SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Rule 14a-101)
PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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20 Firstfield Road
Gaithersburg, MD 20878
T 240-268-2000
F 240-268-2100
www.novavax.com
Nasdaq: NVAX
April 30, 2014
20, 2016
Dear Novavax Stockholder:
You are cordially invited to our Annual Meeting of Stockholders on Thursday, June 12, 2014,9, 2016, beginning at 10:008:30 a.m., local time, at Novavax’ offices 20 Firstfield Road, Gaithersburg,located at 9920 Belward Campus Drive, Rockville, Maryland 20878.20850. We haveare pleased to also made availableprovide a copy of our 20132015 Annual Report to Stockholders with this proxy statement.
Your vote is important, and we hope you will be able to attend the Annual Meeting. You may vote over the Internet, as well as by telephone, or, if you requested to receive printed proxy materials, by mailing a proxy card or voting instruction form. Please review the instructions on each of your voting options described in this proxy statement. Also, please let us know if you plan to attend our Annual Meeting by marking the appropriate box on the enclosed proxy card, if you requested to receive printed proxy materials, or, if you vote by telephone or over the Internet, by indicating your plans when prompted.
We look forward to seeing you there.
Very truly yours,
Stanley C. Erck
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JUNE 12, 2014
To the Stockholders of Novavax, Inc.:
NOTICE IS HEREBY GIVEN that the 20142016 Annual Meeting of Stockholders (the “Annual Meeting”) of Novavax, Inc., a Delaware corporation (the “Company”, “Novavax”, “we”,“Company,” “Novavax,” “we,” or “us”), will be held on Thursday, June 12, 20149, 2016 at 10:008:30 a.m., local time, at the Company’s headquartersoffices located at 20 Firstfield Road, Gaithersburg,9920 Belward Campus Drive, Rockville, Maryland 2087820850, to consider and act upon the following matters:
1. | To elect |
2. | To |
3. | To amend and restate the Novavax, Inc. |
4. | To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016; and |
5. | To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. |
The Board has fixed the close of business on April 16, 201413, 2016 (the “Record Date”) as the record date for determining stockholders of the Company entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof.
The following Proxy Statement is included with the Company’s Annual Report to Stockholders for the fiscal year ended December 31, 2013,2015, which contains financial statements and other information of interest to stockholders.
By Order of the Board of Directors,
John A. Herrmann III
Senior Vice President, General Counsel &and Corporate Secretary
Gaithersburg, Maryland
April 30, 2014
20, 2016
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY VOTE OVER THE INTERNET OR BY TELEPHONE AS PER THE INSTRUCTIONS ON THE ENCLOSED PROXYOR COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ACCOMPANYING ENVELOPE. POSTAGE IS NOT NEEDED IF MAILED IN THE UNITED STATES.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDERS ANNUAL MEETING
TO BE HELD ON JUNE 9, 2016:
Notice of Annual Meeting, Proxy Statement, and Annual Report are available free of charge at
http://www.edocumentview.com/NVAX.
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i
20 Firstfield Road
Gaithersburg, Maryland 20878
____________
For the Annual Meeting of Stockholders
To Be Held on Thursday, June 12, 2014
9, 2016
This Proxy Statement (“Proxy Statement”) is being furnished to stockholders in connection with the solicitation of proxies by the Board for use at the 20142016 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Thursday, June 12, 20149, 2016 at 10:008:30 a.m. local time at the Company’s headquartersoffices located at 20 Firstfield Road, Gaithersburg,9920 Belward Campus Drive, Rockville, Maryland 2087820850 and at any adjournments or postponements thereof. This Proxy Statement, the form of proxy, and the Company’s Annual Report to Stockholderson Form 10-K for the fiscal year ended December 31, 20132015 (the “Annual Report”) are being made available via the Internet and, upon request, will be mailed to our stockholders on or about May 9, 2014.April 29, 2016.
The Company has made these proxy materials available to you on the Internet andor, upon your request, has delivered print versions of these proxy materials to you by mail, in connectionorder to provide you with information regarding the Company’s solicitation of proxies for usematters on which you may vote at the Annual Meeting. These proxy materials were sent or made available to stockholders on or about May 9, 2014. You are invited to attend the Annual Meeting and are requested to vote on the proposals described in this Proxy Statement.
StockholdersYes, stockholders may access the Proxy Statement and the 2013 Annual Report on Form 10-K via the Internet and vote online (www.envisionreports.com/NVAX)atwww.envisionreports.com/NVAX. On or about April 29, 2016, a Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed to stockholders of record as of the close of business on the Record Date. We are furnishing our proxy materials to our stockholders on the Internet in lieu of mailing a printed copy of our proxy materials. You will not receive a printed copy of our proxy materials unless you request one. If you would like to receive a printed or electronic copy of the proxy materials, free of charge, you should follow the instructions for requesting such materials includedin the Notice. The Notice instructs you as to how you may access and review on the website (www.envisionreports.com/NVAX).
In addition, stockholders may request to receiveInternet all of the important information contained in these proxy materials inor request a printed form by mail or electronically by email. copy of those materials. The Notice also instructs you as to how you may vote your proxy.
The Company encourages stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce the environmental impact of its annual meetings and the cost to the Company associated with the physical printing and mailing of materials.annual meeting materials.
The Company has adopted the process called “householding” for mailing the proxyannual meeting materials in order to reduce printing and postage costs. Certain stockholders who share the same address mayaddress. Such stockholders will have received a notice from their bank, broker, or other holder of record, indicating that they will receive only one copy of this Proxy Statement and the Annual Reportin accordance with a notice delivered from such stockholders’ bank, broker, or other holder of record, unless the applicable bank, broker, or other holder of record received contrary instructions. Report.
If you own your shares through a bank, broker, or other holder of record and wish to either stop or begin householding, you may do so, or you may request a separate copy of this Proxy Statement and the Annual Report, either by contacting your bank, broker, or other holder of record at the telephone number or address provided in the above referenced notice, or contacting Novavax by telephone at (240) 268-2000 or in writing to Novavax, Inc., 20 Firstfield Road, Gaithersburg, Maryland 20878, Attention: Corporate Secretary. If you request to begin or stop householding, you should provide your name, the name of your broker, bank, or other record holder, and your account information.
At the Annual Meeting, stockholders will act uponvote on the following matters:
In addition, management will report on the Company’s performance during fiscal year 20132015 and respond to questions from stockholders.
Will any other business be conducted at the Annual Meeting?
The Company knows of no other matters to be submitted to the stockholders at the Annual Meeting.
The Board has fixed Wednesday, April 16, 2014, as the record date for determining the stockholders entitled to receive notice of and to vote at the Annual Meeting (the “Record Date”). The only class of stock of the Company entitled to vote at the Annual Meeting is its common stock, $0.01 par value (the “Common Stock”).Common Stock. Only the record holders of shares of Common Stock at the close of business on the Record Date may vote at the Annual Meeting. On the Record Date, there were 209,257,750270,778,671 shares of Common Stock outstanding and entitled to be voted. Each share entitles the holder to one vote on each of the matters to be voted upon at the Annual Meeting.
The presence in person or by proxy of the holders of a majority of the shares of Common Stock issued and outstanding on the Record Date and entitled to vote is required to constitute a quorum at the Annual Meeting. If a quorum is not present, the stockholders entitled to vote who are present in person or represented by proxy at the Annual Meeting have the power to adjourn the Annual Meeting until a quorum is present, without notice other than an announcement at the Annual Meeting, so long as such adjournment is less than 30 days and a new record date is not fixed. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the Annual Meeting as originally scheduled. Abstentions and broker non-votes will not count in determining whether a quorum is present at the Annual Meeting. A broker non-vote occurs when a broker or other nominee who holds shares represented by a proxy has not received voting instructions with respect to a particular item and does not have discretionary authority to vote such shares on the item.
You may vote using any of the following methods:
By telephone or the Internet. |
Stockholder of Record. If your shares are registered directly in your name with the Company’s transfer agent, Computershare, Inc., you are considered the stockholder of record with respect to those shares, and the proxy materials were sent directly to you by the Company.
Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the “beneficial owner” of shares held in “street name,name.” and a notice was forwarded to you by that organization. As a beneficial owner, you have the right to instruct your broker, bank, trustee, or nominee how to vote your shares.
All properly executed proxies will be voted in accordance with the instructions of the stockholder. If you are a stockholder of record and you sign and return a proxy card without giving specific instructions, then the persons named as proxy holders, Stanley C. Erck and Barclay A. Phillips, will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting, including any floor proposals.
Broker non-votes occur when a beneficial owner of shares held in street name does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. Under the rules and interpretations of the NASDAQ and the New York Stock Exchange, which generally govern this issue regardless of the exchange on which the company is listed, “non-routine” matters are matters that may substantially affect the rights or privileges of stockholders, such as mergers, stockholder proposals, equity compensation matters, and the election of directors, even if they are not contested.
Most brokers are permitted to vote your shares only with respect to the ratification of the appointment of Ernst & Young LLP as the Company’s independent auditor for the year ending December 31, 2016, even if they do not receive instructions from you in a timely manner, so long as they hold your shares in their name and have requested your instructions. Brokers do not have authority, discretionary or otherwise, to vote your shares for the election of directors the approval, on an advisory basis, of the compensation paid to our named executive officers, or the share increase of authorized shares under the Novavax, Inc. Amendedour equity incentive plan and Restated 2005 Stock Incentive Plan (the “2005 Plan”);ESPP unless they receive proper instructions to do so from you in a timely manner.
In order to minimize the number of broker non-votes, the Company encourages you to vote or to provide voting instructions with respect to each proposal to the organization that holds your shares by carefully following the instructions provided in the proxy card or voting instruction form.
The Board recommends that you vote your shares:
“FOR” the election of Stanley C. Erck and Rajiv I. Modi, Ph.D. to serve on the Board for a three-year term expiring at the 2017 Annual Meeting of Stockholders (Proposal No. 1);
“FOR” the approval of the non-binding advisory resolution approving the compensation of our named executive officers as disclosed in this proxy statement (Proposal No. 2); and
“FOR” the increase of additional shares of the Company’s Common Stock available for issuance under the 2005 Plan by 4,000,000 shares (Proposal No. 3).
Proposal | Board Recommendation | |
No. 1 – Election of Directors | For all nominees | |
No. 2 – Amendment and Restatement of the 2015 Stock Plan | For | |
No. 3 – Amendment and Restatement of the ESPP | For | |
No. 4 – Ratification of Ernst & Young LLP as Independent Auditors for 2016 | For |
Election of Directors. Directors are elected by a plurality of the votes. The nominees for director receiving the highest number of votes cast by stockholders entitled to vote for directors will be elected to serve on the Board. Only the number of votes FOR a nominee affect the outcome. Accordingly, votes withheld, abstentions, and broker non-votes will have no effect on the result of the vote on this matter.
Say-on-Pay. Because Proposal No. 2 asks for a non-binding, advisory vote, there is no “required vote” that would constitute approval. We value the opinions expressed by our stockholders in this advisory vote, and our Compensation Committee, which is responsible for overseeing and administering our executive compensation programs, will consider the outcome of the vote when designing our compensation programs and making future compensation decisions for our named executive officers.
Amendment to the 2005 Plan. Approval of an amendment to the 2005 Plan to increase the number of shares of Common Stock reserved for issuance under such plan by 4,000,000 shares requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and voting on the matter. Abstentions and broker non-votes will not be counted as shares voting on such matter and accordingly will have no effect on the approval of the matter.
Proposal | Vote Required | Broker Non-Votes Allowed | Abstentions | You May Vote | ||||
No. 1 – Election of Directors | Plurality of Votes Cast | No | No Effect | FOR or WITHHOLD | ||||
No. 2 – Amendment and Restatement of the 2015 Stock Plan | Majority of Votes Cast | No | No Effect | FOR, AGAINST, ABSTAIN | ||||
No. 3 – Amendment and Restatement of the ESPP | Majority of Votes Cast | No | No Effect | FOR, AGAINST, ABSTAIN | ||||
No. 4 – Ratification of Ernst & Young LLP as Independent Auditors for 2016 | Majority of Votes Cast | Yes | No Effect | FOR, AGAINST, ABSTAIN |
Stockholders may revoke proxies at any time before they are exercised at the Annual Meeting by (a) signing and submitting a later-dated proxy to the Secretary of the Company; (b) delivering written notice of revocation to the Secretary of the Company; or (c) voting in person at the Annual Meeting. Attendance at the Annual Meeting will not itself be deemed to revoke a proxy unless the stockholder gives affirmative notice at the Annual Meeting that the stockholder intends to revoke the stockholder’s proxy and vote in person.
Preliminary voting results will be announced at the Annual Meeting. Final voting results will be tallied by the inspector of election after the taking of the vote at the Annual Meeting. The Company will publish the final voting results in a Current Report on Form 8-K, which the Company is required to file with the SECSecurities and Exchange Commission (“SEC”) within four business days following the Annual Meeting.
The Company will bear the cost of soliciting proxies. In addition to solicitations by mail, the Company’s directors, officers, and regular employees may, without additional remuneration, solicit proxies in person, by telephone, or by electronic transmission and/or facsimile transmission. The Company may also utilize the assistance of third parties in connection with our proxy solicitation efforts, and will compensate such third parties for their efforts. The Company has retained Georgeson Inc., to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reimbursement of expenses that are not expected to exceed $10,000$16,300 in the aggregate. The Company will also request brokerage houses, custodians, nominees and fiduciaries or other similar organizations to forward copies of the proxy materials to those persons for whom they hold shares and request instructions for voting the proxies. The Company will reimburse such brokerage houses, custodians, nominees and fiduciaries or other similar organizations for their reasonable expenses in connection with this distribution.
What is the deadline to propose actions for consideration or to nominate individuals to serve as directors at the 2015 Annual Meeting of Stockholders?
Stockholder proposals for inclusion in the Company’s proxy statement: Stockholders who wish to present proposals for inclusion in the Company’s proxy materials for the Company’s 2015 Annual Meeting of Stockholders should follow the procedures prescribed in Rule 14a-8 under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and the Company’s amended and restated by-laws (the “By-laws”). Those procedures require that the Company receive a stockholder proposal in writing at the Company’s principal executive offices no later than January 9, 2015. If the date of next year’s annual meeting is changed by more than 30 days from the anniversary date of this year’s Annual Meeting (June 12, 2014), then the deadline is the close of business on the 10th day following the date on which such notice of the date of the meeting was mailed or public disclosure of the date of such meeting was made, whichever occurs first.
Other stockholder proposals: Under the Company’s By-laws, stockholders who wish to include a proposal in the Company’s 2015 Annual Meeting of Stockholders (but do not wish to include such proposal in the Company’s proxy materials) must give the Company timely written notice. To be timely, the Company’s By-laws provide that such notice must be received by the Company at its principal executive offices not less than 60 days nor more than 90 days prior to the anniversary date of this year’s Annual Meeting (June 12, 2014); provided, however, that in the event that the date of the meeting is more than 30 days before or after the anniversary date of the prior year’s annual meeting of the stockholders of the Company, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the date on which such notice of the date of the meeting was mailed or public disclosure of the date of such meeting was made, whichever occurs first.
In addition to being timely, any such notice must set forth as to each matter the stockholder proposes to bring before the annual meeting:
For purposes of this Proxy Statement, a “Stockholder Associated Person” of any stockholder means (i) any “affiliate” or “associate” (as those terms are defined in Rule 12b-2 under the Exchange Act) of the stockholder who owns beneficially or of record any capital stock or other securities of the Company or, through one or more derivative positions, has an economic interest (whether positive or negative) in the price of securities of the Company and (ii) any person acting in concert with such stockholder or any affiliate or associate of such stockholder with respect to the capital stock or other securities of the Company.
Please note that if the stockholder proposes to nominate a director for election to the Company’s Board, the procedures described under the caption “Nomination Procedures” herein relating to director nominations must be followed.
ELECTION OF CLASS IIII DIRECTORS
Pursuant to the Company’s charter, the Board may consist of no fewer than three directors, with the specific number to be authorized by the Board from time to time at its discretion. The Board is presently authorized to consist of eight members, and currently consisting ofincludes the following seven individuals: Gail K. Boudreaux, Richard H. Douglas, Ph.D., Stanley C. Erck, Gary C. Evans, John O. Marsh, Jr. J.D., Michael A. McManus, Jr., J.D., Rajiv I. Modi, Ph.D., and James F. Young, Ph.D.
Mr. John O. Marsh, Jr., J.D. resigned from the Board effective June 12, 2014, and the Board bestowed upon Mr. Marsh the honorary title of Director Emeritus.
The members of the Company’s Board are divided into three classes, designated as Class I, Class II, and Class III, each serving staggered three-year terms. The term of the Class I directorIII directors expires at the Annual Meeting. The terms of the Class III and Class IIIII directors will expire at the 20152017 and 20162018 Annual Meetings of Stockholders, respectively. A director of any class who is elected by the Board to fill a vacancy resulting from an increase in the number of directors holds office for the remaining term of the class to which he or she is elected. A director who is elected by the Board to fill a vacancy arising in any other manner holds office for the remaining term of his or her predecessor. Directors elected by the stockholders at an annual meeting to succeed those whose terms expire at such meeting are of the same class as the directors they succeed and are elected for a term to expire at the third annual meeting of stockholders after their election and until their successors are duly elected and qualified.
In the event of any increase or decrease in the authorized number of directors, the newly created or eliminated directorships must be apportioned by the Board among the three classes so as to ensure that no one class has more than one director more than any other class, unless otherwise determined by a resolution of the Board. However, existing directors cannot move across classes and, therefore, the number of directors in each class may become temporarily imbalanced. On March 6, 2014, Mr. Erck provided notification of his intention to resign
Two directors are to be elected at the Annual Meeting. After recommendation by the Nominating and Corporate Governance Committee, the Board has designated Ms. Boudreaux, Mr. ErckMcManus, and Dr. ModiYoung as nominees for election as Class IIII directors of the Company at the Annual Meeting.
If elected, each such nomineesnominee will serve until the expiration of their termshis or her term at the 20172019 Annual Meeting of Stockholders and until his or her successor is elected and qualified. Ms. Boudreaux, Mr. ErckMcManus, and Dr. ModiYoung have consented to being named in this Proxy Statement and to serve if elected. The Board has no reason to believe that Ms. Boudreaux, Mr. ErckMcManus, and Dr. ModiYoung will be unable or unwilling to serve if elected. If any nominee becomes unavailable to serve as a director, the persons named in the proxy will vote the proxy for a substitute nominee or nominees as they, in their discretion, shall determine.
The election of directors requires the affirmative vote of a plurality of the votes cast by stockholders entitled to vote at the Annual Meeting. Accordingly, votes withheld, abstentions, and broker non-votes will not have any effect on the election of a director.
Information on the nominees follows:
Nominees for Election as Class I Directors
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Gail K. Boudreaux | Age: 55 | Year First Elected | ||
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Other Directorships: | Ms. Boudreaux currently serves on the board of directors for Xcel Energy, Inc. | |||
Education: | Ms. Boudreaux earned a B.A. with honors from Dartmouth College and | |||
Skills/Qualifications: | We believe that | |||
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Information on the continuing directors follows:
Directors Continuing as Class II Directors
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Directors Continuing as Class III Directors
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Michael A. McManus, Jr., J.D.
| Age: 73 | Year First Elected Director:1998 | |||
President and Chief Executive Officer of Misonix, Inc. | |||||
Other Directorships: | Mr. McManus serves as a member of the board of directors of Misonix, Inc. (MSON) and A. Schulman Inc. (SHLM). | ||||
Education: | Mr. McManus received a | ||||
Skills/Qualifications: | We believe that Mr. McManus is well-suited to serve on our Board due to his successful growth and development of businesses and products, |
James F. Young, Ph.D.
| Age: 63 | Year First Elected Director: 2010 | ||
Former President, Research and Development, at MedImmune, Inc. Dr. Young has been Chairman of the Board of Novavax, Inc. since April 2011 and a Director | ||||
Other Directorships: | Dr. Young currently sits on the board of directors of 3-V Biosciences, Inc., a privately-held biopharmaceutical company developing novel antiviral therapeutics, and is the chairman of the board of | |||
Education: | Dr. Young received B.S. degrees in general science and biology from Villanova University, as well as a Ph.D. in microbiology and immunology from Baylor College of Medicine. | |||
Skills/Qualifications: | We believe that Dr. Young is well-suited to serve on our Board due to his over 30 years of experience in the fields of molecular genetics, microbiology, immunology, and pharmaceutical development. In addition, Dr. Young brings extensive scientific background and experiences, particularly in the areas of vaccine research and development. |
Stanley C. Erck | Age: 67 | Year First Elected Director: 2009 | ||
President and Chief Executive Officer of Novavax, Inc. since April 2011. Former Executive Chairman of Novavax, Inc. from February 2010 until April 2011, and a Director since June 2009. From 2000 to 2008, Mr. Erck served as President, Chief Executive Officer and Director of Iomai Corporation, a vaccine development company, which was acquired in 2008 by Intercell. Prior to that, Mr. Erck previously held leadership positions at Procept, a publicly traded immunology company, Integrated Genetics, now Sanofi Genzyme, and Baxter International. | ||||
Other Directorships: | Mr. Erck serves as a member of the boards of BioCryst Pharmaceuticals, Inc. (BCRX), MaxCyte, Inc., and MDBio Foundation. | |||
Education: | Mr. Erck received a B.S. in economics from the University of Illinois and a M.B.A from the University of Chicago. | |||
Skills/Qualifications: | We believe that Mr. Erck is well-suited to serve on our Board due to his leadership experience in the biotechnology industry, having held CEO positions for several companies, and his extensive experience of serving on other companies’ boards. | |||
Rajiv I. Modi, Ph.D. | Age: 55 | Year First Elected Director: 2009 | ||
Managing Director of Cadila Pharmaceuticals, Ltd. (“Cadila”), a company organized in India, since 1995. Dr. Modi was elected to Novavax, Inc.’s Board based upon his relationship with the Company’s largest stockholder at the time. As of April 13, 2016, Satellite Overseas (Holdings) Limited, a subsidiary of Cadila, holds approximately 0.9% of the Company’s outstanding Common Stock. Dr. Modi serves as a member of the boards of other Cadila group companies. | ||||
Education: | Dr. Modi received a bachelor’s degree of technology in chemical engineering from the Indian Institute of Technology, a master’s degree in biological engineering from University College, London, and a Ph.D. in biological science from the University of Michigan. | |||
Skills/Qualifications: | We believe that Dr. Modi is well-suited to serve on our Board due to his extensive leadership experience, as well as technical expertise in the development and manufacturing of pharmaceutical products. He also brings broad experience in international joint ventures and pharmaceutical sales. |
Richard H. Douglas, Ph.D. | Age: 63 | Year First Elected Director: 2010 | ||
Former Senior Vice President, Corporate Development, Genzyme Corporation. From 1989 to 2011, Dr. Douglas led Genzyme Corporation’s Corporate Development team, and was involved in numerous acquisitions, licenses, financings, joint ventures, and strategic alliances. From 1982 until its merger with Genzyme Corporation in 1989 (now Sanofi Genzyme), Dr. Douglas served in science and corporate development capacities at Integrated Genetics. Dr. Douglas was a postdoctoral fellow in Leroy Hood’s laboratory at the California Institute of Technology. | ||||
Other Directorships: | Dr. Douglas serves on the University of Michigan Technology Transfer National Advisory Board. | |||
Education: | Dr. Douglas received a B.S. in chemistry from the University of Michigan and a Ph.D. in biochemistry from the University of California, Berkeley. | |||
Skills/Qualifications: | We believe that Dr. Douglas is well-suited to serve on our Board due to his significant business experience and scientific background. | |||
Gary C. Evans | Age: 58 | Year First Elected Director: 1998 | ||
Gary C. Evans presently serves as Chairman of the Board and Chief Executive Officer of Magnum Hunter Resources Corporation, a Dallas based oil and gas exploration and production company specializing in unconventional resource plays predominately in the Appalachian Basin. Mr. Evans is also President and CEO of Eureka Hunter Holdings, LLC, a mid-stream gas gathering company transporting and managing up to 1 BCF of daily natural gas volumes from production in West Virginia and Ohio on approximately 200 miles of pipe. He has held these positions since May 2009. Mr. Evans previously founded and served as the Chairman and Chief Executive Officer of Magnum Hunter Resources Inc. (MHRI), a NYSE listed company, for twenty years before selling MHRI to Cimarex Energy for approximately $2.2 billion in June 2005. Later that year, Mr. Evans formed Wind Hunter Energy, LLC, a renewable energy company which was subsequently acquired in December 2006 by GreenHunter Energy, Inc., an emerging water resource company focusing on oil field water management and clean water technologies active in the Marcellus and Utica resource plays in Appalachia. Mr. Evans has served as Chairman and Chief Executive Officer of GreenHunter Energy, Inc. since December 2006 and is currently Chairman and Interim CEO. Mr. Evans was recognized by Ernst & Young as the Southwest Area 2004 Entrepreneur of the Year for the Energy Sector and was subsequently inducted into the World Hall of Fame for Ernst & Young Entrepreneurs. Mr. Evans was recognized as the Energy Industry Leader of the year in 2013. He speaks regularly at energy industry conferences around the world on the current affairs of the oil and gas industry with a specialty in the unconventional shale business. | ||||
Other Directorships: | Mr. Evans serves as a member of the boards of Magnum Hunter Resources Corporation (MHRCQ) and GreenHunter Energy, Inc. (GRH). Mr. Evans serves as an Individual Trustee of TEL Offshore Trust, a publicly listed oil and gas trust, and on the Board of the Maguire Energy Institute at Southern Methodist University. | |||
Skills/Qualifications: | We believe that Mr. Evans is well-suited to serve on our Board due to his entrepreneurial experience in the development of a number of companies as well as his extensive leadership experience and his aptitude for reading and understanding financial statements. |
PROPOSAL NO. 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
We are asking stockholders to approve, on an advisory, non-binding basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement. The Company provides its stockholders with the opportunity to cast a triennial advisory vote to approve the compensation of its named executive officers and this Proposal No. 2, commonly referred to as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our executive compensation programs.
As described in detail in the Compensation Discussion and Analysis section and the related tables and narrative disclosure in this Proxy Statement, our executive compensation programs are designed to attract and retain highly qualified executives, reflect performance and reward high performance, reward named executive officers for meeting Novavax’ strategic goals and objectives, and align named executive officers’ goals with those of our stockholders. Please read the Compensation Discussion and Analysis section for additional details about our executive compensation objectives, philosophy, and programs, along with the compensation paid to our Named Executive Officers with respect to the fiscal year ended December 31, 2013 and the rationale for such compensation.
Accordingly, the Board is asking stockholders to cast a non-binding, advisory vote “FOR” the compensation paid to our Named Executive Officers in 2013, as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables, and related narrative discussion included in this Proxy Statement.
We recommend that you vote “FOR” the following resolution at the Annual Meeting:
RESOLVED, that the compensation of the Company’s Named Executive Officers as disclosed in the Company’s proxy statement for the 2014 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, is hereby approved.
Although the say-on-pay vote we are asking you to cast is non-binding, the Board and the Compensation Committee, who are responsible for designing and administering our executive compensation programs, value the opinions of our stockholders on this Proposal No. 2 and will consider the outcome of the vote on this Proposal No. 2 when making future compensation decisions for our named executive officers.
The Company’s current policy is to provide stockholders with an opportunity to approve the compensation of the named executive officers triennially at the annual meeting of stockholders. Accordingly, it is expected that the next “say-on-pay” vote will occur at the 2017 Annual Meeting of Stockholders.
FOR PROPOSAL NO. 2, THE BOARD RECOMMENDS THAT STOCKHOLDERSVOTE “FOR” THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS IN 2013.
PROPOSAL NO. 3
AMENDMENTTABLE OF 2005 STOCK INCENTIVE PLANCONTENTS
The 2005 Plan was adopted by our Board on February 24, 2005 and approved by Novavax stockholders on May 4, 2005. The number of shares originally authorized for issuance under the 2005 Plan was 2,565,724 shares, 565,724 shares of which were previously held for reserve under the 1995 Stock Option Plan (the “1995 Plan”) but were unused. To the extent that stock options granted under the 1995 Plan expire unexercised, the shares underlying those options become available for grant under the 2005 Plan. The 2005 Plan permits a maximum of 5,746,468 shares of Common Stock subject to stock options outstanding under the 1995 Plan to revert to and become issuable under the 2005 Plan, if such options should expire or otherwise terminate unexercised.
On June 20, 2007, Novavax stockholders voted to approve an amendment to increase the number of shares under the 2005 Plan by an additional 3,000,000 shares (“2007 Amendment”). On June 15, 2011 Novavax, stockholders voted to approve an additional amendment to increase the number of shares under the 2005 Plan by an additional 3,000,000 shares (“2011 Amendment”). On June 11, 2012, Novavax stockholders voted to approve an amendment to increase the number of shares under the 2005 Plan by an additional 4,000,000 shares (“2012 Amendment”). On June 13, 2013, Novavax stockholders voted to approve an amendment to increase the number of shares under the 2005 Plan by an additional 4,000,000 shares (“2013 Amendment”).
As further discussed below, we do not believe that the remaining shares of Common Stock available for issuance under the 2005 Plan are sufficient to continue implementing the Company’s stock incentive program over the next year taking into account our historic burn rate (discussed below) and certain other factors, including the Company’s recent growth and anticipated need to attract new employees with appropriate levels of experience and talent. Accordingly, on March 6, 2014, our Board approved an amendment to the 2005 Plan, subject to stockholder approval, to increase the number of shares reserved for issuance under this plan by 4,000,000 shares (“2014 Amendment”). The 2014 Amendment is being submitted to the Company’s stockholders for approval. The resolutions to be presented to the stockholders approving the proposed 2014 Amendment to the 2005 Plan is attached asAppendix 1to this Proxy Statement and is incorporated herein by reference.
Existing Equity Plan Information
At present, the 2005 Plan is the only long-term incentive plan of the Company. As of April 16, 2014, our 2005 Plan had 2,479,719 shares available for grant as equity awards. If the 2014 Amendment is approved, the total number of shares that will be available for future awards under the 2005 Plan will be 6,479,719, which is the sum of 4,000,000 shares plus the number of shares currently available under our 2005 Plan. If the stockholders do not approve the 2014 Amendment, additional awards will only be granted from the shares currently available under the 2005 Plan and the 2014 Amendment will not become effective.
Total potential dilution (as a percentage of shares of Common Stock outstanding on a fully diluted basis for this purpose including shares reserved for exercise under the plans and the 2014 Amendment as of April 16, 2014) after giving effect to the 4,000,000 shares of Common Stock that would be authorized under the 2014 Amendment plus the 2,479,719 shares available for grant under the 2005 Plan, plus the 15,544,855 shares subject to outstanding awards under the 2005 Plan and the 18,700 shares subject to outstanding awards under the 1995 Plan, plus the 1,911,176 shares available for future awards under our Employee Stock Purchase Plan (“ESPP”) (as of April 16, 2014) is 10.3%. We manage our long-term stockholder dilution by limiting the number of equity awards granted annually. The Board carefully monitors our annual burn rate, dilution and equity expense to ensure that we maximize stockholders’ value by granting only the appropriate number of equity awards necessary to attract, reward and retain employees and directors.
The following table provides information regarding the number of shares subject to outstanding awards and the number of shares available for future grants under the 2005 Plan as of April 16, 2014 (after giving effect to the 2014 Amendment) and under our ESPP. We grant awards only under the 2005 Plan and under our ESPP.
Number of shares | As a percentage of stock outstanding on a fully diluted basis(1) | |||||||
Outstanding stock options under the 2005 Plan | 15,528,188 | 6.7% | ||||||
Outstanding restricted stock under the 2005 Plan | 16,667 | 0.0% | ||||||
Outstanding stock options under the 1995 Plan | 18,700 | 0.0% | ||||||
Total shares subject to outstanding awards under the 2005 Plan and the 1995 Plan | 15,563,555 | 6.7% | ||||||
Total shares available for future awards under the 2005 Plan | 2,479,719 | 1.1% | ||||||
Proposed total shares available for future awards under the 2005 Plan following approval of the 2014 Amendment | 6,479,719 | 2.8% | ||||||
Total shares available for future awards under the ESPP | 1,911,176 | 0.8% |
Historical Equity Awards, Burn Rate and Projected Equity Awards
Upon a review of the remaining shares available for grant under the 2005 Plan, historical amounts of equity awards granted by the Company in the past three years, the Company’s three-year average burn rate and projected equity awards to be made under the 2005 Plan after giving effect to the 2014 Amendment, the Board approved the number of shares authorized for issuance under the 2014 Amendment to ensure that the shares reserve is sufficient to continue to provide our eligible employees, consultants and directors with appropriate equity-based incentives. Traditionally, the Company grants stock options as the primary form of equity compensation, but does, at times, grant restricted stock to attract and retain key executive officers.
The table below sets forth the aggregate number of shares underlying all equity awards made during each of the past three years.
Year | Equity Awards Granted under 2005 Plan | |||
2013 | 4,370,000 | |||
2012 | 3,483,000 | |||
2011 | 3,675,400 |
A summary of the Company’s gross burn rate for the 2011 - 2013 period is set forth below. Gross burn rate includes the sum of all awards granted in a fiscal year divided by the weighted average number of common shares outstanding during that fiscal year.
Burn Rate | 2013 | 2012 | 2011 | 3-year Average | ||||||||||||
Stock option awards granted | 4,370,000 | 3,483,000 | 3,675,400 | 3,842,800 | ||||||||||||
Weighted average common shares outstanding | 169,658,000 | 131,726,000 | 113,610,000 | 138,331,333 | ||||||||||||
Burn rate | 2.6% | 2.6% | 3.2% | 2.8% |
Summary of 2005 Plan
The following summary describes the material terms of the 2005 Plan and provides a general description of the U.S. federal income tax consequences applicable to certain transactions involving awards under the 2005 Plan. This summary of the 2005 Plan is not a complete description of all provisions of the 2005 Plan and is qualified in its entirety by reference to the 2005 Plan, which is filed as an appendix to this Proxy Statement.
Purpose; Term. The 2005 Plan provides for the grant to employees, officers and directors of, as well as consultants and advisors to, the Company, of stock options (non-statutory stock options (“NSOs”) and incentive stock options (“ISOs”)), restricted stock awards, stock appreciation rights (“SARs”) and restricted stock units. The stated purpose of the 2005 Plan is to secure for the Company and its stockholders the benefits arising from capital stock ownership by eligible participants who are expected to contribute to the Company’s future growth and success. Unless sooner terminated in accordance with its terms, the 2005 Plan will terminate upon the close of business on February 23, 2015.
Administration. The 2005 Plan is administered by the Board, which may, as permitted by and consistent with applicable law, delegate any or all of its powers under the plan to a committee it appoints. Subject to the terms of the 2005 Plan, the Board (or such committee) has the authority to determine the individuals to whom, and the time or times at which, awards are made, the size of each award, and the other terms and conditions of each award (which need not be identical across recipients). The Board also has the authority, subject to the express provisions of the 2005 Plan, to construe the respective agreements under the plan, prescribe, amend and rescind rules and regulations relating to the plan, accelerate or extend the dates options may be exercised or other stock awards may vest, and make all other determinations which are in the Board’s judgment necessary or desirable for the administration of the plan. The Board’s construction and interpretation of the terms and provisions of the 2005 Plan are final and conclusive.
Initial Stock Subject to 2005 Plan; Transfer of Shares from 1995 Plan. The number of shares of Common Stock that were initially set aside and reserved for issuance under the 2005 Plan was 2,565,724 shares (subject to adjustment as described herein), including 565,724 unused shares transferred from the 1995 Plan. In addition, the 2005 Plan permits a maximum of 5,746,468 shares of Common Stock subject to stock options outstanding under the 1995 Plan to revert to and become issuable under the 2005 Plan, if such options should expire or otherwise terminate unexercised. The 2007 Amendment, 2011 Amendment, 2012 Amendment and 2013 Amendment increased the number of shares of Common Stock available under the 2005 Plan by an additional 3,000,000, 3,000,000, 4,000,000 and 4,000,000 shares, respectively. The proposed 2014 Amendment to the 2005 Plan will increase the number of shares of Common Stock available under the plan by 4,000,000 shares, subject to stockholder approval.
The 1995 Plan continues to exist, and stock options previously granted under the 1995 Plan remain in existence in accordance with their terms. However, no new awards have been under the 1995 Plan since the adoption of the 2005 Plan. There are currently 18,700 shares of Common Stock subject to existing options under the 1995 Plan as of April 16, 2014.
Reversion of Shares. There are certain circumstances under which shares of Common Stock that are already subject to an outstanding award under the 2005 Plan may revert to the 2005 Plan and become available for reissuance. Specifically, if an award under the 2005 Plan expires or otherwise terminates, in whole or in part, without having been exercised or paid in full (i.e.,in the case of a stock option, SAR or restricted stock unit), or if any shares of Common Stock issued to a recipient pursuant to an award are forfeited back to or are repurchased by the Company (i.e.,in the case of restricted stock), then the shares represented by such awards will revert to and again become available for issuance under the 2005 Plan. A forfeiture or repurchase of stock may occur, for example, because of a recipient’s failure to satisfy a contingency or condition that is required for the vesting of such shares.
Effect on Share Reserve of Use of Shares to Cover Tax Withholding. The Board has discretion under the 2005 Plan to allow a recipient of a stock option to use shares of Common Stock to satisfy the tax-withholding requirement that may arise upon exercise of such option. The shares may be shares previously owned by the recipient, or may be the shares acquired from the exercise of the option. Any shares of Common Stock that are not delivered to a recipient because those shares are used to satisfy the payment of taxes will revert to the share reserve under the 2005 Plan and will again become available for issuance in the future.
Effect on Share Reserve of a “Net Exercise” or Cashless Exercise of Stock Options. Payment of the exercise price of a stock option may be made in cash or check payable to the Company. The Board may also provide in the applicable stock option agreement under the 2005 Plan that a recipient may use shares of already-owned Common Stock to satisfy payment of the exercise price, or any other means approved by the Board (including a “net exercise” in which the Company withholds a number of shares that would otherwise be issued to a recipient upon the exercise of the option that have a fair market value equal to the option exercise price). Any shares of Common Stock that are not delivered to a recipient because those shares are used to satisfy the payment of the exercise price will revert to the share reserve under the 2005 Plan and shall again become available for issuance in the future.
Maximum Number of Shares Issued through Incentive Stock Options. The maximum aggregate number of shares that may be issued under the 2005 Plan through the exercise of ISOs is 26,312,192, subject to stockholder approval of the 2014 Amendment to the 2005 Plan.
Eligible Participants. Subject to certain limitations, awards under the 2005 Plan of NSOs, restricted stock awards, restricted stock units and SARs may be granted to any employee, officer, director, consultant or advisor to the Company. Only employees of the Company may be granted incentive stock options (“ISOs”) under the 2005 Plan. As of April 16, 2014, the Company had 217 full-time employees and six members of the Board of Directors who were not employees of the Company.
Plan Amendments and Termination. The Board may at any time, and from time to time, modify or amend the 2005 Plan in any respect,providedthat no such modification or amendment may adversely affect the rights of a recipient under an existing stock award. In addition, if at any time stockholder approval is required under Section 422 of the Internal Revenue Code, as amended (the “Code”) or any successor provision with respect to ISOs, or under Rule 16b-3 under the Exchange Act (if then applicable) or other applicable rules and regulations, the Board may not effect such modification or amendment without such approval.
The Board may at any time suspend or terminate the 2005 Plan,providedthat any such suspension or termination may not adversely affect the rights of a recipient under any award previously granted while the 2005 Plan is in effect except with the consent of the recipient.
Options
The following is a description of the permissible terms of stock options under the 2005 Plan. Individual option grants may be more restrictive as to all or any of the permissible terms described below.
Option Duration. The term of each ISO will be 10 years from the date of grant or such shorter term as the Board determines, except that in the case of an ISO that is awarded to an employee 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, the term of the ISO must be five years or such shorter period as the Board determines. The term of each NSO is as determined by the Board. The term of any option granted under the 2005 Plan, and all other materials terms and conditions of such option, will be evidenced by an option agreement between the Company and the recipient.
Exercise Price. The exercise price for any option granted under the 2005 Plan may not be less than the fair market value of the Common Stock on the date of grant. In the case of an ISO granted to an employee 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 of its parents or subsidiaries, the exercise price may not be less than 110% of the fair market value on the date of grant.
Fair Market Value. For purposes of the 2005 Plan, if the Common Stock is listed on an established stock exchange or traded on The NASDAQ Global Select Market (“NASDAQ”) or The NASDAQ Small Cap Market, the fair market value of a share of Common Stock will be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the day of determination, as reported inThe Wall Street Journalor such other source as the Board deems reliable. If the day of determination is not a market-trading day, then the trading day prior to the day of determination will be used. In the absence of such markets for the Common Stock, the fair market value will be determined in good faith by the Board.
Exercise of Option and Payment for Stock. Stock options are exercisable at such time or times and subject to such conditions as set forth in the agreement evidencing such option, subject to the provisions of the 2005 Plan.
Under the current form of stock option agreement approved by the Board for use under the 2005 Plan (which is subject to change), options generally vest and become exercisable in accordance with the following schedule: (a) 25% of the shares subject to the option vest on each of the first four anniversaries of the date of grant for employees, and (b) the shares subject to the option vest in full on the six-month anniversary of the date of grant for directors. The Board has authority to accelerate the time at which an option may vest or be exercised. See “Corporate Changes” below for a description of how options vest upon a change in control of the Company.
The consideration to be paid for shares to be issued upon exercise of an option may be made by (a) delivery of cash or a check to the Company; (b) to the extent permitted by the applicable option agreement, delivery to the Company of shares of Common Stock already owned by the recipient having a fair market value on the date of surrender equal to the aggregate exercise price of the shares being purchased; or (c) by any other means approved by the Board.
Effect of Recipient’s Termination of Employment or other Service, Death or Disability. The Board has the power to determine the period of time during which a recipient (or, if applicable, the recipient’s estate or representative) may exercise a stock option under the 2005 Plan following the termination of the recipient’s employment or other relationship with the Company, including upon the death or disability (within the meaning of Section 22(e)(3) of the Code) of the recipient. Such periods must be set forth in the agreement evidencing the option. The current form of option agreement under the 2005 Plan provides in general that a recipient will have three months to exercise the vested portion of the option following termination of service with the Company, after which time the option will expire and will no longer be exercisable; in the case of members of the Company’s Board of Directors the period of time is generally three years. The unvested portion of the stock option cannot be exercised and is forfeited on the date of termination. However, under the form of option agreement, if a recipient’s employment or other service on behalf of the Company or an affiliate is terminated because of his or her death (which occurs while the recipient is either actively providing such services or within three months after the recipient’s termination for a reason other than cause), then the exercise period is extended to one year after the date of death. If the recipient is terminated because of a disability, the exercise period is also extended to one year after the date of termination. In no event, however, may a stock option be exercised after the expiration date of the option. In the case of a termination for “cause” under the form of stock option agreement (as defined therein), the option cannot be exercised and is forfeited both as to the vested and unvested shares subject to the option. The Board in its discretion may in the future change the form of option agreement to provide for shorter or longer exercise periods upon termination of service than the periods described above.
For an option to retain its status as an ISO, the recipient must have been in the continuous employment of the Company or an affiliate since the date of grant of the ISO, and the ISO must be exercised within three months after the date the recipient ceases to be an employee of the Company or an affiliate. An option otherwise intended to be an ISO will be considered an NSO if these requirements are not met.
Transferability. Options are not assignable or transferable by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the recipient, are exercisable only by the recipient. NSOs may, however, be transferred pursuant to a domestic relations order (within the meaning ofExchange Act Rule 16a-12) or as otherwise expressly permitted in the agreement evidencing such NSO.
Repricing. The 2005 Plan does not affirmatively give the Board authority, in the event of a decline in the value of the Company’s Common Stock, to replace outstanding higher priced options with new lower priced options, nor does it give the Board authority to reprice anyout-of-the-moneyoptions.
Restricted Stock Awards, Restricted Stock Units and SARs
Generally. As a condition to the grant of a restricted stock award, restricted stock unit or SAR, each recipient must execute an agreement evidencing such award. The terms and conditions of each such agreement may change from time to time and agreements need not be identical, with certain exceptions noted below.
Restricted Stock Awards. The Board will determine the purchase price per share at the time of grant of a restricted stock award, which may not be less than the par value of the Common Stock. A restricted stock award may be awarded as a stock bonus with no cash purchase price to be paid by a recipient to the extent permitted under applicable law. At the time of the grant, the Board will also determine the permitted consideration for the payment of the purchase price, if any, which may be: (a) cash at the time of purchase; (b) services rendered or to be rendered to the Company; or (c) any other form of legal consideration that may be acceptable to the Board, subject to applicable law (including Delaware corporate law). Shares of Common Stock acquired under a restricted stock award may be subject to forfeiture or a share repurchase option in favor of the Company or an affiliate in accordance with a vesting schedule as determined by the Board.
Transferability. Rights to purchase or receive shares of Common Stock granted under a restricted stock award are transferable by the recipient only upon such terms and conditions as are set forth in the restricted stock award agreement, as the Board determines in its discretion, and so long as the Common Stock awarded then remains subject to the terms of the restricted stock award agreement. Transferability of other awards will be as determined by the Board.
Restricted Stock Units. A restricted stock unit award is denominated in shares of Common Stock and represents a promise by the Company to issue shares of Common Stock or cash measured by the value of shares in the future. The Board will determine the consideration, if any, to be paid by the recipient upon delivery of each share of Common Stock subject to a restricted stock unit award, which, to the extent required by applicable law, will not be less than par value. At the time of grant, the Board may also determine any restrictions or conditions to the vesting of the shares subject to the award or any other restrictions or conditions that delay delivery of such shares. Dividend equivalents may be credited in respect of restricted stock units as the Board determines. If the recipient’s service with the Company terminates for any reason, unvested restricted stock units will be forfeited unless the applicable award agreement provides otherwise.
SARs. An SAR entitles the recipient to a payment equal in value to the appreciation in the value of an underlying share of the Company’s Common Stock from the date of grant to the date the SAR is exercised. SARs will be denominated in shares of Common Stock. Payment may be made in shares of Common Stock, cash or any combination of the two, as the Board deems appropriate. The amount payable on the exercise of an SAR may not be greater than the amount equal to the excess of (1) the aggregate fair market value (on the date of the exercise of the SAR) of the number of shares of Common Stock underlying the SAR that are being exercised, over (2) the aggregate fair market value of such shares of Common Stock on the grant date. The Board may impose any restrictions it deems appropriate on the vesting of SARs. If the recipient’s service with the Company terminates for any reason, unvested SARs will be forfeited and the Company will automatically redeem vested SARs.
Corporate Changes
Adjustment Provisions. Transactions not involving receipt of consideration by the Company, such as reorganizations, reclassifications, stock dividends or stock splits, may change the type, class and number of shares of Common Stock subject to the 2005 Plan and outstanding awards. In such event, the 2005 Plan will be appropriately adjusted as to the type, class and the maximum number of shares of Common Stock subject to the plan, and outstanding awards will be adjusted as to the type, class, number of shares and price per share of Common Stock subject to such awards.
Change in Control. In the event of certain specified organizational changes, including but not limited to (a) a consolidation, merger, combination or reorganization of the Company, (b) the sale, lease or other disposition of all or substantially all of the assets, or a dissolution or liquidation, of the Company, (c) a transaction or series of related transactions in which persons who were not stockholders of the Company immediately prior to acquiring Company capital stock as part of such transaction(s) become the owners of capital stock of the Company that represents more than 50% of the combined voting power of the Company’s outstanding capital stock, or (d) a liquidation or dissolution of the Company, then the Board or the board of any corporation assuming the Company’s obligations will take any one or more actions as to outstanding awards under the 2005 Plan, including:
In 2005, the Board adopted a Change in Control Severance Benefit Plan (the “Severance Plan”), which provided, among other things, that all outstanding awards will become vested and exercisable in full upon a change in control of the Company (a “Single Trigger Acceleration”). In July 2006, the Board amended the Severance Plan to provide that, upon a termination of employment following a change in control, all outstanding awards will become vested and exercisable in full (a “Double Trigger Acceleration”). In April 2007, the Compensation Committee recommended and the Board adopted revised stock option agreements, restricted stock agreements and restricted stock unit agreements for all awards made in March 2007 and thereafter that provide for Double Trigger Acceleration. This action did not alter awards before March 2007.
Changes to Incumbent Board. The Board or its designee may also provide for the accelerated vesting or exercisability of an award under the 2005 Plan (including the lapse of any reacquisition or repurchase rights in favor of the Company) upon the occurrence of a change in the incumbent board (as defined below) in an option agreement or other stock award agreement at the time of grant of the award, or at any time thereafter. A “change in the incumbent board” is deemed to occur if the existing members of the Board on the date the 2005 Plan is initially adopted by the Board cease to constitute at least a majority of the members of the Board, with certain exceptions. In that regard, any person that becomes a new Board member after the adoption of the 2005 Plan will be deemed a member of the incumbent board for this purpose if his or her election or appointment was approved or recommended by a majority vote of the members of the existing incumbent board who are then still in office.
Tax Matters
Incentive Stock Options. In general, taxable income is recognized with respect to an ISO only upon the sale of Common Stock acquired through the exercise of the ISO (“ISO Stock”) and not in connection with the grant or exercise of such ISO. However, the exercise of an ISO may subject the recipient to the alternative minimum tax. The tax consequences of selling ISO Stock will vary with the length of time that the recipient has owned the ISO Stock at the time it is sold. If the recipient sells ISO Stock after having owned it for the greater of (a) two years from the date the option was granted, and (b) one year from the date the option was exercised, then the recipient will recognize a long-term capital gain in an amount equal to the excess of the amount realized by the recipient on the sale price of the ISO Stock over the exercise price. If the recipient sells ISO Stock for more than the exercise price prior to having owned it for at least two years from the grant date and one year from the exercise date (a “Disqualifying Disposition”), then the gain recognized by the recipient will be ordinary compensation income to the extent of the fair market value of the ISO Stock on the date the option was exercised over the exercise price and the remaining gain, if any, will be a capital gain. If a recipient sells ISO Stock for less than the exercise price, then the recipient will recognize a capital loss equal to the excess of the exercise price over the sale price of the ISO Stock. This capital loss will be a long-term capital loss if the recipient has held the ISO Stock for more than one year to the date of sale.
Nonstatutory Stock Options. As with ISOs, the grant of NSOs with an exercise price per share that is at least equal to the fair market value of a share of Common Stock on the date of grant does not result in the recognition of taxable income to the recipient. The exercise of an NSO results in the recognition of ordinary income to the recipient in the amount by which the fair market value of the Common Stock acquired through the exercise of the NSO (“NSO Stock”) on the exercise date exceeds the exercise price and the recipient’s tax basis in the NSO Stock will be equal to the exercise price plus any income recognized upon the exercise of the option. The sale of NSO Stock generally will result in the recognition of a capital gain or loss in an amount equal to the excess of the sale price of the NSO Stock over the recipient’s tax basis in the NSO Stock. This capital gain or loss will be a long-term capital gain or loss if the recipient has held the NSO Stock for more than one year prior to the date of the sale.
Federal Income Tax Consequences to the Company in connection with Stock Options. The grant and exercise of ISOs and NSOs generally have no direct tax consequences to the Company. The Company generally will be entitled to a compensation deduction with respect to any ordinary income recognized by a recipient, including income that results from the exercise of a NSO or a Disqualifying Disposition of an ISO. Any such deduction will be subject to the limitations of Section 162(m) of the Code, unless certain requirements are satisfied. The Company has a statutory obligation to withhold appropriate income taxes from the ordinary income that is realized from the exercise of NSOs by employees.
Restricted Stock Awards and Stock Bonuses. Restricted stock awards and stock bonuses granted under the 2005 Plan generally have the following federal income tax consequences.
Upon acquisition of stock that is not subject to a substantial risk of forfeiture, the recipient generally will recognize taxable ordinary income equal to the excess, if any, of the stock’s fair market value on the acquisition date over the purchase price. However, to the extent the stock is subject to a substantial risk of forfeiture, including certain types of vesting restrictions, the taxable event will be delayed until the vesting restrictions lapse, unless the recipient elects to be taxed on receipt of the stock by making an election under Section 83(b) of the Code. An 83(b) election must be made not later than 30 days after the transfer of the shares to the participant and must satisfy certain other requirements. A recipient who makes an effective 83(b) election will realize ordinary income equal to the fair market value of the shares as of the time of the acquisition, less any price paid for the shares. If a recipient makes an effective 83(b) election, no additional income results by reason of the lapsing of the restrictions. With respect to employees, the Company is generally required to withhold from regular wages or supplemental wage payments an amount based on the ordinary income recognized. Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax-reporting obligation, the Company will generally be entitled to a business expense deduction equal to the taxable ordinary income realized by the recipient.
Upon disposition of the stock, the recipient will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock plus any amount recognized as ordinary income upon acquisition (or vesting) of the stock. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year. Slightly different rules may apply to recipients who acquire stock subject to certain repurchase options or who are subject to Section 16(b) of the Exchange Act.
Stock Appreciation Rights. No taxable income is realized upon the receipt of an SAR, but upon exercise of the SAR the fair market value of the shares (or cash in lieu of shares) received will be treated as compensation taxable as ordinary income to the recipient in the year of such exercise. Generally, with respect to employees, the Company is required to withhold from the payment made on exercise of the SAR or from regular wages or supplemental wage payments an amount based on the ordinary income recognized. Subject to the requirement of reasonableness, the requirements of Section 162(m) of the Code as described below, and the satisfaction of a reporting obligation, the Company will be entitled to a business expense deduction equal to the taxable ordinary income recognized by the recipient.
Restricted Stock Units. A recipient does not have taxable ordinary income upon the grant of a restricted stock unit. Ordinary income arises on the actual or constructive receipt of the stock underlying the units (or upon receipt of cash, if the restricted stock unit is settled in cash), which generally occurs when the restricted stock units vest, unless delivery of shares or cash is deferred under Section 409A of the Code. If shares delivered are restricted for tax purposes, the recipient will be subject to the rules described above applicable to restricted stock.
Under Section 409A of the Code, a restricted stock unit generally will not result in the deferral of compensation if the restricted stock unit award must be settled shortly after vesting occurs. If the recipient has the right to elect to defer payment under the award to a future taxable year, this will be considered a deferred compensation arrangement under Section 409A. Non-compliance with Section 409A can result in the imposition of income tax and penalties on a recipient at the time of grant of the restricted stock unit or upon later vesting.
Potential Limitation on Company Deductions. Section 162(m) of the Code denies a deduction to any publicly held corporation for compensation paid to certain “covered employees” in a taxable year to the extent that compensation to such covered employee exceeds $1 million. It is possible that compensation attributable to awards, when combined with all other types of compensation received by a covered employee from the Company, may cause this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified “performance-based compensation,” are disregarded for purposes of the deduction limitation. In accordance with Treasury Regulations issued under Section 162(m), compensation attributable to stock options and SARs will generally qualify as performance-based compensation if the award is granted by a compensation committee comprised solely of “outside directors” and either (i) the plan contains a per-employee limitation on the number of shares for which such awards may be granted during a calendar year, the per-employee limitation is approved by the stockholders, and the exercise price of the award is no less than the fair market value of the stock on the date of grant, or (ii) the award is granted (or exercisable) only upon the achievement (as certified in writing by the compensation committee) of an objective performance goal established in writing by the compensation committee while the outcome is substantially uncertain, and the award is approved by stockholders.
Awards to purchase restricted stock and stock bonus awards will qualify as performance-based compensation under the Treasury Regulations only if (i) the award is granted by a compensation committee comprised solely of “outside directors,” (ii) the award is granted (or exercisable) only upon the achievement of an objective performance goal established in writing by the compensation committee while the outcome is substantially uncertain, (iii) the compensation committee certifies in writing prior to the granting (or exercisability) of the award that the performance goal has been satisfied and (iv) prior to the granting (or exercisability) of the award, stockholders have approved the material terms of the award (including the class of employees eligible for such award, the business criteria on which the performance goal is based, and the maximum amount — or formula used to calculate the amount — payable upon attainment of the performance goal).
The foregoing is only a summary of the material federal income tax consequences associated with the grant, exercise and disposition of the shares of Common Stock subject to awards granted under the 2005 Plan. It does not purport to be complete and does not discuss the tax consequences arising in the event of a recipient’s death or the income tax laws of the municipality, state or foreign country under which the recipient’s income may be taxable.
2005 Plan Benefits
Awards of stock options, restricted stock, restricted stock units and SARs made to eligible participants under the 2005 Plan are subject to the discretion of the Board, upon recommendation by the Compensation Committee and, therefore, are not determinable at this time.
Each option granted under the 2005 Plan will have an exercise price that is no less than the fair market value of a share of Common Stock on the date of grant. Prices and consideration for restricted stock awards, restricted stock units and SARs under the 2005 Plan will be as determined by the Board. The value of each such grant and award may depend on the market value of the Company’s Common Stock on the day of exercise and therefore cannot be determined or estimated at this time. The closing market value of the Company’s Common Stock on April 16, 2014 was $4.05 per share.
Approval of the 2014 Amendment to the 2005 Plan to increase the number of shares reserved for issuance under such plan by 4,000,000 shares requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and voting on the matter. Abstentions and broker non-votes will not be counted as shares voting on such matter and accordingly will have no effect on the approval of this Proposal 3.
FOR PROPOSAL 3, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” ADOPTION OF THE 2014 AMENDMENT TO INCREASE THE NUMBER OF SHARES BY 4,000,000 UNDER THE 2005 PLAN.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as noted below, the following table sets forth certain information as of April 16, 2014 with respect to the beneficial ownership of our Common Stock by (i) each person (including any group) known to the Company to beneficially own more than 5% of the outstanding shares of our Common Stock, (ii) each director of the Company or nominee for director, (iii) each of the Named Executive Officers of the Company as identified in the “Summary Compensation Table” below, and (iv) all directors and executive officers of the Company as a group.
Name of Beneficial Owner(1) | Shares of Common Stock Beneficially Owned(2) | Percentage of Class Outstanding(3) | ||||||
FMR LLC 82 Devonshire St Boston, MA 02109 | 25,127,491 | (4) | 12.0 | |||||
BlackRock, Inc. 40 East 52nd Street New York, NY 10022 | 13,465,748 | (5) | 6.4 | |||||
RA Capital Management, LLC 20 Park Plaza, Suite 1200 Boston, MA 02116 | 10,811,888 | (6) | 5.2 | |||||
Directors, Nominees, and Executive Officers | ||||||||
Richard H. Douglas, Ph.D | 350,000 | (7) | * | |||||
Gary C. Evans | 678,680 | (8) | * | |||||
John O. Marsh, Jr., J.D | 211,000 | (9) | * | |||||
Michael A. McManus, Jr. J.D | 252,590 | (9) | * | |||||
Rajiv I. Modi, Ph.D | 9,500,000 | (10) | 4.5 | |||||
James F. Young, Ph.D | 815,000 | (11) | * | |||||
Stanley C. Erck | 1,354,868 | (12) | * | |||||
Barclay A. Phillips | 14,868 | * | ||||||
Fredrick W. Driscoll | 30,000 | (13) | * | |||||
Gregory M. Glenn, M.D | 514,602 | (14) | * | |||||
Timothy J. Hahn, Ph.D | 292,916 | (15) | * | |||||
John J. Trizzino | — | — | ||||||
Russell P. Wilson | 229,900 | (16) | * | |||||
All directors and executive officers as a group (12 persons) (17) | 14,214,424 | 6.7 |
On March 6, 2014,15, 2016, the Board determined, upon a recommendation by the Nominating and Corporate Governance Committee, that, with the exception of Dr. Modi and Mr. Erck, all of the members of the Board are “independent” directors, as that term is defined in the NASDAQ listing standards. Mr. Erck is currently the President and Chief Executive Officer of the Company. Dr. Modi is not an “independent” director due to his interest in Cadila and the joint venture it has with the Company, as described in the section titled “Certain Relationships and Related Transactions.”
TheDuring 2015, the Board met five (5)six (6) times during 2013 and acted by written consent in lieu of a meeting two (2) times. In addition, the non-employee directors met five (5)six (6) times in executive session during the same period. Each of the directors attended at least 75% of the aggregate of the total number of meetings of the Board they were eligible to attend and the total number of meetings held by all committees on which they served.
Recognizing that director attendance at the Company’s annual meetings of stockholders provides stockholders with an opportunity to communicate with members of the Board, Novavax strongly encourages (but does not require) members of the Board to attend such meetings. Drs. Douglas, Modi, and Young and Messrs. Erck, Evans, Marsh, and McManus, constitutingAll members of the entire Board attended the 20132015 Annual Meeting of Stockholders.
The Board has elected to separate the roles of Chief Executive Officer and Chairman of the Board. On April 19, 2011, Mr. Erck was elected to the role of President and Chief Executive Officer and Dr. Young was elected as Chairman of the Board. Mr. Erck had served as Executive Chairman from February 2010 until April 19, 2011. Before being elected as Chairman of the Board, Dr. Young had served as a member of the Board from April 2010 until April 19, 2011.
The Chief Executive Officer and Chairman work closely together to execute the strategic plan of the Company. The Chairman mentors and advises the senior scientific team, provides an extensive network of contacts, and reports regularly to the Board. The Company believes that the combination of Mr. Erck as the President and Chief Executive Officer and Dr. Young as the Chairman of the Board is an effective leadership structure for the Company. The additional avenues of communication between the Board and management associated with having Dr. Young serve as Chairman provides the basis for the proper functioning of the Board and its oversight of management.
Management of the Company is primarily responsible for managing the risks Novavax faces in the ordinary course of operating the business. The Board actively oversees potential risks and risk management activities by receiving operational and strategic presentations from management, which include discussions of key risks to the business. In addition, the Board has delegated risk oversight to each of its key committees within their areas of responsibility. For example, the Audit Committee assists the Board in its risk oversight function by reviewing and discussing with management the system of disclosure controls and internal controls over financial reporting and discusses the key risks facing the Company and the processes or actions being taken to mitigate those risks. The Nominating &and Corporate Governance Committee assists the Board in its risk oversight function by periodically reviewing and discussing with management important compliance and quality issues. The Compensation Committee assists the Board in its risk oversight function by overseeing strategies with respect to incentive compensation programs and key employee retention issues. The Board committees are chaired by independent directors and, at each Board meeting, each of the committee chairmenchairs delivers a report to the full Board on the activities and decisions made by the committees at recent meetings. There is also a significant amount of cross-over ofwith respect to the membership of the various committees, allowing information to flow freely outside of a full board meeting.
The Board currently has fourthree standing committees: an Audit Committee, a Compensation Committee, a Finance Committee, and a Nominating and Corporate Governance Committee. In addition to the descriptions below, please refer to the “Compensation Committee Report” and “the Audit Committee Report” included in this Proxy Statement. The members of the committees are shown below.
Director | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | |||||||||
— | Member | Member | ||||||||||
Richard H. Douglas, Ph.D. | Member | Member | — | |||||||||
Stanley C. Erck | — | — | — | |||||||||
Gary C. Evans | Member | — | Chair | |||||||||
Michael A. McManus, Jr., | Chair | Member | Member | |||||||||
Rajiv I. Modi, | — | — | — | |||||||||
James F. Young, | — | Chair | Member |
Each Audit Committee member is a “non-employee director,” as defined by Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), “outside director,” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and an “independent director,” as defined by the listing standards of the NASDAQ. The Board has determined that each of Mr. McManus and Mr. Evans qualifies as an “audit committee financial expert” as that term is defined by the rules and regulations of the SEC, and is financially sophisticated as required by the listing standards of the NASDAQ. TheDuring 2015, the Audit Committee met five (5) times in 2013 and did not act by written consent in lieu of a meeting.
The Audit Committee acts pursuant to a written charter as adopted by the Board. A current copy of the charter is available on the Company’s website atwww.novavax.com. The Audit Committee reviews and evaluates the charter annually to ensure its adequacy and accuracy, and is charged with performing an annual self-evaluation with the goal of continuing improvement. In 2013,2015, the Audit Committee reviewed and approved its charter in its current form.
The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of the work of any independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Company. To this end, the Audit Committee meets with the Company’s independent registered public accounting firm to discuss the scope and results of its examination and reviews the financial statements and reports contained in the Company’s periodic and other filings. The Audit Committee also reviews the adequacy and efficacy of the Company’s accounting, auditing and financial control systems, as well as the Company’s disclosure controls and procedures; monitors the adequacy of the Company’s accounting and financial reporting processes and practices; and considers any issues raised by its members, the Company’s independent registered public accounting firm and the Company’s employees. To assist in carrying out its duties, the Audit Committee is authorized to investigate any matter brought to its attention, retain the services of independent advisors (including legal counsel, auditors, and other experts), and receive and respond to concerns and complaints relating to accounting, internal accounting controls, and auditing matters. The Audit Committee regularly meets with both the Company’s management and its independent auditor collectively and, at times, independently and without the other present, and meets in executive session without management or the independent auditor present.
Each Compensation Committee member is a “non-employee director,” as defined by Rule 16b-3 of the Exchange Act, “outside director,” as defined in Section 162(m) of the Code (“Section 162(m)”), and an “independent director,” as defined by the listing standards of the NASDAQ, including the heightened standards that apply to compensation committee members. The Compensation Committee is tasked with
meeting at least four times during the year, and more frequently, if necessary. During 2013,2015, the Compensation Committee met five (5) times and did not act by written consent in lieu of a meeting.
The Compensation Committee acts pursuant to a written charter, a current copy of the charter is available on the Company’s website at www.novavax.com.www.novavax.com. The Compensation Committee reviews and evaluates the charter annually to ensure its adequacy and accuracy. In 2013,2015, the Compensation Committee reviewed and approved its charter in its current form.
The Compensation Committee reviews and recommends salaries and other compensatory benefits for the employees, executive officers, and directors of Novavax. The Compensation Committee also recommends actions to administer the Company’s equity incentive plans and recommends stock option grants and other awards for employees, executive officers, and directors of Novavax.
As set forth in its charter, the Compensation Committee’s authority and responsibilities include but are not limited to:
The Compensation Committee has the authority to engage independent compensation consultants or advisors, as it may deem appropriate in its sole discretion, and to approve related fees and retention terms of such consultants or advisors.
The Compensation Committee routinely holds meetings, some of which management attends, as well as executive sessions without management, where compensation is discussed. The Chairmanchair of the Compensation Committee is responsible for leadership of the Compensation Committee and sets meeting agendas.
The Compensation Committee may request that any executive officer or employee of the Company, outside counsel, or consultant attend Compensation Committee meetings or confer with any members of, or consultants to, the Compensation Committee. The Compensation Committee is supported in its efforts by the Company’s legalLegal and human resourcesHuman Resources teams, to which the Compensation Committee delegates authority for certain administrative functions. The Chief Executive Officer gives performance assessments and compensation recommendations for each executive officer of the Company (other than himself). The Chairman gives performance assessments and compensation recommendations for the Chief Executive Officer. The Compensation Committee considers the Chief Executive Officer’s and the Chairman’s recommendations and the information provided by the human resourcesHuman Resources team in its deliberations regarding executive compensation and sets the compensation of the executive officers based on such deliberations and recommends that the Board ratify such compensation. The Chief Executive Officer and the Executive Director ofVice President, Human Resources and Administration generally attend Compensation Committee meetings but are not present for executive sessions or any discussion of their own compensation.
Finance Committee
With the exception of Mr. Erck, each Finance Committee member is a “non-employee director,” as defined by Rule 16b-3 of the Exchange Act, “outside director,” as defined in Section 162(m) of the Code, and an “independent director,” as defined by the listing standards of NASDAQ. The Finance Committee did not meet during the 2013 fiscal year and took no action by written consent in lieu of a meeting.
The Finance Committee acts pursuant to a written charter, a current copy of the charter is available on the Company’s website at www.novavax.com. The Finance Committee reviews and evaluates the charter annually to ensure its adequacy and accuracy, and is charged with performing an annual self-evaluation with the goal of continuing improvement. In 2013, the Finance Committee did not approve any revisions to its charter.
The purpose of the Finance Committee is to assist the Board with its responsibilities and provide advice to senior management of the Company relating to the financial condition and the equity and debt capital raising strategies and activities of the Company, oversight of the Company’s investment and cash management policies, all in the context of the Company’s overall strategic business plan and to carry out such other functions as the Board may from time to time authorize. In 2013, the Finance Committee did not meet as a committee, as all such functional activity was conducted by the Board.
Nominating and Corporate Governance Committee
Each Nominating and Corporate GovernanceCommitteeGovernance Committee member is an “independent director,” as defined by the listing standards of the NASDAQ. TheDuring 2015, the Nominating and Corporate Governance Committee met three (3)five (5) times during 2013 and took no actionacted by written consent in lieu of a meeting.meeting once.
The Nominating and Corporate Governance Committee acts pursuant to a written charter, a current copy of the charter is available on the Company’s website at www.novavax.com.www.novavax.com. The Nominating and Corporate Governance Committee reviews and evaluates the charter annually to ensure its adequacy and accuracy. In 2013,2015, the Nominating and Corporate Governance Committee reviewed and approved its charter in its current form.
As provided in the charter, the primary function of the Nominating and Corporate Governance Committee is to assist the Board in fulfilling its responsibilities by: reviewing and making recommendations to the Board regarding the Board’s size, structure and composition; establishing criteria for Board membership; identifying and evaluating candidates qualified to become members of the Board, including candidates proposed by stockholders; selecting, or recommending for selection, director nominees to be presented for approval at the annual meeting of stockholders and to fill vacancies on the Board; overseeing our corporate governance guidelines; evaluating Company policies relating to the recruitment of Board members; developing and recommending to the Board corporate governance policies and practices applicable to the Company; monitoring compliance with the Company’s Code of Business Conduct and Ethics and handling such other matters as the Board or committee deems appropriate. The Nominating and Corporate Governance Committee’s goal is to contribute to the effective representation of the Company’s stockholders and to play a leadership role in shaping the Company’s corporate governance.
As noted above, it is the Nominating and Corporate Governance Committee’s responsibility to review and evaluate director candidates, including candidates submitted by stockholders. In performing its evaluation and review, the Nominating and Corporate Governance Committee does not differentiate between candidates based on the proposing constituency, but rather applies the same criteria to each candidate.
During 2015, the Finance Committee members were Dr. Douglas, Mr. Erck, Mr. Evans (Chair), and Mr. McManus, and with the exception of Mr. Erck, each Finance Committee member was a “non-employee director,” as defined by Rule 16b-3 of the Exchange Act, “outside director,” as defined in Section 162(m), and an “independent director,” as defined by the listing standards of the NASDAQ. During 2015, the Finance Committee met three (3) times and did not act by written consent in lieu of a meeting. The purpose of the Finance Committee was to assist the Board with its responsibilities and provide advice to senior management of the Company relating to the financial condition and the equity and debt capital raising strategies and activities of the Company, as well as oversight of the Company’s investment and cash management policies, all in the context of the Company’s overall strategic business plan, and to carry out such other functions as the Board may have authorized from time to time. In 2015, the Finance Committee was dissolved and, in its place, the Board reassumed responsibility for advising the Company’s senior management with respect to the Company’s financial condition, as well as equity and debt capital raising strategies. In addition, the Audit Committee was empowered to oversee the Company’s investment and cash management policies, which were previously exercised by the Finance Committee. The Board believes that this change will serve the best interests of the Company.
Stockholders who wish to nominate qualified candidates to serve as directors of the Company may do so in accordance with the procedures set forth in the Company’s Amended and Restated By-laws (“By-laws”), which procedures did not change during the last fiscal year. As set forth in the By-laws, a stockholder must notify the Company in writing, by notice delivered to the attention of the Secretary of the Company at the address of the Company’s principal executive offices, of a proposed nominee. In order to ensure meaningful consideration of such candidates, notice must be received not less than 60 days nor more than 90 days prior to the anniversary date of this year’s Annual Meeting; provided, however, that in the event that the date of the current year’s Annual Meetingannual meeting of the stockholders is more than 30 days before or after the anniversary date of the prior year’s annual meeting of the stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th10th day following the day on which such notice of the date of the meeting was mailed or public disclosure of the date of such meeting was made, whichever occurs first. .
The notice must set forth as to each proposed nominee:
The notice must also set forth with respect to the stockholder giving the notice and each Stockholder Associated Person:
For purposes of this Proxy Statement, a “Stockholder Associated Person” of any stockholder means (i) any “affiliate” or “associate” (as those terms are defined in Rule 12b-2 under the Exchange Act) of the stockholder who owns beneficially or of record any capital stock or other securities of the Company or, through one or more derivative positions, has an economic interest (whether positive or negative) in the price of securities of the Company and (ii) any person acting in concert with such stockholder or any affiliate or associate of such stockholder with respect to the capital stock or other securities of the Company.
In addition, any nominee proposed by a stockholder shall complete a questionnaire, in a form provided by the Company, and such completed questionnaire shall be submitted promptly, and in any event within 10ten days, after the Company provides the form of such questionnaire. The Company may require any proposed nominee to furnish such other information as may reasonably be required to determine the eligibility of the nominee to serve as a director. Nominations received through this process will be forwarded to the Nominating and Corporate Governance Committee for review.
The Nominating and Corporate Governance Committee strives to maintain a board of directors with a diverse set of skills and qualifications, to ensure that the board of directors is adequately serving the needs of the Company’s stockholders. Before evaluating director candidates, the Nominating and Corporate Governance Committee reviews the skills and qualifications of the directors currently serving on the Board and identifies any areas of weakness or skills of particular importance. On the basis of that review, the Nominating and Corporate Governance Committee will evaluate director candidates with those identified skills. While the Nominating and Corporate Governance Committee does not have a formal policy on Board diversity, the committee takes into account a broad range of diversity considerations when assessing director candidates, including individual backgrounds and skill sets, professional experiences, and other factors that contribute to the Board having an appropriate range of expertise, talents, experiences, and viewpoints, and considers those diversity considerations, in view of the needs of the Board as a whole, when making decisions on director
nominations. The Nominating and Corporate Governance Committee considers the following skills and experiences necessary to the Board: industry knowledge, clinical development expertise, commercialization expertise, manufacturing expertise, financial expertise and capital raising experience, and scientific or medical education and experience, particularly in vaccine-related fields.
While there are no set minimum requirements, a candidate should:
In addition to the above criteria (which may be modified from time to time), the Nominating and Corporate Governance Committee may consider such other factors as it deems in the best interests of the Company and its stockholders and that may enhance the effectiveness and responsiveness of the Board and its committees. Finally, the Nominating and Corporate Governance Committee must consider a candidate’s independence to make certain that the Board includes at least a majority of “independent” directors to satisfy all applicable independence requirements, as well as a candidate’s financial sophistication and special competencies.
The Nominating and Corporate Governance Committee identifies potential candidates through referrals and recommendations, including by incumbent directors, management, and stockholders, as well as through business and other organizational networks. To date, the Nominating and Corporate Governance Committee has not retained or paid any third party to identify or evaluate, or assist in identifying or evaluating, potential director nominees, although it reserves the right to engage executive search firms and other third parties to assist in finding suitable candidates.
Current members of the Board with the requisite skills and experience are considered for re-nomination, balancing the value of the member’s continuity of service with that of obtaining a new perspective, and considering each individual’s contributions, performance and level of participation, the current composition of the Board, and the Company’s needs. The Nominating and Corporate Governance Committee also must consider the age and length of service of incumbent directors. In March 2005, the Nominating and Corporate Governance Committee recommended to the Board, and the Board adopted, a rule not to re-nominate a director for re-election if such director has served ten years as a director or has reached 75 years of age, unless circumstances exist which cause the Nominating and Corporate Governance Committee to believe that despite such factors, such a nomination was in the best interest of the Company. If any existing members do not wish to continue in service or if it is decided not to re-nominate a director, new candidates are identified in accordance with those skills, experience, and characteristics deemed necessary for new nominees, and are evaluated based on the qualifications set forth above. In every case, the Nominating and Corporate Governance Committee meets (in person or telephonically) to discuss each candidate, and may require personal interviews before final approval. Once a slate of nominees is selected, the Nominating and Corporate Governance Committee presents it to the full Board.
In 2015, the Board adopted corporate governance guidelines which are available on the Company’s website atwww.novavax.com.
The Board has adopted a written Code of Business Conduct and Ethics in March 2004, most recently amended in June 2011, which(“Code of Ethics”) that applies to each of Novavax’ employees, executive officers, and directors, including, but not limited to, the Company’s Chief Executive Officer and Chief Financial Officer. Each of Novavax’ employees, executive officers, and directors are required to adhere to this code in addressing the legal and ethical issues encountered in conducting their work. The code requires that employees avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner, and otherwise act with integrity and in the Company’s best interest. Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the code. The Sarbanes-Oxley Act of 2002 requires companies to have procedures to receive, retain, and treat complaints received regarding accounting, internal accounting controls, or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The Company currently has such procedures in place. The Code of Business Conduct and Ethics is reviewed at least annually by the Nominating and Corporate Governance Committee. A current copy of the Code of Business Conduct and Ethics, as amended, is postedavailable on Novavax’the Company’s website atnovavax.comwww.novavax.com. NovavaxThe Company intends to disclose on its website the nature of any future amendments to and waivers of the codeCode of Ethics that apply to its Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer, and persons performing similar functions.
The Board welcomes communications from stockholders and has adopted a procedure for receiving and addressing such communications. Stockholders may send written communications to the entire Board or individual directors, addressing them to Novavax, Inc., 20 Firstfield Road, Gaithersburg, Maryland 20878, Attention: Corporate Secretary. Communications by email should be addressed to ir@novavax.com and marked “Attention: Corporate Secretary” in the “Subject” field. All such communications will be forwarded to the full Board or to any individual director or directors to whom the communication is directed unless the communication is clearly of a marketing nature or is unduly hostile, threatening, illegal, or similarly inappropriate, in which case the Company has the authority to discard the communication or take appropriate legal action.
The Company’s Code of Business Conduct and Ethics provides that the Audit Committee is responsible for approving all transactions or business relationships involving Novavax and any director or executive officer, including any indebtedness of such individuals to the Company and transactions between Novavax and either the director or officer personally, members of their immediate families or entities in which they have an interest. In evaluating related party transactions, ourthe Audit Committee members apply the same standards of good faith and fiduciary duty they apply to their general responsibilities as a committee of the Board and as individual directors. The Audit Committee will approve a related party transaction when, in its good faith judgment, the transaction is in the best interest of the Company.
Dr. Modi, a director of Novavax, is also a managing director of Cadila Pharmaceuticals Ltd. (“Cadila”). Novavax and Cadila have formed a joint venture called CPL Biologicals Private Limited (“CPL Biologicals”CPLB”), of which Novavax owns 20% and Cadila owns the remaining 80%. Novavax and Cadila have also entered into a master services agreement, the terms of which provide that if, by March 2015,2016, the amount of services provided by Cadila under the agreement iswas less than $7.5 million, the Company will paywould have paid Cadila the portion of the shortfall amount that is less than or equal to $2.0 million and 50% of the portion of the shortfall amount that exceeds $2.0 million. ThroughThe Company fulfilled its financial obligation under the agreement in the fourth quarter of 2015; thus, while the agreement continues to allow Novavax to use Cadila’s and/or CPLB’s services, there are no further financial obligations under the agreement or any other agreements related to CPLB. As of December 31, 2013,2015, the Company hashad purchased $3.0$2.2 million in services from Cadila pursuant to this agreement. In addition, as of April 16, 2014,13, 2016, a subsidiary of Cadila owns 9.52,500,000 million shares of Novavax’ outstanding Common Stock. See also the information regarding the master services agreement in Note 1716 to the Company’s Annual Report on Form 10-K for the year ended December 31, 20132015 filed with the SEC on March 12, 2014.
February 29, 2016.
There are no family relationships among any of the directors or executive officers (or any nominee therefor) of Novavax. No director, executive officer, nominee, or any associate of any of the foregoing has any interest, direct or indirect, in any proposal to be considered and acted upon at the Annual Meeting (other than the election of directors).
During 2015, Ms. Boudreaux, Dr. Douglas, Mr. McManus, Jr. and Dr. Young served as members of the Compensation Committee. None of the members of the Compensation Committee was at any time during 20132015 an employee or executive officer of Novavax. Mr. Marsh served as interim Chief Executive Officer of the Company from July 1996 to March 1997.
No executive officer of the Company currently serves, or during 20132015 served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company’s Board or Compensation Committee.
Compensation for non-employee directors is comprised of two components: (i) cash compensation and (ii) equity awards.
Cash Compensation
Our non-employee director cash compensation arrangement for 2015 was as follows:
Fee(s) | Amount | |||
Annual Director Retainer | $ | 40,000 – Non-Employee Director | ||
Annual Chairperson Retainer | $ | 35,000 – Board | ||
$ | 18,000 – Audit Committee | |||
$ | 12,500 – Compensation Committee | |||
$ | 9,500 – Nominating and Corporate Governance Committee | |||
$ | 7,000 – Finance Committee (dissolved after 2015) | |||
Committee Member Retainer | $ | 10,000 – Audit Committee | ||
$ | 7,000 – Compensation Committee | |||
$ | 5,000 – Nominating and Corporate Governance Committee | |||
$ | 4,000 – Finance Committee (dissolved after 2015) | |||
Board and Committee Meetings | Directors do not receive compensation for attending meetings. Directors are reimbursed for reasonable costs and expenses incurred in connection with attending any Board or committee meetings or any other Company related business activities. |
During 2013, outside2015, the Company implemented a Director Deferred Fee Policy (the “Policy”) for its non-employee directors. The Policy permits an eligible director to defer receipt of all or part of the director’s cash retainer. To defer fees payable during any calendar year, a director must make an election by the end of the preceding calendar year. A director can elect to have 100% of deferred amounts credited to a “cash account” or a “Company Common Stock account,” or, alternatively, a director may elect to have deferred amounts credited 50% to each account. Cash accounts are credited with interest quarterly at the IRS Applicable Federal Rate for short-term debt instruments for the last month of such calendar quarter. Company Common Stock accounts are credited as if amounts were invested in notional stock units based upon the market price of Company Common Stock and are credited with additional notional units if dividends are paid on Company Common Stock. Payment of deferred amounts is to be made in cash upon the occurrence of certain events, including the director’s separation from service, death of the director, or a change in control of the Company. The director may also elect to receive payment of the deferred amounts in a specified year that is not more than ten years from the year in which the director’s fees were earned. A director may elect to receive payment in either a lump sum or in up to ten annual installments.
The directors were entitlednot eligible to receive an annual retainer of $25,000 and insidedefer any fees earned in the fiscal year ending December 31, 2015. Two directors were entitledelected to receive an annual retainer of $10,000.defer fees earned in the fiscal year ending December 31, 2016. The chairs of each of the Audit, Compensation, Finance, and Nominating & Corporate Governance Committees were entitled to receive additional annual retainers of $12,500, $7,000, $7,000, and $7,000, respectively; whilefollowing table shows how those directors serving on a committee, other than as chairman, were entitled to receive an additional annual retainer of $4,000 for each of the Audit, Compensation, Finance, and Nominating & Corporate Governance Committees. During 2013, the directors, other than Dr. Modi and Mr. Erck, received $2,000 for each in-person Board meeting attended and $1,000 for each Board meeting attended by telephone (provided such meeting lasted longer than 30 minutes). All directors are reimbursed for reasonable costs and expenses incurred in connection with attending any Board and committee meetings or any other Company related business activities.currently have their deferred fees credited.
Name Annual Retainer Gail K. Boudreaux Cash account – 0% Company Common Stock account – 100% Richard H. Douglas, Ph.D. Cash account – 0% Company Common Stock account – 100% Equity Awards
At its meeting on March 2, 2013,5, 2015, the Board granted options to purchase 30,00040,000 shares of Company Common Stock to each of Messrs. Evans Marsh, and McManus, and Dr. Douglas. Mr. Marsh was granted an option to purchase 20,000 shares of Company Common Stock. Dr. Young was granted an option to purchase 75,000100,000 shares of Company Common Stock. All of the aforementioned options have an exercise price of $1.83$8.94 per share and will vestvested in full six months after the date of grant.
On June 17, 2015, the Board granted options to purchase 40,000 shares of Company Common Stock to Ms. Boudreaux as part of her appointment to the Board. Ms. Boudreaux’ options have an exercise price of $9.13 per share and vested in full six months after the date of grant.
Summary Director Compensation Table
The Company does not pay employee directors additional compensation for service on the Board. The following table sets forth information concerning the compensation paid by the Company to each individual who served as a non-employee director at any time during fiscal year 2013:
2015:
Fees | ||||||||||||||||||||
Earned or | ||||||||||||||||||||
Paid in | Stock | Option | All Other | |||||||||||||||||
Cash(1) | Awards(2) | Awards(2) | Compensation | Total | ||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
Richard H. Douglas, Ph.D | 48,000 | — | 36,162 | — | 84,162 | |||||||||||||||
Stanley C. Erck(3) | — | — | — | — | — | |||||||||||||||
Gary C. Evans | 54,000 | — | 36,162 | — | 90,162 | |||||||||||||||
John O. Marsh, Jr., J.D | 43,000 | — | 36,162 | — | 79,162 | |||||||||||||||
Michael A. McManus, Jr., J.D | 59,500 | — | 36,162 | — | 95,662 | |||||||||||||||
Rajiv I. Modi, Ph.D(4) | — | — | — | — | — | |||||||||||||||
James Young, Ph.D | 71,000 | — | 90,405 | — | 161,405 |
Name | Fees Earned or Paid in Cash(1) ($) | Stock Awards ($) | Option Awards(2) ($) | Total ($) | ||||||||||||
Gail K. Boudreaux(3) | 28,022 | — | 243,276 | 271,298 | ||||||||||||
Richard H. Douglas, Ph.D. | 61,000 | — | 256,800 | 317,800 | ||||||||||||
Gary C. Evans | 66,500 | — | 256,800 | 323,300 | ||||||||||||
Jack O. Marsh, Jr., J.D.(4) | 10,000 | — | 128,400 | 138,400 | ||||||||||||
Michael A. McManus, Jr., J.D. | 74,000 | — | 256,800 | 330,800 | ||||||||||||
Rajiv I. Modi, Ph.D.(5) | — | — | — | — | ||||||||||||
James Young, Ph.D. | 92,500 | — | 642,000 | 734,500 |
____________
(1) | Represents fees earned in |
(2) | The grant date fair value was calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) |
(3) |
(4) | Mr. Marsh resigned from the Board effective June 12, 2014. The Company entered into a consulting agreement with Mr. Marsh beginning on June 12, 2014 pursuant to which Mr. Marsh was paid $10,000 during fiscal year 2015. |
(5) | Due to his relationship with Cadila and |
Section 16(a) of the Exchange Act requires the Company’s executive officers, directors, and holders of more than 10% of the Company’s Common Stock to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Based solely on a review of the (i) copies of such reports (and any amendments thereto) furnished to the Company during or with respect to 20132015 or (ii) written representations that no reports were required, the Company believes that during 20132015 its executive officers, directors, and holders of more than 10% of the Company’s Common Stock complied with all Section 16(a) filing requirements.requirements with the possible exception of delinquent Form 4 filings by Mr. Evans for sales or direct stock distributions of up to 330,000 shares of Common Stock in prior years.
EQUITY COMPENSATION PLAN INFORMATION
Our executive officers hold office until the first meeting of the Board following the annual meeting of stockholders and until their successors are duly chosen and qualified, or until they resign or are removed from office in accordance with our By-laws. The following table providesinformation outlines our executive officers and their ages and positions as of April 13, 2016, followed by biographical information of each such executive officer:
Name | Age | Title | ||
Stanley C. Erck | 67 | President and Chief Executive Officer and Director | ||
Barclay A. Phillips | 53 | Senior Vice President, Chief Financial Officer and Treasurer | ||
Gregory M. Glenn, M.D. | 62 | President, Research and Development | ||
John A. Herrmann III | 50 | Senior Vice President, General Counsel and Corporate Secretary | ||
John J. Trizzino | 56 | Senior Vice President, Commercial Operations |
Stanley C. Erck has served as President and Chief Executive Officer since April 2011 and a Director since June 2009, and previously served as Executive Chairman from February 2010 to April 2011. From 2000 to 2008, Mr. Erck served as President and Chief Executive Officer of Iomai Corporation, a developer of vaccines and immune system therapies, which was acquired in 2008 by Intercell AG. He also previously held leadership positions at Procept, a publicly traded immunology company, Integrated Genetics, now Sanofi Genzyme, and Baxter International. Mr. Erck also serves on the board of directors of BioCryst Pharmaceuticals, Inc., MaxCyte, Inc., and MDBio Foundation. Mr. Erck received a B.S. in economics from the University of Illinois and a M.B.A. from the University of Chicago.
Barclay A. Phillips has served as Senior Vice President, Chief Financial Officer and Treasurer since June 2013. Prior to joining the Company, Mr. Phillips served as Senior Vice President and Chief Financial Officer of Micromet, Inc., which was acquired by Amgen in 2012. Previously, he was Managing Director of Vector Fund Management and a Biotechnology Analyst and Director of Venture Investments at Invesco Funds Group, Inc. Mr. Phillips received a B.A. in economics from the University of Colorado at Boulder.
Gregory M. Glenn, M.D. has served as President, Research and Development since March 2016, and previously served as Senior Vice President, Research and Development since January 2014, as Senior Vice President, Chief Medical Officer from January 2011 to January 2014, and Senior Vice President and Chief Scientific Officer from June 2010 to January 2011. Prior to joining the Company, Dr. Glenn was the Chief Scientific Officer and founder of Iomai Corporation, which was acquired in 2008 by Intercell AG, an associate in international health at Johns Hopkins University’s School of Public Health and a clinical and basic research scientist at Walter Reed Army Institute of Research. Dr. Glenn received a B.A. in biology and chemistry from Whitman College and a M.D. from Oral Roberts University School of Medicine. He also completed the Medical Research Fellowship at the Walter Reed Army Institute of Research.
John A. Herrmann III has served as Senior Vice President, General Counsel and Corporate Secretary since June 2014. He previously served as the Company’s equity compensation plan informationVice President, General Counsel and Corporate Secretary from March 2012 to June 2014, and its Executive Director, Legal Affairs and Corporate Secretary from April 2010 to March 2012. Prior to joining the Company, Mr. Herrmann was General Counsel at Ore Pharmaceuticals and Deputy General Counsel at Gene Logic before it became Ore Pharmaceuticals. Mr. Herrmann worked as Senior Counsel for Celera Genomics following his position as Senior Corporate Counsel at Baxter Healthcare in its Renal Division. Mr. Herrmann received a B.A. in political science and history from Brown University and a J.D. from the University of December 31, 2013. Under this plan,Illinois.
John J. Trizzino has served as Senior Vice President, Commercial Operations since March 2014. He previously served as the Company’s Common Stock may be issued uponSenior Vice President, Business Development from August 2010 to September 2011, and its Senior Vice President, International and Government Alliances from July 2009 to July 2010. Prior to joining the exerciseCompany, Mr. Trizzino was the CEO of options. See also the information regarding stock options in Note 14Immunovaccine from September 2011 to the Company’s consolidated financial statements for the year ended December 31,September 2013, includedVP, Vaccine Franchise at Medimmune, LLC, Senior Vice President, Business Development at ID Biomedical, and Vice President, Business Development in the Company’ s Annual Report on Form 10-K filed with the SEC on March 12, 2014.Medical Group of Henry Schein, Inc. following his position as Vice President, General Manager of its GIV division. Mr. Trizzino received a B.S. from Long Island University, CW Post and a M.B.A. from New York University.
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities in Column (a)) (c) | |||||||||
Equity compensation plans approved by security holders(1) | 11,976,250 | $ | 1.93 | 8,463,969 | ||||||||
Equity compensation plans not approved by security holders | N/A | N/A | N/A |
_____________
EXECUTIVE COMPENSATION
The Compensation Discussion and Analysis (the “CD&A”) discusses the compensation of Novavax’ Named Executive Officersour five “named executive officers” for 2013. The Named Executive Officers in 2013 were2015 (each an “NEO”): (i) Stanley C. Erck, President and Chief Executive Officer,Officer; (ii) Barclay A. Phillips, Senior Vice President, Chief Financial Officer and Treasurer, Frederick W. Driscoll, Former Vice President, Chief Financial Officer & Treasurer,Treasurer; (iii) Dr. Gregory M. Glenn, President, Research and Development; (iv) John A. Herrmann III, Senior Vice President, ResearchGeneral Counsel and Development, Dr. Timothy Hahn,Corporate Secretary; and (v) John J. Trizzino, Senior Vice President, Manufacturing and Product Development, and Mr. Russell P. Wilson, Senior Vice President, Business Development (collectively, the “Named Executive Officers”).
Commercial Operations.
The CD&A considersreviews the Company’s executive compensation philosophy, the objectives and operation of the compensation program, how compensation was set for 20132015, and the various elements of compensation paid to the Named Executive Officersexecutive officers including the NEOs for services during 2013.2015.
Novavax’Our compensation program is designed to attract, retain, and reward a performinghigh-performance workforce in a highlyan extremely competitive recruitment and retention market to achieve the Company’s mission, vision, and goals. This philosophy is reflected in the components of the Company’s compensation program, andwhich includes:
The Compensation Committee believes that these components provide manythe tools for retainingwe need to deliver performance-based compensation that retains and rewarding high performingrewards high-performing employees and covers the wide spectrum of employment needs.aligns with general industry practices. We conducted our firstmost recent advisory vote on executive compensation at our 20112014 Annual Meeting of Stockholders. While this vote was not binding on us, ourOur Board and our Compensation Committee value the opinions of our stockholders. At our 2011 Annual Meetingstockholders, so we paid close attention to the outcome of Stockholders, morethis vote even though it is non-binding. More than 96%95% of the votes cast on the advisory vote on executive compensation proposal were in favor of our named executive officer compensation as disclosed in our 2014 proxy statement, and, as a result, our named executive officer compensation was approved.statement. We view this support as an affirmation of our pay practices; and, consequently, the vote did not cause us to change thewe have maintained a consistent approach to executive compensation described above.since that time.
Attract and retain highly qualified executives.
The Compensation Committee believes that the compensation program for Novavax’ Named Executive Officersour executive officers, including our NEOs, should be designed to attract, motivate, and retain highly qualified executive officers responsible for the success of Novavax and should be determined within a framework that rewards performance and aligns the interests of the Named Executive Officersexecutive officers with the interests of the Company’s stockholders. Within this overall philosophy, the Compensation Committee’s objectives are to:
industries.
Reflect performance and reward high performance.
The Compensation Committee believes that a significant portion of a Named Executive Officer’san executive officer’s total compensation should reflect overall Company performance and individual performance. Incentives are based on meeting criteria in each of these categories and reflect the Named Executive Officer’sexecutive officer’s overall contribution to the Company.
Reward
Named Executive OffıcersExecutives for meeting Novavax’ strategic goalsMeeting Strategic Goals and objectives.
The compensation program rewards the Company’s Named Executive Officersexecutive officers for achieving specified performance goals, building stockholder value, and maintaining long-term careers with Novavax. The compensation program is designed to reward these three aspects because the Compensation Committee believes it will motivate the executive team to make balanced annual and long-term decisions resulting in financial performance, scientific and product development innovations, and the achievement of the Company’s strategic business objectives.
Align
Named Executive Offıcers’ goalsExecutives’ Interests with Novavax’ stockholders’ goals.
The Compensation Committee believes that Novavax’ long-term success depends upon aligning executives’ and stockholders’ interest.interests. To support this objective, Novavax provides the Named Executive Officersexecutive officers with equity accumulation opportunities by awarding stock options and, in certain cases, restricted stock. Generally, restricted stock and stock option grants vest annually over four years, although certain options granted in 2010 havevest annually over a three yearthree-year period. Restricted stock may vest based on either critical milestones to be achieved over a limited period of time or over a similar four-year period as stock option grants. Beginning with stock option awards made in 2016, such stock option grants vest as to 25% of the award on the first anniversary of the grant date and the remaining 75% vests monthly thereafter over the next three-year period. Such vesting period. This vesting period supports long-term retention of Named Executive Officersexecutive officers because Named Executive Officersexecutive officers cannot exercise the options or sell shares of restricted stock until they have vested. At times, the Company may awardelect to grant stock options or restricted stock that vest as an executive achieves certain milestones or to incentivize the achievement of strategic Company goals within that executive’s area of responsibility.
The Compensation Committee is appointed by the Board to assist the Board with its responsibilities related to the compensation of the Company’s directors, officers, and employees and the development and administration of the Company’s compensation plans. For details on the Compensation Committee’s oversight of the executive compensation program, see the section titled “Information Regarding the Board of Directors, Certain Committees and Corporate Governance Matters — Compensation Committee” beginning on page 2111 of this Proxy Statement.
The Chief Executive Officer (the “CEO”) evaluates and provides to the Compensation Committee performance assessments and compensation recommendations for each Named Executive Officerexecutive officer other than himself to the Compensation Committee.himself. The Chairman of the Company’s Board of Directors, evaluates the CEO’s performance and makes compensation recommendations for the CEO to the Compensation Committee. In March 2013, Dr. Young performed a comprehensive review of Mr. Erck’s performance. The Compensation Committee considers the CEO’s and the Chairman’s recommendations and information provided by the human resourcesHuman Resources team (described(as described below) in its deliberations regarding executive compensation and recommends to the Board the compensation of the Named Executive Officersexecutive officers based on such deliberations. The Board determines theall executive compensation based on the recommendation of the Compensation Committee. In 2013,2015, the CEO and the Executive Director ofVice President, Human Resources and Administration generally attended Compensation Committee meetings, but were not present for executive sessionsessions or any discussion of their own compensation.
Compensation packages for each Named Executive Officerexecutive officer are analyzed and discussed separately at the first Compensation Committee meeting each year. Prior to that meeting, LCG Group Compensation & HR Consulting (“LCG”) performs a comprehensive competitive analysis on the Company’s human resources team performs ancompensation package for
each executive officer. The results of this analysis considering the goals of market competitiveness, the executive’s performance and contributionare presented to the Company, and internal equity. The human resources team then surveys each Named Executive Officer’s current compensation against the 50th percentile of Survey Data, which is described in further detail below. The Compensation Committee, believes this is a common reference among biotechnology companies similar in size to Novavax and therefore the Company remains competitive by targeting the 50th percentile of the Survey Data. Atat any time, the Compensation Committee and the Board may request additional information from LCG or the human resourcesHuman Resources team.
Survey Data
When setting the compensation for the Named Executive Officersexecutive officers for 2013, the human resources team and2015, the Compensation Committee reviewed wagecompensation survey data specific to the life sciences industry. The survey utilizedindustry that was provided by the human resources team isLCG using the Radford Global Life Sciences Survey (the “Survey Data”“Survey”). The Radford Global Life Sciences Survey provides total compensation and practices data for multinational life sciences companies for 575+700+ companies and more than 200,000335,000 individuals. Global market data is available for 2565 countries and positions at the executive, management, professional, sales, and support levels, as well as overall compensation practices. Target industries include biotechnology, pharmaceutical, medical device, diagnostic and clinical research organizations. The Radford Global Life Sciences Survey is the primary source of reference data used.
The Survey Data is used to determine whether or not a Named Executive Officer’seach executive officer’s salary and bonus opportunity are competitive. LCG benchmarks each executive officer’s current compensation against the 50th percentile of the Survey. The Compensation Committee believes this is a common reference point among biotechnology companies similar in size to Novavax and that the Company remains competitive withinby targeting the industry.50th percentile of the Survey data.
Internal Equity
The Compensation Committee considers internal equity when determining compensation to ensure that the Company is fair in its compensation practices across all levelsroles similar in scope and to ensure that there is no discrimination in compensation practices among the protected classes. Thelevel of responsibility.
Total Direct Compensation Report
In 2013,2015, the Compensation Committee engaged LCG Group Compensation & HR Consulting (“LCG”), to review and analyze its currentexecutive compensation programs and to make recommendations regardingconduct a competitive market analysis for each member of the appropriateness of its current compensation strategy and practices, the competitiveness of each component of compensation, and whether modifications should be made to its annual incentive plan and stock option grant approach.senior leadership team. LCG first performed such services for the Company in 2010 and has provided similar services in subsequent years, including 2013.years. In addition, LCG reviewed the competitiveness of long-term incentives, assessed the metrics used to reward executives and Board members, and assessed the mix of equity grants to correctly align risk and performance with long-term incentives. The consultantLCG was authorized by the Compensation Committee to work with certain executive officers of the Company, as well as other employees in the Company’s human resources, legal,Human Resources, Legal, and financeFinance departments in connection with the consultant’sLCG’s work for the Compensation Committee. The consultantLCG conducted a review of the total compensation of the Company’s executive officers and prepared a report for review by management and subsequently by the Compensation Committee that was used in determining appropriate levels of compensation for the Company’s executive officers for 2014.2015. As required by rules adopted by the Securities and Exchange CommissionSEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Compensation Committee engaged LCG after assessing LCG’s independence, including taking into consideration the fact that LCG does not provide any services to the Company other than those requested by the Compensation Committee and the absence of any significant business or personal relationships between LCG and members of the Compensation Committee and any executive officer of the Company. Based upon this assessment, it was determined that the engagement of LCG does not raise any conflicts of interest or similar concerns.
Company Performance
The executive compensation program is designed to reward both individual performance and Company performance. A significant portion of a Named Executive Officer’san executive officer’s total compensation package is based on the Company’s performance and the achievement of certain corporate goals. Because of the key roles the Named Executive Officersexecutive officers play in the success of the Company, a significant portion of the achievement of corporate goals is reflective of the Named Executive Officers’executive officers’ individual performance. During 2013,2015, the Board and the Company’s senior executives jointly developed a set of objectives for 20132015 which were based on the Company’s strategic plan (the “2013“2015 Objectives”). These objectives include:
included:
Individual Performance
For 2013,2015, the CEO reviewed and evaluated the performance of the other Named Executive Officersexecutive officers and setrecommended their performance goals and objectives for the following year.2016. This review was conducted in the first quarter of the year.2016. For 2013,2015, the Chairman of the Board reviewed and evaluated the performance of the CEO. The performance goals and objectives for the CEO were the same as the annual corporate objectives based on the strategic plan. Each of the Named Executive Officersexecutive officers was evaluated on the competencies of teamwork, results orientation, business ethics, accountability, business process improvement, leadership, personnel development, staff communication, and treatment of employees.
In addition, with the exception of the CEO, whose incentive compensation is based entirely on achievement of the 2015 Objectives and the discretion of the Board, each executive officer hasNEO had additional individual goals to support the 20132015 Objectives or to further the Company’s strategic plan. More specifically:
Based on the performance evaluations, each Named Executive Officer isexecutive officer, with the exception of the CEO, was given a performance rating. The performance rating determines the amount of any merit salary increase and adjustments to the incentive cash bonus awards and equity awards. The performance ratings used by the Company include Outstanding, Exceeds Expectations, Meets Expectations, and Improvement Needed. All of the Named Executive OfficersNEOs received a performance rating of at least “Exceeds Expectations.Expectations,” with the exception of the CEO, who was not given a performance rating.
The Compensation Committee believes that the most effective compensation program is one that provides a competitive base salary, rewards the achievement of established annual and long-term goals and objectives, and provides an incentive for retention. For this reason, the compensation program is comprised of three primary elements: (i) base salary, (ii) a cash incentive bonus program, and (iii) equity awards. The Compensation Committee believes that these three elements are the most effective combination to motivate and retain the Named Executive Officers.executive officers.
The Compensation Committee has not adopted any formal guidelines for allocating total compensation between equity compensation and cash compensation, but generally seeks to provide an overall executive compensation package designed to attract, motivate, and retain highly qualified executive officers, to reward them for performance over time, and to align the interests of the Named Executive Officersexecutive officers with the interests of the stockholders. Although equity compensation is an important component of the compensation program, particularly with respect to creating long-term stockholder value, in 2013,2015, with guidance from LCG based on analysis of the Survey data, the Compensation Committee has focused on ensuring that Named Executive Officerexecutive officers’ base salaries and bonus opportunities were in line with the median average salaries and annual incentives for comparable positions within the biotechnology industry.Survey.
Base Salary
The Compensation Committee’s philosophy is to maintain base salaries at a competitive level sufficient to recruit and retain individuals possessing the skills and capabilities necessary to achieve the Company’s goals over the long-term.
long term.
The Company provides an annual salary to each Named Executive Officerexecutive officer designed to reflect eachthat person’s level of responsibility, expertise, skills, knowledge, and experience, which theexperience. The Compensation Committee compares Novavax salaries to those at other comparable companies within the biotechnology and pharmaceutical industryindustries and adjusts, as appropriate, to assist the Company in retaining this expertise, skill, and knowledge at Novavax. Merit increases are typically awarded effective April 1st1st of each year, reflecting performance for the previous year. The increases were determined by an annual performance review in light of the individual’s 20132014 performance goals and achievement of Company objectives, as well as by reference to the Survey Data.Survey. Salary increases were provided April 1, 2013.2015. The base salaries for these Named Executive Officersthe NEOs were:
Executive | Base Salary ($) | Percentage Increase in Base Salary from December 31, 2012 | ||||||
Stanley C. Erck | 451,000 | 2.5 | ||||||
Barclay A. Phillips(1) | 300,000 | — | ||||||
Frederick W. Driscoll(2) | 307,744 | 3.0 | ||||||
Gregory M. Glenn, M.D | 374,132 | 2.5 | ||||||
Timothy J. Hahn, Ph.D | 286,252 | 2.5 | ||||||
Russell P. Wilson | 319,262 | 2.5 |
Executive | Base Salary ($) | Percentage Increase in Base Salary from December 31, 2014 (%) | ||||||
Stanley C. Erck | 600,000 | 20.0 | (1) | |||||
Barclay A. Phillips | 355,000 | 4.4 | (2) | |||||
Gregory M. Glenn, M.D. | 415,000 | 5.1 | (2) | |||||
John A. Herrmann III | 320,000 | 6.7 | (2) | |||||
John J. Trizzino | 340,000 | 6.3 | (2) |
______________
(1) | Mr. |
(2) |
The incentive cash bonus program is designed to motivate and reward the Named Executive Officersexecutive officers for the achievement of specific corporate goals. The purpose of the incentive cash bonus program is to align company, departmental, and individual goals throughout the Company and to provide an incentive that further ties compensation to individual contribution and teamwork to compensation.teamwork. At the time that the Board approved the 20132015 Objectives, the Board also weighted each objective. The Board assigns a percentage to each objective (where 100% of a weighted objective means anthe objective has been fully met by the Company) which reflects the Board’s determination as to whether the Company achieved an objective, failed to meet an objective, partially met an objective, or exceeded an objective. In some instances, the Board uses its discretion to make such determinations, and in doing so will looklooks at other performance factors, mitigating circumstances, and other material successes or missed opportunities. The Board then assesses the overall percentage achieved by the Company against all of its objectives in determining the cumulative percentage.
On FebruaryDecember 3, 2014,2015, the Compensation Committee reviewed the Company’s performance related to its 20132015 Objectives. The following table summarizes its conclusions regarding these objectives:
2013 Objective | Weight | Achievement | Percent | Explanation | ||||||||
Advance seasonal and pandemic influenza vaccine programs under development plan | 25% | Partially met objective | 21.88% | Success in H7N9 clinical trial conducted in Australia, however additional time and effort required before manufacturing of S206 clinical trial material | ||||||||
Advance discovery and pre-clinical programs towards Phase 1 | 5% | Exceeded objective | 6.67% | Pre-clinical package for combination product as well as support of H7N9 | ||||||||
Develop the RSV vaccine manufacturing process for Phase 2 clinical trials and completing clinical studies in the elderly and women of child-bearing age | 20% | Met objective | 20% | Met clinical trial parameters while successfully manufacturing for and initiating Phase 2 clinical trial | ||||||||
Manage current partnerships and acquiring new products and/or technologies | 10% | Exceeded objective | 10.63% | Successful acquisition of Isconova AB and related adjuvant programs, while managing its collaboration with LG Life Sciences, and gaining additional PATH funding of RSV maternal program | ||||||||
Advance and support clinical and pre-clinical product candidates at the Company’s joint venture with CPL Biologicals | 20% | Partially met objective | 17.5% | Achieved pre-clinical and clinical goals in influenza, although the rabies clinical trial approval was delayed to 2014 | ||||||||
Move and validate GMP at Gaithersburg manufacturing facility | 10% | Met Objective | 10% | GMP facility qualification and validation objectives met. | ||||||||
Complete financing to end 2013 with 18 months of cash | 10% | Exceeded objective | 20% | Company raised approximately $130M in 2013. | ||||||||
Total | 100% | 106.68% |
2015 Objective | Weight | Achievement | Percent | Explanation | ||||
Execute on the seasonal influenza and pandemic influenza vaccine development plans | 25% | Partially met objective | 12.5% | Successful data from seasonal Phase 2 clinical trial, with ongoing Department of Health and Human Services, Biomedical Advanced Research and Development Authority support, although pandemic and combination clinical trials delayed | ||||
Execute on the RSV vaccine clinical development plan | 50% | Exceeded objective | 67.5% | Successful data from RSV Phase 2 clinical trials in older adults and maternal immunization, and Phase 1 clinical trial in pediatrics, and initiated two Phase 3 clinical trials and roll-over Phase 2 clinical trial | ||||
Execute on the Ebola vaccine development program | 5% | Met objective | 5% | Successful data from Phase 1 clinical trial and multiple NHP challenge studies | ||||
Advance preclinical vaccine candidate programs | 5% | Met objective | 5% | Successfully demonstrated broad protection in preclinical candidate | ||||
Support advancement of vaccine candidates at CPLB and meet commitments to Cadila | 5% | Partially met objective | 2.5% | Eliminated remaining financial obligation to Cadila and supported seasonal influenza vaccine BLA | ||||
Manage current partnerships and commercial activities | 5% | Partially met objective | 2.5% | Executed grant agreement with the Bill & Melinda Gates Foundation, assessed various new opportunities and managed multiple ongoing partnerships | ||||
Complete financing to end 2015 with 18 months of cash | 5% | Met objective | 5% | Company ended 2015 with approximately $230.7 million | ||||
Total | 100% | 100% |
On March 6, 2014,December 4, 2015, upon recommendation of the Compensation Committee, the Board determined that incentive bonuses would be awarded for 20132015 based on achievement of 106.68%100% of the 20132015 Objectives. In doing so, the Board exercised discretion in ascribing additional value to the Company’s achievement of a number of critical tasks in 2013, including achievement of exceptional results in its objectives2015 related to the H7N9 pandemic influenza trial, the acquisitionsuccessful results of Isconova AB in Sweden,multiple Phase 2 clinical trials from its RSV vaccine program and the successful financing activities conducted during 2013.subsequent launches of two pivotal Phase 3 clinical trials from that program in older adults and newborns via maternal immunization.
The target bonus is based uponset at a percentage of the Named Executive Officer’sexecutive officer’s base salary. The target bonussalary, with such percentages are determinedbeing based on market data anddata. However, the ultimate amount of any bonus is at the discretion of the Board. The 20132015 NEO bonus targets were as follows:
Executive | Percentage of Base Salary (%) | |||
Stanley C. | 60 | % | ||
Barclay A. Phillips | ||||
35 | % | |||
Gregory M. Glenn, | 35 | % | ||
35 | % | |||
35 | % |
The CEO’s bonus is based solely on the achievements of the 2013 Objectives and the discretion of the Board. The Compensation Committee believes that the higher the individual’s position within Novavax, the more closely his or her bonus award should be tied to the Company’s success. For allThe CEO’s bonus is based solely on the achievement of the other Named Executive Officers,2015 Objectives and the Compensation Committee considers both corporate achievements, as well as individual performance. To be eligible for a bonus,discretion of the Named Executive Officers must achieve at least a “Meets Expectations” on his or her annual performance review.Board. For these Named Executive Officers (otherexecutive officers other than the CEO),CEO, 80% of the bonus is based on corporate achievement and 20% of the bonus is based on individual performance. To be eligible for a bonus, an executive officer must achieve at least a “Meets Expectations” on his or her annual performance review, which the Compensation Committee determined was the case with each of the NEOs.
Equity Awards
Equity incentive awards are a fundamental element in the executive compensation program because they emphasize long-term performance, as measured by creation of stockholder value, and foster a commonality of interest between stockholders and key executives. In addition, they are crucial to a competitive compensation program for Named Executive Officersexecutive officers because they act as a powerful retention tool. The Compensation Committee views the Company as still facing significant risk, but with a potential for a high upside. Equity incentive awards are designed to provideIn the most meaningful componentcase of stock options, the executive compensation. The Named Executive Officersofficers are motivated by the potential appreciation in the stock price above the exercise price of the stock options.price. To encourage continued employment, stock option grants to the Named Executive Officersexecutive officers typically include options that require the executive to remain a Novavaxan employee of the Company for four years before the options are fully vested.vested, although certain options granted in 2010 have a three-year vesting period. Beginning with stock option awards made in 2016, such stock option grants vest as to 25% of the award on the first anniversary of the grant date and the remaining 75% vests monthly thereafter over the next three-year period. In addition, the Compensation Committee may award options that vest as the Named Executive Officerexecutive officer achieves certain milestones. The Compensation Committee believes it is important to tie the long-term benefit potentially realizable by the executive to a long-term commitment with Novavax.
Equity incentive awards may include stock options, stock appreciation rights, restricted or unrestricted stock awards, restricted stock units, and any other stock based awards under Section 162(m) of the Code. Traditionally, the Company grants stock options as the primary form of equity compensation, but the Company does, at times, grant restricted stock. Restricted stock grants are used at times to attract and retain key executive officers.employees. Restricted stock grants are typically vest based on critical milestones to be achieved over a limited period of time or vestcontinued service over three years.
a similar four-year period as stock option grants. Annual stock option grants are awarded to the Named Executive Officersexecutive officers at the discretion of the Board upon a recommendation by the Compensation Committee. TheIn making its recommendations, the Compensation Committee consideredconsiders Company performance, competitiveSurvey data, and the individual’s scope of responsibility and continuing performance.
To be eligible to receive an award of stock options, the Named Executive Officerexecutive officer must have an overall performance rating of at least “Meets Expectations.”
The With guidance from LCG upon its analysis of Survey data, stock options were awarded to the Named Executive OfficersNEOs in 2013 were awarded in amounts recommended in the Radford Compensation Survey2015, and vest annually over four (4) years.
The Named Executive Officersexecutive officers also have the ability to participate in the Company’s ESPP.
The Company provides the Named Executive Officers with certain perquisites andWe do not have any executive perquisite programs. From time to time, on a limited or exception basis, we may provide other personal benefits that the Compensation Committee believeswe believe are reasonable and consistent with the overall compensation program and with competitive practice in the industry.related to a business purpose or are customary among our peer public companies that may otherwise be considered perquisites. All of the Named Executive OfficersNEOs are eligible to participate in the Company’s employee benefit plans offered to all employees, including health, dental and vision insurance, a prescription drug plan, flexible spending accounts, short and long-termlong term disability, life insurance and a 401(k) plan. These plans are offered to all employees and do not discriminate in favor of Named Executive Officers.
As of December 31, 2013,2015, the Company had employment agreements in place with all of the following Named Executive Officers: Drs. Glenn and Hahn, and Messrs. Erck, Phillips, and Wilson.NEOs. The employment agreements provide for certain payments if the Named Executive OfficerNEO is terminated by the Company without cause or leaves for good reason. The terms of these agreements are described in greater detail in the section entitledtitled “Overview of Employment and Change ofin Control Agreements.” All of the Named Executive OfficersNEOs are “at will” employees.
The Company has established a Change in Control Severance Benefit Plan, which provides for severance payments to participating employees if the participant’s employment is terminated in connection with a change in control. This plan is described in greater detail in the section entitledtitled “Overview of Employment and Change ofin Control Agreements.” The Compensation Committee believes it is important to provide such employees with an incentive to remain with the Company amid the uncertainty that often accompanies efforts to consummate a corporate sale or similar transaction that may enhance stockholder value. All of the Named Executive OfficersNEOs participate in the Change in Control Severance Benefit Plan.
Section 162(m) of the Internal Revenue Code (“Section 162(m)”) limits to $1 million the amount a company may deduct for compensation paid to its CEOchief executive officer and any of its other three named executive officers (excluding the chief financial officer). This limitation, however, does not apply to compensation meeting the definition ofrequirements for qualifying performance-based compensation within the meaning of Section 162(m). The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) in designing our executive compensation program. The Compensation Committee, however, believes that a compensation program that attracts and retains highly qualified executives and rewards them for their achievements is necessary for our success and, therefore, is in the best interests of the Company and our stockholders. Accordingly, the Compensation Committee believes that in establishing the cash and equity incentive compensation program for the Company’s executive officers, the potential deductibility of the compensation payable under that program should only be one of a number of relevant factors taken into consideration. Consequently, the Compensation Committee may pay or provide compensation in excess of $1 million that is not exempt from the deduction limitations under Section 162(m).
Our insider trading policy prohibits all directors and officers from pledging or engaging in hedging or similar transactions in our stock,Common Stock, such as prepaid variable forwards, equity swaps, collars, puts, calls, and short sales.
We do not believe that our compensation policies and practices create risks that are reasonably likely to have a material adverse effect on our business and operations.
The following table sets forth information concerning the compensation earned duringof our NEOs for the fiscal years ended December 31, 2013, 2012,2015, 2014, and 2011 by the Named Executive Officers.
2013.
Name and Principal Position | Year | Salary(1) ($) | Bonus(2) ($) | Stock Awards ($) | Stock Option Awards(3) ($) | Non-Equity Incentive Plan Compensation(4) ($) | All Other Compensation(5) ($) | Total ($) | ||||||||||||||||||||||||
Stanley C. Erck President and CEO | 2015 | 575,000 | — | — | 3,924,000 | 345,000 | 7,800 | 4,851,800 | ||||||||||||||||||||||||
2014 | 487,750 | — | — | 2,280,780 | 304,844 | 7,650 | 3,081,024 | |||||||||||||||||||||||||
2013 | 448,250 | — | — | 900,000 | 239,097 | 7,967 | 1,595,314 | |||||||||||||||||||||||||
Barclay A. Phillips(6) SVP, Chief Financial Officer and Treasurer | 2015 | 351,250 | — | — | 872,000 | 122,938 | 6,487 | 1,352,675 | ||||||||||||||||||||||||
2014 | 330,000 | — | — | 380,130 | 139,755 | 5,507 | 855,392 | |||||||||||||||||||||||||
2013 | 156,346 | — | — | 263,340 | 57,645 | 4,315 | 481,646 | |||||||||||||||||||||||||
Gregory M. Glenn, M.D. President, Research and Development | 2015 | 410,000 | — | — | 1,308,000 | 143,500 | 10,514 | 1,872,014 | ||||||||||||||||||||||||
2014 | 389,783 | — | — | 443,485 | 165,073 | 9,920 | 1,008,261 | |||||||||||||||||||||||||
2013 | 371,850 | — | — | 150,000 | 137,103 | 6,944 | 665,897 | |||||||||||||||||||||||||
John A. Herrmann III SVP, General Counsel and Corporate Secretary | 2015 | 315,000 | — | — | 872,000 | 110,250 | 6,811 | 1,304,061 | ||||||||||||||||||||||||
2014 | 280,458 | — | — | 477,190 | 119,956 | 7,321 | 884,925 | |||||||||||||||||||||||||
2013 | 229,269 | — | — | 150,000 | 84,729 | 4,572 | 468,570 | |||||||||||||||||||||||||
John J. Trizzino(7) SVP, Commercial Operations | 2015 | 335,000 | — | — | 872,000 | 117,250 | 8,067 | 1,332,317 | ||||||||||||||||||||||||
2014 | 247,846 | — | — | 738,810 | 110,609 | 4,000 | 1,101,265 | |||||||||||||||||||||||||
Name and Principal Position | Year | Salary(1) ($) | Bonus(2) ($) | Stock Awards(3) ($) | Option Awards(3) ($) | Non-Equity ($) | All ($) | Total ($) | ||||||||||||||||||||||
Stanley C. Erck | 2013 | 448,250 | — | — | 900,000 | 239,097 | 7,967 | 1,595,314 | ||||||||||||||||||||||
President & CEO | 2012 | 430,000 | — | — | 612,990 | 198,000 | 1,357 | 1,242,347 | ||||||||||||||||||||||
2011 | 370,417 | — | — | 905,760 | 138,906 | 1,187 | 1,416,270 | |||||||||||||||||||||||
Barclay A. Phillips(6) | 2013 | 156,346 | — | — | 263,340 | 57,645 | 4,315 | 418,646 | ||||||||||||||||||||||
SVP, Chief Financial | 2012 | — | — | — | — | — | — | — | ||||||||||||||||||||||
Officer & Treasurer | 2011 | — | — | — | — | — | — | — | ||||||||||||||||||||||
Frederick W. Driscoll(7) | 2013 | 115,530 | — | — | 150,000 | — | 46,442 | 311,972 | ||||||||||||||||||||||
Former, VP, Chief Financial | 2012 | 296,605 | — | — | 102,165 | 95,522 | 2,543 | 496,835 | ||||||||||||||||||||||
Officer & Treasurer | 2011 | 287,289 | — | — | 205,560 | 80,441 | 2,598 | 575,888 | ||||||||||||||||||||||
Gregory M. Glenn, | 2013 | 371,850 | — | — | 150,000 | 137,103 | 6,944 | 665,897 | ||||||||||||||||||||||
M.D. SVP & | 2012 | 362,349 | — | — | 102,165 | 116,691 | 1,972 | 583,177 | ||||||||||||||||||||||
Chief Medical Officer | 2011 | 353,281 | — | — | 87,706 | 98,919 | 3,172 | 543,078 | ||||||||||||||||||||||
Timothy J. Hahn, Ph.D.(8) | 2013 | 284,506 | — | — | 150,000 | 99,920 | 6,359 | 540,785 | ||||||||||||||||||||||
SVP, Manufacturing and | 2012 | 278,203 | — | — | 102,165 | 89,581 | — | 469,949 | ||||||||||||||||||||||
Process Development | 2011 | 142,326 | — | — | 156,520 | 39,851 | — | 338,697 | ||||||||||||||||||||||
Russell P. Wilson | 2013 | 317,316 | — | — | 150,000 | 116,996 | 8,540 | 592,852 | ||||||||||||||||||||||
SVP, Business Development(9) | 2012 | 311,107 | — | — | 17,028 | 100,176 | 3,605 | 431,916 | ||||||||||||||||||||||
2011 | 49,183 | 58,310 | (10) | 69,500 | 198,575 | 13,771 | — | 389,339 |
(1) | Includes amounts earned, but deferred at the election of the |
(2) | Performance-based bonuses are generally paid under the Company’s incentive cash bonus program and reported as Non-Equity Incentive Plan Compensation. |
(3) | The grant date fair value was calculated in accordance with FASB ASC Topic 718 excluding the effect of estimated forfeitures. Assumptions used in the calculation of this amount are included in Note |
(4) | Represents |
(5) |
(6) | Mr. Phillips |
(7) | Mr. |
All Other Compensation
Novavax provides the Named Executive Officers with additional benefits, reflected in the All Other Compensation table below for 2013, that the Company believes are reasonable, competitive, and consistent with the Company’s overall executive compensation program. For more information regarding the perquisites paid by Novavax, see page 37 of the Compensation Discussion and Analysis.
Name | Company 401(k) Contributions(1) ($) | Other Compensation ($) | Total | |||||||||
Stanley C. Erck | 7,967 | — | 7,967 | |||||||||
Barclay A. Phillips | 4,315 | — | 4,315 | |||||||||
Frederick W. Driscoll(2) | 6,352 | 40,090 | 46,442 | |||||||||
Gregory M. Glenn, M.D | 6,944 | — | 6,944 | |||||||||
Timothy J. Hahn, Ph.D | 6,359 | — | 6,359 | |||||||||
Russell P. Wilson | 8,540 | — | 8,540 |
The following table sets forth information with respect to option awards and other plan-based awards granted to our NEOs during the fiscal year ended December 31, 2013 to the Company’s Named Executive Officers:
2015:
Estimated Future Payments Under Non-Equity Incentive Plan Awards(1) | All Other Stock Awards: Number | All Other Stock and Option Awards: Number of Securities | Exercise or Base Price of | Grant Date Fair Value of Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Estimated Future Payments Under Non-Equity Incentive Plan Awards(1) | Grant Date | All Other Stock Awards: Number of Shares of Stock (#) | All Other Stock and Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards(2) ($/Sh) | Grant Date Fair Value of Stock and Option Awards(3) ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Over- Achievement ($) | Grant Date | of Shares of Stock or Unit (#) | Underlying Options (#) | Option ($/Sh) | and Option Awards(3) ($) | Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Stanley C. Erck | 168,094 | 224,125 | 280,156 | 3/2/13 | — | 900,000 | 1.83 | 900,000 | 258,750 | 345,000 | 431,250 | 3/5/2015 | — | 900,000 | 8.94 | 3,924,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Barclay A. Phillips | 41,041 | 54,721 | 68,401 | 6/24/13 | — | 300,000 | 2.03 | 263,340 | 92,203 | 122,938 | 153,672 | 3/5/2015 | — | 200,000 | 8.94 | 872,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Frederick W. Driscoll | — | — | — | 3/2/13 | — | 150,000 | 1.83 | 150,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gregory M. Glenn, M.D. | 97,611 | 130,148 | 162,685 | 3/2/13 | — | 150,000 | 1.83 | 150,000 | 107,625 | 143,500 | 179,375 | 3/5/2015 | — | 300,000 | 8.94 | 1,308,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Timothy J. Hahn, Ph.D. | 74,683 | 99,577 | 124,471 | 3/2/13 | — | 150,000 | 1.83 | 150,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Russell P. Wilson | 83,295 | 111,061 | 138,826 | 3/2/13 | — | 150,000 | 1.83 | 150,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
John A. Herrmann III | 82,688 | 110,250 | 137,813 | 3/5/2015 | — | 200,000 | 8.94 | 872,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
John J. Trizzino | 87,938 | 117,250 | 146,563 | 3/5/2015 | — | 200,000 | 8.94 | 872,000 |
(1) |
(2) | Options granted have an exercise price equal to the fair market value of the Company’s Common Stock on the date of grant which, under the Company’s |
(3) | The grant date fair value was calculated in accordance with FASB ASC Topic 718 excluding the effect of estimated forfeitures. Assumptions used in the calculation of this amount are included in Note |
OUTSTANDING EQUITY AWARDS AT 2015 FISCAL YEAR END
The following table sets forth certain information with respect to the value of all unexercised options previously awardedoutstanding equity awards to the Company’s Named Executive OfficersNEOs as of December 31, 2013:2015:
Option Awards | Stock Awards | Option Awards(1) | ||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Option Exercisable (#) | Number of Securities Underlying Options Unexercisable (#) | Option Exercise Price ($/Sh) | Option Expiration Date | Number of Shares of Stock that Have Not Vested (#) | Market Value of Shares that Have Not Vested(1) ($) | Grant Date | Number of Securities Underlying Unexercised Option Exercisable (#) | Number of Securities Underlying Options Unexercisable (#) | Option Exercise Price ($/Sh) | Option Expiration Date | ||||||||||||||||||||||||||||||||||
Stanley C. Erck | 6/24/2009 | 20,000 | — | 2.44 | 6/24/2019(2) | 6/24/2009 | 20,000 | — | 2.44 | 6/24/2019 | (2) | |||||||||||||||||||||||||||||||||||
2/15/2010 | 150,000 | — | 2.40 | 2/15/2020(3) | 2/15/2010 | 150,000 | — | 2.40 | 2/15/2020 | (3) | ||||||||||||||||||||||||||||||||||||
6/22/2011 | 425,000 | 425,000 | 1.99 | 6/22/2021(4) | 6/22/2011 | 850,000 | — | 1.99 | 6/22/2021 | |||||||||||||||||||||||||||||||||||||
3/1/2012 | 225,000 | 675,000 | 1.28 | 3/1/2022(4) | 3/1/2012 | 675,000 | 225,000 | 1.28 | 3/1/2022 | |||||||||||||||||||||||||||||||||||||
3/2/2013 | — | 900,000 | 1.83 | 3/2/2013(4) | 3/2/2013 | 450,000 | 450,000 | 1.83 | 3/2/2023 | |||||||||||||||||||||||||||||||||||||
3/6/2014 | 225,000 | 675,000 | 6.05 | 3/6/2024 | ||||||||||||||||||||||||||||||||||||||||||
3/5/2015 | — | 900,000 | 8.94 | 3/5/2025 | ||||||||||||||||||||||||||||||||||||||||||
Barclay A. Phillips | 6/24/2013 | — | 300,000 | 2.03 | 6/24/23(4) | 6/24/2013 | 150,000 | 150,000 | 2.03 | 6/24/2023 | ||||||||||||||||||||||||||||||||||||
3/6/2014 | 37,500 | 112,500 | 6.05 | 3/6/2024 | ||||||||||||||||||||||||||||||||||||||||||
Frederick W. Driscoll(5) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
3/5/2015 | — | 200,000 | 8.94 | 3/5/2025 | ||||||||||||||||||||||||||||||||||||||||||
Gregory M. Glenn, M.D. | 7/1/2010 | 350,000 | — | 2.11 | 7/1/2020(6) | 7/1/2010 | 335,000 | — | 2.11 | 7/1/2020 | (4) | |||||||||||||||||||||||||||||||||||
3/10/2011 | 32,000 | 32,000 | 2.50 | 3/10/2021(4) | 3/10/2011 | 64,000 | — | 2.50 | 3/10/2021 | |||||||||||||||||||||||||||||||||||||
3/1/2012 | 37,500 | 112,500 | 1.28 | 3/1/2022(4) | 3/1/2012 | 112,500 | 37,500 | 1.28 | 3/1/2022 | |||||||||||||||||||||||||||||||||||||
3/2/2013 | — | 150,000 | 1.83 | 3/2/2013(4) | 3/2/2013 | 13,114 | 75,000 | 1.83 | 3/2/2023 | |||||||||||||||||||||||||||||||||||||
3/6/2014 | 43,750 | 131,250 | 6.05 | 3/6/2024 | ||||||||||||||||||||||||||||||||||||||||||
Timothy J. Hahn, Ph.D. | 9/22/2011 | 100,000 | 100,000 | 1.42 | 9/22/2021(4) | |||||||||||||||||||||||||||||||||||||||||
3/5/2015 | — | 300,000 | 8.94 | 3/5/2025 | ||||||||||||||||||||||||||||||||||||||||||
John A. Herrmann III | 4/15/2010 | 75,000 | — | 2.66 | 4/15/2020 | |||||||||||||||||||||||||||||||||||||||||
3/1/2012 | 37,500 | 112,500 | 1.28 | 3/1/2022(4) | 3/10/2011 | 20,000 | — | 2.50 | 3/10/2021 | |||||||||||||||||||||||||||||||||||||
3/2/2013 | — | 150,000 | 1.83 | 3/2/2013(4) | 3/1/2012 | 112,500 | 37,500 | 1.28 | 3/1/2022 | |||||||||||||||||||||||||||||||||||||
3/2/2013 | 75,000 | 75,000 | 1.83 | 3/2/2023 | ||||||||||||||||||||||||||||||||||||||||||
Russell P. Wilson | 12/1/2011 | 125,000 | 125,000 | 1.39 | 12/1/2021(4) | |||||||||||||||||||||||||||||||||||||||||
3/1/2012 | 6,250 | 18,750 | 1.28 | 3/1/2022(4) | 3/6/2014 | 37,500 | 112,500 | 6.05 | 3/6/2024 | |||||||||||||||||||||||||||||||||||||
3/2/2013 | — | 150,000 | 1.83 | 3/2/2013(4) | 16,667(7) | 85,335 | 6/12/2014 | 12,500 | 37,500 | 4.55 | 6/12/2024 | |||||||||||||||||||||||||||||||||||
3/5/2015 | — | 200,000 | 8.94 | 3/5/2025 | ||||||||||||||||||||||||||||||||||||||||||
John J. Trizzino | 3/10/2014 | 75,000 | 225,000 | 5.86 | 3/10/2024 | |||||||||||||||||||||||||||||||||||||||||
3/5/2015 | — | 200,000 | 8.94 | 3/5/2025 |
(1) |
These options |
(3) | These options vested one year following the date of grant. |
(4) | These options vested in three equal increments on the first three anniversaries of the date of grant. |
The following table sets forth certain information concerning the vestingexercise of the Company’s Common Stockstock options held by the Named Executive OfficersNEOs during the fiscal year ended December 31, 2013:2015:
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(1) ($) | Number of Shares Acquired on Vesting (#) | Value Realized Vesting(2) ($) | ||||||||||||
Stanley C. Erck | — | — | — | — | ||||||||||||
Barclay A. Phillips | — | — | — | — | ||||||||||||
Frederick W. Driscoll | 172,500 | 185,352 | — | — | ||||||||||||
Gregory M. Glenn, M.D | — | — | — | — | ||||||||||||
Timothy J. Hahn, Ph.D | — | — | — | — | ||||||||||||
Russell P. Wilson | — | — | 16,667 | 46,001 |
Option Awards | ||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(1) ($) | ||||||
Stanley C. Erck | — | — | ||||||
Barclay A. Phillips | — | — | ||||||
Gregory M. Glenn, M.D. | 76,886 | 588,597 | ||||||
John A. Herrmann III | — | — | ||||||
John J. Trizzino | — | — |
______________
(1) | This amount represents the difference between the |
The following table provides information about the Company’s Common Stock authorized for issuance under our equity compensation plans as of December 31, 2015. See also the information regarding stock options in Note 12 to the Company’s consolidated financial statements for the year ended December 31, 2015, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 29, 2016.
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) | Weighted- Average Exercise Price of Outstanding Options, Warrants, and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities in Column (a)) (c) | |||||||||
Equity compensation plans approved by security holders(1) | 23,807,545 | $ | 5.29 | 17,733,007 | (2) | |||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 23,807,545 | $ | 5.29 | 17,733,007 |
(1) | Consists of the |
(2) |
On December 31, 2013,2015, the Company had employment agreements in place with Drs. Glenn and Hahn, and Messrs. Erck, Phillips, and Wilson.
each of our NEOs. Each employment agreement provides for a base salary subject to review each year, an incentive bonus, and equity awards. Salary information and the target amount of the incentive bonus are described in greater detail on pages 3521 through 3628 in the Compensation Discussion and Analysis.CD&A. The amount of any incentive bonus and the form of payment (cash, shares of restricted stock, or some combination of the two) isare at the discretion of the Board.
The employment agreements also provide that additional equity may be awarded to the Named Executive OfficerNEO based upon his or her performance and subject to the Board’s approval, and for the reimbursement of reasonable expenses incurred by him or her in connection with the performance of his or her duties, and for the NEO to participate in the Company’s Severance Plan (discussed below). Each Named Executive OfficerNEO must devote his or her full business time to the performance of services to the Company.
The employment agreements require each Named Executive OfficerNEO to maintain the confidentiality of the Company’s proprietary information and provide that all work product discovered or developed by him or her in the course of his or her employment belongs to the Company. In addition, in the employment agreements, the Named Executive OfficersNEOs have agreed not to compete with the Company, directly or indirectly, within the United States or interfere with or solicit the Company’s contractual relationships, in each case during the term of his or her employment and for the duration of the severance period described for each Named Executive Officerthe NEO following the termination of his or her employment.
If Named Executive Officeran NEO is terminated without “cause” or leaves the Company for “good reason” (as such terms are defined in each employment agreement), the Named Executive OfficerNEO may receive a lump sum separation payment. The amount of these payments is more specifically described in the section “Potential Payments Upon Termination” beginning on page 45.36. To be entitled to such a payment, the Named Executive OfficerNEO must execute and deliver to the Company a waiver and separation agreement, releasing the Company from any claims.
In August 2005, the Board adopted a Change ofin Control Severance Benefit Plan, (the “Severance Plan”). The Severance Plan waswhich has since been amended in July 2006 and December 2008 as described below.(the “Severance Plan”). The purpose of the Severance Plan is to provide severance pay and benefits to a select group of employees whose employment with the Company may be terminated following a change in control event, to provide such employees with an incentive to remain with the Company and help the Company consummate a strategic corporate sale or transaction that maximizes stockholder value. Participants in the Severance Plan are recommended by the CEO and approved by the Board. Selected participants with existing severance agreements will be deemed to elect coverage under the Severance Plan and are not eligible for any severance benefits under such other agreements unless expressly provided otherwise by the Board. Each of the Named Executive Officers that are currently officers of the Company participateNEOs participates in the Severance Plan.
The Severance Plan provides for the payment of benefits upon certain triggering events. A triggering event occurs if a participant’s employment is terminated due to an “Involuntary Termination without Cause” for a reason other than death or disability or as a result of a “Constructive Termination” which occurs either (i) forwithin a certain period (not to exceed 24 months) after the effective date of a “Change in Control” or (ii) before the Change in Control but after the first day on which the Board and/or senior management of the Company has entered into formal negotiations with a potential acquirer that results in the consummation of the Change Inin Control. The specific periodperiods of time following the effective date of a Change in Control during which payment of benefits under the Severance Plan may be triggered isby termination are as follows:
Executive | Protected Period | |||
Stanley C. Erck | 24 months | |||
Barclay A. Phillips | 12 months | |||
Gregory M. Glenn, | 12 months | |||
12 months | ||||
12 months |
If a triggering event occurs, the participant is entitled to a lump sum severance payment, a bonus equal to 100% of the target annual performance bonus for the periodyear in which the termination date occurred multiplied by the length in years of the participant’s severance benefit period and continuation of medical, dental, vision, and hospitalizationvision benefits for the same number of months as the severance period, with the exception of Mr. Erck, whose benefits continue for 18 months.
Executive | Severance Payment | Continuation of
| ||||||
Stanley C. Erck | 24 months salary | 18 months | ||||||
Barclay A. Phillips | 12 months salary | 12 months | ||||||
Gregory M. Glenn, | 12 months salary | 12 months | ||||||
12 months salary | 12 months | |||||||
12 months salary | 12 months |
Initially,Under the Severance Plan, provided that all outstanding equitycurrent unvested awards held by participants becamebecome vested and exercisable upon a change in control of the Company (a “Single Trigger Acceleration”). In July 2006, the Board amended and restated the Severance Plan to provide that,full only upon a termination of employment following a Change in Control all awards granted thereafter and held by participants shall become vested and exercisable in full (a “Double Trigger Acceleration”)double trigger acceleration). In April 2007, the Compensation Committee recommended, and the Board adopted, revised stock option agreements, restricted stock agreements and restricted stock unit agreements for all awards made in March 2007 and thereafter that provide for Double Trigger Acceleration to conform to the amended Severance Plan. This action did not alter awards granted before March 2007. The Severance Plan provides that all vested and exercisable options may be exercised within one year from the participant’s termination date, provided, however, that no exercise may occur later than the expiration date of the option as set forth in the applicable option agreement.
In December 2008, the Board amended and restated the Severance Plan with the intention to comply with or be exempt from the requirements of Section 409A of the Code. Specifically, the Severance Plan was amended to clarify provisions relating to the types of benefits available under the Severance Plan and the timing of the payments of such benefits. As used herein, the below terms “Involuntary Termination without Cause,” “Cause,” “Constructive Termination,” and “Change in Control” shall have the following meanings: