Payments due to Mr. Connaughton in connection with his termination without cause or resignation for good reason are subject to his execution of a general release of claims and continued compliance with applicable restrictive covenants.
Thomas R. Staab, II Employment Letter
In July 2020, we entered into an employment letter with Mr. Staab. Pursuant to his employment letter, Mr. Staab serves as the Chief Financial Officer of the Company and reports to Mr. Curtis. Under the employment letter, Mr. Staab is entitled to receive an annual base salary as specified above and is eligible to receive an annual performance bonus based on his target annual bonus. His annual base salary and target annual bonus will be subject to review by our boardBoard of directorsDirectors or its compensation committee on an annual basis. The actual amount of any such bonus will be determined by reference to the attainment of applicable performance objectives, as determined by the Company’s boardBoard of directors,Directors, and to Mr. Staab’s continued employment with us through the applicable payment date.
Mr. Staab’s employment letter provides that if he is terminated without cause or he resigns for good reason (each as defined in the employment letter), in each case prior to or more than 12 months following a change in control (as defined in our 2020 Plan), then he is entitled to the following: (1) a lump sum payment equal to the sum of (i) 9 months of base salary, as in effect immediately prior to the separation, (ii) 75% of his target bonus for the year in which the separation occurs, and (iii) 9 months of premium payments to maintain health coverage under COBRA, and (2)
accelerated vesting of such portion of his time-based equity awards as would have vested during the 9 months following his termination had he remained employed during such period (but no less than 25% of the unvested equity awards will vest if such termination occurs during his first year of employment). In addition, if Mr. Staab’s termination occurs during his first nine months of employment, the foregoing cash and healthcare severance benefits will be reduced by 50%.
period.Mr. Staab’s employment letter further provides that if he is terminated without cause or he resigns for good reason, in each case within 12 months following a change in control, then he is entitled to the following: (1) a lump sum payment equal to the sum of (i) 12 months of base salary as in effect immediately prior to the separation, (ii) his target bonus for the year in which the separation occurs, and (iii) 12 months of premium payments to maintain health coverage under COBRA, and (2) accelerated vesting of all of his time-based equity awards. In addition, if Mr. Staab’s termination occurs during his first nine months of employment, but following a change in control, the foregoing cash and healthcare severance benefits will be reduced by 50%.
In addition, all of his time-based equity awards will vest on an accelerated basis in the event of a change in control on or prior to December 31, 2021, provided Mr. Staab is employed by or providing services to us on such date.
Payments due to Mr. Staab in connection with his termination without cause or resignation for good reason are subject to his execution of a general release of claims and continued compliance with applicable restrictive covenants.
Defined Terms Under Employment Letters
For purposes of the employment letters with our named executive officers:
•“Cause” means a named executive officer’s: (1) intentional theft, willful misconduct, or breach of fiduciary duty for personal gain, (2) material failure to comply with our code of conduct and other written policies, (3) material and intentional theft or destruction of company property, (4) willful act that is detrimental to our reputation or business, (5) repeated failure to perform the named executive officer’s duties after an opportunity to cure the failure, (6) material breach of any agreement or covenant with the Company that is not cured within 20 days, or (7) conviction of any criminal act involving moral turpitude.
•“Good reason” means a named executive officer’s voluntary resignation following our failure to cure: (1) a material diminution in authority, duties or responsibilities, (2) for Mr. Curtis, a requirement that he report to anyone other than our boardBoard of directors,Directors, (3) a material reduction in the named executive officer’s base salary, (4) a material change in the location at which he must perform his duties, or (5) any material breach of the employment letters.
TABLE OF CONTENTS Additionally, the stock option and restricted stock unit awards granted to our named executive officers will accelerate and vest in full upon a change in control of the Company.
We provide compensation to our non-employee directors in the form of cash and stock-based compensation. During 2020, prior to the consummation of the Spin-Off, we paid Dr. Link an annual cash retainer of $100,000, we paid Mr. McLaughlin an annual cash retainer of $50,000, and we paid each of our other non-employee directors an annual cash retainer of $36,000. We have reimbursed, and will continue to reimburse, our non-employee directors for their actual out-of-pocket costs and expenses incurred in connection with attending board meetings.
In July 2020, Drs. Lindstrom and Link and Mr. Winer were granted 160,636, 400,787 and 20,079 shares of restricted stock, respectively, under our 2020 Plan, with “target percentages” under such awards of 1.6%, 4.0% and 0.2%, respectively (the “July 2020 Director Awards”). The July 2020 Director Awards are subject to the same terms and conditions as the July 2020 Awards grantedPursuant to our named executive officers and described above under “Executive Compensation – Narrative Disclosure to Compensation Tables – Equity Base Incentive Awards.” In addition, restricted stock will vest on an accelerated basis in the event of a change in control of the Company or a director’s death or disability.
At the time of the Spin-Off, our board of directors waived the clawback provision and none of the July 2020 Director Awards originally granted to the directors was forfeited in connection with the Spin-Off. The number of restricted stock awards retained by our directors were in the following amounts: Dr. Lindstrom, 1,408 shares; and Dr. Link, 2,717 shares. In addition, our board of directors determined that Mr. Winer’s holdings at the time of the Spin-Off were below his target percentage of 0.2% and determined to award him an additional restricted stock award of 51 shares in October 2020, which additional award had the same terms and conditions as his July 2020 Director Award.
On December 7, 2020, our board of directors approved awards of restricted stock to each of Drs. Lindstrom and Link and Mr. Winer in connection with an amendment to their July 2020 Director Awards, which modified and extended the vesting schedule to provide for quarterly vesting of these grants rather than three cliff vesting dates as originally issued. The board of directors approved amendments to each such director’s July 2020 Director Award to amend and extend the vesting schedule applicable to such July 2020 Director Award. In order to comply with tax laws and to recognize the director’s agreement to an extension of the vesting schedule of the July 2020 Director Awards, each director was issued an additional restricted stock award, which represented 20% of the total number of shares subject to his July 2020 Director Award, as follows: Dr. Lindstrom, 32,127 shares of restricted stock; Dr. Link, 80,157 shares of restricted stock; and Mr. Winer, 4,026 shares of restricted stock. The newly-awarded restricted stock will vest on the same amended vesting schedules applicable to the amended July 2020 Director Award, which amended vesting schedules provide for vesting in quarterly installments over a three-year period following the amendment date, subject to continued service through the vesting date. In addition, consistent with the terms of the July 2020 Director Awards, the restricted stock will vest on an accelerated basis in the event of a change in control of the Company or a director’s death or disability. The new restricted stock awards were granted pursuant to the 2020 Plan.
In connection with the Spin-Off, we adopted a non-employee director compensation program, that provides forour non-employee directors receive annual retainer fees and/or long-term equity awards for our non-employee directors.awards. Under the non-employee director compensation program, each non-employee director receives an annual retainer of $50,000, with the chairperson receiving an annual retainer of $75,000. Non-employee directors serving as the chairs of the audit, compensation and nominating and corporate governance committees receive additional annual retainers of $15,000, $10,000 and $9,000, respectively. Non-employee directors serving as members of the audit, compensation and nominating and corporate governance committees receive additional annual retainers of $7,500, $5,000 and $4,500, respectively.
Non-employee directors who are newly elected or appointed to our boardBoard of directorsDirectors will receive initial stock option awards having a value of $200,000, calculated based on the Black-Scholes value on the grant date, vesting over three years with one-third of such options vesting on the first anniversary of the date of such election or appointment to the boardBoard of directorsDirectors and the remainder vesting in equal monthly installments over the remaining two years thereafter.
Our non-employee directors are also eligible for annual equity awards. On the date of each annual meeting of our stockholders, followingincluding the Spin-Off,2023 annual meeting of our stockholders, each non-employee director will receivereceived an annual stock option award having a value of $100,000,$70,000, calculated based on the Black-Scholes value on the grant date, which annual awards will vestvests in equal monthly installments over 12 months following the grant date and an annual RSU award having a value of $30,000, calculated based on the closing price per share for our common stock on the grant date, which vests on the first anniversary of the grant date. Additionally,
All equity awards granted to our non-employee directors will vest upon a change in control of our company or upon a director’s death or disability.
Compensation under our non-employee director compensation policy is subject to the annual limits on non-employee director compensation set forth in the 2020 Plan. Our boardBoard of directorsDirectors or its authorized committee may modify the non-employee director compensation program from time to time in the exercise of its business judgment, taking into