have appeared in journals that include
Science
,
PNAS
,
Diabetes
,
Lancet, Annals of Internal Medicine
, and
Nature
Medicine
. Dr. Plutzky has been involved with the U.S. Food and Drug Administration, serving both as a member of the Endocrinologic and Metabolic Drugs Advisory Committee
and in advising and presenting for new drug application sponsors. He has been involved with both the American Heart Association and the American Diabetes Association. Dr. Plutzky has been
recognized with the Eugene Braunwald Teaching Award, the University of Cologne's Klenk Lecture, Vanderbilt University's Rabin Lecture, Northwestern University's DeStevens Lecture and Harvard Medical
School's Tucker Collins Lecture. Dr. Plutzky served on the board of directors of Novelion Therapeutics Inc. (which acquired Aegerion Pharmaceuticals, Inc.), a publicly traded
biopharmaceutical company, from April 2015 to August 2017. Dr. Plutzky holds a B.A. from the University of Virginia, where he was an Echols Scholar and a member of Phi Beta Kappa, and an M.D.
from the University of North Carolina, Chapel Hill. He completed research fellowships at the National Institutes of Health and the Massachusetts Institute of Technology.
Dr. Plutzky's
clinical background, medical knowledge, and science expertise in the prevention and treatment of cardiometabolic disease brings valuable and unique insight to the
Board as evaluation, development and commercialization of our current and potential future products proceed.
Eric W. Roberts
has served as a director of the Company since September 15, 2015. Since January 2012, Mr. Roberts has been a
founding Managing Director of Valence Life Sciences, LLC, a life sciences venture capital firm. From 2004 to 2012, Mr. Roberts was a founding Managing Director of Caxton Advantage
Venture Partners, an investment firm. From 1986 to 2004, Mr. Roberts served in a variety of roles as an investment banker, including as Managing Director, Partner and Founder of the Life
Sciences Department at Dillon, Read & Co. Inc., an investment bank which merged to become UBS AG, and Managing Director and Co-Head of the Global Healthcare Investment Banking
Group at Lehman Brothers, a former global services financial firm. Mr. Roberts currently serves on the board of directors of Invuity, Inc., a publicly traded medical technology company.
He also served on the board of directors of Gemin X Pharmaceuticals, Inc., a biotechnology company, from 2007 through its sale to Cephalon, Inc. (now Teva Pharmaceutical
Industries Ltd.) in 2011. Mr. Roberts holds a B.S. in economics from the Wharton School of the University of Pennsylvania.
Mr. Roberts'
qualifications as a director include his extensive experience as an investment banker and venture capitalist in the healthcare industry and his broad healthcare
industry knowledge.
Herman Rosenman
has served as a director of the Company since July 19, 2013. Mr. Rosenman was Chief Financial Officer of
Natera, Inc., a publicly traded diagnostics company, from February 2014 to January 2017. Prior to this, Mr. Rosenman was Senior Vice President, Finance and Chief Financial Officer of
Gen-Probe, Inc. (currently, Hologic, Inc.), a molecular diagnostic company, from June 2001 to October 2012. Prior to joining Gen-Probe in 2001, Mr. Rosenman was President and
Chief Executive Officer of Ultra Acquisition Corp., a retail chain and consumer products manufacturer, from 1997 to 2000. In addition, he served as President and Chief Executive Officer of RadNet
Management, Inc., a large healthcare provider, from 1994 to 1997, and as Executive Vice President and Chief Financial
12
Table of Contents
Officer
for Rexene Corp., a Fortune 1000 company in the petrochemicals industry. Mr. Rosenman was previously a partner at Coopers & Lybrand (currently,
PricewaterhouseCoopers LLP), where he served numerous Fortune 1,000 clients, principally in the pharmaceuticals and telecommunications industries. Mr. Rosenman currently serves on the
board of directors of Natera, Inc., Oxford Immunotec Global PLC, a publicly traded diagnostics company, and DermTech, Inc., a privately held genomics company. Mr. Rosenman
also served on the board of directors of Discovery Partners International, Inc., from 2003 until its reverse-merger into Infinity Pharmaceuticals, Inc. in 2006, and thereafter Infinity
Pharmaceuticals, Inc., where he served until 2007, as well as on the boards of directors of ARYx Therapeutics, Inc., from which he resigned in 2011, Emphasys Medical, Inc. and
Medistem, Inc. (acquired by Intrexon Corp.). Mr. Rosenman received a B.B.A. in finance and accounting from Pace University and an M.B.A. in finance from the Wharton School of the
University of Pennsylvania.
Mr. Rosenman's
qualifications as a director include his experience in the biotechnology and pharmaceuticals industries, his extensive leadership experience as both a Chief
Executive Officer and a Chief Financial Officer, his diverse industry background in companies ranging from large multinational corporations to start-ups, and his broad base of expertise with initial
public offerings, mergers & acquisitions, turn-arounds and high growth companies.
Allan L. Shaw
has served as a director of the Company since September 15, 2015. Mr. Shaw served as a consultant to the
Company from February 1, 2018 to June 30, 2018. Since March 2017, he has served as an advisor and consulting Chief Financial Officer to a portfolio of biopharmaceutical companies. From
January 2016 to February 2017, Mr. Shaw was the Chief Financial Officer and Treasurer of Syndax Pharmaceuticals, Inc., a publicly traded clinical stage biopharmaceutical company.
Mr. Shaw was Managing Director of Alvarez & Marsal LLC, a global professional services firm, and led their biopharmaceutical consulting practice, from December 2011 to March 2015,
and supported the firm on an ad hoc basis from March 2015 to October 2015. From 2009 to 2011, he served as the Chief Financial Officer of NewLead Holdings LTD., a publicly traded global
shipping company. From 2005 to 2009, he was the founder and Senior Managing Director of Shaw Strategic Capital LLC, an international financial advisory firm, focused on providing strategic
financial counsel on a wide variety of issues such as general corporate finance, mergers and acquisitions, capital structuring, licensing and capital markets. From 2002 to 2004, Mr. Shaw was
the Chief Financial Officer of Serono S.A., a publicly traded global biotechnology company, and from 1994 to 2001, he was the Chief Financial Officer of Viatel, Inc., a publicly traded
international communications company. Mr. Shaw serves on the board of directors of Edith & Carl Marks JCH of Bensonhurst, a non-profit organization. He also served on the board of
directors of Akari Therapeutics, Plc. from 2013 to 2016, the Central New York Biotech Accelerator (formerly Central New YorkBiotech Research Center) from 2009 to 2013, NewLead
Holdings LTD. from 2009 to 2011, Navios Maritime Holdings, Inc. from 2005 to 2010, Serono S.A. as an Executive Management Board Member from 2002 to 2004 and Viatel Inc.
from 1996 to 2002. He has contributed to several corporate governance books and is a member of the American Institute of Certified Public Accountants, New York Society of Certified Public Accountants
and Corporate Directors Group. Mr. Shaw received a B.S. from the State University of New York (Oswego College) and is a certified public accountant in the State of New York.
Mr. Shaw's
qualifications as a director include his extensive leadership experience as a Chief Financial Officer, his diverse industry background in companies of ranging sizes,
and his broad base of expertise with capital markets and operational expertise with a view toward corporate governance, risk management and leadership.
13
Table of Contents
PROPOSAL NO. 2:
NON-BINDING ADVISORY RESOLUTION ON THE COMPENSATION OF
OUR NAMED EXECUTIVE OFFICERS
General
Our stockholders are afforded this advisory vote pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and related
federal securities laws set forth at Section 14A of the Exchange Act. Although we describe this to be a solicitation of an advisory vote on the compensation for our named executive officers, it
is more commonly known as "say-on-pay." In accordance with the results of the say-on-pay frequency vote held at our 2017 Annual Meeting of Stockholders, we currently hold say-on-pay votes on an annual
basis, and, unless the Board modifies its determination on the frequency of future advisory say-on-pay votes, the next advisory say-on-pay vote will be held at our 2020 Annual Meeting of Stockholders.
By way of this solicitation, stockholders may submit a non-binding advisory vote to approve the compensation of our named executive officers as discussed in the Compensation Discussion and Analysis
section in this Proxy Statement and as summarized in the 2018 Summary Compensation Table in this Proxy Statement, which information provides an annual snapshot of the compensation paid or granted to
our named executive officers.
Although
it is non-binding, the Board and the Compensation Committee will review and carefully consider the voting results when evaluating our executive compensation program. Based in
part on the outcome of the say-on-pay vote, our Board or Compensation Committee will determine whether any changes to the compensation program should be considered for our named executive officers. At
the 2018 Annual Meeting of Stockholders, the stockholders did not approve, on an advisory basis, our 2017
executive compensation. Following our 2018 say-on-pay vote and after careful consideration, we reduced the number of equity awards granted to our then serving named executive officers, continued to
integrate the changes to our senior management team in 2018 (including the hiring of a new Chief Executive Officer and a new President) with the goal of executing on our business strategy, changed the
composition of the Board of Directors and changed the composition of the Compensation Committee in February 2019.
As
discussed in the Compensation Discussion and Analysis section, the Compensation Tables and the related disclosures contained in this Proxy Statement, our compensation program is
designed and implemented to attract, retain, reward and motivate our named executive officers while aligning their and our performance with the long-term interests of our stockholders. The
Compensation Committee believes that our compensation program as designed and implemented through the use of a combination of base salary, cash bonus and equity compensation is effective to achieve
these program goals for the following reasons:
-
-
we attract and retain our named executive officers by providing an overall compensation package that is competitive in the market in which we
compete through base salaries, cash bonuses and long-term equity awards based on corporate and individual performance;
-
-
we share the risks and rewards of our business with our named executive officers;
-
-
we align the interests of our named executive officers with the interests of our stockholders in particular through equity awards; and
-
-
we compensate our named executive officers in a manner that is efficient and affordable for the Company.
We
believe our executive compensation programs are designed in the best manner possible to support the Company and our short- and long-term business and financial objectives. Please
review our Compensation Discussion and Analysis section, the accompanying Compensation Tables and the related disclosures on our 2018 compensation, which describe in more detail how our executive
compensation
14
Table of Contents
policies
and procedures operate and are designed to drive stockholder value. We also urge you to read our Annual Report on Form 10-K for the year ended December 31, 2018, which describes
our business and our 2018 financial results in more detail.
Required Vote
The affirmative vote of the holders of a majority of shares present and entitled to vote will be required to approve, on an advisory basis, the
compensation of our named executive officers.
Board Recommendation
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE RESOLUTION APPROVING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DESCRIBED IN THE COMPENSATION
DISCUSSION AND ANALYSIS SECTION AND THE RELATED TABULAR AND NARRATIVE DISCLOSURE SET FORTH IN THIS PROXY STATEMENT.
Non-Binding Advisory Resolution
Our Board believes that the information provided above and within the "Executive Compensation" section of this Proxy Statement demonstrates that
our executive compensation program was designed appropriately and is working to ensure that management's interests are aligned with our stockholders' interests to support long-term value creation.
In
accordance with Section 14A of the Exchange Act, as a matter of good corporate governance, we are asking our stockholders to approve, on an advisory basis, the following
resolution relating to the overall compensation of our named executive officers as set forth in this Proxy Statement:
"RESOLVED,
that the compensation paid to the Company's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis,
Compensation Tables and narrative discussion, is hereby APPROVED."
PROPOSAL NO. 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
General
The Board has selected OUM to audit our financial statements for the fiscal year ending December 31, 2019. The decision of the Board to
appoint OUM was based on the recommendation of the Audit Committee of the Board (the "
Audit Committee
"). Before making its recommendation to the Board,
the Audit Committee carefully considered OUM's qualifications as an independent registered public accounting firm and auditors. This included a review of the qualifications of the engagement team, the
quality control procedures the firm has established, any issues raised by the most recent quality control review of the firm and its reputation for integrity and competence in auditing. The Audit
Committee's review also included matters required to be considered under the
SEC's Rules on Auditor Independence, including the nature and extent of non-audit services, to ensure that they will not impair the independence of the accountants. The Audit Committee was satisfied
with OUM in all of these respects.
OUM
audited our financial statements for the fiscal year ended December 31, 2018. OUM was first appointed by the Board in the fiscal year ended December 31, 2005.
Representatives of OUM are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they so desire and be available to respond to appropriate questions.
15
Table of Contents
Required Vote
The affirmative vote of the holders of a majority of shares of Common Stock present and entitled to vote will be required to ratify the
selection of OUM as our independent registered public accounting firm for fiscal year 2019. Stockholder ratification is not required by our Amended and Restated Bylaws, as further amended, or other
applicable legal requirement. However, as a matter of good corporate practice, the Board is seeking stockholder ratification of its appointment of OUM as our independent registered public accounting
firm for fiscal year 2019. In the event that the stockholders do not approve the selection of OUM, the appointment of the independent registered public accounting firm may be reconsidered by the Audit
Committee. Even if the selection is ratified, the Audit Committee may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines
that such a change would be in the best interests of the Company and its stockholders.
Board Recommendation
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF OUM & CO. LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
THE FISCAL YEAR ENDING DECEMBER 31, 2019.
Principal Accountant Fees and Services
The following table presents fees for professional services rendered by OUM for the audit of our annual financial statements for fiscal years
2018 and 2017 and fees billed for audit-related services, tax services and all other services rendered by OUM for these periods:
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
Audit Fees(1)
|
|
$
|
566,460
|
|
$
|
436,726
|
|
Audit-Related Fees(2)
|
|
|
|
|
|
|
|
Tax Fees(3)
|
|
|
|
|
|
|
|
All Other Fees(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
566,460
|
|
$
|
436,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Audit
Fees: This category consists of fees for the audit of our annual financial statements, review of the financial statements included in our quarterly reports on
Form 10-Q and services that are normally provided by the independent auditors in connection with regulatory filings or engagements, and for attestation services related to Sarbanes-Oxley
compliance for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
-
(2)
-
Audit-Related
Fees: There were no audit-related fees billed by OUM during these periods.
-
(3)
-
Tax
Fees: There were no tax fees billed by OUM during these periods.
-
(4)
-
All
Other Fees: There were no other fees billed by OUM during these periods.
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Pre-Approval Policy and Procedures
The Audit Committee reviews and pre-approves all audit and non-audit services that may be provided by OUM as well as the fees charges by OUM for
such services. In its pre-approval and review of non-audit service fees, the Audit Committee considers, among other factors, the possible effect of the performance of such services on the auditors'
independence. Pre-approval is generally provided for up to one year, and the Audit Committee may periodically revise the amount and/or list of services that have received class pre-approval as
necessary. The Audit Committee has delegated the authority to grant pre-approvals to the Audit Committee Chairman when the full Audit Committee is unable to do so. Such pre-approvals are then reviewed
by the full Audit Committee at its next regular meeting. In 2018, all audit services were pre-approved and reviewed in accordance with our policy; in 2018, there were no non-audit services.
PROPOSAL NO. 4:
APPROVAL OF AN AMENDMENT TO THE 2018 EQUITY INCENTIVE PLAN
The Board is seeking stockholder approval of an amendment to the 2018 Equity Incentive Plan (the "
2018
Plan
") to increase the number of shares of Common Stock reserved for issuance under the 2018 Plan by 600,000 shares to a new total of 1,353,375 shares. Other than the request
to add more shares to the 2018 Plan, there were no additional amendments made to the 2018 Plan.
The
Board and the Compensation Committee believe that equity awards are an important factor in attracting, motivating, and retaining qualified personnel who are essential to the success
of the Company. The 2018 Plan provides a significant incentive by allowing employees and other service providers to receive or purchase shares of our Common Stock pursuant to equity awards granted
under it.
Background of the Share Reserve Under the 2018 Plan
In determining the number of shares to be reserved under the 2018 Plan, the Board considered a number of factors, including the
following:
-
-
Shares Available for Grant.
As of April 1, 2019, 167,146 shares
remained available for grant under the 2018 Plan. As of the same date, no awards have been granted and no benefits or amounts under the 2018 Plan relating to the additional 600,000 shares to be
reserved under the 2018 Plan have been received by, or allocated to, any individuals.
-
-
Awards Outstanding.
As of April 1, 2019, under the 2018 Plan there
were: (i) 603,162 shares subject to outstanding options, with a weighted average exercise price of $3.92 and a weighted average remaining term of 6.93 years, and (ii) no shares
subject to outstanding restricted stock units. As of the same date, under the Company's 2018 Inducement Equity Incentive Plan (the "
Inducement Plan
"),
there were: (i) 502,000 shares subject to outstanding options, with a weighted average exercise price of $3.70 and a weighted average remaining term of 6.08 years, and (ii) no
shares subject to outstanding restricted stock units. As of the same date, under the 2010 Equity Incentive Plan (the "
2010 Plan
") there were:
(i) 1,763,653 shares subject to outstanding options, with a weighted average exercise price of $26.97 and a weighted average remaining term of 4.40 years, and (ii) 88 shares
subject to outstanding restricted stock units. As of the same date, under the 2001 Stock Option Plan (the "
2001 Plan
" and together with the 2018 Plan,
the Inducement Plan, the 2010 Plan and 2001 Plan, the "
Equity Plans
") there were: (i) 9,176 shares subject to outstanding options, with a
weighted average exercise price of $88.07 and a weighted average remaining term of 0.79 years, and (ii) no shares subject to outstanding restricted stock units. As of the same date,
under all of the Equity Plans, collectively, there were a total of (i) 2,877,991 shares subject to outstanding options, with a weighted average exercise
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Summary of the 2018 Equity Incentive Plan
The following is a summary of the principal features of the 2018 Plan and its operation. This summary does not contain all of the terms and
conditions of the 2018 Plan and is qualified in its entirety by reference to the 2018 Plan as set forth in
Appendix A
.
The purposes of the 2018 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide
incentives to individuals who perform
services to the Company, and to promote the success of the Company's business. These incentives are provided through the grant of stock options, stock appreciation rights
("
SARs
"), restricted stock awards, restricted stock units, performance shares and performance units.
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Table of Contents
Upon stockholder approval of the 2018 Plan, and subject to adjustment upon certain changes in our capitalization as described in the 2018 Plan,
the maximum aggregate number of shares of our Common Stock that will be available for issuance under the 2018 Plan will equal the sum of (i) 1,353,375 shares, which includes 603,375 shares that
had been reserved but not issued pursuant to any awards granted under the 2010 Plan as of the date of stockholder approval of this Plan at the 2018 Annual Meeting, and (ii) any shares subject
to stock options or similar awards granted under the 2010 Plan or 2001 Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted under
the 2010 Plan or 2001 Plan that are forfeited to or repurchased by the Company (up to a maximum of 1,897,382 shares pursuant to clause (ii)). Subject to adjustment upon certain changes in our
capitalization as described in the 2018 Plan, the maximum number of shares that may be issued upon the exercise of incentive stock options granted under the 2018 Plan will be the foregoing sum, plus
any additional shares that are returned to the 2018 Plan as described below to the extent permitted by Section 422 of the U.S. Internal Revenue Code of 1986, as amended (the
"
Code
"). Shares under the 2018 Plan may be authorized, but unissued, or reacquired Common Stock of the Company, except that shares that are reacquired
by the Company on an established stock exchange or national market system on which our Common Stock is listed through the use of cash proceeds received by the Company from the exercise of options
granted under the Equity Plans will not be added to the shares authorized for grant under the 2018 Plan.
Shares
subject to awards of restricted stock, restricted stock units, performance shares and performance units (which are collectively referred to as "
Full Value
Awards
") will count against the 2018 Plan's share reserve as 1.22 shares for each share subject to such award. If shares acquired pursuant to Full Value Awards are forfeited or
repurchased by the Company and otherwise would return to the share reserve as described above, then 1.22 times the number of shares forfeited or repurchased will return to the share reserve under the
2018 Plan.
If
an award granted under the 2018 Plan expires or becomes unexercisable without having been exercised in full or with respect to restricted stock units, performance shares and
performance units granted under the 2018 Plan, is terminated due to failure to vest, the unpurchased or (for awards other than options and SARs) unissued shares subject to such award will become
available for future grant or
sale under the 2018 Plan (unless the 2018 Plan has terminated). Upon the exercise of SARs granted under the 2018 Plan that are settled in shares, the gross number of shares covered by the portion of
the award exercised will cease to be available under the 2018 Plan. If shares issued pursuant to restricted stock, restricted stock units, performance shares or performance units granted under the
2018 Plan are repurchased by or forfeited to the Company due to failure to vest, such shares will become available for future grant under the 2018 Plan. Shares used to pay the exercise price or
purchase price of an award granted under the 2018 Plan and/or to satisfy the tax withholding obligations of an award granted under the 2018 Plan will not remain available for issuance under the 2018
Plan. Payment of cash rather than shares pursuant to an award granted under the 2018 Plan will not result in reducing the number of shares available for issuance under the 2018 Plan.
In the event of any dividend or other distribution (whether in the form of cash, shares, other securities, or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, exchange of shares or other securities of the Company, or other change in our
corporate structure affecting our Common Stock, the Administrator (as defined below), in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available
under the 2018 Plan, will adjust the number and class of shares that are reserved under the 2018 Plan, may be delivered under the 2018 Plan, and the number, class and price of shares covered by
outstanding awards under the 2018 Plan. For example, in September 2018, we
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enacted
a 1-for-10 reverse stock split, and we adjusted the 2018 Plan share reserve and the number of shares subject to outstanding awards, including the purchase price relating thereto, if
applicable, to reflect the same.
The 2018 Plan will be administered by the Board or a committee of individuals satisfying applicable laws appointed by the Board, including the
Compensation Committee (the "
Committee
") of the Board (the "
Administrator
"). To make grants to certain
officers and key
employees of the Company, the members of the committee administering the 2018 Plan must qualify as "non-employee directors" under Rule 16b-3 of the Exchange Act.
Subject
to the terms of the 2018 Plan, the Administrator has the sole discretion to select the employees, consultants, and directors who will receive awards, to determine the terms and
conditions of awards, to modify or amend each award (subject to the restrictions of the 2018 Plan), including to accelerate vesting or waive forfeiture restrictions, and to interpret the provisions of
the 2018 Plan and outstanding awards. Under the 2018 Plan, the Administrator cannot institute a program under which (i) outstanding options or SARs are surrendered or cancelled in exchange for
awards of the same type (which may have higher or lower exercise prices and different terms), awards of a different type, and/or cash, (ii) participants would have the opportunity to transfer
any outstanding awards granted under the 2018 Plan to a financial institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding options
or SARs is reduced.
The
Administrator may allow a participant to defer the receipt of payment of cash or delivery of shares that otherwise would be due to such participant. The Administrator may make rules
and regulations relating to the 2018 Plan as well as establish sub-plans under the 2018 Plan for the purpose of satisfying applicable non-U.S. laws or qualifying for favorable tax treatment under
applicable non-U.S. laws and may make all other determinations deemed necessary or advisable for administering the 2018 Plan. The Administrator's decisions, determinations and interpretations will be
final and binding on all participants and other award holders and will be given the maximum deference permitted by applicable laws.
Awards may be granted to employees and consultants of the Company and any affiliate of the Company and members of the Board. Incentive stock
options may be granted only to employees who, as of the time of grant, are employees of the Company or any parent or subsidiary corporation of the Company. As of April 1, 2019, the individuals
eligible to participate in the 2018 Plan consisted of approximately 58 employees, including six executive officers, eight consultants and eight non-employee directors.
Each option granted under the 2018 Plan will be evidenced by a written or electronic agreement between the Company and a participant, specifying
the number of shares subject to the option and the other terms and conditions of the option, consistent with the requirements of the
2018 Plan. The exercise price per share of each option may not be less than the fair market value of a share of our Common Stock on the date of grant, except in limited circumstances specified in Code
Section 424(a). Any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation of the Company (a "
Ten Percent Stockholder
") must have an exercise price per share equal to at least
110% of the fair market value of a share of our Common Stock on the date of grant. The aggregate fair market value of the shares (determined on the grant date) covered by
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incentive
stock options that first become exercisable by any participant during any calendar year also may not exceed $100,000. Generally, the fair market value of a share of our Common Stock is its
closing sales price (or closing bid, if no sales were reported) as quoted on The Nasdaq Stock Market on the day of determination. On April 1, 2019, the closing price of a share of our Common
Stock on The Nasdaq Stock Market was $3.99 per share.
The
2018 Plan provides that the option exercise price may be paid, as determined by the Administrator, in cash, check, other shares of our Common Stock having a fair market value equal
to the aggregate exercise price of the exercised shares, net exercise, consideration received under a broker-assisted (or other) cashless exercise program (whether through a broker or otherwise) that
the Company implements in connection with the 2018 Plan, reduction in any Company liability to the participant, such other consideration and method of payment for the issuance of shares to the extent
permitted by applicable laws, or by any combination of the foregoing methods. With respect to any specific option, the methods of payment of the option exercise price will be authorized by the
Administrator and set forth in the applicable option agreement. An option will be deemed exercised when the Company receives the notice of exercise and full payment for the shares to be exercised,
together with applicable tax withholdings. Options will be exercisable at such times or under such conditions as determined by the Administrator and set forth in the award agreement. The maximum term
of an option will be specified in the award agreement, provided that the term will be no more than 10 years, and provided further that an incentive stock option granted to a Ten Percent
Stockholder must have a term not exceeding 5 years.
The
Administrator will determine and specify in each award agreement, and solely in its discretion, the period of exercisability following termination of service applicable to each
option. In the absence of such a determination by the Administrator, the participant generally will be able to exercise his or her option (to the extent vested) for (i) three months following
his or her termination for reasons other than death or disability, and (ii) 12 months following his or her termination due to disability or following his or her death while holding the
option. An award agreement also may provide that if exercising an option following termination of a participant's service (other than upon death or disability) would result in liability under
Section 16(b) of Exchange Act ("
Section 16(b)
"), then the option will terminate 10 days after the last date on which exercise would
result in liability under Section 16(b), but no later than the option's maximum term. An award agreement also may provide that if exercising an option following termination of a participant's
service (other than upon death or disability) would be prohibited solely
due to a violation of registration requirements under the Securities Act of 1933, as amended, then the option will terminate three months after termination of the participant's service during which
exercising the option would not violate such registration requirements, but no later than the option's maximum term.
A stock appreciation right gives a participant the right to receive the appreciation in the fair market value of our Common Stock between the
date of grant of the award and the date of its exercise. Each stock appreciation right granted under the 2018 Plan will be evidenced by a written or electronic agreement between the Company and the
participant specifying the exercise price and the other terms and conditions of the award, consistent with the requirements of the 2018 Plan. At the Administrator's discretion, the payment upon
exercise of SARs may be in cash, shares of our Common Stock of equivalent value, or a combination of both. The exercise price per share of each stock appreciation right may not be less than the fair
market value of a share of our Common Stock on the date of grant, except in limited circumstances specified in Code Section 424(a). Upon exercise of a stock appreciation right, the holder of
the award will be entitled to receive an amount determined by multiplying (i) the difference between the fair market value of a share on the date of exercise over the exercise price by
(ii) the number of exercised shares. The term of a stock appreciation right will be no
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Table of Contents
more
than 10 years from the date of grant. The terms and conditions relating to the period of exercisability following termination of service with respect to options described above also apply
to SARs.
Awards of restricted stock are rights to acquire or purchase shares, which vest in accordance with the terms and conditions established by the
Administrator in its sole discretion. Each restricted stock award granted will be evidenced by a written or electronic agreement between the Company and the participant specifying the number of shares
subject to the award and the other terms and conditions of the award, consistent with the requirements of the 2018 Plan. Restricted stock awards
may be subject to vesting conditions as the Administrator specifies, and the shares acquired may not be transferred by the participant until vested.
Unless
otherwise provided by the Administrator, a participant will forfeit any shares of restricted stock as to which the restrictions have not lapsed as specified in the restricted
stock award agreement. Unless the Administrator provides otherwise, participants holding restricted stock will have the right to vote the shares. The Administrator, in its sole discretion, generally
may reduce or waive any restrictions and may accelerate the time at which any restrictions will lapse or be removed.
The Administrator may grant restricted stock units, which represent a right to receive shares of our Common Stock at a future date as set forth
in the participant's award agreement. Each restricted stock unit granted under the 2018 Plan will be evidenced by a written or electronic agreement between the Company and the participant specifying
the number of shares subject to the award and other terms and conditions of the award, consistent with the requirements of the 2018 Plan. Restricted stock units will result in a payment to a
participant if the performance goals or other vesting criteria the Administrator may establish are achieved or the awards otherwise vest. Earned restricted stock units will be paid, in the sole
discretion of the Administrator, in the form of cash, shares, or in a combination of both. The Administrator may establish vesting criteria in its discretion, which may be based on Company-wide,
divisional, business unit or individual goals (including without limitation continued employment or service), applicable federal or state securities laws, or any other basis determined by the
Administrator. After the grant of a restricted stock unit award, the Administrator, in its sole discretion, generally may reduce or waive any vesting criteria that must be met to receive a payout and
may accelerate the time at which any restrictions will lapse or be removed. A participant will forfeit any unearned restricted stock units as of the date set forth in the restricted stock unit award
agreement.
Performance units and performance shares also may be granted under the 2018 Plan. Each award of performance shares or units granted under the
2018 Plan will be evidenced by a written or electronic agreement between the Company and the participant specifying any performance period and other terms and conditions of the award, consistent with
the requirements of the 2018 Plan. Performance units and performance shares will result in a payment to a participant if any performance goals or other vesting criteria the Administrator may establish
are achieved or the awards otherwise vest. Earned performance units and performance shares will be paid, in the sole discretion of the Administrator, in the form of cash, shares (which will have an
aggregate fair market value equal to the
earned performance units or shares at the close of the applicable performance period), or in a combination of both.
The
Administrator may establish performance objectives in its discretion, which may be based on Company-wide, divisional, business unit or individual goals (including without limitation
continued
22
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employment
or service), applicable federal or state securities laws, or any other basis determined by the Administrator. After the grant of a performance unit or performance share, the Administrator,
in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such performance units or shares and accelerate the time at which any restrictions will lapse or
be removed. Performance units will have an initial value established by the Administrator on or before the date of grant. Each performance share will have an initial value equal to the fair market
value of a share of our Common Stock on the award's grant date. A participant will forfeit any performance shares or units that are unearned as of the date set forth in the award agreement.
Awards under the 2018 Plan may be made subject to the attainment of performance goals relating to one or more business criteria and may provide
for a targeted level or levels of achievement including: attainment of research and development milestones, bookings, business divestitures and acquisitions, cash flow, cash position, contract awards
or backlog, customer renewals, customer retention rates from an acquired company, business unit or division, earnings (which may include earnings before interest and taxes, earnings before taxes and
net earnings), earnings per share, expenses, gross margin, growth in stockholder value relative to the moving average of the S&P 500 Index or another index, internal rate of return, market
share, net income, net profit, net sales, new product development, new product invention or innovation, number of customers, operating cash flow, operating expenses, operating income, operating
margin, overhead or other expense reduction, product defect measures, product release timelines, productivity, profit, return on assets, return on capital, return on equity, return on investment,
return on sales, revenue, revenue growth, sales results, sales growth, stock price, time to market, total stockholder return, and working capital. The performance goals may differ from participant to
participant and from award to award, may be used to measure the performance of the Company as a whole or a business unit or other segment of the Company, or one or more product lines or specific
markets and may be measured relative to a peer group or index. Any criteria used may be measured in absolute terms or in terms of growth, compared to other companies, measured against the market as a
whole and/or according to applicable market indices, measured against the Company as a whole or a segment of the Company, and/or measured on a pre-tax or post-tax basis, if applicable. The
Administrator will determine whether any significant element(s) will be
included or excluded from any performance goals applicable to the award. In all other respects, performance goals will be calculated in accordance with the Company's financial statements, generally
accepted accounting principles, or under a methodology established by the Administrator prior to issuance of an award and applied consistently with respect to the performance goal for the relevant
performance period.
Other than with respect to the adjustments referenced under "Adjustments to Shares Subject to the 2018 Plan" above, no dividends or other right
for which the record date is (i) before the date the shares subject to an award of options or SARs are issued will be paid or payable, accrue or cause any adjustment to the award, or
(ii) before the shares subject to an award of restricted stock, restricted stock units, performance shares and performance units vest will be paid or payable, accrue or cause any adjustment to
the award. In addition, unless the Administrator determines otherwise, dividends and other rights for which the record date is before any shares of our Common Stock are issued under any vested
restricted stock units, performance shares or performance units will not be paid or payable, accrue or cause any adjustment to such award.
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Awards granted under the 2018 Plan generally are not transferable other than by will or by the laws of descent or distribution, and may be
exercised during a participant's lifetime only by the participant, unless the Administrator determines otherwise.
In the event of the Company's proposed dissolution or liquidation, the Administrator will notify each participant as soon as practicable prior
to the effective date of such proposed transaction. An award will terminate immediately prior to consummation of such proposed action to the extent the award has not been previously exercised.
The 2018 Plan provides that, in the event of a merger or our "change in control" (as defined in the 2018 Plan), the Administrator will have
authority to determine the treatment of outstanding awards (without participants' consent), including, without limitation, that:
-
-
awards will be assumed or substantially equivalent awards will be substituted by the acquiring or succeeding corporation or its affiliate;
-
-
awards will terminate upon or immediately prior to consummation of such transaction, upon providing written notice to the participant;
-
-
outstanding awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an award will lapse, in whole or in
part prior to or upon such transaction and, to the extent the Administrator determines, terminate upon or immediately prior to the effectiveness of the transaction;
-
-
an award will terminate in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon
exercise of the award or realization of the participant's rights as of the date of the transaction, or an award will be replaced with other rights or property selected by the Administrator in its sole
discretion; or
-
-
any combination of the foregoing.
If
the successor corporation does not assume or substitute outstanding awards (or portions thereof), then with respect to those awards (or portions thereof) not assumed or substituted,
options and SARs will become fully vested and exercisable, all restrictions on restricted stock, restricted stock units, performance shares and performance units will lapse, and, with respect to
awards with performance-based vesting (or portions thereof) not assumed or substituted, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other
terms and conditions met, in all cases unless specifically provided otherwise under the applicable award agreement or other written agreement between the participant and the Company or any of its
affiliates, as applicable. The Administrator will not be required to treat all awards, all awards held by a participant, or all awards of the same type similarly in the transaction. In addition, if an
option or stock appreciation right (or portion thereof) is not assumed or substituted for in the event of a merger or change in control, the Administrator will notify the participant in writing or
electronically that the option or SARs (or its applicable portion) will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the option or
SARs (or its applicable portion) will terminate upon the expiration of such period.
Additionally,
the 2018 Plan provides that with respect to awards granted to a non-employee director, in the event of our change in control, the participant will fully vest in and have
the right to exercise options or SARs as to all of the shares underlying the award and all restrictions on restricted
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Table of Contents
stock,
restricted stock units, performance shares and performance units will lapse, and with respect to awards with performance-based vesting, all performance goals or other vesting criteria will be
deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met, unless specifically provided otherwise.
The 2018 Plan automatically will terminate 10 years from the date of its adoption by the Board, unless terminated at an earlier time by
the Administrator. The Administrator may terminate, alter, suspend or amend the 2018 Plan at any time, provided that the Company will obtain stockholder approval of any amendment to the 2018 Plan to
the extent necessary or desirable to comply with any applicable laws. No termination, alteration, suspension or amendment of the 2018 Plan may impair the rights of any participant unless mutually
agreed otherwise between the participant and the Administrator.
Summary of U.S. Federal Income Tax Consequences
The following summary is intended only as a general guide to the material U.S. federal income tax consequences of participation in the 2018
Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be
complete and does not discuss the tax consequences upon a participant's death, or the provisions of the income tax laws of any municipality, state or non-U.S. jurisdiction to which the participant may
be subject. As a result, tax consequences for any particular participant may vary based on individual circumstances.
No taxable income is reportable when an incentive stock option is granted or exercised, although the exercise may subject the participant to the
alternative minimum tax or may affect the determination of the participant's alternative minimum tax (unless the shares are sold or otherwise disposed of in the same year). If the participant
exercises the option and then later sells or otherwise disposes of the shares acquired more than two years after the grant date and more than one year after the exercise date, the difference between
the sale price and the exercise price will be taxed as capital gain or loss. If the participant exercises the option and then later sells or otherwise disposes of the shares before the end of the two
or one year holding periods described above, he or she generally will have ordinary income at the time of the sale equal to the fair market value of the shares on the exercise date (or the sale price,
if less) minus the exercise price of the option. For purposes of the alternative minimum tax, the difference between the option exercise price and the fair market value of the shares on the exercise
date is treated as an adjustment item in computing the participant's
alternative minimum taxable income in the year of exercise. In addition, special alternative minimum tax rules may apply to certain subsequent disqualifying dispositions of the shares or provide
certain basis adjustments or tax credits for alternative minimum tax purposes.
No taxable income is reportable when a nonstatutory stock option with a per share exercise price at least equal to the fair market value of a
share of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the excess of the fair market value
(on the exercise date) of the shares purchased over the exercise price of the exercised shares subject to the option. Any taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by us. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss to the participant.
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No taxable income is reportable when a stock appreciation right with a per share exercise price equal to at least the fair market value of a
share of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of cash received and the
fair market value of any shares received. Any taxable income recognized in connection with the exercise of a stock appreciation right by an employee of the Company is subject to tax withholding by us.
Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss to the participant.
Restricted Stock, Restricted Stock Units, Performance Units and Performance Shares
A participant generally will not have taxable income at the time an award of restricted stock, restricted stock units, performance units or
performance shares, are granted. Instead, he or she will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the award becomes either
(i) freely transferable, or (ii) no longer subject to substantial risk of forfeiture. If the participant is an employee, such ordinary income generally is subject to tax withholding by
us. However, the recipient of a restricted stock award may elect to recognize income at the time he or she receives the award in an amount equal to the fair market value of the shares underlying the
award (less any cash paid for the shares) on the date the award is granted.
A participant's annual "net investment income," as defined in Section 1411 of the Code may be subject to a 3.8% federal surtax (generally
referred to as the "
Medicare Surtax
"). Net investment income may include capital gain and/or loss arising from the disposition of shares subject to a
participant's awards under the 2018 Plan. Whether a participant's net investment income will be subject to the Medicare Surtax will depend on the participant's level of annual income and other
factors.
Section 409A of the Code provides certain requirements for nonqualified deferred compensation arrangements with respect to an
individual's deferral and distribution elections and permissible distribution events. Awards granted under the 2018 Plan with a deferral feature will be subject to the requirements of
Section 409A of the Code. Section 409A also generally provides that distributions must be made on or following the occurrence of certain events (e.g., the individual's separation
from service, a predetermined date, or the individual's death). For certain individuals who are officers, subject to certain exceptions, Section 409A requires that distributions in connection
with the officer's separation from service commence no earlier than six months after such officer's separation from service.
If
an award granted under the 2018 Plan is subject to and fails to satisfy the requirements of Section 409A of the Code, the recipient of that award may recognize ordinary income
on the amounts
deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to
comply with Section 409A's provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred
compensation. Certain states, such as California, have enacted laws similar to Section 409A which impose additional taxes, interest and penalties on nonqualified deferred compensation
arrangements. The Company will also have withholding and reporting requirements with respect to such amounts. In no event will the Company or any of its affiliates have any obligation under the terms
of this Plan to reimburse, indemnify, or hold harmless a participant for any taxes, interest or penalties imposed, or other costs incurred, as a result of Section 409A.
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We generally will be entitled to a tax deduction in connection with an award under the 2018 Plan in an amount equal to the ordinary income
realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock option). Special rules limit the deductibility of compensation paid
to our Chief Executive Officer and other "covered employees" within the meaning of Code Section 162(m). Under Code Section 162(m), the annual compensation paid to any of these specified
employees will be deductible only to the extent that it does not exceed $1,000,000.
Number of Awards Granted to Certain Individuals and Groups
The number of awards that an employee, director or consultant may receive under the 2018 Plan is in the discretion of the Administrator and
therefore cannot be determined in advance. Our executive officers and non-employee directors have an interest in this proposal because they are eligible to receive awards under the 2018 Plan. The
following table sets forth (i) the aggregate number of shares of Common Stock subject to options and restricted stock unit awards granted under the 2010 Plan and the 2018 Plan during the last
fiscal year, and (ii) the average per share exercise price of such options and the dollar value of such restricted stock units granted. We ceased to grant awards under the 2010 Plan after
stockholders approved the 2018 Plan on September 7, 2018.
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Name of Individual or Group
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Number of
Shares Subject to
Options Granted
|
|
Average Per
Share
Exercise
Price ($)
|
|
Number of
Shares of
Restricted Stock
Units Granted
|
|
Dollar Value of
Restricted Stock
Units Granted ($)
|
|
John P. Amos
Chief Executive Officer and Director
|
|
|
290,000
|
|
|
3.70
|
|
|
|
|
|
|
|
Mark K. Oki
Senior Vice President, Chief Financial Officer and Chief Accounting Officer
|
|
|
55,000
|
|
|
3.89
|
|
|
|
|
|
|
|
Kenneth Suh
President
|
|
|
190,000
|
|
|
3.70
|
|
|
|
|
|
|
|
John L. Slebir
Senior Vice President, Business Development and General Counsel and Secretary
|
|
|
62,500
|
|
|
3.90
|
|
|
|
|
|
|
|
Santosh T. Varghese, M.D.
Chief Medical Officer
|
|
|
26,250
|
|
|
4.00
|
|
|
|
|
|
|
|
Thomas B. King
Former Interim Chief Executive Officer, Former Interim President and Director
|
|
|
95,000
|
|
|
5.23
|
|
|
|
|
|
|
|
All current executive officers, as a group
|
|
|
800,750
|
|
|
3.92
|
|
|
|
|
|
|
|
All current directors who are not executive officers, as a group
|
|
|
160,000
|
|
|
4.09
|
|
|
|
|
|
|
|
All current employees who are not executive officers, as a group
|
|
|
356,918
|
|
|
4.03
|
|
|
|
|
|
|
|
Required Vote
Approval of the amendment to the 2018 Plan to increase the number of shares reserved for issuance thereunder by 600,000 shares of Common Stock
requires the affirmative "
FOR
" vote of a majority of the shares present in person or represented by Proxy entitled to vote at the Annual Meeting.
27
Table of Contents
Board Recommendation
We believe strongly that the approval of the amendment to the 2018 Plan is essential to our continued success. Our employees are one of our most
valuable assets. Stock options, restricted stock units and other awards provided under the 2018 Plan are vital to our ability to attract and retain outstanding and highly skilled individuals. Such
awards also are crucial to our ability to motivate employees to achieve the Company's goals. For the reasons stated above, the stockholders are being asked to approve the amendment to the 2018 Plan to
increase the number of shares reserved for issuance thereunder.
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO THE 2018 EQUITY INCENTIVE PLAN.
PROPOSAL NO. 5:
APPROVAL OF AN AMENDMENT TO THE 1994 EMPLOYEE STOCK PURCHASE PLAN
The Board is seeking stockholder approval of an amendment to the 1994 Employee Stock Purchase Plan (the
"
ESPP
") to increase the number of shares of Common Stock reserved for issuance thereunder by 400,000 shares to a new total of 600,000 shares. The Board
expects that the additional number of shares reserved for issuance under the ESPP will be sufficient to operate the ESPP for at least four years without having to request additional shares. The Board
will periodically review actual share consumption under the ESPP and may make an additional request for shares under the ESPP earlier or later than this period as needed.
The
Board believes that approval of the amendment to the ESPP to increase the number of shares reserved for issuance thereunder is appropriate and in the best interest of the Company and
its stockholders. The Company believes that maintaining an employee stock purchase plan is an important
factor to continuing to attract, motivate and retain qualified individuals to serve as employees of the Company.
Other
than the reservation of additional shares under the ESPP, no other material amendments have been made to the plan.
Additional Information Regarding the ESPP
-
-
The actual number of shares of Common Stock that will be purchased under the ESPP cannot be determined because such number will depend on a
number of indeterminable factors (including the number of participants, the rates at which participants make contributions to the ESPP, and our stock price). However, in fiscal years 2016, 2017 and
2018, the numbers of shares purchased under the ESPP were 4,104 shares, 5,072 shares, and 11,479 shares, respectively.
-
-
10 employees participated in the most recently completed offering period, purchasing approximately 6,284 shares of Common Stock (with an
approximate value of $20,046 on the date of purchase) at a purchase price of $2.71 per share. As of April 1, 2019, approximately 58 employees were eligible to participate in the ESPP.
-
-
As of April 1, 2019, there were 10 employees participating in the offering period then in progress under the ESPP.
Summary of the 1994 Employee Stock Purchase Plan
The following is a summary of the principal features of the ESPP and its operation. This summary does not contain all of the terms and
conditions of the ESPP and is qualified in its entirety by reference to the ESPP as set forth in
Appendix B
.
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Table of Contents
The purpose of the ESPP is to provide employees of the Company and designated subsidiaries with an opportunity to purchase Common Stock of the
Company through accumulated payroll deductions.
Upon stockholder approval of this proposal, a total of 600,000 shares of Common Stock will be reserved for issuance under the ESPP.
The ESPP is administered by the Board or any committee of members of the Board appointed by the Board (the
"
Administrator
"). The Administrator has full and exclusive discretionary authority to construe, interpret and apply the terms of the ESPP, to designate
separate offerings, to determine eligibility, to adjudicate all disputed claims filed under the ESPP and to establish rules, sub-plans and procedures necessary or appropriate for administration of the
ESPP. Every finding, decision and determination made by the Board or its committee will, to the full extent permitted by law, be final and binding upon all parties.
The ESPP provides that any individual who is a common law employee of the Company or any designated subsidiary whose customary employment with
the Company or any designated subsidiary is at least 20 hours per week and more than five months in any calendar year on a given enrollment date will be eligible to participate in the ESPP
subject to the laws in which our designated subsidiaries operate; except that no employee will be granted an option under the ESPP (i) to the extent, immediately after the grant, such employee
would own capital stock of the Company or subsidiary and/or hold outstanding options to purchase such stock possessing 5% or more of the total combined voting power, or (ii) to the extent the
employee accrues through payroll deductions at a rate that exceeds $25,000 worth of stock for each calendar year in which such option is outstanding at any time. As of April 1, 2019, there were
approximately 58 employees eligible to participate in the ESPP, including six executive officers.
The ESPP is implemented by consecutive offering periods with a new offering period commencing on the first trading day on or after May 15
and terminating on the last trading day in the period ending the following November 14, or commencing on the first trading day on or after November 15 and terminating on the last trading
day in the period ending the following May 14, or on such other date as the Administrator will determine, and continuing thereafter until terminated in accordance with the ESPP. The
Administrator has the power to change the duration of offering periods (including the commencement dates thereof) with respect to future offerings without stockholder approval if such change is
announced prior to the scheduled beginning of the first offering period to be affected thereafter.
An
employee may become a participant in the ESPP by completing a subscription agreement authorizing payroll deductions in the form of Exhibit A to the ESPP and may elect to have
payroll deductions on each pay day during the offering period in an amount not less than 1% and not exceeding 10% of the compensation the participant receives on each pay day during the offering
period. Once an employee becomes a participant in the ESPP, the employee automatically will participate in each successive offering period until the employee withdraws from the ESPP or the employee's
employment with the Company or the designated subsidiaries terminates. At the beginning
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Table of Contents
of
each offering period, each participant automatically is granted an option to purchase shares of Company's Common Stock. The option expires at the end of the offering period or upon termination of
employment, whichever is earlier, but is exercised at the end of each offering period to the extent of the payroll deductions accumulated during such offering period unless the participant has
withdrawn from the ESPP.
The exercise price of shares purchased under the ESPP will be 85% of the lesser of the fair market value of Common Stock on (i) the
enrollment date or (ii) the exercise date of the applicable offering period. The fair market value of Common Stock will be the closing price per share as reported on any established stock
exchange market system or the mean of the closing bid and asked prices, if no sales were reported, as quoted on such exchange or reported in
The Wall Street
Journal
.
On the enrollment date of each offering period, each employee participating in such offering period will be granted an option to purchase on the
exercise date of such offering period (at the applicable purchase price) up to a number of shares of the Company's Common Stock determined by dividing such employee's payroll deductions (or other
contributions) accumulated prior to such exercise date and retained in the participant's account as of the exercise date by the applicable purchase price. In no event will an employee be permitted to
purchase during each offering period
more than 1,000 shares of the Company's Common Stock. During the offering period, a participant may discontinue his or her participation in the ESPP, and may decrease or increase the rate of payroll
deductions in an offering period within limits set by the administrator.
All
payroll deductions made for a participant will be credited to his or her account under the ESPP and are withheld in whole percentages only. A participant may not make any additional
payments into such account. Funds received or held by the Company under the ESPP may be used for general corporate purposes.
Generally, a participant may withdraw from an offering period at any time by written notice without affecting his or her eligibility to
participate in future offering periods. However, if a participant withdraws from participation during a particular offering period, that participant may not participate again in the same offering
period. To participate in a subsequent offering period, the participant must deliver to the Company a new subscription agreement.
Upon termination of a participant's employment for any reason, or failure of the participant to remain an employee, he or she will be deemed to
have elected to withdraw from the plan and the payroll deduction will be credited to the participant's account (to the extent not used to make a purchase of Company's Common Stock) or will be returned
to the participant or, in the case of death, to the person or persons entitled thereto as provided in the ESPP, and such participant's option will be automatically terminated.
Subject to any required action by the stockholders, the number and price per share of Common Stock covered by each option under the ESPP which
have not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option will be proportionately adjusted for any increase or decrease in the number of issued
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Table of Contents
shares
of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares
of Common Stock effected without receipt of consideration by the Company. For example, in September 2018, we enacted a 1-for-10 reverse stock split, and we adjusted the ESPP share reserve, related
ESPP share limits, and outstanding offerings to reflect the same.
In the event of dissolution or liquidation of the Company, the offering period will be shortened by setting a new exercise date and will
terminate immediately prior to the completion of the dissolution or liquidation, unless provided otherwise by the Administrator. The new exercise date will be prior to the dissolution or liquidation.
The Administrator will notify each participant in writing, at least ten (10) business days prior to the new exercise date, that the exercise date for the participant's option has been changed
to the new exercise date and that the participant's option will be exercised automatically on the new exercise date, unless prior to such date the participant has withdrawn from the offering period.
In the event of a merger or change of control (as defined in the ESPP), each option under the ESPP will be assumed or an equivalent option will
be substituted by such successor corporation or a parent or subsidiary of such successor corporation. If no surviving corporation assumes outstanding rights or substitutes similar rights, the
Administrator will shorten the offering period then in progress by setting a new exercise date on which such offering will end or cancel each outstanding right to purchase shares and refund all sums
collected from participants for the offering period in progress. If the Administrator shortens any offering periods then in progress, the Administrator will notify each participant in writing at least
ten (10) business days prior to the new exercise date, that the exercise date has been changed to the new exercise date and that the right will be exercised automatically on the new exercise
date, unless the participant has already withdrawn from the offering.
The Administrator may at any time amend or terminate the ESPP without approval of the stockholders; provided, however, that the Company will
obtain stockholder approval of any amendment to the ESPP to the extent necessary to comply with Section 423 of the Code, or with any other applicable law or regulation, including requirements
of Nasdaq or any established stock exchange. Any amendment or termination of the ESPP is subject to the rights of optionees under agreements entered into prior to such amendment or termination.
However, the Administrator may, without regard to whether participant rights are adversely affected, make changes to offering periods, designate separate offerings, limit the frequency and/or number
of changes in the amounts withheld during an offering period, and make certain other changes as provided in the ESPP.
Summary of U.S. Federal Income Tax Consequences
The following brief summary of the effect of federal income taxation upon the participant and with respect to the shares purchased under the
ESPP does not purport to be complete, and does not discuss the tax consequences of a participant's death or the income tax laws of any state or foreign country in which the participant may reside.
The
ESPP, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Sections 421 and 423 of the Code. Under these provisions, no
income will be taxable to a participant until the shares purchased under the ESPP are sold or otherwise disposed of. Upon sale or other disposition of the shares, the participant will generally be
subject to tax in an amount that depends upon the holding period. If the shares are sold or otherwise disposed of more than two years
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from
the first day of the applicable offering period and one year from the applicable date of purchase, the participant will recognize ordinary income measured as the lesser of (i) the excess
of the fair market value of the shares at the time of such sale or disposition over the purchase price, or (ii) an amount equal to 15% of the fair market value of the shares as of the first day
of the applicable offering period.
Any additional gain will be treated as long-term capital gain. If the shares are sold or otherwise disposed of before the expiration of these holding periods, the participant will recognize ordinary
income generally measured as the excess of the fair market value of the shares on the date the shares are purchased over the purchase price. Any additional gain or loss on such sale or disposition
will be long-term or short-term capital gain or loss, depending on how long the shares have been held from the date of purchase. The Company generally is not entitled to a deduction for amounts taxed
as ordinary income or capital gain to a participant except to the extent of ordinary income recognized by participants upon a sale or disposition of shares prior to the expiration of the holding
periods described above.
Number of Shares Purchased by Certain Individuals and Groups
Given that participation in the ESPP is voluntary and is dependent on each employee's election to participate and his or her determination as to
the level of payroll deductions, the actual number of shares that may be purchased by any individual is not determinable.
For
illustrative purposes, the following table sets forth certain information regarding shares purchased under the ESPP during the last fiscal year and the payroll deductions accumulated
at the end of the last fiscal year in accounts under the ESPP for each of the executive officers named in the Summary Compensation Table, for all current executive officers as a group and for all
other employees who participated in the ESPP as a group:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Shares
Purchased
|
|
Dollar
Value*
|
|
Payroll
Deductions
as of Fiscal
Year end
|
|
John P. Amos
Chief Executive Officer and Director
|
|
|
|
|
|
|
|
|
|
|
Mark K. Oki
Senior Vice President, Chief Financial Officer and Chief Accounting Officer
|
|
|
700
|
|
|
335
|
|
|
1,440
|
|
Kenneth Suh
President
|
|
|
|
|
|
|
|
|
|
|
John L. Slebir
Senior Vice President, Business Development and General Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
Santosh T. Varghese, M.D.
Chief Medical Officer
|
|
|
700
|
|
|
335
|
|
|
799
|
|
Thomas B. King
Former Interim Chief Executive Officer, Former Interim President and Director
|
|
|
|
|
|
|
|
|
|
|
All current executive officers, as a group
|
|
|
1,400
|
|
|
670
|
|
|
2,239
|
|
All other employees who are not executive officers, as a group
|
|
|
10,079
|
|
|
6,545
|
|
|
5,540
|
|
-
*
-
Market
value of shares on date of purchase, minus the purchase price under the ESPP.
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Table of Contents
Required Vote
Approval of the amendment to the ESPP to increase the number of shares reserved for issuance thereunder by 400,000 shares requires the
affirmative "
FOR
" vote of a majority of the shares present in person or represented by Proxy entitled to vote at the Annual Meeting.
Board Recommendation
The Board believes strongly that the approval of the amendment to the ESPP is in the best interest of Company and the stockholders. The
opportunity to purchase shares under the ESPP provides an important incentive to employees and helps the Company recruit, retain, and motivate talented employees. For the reasons stated above, the
stockholders are being asked to approve the amendment to the ESPP to increase the number of shares reserved for issuance.
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO THE 1994 EMPLOYEE STOCK PURCHASE PLAN.
33
Table of Contents
CORPORATE GOVERNANCE
Board Meetings
The Board met 12 times during fiscal year 2018. All directors attended at least 75% of the aggregate of all meetings of the Board and of the
committees on which they served during the year ended December 31, 2018.
Although
we do not have a formal policy regarding attendance by members of the Board at our annual meetings of stockholders, directors are encouraged to attend annual meetings of
stockholders. Five of our seven then serving directors attended the 2018 Annual Meeting of Stockholders.
Board Independence
As required under Rule 5605 of the Nasdaq Listing Rules, a listed company's board of directors must affirmatively determine that a
majority of its directors are "independent," as defined by such listing standards. That definition includes a series of objective factors, including that the director is not an employee of the company
and has not engaged in various types of business dealings with the company. Additionally, the board of directors must make a subjective determination as to each director that no relationship exists
that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In addition, the Nasdaq Listing Rules require that, subject to specified exceptions,
each member of a listed company's audit, compensation, and nominating and corporate governance committees be independent and that audit committee members also satisfy independence criteria set forth
in Rule 10A-3 under the Exchange Act. Compensation committee members must also satisfy independence criteria set forth in Rule 10C-1 under the Exchange Act.
Consistent
with these requirements, our Board has determined that each of Karen Ferrell, Edward A. Kangas, Thomas B. King, David Y. Norton, Jorge
Plutzky, M.D., Eric W. Roberts and Herman Rosenman, which represent seven of our nine directors, currently satisfies the director independence standards of the Nasdaq Listing Rules.
Mr. King served as our interim Chief Executive Officer from December 31, 2017 to April 30, 2018 and as our interim President from April 30, 2018 to May 30, 2018.
Mr. King's position as an interim executive officer during such periods does not disqualify him from being considered independent under the Nasdaq Listing Rules as of the date of this Proxy
Statement. Our Board has determined that John P. Amos, our Chief Executive Officer, is not independent by virtue of his employment with the Company, and Allan L. Shaw in not independent by virtue of
his prior role as a consultant with the Company. The Board also determined that each member of the Audit, Compensation and Nominating and Governance Committees satisfies the independence standards for
such committees established by the SEC and the Nasdaq Listing Rules, as applicable.
Board Leadership Structure
The Company maintains separate positions of the Chairman of the Board and the Chief Executive Officer. Having these positions separate allows
our Chief Executive Officer to focus on the daily operations, while allowing the Chairman of the Board to lead the Board in its fundamental role of providing advice to and independent oversight of
management. Though our charter documents do not require that our Chairman of the Board and Chief Executive Officer positions be separate, the Board believes that having separate positions is the
appropriate leadership structure to assure good and efficient corporate governance. The Board has charged the Chairman of the Board with responsibility for presiding over meetings of the Board,
developing meeting agendas in consultation with management, facilitating communication between management and the Board, representing director views to management and improving meeting effectiveness,
among other things. Our Chairman of the Board is elected annually at the first Board meeting following the annual meeting of stockholders and is currently David Y. Norton.
34
Table of Contents
Risk Oversight
Our Board as a whole is responsible for overseeing our risk management function. Members of our senior management team are responsible for
implementation of our day-to-day risk management processes, while the Board, as a whole and through its Audit Committee, Compensation Committee, Nominating and Governance Committee and Corporate
Development Committee, has responsibility for the oversight of overall risk management. As risk is inherent in every business and is rarely static, the Board and senior management routinely discuss
and analyze any significant strategic, operational, financial, legal and compliance risks facing the Company, as well as our general risk management strategy and actions taken by senior management in
compliance with this strategy. At meetings of the Board, senior management provides updates to the Board on any specific risk-related issues as they evolve, which allows the Board to satisfy itself
that the risk management processes designed and implemented by management are adequate and functioning as designed.
In
addition, each of the committees of our Board considers any risks that may be within its area of responsibilities and directors periodically engage in discussions with members of the
senior management team as appropriate. Specifically, the Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial
reporting, internal controls, compliance with legal and regulatory requirements and cybersecurity (including protection of customer and employee data and other confidential information, and ensuring
the security of data on the cloud). The Compensation Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation
policies and programs. The Nominating and Governance Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with board
organization, membership and structure, succession planning for our directors and executive officers and corporate governance. The Corporate Development Committee assists the Board in assessing
specific risks and issues relating to potential transactions not in the ordinary course of business.
Board Committees
The Board has Audit, Compensation, Nominating and Governance, and Corporate Development Committees. The written charter for each of these
committees can be found on our website at
www.vivus.com
. All members of the Audit, Compensation, Nominating and Governance, and Corporate Development
Committees are appointed by the Board. The following describes each committee, including its current membership, the number of meetings held during fiscal year 2018, and its function:
The Audit Committee currently consists of directors Ferrell, King, Norton and Rosenman, none of whom is an employee of the Company and each of
whom is independent within the meaning of the Nasdaq Listing Rules and the Exchange Act, in each case as currently in effect. The Board has determined that Mr. Rosenman is an "audit committee
financial expert" as defined in the applicable SEC rules. Mr. Rosenman currently serves as Chairman of the Audit Committee. In 2018 until February 2018, Allan L. Shaw also served as a member of
the Audit Committee. From February 2018 until February 2019, Jorge Plutzky, M.D. also served as a member of the Audit Committee. The Audit Committee held four meetings during fiscal year 2018.
The
Audit Committee's main function is to oversee our accounting and financial reporting processes, internal system of control, independent registered public accounting firm
relationships and
35
Table of Contents
the
audits of our financial statements. The Audit Committee's responsibilities include, among other things:
-
-
assisting the Board in its oversight of the integrity of the Company's accounting and financial reporting process and the audits of the
Company's financial statements by the Company's independent registered public accounting firm;
-
-
monitoring the periodic reviews of the adequacy of the accounting and financial reporting processes and systems of internal control that are
conducted by the independent registered public accounting firm and the Company's financial and senior management;
-
-
evaluating the Company's compliance with legal and regulatory requirements under applicable securities law;
-
-
interacting directly with and evaluating the performance of the independent registered public accounting firm, including engaging or dismissing
the independent registered public accounting firm and monitoring the independent registered public accounting firm's qualifications and independence; and
-
-
facilitating communication among the independent registered public accounting firm and the Company's financial and senior management and the
Board.
Both
our independent registered public accounting firm and internal financial personnel meet privately with the Audit Committee and have unrestricted access to the Audit Committee.
The
Audit Committee Report is included herein below.
The Compensation Committee currently consists of directors Kangas, Norton and Rosenman, none of whom is currently or has served as an employee
of the Company during fiscal year 2018 and each of whom is independent within the meaning of the Nasdaq Listing Rules and the Exchange Act, in each case as currently in effect. The Compensation
Committee held nine meetings during fiscal year 2018. In 2018 until February 2018, Allan L. Shaw also served as a member and Chairman of the Compensation Committee. In 2018 until February 2019, Eric
W. Roberts also served as a member of the Compensation Committee. No member of the Compensation Committee serves as a member of the board of directors or compensation committee of any entity that has
one or more officers serving as a member of our Board or Compensation Committee. Mr. Norton currently serves as Chairman of the Compensation Committee. The Compensation Committee's
responsibilities include, among other things:
-
-
establishing and maintaining compensation and benefit plans, policies and programs designed to attract, motivate and retain personnel with the
requisite skills and abilities to enable the Company to achieve superior operating results;
-
-
reviewing the compensation of the Company's Chief Executive Officer, the Company's other executive officers as defined by Rule 3b-7 of
the Exchange Act and the Company's non-employee directors; and
-
-
ensuring compliance with the compensation rules, regulations and guidelines promulgated by Nasdaq, the SEC and other law, as applicable.
The
Compensation Committee reviews and approves the salaries and incentive compensation of our officers and directors. In addition, the Compensation Committee approves all new hire
equity grants, as well as equity grants for all employees as part of our annual performance review process.
The
agenda for meetings of the Compensation Committee is prepared by the Compensation Committee Chair in consultation with management. The Compensation Committee may request that
36
Table of Contents
any
directors, officers or employees of the Company, or other persons whose advice and counsel are sought by the Compensation Committee, attend any meeting to provide such information as the
Compensation Committee requests. In rendering its decisions, the Compensation Committee also considers the information regarding comparably sized companies in the biotechnology and pharmaceutical
industries in the United States and its collective experience with other companies. The Chief Executive Officer and any other officers cannot be present during the portion of any meeting relating to
their own compensation or performance.
The
Compensation Committee is entitled to delegate any or all of its responsibilities to a subcommittee of the Compensation Committee, but only to the extent consistent with the
Company's Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, as further amended, Section 162(m), Nasdaq Listing Rules and other applicable law. The Board retains
the authority to review and approve cash and equity compensation for our officers and directors, which it exercises from time to time.
The
Compensation Committee is committed to ensuring that compensation programs are designed to encourage high performance, promote accountability and assure that employee interests are
aligned with the interests of the Company's stockholders. To this end, the Compensation Committee has directly selected and retained the services of Radford, an Aon Hewitt Company, or Radford, to
assist it in evaluating executive and non-employee director compensation matters. During 2018, Radford only provided services to the Compensation Committee and such services were related exclusively
to executive, equity and non-employee director compensation. In 2018, the Compensation Committee engaged Radford to conduct a peer group analysis, an analysis of the executive compensation programs,
including that of the Chief Executive Officer, a review of ongoing equity strategies, and an analysis of non-employee directors' compensation. The Compensation Committee has the sole discretion to
retain or obtain the advice of compensation consultants, legal counsel and other compensation advisers, direct responsibility for the appointment, compensation and oversight of the work of any
compensation adviser, the right to receive from the Company appropriate funding, as determined by the Compensation Committee, for the payment of reasonable compensation to compensation advisers
retained by the Compensation Committee and responsibility to consider certain independence factors before selecting such compensation advisers, other than in-house legal counsel. The compensation
consultant reports directly and exclusively to the Compensation Committee with respect to executive and non-employee director compensation matters.
After
review and consultation with Radford and executive management, the Compensation Committee has determined that Radford is independent and there is no conflict of interest resulting
from retaining Radford currently or during the year ended December 31, 2018. In reaching these conclusions, the Compensation Committee considered the factors set forth in Rule 10C-1 of
the Exchange Act and applicable Nasdaq Listing Rules.
The
Compensation Committee Report is included herein below.
The Nominating and Governance Committee currently consists of directors King, Norton and Roberts, none of whom is an employee of the Company and
each of whom is independent within the meaning of the Nasdaq Listing Rules as currently in effect. The Nominating and Governance Committee held two meetings during fiscal year 2018. Mr. Norton
currently serves as Chairman of the Nominating and Governance Committee.
The
Nominating and Governance Committee is responsible for:
-
-
identifying, considering and recommending candidates for nomination to the Board;
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-
-
developing, reviewing and recommending to the Board, corporate governance guidelines and principles applicable to the Company;
-
-
overseeing the evaluation of the Board, including from time to time conducting surveys of director observations, suggestions and preferences;
and
-
-
advising the Board on corporate governance matters and performance matters of the Board, including recommendations regarding the structure and
composition of the Board and Board committees.
The
Nominating and Governance Committee will consider properly submitted stockholder recommendations for candidates for membership on the Board as described below. Any stockholder
recommendations proposed for consideration by the Nominating and Governance Committee should include the candidate's name and qualifications for membership on the Board and should be addressed to our
Corporate Secretary at VIVUS, Inc., 900 E. Hamilton Avenue, Suite 550, Campbell, CA 95008. In addition, procedures for stockholder direct nomination of directors are discussed in detail
in our Amended and Restated Bylaws, as further amended, which can be provided to you upon written request. The Nominating and Governance Committee will consider a director candidate recommended by our
stockholders in the same manner as a nominee recommended by a member of the Board, management or other sources.
The
Nominating and Governance Committee will utilize a variety of methods for identifying and evaluating nominees for director. The Nominating and Governance Committee intends to
regularly assess the appropriate size of the Board, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise,
the Nominating and Governance Committee plans to consider various potential candidates for director. Candidates may come to the attention of the Nominating and Governance Committee through current
members of the Board, professional search firms, stockholders or other persons. These candidates will be evaluated at regular or special meetings of the Nominating and Governance Committee, and may be
considered at any point during the year. In evaluating such recommendations, the Nominating and Governance Committee uses the qualifications standards discussed below and seeks to achieve a balance of
knowledge, experience and skill on the Board.
The
Nominating and Governance Committee will use a variety of criteria to evaluate the qualifications and skills necessary for members of our Board. The Nominating and Governance
Committee has also specified the following minimum qualifications that it believes must be met by a nominee for a position on the Board as follows:
-
-
possession of the highest professional and personal ethics and values;
-
-
the ability to think and act independently;
-
-
broad experience at the policy-making level in business, healthcare, education, or government;
-
-
a commitment to enhancing stockholder value and providing insight and practical wisdom based on experience;
-
-
service on other boards of public companies limited to a number that permits a director, given each director's individual circumstances, to
perform all director duties responsibly; and
-
-
the ability to represent the interests of our stockholders.
While
the Company does not have a formal policy on director diversity, the Board and the Nominating and Governance Committee also consider diversity when reviewing the composition of the
Board and considering the slate of nominees for annual election to the Board and the appointment of individual directors to the Board. In this context, diversity factors include without limitation
experience, specialized expertise, geographic location, cultural background and gender. Diversity factors are then
38
Table of Contents
considered
with other factors by our Nominating and Governance Committee in the context of an assessment of the perceived needs of our Board on an annual basis or at a particular point in time.
After
completing its evaluation, the Nominating and Governance Committee makes a recommendation to the full Board as to the persons who should be nominated to the Board, and the Board
determines the nominees after considering the recommendation and report of the Nominating and Governance Committee.
The Corporate Development Committee currently consists of directors King, Norton, Plutzky, Roberts, Rosenman and Shaw, none of whom is an
employee of the Company. The Corporate Development Committee held six meetings during fiscal year 2018. Mr. Roberts currently serves as Chairman of the Corporate Development Committee.
The
Corporate Development Committee is responsible for:
-
-
reviewing and making recommendations with respect to the Company's long-term business goals and strategic plans developed by management;
-
-
assisting management in the review of transactions not in the ordinary course of business; and
-
-
reviewing the integration plans for proposed transactions as applicable.
Compensation Committee Interlocks and Insider Participation
None of our directors who served on our Compensation Committee during 2018 is currently or has been, at any time since our formation, one of our
officers or employees. However, Mr. Shaw previously served on the Compensation Committee in 2018 until February 1, 2018, and on February 26, 2018, he entered into a Consulting
Agreement with the Company, effective February 1, 2018. During 2018, no executive officer served as a member of the board of directors or compensation committee of any entity that has one or
more executive officers serving on our Board or our Compensation Committee. The Compensation Committee currently consists of directors Kangas, Norton and Rosenman. None of the members of our
Compensation Committee during 2018 currently has or has had any relationship or transaction with a related person requiring disclosure pursuant to Item 404 of Regulation S-K, other than
the Consulting Agreement between the Company and Mr. Shaw as described above and as discussed in more detail in the section entitled "Certain Relationships and Related
TransactionsConsulting Agreement and Stock Purchase Agreement."
Stockholder Communications to Directors
Stockholders may communicate directly with our Board by sending a letter addressed to:
General
Counsel
VIVUS, Inc.
900 E. Hamilton Avenue, Suite 550
Campbell, CA 95008
Our
General Counsel will ensure that a summary of all communications received is provided to the Board at its regularly scheduled meetings. Stockholders who would like their submission
directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate. Where the nature of a communication warrants, the General Counsel may decide to obtain the
more immediate attention of the appropriate committee of the Board or a non-management director, management or independent advisors, as the General Counsel considers appropriate. The General
Counsel may decide, in the exercise of his judgment, whether a response to a stockholder communication is necessary.
39
Table of Contents
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics, which is applicable to all of our employees, officers and directors. The Code of
Business Conduct and Ethics may be found on our website at
www.vivus.com
. We will disclose any amendment to the Code of Business Conduct and Ethics or
waiver of a provision of the Code of Business Conduct and Ethics, including the name of the person to whom the waiver was granted, on our website on the Investor Relations page within four business
days following the date of such amendment or waiver.
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines, which set forth amongst other things the principles that guide the Board's exercise of
its responsibility to oversee corporate governance, maintain its independence and evaluate its own performance. Our Corporate Governance Guidelines provide that the Board shall elect its Chairman and
appoint the Company's Chief Executive Officer in accordance with the best interests of the Company. Our Corporate Governance Guidelines also provide that directors should not serve on boards of public
companies in addition to the Company's Board where such service is likely to interfere with the performance of the director's duties to the Company, taking into account the individual, the nature of
his or her activities and such other factors or considerations as the Board deems relevant. The Corporate Governance Guidelines may be found on our website at
www.vivus.com
.
40
Table of Contents
EXECUTIVE OFFICERS
Officers serve at the discretion of the Board. The following table and the biographical information that follows it set forth information as of
April 1, 2019 regarding our executive officers:
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
John P. Amos
|
|
52
|
|
Chief Executive Officer and Director
|
Mark K. Oki
|
|
50
|
|
Senior Vice President, Chief Financial Officer and Chief Accounting Officer
|
Kenneth Suh
|
|
43
|
|
President
|
John L. Slebir
|
|
53
|
|
Senior Vice President, Business Development and General Counsel and Secretary
|
M. Scott Oehrlein
|
|
53
|
|
Chief Operations Officer
|
Santosh T. Varghese, M.D.
|
|
48
|
|
Chief Medical Officer
|
The
biographical information of Mr. Amos is set forth above under Proposal No. 1, "Election of Directors."
Mark K. Oki
has served as our Senior Vice President, Chief Financial Officer and Chief Accounting Officer since February 2019. From
October 2015 until February 2019, Mr. Oki served as our Chief Financial Officer and Chief Accounting Officer. Prior to this, Mr. Oki held the following positions at Alexza
Pharmaceuticals, Inc., a publicly traded pharmaceutical company: Senior Vice President, Finance and Chief Financial Officer from July 2012 until October 2015, Principal Accounting Officer from
May 2010 until October 2015, Principal Financial Officer and Secretary from December 2011 until October 2015, Vice President, Finance and Controller from February 2010 until July 2012 and Controller
from April 2006 until February 2010. From June 2001 until April 2006, he served as the Controller of Pharmacyclics, Inc., a publicly traded development stage pharmaceutical company. From 1998
until 2001, Mr. Oki held several positions at Incyte Genomics, Inc., now Incyte Corporation, a publicly traded company, including most recently as Assistant Controller. From 1992 until
1997, he held several positions at Deloitte & Touche LLP, a public accounting firm. Mr. Oki holds a B.S. in Business Administration with a concentration in Accounting from San
Jose State University.
Kenneth Suh
has served as our President since August 2018. Mr. Suh founded Willow Biopharma Inc., a biopharmaceutical
company, in 2015 and served as the President and Chief Executive Officer and as a director from August 2015 to August 2018. In April 2018, Willow Biopharma Inc. became a wholly owned subsidiary
of the Company, and Mr. Suh was reappointed as the President and Chief Executive
Officer and as a director of Willow Biopharma Inc. In August 2018, Mr. Suh resigned as the President and Chief Executive Officer and as a director of Willow Biopharma Inc.
Mr. Suh also founded KRIM Biopharma Inc., a biopharmaceutical company, in 2013 and served as the President and Chief Executive Officer from August 2013 to August 2015 and as a director
from August 2013 to August 2015. Mr. Suh held the following roles for Novartis Pharma Canada, a pharmaceutical company: Franchise Lead from 2012 to 2013, Brand Manager from 2010 to 2012,
Associate Brand Manager from 2009 to 2010 and Medical Representative from 2006 to 2009. He received a Bachelor of Commerce, Honors Program from the University of Guelph, Ontario.
John L. Slebir
has served as our Senior Vice President, Business Development and General Counsel since January 2014, and, since June 2012,
he also has served as our Secretary. From June 2011 until January 2014, Mr. Slebir served as our Vice President, Business Development and General Counsel, from January 2011 until June 2011, he
served as our Vice President, General Counsel, and, from September 2009 until January 2011, he served as our General Counsel on a part-time basis. From March 1999 until January 2011, Mr. Slebir
served as an attorney at Wilson Sonsini Goodrich & Rosati, P.C., specializing in corporate securities and corporate governance. Prior to joining Wilson Sonsini Goodrich & Rosati,
P.C., Mr. Slebir was an attorney at two prominent Bay Area law firms
41
Table of Contents
specialized
in insurance and sporting equipment defense litigation. Mr. Slebir holds a B.A. in Communications from San Diego State University and a J.D. from Santa Clara University School of
Law.
M. Scott Oehrlein
has served as our Chief Operations Officer since April 30, 2018. Mr. Oehrlein served as the Global Chief
Operations Officer of Willow Biopharma Inc., a biopharmaceutical company, from November 2017 to April 2018 when it was acquired by us. He served as Vice President and Head of General Medicines
Sales/Diabetes and CV Sales, U.S. Sanofi, a global biopharmaceutical company, from April 2014 to June 2017. Mr. Oehrlein held various roles for Novartis Pharmaceuticals Corporation, a global
healthcare company, from August 2004 to April 2014 including the following: Vice President, Head of Primary Care Sales US from April 2012 to April 2014, General Manager South Operating Unit from
August 2011 to March 2012, and Vice President Primary Care Franchise, Novartis Canada Montreal from January 2009 to July 2011. He began his career as a sales representative with The Upjohn Company, a
global pharmaceutical company, in 1989 before moving into multiple leadership roles in sales and marketing. He received a B.A. in Biology and Pre-Medicine from Franklin and Marshall College.
Santosh T. Varghese, M.D.
has served as our Chief Medical Officer since January 2016. Dr. Varghese served as our Vice President,
Medical & Regulatory Affairs, Pharmacovigilance, and QA from October 2013 until December 2015, as our Vice President, Head of Medical Affairs, Pharmacovigilance, and Regulatory Compliance from
July 2013 until October 2013, as our Vice President, Head of Medical Affairs and Pharmacovigilance from April 2012 until July 2013, and as our Vice President, Head of
Medical Affairs from March 2012 until April 2012. Prior to this, Dr. Varghese was Senior Vice President, Medical Affairs at Elan Pharmaceuticals, a biopharmaceutical company, from January 2011
until March 2012. From April 2010 until January 2011, Dr. Varghese served as an executive consultant in the pharmaceutical industry for medical education and pharmaceutical companies. From June
2008 until April 2010, he was Vice President Primary Care & Cardiovascular in Global Medical Affairs at Schering-Plough Corporation (now Merck & Co.), a pharmaceutical company, in
addition to other senior roles at Schering-Plough Corporation from May 2006 until June 2008. From November 2000 until May 2006, he held senior roles at Aventis and Sanofi-Aventis (now
Sanofi SA), a pharmaceutical company. Dr. Varghese previously served on the board of directors of the American Lung AssociationNew York, and was an Adjunct Associate
Professor at Touro University College of Medicine (now New York Medical College). Dr. Varghese is the co-author of abstracts and journal publications in multiple therapeutic areas.
Dr. Varghese holds a B.S. in Biology from Pennsylvania State University and an M.D. from St. George's University School of Medicine. He completed his medical training in the Caribbean,
United States, and United Kingdom.
42
Table of Contents
AUDIT COMMITTEE REPORT
Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, this report of the
Audit Committee of our Board of Directors shall not be deemed "filed" with the SEC or "soliciting material" under the Securities Exchange Act of 1934, as amended, and shall not be incorporated by
reference into any such filings.
The
following is the report of the Audit Committee of the Board of Directors. The Audit Committee has reviewed and discussed our audited financial statements for the fiscal year ended
December 31, 2018 with our management. In addition, the Audit Committee has discussed with OUM & Co. LLP, our independent registered public accounting firm, or the
Auditors, the matters required to be discussed by the Statement on Auditing Standards No. 1301, "Communications with Audit Committees," as adopted by the Public Company Accounting Oversight
Board ("
PCAOB
").
The
Audit Committee also has received the written disclosures and the letter from the Auditors required by applicable requirements of the PCAOB regarding the Auditors' communications
with the Audit Committee concerning independence, and has discussed with the Auditors the Auditors' independence.
Based
on the Audit Committee's review of the matters noted above and its discussions with our Auditors and our management, the Audit Committee recommended to the Board of Directors that
the financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
|
|
|
|
|
AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
Herman Rosenman,
Chairman
|
|
|
Karen Ferrell
Thomas B. King
David Y. Norton
|
43
Table of Contents
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following Compensation Discussion and Analysis describes the philosophy, objectives and structure of our 2018 executive compensation
program. This includes discussion and background information regarding the compensation of our named executive officers.
We
refer to the following individuals as our "named executive officers" for 2018:
|
|
|
Name
|
|
Title
|
John P. Amos
|
|
Chief Executive Officer
|
Mark K. Oki
|
|
Senior Vice President, Chief Financial Officer and Chief Accounting Officer
|
Kenneth Suh
|
|
President
|
John L. Slebir
|
|
Senior Vice President, Business Development and General Counsel and Secretary
|
Santosh T. Varghese, M.D.
|
|
Chief Medical Officer
|
Thomas B. King
|
|
Former Interim Chief Executive Officer and Former Interim President
|
General Philosophy
We compensate our named executive officers through a combination of base salary, cash bonus and equity compensation designed to be competitive
with comparable companies. Our core objective is to attract, retain, reward and motivate our named executive officers and to align our performance with the long-term interests of our stockholders. We
evaluate our compensation based on a number of factors, including corporate and individual performance.
Our
compensation programs are designed to:
-
-
attract and retain our named executive officers by providing an overall compensation package that is competitive in the market in which we
compete through cash bonuses and long-term equity awards based on corporate and individual performance;
-
-
share the risks and rewards of our business with our named executive officers;
-
-
align the interests of our named executive officers with the interests of our stockholders in particular through equity awards; and
-
-
compensate our named executive officers in a manner that is efficient and affordable for the Company.
In
determining the compensation for our named executive officers, we, in connection with consulting with our compensation consultant, Radford, consider a number of factors, including
information regarding comparably sized companies in the biotechnology and pharmaceutical industries in the United States. We also consider the seniority level of the employee, and the employee's
overall performance and contribution to the Company.
Executive Summary
In 2018, we refocused VIVUS' business strategy to building a commercial company generating positive cash flows. We added to our team three new
executives with significant experience in acquiring and commercializing cash flow generating pharmaceutical products, Mr. Amos as our Chief Executive Officer, Mr. Suh as our President,
and Mr. Oerhlein as our Chief Operations Officer. In addition, we acquired PANCREAZE®, a cash flow generating asset. Our focus in the second half of 2018 and the
44
Table of Contents
first
quarter of 2019 was commercializing PANCREAZE and Qsymia®, maximizing the value of STENDRA®/SPEDRA, maintaining our Nasdaq listing and addressing our
outstanding debt balances. In the first quarter of 2019, we relaunched PANCREAZE, with a sales force of 10 representatives focused on targeting the top 40% of U.S. physicians who prescribe treatment
for exocrine pancreatic insufficiency. We are rolling out a direct-to-consumer distribution channel for Qsymia, which we believe will make Qsymia available to a greater number of potential customers
and increased our sales team to 21 representatives. We gained approval for STENDRA/SPEDRA in Russia, Jordan and Saudi Arabia. We completed our 1-for-10 reverse stock split allowing for our continued
listing on Nasdaq, and repurchased a total of $68.6 million of our convertible notes at a discount to face value. We continue the development of VI-0106 and anticipate filing an Investigational
New Drug Application with the U.S. Food and Drug Administration in 2019.
In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we held a non-binding stockholder vote at our 2018
Annual Meeting of Stockholders on our 2017 executive compensation practices. The Compensation Committee, while not bound to act on a negative vote, carefully considers the opinion of its stockholders
in making compensation decisions. We also have an ongoing dialogue with our largest stockholders about various aspects of our business and corporate governance, and we take into consideration the
concerns raised by such stockholders. The stockholders did not approve, on an advisory basis, our 2017 executive compensation at the 2018 Annual Meeting. After careful consideration, the Compensation
Committee in conjunction with executive management reduced the number of equity awards granted to our then serving named executive officers, continued to integrate the changes to our senior management
team in 2018 (including the hiring of a new Chief Executive Officer and a new President) with the goal of executing on our business strategy, changed the composition of the Board of Directors and
changed the composition of the Compensation Committee in February 2019. In alignment with our philosophy on stockholder say-on-pay and with the results of the say-on-pay frequency vote held at our
2017 Annual Meeting, we intend to continue to hold non-binding stockholder say-on-pay votes annually.
Executive Compensation Program Objectives
Our Compensation Committee relies on experience with other companies in our industry and third-party industry compensation surveys, including
those compiled and periodically provided to the Compensation Committee by Radford, executive compensation data as reported in peer companies' proxy statements, and internally generated comparisons of
the various elements of total compensation to peer group companies (the "
Peer Group
") to determine base salary, performance-based cash bonuses and
performance-based equity awards and the portion of total compensation each element should comprise. Given our named executive officers' level of responsibility in the Company and impact on the
performance of the Company, we believe that a larger portion of our named executive officers' compensation should be based on performance than that of our lower-level employees. Consistent with our
compensation philosophy, we have structured each element of our compensation program as described below.
We
design our base pay to provide the essential reward for an employee's work. Once base pay levels are determined, annual increases in base pay are provided to recognize an employee's
expanded role and capabilities, specific performance achievements and contributions. Adjustments may also be made for changes in comparable peer company compensation levels in order to remain
competitive to attract and retain employees.
45
Table of Contents
We
also utilize annual cash bonuses to compensate employees for the achievement of corporate objectives as well as an employee's outstanding results while allowing us to remain
competitive with other companies.
We
utilize equity-based compensation to ensure that we have the ability to retain employees over a longer period of time and to provide employees with a form of reward that aligns their
interests with those of our stockholders. Employees whose skills and results we deem to be critical to our long-term success are eligible to receive higher levels of equity-based compensation.
In
2018, our annual equity-based compensation to our named executive officers consisted of stock options. The annual equity awards to our then serving named executive officers,
Messrs. Oki and Slebir and Dr. Varghese, and our other employees vest over a period of four years, providing a long-term incentive to our employees as they work on multi-year
commercialization and drug development programs. Also, in April 2018, Messrs. Amos and Suh were granted equity awards under our 2018
Inducement Equity Incentive Plan, which also vest over a period of four years. Further, in April 2018, each of Messrs. Amos, Oki, Slebir and Suh were granted an additional option award under an
equity bonus plan; the option awards vest upon satisfaction of a performance target involving the Company obtaining and retaining for 30 consecutive days, a market capitalization of
$300 million or greater, within 36 months.
Mr. King
served as the Company's interim Chief Executive Officer from December 31, 2017 to April 30, 2018 and as the Company's interim President from
April 30, 2018 to May 30, 2018. Additionally, Mr. King has been on the Company's Board since May 24, 2017. Mr. King's equity-based compensation during 2018 was for
his role as a non-employee director on the Company's Board and for his role as the Company's interim Chief Executive Officer. The two 2018 option awards to Mr. King for his role as the
Company's interim Chief Executive Officer vest as follows: one award vests over a three year period and the other award was fully vested on the grant date. The 2018 option award to Mr. King for
his role as a non-employee director vests monthly over a one year period.
Core
benefits, such as our basic health benefits, 401(k) program, disability and life insurance plans, are designed to provide support to employees and their families and to be
competitive with other companies in our industry.
For determining 2018 compensation levels, our Compensation Committee, after consulting with Radford, chose a group of 22 companies to include in
the Peer Group based on their similarity to us in terms of industry focus, stage of development, market capitalization size, revenues, financial position, entity size, pharmaceutical assets, business
strategy, and the geographical location of the talent pool with which we compete. The market data for the Peer Group was drawn from publicly available
46
Table of Contents
documents.
For 2018, the Peer Group, which was determined by the Compensation Committee after consulting with Radford, consisted of the following companies:
|
|
|
AcelRx Pharmaceuticals, Inc.
|
|
Fortress Biotech, Inc.
|
Adamis Pharmaceuticals Corporation
|
|
Juniper Pharmaceuticals, Inc.
|
ADMA Biologics, Inc.
|
|
MannKind Corporation
|
Alimera Sciences, Inc.
|
|
Neos Therapeutics, Inc.
|
Aralez Pharmaceuticals Inc.
|
|
Orexigen Therapeutics, Inc.
|
Arena Pharmaceuticals, Inc.
|
|
Pernix Therapeutics Holdings, Inc.
|
BioDelivery Sciences International, Inc.
|
|
Retrophin, Inc.
|
Corium International, Inc.
|
|
Sorrento Therapeutics, Inc.
|
CTI BioPharma Corp.
|
|
Teligent, Inc.
|
Cumberland Pharmaceuticals Inc.
|
|
Verastem, Inc.
|
Endocyte, Inc.
|
|
Vericel Corporation
|
The
data on the compensation practices of the Peer Group is gathered by our searches of publicly available information. Due to the variations between companies reporting the individual
and roles for which compensation is disclosed, directly comparable information is not available from each peer company with respect to each of our named executive officers. In considering the Peer
Group compensation data, the Compensation Committee recognizes that executives at different companies can play significantly different roles, with different responsibilities and scope of work, even
though they may hold similar titles or positions. Moreover, it is not always possible to determine the respective qualitative factors that may influence compensation from the publicly reported
compensation data, such as scope of each named executive officer's responsibilities, their performance during the period under consideration or their perceived importance to their companies' business,
strategy and objectives. Accordingly, the Compensation Committee looked to information about the Peer Group as one of a number of considerations in establishing executive compensation levels (as
described in more detail below). In determining compensation for our named executive officers, the Compensation Committee reviewed both Peer Group information and the collective experience of the
members of our Compensation Committee and executive management to establish our compensation practices.
Executive Compensation Components
We have structured each element of our compensation package as follows:
We determine our named executive officers' salaries based on job responsibilities and individual experience, and we benchmark the amounts we pay
against comparable competitive market compensation for similar positions within our Peer Group and industry. Specifically, we utilize information obtained from our comparison of Peer Group
compensation data and the annual Radford Global Life Sciences Survey (the "
Comparison Data
"). Our Compensation Committee reviews the salaries of our
named executive officers annually, and our Compensation Committee grants increases in salaries based on a review of the Comparison Data and of individual performance during the prior calendar year
provided that any increases are within the guidelines provided by Radford and determined by the Compensation Committee for each position. Guidelines are adjusted and modified on an annual basis based
on information obtained from our review of the Comparison Data, as well as from our Compensation Committee's and management's experience and general employment market conditions for our industry and
geographic area. Increases in base salary are based on individual performance as merit increases and on the Comparison Data as market increases; such increases are not automatic or guaranteed.
47
Table of Contents
In
January 2018, our Compensation Committee reviewed base salaries for our then serving named executive officers. The Compensation Committee considered a number of factors in setting the
2018 base salaries for our then serving named executive officers, including maximizing the value of Qsymia and STENDRA/SPEDRA, building our product development pipeline, identifying and acquiring a
cash flow producing product, and managing our cost structure. In addition, the Compensation Committee reviewed the Comparison Data and the individual performance of our named executive officers during
the prior calendar year. Following the Compensation Committee's review, Messrs. Oki and Slebir and Dr. Varghese received increases to their base salaries.
The
table below provides the base salary for each named executive officer:
|
|
|
|
|
|
|
|
Name
|
|
2018
Increase to
Base Salary
|
|
2018
Base Salary ($)
|
|
John P. Amos(1)
|
|
|
|
|
|
545,000
|
|
Mark K. Oki
|
|
|
6
|
%
|
|
383,985
|
|
Kenneth Suh(2)
|
|
|
|
|
|
460,000
|
|
John L. Slebir
|
|
|
3
|
%
|
|
482,710
|
|
Santosh T. Varghese, M.D.
|
|
|
1
|
%
|
|
426,120
|
|
Thomas B. King(3)
|
|
|
|
|
|
507,000
|
|
-
(1)
-
Effective
April 30, 2018, Mr. Amos was appointed to serve as the Company's Chief Executive Officer.
-
(2)
-
Effective
August 3, 2018, Mr. Suh was appointed to serve as the Company's President. Mr. Suh previously served as President and Chief Executive
Officer of Willow Biopharma Inc., a wholly owned subsidiary of the Company.
-
(3)
-
Mr. King
served as the Company's interim Chief Executive Officer from December 31, 2017 to April 30, 2018 and as the Company's interim President
from April 30, 2018 to May 30, 2018.
Annual Bonus Plan.
We awarded cash bonuses under the Annual Bonus Plan to our eligible named executive officers based on our overall
corporate
performance, achievement of general corporate performance objectives established by our Board of Directors in August 2018 and individual performance. The cash bonuses are based on an end-of-year
assessment by our Compensation Committee. The corporate performance and the achievement of corporate objectives determine the percent of the eligible cash bonus to be paid to each eligible named
executive officer. Each eligible named executive officer's individual performance is reviewed to determine how such named executive officer's performance contributed to our overall corporate
performance and achievement of corporate performance objectives. The Compensation Committee uses this information to determine the named executive officer's cash bonus award, such that the percent of
the eligible bonus to be paid to a named executive officer may be increased, decreased or eliminated based on the individual performance review. Cash bonuses under the Annual Bonus Plan are awarded on
a discretionary basis, and the Compensation Committee may modify, eliminate or adjust corporate objectives at any time, thereby ensuring that employees are compensated for performance.
For
2018, our corporate performance objectives as approved by our Board in August 2018, were as follows:
-
-
achieving certain strategic goals to increase enterprise and stockholder value;
-
-
achieving certain PANCREAZE and Qsymia commercialization goals; and
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Table of Contents
-
-
achieving certain corporate development goals, certain compliance excellence goals and certain human resources goals.
In
the Compensation Committee's opinion, the Company succeeded in meeting the following corporate objective: achieving certain strategic goals to increase enterprise and stockholder value. Further, in
the Compensation Committee's opinion, the Company succeeded, in part, in meeting the following corporate objectives: achieving certain PANCREAZE and Qsymia commercialization goals and achieving
certain corporate development goals, certain compliance excellence goals and certain human resources goals. Based on the achievements in 2018, the Compensation Committee determined that bonuses under
the Annual Bonus Plan equaling 85% of the eligible cash bonus potential would be paid for 2018 to our eligible employees under the plan, including our eligible named executive officers.
The
table below provides the target bonus for each named executive officer who participated in the Annual Bonus Plan for 2018 and the executive's actual bonus amount:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2018 Target
Bonus as a
Percentage of
Base Salary
|
|
2018 Target
Bonus ($)
|
|
2018
Maximum
Bonus as a
Percentage of
Base Salary
|
|
2018
Maximum
Bonus ($)(1)
|
|
2018 Actual
Bonus as a
Percentage of
Base Salary
|
|
2018
Actual
Bonus ($)
|
|
John P. Amos(2)
|
|
|
60
|
%
|
|
327,000
|
|
|
60
|
%
|
|
327,000
|
|
|
34
|
%
|
|
186,227
|
|
Mark K. Oki
|
|
|
40
|
%
|
|
153,594
|
|
|
40
|
%
|
|
153,594
|
|
|
34
|
%
|
|
130,555
|
|
Kenneth Suh(2)
|
|
|
50
|
%
|
|
230,000
|
|
|
50
|
%
|
|
230,000
|
|
|
28
|
%
|
|
130,985
|
|
John L. Slebir
|
|
|
50
|
%
|
|
241,355
|
|
|
50
|
%
|
|
241,355
|
|
|
43
|
%
|
|
205,152
|
|
Santosh T. Varghese, M.D.
|
|
|
40
|
%
|
|
170,448
|
|
|
40
|
%
|
|
170,448
|
|
|
34
|
%
|
|
144,881
|
|
Thomas B. King(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
Compensation Committee may award up to 10% of base salary of additional bonus to each named executive officer based on individual performance.
-
(2)
-
Amounts
for Messrs. Amos and Suh represent a pro rata portion of their respective bonus under the Annual Bonus Plan based on the time that they each served in
their respective positions with the Company in 2018.
-
(3)
-
Mr. King
served as the interim Chief Executive Officer from December 31, 2017 to April 30, 2018 and as the interim President from
April 30, 2018 to May 30, 2018. Mr. King did not participate in the Annual Bonus Plan for 2018.
For
2019, under the Annual Bonus Plan, the Compensation Committee determined that our Chief Executive Officer, Chief Financial Officer, Senior Vice Presidents (or equivalent pay grade)
and Vice Presidents (or equivalent pay grade) would be eligible to receive target and maximum cash bonuses of up to 60%, 50%, 50% and 40% of their base salaries, respectively. The table below provides
the 2019
49
Table of Contents
base
salary and the target and maximum bonuses for each named executive officer who is participating in the Annual Bonus Plan for 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2019 Base
Salary ($)
|
|
2019 Target
Bonus as a
Percentage of
Base Salary
|
|
2019 Target
Bonus ($)
|
|
2019 Maximum
Bonus as a
Percentage of
Base Salary
|
|
2019 Maximum
Bonus ($)(1)
|
|
John P. Amos
|
|
|
545,000
|
|
|
60
|
%
|
|
327,000
|
|
|
60
|
%
|
|
327,000
|
|
Mark K. Oki
|
|
|
411,000
|
|
|
50
|
%
|
|
205,500
|
|
|
50
|
%
|
|
205,500
|
|
Kenneth Suh
|
|
|
473,800
|
|
|
50
|
%
|
|
236,900
|
|
|
50
|
%
|
|
236,900
|
|
John L. Slebir
|
|
|
497,200
|
|
|
50
|
%
|
|
248,600
|
|
|
50
|
%
|
|
248,600
|
|
Santosh T. Varghese, M.D.
|
|
|
438,900
|
|
|
40
|
%
|
|
175,560
|
|
|
40
|
%
|
|
175,560
|
|
-
(1)
-
The
Compensation Committee may award up to 10% of base salary of additional bonus to each named executive officer based on individual performance.
Supplemental Cash Bonus Plan.
We implemented a Supplemental Cash Bonus Plan. Under the Supplemental Cash Bonus Plan, our named executive
officers,
other than Mr. King, are eligible to each receive a supplemental cash bonus of $200,000 should the Company achieve certain financial metrics in fiscal year 2019; provided, however, that the
payment of the supplemental cash bonus shall be at the sole discretion of the Compensation Committee and made only to eligible officers in good standing and employed on the date of payment.
2018 Cash Bonus.
In June 2018, we awarded special bonus payments to Messrs. Oki and Slebir in the amount of $50,000 each for their
performance
in the first half of 2018 in connection with the acquisition of the shares of Willow Biopharma Inc. and onboarding of the members of new management, the acquisition of the product
PANCREAZE® from Janssen Pharmaceuticals, Inc., and the financing with Athyrium Capital Management, L.P.
We award equity compensation to our named executive officers based on the performance of the named executive officer and guidelines provided by
Radford related to each named executive officer's position in the Company. In addition, we rely on the assistance and recommendations of Radford with regards to peer practices and pay levels, as well
as other relevant information regarding companies in our industry. We utilize the Comparison Data to modify and adjust our equity award guidelines. We typically base awards to newly hired employees on
these guidelines, and we base awards to continuing employees on these guidelines along with an employee's performance for the prior fiscal year. In determining the amount of awards, we generally do
not consider an employee's current equity ownership in the Company or the prior awards that are fully vested. Rather, we evaluate each employee's awards based on the factors described above and
competitive market factors in our industry.
Our
stock option awards typically vest over a four-year period subject to the continued service of the employee to the Company. Twenty-five percent of the shares typically vest on the
first anniversary of the option award, with the remaining shares vesting monthly in equal amounts over the remainder of the vesting period. Our restricted stock unit awards typically vest over a
four-year period subject to the continued service of the employee to the Company. Twenty-five percent of the shares typically vest on each annual anniversary of the restricted stock unit award. Unless
our employees (including our named executive officers) elect otherwise, upon the vesting of the restricted stock units shares of Common Stock are sold to satisfy the tax liability due upon such
vesting. We believe these vesting arrangements encourage our employees to continue service to the Company for a longer period of time and remain focused on our multi-year long-term drug development
and commercialization programs.
50
Table of Contents
Timing of Equity Awards.
Our Compensation Committee typically makes award decisions for employees at its first meeting in each fiscal
year. We
believe determining annual awards at this time allow the Compensation Committee to consider a number of factors related to the stock option award and restricted stock unit award decisions, including
corporate performance for the prior fiscal year, employee performance for the prior fiscal year and expectations for the upcoming fiscal year. With respect to newly hired employees, our practice is
typically to make stock option awards at the first meeting of the Compensation Committee following the employee's hire date. We do not plan or time our stock option awards in coordination with the
release of material non-public information for the purpose of affecting the value of executive compensation.
Allocation of Equity Compensation.
In 2018, we granted stock options to purchase 1,157,668 shares of our Common Stock, of which stock
options to
purchase (i) a total of 718,750 shares were awarded to named executive officers (includes shares granted to Mr. King during 2018 for his role as a non-employee director on the Company's
Board), representing approximately 62% of all stock option awards in 2018, and (ii) a total of 160,000 shares were awarded to directors (excludes shares granted to Mr. King during 2018
for his role as a non-employee director on the Company's Board and includes shares granted to Mr. Shaw during 2018 for his role as a consultant with the Company), representing approximately 14%
of all stock option awards in 2018. Our Compensation Committee does not apply a formula for allocating stock options and restricted stock units to named executive officers. Instead, our Compensation
Committee considers the role and responsibilities of the named executive officers, competitive factors, the non-equity compensation received by the named executive officers and the total number of
stock options and restricted stock units to be granted in the fiscal year. Mr. King received a stock option award to purchase 15,000 shares of the Company's Common Stock for his role as a
non-employee director on the Company's Board in 2018 and received stock option awards to purchase 80,000 shares of the Company's Common Stock for his role as interim Chief Executive Officer in 2018.
Type of Equity Awards.
Under our 2018 Equity Incentive Plan, we may award incentive stock options, within the meaning of
Section 422 of the
Code to our employees, and we may award nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares to our employees,
directors and consultants. In 2018, we awarded stock options to our named executive officers. In 2018, Mr. King received stock options for his role as interim Chief Executive Officer and for
his role as a non-employee director on the Company's Board.
Equity Awards in 2018.
In January 2018, our Compensation Committee reviewed equity compensation for our then serving named executive
officers. The
Compensation Committee reviewed the Comparison Data and the individual performance of such named executive officers during the prior calendar year. Following the Compensation Committee's review, all
of our named executive officers, with the exception of Messrs. Amos, Suh and King, received stock options as reflected in the 2018 Grants of Plan-Based Awards Table below. In April 2018,
Messrs. Amos and Suh were granted equity awards under our 2018 Inducement Equity Incentive Plan as reflected in the 2018 Grants of Plan-Based Awards Table below. Also, in April 2018, each of
Messrs. Amos, Oki, Slebir and Suh were granted an additional stock option award under an equity bonus plan as reflected in the 2018 Grants of Plan-Based Awards Table below. Further, in 2018,
Mr. King received stock options for his role as interim Chief Executive Officer and for his role as a non-employee director on the Company's Board as reflected in the 2018 Grants of Plan-Based
Awards Table below.
Retirement Savings Plan
We maintain a 401(k) retirement savings plan for the benefit of our eligible employees. Employees may elect to contribute their compensation up
to the statutorily prescribed limit. We currently match employee contributions up to a maximum of 4% of an employee's salary per pay period. In 2018, the employer-match contribution limit was $10,800
per employee.
51
Table of Contents
Change of Control Benefits
A description of the change of control benefits given to our named executed officers and a table showing potential payments upon termination or
change of control of our named executive officers are set forth below under the section entitled "Potential Payments Upon Termination or Change of Control for each Named Executive Officer."
Perquisites and Other Benefits
We annually review the perquisites that our named executive officers receive. We offer short-term and long-term disability insurance plans to
all of our employees, including all of our named executive officers.
Compensation Process
The Compensation Committee reviews and approves the salaries and incentive compensation of our named executive officers, executive and
non-executive officers and non-employee directors and reviews and approves all new hire stock option awards to employees. In addition, the Compensation Committee approves equity awards for all
employees as part of our annual performance review process. The Compensation Committee approves a pool of equity awards for employees who are not executive officers, and the Chief Executive Officer
distributes this pool in his discretion and based on the performance of each individual. The agendas for meetings of the Compensation Committee are prepared by the Compensation Committee Chairman in
consultation with management. Our Chief Executive Officer, Chief Financial Officer, and General Counsel typically attend the meetings of the Compensation Committee, but the Chief Executive Officer,
the Chief Financial Officer and the General Counsel do not participate in deliberations relating to their own compensation. In rendering its decisions, the Compensation Committee considers the
recommendations of the Chief Executive Officer, with input by the Chief Financial Officer and the General Counsel, the information regarding comparably sized companies in the biotechnology and
pharmaceutical industries in the United States and its collective experience with other companies. Additionally, the Compensation Committee considers data and information provided by Radford. The
Compensation Committee reviews the performance and compensation of the Chief Executive Officer and Chief Financial Officer annually, in addition to all other executive and non-executive officers.
Our
Compensation Committee also works with our Chief Executive Officer and Chief Financial Officer in evaluating the financial, accounting, tax and retention implications of our various
compensation programs.
Effect of Accounting and Tax Treatment on Compensation Decisions
Generally, Section 162(m) of the Code disallows a tax deduction to any publicly-held corporation for any remuneration in excess of
$1.0 million paid in any taxable year to its chief executive officer and each of its three next most highly-compensated named executive officers (other than its chief financial officer only for
fiscal years prior to 2017). Remuneration in excess of $1.0 million may be deducted if, among other things, it qualifies as "performance-based compensation" within the meaning of the Code.
The
2017 tax reform legislation removed the "performance-based compensation" exception from Section 162(m). Accordingly, awards made after November 2, 2017, generally are
not eligible for the "performance-based compensation" exception and will not be deductible to the extent that they cause the compensation of the affected executive officers to exceed $1 million
in any year. Awards that were made and subject to binding written contracts in effect on November 2, 2017, are "grandfathered" under prior law and can still qualify as deductible
"performance-based compensation," even if paid in future years. Our Compensation Committee will continue to monitor these awards and endeavor to ensure that they are deductible if and when paid. While
the Compensation Committee considers the
52
Table of Contents
deductibility
of compensation as one factor in determining executive compensation, the Compensation Committee believes that it is in the best interests of our stockholders to maintain flexibility in
our approach to executive compensation and to structure a program that we consider to be the most effective in attracting, motivating and retaining key employees.
Executive Time Off
All of our full-time employees, including our named executive officers, receive three to seven weeks of vacation each year, based upon the
length of service. Mr. King, our former interim Chief Executive Officer from December 31, 2017 to April 30, 2018, then interim President from April 30, 2018 to
May 30, 2018, was entitled to receive four weeks of vacation each year. Mr. Amos, our current Chief Executive Officer, is entitled to receive three weeks of vacation each year. Unused
vacation carries over to the following year and may accumulate up to three weeks at any time. Upon termination, all employees are paid their accrued benefit that existed as of the date of such
termination. Additionally, all employees receive two personal days and eight sick days each year. Unused personal days carry over to the following year and may accumulate up to two days. All employees
are paid their accrued benefit of any unused personal days as of the date of termination. Sick days expire if unused as of the date of termination or the end of the calendar year.
Compensation Committee Report
The information contained in this report shall not be deemed to be "soliciting material" or "filed" with the SEC or
subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference into a document
filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
The
Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee
recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
|
|
|
|
|
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
|
|
|
David Y. Norton,
Chairman
Edward A. Kangas
Herman Rosenman
|
53
Table of Contents
EXECUTIVE AND DIRECTOR COMPENSATION TABLES
2018 Summary Compensation Table
The following table presents information for our fiscal year ended December 31, 2018 concerning the total compensation paid to or accrued
for our Chief Executive Officer, former interim Chief Executive Officer, Chief Financial Officer, and each of our three other most highly compensated executive officers. We refer to these executive
officers as our "named executive officers" below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
($)(1)
|
|
Bonus
($)(2)
|
|
Stock
Awards
($)(3)
|
|
Option
Awards
($)(3)
|
|
Non-Equity
Incentive Plan
Compensation
($)(4)
|
|
All Other
Compensation
($)(5)
|
|
Total
($)
|
|
John P. Amos(6)
|
|
|
2018
|
|
|
365,429
|
|
|
|
|
|
|
|
|
532,440
|
|
|
186,227
|
|
|
10,800
|
|
|
1,094,896
|
|
Chief Executive Officer and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark K. Oki(7)
|
|
|
2018
|
|
|
383,986
|
|
|
50,000
|
|
|
|
|
|
102,870
|
|
|
130,555
|
|
|
10,800
|
|
|
678,211
|
|
Senior Vice President,
|
|
|
2017
|
|
|
362,250
|
|
|
|
|
|
|
|
|
210,595
|
|
|
100,561
|
|
|
10,800
|
|
|
684,206
|
|
Chief Financial Officer and
|
|
|
2016
|
|
|
350,000
|
|
|
|
|
|
|
|
|
52,510
|
|
|
126,000
|
|
|
4,000
|
|
|
532,510
|
|
Chief Accounting Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Suh(8)
|
|
|
2018
|
|
|
306,140
|
|
|
|
|
|
|
|
|
348,840
|
|
|
130,985
|
|
|
100,000
|
|
|
885,965
|
|
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Slebir
|
|
|
2018
|
|
|
482,710
|
|
|
50,000
|
|
|
|
|
|
117,045
|
|
|
205,152
|
|
|
10,800
|
|
|
865,707
|
|
Senior Vice President,
|
|
|
2017
|
|
|
468,650
|
|
|
|
|
|
|
|
|
239,313
|
|
|
162,622
|
|
|
10,800
|
|
|
881,385
|
|
Business Development and
|
|
|
2016
|
|
|
452,800
|
|
|
|
|
|
|
|
|
351,000
|
|
|
203,760
|
|
|
10,600
|
|
|
1,018,160
|
|
General Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Santosh T. Varghese, M.D.
|
|
|
2018
|
|
|
426,120
|
|
|
|
|
|
|
|
|
49,613
|
|
|
144,881
|
|
|
10,800
|
|
|
631,414
|
|
Chief Medical Officer
|
|
|
2017
|
|
|
421,900
|
|
|
|
|
|
|
|
|
210,595
|
|
|
75,942
|
|
|
10,800
|
|
|
719,237
|
|
|
|
|
2016
|
|
|
407,600
|
|
|
|
|
|
|
|
|
308,880
|
|
|
146,736
|
|
|
10,600
|
|
|
873,816
|
|
Thomas B. King(9)
|
|
|
2018
|
|
|
217,587
|
|
|
|
|
|
|
|
|
242,458
|
|
|
|
|
|
23,333
|
|
|
483,378
|
|
Former Interim Chief Executive Officer,
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
59,688
|
|
|
|
|
|
30,176
|
|
|
89,864
|
|
Former Interim President and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
amounts in this column include payments in respect of vacation, personal days, holidays and sick days taken during the fiscal years presented.
-
(2)
-
The
amounts included in this column represent special bonus payments that were approved by the Compensation Committee in June 2018 and paid to Messrs. Oki and
Slebir for their performance in the first half of 2018 in connection with the acquisition of the shares of Willow Biopharma Inc. and onboarding of the members of new management, the acquisition
of the product PANCREAZE® from Janssen Pharmaceuticals, Inc., and the financing with Athyrium Capital Management, L.P.
-
(3)
-
The
amounts included in this column do not reflect compensation actually received by the named executive officer but represent the grant date fair value computed in
accordance with FASB ASC Topic 718. The valuation assumptions used in determining such amounts are described in Note 15 to our consolidated financial statements included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2018. See also the 2018 Grants of Plan-Based Awards table below for information on option awards made in 2018.
-
(4)
-
The
amounts for fiscal year 2018 in this column consist of cash bonus payments under the Annual Bonus Plan approved by the Compensation Committee in January 2019.
Please see "Compensation Discussion and Analysis" above for a description of the Annual Bonus Plan.
54
Table of Contents
-
(5)
-
The
amounts in this column include (i) contributions made by the Company under its 401(k) Plan; (ii) reimbursement for moving expenses; and
(iii) Board fees earned or paid in cash to Mr. King for his role as a non-employee director on the Company's Board, as provided in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Year
|
|
401(k)
Contributions
($)
|
|
Reimbursement
for Moving
Expenses ($)
|
|
Board
Fees ($)
|
|
John P. Amos
|
|
|
2018
|
|
|
10,800
|
|
|
|
|
|
|
|
Mark K. Oki
|
|
|
2018
|
|
|
10,800
|
|
|
|
|
|
|
|
Kenneth Suh
|
|
|
2018
|
|
|
|
|
|
100,000
|
|
|
|
|
John L. Slebir
|
|
|
2018
|
|
|
10,800
|
|
|
|
|
|
|
|
Santosh T. Varghese, M.D.
|
|
|
2018
|
|
|
10,800
|
|
|
|
|
|
|
|
Thomas B. King
|
|
|
2018
|
|
|
|
|
|
|
|
|
23,333
|
|
-
(6)
-
Mr. Amos
was appointed to serve as the Company's Chief Executive Officer, effective April 30, 2018.
-
(7)
-
The
Board of Directors of the Company authorized and approved the promotion of Mr. Oki from his role as Chief Financial Officer and Chief Accounting Officer
to the role of Senior Vice President, Chief Financial Officer and Chief Accounting Officer, effective February 21, 2019.
-
(8)
-
Mr. Suh
was appointed to serve as the Company's President, effective August 3, 2018. Mr. Suh previously served as President and Chief Executive
Officer of Willow Biopharma Inc., a wholly owned subsidiary of the Company. Prior to Mr. Suh's appointment as the Company's President, he received compensation in Canadian dollars.
Amounts shown reflect the exchange rate from Canadian dollars to U.S. dollars of 0.768, the average exchange rate over the period of such compensation.
-
(9)
-
The
amount in the Option Awards column for fiscal year 2018 represents the value of stock option awards received by Mr. King for his role as interim Chief
Executive Officer and for his role as a non-employee director on the Company's Board, and the amount in the Option Awards column for fiscal year 2017 represents the value of stock option awards
received by Mr. King for his role as a non-employee director on the Company's Board. The amounts in the All Other Compensation column represent fees earned or paid in cash to Mr. King
for his role as a non-employee director on the Company's Board. Mr. King served as the Company's interim Chief Executive Officer from December 31, 2017 to April 30, 2018 and as
the Company's interim President from April 30, 2018 to May 30, 2018. Mr. King has been on the Company's Board since May 24, 2017.
55
Table of Contents
2018 Grants of Plan-Based Awards
The following table provides information with regard to each grant of an award made to a named executive officer under any plan during the
fiscal year ended December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(#)
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options(#)
|
|
Exercise
or Base
Price of
Option
Awards
($/Sh)(2)
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1)
|
|
Grant Date
Fair Value
of Stock
and Option
Awards($)(3)
|
|
|
|
Grant
Date
|
|
Name
|
|
Threshold($)
|
|
Target($)
|
|
Maximum($)
|
|
John P. Amos
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
4/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270,000
|
|
|
3.70
|
|
|
495,720
|
|
|
|
|
4/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
3.70
|
|
|
36,720
|
|
Restricted Stock Unit Award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus Plan
|
|
|
|
|
|
|
|
|
327,000
|
|
|
327,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark K. Oki
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
2/2/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
4.00
|
|
|
66,150
|
|
|
|
|
4/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
3.70
|
|
|
36,720
|
|
Restricted Stock Unit Award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus Plan
|
|
|
|
|
|
|
|
|
153,594
|
|
|
153,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Suh
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
4/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170,000
|
|
|
3.70
|
|
|
312,120
|
|
|
|
|
4/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
3.70
|
|
|
36,720
|
|
Restricted Stock Unit Award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus Plan
|
|
|
|
|
|
|
|
|
230,000
|
|
|
230,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Slebir
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
2/2/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,500
|
|
|
4.00
|
|
|
80,325
|
|
|
|
|
4/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
3.70
|
|
|
36,720
|
|
Restricted Stock Unit Award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus Plan
|
|
|
|
|
|
|
|
|
241,355
|
|
|
241,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Santosh T. Varghese, M.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
2/2/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,250
|
|
|
4.00
|
|
|
49,613
|
|
Restricted Stock Unit Award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus Plan
|
|
|
|
|
|
|
|
|
170,448
|
|
|
170,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas B. King(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
1/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
4.60
|
|
|
130,380
|
|
|
|
|
6/15/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
8.40
|
|
|
84,260
|
|
|
|
|
10/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
3.53
|
|
|
27,818
|
|
Restricted Stock Unit Award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
row entitled "Annual Bonus Plan" for each respective named executive officer in the table above reflects the threshold, target and maximum value of a cash bonus
award to each respective named executive officer for 2018 under the Annual Bonus Plan approved by the Compensation Committee in January 2019. Please see "Compensation Discussion and Analysis" above
for further detail on the maximum value of a cash bonus award to each respective named executive officer. The cash bonus award amounts actually paid under the Annual Bonus Plan to the named executive
officers for 2018 are shown in the Summary Compensation Table for 2018 under the heading "Non-Equity Incentive Plan Compensation." Please see "Compensation Discussion and Analysis" above for a
description of the Annual Bonus Plan.
-
(2)
-
Stock
options are granted at an exercise price equal to the fair market value of the Company's Common Stock, as determined by reference to the closing price reported
by The Nasdaq Global Select Market on the date of grant.
56
Table of Contents
-
(3)
-
The
grant date fair value of stock awards is calculated based on the market value of the Company's Common Stock on the date of grant. The grant date fair value of
option awards is calculated using the Black-Scholes option pricing model on the date of the grant.
-
(4)
-
The
information in the table above relates to stock option awards received by Mr. King for his role as interim Chief Executive Officer and for his role as a
non-employee director on the Company's Board. Mr. King served as the Company's interim Chief Executive Officer from December 31, 2017 to April 30, 2018 and as the Company's
interim President from April 30, 2018 to May 30, 2018. Mr. King has been on the Company's Board since May 24, 2017.
Outstanding Equity Awards at Fiscal Year-End
The following table presents certain information concerning the outstanding equity awards held as of December 31, 2018 by each named
executive officer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable(1)
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(1)
|
|
Option
Exercise
Price
($)(2)
|
|
Option
Expiration
Date(3)
|
|
Number of
Shares or Units
of Stock That
Have Not
Vested(#)(4)
|
|
Market Value of
Shares or Units
of Stock That
Have Not
Vested
($)(5)
|
|
John P. Amos
|
|
|
|
|
|
270,000
|
|
|
3.70
|
|
|
4/30/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
3.70
|
|
|
4/30/2025
|
|
|
|
|
|
|
|
Mark K. Oki
|
|
|
17,813
|
|
|
4,687
|
|
|
12.60
|
|
|
10/30/2022
|
|
|
|
|
|
|
|
|
|
|
6,818
|
|
|
2,532
|
|
|
10.60
|
|
|
1/22/2023
|
|
|
|
|
|
|
|
|
|
|
18,449
|
|
|
20,051
|
|
|
11.20
|
|
|
1/27/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
4.00
|
|
|
2/2/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
3.70
|
|
|
4/30/2025
|
|
|
|
|
|
|
|
Kenneth Suh
|
|
|
|
|
|
170,000
|
|
|
3.70
|
|
|
4/30/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
3.70
|
|
|
4/30/2025
|
|
|
|
|
|
|
|
John L. Slebir
|
|
|
375
|
|
|
|
|
|
63.90
|
|
|
9/4/2019
|
|
|
162
|
|
|
361
|
|
|
|
|
16,626
|
|
|
|
|
|
87.40
|
|
|
1/21/2021
|
|
|
|
|
|
|
|
|
|
|
5,001
|
|
|
|
|
|
120.40
|
|
|
1/27/2022
|
|
|
|
|
|
|
|
|
|
|
7,001
|
|
|
|
|
|
123.90
|
|
|
1/25/2023
|
|
|
|
|
|
|
|
|
|
|
5,101
|
|
|
|
|
|
77.50
|
|
|
1/28/2021
|
|
|
|
|
|
|
|
|
|
|
24,557
|
|
|
83
|
|
|
27.40
|
|
|
1/23/2022
|
|
|
|
|
|
|
|
|
|
|
45,573
|
|
|
16,927
|
|
|
10.60
|
|
|
1/22/2023
|
|
|
|
|
|
|
|
|
|
|
20,963
|
|
|
22,787
|
|
|
11.20
|
|
|
1/27/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,500
|
|
|
4.00
|
|
|
2/2/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
3.70
|
|
|
4/30/2025
|
|
|
|
|
|
|
|
Santosh T. Varghese, M.D.
|
|
|
20,001
|
|
|
|
|
|
242.30
|
|
|
4/25/2022
|
|
|
92
|
|
|
205
|
|
|
|
|
5,251
|
|
|
|
|
|
123.90
|
|
|
1/25/2023
|
|
|
|
|
|
|
|
|
|
|
3,401
|
|
|
|
|
|
77.50
|
|
|
1/28/2021
|
|
|
|
|
|
|
|
|
|
|
13,840
|
|
|
130
|
|
|
27.40
|
|
|
1/23/2022
|
|
|
|
|
|
|
|
|
|
|
40,105
|
|
|
14,895
|
|
|
10.60
|
|
|
1/22/2023
|
|
|
|
|
|
|
|
|
|
|
18,448
|
|
|
20,052
|
|
|
11.20
|
|
|
1/27/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,250
|
|
|
4.00
|
|
|
2/2/2025
|
|
|
|
|
|
|
|
Thomas B. King(6)
|
|
|
6,598
|
|
|
5,902
|
|
|
11.50
|
|
|
7/27/2024
|
|
|
|
|
|
|
|
|
|
|
20,001
|
|
|
39,999
|
|
|
4.60
|
|
|
1/26/2025
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
8.40
|
|
|
6/15/2025
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
12,500
|
|
|
3.53
|
|
|
10/26/2025
|
|
|
|
|
|
|
|
-
(1)
-
The
stock options outstanding generally vest, subject to the employee's continued service to the Company, with respect to 25% of the options upon the one year
anniversary of the grant date and 1/36
th
of the remaining options vesting each month thereafter, with full vesting occurring on the fourth anniversary of the date of grant.
Mr. King's option grant on July 27, 2017 provides for monthly vesting of 1/36
th
of the total number of options granted commencing after May 24, 2017, subject
to his continued service to the Company; Mr. King's option grant on January 26, 2018 provides for monthly vesting of 1/36
th
of the total number of options granted on
the last day of each month commencing January 31, 2018, subject to his continued service to the Company; Mr. King's option grant on June 15, 2018 was fully vested on the grant
date; and Mr. King's option grant on October 26, 2018 provides for monthly vesting of 1/12
th
of the total number of options granted commencing on the grant date,
subject to his continued service to the Company. Messrs. Amos, Oki, Suh and Slebir
57
Table of Contents
received
grants of 20,000 options each on April 30, 2018 which will vest upon the Company achieving and sustaining a market capitalization of $300 million or more for 30 consecutive days
at any time on or prior to April 30, 2021, subject to their continued service to the Company.
-
(2)
-
Stock
options are granted at an exercise price equal to the fair market value of our Common Stock, as determined by reference to the closing price reported by The
Nasdaq Global Select Market on the date of grant.
-
(3)
-
Options
granted in January 2013 or prior thereto generally expire 10 years from the date of grant, and options granted after January 2013 generally expire
seven years from the date of grant.
-
(4)
-
Subject
to the employee's continued service to the Company, the restricted stock unit awards outstanding vest over a four year period with 25% vesting on
January 1, 2016 and an additional 1/16
th
vesting at the end of each calendar quarter thereafter (i.e. March 31
st
,
June 30
th
, September 30
th
and December 31
st
).
-
(5)
-
The
market value of unvested restricted stock units is based on the closing price of our Common Stock on The Nasdaq Global Select Market of $2.23 per share on
December 31, 2018.
-
(6)
-
The
information in the table above relates to stock option awards received by Mr. King for his role as interim Chief Executive Officer and for his role as a
non-employee director on the Company's Board. Mr. King served as the Company's interim Chief Executive Officer from December 31, 2017 to April 30, 2018 and as the Company's
interim President from April 30, 2018 to May 30, 2018. Mr. King has been on the Company's Board since May 24, 2017.
2018 Option Exercises and Stock Vested
The following table shows the number of shares acquired pursuant to the vesting of restricted stock units by each named executive officer during
the fiscal year ended December 31, 2018 and the aggregate dollar amount realized by the named executive officer upon vesting of the restricted stock units.
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
Name
|
|
Number of Shares
Acquired on
Vesting(#)
|
|
Value
Realized on
Vesting($)(1)
|
|
John P. Amos
|
|
|
|
|
|
|
|
Mark K. Oki
|
|
|
|
|
|
|
|
Kenneth Suh
|
|
|
|
|
|
|
|
John L. Slebir
|
|
|
788
|
|
|
3,882
|
|
Santosh T. Varghese, M.D.
|
|
|
460
|
|
|
2,262
|
|
Thomas B. King
|
|
|
|
|
|
|
|
-
(1)
-
The
aggregate dollar amount realized upon vesting is based on the closing price of our Common Stock on The Nasdaq Global Select Market on the vesting dates.
58
Table of Contents
Potential Payments Upon Termination or Change of Control for each Named Executive Officer
Based upon a hypothetical triggering date of December 31, 2018, the quantifiable benefits for each named executive officer upon the
occurrence of certain specified events are set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive benefits and payments upon termination:
|
|
Involuntary
termination not
for cause or by
constructive
termination
not in connection
with a change of
control($)
|
|
Benefits in
connection
with a change
of control($)
|
|
Involuntary
termination not
for cause or by
constructive
termination
in connection
with a change
of control($)
|
|
Death or
Disability($)
|
|
John P. Amos
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary
|
|
|
545,000
|
|
|
|
|
|
817,500
|
|
|
|
|
Bonus
|
|
|
327,000
|
|
|
|
|
|
490,500
|
|
|
|
|
Medical continuation
|
|
|
37,500
|
|
|
|
|
|
56,250
|
|
|
|
|
Outplacement services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated stock options(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated restricted stock units(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark K. Oki
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary
|
|
|
383,985
|
|
|
|
|
|
575,978
|
|
|
|
|
Bonus
|
|
|
276,009
|
|
|
|
|
|
352,806
|
|
|
|
|
Medical continuation
|
|
|
37,500
|
|
|
|
|
|
56,250
|
|
|
|
|
Outplacement services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated stock options(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated restricted stock units(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Suh
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary
|
|
|
460,000
|
|
|
|
|
|
690,000
|
|
|
|
|
Bonus
|
|
|
230,000
|
|
|
|
|
|
345,000
|
|
|
|
|
Medical continuation
|
|
|
37,500
|
|
|
|
|
|
56,250
|
|
|
|
|
Outplacement services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated stock options(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated restricted stock units(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Slebir
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary
|
|
|
482,710
|
|
|
|
|
|
724,065
|
|
|
|
|
Bonus
|
|
|
433,715
|
|
|
|
|
|
554,393
|
|
|
|
|
Medical continuation
|
|
|
37,500
|
|
|
|
|
|
56,250
|
|
|
|
|
Outplacement services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated stock options(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated restricted stock units(2)
|
|
|
181
|
|
|
|
|
|
361
|
|
|
|
|
Santosh T. Varghese, M.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary
|
|
|
426,120
|
|
|
|
|
|
639,180
|
|
|
|
|
Bonus
|
|
|
285,500
|
|
|
|
|
|
370,724
|
|
|
|
|
Medical continuation
|
|
|
37,500
|
|
|
|
|
|
56,250
|
|
|
|
|
Outplacement services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated stock options(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated restricted stock units(2)
|
|
|
103
|
|
|
|
|
|
205
|
|
|
|
|
Thomas B. King(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical continuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated stock options(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated restricted stock units(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Represents
the aggregate value of the acceleration of vesting of the named executive officer's unvested stock options based on the product of (i) the spread
between the closing price of our Common Stock on
59
Table of Contents
December 31,
2018 of $2.23 and the exercise price of the stock options, and (ii) the number of shares of our Common Stock underlying unvested stock options. Aggregate intrinsic value
represents only the value for those stock options in which the exercise price of the option is less than the market value of our Common Stock on December 31, 2018. The exercise price of all
outstanding stock option awards was greater than the market value of our Common Stock on December 31, 2018.
-
(2)
-
Represents
the aggregate value of the acceleration of vesting of the named executive officer's unvested restricted stock units based on the product of
(i) $2.23, which is the closing price of our Common Stock on December 31, 2018, and (ii) the number of shares of our Common Stock underlying unvested restricted stock units.
-
(3)
-
Mr. King
served as the Company's interim Chief Executive Officer from December 31, 2017 to April 30, 2018 and as the Company's interim President
from April 30, 2018 to May 30, 2018. Mr. King does not currently have any termination or change of control benefits provided to him under any agreement.
The
Compensation Committee believes that providing our named executive officers protection against a termination of employment by the Company without cause or by a named executive
officer for good reason is consistent with competitive practices and will help retain our named executive officers and maintain leadership stability. The Compensation Committee also believes that
providing our named executive officers with benefits upon a change of control is in the best interests of our stockholders because change of control benefits help reduce the potential reluctance of
our named executive officers to pursue certain change of control transactions that create employment uncertainty. The change of control benefits are designed to help retain the Company's named
executive officers and maintain a stable work environment.
Because
of the so-called "parachute" tax imposed by Section 280G of the Code, we limit the change of control benefits of our named executive officers such that no taxes will be
imposed under Section 280G. For our named executive officers, we have agreed that their severance benefits will be either (i) delivered in full, or (ii) delivered as to such
lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the
applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by the named executive officer on an after-tax basis of the greatest amount
of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code.
Termination and Change of Control Benefits for our Former Interim Chief Executive Officer and Former
Interim President
Our former interim Chief Executive Officer and former interim President does not currently have any termination or change of control benefits
provided to him under any agreement.
We have entered into a Third Amended and Restated Change of Control and Severance Agreement (the "
Amended
Agreement
") with each of our named executive officers, other than Mr. King.
The
Amended Agreement provides that if the named executive officer's employment with the Company is terminated without Cause or by the named executive officer for Good Reason and the
termination does not occur within three months before a Change of Control or 18 months after a Change of Control (as such terms are defined in the Amended Agreement) of the Company, the named
executive officer will receive, subject to signing a release of claims in favor of the Company, (i) monthly severance payments equal to the monthly salary the named executive officer was
receiving immediately prior to the termination date for twelve months, (ii) monthly severance payments equal to 1/12
th
of the named executive officer's target bonus for the
fiscal year in which the termination occurs for twelve months, (iii) an additional pro rata portion of the named executive officer's target bonus for
60
Table of Contents
the
fiscal year in which the termination occurs calculated based on the number of months during such fiscal year the named executive officer was employed by the Company (and a prior fiscal year to the
extent the bonus for such prior fiscal year has not yet been declared and paid by the Company) multiplied by the average of the actual bonus percentage payouts in the two most recent years prior to
the year of termination, (iv) up to twelve months of reimbursement for premiums paid for COBRA coverage, and (vi) any then-outstanding and unvested equity awards held by the named
executive officer are subject to 50% accelerated vesting.
The
Amended Agreement also provides that if the named executive officer's employment with the Company is terminated by the Company without Cause or by the named executive officer for
Good Reason within three months before a Change of Control or 18 months after a Change of Control, the named executive officer will receive, subject to signing a release of claims in favor of
the Company, (i) monthly severance payments equal to the monthly salary the named executive officer was receiving immediately prior to the Change of Control for 18 months,
(ii) monthly severance payments equal to 1/12
th
of the named executive officer's target bonus for the fiscal year in which the termination occurs for 18 months,
(iii) an additional pro rata portion of the named executive officer's target bonus for the fiscal year in which the termination occurs calculated based on the number of months during such
fiscal year the named executive officer was employed by the Company (and a prior fiscal year to the extent the bonus for such prior fiscal year has not yet been declared and paid by the Company)
multiplied by the average of the actual bonus percentage payouts in the two most recent years prior to the year of termination, and (iv) up to 18 months of reimbursement for premiums
paid for COBRA coverage. The Amended Agreement also provides that if the named executive officer's employment is terminated without Cause or for Good Reason within three months before a Change of
Control or 18 months after a Change of Control, all equity awards granted to the named executive officer by the Company will automatically vest in full and become immediately exercisable.
For
purposes of the Amended Agreement, a "Change of Control" occurs when:
-
-
any person becomes a beneficial owner, directly or indirectly, of securities of the Company representing 15% or more of the total voting power
represented by the Company's then outstanding voting securities without the approval of the Board;
-
-
a merger or consolidation occurs, whether or not approved by the Board, other than a merger or consolidation which results in the outstanding
voting securities of the Company immediately prior to the merger or consolidation to represent more than 50% of the total voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;
-
-
the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets; or
-
-
there is a change in the composition of the Board, as a result of which fewer than a majority of the directors are "Incumbent Directors."
Incumbent Directors are directors who are either (i) directors of the Company as of May 1, 2018, or (ii) are elected, or nominated for election, to the Board with the affirmative
votes of at least a majority of the Incumbent Directors at the time of such election or nomination. An individual whose election or nomination is in connection with an actual or threatened proxy
contest relating to the election of the Company's directors is not considered an Incumbent Director.
61
Table of Contents
Chief Executive Officer Pay Ratio
We identified our median employee by reviewing annual base salaries for all persons who were employed by us on December 31, 2018. We
annualized the base salary of all employees who were hired in 2018 but did not work for the entire year. After identifying the median employee, we calculated the annual total compensation for this
employee using the same methodology we use for our named executive officers as disclosed in the Summary Compensation Table for 2018 above. The annual total compensation of our median employee was
$131,224.
Mr. King
was appointed to serve as the Company's interim Chief Executive Officer, effective December 31, 2017, and served in this role until April 30, 2018.
Mr. Amos was appointed to serve as the Company's Chief Executive Officer, effective April 30, 2018. We calculated the Chief Executive Officer pay ratio using Mr. Amos'
compensation. Mr. Amos' annualized total compensation for 2018 for
purposes of this Chief Executive Officer pay ratio disclosure was $1,266,811. Based on this information, for 2018, the ratio of the compensation of the Chief Executive Officer to the median employee
was estimated to be 10:1. The above ratio, annual total compensation amount and annualized total compensation amount have been calculated using methodologies and assumptions permitted by SEC rules.
Director Compensation
The following table sets forth the compensation paid by us during the fiscal year ended December 31, 2018 to our non-employee directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Year
|
|
Fees Earned
or Paid in
Cash($)(1)
|
|
Stock
Awards($)(2)
|
|
Option
Awards($)(3)
|
|
All Other
Compensation
($)(4)
|
|
Total($)
|
|
Karen Ferrell(5)(7)
|
|
|
2018
|
|
|
10,000
|
|
|
|
|
|
41,726
|
|
|
|
|
|
51,726
|
|
Edward A. Kangas(5)(7)
|
|
|
2018
|
|
|
10,000
|
|
|
|
|
|
41,726
|
|
|
|
|
|
51,726
|
|
Thomas B. King(5)(6)(7)
|
|
|
2018
|
|
|
23,333
|
|
|
|
|
|
242,458
|
|
|
|
|
|
265,791
|
|
David Y. Norton(5)(7)
|
|
|
2018
|
|
|
93,750
|
|
|
|
|
|
27,818
|
|
|
|
|
|
121,568
|
|
Jorge Plutzky, M.D.(5)(7)
|
|
|
2018
|
|
|
48,750
|
|
|
|
|
|
27,818
|
|
|
|
|
|
76,568
|
|
Eric W. Roberts(5)(7)
|
|
|
2018
|
|
|
70,000
|
|
|
|
|
|
27,818
|
|
|
2,388
|
|
|
100,206
|
|
Herman Rosenman(5)(7)
|
|
|
2018
|
|
|
83,062
|
|
|
|
|
|
27,818
|
|
|
|
|
|
110,880
|
|
Allan L. Shaw(5)(7)(8)
|
|
|
2018
|
|
|
46,250
|
|
|
|
|
|
123,214
|
|
|
2,300
|
|
|
171,764
|
|
-
(1)
-
Under
the cash compensation arrangement approved by the Board on April 29, 2016, each non-employee director will receive an annual retainer of $40,000, with
the Chairman of the Board of Directors receiving an additional $25,000 per year, the Chairman of the Audit Committee receiving an additional $20,000 per year, the Chairman of the Compensation
Committee receiving an additional $15,000 per year, the Chairman of the Nominating and Governance Committee receiving an additional $10,000 per year, members of the Audit Committee (other than the
Chairman of such Committee) receiving an additional $10,000 per year, members of the Compensation Committee (other than the Chairman of such Committee) receiving an additional $7,500 per year, members
of the Nominating and Governance Committee (other than the Chairman of such Committee) receiving an additional $5,000 per year, and members of any unchartered committees receiving an additional $1,500
per meeting attended. The annual retainers, less any amounts previously paid under the then existing compensation arrangement, will be paid in equal quarterly installments effective as of
October 30, 2015, and the per meeting fees for any unchartered committees will be paid quarterly effective as of April 29, 2016. In addition, under the changes to the cash compensation
arrangement approved by the Board on January 2, 2018, certain non-employee directors will also receive the following: the Chairman of the Corporate Development Committee will receive an
additional $17,500 per year and members of the
62
Table of Contents
Corporate
Development Committee (other than the Chairman of such Committee) will receive an additional $8,750 per year.
-
(2)
-
As
of December 31, 2018, there were no restricted stock units outstanding for our non-employee directors.
-
(3)
-
As
of December 31, 2018, the aggregate number of stock options outstanding for each non-employee director was as follows:
|
|
|
|
|
Name
|
|
Stock options
outstanding
at 12/31/18
|
|
Karen Ferrell
|
|
|
22,500
|
|
Edward A. Kangas
|
|
|
22,500
|
|
Thomas B. King
|
|
|
107,500
|
|
David Y. Norton
|
|
|
37,500
|
|
Jorge Plutzky, M.D.
|
|
|
37,500
|
|
Eric W. Roberts
|
|
|
32,500
|
|
Herman Rosenman
|
|
|
27,500
|
|
Allan L. Shaw
|
|
|
52,500
|
|
-
(4)
-
During
2018, restricted stock units held by non-employee directors of the Company vested. These restricted stock units were settled by issuing to each non-employee
director shares in the amount due to the director upon vesting, less the portion required to satisfy the estimated income tax liability based on the published stock price at the close of market on the
settlement date or the next trading day, which the Company issued to the non-employee director in cash. The amounts shown in this column for each non-employee director represents this cash.
-
(5)
-
Messrs. Roberts
and Shaw have served as directors of the Company since September 2015, Messrs. Norton and Rosenman have served as directors of the
Company since July 2013, Dr. Plutzky has served as a director of the Company since May 2013, Mr. King has served as a director of the Company since May 2017, and Ms. Ferrell and
Mr. Kangas have served as directors of the Company since October 2018.
-
(6)
-
The
disclosure in this table and footnotes include stock option awards granted to Mr. King for his role as the Company's interim Chief Executive Officer.
Mr. King has been on the Company's Board since May 24, 2017. Mr. King served as the Company's interim Chief Executive Officer from December 31, 2017 to April 30,
2018 and as the Company's interim President from April 30, 2018 to May 30, 2018; Mr. King did not participate in the Company's cash and equity compensation arrangement for
non-employee directors during these periods.
-
(7)
-
From
January 2018 to February 2018, the Audit Committee consisted of Messrs. Norton, Rosenman and Shaw, with Mr. Rosenman designated as the Chairman of
the Audit Committee. From February 2018 to February 2019, the Audit Committee consisted of Messrs. Norton and Rosenman and Dr. Plutzky, with Mr. Rosenman designated as the
Chairman of the Audit Committee. Since February 2019, the Audit Committee has consisted of Messrs. King, Norton and Rosenman and Ms. Ferrell, with Mr. Rosenman designated as the
Chairman of the Audit Committee.
From
January 2018 to February 2019, the Nominating and Governance Committee consisted of Messrs. Norton and Roberts, with Mr. Norton acting as the Chairman of the Nominating and
Governance Committee from January 2017 to February 2018 and designated as the Chairman of the Nominating and Governance Committee from February 2018 to February 2019. Since February 2019, the
Nominating and Governance Committee has consisted of Messrs. King, Norton and
63
Table of Contents
Roberts,
with Mr. Norton designated as the Chairman of the Nominating and Governance Committee.
From
January 2018 to February 1, 2018, the Compensation Committee consisted of Messrs. Roberts, Rosenman and Shaw, with Mr. Shaw designated as the Chairman of the Compensation
Committee. From February 2, 2018 to February 22, 2018, the Compensation Committee consisted of Messrs. Roberts, and Rosenman, with Mr. Roberts acting as the Chairman of the
Compensation Committee. From February 23, 2018 to February 2019, the Compensation Committee consisted of Messrs. Norton, Roberts and Rosenman, with Mr. Norton designated as the
Chairman of the Compensation Committee. Since February 2019, the Compensation Committee has consisted of Messrs. Kangas, Norton and Rosenman, with Mr. Norton designated as the Chairman
of the Compensation Committee.
Since
becoming a chartered committee of the Board on January 2, 2018 to February 2019, the Corporate Development Committee consisted of Messrs. Norton, Roberts and Rosenman and
Dr. Plutzky, with Mr. Roberts designated as the Chairman of the Corporate Development Committee. Since February 2019, the Corporate Development Committee has consisted of
Messrs. King, Norton, Roberts, Rosenman and Shaw and Dr. Plutzky, with Mr. Roberts designated as the Chairman of the Corporate Development Committee.
Mr. Norton
has served as the Chairman of the Board of Directors since September 2014.
-
(8)
-
The
disclosure in this table and footnotes include stock option awards granted to Mr. Shaw for his role as a consultant to the Company. On February 26,
2018, Mr. Shaw entered into a Consulting Agreement, effective February 1, 2018, with the Company. Mr. Shaw has served as a member of the Company's Board since September 15,
2015, and Mr. Shaw will continue serving on the Board. Effective February 1, 2018, Mr. Shaw resigned from the Company's Audit Committee and Compensation Committee. Since February
2019, Mr. Shaw has served as a member of the Company's Corporate Development Committee. As a continuing Board member, Mr. Shaw will continue to participate in the Company's cash and
equity compensation arrangement for non-employee directors.
The
cash and equity compensation arrangement for the Company's non-employee directors is indicated below.
Under
the cash compensation arrangement, each non-employee director will receive an annual retainer of $40,000, with the Chairman of the Board of Directors receiving an additional
$25,000 per year, the Chairman of the Audit Committee receiving an additional $20,000 per year, the Chairman of the Compensation Committee receiving an additional $15,000 per year, the Chairman of the
Nominating and Governance Committee receiving an additional $10,000 per year, members of the Audit Committee (other than the Chairman of such Committee) receiving an additional $10,000 per year,
members of the Compensation Committee (other than the Chairman of such Committee) receiving an additional $7,500 per year, members of the Nominating and Governance Committee (other than the Chairman
of such Committee) receiving an additional $5,000 per year, and members of any unchartered committees receiving an additional $1,500 per meeting attended. The annual retainers, less any amounts
previously paid under the then existing compensation arrangement, will be paid in equal quarterly installments effective as of October 30, 2015, and the per meeting fees for any unchartered
committees will be paid quarterly effective as of April 29, 2016.
Under
the equity compensation arrangement, following the initial appointment or election to the Board, each non-employee director will be granted as determined by the Compensation
Committee of the Board (i) a non-qualified stock option to purchase 22,500 shares of Common Stock with an exercise price equal to the fair market value of our Common Stock as of the date of
grant, or (ii) an equivalent number of restricted stock units to afford approximately the same value of (i), or (iii) a combination
64
Table of Contents
thereof
(the "
Initial Grant
"). Initial Grants vest monthly over three (3) years on each monthly anniversary date commencing on the date service
as a non-employee director began and will continue to vest, subject to each such non-employee director continuing to be a Service Provider (as defined in the 2018 Plan) on the relevant vesting dates
and, if stock options, have (i) a seven (7) year term and (ii) a six (6) month post-termination exercise period.
Thereafter,
provided that the non-employee director is re-elected to the Board and has served as a director for at least six (6) months as of such election date, each such
non-employee director will be
granted on the date of the Annual Meeting of Stockholders as determined by the Compensation Committee of the Board (i) a non-qualified stock option to purchase 15,000 shares of Common Stock
with an exercise price equal to the fair market value of our Common Stock as of the date of grant, or (ii) an equivalent number of restricted stock units to afford approximately the same value
of (i), or (iii) a combination thereof (the "
Subsequent Grant
"). Subsequent Grants vest monthly over one (1) year following the date of
grant, subject to each such non-employee director continuing to be a Service Provider on the relevant vesting dates and, if stock options, have (i) a seven (7) year term and
(ii) a six (6) month post-termination exercise period.
On
January 2, 2018, the Board approved changes to the cash compensation arrangement for the Board, such that certain non-employee directors will also receive the following: the
Chairman of the Corporate Development Committee will receive an additional $17,500 per year and members of the Corporate Development Committee (other than the Chairman of such Committee) will receive
an additional $8,750 per year.
65
Table of Contents
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to us with respect to beneficial ownership of our Common Stock as of April 1,
2019 by (i) each person or entity who is known by us to own beneficially more than 5% of our Common Stock; (ii) each of our directors; (iii) each of our named executive officers,
as specified in the "Compensation Discussion and Analysis" section of this Proxy Statement; and (iv) all directors and executive officers as a group. Unless otherwise noted, the address of the
persons or entities shown in the table is 900 E. Hamilton Avenue, Suite 550, Campbell, California, 95008.
|
|
|
|
|
|
|
|
|
|
Beneficially
Owned Stock(1)
|
|
Name
|
|
Number
of Shares
|
|
Percent
|
|
5% Holders
|
|
|
|
|
|
|
|
Renaissance Technologies LLC(2)
|
|
|
644,475
|
|
|
6.1
|
%
|
Steven Chlavin(3)
|
|
|
610,000
|
|
|
5.7
|
%
|
Non-Employee Directors
|
|
|
|
|
|
|
|
Karen Ferrell(4)
|
|
|
4,375
|
|
|
*
|
|
Edward A. Kangas(5)
|
|
|
4,375
|
|
|
*
|
|
David Y. Norton(6)
|
|
|
37,025
|
|
|
*
|
|
Jorge Plutzky, M.D.(7)
|
|
|
36,589
|
|
|
*
|
|
Eric W. Roberts(8)
|
|
|
33,110
|
|
|
*
|
|
Herman Rosenman(9)
|
|
|
34,107
|
|
|
*
|
|
Allan L. Shaw(10)
|
|
|
51,263
|
|
|
*
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
John P. Amos(11)
|
|
|
343,475
|
|
|
3.2
|
%
|
Mark K. Oki(12)
|
|
|
71,345
|
|
|
*
|
|
Kenneth Suh(13)
|
|
|
261,141
|
|
|
2.5
|
%
|
John L. Slebir(14)
|
|
|
162,839
|
|
|
1.5
|
%
|
Santosh T. Varghese, M.D.(15)
|
|
|
127,988
|
|
|
1.2
|
%
|
Thomas B. King(16)
|
|
|
65,418
|
|
|
*
|
|
All directors and executive officers as a group (14 persons)(17)
|
|
|
1,273,741
|
|
|
12.0
|
%
|
-
*
-
Less
than 1%
-
(1)
-
Applicable
percentage ownership is based on 10,637,164 shares of Common Stock outstanding as of April 1, 2019. Beneficial ownership is determined in
accordance with SEC rules. In computing the number of shares beneficially owned by a person and the percentage of ownership of that person, shares of Common Stock subject to options, restricted stock
units and warrants held by that person that will be exercisable/vested within 60 days of April 1, 2019 are deemed outstanding. Those shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of any other person. The persons named in this table have sole voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws, where applicable, and except as indicated in the other footnotes to this table.
-
(2)
-
Consists
of 644,475 shares of Common Stock as to which Renaissance Technologies LLC and its affiliates (together "Renaissance Technologies") have sole voting
and dispositive power. Beneficial ownership information is based on a Schedule 13G/A filed with the SEC on February 13, 2019. The address of Renaissance Technologies is 800 Third Avenue,
New York, New York, 10022.
66
Table of Contents
-
(3)
-
Consists
of 610,000 shares of Common Stock as to which Steven Chlavin has sole voting and dispositive power. Beneficial ownership information is based on a
Schedule 13G filed with the SEC on January 18, 2019. The address of Steven Chlavin is 9663 Santa Monica Blvd., Suite 214, Beverly Hills, California, 90210.
-
(4)
-
Consists
of 4,375 options to purchase shares of Common Stock exercisable within 60 days of April 1, 2019.
-
(5)
-
Consists
of 4,375 options to purchase shares of Common Stock exercisable within 60 days of April 1, 2019.
-
(6)
-
Consists
of (i) 5,775 shares of Common Stock and (ii) 31,250 options to purchase shares of Common Stock exercisable within 60 days of
April 1, 2019.
-
(7)
-
Consists
of (i) 5,339 shares of Common Stock and (ii) 31,250 options to purchase shares of Common Stock exercisable within 60 days of
April 1, 2019.
-
(8)
-
Consists
of (i) 6,860 shares of Common Stock and (ii) 26,250 options to purchase shares of Common Stock exercisable within 60 days of
April 1, 2019.
-
(9)
-
Consists
of (i) 7,357 shares of Common Stock, (ii) 500 shares of Common Stock Mr. Rosenman is deemed to beneficially own that are held in an
Individual Retirement Account for the benefit of Mr. Rosenman, (iii) 5,000 shares of Common Stock Mr. Rosenman is deemed to beneficially own that are held by his spouse, and
(iv) 21,250 options to purchase shares of Common Stock exercisable within 60 days of April 1, 2019.
-
(10)
-
Consists
of (i) 5,013 shares of Common Stock and (ii) 46,250 options to purchase shares of Common Stock exercisable within 60 days of
April 1, 2019.
-
(11)
-
Consists
of (i) 170,850 shares of Common Stock, (ii) 73,125 options to purchase shares of Common Stock exercisable within 60 days of
April 1, 2019, and (iii) 99,500 warrants to purchase shares of Common Stock exercisable within 60 days of April 1, 2019.
-
(12)
-
Consists
of (i) 10,000 shares of Common Stock and (ii) 61,345 options to purchase shares of Common Stock exercisable within 60 days of
April 1, 2019.
-
(13)
-
Consists
of (i) 46,041 options to purchase shares of Common Stock exercisable within 60 days of April 1, 2019, and (ii) 215,100 warrants
to purchase shares of Common Stock exercisable within 60 days of April 1, 2019.
-
(14)
-
Consists
of (i) 13,209 shares of Common Stock and (ii) 149,630 options to purchase shares of Common Stock exercisable within 60 days of
April 1, 2019.
-
(15)
-
Consists
of (i) 8,869 shares of Common Stock and (ii) 119,119 options to purchase shares of Common Stock exercisable within 60 days of
April 1, 2019.
-
(16)
-
Consists
of 65,418 options to purchase shares of Common Stock exercisable within 60 days of April 1, 2019.
-
(17)
-
Includes
(i) 696,469 options to purchase shares of Common Stock exercisable within 60 days of April 1, 2019 and (iii) 338,500 warrants
to purchase shares of Common Stock exercisable within 60 days of April 1, 2019.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of a registered class
of our equity securities, to file certain reports of ownership with the SEC. Such officers, directors and stockholders are also required by SEC rules to provide us with copies of all
Section 16(a) forms that they file. Based solely on our review of copies of such forms received by us or on written representations from reporting persons that no other reports were required
during the fiscal year ended December 31, 2018, we believe that during 2018, all of our executive officers, directors and 10% stockholders timely complied with all Section 16(a) filing
requirements.
EQUITY COMPENSATION PLAN INFORMATION
Information about our equity compensation plans at December 31, 2018, that were approved by our stockholders was as follows:
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of Shares
to be issued
Upon Exercise
of Outstanding
Options and
Rights
|
|
Weighted Average
Exercise Price
of Outstanding
Options
|
|
Number of Shares
Remaining
Available for
Future Issuance(3)
|
|
Equity compensation plans approved by stockholders(1)
|
|
|
1,940,107
|
|
$
|
25.37
|
|
|
717,758
|
|
Equity compensation plans not approved by stockholders(2)
|
|
|
502,000
|
|
$
|
3.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,442,107
|
|
$
|
20.91
|
|
|
717,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Consists
of four plans: our 2001 Stock Option Plan, our 2010 Equity Incentive Plan, our 2018 Equity Incentive Plan and our 1994 Employee Stock Purchase Plan.
-
(2)
-
Consists
of our 2018 Inducement Equity Incentive Plan.
-
(3)
-
Includes
707,648 shares for our 2018 Equity Incentive Plan and 10,110 shares for our 1994 Employee Stock Purchase Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Change of Control Agreements with Executive Officers
We previously entered into the Second Amended and Restated Change of Control and Severance Agreement that provided for certain benefits in the
event of a Change of Control with each of Mark K. Oki, John L. Slebir and Santosh T. Varghese, M.D. In April 2018, we entered into the Third Amended and Restated Change of Control and Severance
Agreement (the "
Amended Agreement
") with each of John P. Amos, M. Scott Oehrlein, Mark K. Oki, John L. Slebir, and Santosh T. Varghese, M.D.; such
agreements superseded the Second Amended and Restated Change of Control and Severance Agreement for Messrs. Oki and Slebir and Dr. Varghese. In April 2018, our wholly own subsidiary,
Willow Biopharma Inc., entered into a Change of Control and Severance Agreement with Mr. Suh. In August 2018, we entered into the Amended Agreement with Mr. Suh, on substantially
the same terms as the Amended Agreement entered into with each of our other executive officers. The Amended Agreement superseded the Change of Control and Severance Agreement Mr. Suh previously
entered into with Willow Biopharma Inc.
The
above referenced agreements recognize that there may be periods where another company, entity or individual considers the possibility of acquiring the Company or that a change in our
Board
68
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may
otherwise occur (collectively known as a Change of Control), with or without the approval of our Board. These agreements recognize that such an event may cause a distraction to employees, which
may in turn cause employees to consider alternative employment opportunities. The Board determined that it was in the best interest of the Company to give such employees an incentive to continue their
employment during periods when the threat or occurrence of a Change of Control may exist. The Third Amended and Restated Change of Control and Severance Agreement is discussed in more detail in the
section entitled "Potential Payments Upon Termination or Change of Control for each Named Executive Officer" found elsewhere in this Proxy Statement.
Indemnification Agreements
We have entered into indemnification agreements with each of our directors and executive officers. These agreements require us to indemnify such
individuals, to the fullest extent permitted by Delaware law, for certain liabilities to which they may become subject as a result of their affiliation with us.
Consulting Agreement and Stock Purchase Agreement
On February 26, 2018, the Company and Allan L. Shaw entered into the Consulting Agreement, effective February 1, 2018.
Mr. Shaw has served as a member of the Company's Board since September 15, 2015, and Mr. Shaw will continue serving on the Board. Effective February 1, 2018,
Mr. Shaw resigned from the Company's Audit Committee and Compensation Committee. As a continuing Board member, Mr. Shaw will continue to participate in the Company's cash and equity
compensation arrangement for non-employee directors. Under the Consulting Agreement, Mr. Shaw provided services to the Company relating to new commercial product candidates, the outstanding
debt balances of the Company and other strategic partnering opportunities and capital structure matters. The Consulting Agreement remained in effect until June 30, 2018. Under the Consulting
Agreement, Mr. Shaw received an initial payment of $60,000 for the month of February 2018 and then $30,000 per month starting in the month of March 2018, with any partial months being paid on a
pro rata basis. Mr. Shaw was also eligible to receive cash bonuses based on certain factors related to the Company, with total cash bonuses not to exceed $250,000.
The
Consulting Agreement included that the Company would recommend at the next meeting of the Compensation Committee of the Board that Mr. Shaw be granted a stock option to
purchase 30,000 shares of our Common Stock at a price per share equal to the fair market value as determined by the closing price of our Common Stock on the date of grant. On March 9, 2018, the
Compensation Committee of the Board authorized and approved the grant to Mr. Shaw of a stock option to purchase 30,000 shares of our Common Stock at a price per share equal to the closing price
of our Common Stock on the date of grant ($4.90 per share). Subject to Mr. Shaw continuing to provide services under the Consulting Agreement on the relevant vesting dates, the option will vest
as follows: 5,000 shares subject to the option will vest on the date of grant, 5,000 shares subject to the option will vest on June 30, 2018, 10,000 shares subject to the option will vest on
December 31, 2018 and 10,000 shares subject to the option will vest on June 30, 2019. The option has a seven (7) year term from the date of grant and an exercise period equal to
six (6) months from the date Mr. Shaw ceases to be a Service Provider (as defined in the Company's 2010 Plan).
In
addition, Mr. Shaw was eligible to receive an additional fully vested stock option to purchase 10,000 shares of our Common Stock at the discretion of the Board. On
June 15, 2018, the Compensation Committee of the Board authorized and approved the grant to Mr. Shaw of a fully vested stock option to purchase 10,000 shares of our Common Stock at a
price per share equal to the closing price of our Common Stock on the date of grant ($8.40 per share). The option has a seven (7) year term from the date of grant and an exercise period equal
to six (6) months from the date Mr. Shaw ceases to be a Service Provider (as defined in the Company's 2010 Plan).
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On
April 30, 2018, the Company, Willow Biopharma Inc. ("
Willow
") and the shareholders of Willow, including Mr. Amos,
Mr. Oehrlein and Mr. Suh (the "
Willow Sellers
"), entered into a stock purchase agreement (the "
Stock Purchase
Agreement
"). Pursuant to the Stock Purchase Agreement, the Company agreed to acquire all of the equity interest of Willow (the "
Willow
Acquisition
"). Under the Stock Purchase Agreement, the Company issued to the Willow Sellers, warrants (the "
Willow Warrants
") to
purchase, in aggregate, up to 357,000 shares of our Common Stock (the "
Willow Warrant Shares
") with a per share exercise price of $3.70, the closing
price of our Common Stock on April 30, 2018. The Willow Warrants are immediately exercisable, subject to adjustment, and will expire seven years after the date of issuance. The Willow
Acquisition closed on April 30, 2018. In 2018, the Company paid $1,549,613 to the Willow Sellers for fees and reimbursements relating to the Willow Acquisition, including $527,271 to
Mr. Amos, $202,218 to Mr. Oehrlein and $505,300 to Mr. Suh in April 2018.
Other
than the above mentioned agreements, we have not been a party to any transaction or series of similar transactions in which the amount involved exceeded or will exceed $120,000 and
in which any current director, executive officer, holder of more than 5% of our Common Stock or entities affiliated with them had or will have a material interest.
Review, Approval or Ratification of Transactions with Related Parties
We, or one of our subsidiaries, may occasionally enter into transactions with certain "related parties." Related parties include our executive
officers, directors, or 5% or more beneficial owners of our Common Stock and immediate family members of these persons. We refer to transactions in which the related party has a direct or indirect
material interest as "related party transactions." Each related party transaction must follow the procedures set forth in the Company's
Code of Business Conduct and Ethics and be reviewed and approved by the Audit Committee prior to the entering into of such transaction.
The
Audit Committee considers all relevant factors when determining whether to approve a related party transaction including, without limitation, the
following:
-
-
the extent of the related party's interest in the related party transaction;
-
-
the aggregate value of the related party transaction;
-
-
the benefit to the Company; and
-
-
whether the transaction involves the provision of goods or services to the Company that are available from unaffiliated third parties and
whether the transaction is on terms and made under circumstances that are at least as favorable to the Company as would be available in comparable transactions with or involving unaffiliated third
parties.
STOCKHOLDER PROPOSALS FOR 2020 ANNUAL MEETING
Under the rules of the SEC, eligible stockholders may submit proposals for inclusion in the Proxy Statement for our 2020 Annual Meeting of
Stockholders, or 2020 Annual Meeting. In order for a proposal to be included in our Proxy Materials for a particular meeting, the person submitting the proposal must own, beneficially or of record, at
least 1% or $2,000 in market value, whichever is less, of shares of our Common Stock entitled to be voted on that proposal at the meeting, and must have held those shares for a period of at least one
year and continue to hold them through the date of the meeting. Also, the proposal and the stockholder submitting it must comply with certain other eligibility and procedural requirements contained in
rules of the SEC.
Pursuant
to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in the Proxy Statement and for consideration at our next annual meeting of
stockholders. To
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be
eligible for inclusion in the 2020 Proxy Statement, your proposal must be received by us no later than December 25, 2019, based on an anticipated Proxy Statement mailing date of
April 23, 2019 and must otherwise comply with Rule 14a-8. While our Board will consider stockholder proposals, we reserve the right to omit from the Proxy Statement stockholder proposals
that we are not required to include under the Exchange Act, including Rule 14a-8.
Under
our Amended and Restated Bylaws, as further amended, in order to nominate a director or bring any other business before the stockholders at the 2020 Annual Meeting that will not be
included in our Proxy Statement, the proposal must be received by the Company's Corporate Secretary on or between February 6, 2020 and March 7, 2020.
In
accordance with our Amended and Restated Bylaws, as further amended, the required notice of a nomination for director must include, among other things, (1) the name, age,
business address and residence address of the nominee, (2) the principal occupation or employment of such nominee, (3) the class and number of VIVUS shares that are beneficially owned by
such nominee, (4) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which
the nominations are to be made by the stockholder, and (5) any other information relating to such nominee that is required to be disclosed in the solicitations for Proxies for elections of
directors or is otherwise required pursuant to Regulation 14A under the Exchange Act (including such person's written consent to being named in the Proxy Statement as a nominee and to serving
as a director if elected). Only persons who are nominated in the manner described in our Amended and Restated Bylaws, as further amended, are eligible to be elected as directors at meetings of our
stockholders, and the Chairman of a meeting of our stockholders may refuse to acknowledge a nomination that is not made in compliance with the required notice procedure.
All
proposals for inclusion in the 2020 Proxy Statement or consideration at the 2020 Annual Meeting must set forth the information required by our Amended and Restated Bylaws, as further
amended, a copy of which is available upon written request to VIVUS, Inc., 900 E. Hamilton Avenue, Suite 550, Campbell, CA 95008, Attention: Corporate Secretary. Proposals should be
addressed to:
Corporate
Secretary
VIVUS, Inc.
900 E. Hamilton Avenue, Suite 550
Campbell, CA 95008
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Proxy
Statements and Annual Reports with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials or a single set of Proxy
Materials addressed to those stockholders. This process, which is commonly referred to as "householding," potentially means extra convenience for stockholders and cost savings for companies.
A
single Notice of Internet Availability of Proxy Materials or a single set of Proxy Materials will be delivered to multiple stockholders sharing an address unless contrary instructions
have been received from the affected stockholders. If you share an address with another stockholder and have received only one Notice of Internet Availability of Proxy Materials or one set of this
year's Proxy Materials and you wish to receive a separate copy, please notify us in writing to our Corporate Secretary at VIVUS, Inc., 900 E. Hamilton Avenue, Suite 550, Campbell, CA
95008, or via phone at 650-934-5200 and we will deliver a separate copy to you promptly.
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Once
you have received notice from your broker that it will be "householding" communications to your address, "householding" will continue until you are notified otherwise or until you
revoke your consent thereto. If, at any time, you no longer wish to participate in "householding" and would prefer to receive a separate Notice of Internet Availability of Proxy Materials or a
separate set of printed Proxy Materials, please notify your broker. Stockholders who received multiple copies of the Notice of Internet Availability of Proxy Materials or multiple sets of Proxy
Materials at their address and would like to request "householding" of their communications should contact their broker.
OTHER MATTERS
Other than matters and proposals described in this Proxy Statement, we have not received valid notice of any other business to be acted upon at
the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the Proxy Card or Voting Instruction Form to vote the shares they
represent as the Board may recommend.
It
is important that your stock be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to execute and return the Proxy Card or
Voting Instruction Form at your earliest convenience.
The
Board of Directors
Campbell, California
April 17, 2019
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Table of Contents
Appendix A
VIVUS, INC.
2018 EQUITY INCENTIVE PLAN
(Share numbers adjusted for 1-for-10 reverse stock split effected September 10, 2018)
1.
Purposes of the Plan.
The purposes of this Plan are:
-
-
to attract and retain the best available personnel for positions of substantial responsibility,
-
-
to provide incentives to individuals who perform services to the Company, and
-
-
to promote the success of the Company's business.
The
Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units and Performance
Shares.
2.
Definitions.
As used herein, the following definitions will apply:
(a)
"Administrator
" means the Board or any of its Committees as will be administering the Plan, in accordance with
Section 4 of the Plan.
(b)
"Affiliate
" means any corporation or any other entity (including, but not limited to, partnerships and joint ventures)
controlling, controlled by, or under common control with the Company.
(c)
"Applicable Laws
" means the legal and regulatory requirements relating to the administration of equity-based awards,
including but not limited to the related issuance of shares of Common Stock, including but not limited to, under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock
exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any non-U.S. country or jurisdiction where Awards are, or will be, granted under the Plan.
(d)
"Award
" means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Performance Units or Performance Shares.
(e)
"Award Agreement
" means the written or electronic agreement setting forth the terms and provisions applicable to each
Award granted under the Plan. The Award Agreement is subject to the terms and provisions of the Plan.
(f)
"Board
" means the Board of Directors of the Company.
(g)
"Change in Control
" means the occurrence of any of the following events:
(i)
Change in Ownership of the Company.
A change in the ownership of the Company which occurs on the date that
any one person, or more than one person acting as a group ("
Person
"), acquires ownership of the stock of the Company that, together with the stock held
by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection (i), the acquisition of
additional stock by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company will not be considered a Change in Control. Further, if
the stockholders of the Company immediately before such change in ownership continue to retain immediately after the change in ownership, in substantially the same proportions as their ownership of
shares of the Company's voting stock immediately prior to the change in ownership, direct or indirect beneficial ownership of fifty percent (50%) or more of the total voting power of the stock of the
Company or of the
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ultimate
parent entity of the Company, such event shall not be considered a Change in Control under this subsection (i). For this purpose, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company, as the case may be, either directly or through
one or more subsidiary corporations or other business entities; or
(ii)
Change in Effective Control of the Company.
If the Company has a class of securities registered pursuant to
Section 12 of the Exchange Act, a change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month
period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this
subsection (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change
in Control; or
(iii)
Change in Ownership of a Substantial Portion of the Company's Assets.
A change in the ownership of a
substantial portion of the Company's assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent
acquisition by such Person) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the
Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a
substantial portion of the Company's assets: (A) a transfer to an entity that is controlled by the Company's stockholders immediately after the transfer, or (B) a transfer of assets by
the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company's stock, (2) an entity, fifty percent (50%) or
more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total
value or voting power of all the outstanding stock of the Company, or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly,
by a Person described in this subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the
assets being disposed of, determined without regard to any liabilities associated with such assets.
For
purposes of this Section 2(g), persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or
acquisition of stock, or similar business transaction with the Company.
Notwithstanding
the foregoing, a transaction shall not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of
Section 409A of the Code, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or
may be promulgated thereunder from time to time.
Further
and for the avoidance of doubt, a transaction shall not constitute a Change in Control if: (i) its sole purpose is to change the jurisdiction of the Company's
incorporation, or (ii) its sole purpose is to create a holding company that shall be owned in substantially the same proportions by the persons who held the Company's securities immediately
before such transaction.
(h)
"Code
" means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code or Treasury
Regulation thereunder will include such section or regulation, any valid regulation or other official applicable guidance promulgated under such section, and any
A-2
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comparable
provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
(i)
"Committee
" means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board, or
a duly authorized committee of the Board, in accordance with Section 4 hereof.
(j)
"Common Stock
" means the common stock of the Company.
(k)
"Company
" means VIVUS, Inc., a Delaware corporation, or any successor thereto.
(l)
"Consultant
" means any consultant, independent contractor, advisor, or other natural person who provides services to the
Company or its Affiliates, but who is neither an Employee nor a Director, provided the services (i) are not in connection with the offer or sale of securities in a capital-raising transaction,
and (ii) do not directly promote or maintain a market for the Company's securities, in each case, within the meaning of Form S-8 promulgated under the Securities Act of 1933, as amended
(the "
Securities Act
"), and provided, further, that a Consultant will include only those persons to whom the issuance of Shares may be registered under
Form S-8 promulgated under the Securities Act.
(m)
"Director
" means a member of the Board.
(n)
"Disability
" means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in the
case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory
standards adopted by the Administrator from time to time.
(o)
"Employee
" means any person, including Officers and Directors, employed by the Company or its Affiliates. Neither service
as a Director nor payment of a director's fee by the Company will be sufficient to constitute "employment" by the Company.
(p)
"Exchange Act
" means the Securities Exchange Act of 1934, as amended.
(q)
"Exchange Program
" means a program under which (i) outstanding Options or Stock Appreciation Rights are
surrendered or cancelled in exchange for awards of the same type (which may have higher or lower exercise prices and different terms), awards of a different type, and/or cash, (ii) Participants
would have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an
outstanding Option or Stock Appreciation Right is reduced. For the avoidance of doubt, as set forth in Section 4(b)(viii), the Administrator may not implement an Exchange Program.
(r)
"Fair Market Value
" means, as of any date, the value of Common Stock determined as follows:
(i) If
the Common Stock is listed on any established stock exchange or a national market system, including without limitation the New York Stock Exchange, the Nasdaq Global
Select Market, the Nasdaq Global Market or the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or, the closing bid, if no sales
were reported) as quoted on such exchange or system on the day of determination, as reported in
The Wall Street Journal
or such other source as the
Administrator deems reliable;
(ii) If
the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high
bid and low asked prices for the Common Stock on the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such bids and asks are reported),
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as
reported in
The Wall Street Journal
or such other source as the Administrator deems reliable; or
(iii) In
the absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the Administrator.
(s)
"Fiscal Year
" means the fiscal year of the Company.
(t)
"Incentive Stock Option
" means an Option that by its terms qualifies and is otherwise intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(u)
"Inside Director
" means a Director who is an Employee.
(v)
"Nonstatutory Stock Option
" means an Option that by its terms does not qualify or is not intended to qualify as an
Incentive Stock Option.
(w)
"Officer
" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder.
(x)
"Option
" means a stock option granted pursuant to the Plan.
(y)
"Outside Director
" means a Director who is not an Employee.
(z)
"Parent
" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the
Code.
(aa)
"Participant
" means the holder of an outstanding Award.
(bb)
"Performance Goals
" will have the meaning set forth in Section 11 of the Plan.
(cc)
"Performance Period
" means any Fiscal Year of the Company or such longer or shorter period as determined by the
Administrator in its sole discretion.
(dd)
"Performance Share
" means an Award denominated in Shares which may be earned in whole or in part upon attainment of
performance goals (including without limitation any Performance Goals) or other vesting criteria as the Administrator may determine pursuant to Section 10.
(ee)
"Performance Unit
" means an Award which may be earned in whole or in part upon attainment of performance goals or other
vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10.
(ff)
"Period of Restriction
" means the period during which the transfer of Shares of Restricted Stock are subject to
restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the
occurrence of other events as determined by the Administrator.
(gg)
"Plan
" means this 2018 Equity Incentive Plan, as amended.
(hh)
"Restricted Stock
" means Shares issued pursuant to a Restricted Stock award under Section 8 of the Plan, or
issued pursuant to the early exercise of an Option.
(ii)
"Restricted Stock Unit
" means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share,
granted pursuant to Section 9. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.
(jj)
"Rule 16b-3
" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when
discretion is being exercised with respect to the Plan.
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(kk)
"Section 16(b)
" means Section 16(b) of the Exchange Act.
(ll)
"Service Provider
" means an Employee, Director or Consultant.
(mm)
"Share
" means a share of the Common Stock, as adjusted in accordance with Section 15 of the Plan.
(nn)
"Stock Appreciation Right
" means an Award, granted alone or in connection with an Option, that pursuant to
Section 7 is designated as a Stock Appreciation Right.
(oo)
"Subsidiary
" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of
the Code.
3.
Stock Subject to the Plan.
(a) Subject
to the provisions of Section 15 of the Plan, the maximum aggregate number of Shares that may be issued under the Plan is equal to the sum of
(i) 1,353,375 Shares, and (ii) any Shares subject to stock options or similar awards granted under the Company's 2010 Equity Incentive Plan (the "
2010
Plan
") or the Company's 2001 Stock Option Plan (the "
2001 Plan
" and, together with the 2010 Plan, the
"
Prior Plans
") that expire or otherwise terminate without having been exercised in full and Shares issued pursuant to awards granted under the Prior
Plans that are forfeited to or repurchased by the Company (up to a maximum of 1,897,382 Shares pursuant to clause (ii)). The Shares may be authorized, but unissued, or reacquired Common Stock.
For the avoidance of doubt, Shares reacquired by the Company on an established stock exchange or national market system on which the Common Stock is listed through the use of cash proceeds received by
the Company from the exercise of Options or options that were granted under a Prior Plan or the Company's 2018 Inducement Equity Incentive Plan shall not be added to the Shares authorized for grant or
issuance under this Section 3.
(b)
Full Value Awards.
Any Shares subject to Awards of Restricted Stock, Restricted Stock Units, Performance
Units, and Performance Shares will be counted against the numerical limits of this Section 3 as 1.22 Shares for every one Share subject thereto. Further, if Shares acquired pursuant to any such
Award are forfeited or repurchased by the Company and would otherwise return to the Plan pursuant to Section 3(c), 1.22 times the number of Shares so forfeited or repurchased will return to the
Plan and will again become available for issuance.
(c)
Lapsed Awards.
If an Award expires or becomes unexercisable without having been exercised in full or, with
respect to an Award of Restricted Stock Units, Performance Units or Performance Shares, is terminated due to failure to vest, the unpurchased Shares (or for Awards other than Options or Stock
Appreciation Rights, the unissued Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). Upon the exercise of a Stock
Appreciation Right settled in Shares, the gross number of Shares covered by the portion of the Award so exercised will cease to be available under the Plan. Shares that have actually been issued under
the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if Shares issued pursuant to Awards of
Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company due to failure to vest, such Shares will become
available for future grant under the Plan. Shares used to pay the exercise or purchase price of an Award and/or to satisfy the tax withholding obligations related to an Award will not become available
for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for
issuance under the Plan. Notwithstanding the foregoing and, subject to adjustment as provided in Section 15, the maximum
number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a), plus, to the extent allowable under
Section 422 of the Code and the
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Treasury
Regulations promulgated thereunder, any Shares that become available for issuance under the Plan under this Section 3(c).
(d)
Share Reserve.
The Company, during the term of this Plan, will at all times reserve and keep available such
number of Shares as will be sufficient to satisfy the requirements of the Plan.
4.
Administration of the Plan.
(a)
Procedure.
(i)
Multiple Administrative Bodies.
Different Committees with respect to different groups of Service Providers
may administer the Plan.
(ii)
Rule 16b-3.
To the extent desirable to qualify transactions hereunder as exempt under
Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.
(iii)
Other Administration.
Other than as provided above, the Plan will be administered by (A) the Board
or (B) a Committee, which committee will be constituted to satisfy Applicable Laws.
(b)
Powers of the Administrator.
Subject to the terms and provisions of the Plan, and in the case of a
Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:
(i) to
determine the Fair Market Value;
(ii) to
select the Service Providers to whom Awards may be granted hereunder;
(iii) to
determine the number of Shares to be covered by each Award granted hereunder;
(iv) to
approve forms of Award Agreements for use under the Plan;
(v) to
determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not
limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine;
(vi) to
construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;
(vii) to
prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of
satisfying applicable non-U.S. laws or for qualifying for favorable tax treatment under applicable non-U.S. laws;
(viii) to
modify or amend each Award (subject to Section 20(c) of the Plan), including but not limited to the discretionary authority to extend the post-termination
exercisability period of Awards and to extend the maximum term of an Option (subject to Section 6(d) regarding Incentive Stock Options). Notwithstanding the previous sentence, the Administrator
may not implement an Exchange Program;
(ix) to
allow Participants to satisfy tax withholding obligations in such manner as prescribed in Section 16;
(x) to
authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;
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(xi) to
allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award pursuant to
such procedures as the Administrator may determine; and
(xii) to
make all other determinations deemed necessary or advisable for administering the Plan.
(c)
Effect of Administrator's Decision.
The Administrator's decisions, determinations and interpretations will
be final and binding on all Participants and any other holders of Awards and will be given the maximum deference permitted by Applicable Laws.
(d)
No Liability.
Under no circumstances shall the Company, its Affiliates, the Administrator, or the Board
incur liability for any indirect, incidental, consequential or special damages (including lost profits) of any form incurred by any person, whether or not foreseeable and regardless of the form of the
act in which such a claim may be brought, with respect to the Plan or the Company's, its Affiliates', the Administrator's or the Board's roles in connection with the Plan.
5.
Eligibility.
Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights,
Performance Units, and Performance Shares may be granted to Service Providers. Incentive Stock Options may be granted only to Employees of the Company or any Parent or Subsidiary of the Company.
6.
Stock Options.
(a)
Grant of Stock Options.
Subject to the terms and provisions of the Plan, an Option may be granted to Service
Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion. Each Option will be designated in the Award Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand U.S. dollars ($100,000), such
Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be taken into account in the order in which they were granted. The Fair
Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.
(b)
Exercise Price and Other Terms.
The Administrator, subject to the terms and provisions of the Plan, will
have complete discretion to determine the terms and conditions of Options granted under the Plan, provided, however, that the per Share exercise price for the Shares to be issued pursuant to exercise
of an Option will not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant. In addition, in the case of an Incentive Stock Option granted to an Employee of
the Company or any Parent or Subsidiary of the Company who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant.
Notwithstanding the foregoing provisions of this Section 6(b), Options may be granted with a per Share exercise price of less than one hundred percent (100%) of the Fair Market Value per Share
on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code and the Treasury Regulations thereunder.
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(c)
Option Agreement.
(i)
Terms and Conditions.
Each Option grant will be evidenced by an Award Agreement that will specify the
exercise price, the term of the Option, the acceptable forms of consideration for exercise (which may include any form of consideration permitted by Section 6(c)(ii), the conditions of
exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(ii)
Form of Consideration.
The Administrator will determine the acceptable form(s) of consideration for
exercising an Option, including the method of payment, to the extent permitted by Applicable Laws. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of
consideration at the time of grant. Such consideration to the extent permitted by Applicable Laws may include, but is not limited to:
(1) cash;
(2) check;
(3) other
Shares which have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option will be exercised and
provided that accepting such
Shares, in the sole discretion of the Administrator, will not result in any adverse accounting consequences to the Company;
(4) by
net exercise;
(5) consideration
received by the Company under a broker-assisted (or other) cashless exercise program (whether through a broker or otherwise) implemented by the Company in
connection with the Plan;
(6) a
reduction in the amount of any Company liability to the Participant, including any liability attributable to the Participant's participation in any Company-sponsored
deferred compensation program or arrangement;
(7) such
other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or
(8) any
combination of the foregoing methods of payment.
(d)
Term of Option.
An Option granted under the Plan will expire upon the date determined by the Administrator,
in its sole discretion, and set forth in the Award Agreement; provided, however, that the term will be no more than ten (10) years from the date of grant thereof. In the case of an Incentive
Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award
Agreement.
(e)
Exercise of Option.
(i)
Procedure for Exercise; Rights as a Stockholder.
Any Option granted hereunder will be exercisable according
to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.
An
Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator specifies from time to time) from the person entitled to
exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with applicable tax withholdings). Full payment may consist of any
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consideration
and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the
Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to an Option,
notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No dividend or other right for which the record date is
prior to the date the Shares subject to an Option are issued will be paid or payable, accrue, or cause any adjustment to an Option, except as provided in Section 15 of the Plan.
Exercising
an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.
(ii)
Termination of Relationship as a Service Provider.
If a Participant ceases to be a Service Provider, other
than upon the Participant's termination as the result of the Participant's death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award
Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence
of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the Participant's termination. Unless otherwise provided by the Administrator, if
on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the
Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iii)
Disability of Participant.
If a Participant ceases to be a Service Provider as a result of the
Participant's Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain
exercisable for twelve (12) months following the Participant's termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his
or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the
Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iv)
Death of Participant.
If a Participant dies while a Service Provider, the Option may be exercised following
the Participant's death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the Option be exercised
later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant's designated beneficiary, provided such beneficiary has been designated prior to
Participant's death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the
Participant's estate or by the person(s) to whom the Option is transferred pursuant to the Participant's will or in accordance with the laws of descent and distribution. In the absence of a specified
time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant's death. Unless otherwise provided by the Administrator, if at the time of death
Participant is not vested as to
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his
or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option
will terminate, and the Shares covered by such Option will revert to the Plan.
(v)
Other Termination.
A Participant's Award Agreement also may provide that if the exercise of the Option
following the termination of Participant's status as a Service Provider (other than upon the Participant's death or Disability) would result in liability under Section 16(b), then the Option
will terminate on the earlier of (A) the expiration of the term of the Option set forth in the Award Agreement, or (B) the tenth (10th) day after the last date on which such exercise
would result in such liability under Section 16(b). Finally, a Participant's Award Agreement may also provide that if the exercise of the Option following the termination of the Participant's
status as a Service Provider (other than upon the Participant's death or Disability) would be prohibited at any time solely because the issuance of Shares would violate the registration requirements
under the Securities Act, then the Option will terminate on the earlier of (A) the expiration of the term of the Option, or (B) the expiration of a period of three (3) months
after the termination of the Participant's status as a Service Provider during which the exercise of the Option would not be in violation of such registration requirements.
7.
Stock Appreciation Rights.
(a)
Grant of Stock Appreciation Rights.
Subject to the terms and provisions of the Plan, a Stock Appreciation
Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion.
(b)
Number of Shares.
Subject to the terms and provisions of the Plan, the Administrator will have complete
discretion to determine the number of Stock Appreciation Rights granted to any Service Provider.
(c)
Exercise Price and Other Terms.
The Administrator, subject to the terms and provisions of the Plan, will
have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan, provided, however, that the exercise price will not be less than one hundred percent
(100%) of the Fair Market Value of a Share on the date of grant. Notwithstanding the foregoing provisions of this Section 7(c), Stock Appreciation Rights may be granted with a per Share
exercise price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with,
Section 424(a) of the Code and the Treasury Regulations thereunder.
(d)
Stock Appreciation Right Agreement.
Each Stock Appreciation Right grant will be evidenced by an Award
Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion,
will determine.
(e)
Expiration of Stock Appreciation Rights.
A Stock Appreciation Right granted under the Plan will expire upon
the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement; provided, however, that the term will be no more than ten (10) years from the date of
grant thereof. Notwithstanding the foregoing, the rules of Section 6(e) relating to exercise and dividends also will apply to Stock Appreciation Rights.
(f)
Payment of Stock Appreciation Right Amount.
Upon exercise of a Stock Appreciation Right, a Participant will
be entitled to receive payment from the Company in an amount determined by multiplying:
(i) The
difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times
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At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or in some combination
thereof.
8.
Restricted Stock.
(a)
Grant of Restricted Stock.
Subject to the terms and provisions of the Plan, the Administrator, at any time
and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.
(b)
Restricted Stock Agreement.
Each Award of Restricted Stock will be evidenced by an Award Agreement that will
specify any Period of Restriction, the number of Shares granted, and such other
terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, the Company as escrow agent will hold Shares of Restricted Stock until
the restrictions on such Shares have lapsed.
(c)
Transferability.
Except as provided in this Section 8, Shares of Restricted Stock may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
(d)
Other Restrictions.
The Administrator, in its sole discretion, may impose such other restrictions on Shares
of Restricted Stock as it may deem advisable or appropriate.
(e)
Removal of Restrictions.
Except as otherwise provided in this Section 8, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of any Period of Restriction or at such other time as the
Administrator may determine. The Administrator, in its sole discretion, may reduce or waive any restrictions for such Award and may accelerate the time at which any restrictions will lapse or be
removed.
(f)
Voting Rights.
During the Period of Restriction, Service Providers holding Shares of Restricted Stock
granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.
(g)
Dividends and Other Distributions.
During the Period of Restriction, no dividends and other distributions
for which the record date occurs during the Period of Restriction will be paid or payable, accrue, or cause any adjustment with respect to the Shares of Restricted Stock to which the Period of
Restriction applies, except as provided in Section 15 of the Plan.
(h)
Return of Restricted Stock to Company.
On the date set forth in the Award Agreement, the Restricted Stock
for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.
9.
Restricted Stock Units.
(a)
Grant.
Subject to the terms and provision of the Plan, Restricted Stock Units may be granted at any time and
from time to time as determined by the Administrator. After the Administrator determines that it will grant Restricted Stock Units under the Plan, it will advise the Participant in an Award Agreement
of the terms, conditions, and restrictions related to the grant, including the number of Restricted Stock Units.
(b)
Vesting Criteria and Other Terms.
The Administrator will set vesting criteria in its discretion, which,
depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator may set vesting criteria based
upon the achievement of Company-wide, divisional, business unit or
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individual
goals (including without limitation continued employment or service), applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion.
(c)
Earning Restricted Stock Units.
Upon meeting the applicable vesting criteria, the Participant will be
entitled to receive a payout as determined by the Administrator. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may
reduce or waive any vesting criteria that must be met to receive a payout and may accelerate the time at which any restrictions will lapse or be removed.
(d)
Form and Timing of Payment.
Payment of earned Restricted Stock Units will be made as soon as practicable
after the date(s) set forth in the Award Agreement or as otherwise provided in the applicable Award Agreement or as required by Applicable Laws. The Administrator, in its sole discretion, may pay
earned Restricted Stock Units in cash, Shares, or a combination thereof. Shares represented by Restricted Stock Units that are fully paid in cash will not reduce the number of Shares available for
grant under the Plan.
(e)
Dividends and Other Distributions.
No dividends and other distributions for which the record date occurs
(i) while the Shares subject to Restricted Stock Units are unvested will be paid or payable, accrue, or cause any adjustment with respect to such unvested Restricted Stock Units, or
(ii) before the date that the Shares subject to vested Restricted Stock Units are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), unless the Administrator determines otherwise, will be paid or payable, accrue or cause any adjustment with respect to such Restricted Stock Units, in each case except as
provided in Section 15 of the Plan.
(f)
Cancellation.
On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be
forfeited to the Company.
10.
Performance Units and Performance Shares.
(a)
Grant of Performance Units/Shares.
Performance Units and Performance Shares may be granted to Service
Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. Subject to the terms and provisions of the Plan, the Administrator will have complete
discretion in determining the number of Performance Units and Performance Shares granted to each Participant.
(b)
Value of Performance Units/Shares.
Each Performance Unit will have an initial value that is established by
the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.
(c)
Performance Objectives and Other Terms.
The Administrator will set any performance objectives or other
vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or value of
Performance Units/Shares that will be paid out to the Service Providers. The time period during which any performance objectives or other vesting provisions must be met will be called the "Performance
Period." Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify any Performance Period, and such other terms and conditions as the Administrator, in its sole
discretion, will determine. The Administrator may set performance objectives based upon the achievement of Company-wide, divisional, business unit or individual goals (including without limitation
continued employment or service), applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion.
(d)
Earning of Performance Units/Shares.
After the applicable Performance Period has ended, the holder of
Performance Units/Shares will be entitled to receive a payout of the number
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of
Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting
provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for
such Performance Unit/Share and may accelerate the time at which any restrictions will lapse or be removed.
(e)
Form and Timing of Payment of Performance Units/Shares.
Payment of earned Performance Units/Shares will be
made as soon as practicable after the expiration of the applicable Performance Period, or as otherwise provided in the applicable Award Agreement or as required by Applicable Laws. The Administrator,
in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at
the close of the applicable Performance Period) or in a combination thereof.
(f)
Dividends and Other Distributions.
No dividends and other distributions for which the record date occurs
(i) while the Shares subject to Performance Units/Shares are unvested will be paid or payable, accrue, or cause any adjustment with respect to such unvested Performance Units/Shares, or
(ii) before the date that the Shares subject to vested Performance Units/Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), unless the Administrator determines otherwise, will be paid or payable, accrue or cause any adjustment with respect to such Performance Units/Shares, in each case except as
provided in Section 15 of the Plan.
(g)
Cancellation of Performance Units/Shares.
On the date set forth in the Award Agreement, all unearned or
unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.
11.
Performance Awards.
The granting and/or vesting of Awards may be made subject to the attainment of
performance goals relating to one or more business criteria and may provide for a targeted level or levels of achievement ("
Performance Goals
")
including: (i) attainment of research and development milestones, (ii) bookings, (iii) business divestitures and acquisitions, (iv) cash flow, (v) cash position,
(vi) contract awards or backlog, (vii) customer renewals, (viii) customer retention rates from an acquired company, business unit or division, (ix) earnings (which may
include earnings before interest and taxes, earnings before taxes and net earnings), (x) earnings per Share, (xi) expenses, (xii) gross margin, (xiii) growth in stockholder
value relative to the moving average of the S&P 500 Index or another index, (xiv) internal rate of return, (xv) market share, (xvi) net income, (xvii) net profit,
(xviii) net sales, (xix) new product development, (xx) new product invention or innovation, (xxi) number of customers, (xxii) operating cash flow,
(xxiii) operating expenses, (xxiv) operating income, (xxv) operating margin, (xxvi) overhead or other expense reduction, (xxvii) product defect measures,
(xxviii) product release timelines, (xxix) productivity, (xxx) profit, (xxxi) return on assets, (xxxii) return on capital, (xxxiii) return on equity,
(xxxiv) return on investment, (xxxv) return on sales, (xxxvi) revenue, (xxxvii) revenue growth, (xxxviii) sales results, (xxxix) sales growth, (xl) stock
price, (xli) time to market, (xlii) total stockholder return, (xliii) working capital. Any criteria used may be (A) measured in absolute terms, (B) measured in terms
of growth, (C) compared to another company or companies, (D) measured against the market as a whole and/or according to applicable market indices, (E) measured against the
performance of the Company as a whole or a segment of the Company and/or (F) measured on a pre-tax or post-tax basis (if applicable). Further, any Performance Goals may be used to measure the
performance of the Company as a whole or a business unit or other segment of the Company, or one or more product lines or specific markets and may be measured relative to a peer group or index. The
Performance Goals may differ from Participant to Participant and from Award to Award. The Administrator will determine whether any significant element(s) will be included in or excluded from the
calculation of any Performance Goal with respect to any Participant.
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In
all other respects, Performance Goals will be calculated in accordance with the Company's financial statements, generally accepted accounting principles, or under a methodology established by the
Administrator prior to the issuance of an Award and which is consistently applied with respect to a Performance Goal in the relevant Performance Period.
12.
Compliance With Code Section 409A.
Awards will be designed and operated in such a manner that they
are either exempt from the application of, or comply with, the requirements of Code Section 409A such that the grant, payment, settlement or deferral will not be subject to the additional tax
or interest applicable under Code Section 409A, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to meet
the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the
extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A the Award will be granted, paid, settled or deferred in a manner that will meet the
requirements of Code Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A. In no
event will the Company or any of its Affiliates have any obligation under the terms of this Plan to reimburse, indemnify, or hold harmless a Participant for any taxes, interest or penalties imposed,
or other costs incurred, as a result of Code Section 409A.
13.
Leaves of Absence/Transfer Between Locations.
Unless the Administrator provides otherwise and except as
required by Applicable Laws, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Participant will not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no
such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by
the Company is not so guaranteed, then six (6) months following the first (1
st
) day of such leave, any Incentive Stock Option held by the Participant will cease to be treated as
an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.
14.
Transferability of Awards.
Unless determined otherwise by the Administrator, an Award may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant,
only by the Participant. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate.
15.
Adjustments; Dissolution or Liquidation; Merger or Change in Control.
(a)
Adjustments.
In the event that any dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or
other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits
or potential benefits intended to be made available under the Plan, will adjust the number and class of shares that may be delivered under the Plan and/or the number, class, and price of shares
covered by each outstanding Award, and the numerical Share limits set forth in Section 3 of the Plan.
(b)
Dissolution or Liquidation.
In the event of the proposed dissolution or liquidation of the Company, the
Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate
immediately prior to the consummation of such proposed action.
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(c)
Change in Control.
In the event of a merger of the Company with or into another corporation or other entity
or a Change in Control, each outstanding Award will be treated as the Administrator determines without a Participant's consent, including, without limitation, that (i) Awards will be assumed,
or substantially equivalent awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and
prices; (ii) upon written notice to a Participant, that the Participant's Awards will terminate upon or immediately prior to the consummation of such merger or Change in Control;
(iii) outstanding Awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an Award will lapse, in whole or in part prior to or upon consummation of such
merger or Change in Control, and, to the extent the Administrator determines, terminate upon or immediately prior to the effectiveness of such merger or Change in Control; (iv) (A) the
termination of an Award in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant's
rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good faith that no
amount would have been attained upon the exercise of such Award or realization of the Participant's rights, then such Award may be terminated by the Company without payment), or (B) the
replacement of such Award with other rights or property selected by the Administrator in its sole discretion; or (v) any combination of the foregoing. In taking any of the actions permitted
under this subsection 15(c), the Administrator will not be obligated to treat all Awards, all Awards held by a Participant, or all Awards of the same type, similarly.
In
the event that the successor corporation does not assume or substitute for the Award (or portion thereof), the Participant will fully vest in and have the right to exercise all of his
or her outstanding Options and Stock Appreciation Rights (or portions thereof) that are not assumed or substituted for, including Shares as to which such Awards would not otherwise be vested or
exercisable, all restrictions on Restricted Stock, Restricted Stock Units, and Performance Shares/Units not assumed or substituted
for will lapse, and, with respect to Awards with performance-based vesting (or portions thereof) not assumed or substituted for, all performance goals or other vesting criteria will be deemed achieved
at one hundred percent (100%) of target levels and all other terms and conditions met, in all cases, unless specifically provided otherwise under the applicable Award Agreement or other written
agreement between the Participant and the Company or any of its Affiliates, as applicable. In addition, if an Option or Stock Appreciation Right (or portion thereof) is not assumed or substituted for
in the event of a merger or Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right (or its applicable portion) will
be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right (or its applicable portion) will terminate upon
the expiration of such period.
For
the purposes of this subsection (c) (and subsection (d) below), an Award will be considered assumed if, following the merger or Change in Control, the Award confers the
right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in the case
of a Stock Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Restricted Stock Unit, Performance Share or Performance Unit which the Administrator can
determine to pay in cash, the fair market value of the consideration received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received
in the merger or Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of an Option or Stock
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Appreciation
Right or upon the payout of a Restricted Stock Unit, Performance Unit or Performance Share, for each Share subject to such Award (or in the case of an Award settled in cash, the number of
implied shares determined by dividing the value of the Award by the per share consideration received by holders of Common Stock in the merger or Change in Control), to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or Change in Control.
Notwithstanding
anything in this Section 15(c) to the contrary, and unless otherwise provided for in an Award Agreement or other written agreement between the Participant and the
Company or any of its Affiliates, as applicable, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance objectives (including any Performance Goals) will not be
considered assumed if the Company or its successor modifies any of such performance objectives without the Participant's
consent; provided, however, a modification to such performance objectives only to reflect the successor corporation's post-Change in Control corporate structure will not be deemed to invalidate an
otherwise valid Award assumption.
Notwithstanding
anything in this Section 15(c) to the contrary, if a payment under an Award Agreement is subject to Code Section 409A and if the change in control
definition contained in the Award Agreement or other agreement related to the Award does not comply with the definition of "change in control" for purposes of a distribution under Code
Section 409A, then any payment of an amount that is otherwise accelerated under this Section will be delayed until the earliest time that such payment would be permissible under Code
Section 409A without triggering any penalties applicable under Code Section 409A.
(d)
Outside Director Awards.
With respect to Awards granted to an Outside Director, in the event of a Change in
Control, the Participant will fully vest in and have the right to exercise Options and/or Stock Appreciation Rights as to all of the Shares underlying such Award, including those Shares which
otherwise would not be vested or exercisable, all restrictions on Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units will lapse, and, with respect to Awards with
performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met, unless
specifically provided otherwise under the applicable Award Agreement or other written agreement between the Participant and the Company.
16.
Tax Withholding.
(a)
Withholding Requirements.
Prior to the delivery of any Shares or cash pursuant to an Award (or exercise
thereof) or such earlier time as any tax withholding obligations are due, the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy federal, state, local, non-U.S. or other taxes (including the Participant's FICA obligation) required to be withheld with respect to such Award (or exercise thereof).
(b)
Withholding Arrangements.
The Administrator, in its sole discretion and pursuant to such procedures as it
may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (a) paying cash, check or other cash equivalents,
(b) electing to have the Company withhold otherwise deliverable cash or Shares having a fair market value equal to the minimum statutory amount required to be withheld or such greater amount as
the Administrator may determine if such amount would not have adverse accounting consequences, as the Administrator determines in its sole discretion, (c) delivering to the Company
already-owned Shares having a fair market value equal to the minimum statutory amount required to be withheld or such greater amount as the Administrator may determine, in each case, provided the
delivery of such Shares will not result in any adverse accounting consequences, as the Administrator determines in its sole discretion, (d) selling a sufficient number
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of
Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to
be withheld, or (e) any combination of the foregoing methods of payment. The fair market value of the Shares to be withheld or delivered will be determined as of the date that the taxes are
required to be withheld.
17.
No Effect on Employment or Service.
Neither the Plan nor any Award will confer upon a Participant any right
with respect to continuing the Participant's relationship as a Service Provider with the Company or any Affiliate, nor will they interfere in any way with the Participant's right or the right of the
Company or any Affiliate to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.
18.
Date of Grant.
The date of grant of an Award will be, for all purposes, the date on which the Administrator
makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time
after the date of such grant.
19.
Term of Plan.
Subject to Section 23 of the Plan, the Plan will become effective upon its adoption by
the Board. It will continue in effect for a term of ten (10) years from the date adopted by the Board, unless terminated earlier under Section 20 of the Plan.
20.
Amendment and Termination of the Plan.
(a)
Amendment and Termination.
The Administrator may at any time amend, alter, suspend or terminate the Plan.
(b)
Stockholder Approval.
The Company will obtain stockholder approval of any Plan amendment to the extent
necessary and desirable to comply with Applicable Laws.
(c)
Effect of Amendment or Termination.
No amendment, alteration, suspension or termination of the Plan will
impair the rights of any Participant, unless mutually agreed otherwise between the Participant
and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator's ability to exercise the powers
granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
21.
Conditions Upon Issuance of Shares.
(a)
Legal Compliance.
Shares will not be issued pursuant to the exercise of an Award unless the exercise of such
Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.
(b)
Investment Representations.
As a condition to the exercise of an Award, the Company may require the person
exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is required.
22.
Inability to Obtain Authority.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction or to complete or comply with the requirements of any registration or other qualification of the Shares under any state, federal or non-U.S. law or under the rules and regulations
of the Securities and Exchange Commission, the stock exchange on which Shares of the same class are then listed, or any other governmental or regulatory body, which authority, registration,
qualification or rule compliance is deemed by the Company's counsel to be necessary or advisable for the issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect
of
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the
failure to issue or sell such Shares as to which such requisite authority, registration, qualification or rule compliance will not have been obtained.
23.
Stockholder Approval.
The Plan will be subject to approval by the stockholders of the Company within twelve
(12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.
* * *
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Appendix B
VIVUS, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
(Share numbers adjusted for 1-for-10 reverse stock split effected September 10, 2018)
The following constitute the provisions of the 1994 Employee Stock Purchase Plan of VIVUS, Inc.
1.
Purpose.
The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with
an opportunity to purchase Common Stock of the Company through accumulated Contributions (as defined below). It is the intention of the company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.
2.
Definitions.
(a) "
Administrator
" shall mean the Board or any committee of members of the Board designated by the Board to administer the
Plan pursuant to Section 13.
(b) "
Board
" shall mean the Board of Directors of the company.
(c) "
Change of Control
" shall mean the occurrence of any of the following events:
(i) Any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities;
or
(ii) The
consummation of the sale or disposition by the Company of all or substantially all of the Company's assets; or
(iii) The
consummation of a merger or consolidation of the Company, with any other corporation, other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company, or such surviving
entity or its parent outstanding immediately after such merger or consolidation; or
(iv) A
change in the composition of the Board, as a result of which fewer than a majority of the Directors are Incumbent Directors. "Incumbent Directors" shall mean
Directors who either (A) are Directors of the Company, as applicable, as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at
least a majority of those Directors whose election or nomination was not in connection with any transaction described in subsections (i), (ii) or (iii) or in connection with an
actual or threatened proxy contest relating to the election of Directors of the Company.
(d) "
Code
" shall mean the Internal Revenue Code of 1986, as amended.
(e) "
Common Stock
" shall mean the Common Stock of the Company.
(f) "
Company
" shall mean VIVUS, Inc. and any Designated Subsidiary of the Company.
(g) "
Compensation
" shall mean all base straight time gross earnings and commissions, exclusive of payments for overtime,
shift premium, incentive compensation, incentive payments, bonuses and other compensation. The Administrator, in its discretion, may, on a uniform and
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nondiscriminatory
basis, establish a different definition of Compensation for a subsequent Offering Period.
(h) "
Contributions
" shall mean the payroll deductions and other additional payments that the Company may permit to be made by
a participant to fund the exercise of options granted pursuant to the Plan.
(i) "
Designated Subsidiary
" shall mean any Subsidiary which has been designated by the Administrator from time to time in its
sole discretion as eligible to participate in the Plan.
(j) "
Eligible Employee
" shall mean any individual who is a common law employee of the Company or any Designated Subsidiary
whose customary employment with the Company or any Designated Subsidiary is at least twenty (20) hours per week and more than five (5) months in any calendar year, or any lesser number
of hours per week and/or number of months in any calendar year established by the Administrator (if required under applicable local law) for purposes of any separate Offerings. For purposes of the
Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company. Where the period of leave exceeds three
(3) months and the individual's right to reemployment is not guaranteed either by statute or by contract, the employment relationship will be deemed to have terminated three (3) months
and one (1) day following commencement of such leave. The Administrator, in its discretion, from time to time may, prior to an Enrollment Date for all options to be granted on such Enrollment
Date in an Offering, determine (on a uniform and nondiscriminatory basis or as otherwise permitted by Treasury Regulation Section 1.423-2) that the definition of Eligible Employee will or will
not include an individual if he or she: (i) has not completed at least two (2) years of service since his or her last hire date (or such lesser period of time as may be determined by the
Administrator in its discretion), (ii) customarily works not more than twenty (20) hours per week (or such lesser period of time as may be determined by the Administrator in its
discretion), (iii) customarily works not more than five (5) months per calendar year (or such lesser period of time as may be determined by the Administrator in its discretion),
(iv) is a highly compensated employee within the meaning of Section 414(q) of the Code, or (v) is a highly compensated employee within the meaning of Section 414(q) of the
Code with compensation above a certain level or is an officer or subject to the disclosure requirements of Section 16(a) of the Exchange Act, provided the exclusion is applied with respect to
each Offering in an identical manner to all highly compensated individuals of the Employer whose Employees are participating in that Offering. Each exclusion shall be applied with respect to an
Offering in a manner complying with U.S. Treasury Regulation Section 1.423-2(e)(2)(ii).
(k) "
Enrollment Date
" shall mean the first day of each Offering Period.
(l) "
Exercise Date
" shall mean the last day of each Offering Period.
(m) "
Exchange Act
" shall mean the Securities Exchange Act of 1934, as amended, including the rules and regulations
promulgated thereunder.
(n) "
Fair Market Value
" shall mean, as of any date, the value of Common Stock determined as follows:
(1) If
the Common Stock is listed on any established stock exchange or a national market system, including without limitation the NASDAQ Global Select Market, the NASDAQ
Global Market or the NASDAQ Capital Market of The NASDAQ Stock Market, its Fair Market Value shall be the closing sale price for the Common Stock (or the mean of the closing bid and asked prices, if
no sales were
reported), as quoted on such exchange (or the exchange with the greatest volume of trading in Common Stock) or system on the date of such determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable, or;
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(2) If
the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid
and asked prices for the Common Stock on the date of such determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable, or;
(3) In
the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator.
(o) "Offering"
shall mean an offer under the Plan of an option that may be exercised during an Offering Period as further described in Section 4. For purposes of the
Plan, the Administrator may designate separate Offerings under the Plan (the terms of which need not be identical) in which Eligible Employees of the Company and/or one or more of the Designated
Subsidiaries will participate, even if the dates of the applicable Offering Periods of each such Offering are identical and the provisions of the Plan will separately apply to each Offering. To the
extent permitted by U.S. Treasury Regulation Section 1.423-2(a)(1), the terms of each Offering need not be identical provided that the terms of the Plan and an Offering together satisfy U.S.
Treasury Regulation Sections 1.423-2(a)(2) and (a)(3).
(p) "
Offering Period
" shall mean a period of approximately six (6) months, commencing on the first Trading Day on or
after May 15 and terminating on the last Trading Day in the period ending the following November 14, or commencing on the first Trading Day on or after November 15 and terminating
on the last Trading Day in the period ending the following May 14, during which an option granted pursuant to the Plan may be exercised. The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan. The initial Offering Period shall be determined by the Board of Directors.
(q) "
Plan
" shall mean this Employee Stock Purchase Plan, as amended.
(r) "
Purchase Price
" shall mean an amount equal to 85% of the Fair Market Value of a share of Common Stock on the Enrollment
Date or on the Exercise Date, whichever is lower; provided, however, that the Purchase Price may be determined for subsequent Offering Periods by the
Administrator subject to compliance with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule) or pursuant to
Section 19.
(s) "
Reserves
" shall mean the number of shares of Common Stock covered by each option under the Plan which have not yet been
exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but not yet placed under option.
(t) "
Subsidiary
" shall mean a "subsidiary corporation," whether now or hereafter existing, as defined in
Section 424(f) of the Code.
(u) "
Trading Day
" shall mean a day on which national stock exchanges and the National Association of Securities Dealers
Automated Quotation (NASDAQ) System are open for trading.
3.
Eligibility.
(a) Any
Eligible Employee (as defined in Section 2(g)), who shall be employed by the Company on a given Enrollment Date shall be eligible to participate in the Plan.
(b) Employees
who are citizens or residents of a non-U.S. jurisdiction (without regard to whether they also are citizens or residents of the United States or resident aliens
(within the meaning of Section 7701(b)(1)(A) of the Code)) may be excluded from participation in the Plan or an Offering if the participation of such employees is prohibited under the laws of
the applicable jurisdiction or if complying with the laws of the applicable jurisdiction would cause the Plan or an Offering to violate Section 423 of the Code.
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(c) Any
provisions of the Plan to the contrary notwithstanding, no Eligible Employee shall be granted an option under the Plan (i) to the extent, immediately after
the grant, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company
or of any Subsidiary and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent his or her rights to purchase stock under all employee stock purchase plans (as defined in Section 423 of the Code) of the Company and
its subsidiaries to accrue at a rate which exceeds
Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year in which such option is outstanding
at any time, as determined in accordance with Section 423 of the Code and the regulations thereunder.
4.
Offering Periods.
The Plan shall be implemented by consecutive Offering Periods with a new Offering Period
commencing on the first Trading Day on or after May 15 and November 15 each year, or on such other date as the Administrator shall determine, and continuing thereafter until terminated
in accordance with Section 19 hereof. The Administrator shall have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future
Offerings without stockholder approval if such change is announced prior to the scheduled beginning of the first Offering Period to be affected thereafter.
5.
Participation.
(a) An
Eligible Employee may become a participant in the Plan by completing a subscription agreement authorizing payroll deductions in the form of
Exhibit A
to this Plan and filing it with the Company's
payroll office prior to the applicable Enrollment Date.
6.
Contributions.
(a) At
the time a participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each pay day or other Contributions made (to
the extent permitted by the Administrator) during the Offering Period in an amount not less than one percent (1%) not exceeding ten percent (10%) of the Compensation which he or she receives on each
pay day during the Offering Period; provided, however, that should a pay day occur on an Exercise Date, a participant shall have the payroll deductions made on such day applied to his or her account
under the new Offering Period. The Administrator, in its sole discretion, may permit all participants in a specified Offering to contribute amounts to the Plan through payment by cash, check or other
means set forth in the subscription agreement prior to each Exercise Date of each Offering Period. A participant's subscription agreement shall remain in effect for successive Offering Periods unless
terminated as provided in Section 10 hereof.
(b) Payroll
deductions for a participant shall commence on the first payroll following the Enrollment Date and shall end on the last payroll in the Offering Period to which
such authorization is applicable, unless sooner terminated by the participant as provided in Section 10 hereof.
(c) All
Contributions made for a participant shall be credited to his or her account under the Plan and payroll deductions will be withheld in whole percentages only. A
participant may not make any additional payments into such account.
(d) A
participant may discontinue his or her participation in the Plan as provided in Section 10 hereof, or may increase or decrease the rate of his or her
Contributions during the Offering Period by completing or filing with the Company a new subscription agreement authorizing a change in Contribution rate. If a participant has not followed such
procedures to change the rate of Contributions, the rate of his or her Contributions will continue at the originally
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elected
rate throughout the Offering Period and future Offering Periods (unless terminated as provided in Section 10). The Administrator may, in its discretion, limit the nature and/or number
of Contribution rate changes during any Offering Period, and may establish such other conditions or limitations as it deems appropriate for Plan administration. The change in rate shall be effective
with the first full payroll period following five (5) business days after the Company's receipt of the new subscription agreement unless the Company elects to process a given change in
participation more quickly. A participant's subscription agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof.
(e) Notwithstanding
the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's Contributions
may be decreased to zero percent (0%) at such time during any Offering Period. Subject to Section 423(b)(8) of the Code and Section 3(c) of the Plan, Contributions shall recommence at
the rate provided in such participant' s subscription agreement at the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10 hereof.
(f) Notwithstanding
any provisions to the contrary in the Plan, the Administrator may allow Eligible Employees to participate in the Plan via cash contributions instead of
payroll deductions if the Administrator determines that cash contributions are permissible under Section 423 of the Code.
(g) At
the time the option is exercised, in whole or in part, or at the time some or all of the Company's Common Stock issued under the Plan is disposed of (or any other
time that a taxable event related to the Plan occurs), the participant must make adequate provision for the Company's (or Designated Subsidiary's) federal, state, local or any other tax liability
payable to any authority including taxes imposed by jurisdictions outside of the U.S., national insurance, social security or other tax withholding obligations, if any, which arise upon the exercise
of the option or the disposition of the Common Stock (or any other time that a taxable event related to the Plan occurs). At any time, the Company may, but will not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Eligible Employee. In addition, the Company or its Designated Subsidiary may,
but will not be obligated to, withhold from the proceeds of the sale of Common Stock or any other method of withholding the Company or its Designated Subsidiary deems appropriate to the extent
permitted by U.S. Treasury Regulation Section 1.423-2(f).
7.
Grant of Option.
On the Enrollment Date of each Offering Period, each Eligible Employee participating in such
Offering Period shall be granted an option to purchase on the Exercise Date of such Offering Period (at the applicable Purchase Price) up to a number of shares of the Company's Common Stock determined
by dividing such Eligible Employee's Contributions accumulated prior to such Exercise Date and retained in the Participant's account as of the Exercise Date by the applicable Purchase Price; provided
that in no event shall an Eligible Employee be permitted to purchase during each Offering Period more than 1,000 shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 18), on the Enrollment Date, and provided further that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12 hereof. The Eligible Employee may
accept the grant of such option by turning in a completed and signed subscription agreement (in the form attached hereto as
Exhibit A
) to the
Company on or prior to an Enrollment Date. The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of the Company's Common
Stock an Eligible Employee may purchase during an Offering Period. Exercise of the option shall occur as provided in Section 8 hereof, unless
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the
participant has withdrawn pursuant to Section 10 hereof, and shall expire on the last day of the Offering Period.
8.
Exercise of Option.
(a) Unless
a participant withdraws from the Plan as provided in Section 10 hereof, his or her option for the purchase of shares will be exercised automatically on the
Exercise Date, and the maximum number of full shares subject to option shall be purchased for such participant at the applicable Purchase Price with the accumulated Contributions in his or her
account. No fractional shares will be purchased; any Contributions accumulated in a participant's account which are not sufficient to purchase a full share shall be retained in the participant' s
account for the subsequent Offering Period, subject to earlier withdrawal by the participant as provided in Section 10 hereof. Any other monies left over in a participant's account after the
Exercise Date shall be returned to the participant. During a participant's lifetime, a participant's option to purchase shares hereunder is exercisable only by him or her.
(b) If
the Administrator determines that, on a given Exercise Date, the number of shares with respect to which options are to be exercised may exceed (i) the number
of shares of Common Stock that were
available for sale under the Plan on the Enrollment Date of the applicable Offering Period, or (ii) the number of shares available for sale under the Plan on such Exercise Date, the
Administrator may in its sole discretion (x) provide that the Company shall make a pro rata allocation of the shares of Common Stock available for purchase on such Enrollment Date or Exercise
Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock
on such Exercise Date, and continue all Offering Periods then in effect or (y) provide that the Company shall make a pro rata allocation of the shares available for purchase on such Enrollment
Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Exercise Date, and terminate any or all Offering Periods then in effect pursuant to Section 19. The Company may make pro rata allocation of the shares available on
the Enrollment Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional shares for issuance under the Plan by the Company's
stockholders subsequent to such Enrollment Date.
9.
Delivery.
As promptly as practicable after each Exercise Date on which a purchase of shares occurs, the
Company shall arrange the delivery to each participant, as appropriate, of a certificate representing the shares purchased upon exercise of his or her option in a form determined by the Administrator.
The Company may permit or require that shares be deposited directly with a broker designated by the Company or to a designated agent of the Company, and the Company may utilize electronic or automated
methods of share transfer. The Company may require that shares be retained with such broker or agent for a designated period of time and/or may establish other procedures to permit tracking of
disqualifying dispositions of such shares. No participant will have any voting, dividend, or other stockholder rights with respect to shares of Common Stock subject to any option granted under the
Plan until such shares have been purchased and delivered to the participant as provided in this Section 9.
10.
Withdrawal; Termination of Employment.
(a) A
participant may withdraw all but not less than all the Contributions credited to his or her account and not yet used to exercise his or her option under the Plan at
any time by giving written notice to the Company in the form of
Exhibit B
to this Plan. All of the participant's Contributions credited to his or
her account will be paid to such participant promptly after receipt of notice of withdrawal and such participant's option for the Offering Period will be automatically terminated, and no further
payroll deductions for the purchase of shares will be made during the
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Offering
Period. If a participant withdraws from an Offering Period, payroll deductions will not resume at the beginning of the succeeding Offering Period unless the participant delivers to the
Company a new subscription agreement.
(b) A
participant's withdrawal from an Offering Period will not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted
by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the participant withdraws.
(c) Upon
a participant's ceasing to be an Eligible Employee (as defined in Section 2(g) hereof), for any reason, he or she will be deemed to have elected to withdraw
from the Plan and the Contributions credited to such participant's account during the Offering Period but not yet used to exercise the option will be returned to such participant or, in the case of
his or her death, to the person or persons entitled thereto under Section 14 hereof, and such participant's option will be automatically terminated. The preceding sentence notwithstanding, a
participant who receives payment in lieu of notice of termination of employment shall be treated as continuing to be an Eligible Employee for the participant's customary number of hours per week of
employment during the period in which the participant is subject to such payment in lieu of notice.
11.
Interest.
No interest shall accrue on the Contributions of a participant in the Plan, except as may be
required by applicable law, as determined by the Company, and if so required by the laws of a particular jurisdiction, shall apply to all participants in the relevant Offering except to the extent
otherwise permitted by U.S. Treasury Regulation Section 1.423-2(f).
12.
Stock.
(a) The
maximum number of shares of the Company's Common Stock which shall be made available for sale under the Plan shall be 600,000 shares, subject to adjustment upon
changes in capitalization of the Company as provided in Section 18 hereof.
(b) The
participant will have no interest or voting right in shares covered by his option until such option has been exercised.
(c) Shares
to be delivered to a participant under the Plan will be registered in the name of the participant or in the name of the participant and his or her spouse.
13.
Administration.
The Plan shall be administered by the Board or a committee of members of the Board appointed
by the Board. The Administrator shall have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to designate separate Offerings under the Plan, to
determine eligibility, to adjudicate all disputed claims filed under the Plan and to establish such procedures that it deems necessary for the administration of the Plan (including, without
limitation, to adopt such procedures and sub-plans as are necessary or appropriate to permit the participation in the Plan by employees who are foreign nationals or employed outside the U.S., the
terms of which sub-plans may take precedence over other provisions of this Plan, with the exception of Section 12(a) hereof, but unless otherwise superseded by the terms of such sub-plan, the
provisions of this Plan shall govern the operation of such sub-plan). Unless otherwise determined by the Administrator, the employees eligible to participate in each sub-plan will participate in a
separate Offering. Without limiting the generality of the foregoing, the Administrator is specifically authorized to adopt rules and procedures regarding eligibility to participate, the definition of
Compensation, handling of Contributions, making of Contributions to the Plan (including, without limitation, in forms other than payroll deductions), establishment of bank or trust accounts to hold
Contributions, payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary designation requirements, withholding procedures and handling of stock
certificate that vary with applicable local requirements. The Administrator also is authorized to determine that, to the extent permitted by U.S. Treasury Regulation Section 1.423-2(f), the
terms of option granted under the Plan or an Offering to citizens or residents of a non-U.S. jurisdiction will be less favorable than the terms of options granted under the Plan or the same Offering
to employees resident solely in the U.S. Every finding, decision and determination made by the Administrator shall, to the full extent permitted by law, be final and binding upon all parties.
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14.
Designation of Beneficiary.
(a) If
permitted by the Administrator, a participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of such shares
and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective.
(b) Such
designation of beneficiary may be changed by the participant at any time by written notice in a form determined by the Administrator. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
(c) All
beneficiary designations will be in such form and manner as the Administrator may designate from time to time. Notwithstanding subsections (a) and
(b) above, the Company and/or the Administrator may decide not to permit such designations by participants in non-U.S. jurisdictions to the extent permitted by U.S. Treasury Regulation
Section 1.423-2(f).
15.
Transferability.
Neither Contributions credited to a participant's account nor any rights with regard to the
exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as
provided in Section 14 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as
an election to withdraw funds from an Offering Period in accordance with Section 10 hereof.
16.
Use of Funds.
All Contributions received or held by the Company under the Plan may be used by the Company
for any corporate purpose, and the Company shall not be obligated to segregate such Contributions except under such Offerings in which applicable local law requires that Contributions to the Plan by
participants be segregated from the Company's general corporate funds and/or deposited with an independent third party for participants in non-U.S. jurisdictions. Until shares are issued, participants
shall only have the rights of an unsecured creditor with respect to such shares.
17.
Reports.
Individual accounts will be maintained for each participant in the Plan. Statements of account will
be given to participating Eligible Employees at least annually, which statements will set forth the amounts of Contributions, the Purchase Price, the number of shares purchased and the remaining cash
balance, if any.
18.
Adjustments Upon Changes in Capitalization.
(a)
Changes in Capitalization.
Subject to any required action by the stockholders of the Company, the Reserves
as well as the price per share of Common Stock covered by each option under the Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of
shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration". Such
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adjustment
shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of
Common Stock subject to an option.
(b)
Dissolution or Liquidation.
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period then in progress shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and shall terminate immediately prior to the consummation of such proposed dissolution or
liquidation, unless provided otherwise by the Administrator. The New Exercise Date shall be before the date of the Company's proposed dissolution or liquidation. The Administrator shall notify each
participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that
the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10
hereof.
(c)
Merger or Change of Control.
In the event of a merger or a Change of Control, each option under the Plan
shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the Administrator determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution, to shorten the Offering Period then in progress by setting a new Exercise Date (the "New Exercise Date") or to cancel
each outstanding right to purchase and refund all sums collected from participants during the Offering Period then in progress. If the Administrator shortens the Offering Period then in progress in
lieu of assumption or substitution in the event of a merger or Change of Control, the Administrator shall notify each participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for his or her option has been changed to the New Exercise Date and that his or her option will be exercised automatically on the New Exercise Date, unless prior
to such date he or she has withdrawn from the Offering Period as provided in Section 10 hereof. For purposes of this paragraph, an option granted under the Plan shall be deemed to be assumed
if, following the merger or Change of Control, the option confers the right to purchase, for each share of option stock subject to the option immediately prior to the merger or Change of Control, the
consideration (whether stock, cash or other securities or property) received in the merger or Change of Control by holders of Common Stock for each share of Common Stock held on the effective date of
the transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the merger or Change of Control was not solely common stock of the successor corporation or its parent (as defined in Section 424(e) of the
Code), the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or Change of Control.
The
Administrator may, if it so determines in the exercise of its sole discretion, also make provision for adjusting the Reserves, as well as the price per share of Common Stock covered
by each outstanding option, in the event the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into any other corporation.
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19.
Amendment or Termination.
(a) The
Administrator may at any time and for any reason terminate or amend the Plan. Except as provided in Section 18 hereof, no such termination can affect options
previously granted, provided that an Offering Period may be terminated by the Administrator on any Exercise Date if the Administrator determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 18 hereof, no amendment may make any change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law or regulation), the Company shall obtain
stockholder approval in such a manner and to such a degree as required.
(b) Without
stockholder consent and without regard to whether any participant rights may be considered to have been "adversely affected," the Administrator shall be entitled
to change the Offering Periods, designate separate Offerings, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the
purchase of Common Stock for each participant properly correspond with Contribution amounts, and establish such other limitations or procedures as the Administrator determines in its sole discretion
advisable which are consistent with the Plan.
(c) In
the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Administrator may, in
its discretion and, to the extent necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequence including, but not limited to:
(i) amending
the Plan to confirm with the safe harbor definition under the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any
successor thereto), including with respect to an Offering Period underway at the time;
(ii) altering
the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price;
(iii) shortening
any Offering Period so that Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Administrator action; and
(iv) reducing
the maximum percentage of Compensation a participant may elect to set aside as Contributions; and
(v) allocating
shares.
Such
modifications or amendments shall not require stockholder approval or the consent of any Plan participants
20.
Notices.
All notices or other communications by a participant to the Company under or in connection with the
Plan shall be deemed to have been duly given when received in the form and manner specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
21.
Conditions Upon Issuance of Shares.
Shares shall not be issued with respect to an option unless the exercise
of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act
of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and
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regulations
promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As
a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being
purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
22.
Code Section 409A.
The Plan is exempt from the application of Code Section 409A and any
ambiguities herein will be interpreted to so be exempt from Code Section 409A. In furtherance of the foregoing and notwithstanding any provision in the Plan to the contrary, if the
Administrator determines that an option granted under the Plan may be subject to Code Section 409A or that any provision in the Plan would cause an option under the Plan to be subject to Code
Section 409A, the Administrator may amend the terms of the Plan and/or of an outstanding option granted under the Plan, or take such other action the Administrator determines is necessary or
appropriate, in each case, without the participant's consent, to exempt any outstanding option or future option that may be granted under the Plan from or to allow any such options to comply with Code
Section 409A, but only to the extent any such amendments or action by the Administrator would not violate Code Section 409A. Notwithstanding the foregoing, the Company shall have no
liability to a participant or any other party if the option to purchase Common Stock under the Plan that is intended to be exempt from or compliant with Code Section 409A is not so exempt or
compliant or for any action taken by the Administrator with respect thereto. The Company makes no representation that the option to purchase Common Stock under the Plan is compliant with Code
Section 409A.
23.
Term of Plan.
The Plan shall become effective upon the earlier to occur of its adoption by the Board of
Directors or its approval by the stockholders of the Company. It shall continue in effect until terminated under Section 19 hereof.
24.
Governing Law.
The Plan shall be governed by, and construed in accordance with, the laws of the State of
California (except its choice-of-law provisions).
25.
Severability.
If any provision of the Plan is or becomes or is deemed to be invalid, illegal, or
unenforceable for any reason in any jurisdiction or as to any participant, such invalidity, illegality or unenforceability shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as to such jurisdiction or participant as if the invalid, illegal or unenforceable provision had not been included.
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Exhibit A
VIVUS, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
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Original Application
Change in Payroll Deduction Rate
Change of Beneficiary(ies)
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Enrollment Date:
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1.
hereby elects to participate in the VIVUS, Inc. 1994 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan")
and subscribes to purchase shares of the Company' s Common Stock in accordance with this Subscription Agreement and the Employee Stock Purchase Plan.
2. I
hereby authorize payroll deductions from each paycheck in the amount of
% of my Compensation on each payday (not to exceed
10%) during the Offering Period in accordance with the Employee Stock Purchase Plan. (Please note that no fractional percentages are permitted.)
3. I
understand that said payroll deductions shall be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with
the Employee Stock Purchase Plan. I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used to automatically exercise my option.
4. I
have received a copy of the complete "Employee Stock Purchase Plan." I understand that my participation in the Employee Stock Purchase Plan is in all respects subject
to the terms of the Plan. I understand that the grant of the option by the Company under this Subscription Agreement is subject to obtaining stockholder approval of the Employee Stock Purchase Plan.
5. Shares
purchased for me under the Employee Stock Purchase Plan should be issued in the name(s) of (Eligible Employee or Eligible Employee and Spouse Only):
6. I
understand that if I dispose of any shares received by me pursuant to the Plan within 2 years after the Enrollment Date (the first day of the Offering Period
during which I purchased such shares), I will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the excess of the fair
market value of the shares at the time such shares were purchased by me over the price which I paid for the shares.
I hereby agree to notify the Company in writing within
30 days after the date of any disposition of shares and I will make adequate provision for Federal, state or other tax withholding obligations, if any, which arise upon the disposition of the
Common Stock
. The Company may, but will not be obligated to, withhold from my compensation the amount necessary to meet any applicable withholding obligation including any
withholding necessary to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by me. If I dispose of such shares at any time after the
expiration of the 2-year holding period, I understand that I will be treated for federal income tax purposes as having received income only at the time of such disposition, and that such income will
be taxed as ordinary income only to the extent of an amount equal to the lesser of (1) the excess of the fair market value of the shares at the time of such disposition over the purchase price
which I paid for the shares, or (2) 15% of the fair market value of the shares on the first day of the Offering Period. The remainder of the gain, if any, recognized on such disposition will be
taxed as capital gain.
7. I
hereby agree to be bound by the terms of the Employee Stock Purchase Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Employee Stock Purchase Plan.
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8. In
the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due me under the Employee Stock Purchase Plan:
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NAME:
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(Please print)
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(First) (Middle)
(Last)
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EMPLOYEE NAME:
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(Please print)
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(First)
(Middle) (Last)
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(Address)
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Employee's Social
Security Number:
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Employee's Address:
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I
UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
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Dated:
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Signature of Employee
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Spouse's Signature (If beneficiary other than spouse)
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Exhibit B
VIVUS, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the VIVUS, Inc. 1994 Employee Stock Purchase Plan which began
on
20 (the "Enrollment Date") hereby notifies the Company that he or she hereby withdraws from the Offering Period. He or she hereby directs the Company to pay to the undersigned as
promptly as practicable all the payroll deductions credited to his or her account with respect to such Offering Period. The undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further that no further payroll deductions will be made for the purchase of shares in the current Offering Period and the
undersigned shall be eligible to participate in succeeding Offering Periods only by delivering to the Company a new Subscription Agreement.
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Name and Address of Participant:
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Signature:
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Date:
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MMMMMMMMMMMM C123456789 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 ENDORSEMENT_LINE______________ SACKPACK_____________ Your vote matters heres how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically must be MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 received by 11:59 p.m., EST, on June 4, 2019. Online GIof ntoo welwewct.reonnviicsivoontrienpgo, rts.com/VVUS delete QR code and control # or scan the QR code login details are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/VVUS Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + 1. Election of Directors. To elect nine directors to serve until the next annual meeting of stockholders or until their successors are duly elected and qualified. For Withhold For Withhold For Withhold 01 - John P. Amos 02 - Karen Ferrell 03 - Edward A. Kangas 04 - Thomas B. King 05 - David Y. Norton 06 - Jorge Plutzky, M.D. 07 - Eric W. Roberts 08 - Herman Rosenman 09 - Allan L. Shaw For Against Abstain For Against Abstain 2. To approve, on a non-binding advisory basis, the compensation of our named executive officers. 3. To ratify the appointment of OUM & Co. LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019. 4. To approve an amendment to the 2018 Equity Incentive Plan to increase the number of shares of Common Stock reserved for issuance thereunder by 600,000 shares. 5. To approve an amendment to the 1994 Employee Stock Purchase Plan to increase the number of shares of Common Stock reserved for issuance thereunder by 400,000 shares. 6. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof. This Proxy should be marked, dated and signed by the stockholder(s) exactly as his, her or its name appears hereon, and returned promptly in the enclosed envelope. If held in joint tenancy, all persons must sign. Trustees, administrators, etc. should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy. Date (mm/dd/yyyy) Please print date below. Signature 1 Please keep signature within the box. Signature 2 Please keep signature within the box. C 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 9 4 A V 4 1 6 2 1 6 031H5C MMMMMMMMM B Authorized Signatures This section must be completed for your vote to count. Please date and sign below. A Proposals The Board of Directors recommends a vote FOR all of the nominees listed and FOR Proposals 2, 3, 4 and 5. Annual Meeting Proxy Card1234 5678 9012 345
q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + Notice of 2019 Annual Meeting of Stockholders Proxy Solicited by the Board of Directors for the Annual Meeting of Stockholders June 5, 2019 John P. Amos and John L. Slebir (the Proxies), or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Stockholders of VIVUS, Inc., a Delaware corporation, to be held on Wednesday, June 5, 2019, at 8:00 a.m., local time, at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted by the stockholder. If no such directions are indicated, the Proxies will have authority to vote FOR the nominees listed on the reverse side and FOR Proposals 2, 3, 4 and 5. Should a director nominee be unable to serve as a director, an event not currently anticipated, the Proxies reserve the right, in their discretion, to vote for a substitute nominee designated by the Board of Directors. Also, in their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. If you vote your proxy by internet or by telephone, you do NOT need to mail back your proxy card. To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope. (Items to be voted appear on reverse side) Change of Address Please print new address below. + C Non-Voting Items Proxy VIVUS, INC. Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/VVUS
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