SECURITIES AND EXCHANGE COMMISSION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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5959 Horton Street, Suite 500
Emeryville, California 94608
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS AND PROXY STATEMENT
You are cordially invited to attend the 2020 annual meeting of stockholders (“annual meeting”) of Zogenix, Inc., a Delaware corporation. The annual meeting will be held on Friday, May 29, 2020 at 9:00 a.m., Pacific Time, via a completely virtual format through a live audio-only webcast hosted online at www.virtualshareholdermeeting.com/ZGNX2020. The annual meeting will be held exclusively online and you will not be able to attend the annual meeting physically. You will be able to vote your shares electronically and submit questions during the meeting by logging into the website listed above using the control number included in the Notice of Internet Availability of Proxy Materials, on your proxy card or on the instructions that accompanied our proxy materials. Online check-in will begin at 8:45 a.m. Pacific Time and should allow ample time for the check-in procedures.
The annual meeting of stockholders of Zogenix, Inc.
will be held on Wednesday, May 22, 2019 at 9:00 a.m., local time, at our principal office located at 5959 Horton Street, Suite 500, Emeryville, California 94608is being convened for the following purposes:
1. | To elect two directors for athree-year term to expire at the 2022 annual meeting of stockholders;
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2. | To consider and vote upon the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019;
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3. | To consider and vote upon, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission;
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4. | To consider and vote upon the approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 50,000,000 to 100,000,000;
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5. | To consider and vote upon the approval of the amendment and restatement of the Company’s 2010 Equity Incentive Award Plan; and
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6. | To transact such other business as may be properly brought before the meeting or any adjournment or postponement thereof.
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1.To elect three directors for a three-year term to expire at the 2023 annual meeting of stockholders;
2.To consider and vote upon the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020;
3.To consider and vote upon, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission;
4.To consider and vote upon the approval of an amendment and restatement of our 2010 Employee Stock Purchase Plan; and
5.To transact such other business as may be properly brought before the meeting or any adjournment or postponement thereof.
Our board of directors has fixed the close of business on
March 26, 2019April 9, 2020 as the record date for the determination of stockholders entitled to notice of, and to vote at, the annual meeting or any adjournment or postponement thereof. For our annual meeting, we have elected to use the
Internetinternet as our primary means of providing our proxy materials to stockholders. Consequently, most stockholders will not receive paper copies of our proxy materials. We will instead send to these stockholders a Notice of Internet Availability of Proxy Materials with instructions for accessing the proxy materials, including our proxy statement and annual report,
the matters to be acted upon at the meeting and
for votingour board of directors’ recommendation with regard to each matter, and how to vote your shares via the
Internet.internet or by telephone. The Notice of Internet Availability of Proxy Materials also provides information on how stockholders may obtain paper copies of our proxy materials free of charge, if they so choose. The electronic delivery of our proxy materials will significantly reduce our printing and mailing costs and the environmental impact of the circulation of our proxy materials.
The Notice of Internet Availability of Proxy Materials will also provide the date, time and location of the annual meeting; the matters to be acted upon at the meeting and our board of directors’ recommendation with regard to each matter; atoll-free number, an email address and a website where stockholders may request a paper or email copy of the proxy statement, our annual report to stockholders and a form of proxy relating to the annual meeting; information on how to access the form of proxy; and information on how to attend the meeting and vote in person.
Whether or not you expect to attend ourthe virtual annual meeting, please vote via the internet or by Internet or telephone as describedinstructed in the enclosed proxythese materials, or sign and return your proxy card prior to the meeting in order to ensure your representation at the meeting. Even if you requesthave voted by proxy, you may still vote electronically during the meeting. Please note, however, that the proxy materials be mailed toif your shares are held of record by a broker, bank or other nominee and you by signing, dating and returning the proxy card enclosed with those materials. If you plan to attend our annual meeting and wish to vote
at the meeting, you must obtain a proxy issued in your shares personally, you may do so at any time before the proxy is voted. All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
/s/ Stephen J. Farr, Ph.D.
Stephen J. Farr, Ph.D.
Chief Executive Officer and Director
name from that record holder.
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| By Order of the Board of Directors, | |
| /s/ Stephen J. Farr, Ph.D. | |
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| Stephen J. Farr, Ph.D. | |
| Chief Executive Officer and Director | |
Your vote is important. Please vote your shares whether or not you plan to attend the virtual annual meeting.
5959 Horton Street, Suite 500,
Emeryville, CaliforniaCA 94608
PROXY STATEMENT
FOR THE
20192020 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
WEDNESDAY,FRIDAY, MAY
22, 201929, 2020
The board of directors of Zogenix, Inc. is soliciting your proxy for use at the annual meeting of stockholders to be held on Wednesday,Friday, May 22, 201929, 2020 at 9:00 a.m., local time,Pacific Time, via a completely virtual format through a live audio-only webcast hosted online at 5959 Horton Street, Suite 500, Emeryville, California 94608. If you need directionswww.virtualshareholdermeeting.com/ZGNX2020.
In accordance with SEC rules, we are making our proxy materials available at www.proxyvote.com with an option to
the locationrequest a printed set be mailed to you. We expect to begin mailing a Notice of
the annual meeting, please contact us at (510)550-8300.OnInternet Availability of Proxy Materials on or about April 9, 2019, we will mail17, 2020 to all stockholders of record entitled to vote at the annual meeting a Notice of Internet Availability of Proxy Materials containingmeeting. The notice contains instructions on how to access ourfor viewing the proxy statementmaterials and annual reportvoting online and how to vote online. If you receive such a Notice by mail, you will not receiverequesting a printed copyset of the materials unless you specifically request one. However, the Notice contains instructions on how to request to receive printed copies of these materials and a proxy card by mail.
materials.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 22, 2019 29, 2020: This proxy statement and our annual report are available electronically at http://www.proxyvote.com.
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
There are four proposals scheduled for a vote:
Proposal 1: To elect
two (2) directors:three (3) directors:Erle T. Mast;•Louis C. Bock; and
Renee P. Tannenbaum, Pharm.D.
•Cam L. Garner
•Mark Wiggins
Proposal 2: Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019.2020.
Proposal 3: To consider and vote upon, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission or SEC.(“SEC”).
Proposal 4:Approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 50,000,000 to 100,000,000.Proposal 5:4
: Approval of an amendment and restatement of the Company’s 2010 Equity Incentive Awardto our Employee Stock Purchase Plan. Who can vote at the meeting?
Only stockholders who owned our common stock on March 26, 2019April 9, 2020 are entitled to vote at the annual meeting. On this record date, there were 42,406,95955,340,691 shares of our common stock outstanding. Common stock is our only class of stock entitled to vote.
How many votes do I have?
Each share of our common stock that you own as of
March 26, 2019April 9, 2020 entitles you to one vote.
Why did I receive a
one-page notice in the mail regarding the
Internetinternet availability of proxy materials instead of a full set of proxy materials?
Pursuant
In accordance with SEC rules, and in order to rules adopted byexpedite our stockholders’ receipt of proxy materials, lower our costs and reduce the SEC,environmental impact of the annual meeting, we have elected to provide access toare making our proxy materials available to stockholders primarily over the Internet. Accordingly,internet. As a result, we are sendingmailing a Notice of Internet Availability of Proxy Materials (“Notice”) to our stockholders who have not previously requested the receiptinstead of paper proxy materials advising them that they can access this proxy statement, our annual report and voting instructions over the Internet at www.proxyvote.com, by calling 1-800-579-1639, or by sending a blanke-mail to sendmaterial@proxyvote.com with your twelve digit control number in the subject line. You can also state your preference to receive a paper copy for future meetings. There is no charge forof the full set of proxy materials. As explained in the Notice, you requestingcan view our proxy materials and vote online by visiting www.proxyvote.com and having available the 16-digit control number contained in your Notice. If you received a copy. Please make yourNotice, you will not receive a printed copy of the proxy materials unless you request one by following the instructions provided in the Notice. Should you request it, a printed set of proxy materials will be provided free of charge. Requests for a copy on orprinted set of proxy materials should be made before May 8, 201915, 2020 to facilitate timely delivery.
Why is Zogenix hosting the annual meeting in a virtual meeting format only?
In addition,light of public health concerns, this year’s annual meeting will be held in a virtual meeting format only, via a live audio-
only webcast. There is no physical location for the annual meeting. The virtual annual meeting has been designed to provide the same rights to participate as you would have at an in-person meeting.
How do I attend the Virtual Annual Meeting?
Stockholders of record as of April 9, 2020 will be able to attend and participate in the annual meeting online by accessing www.virtualshareholdermeeting.com/ZGNX2020. To join the annual meeting, you will need to have your 16-digit control number which is included on your Notice or your proxy card (if you received a printed copy of the proxy materials).
Even if you plan to attend the annual meeting online, we recommend that you also vote by proxy as described herein so that your vote will be counted if you subsequently decide not to attend the annual meeting.
Access to the Audio Webcast of the Annual Meeting. The live audio webcast of the annual meeting will begin promptly at 9:00 a.m. Pacific Time on May 29, 2020. We encourage our stockholders may request to receive proxy materials electronically by email or in printed form by mail on an ongoing basis. All stockholders will have the ability to access the proxy materialsmeeting website prior to the start time. Online access to the audio webcast will open approximately 30 minutes prior to the start of the annual meeting to allow time for you to log in and test the computer audio system.
Log in Procedures. To attend the virtual annual meeting, visit www.virtualshareholdermeeting.com/ZGNX2020 to log in. Stockholders will need their unique 16-digit control number which appears on the website referred to above andyour Notice (printed in the Notice of Internet Availability of Proxy Materials or request to receive a printed set ofbox and marked by the arrow) and the instructions that accompanied the proxy materials. We encourage stockholdersIn the event that you do not have a control number, please contact your broker, bank, or other agent as soon as possible and no later than May 3, 2020, so that you can be provided with a control number and gain access to take advantagethe meeting.
Submitting Questions at the Virtual Annual Meeting. Stockholders may submit questions during the annual meeting after logging into www.virtualshareholdermeeting.com/ZGNX2020. Stockholders will need their 16-digit control number which appears on their Notice and proxy card (printed in the box and marked by the arrow) and the instructions that accompanied the proxy materials.
As part of the availabilityannual meeting, we will hold a live question and answer session, during which we intend to answer questions submitted during the meeting in accordance with the annual meeting’s rules of conduct that are pertinent to Zogenix and the meeting matters, as time permits. Answers to any such questions that are not addressed during the meeting will be published following the meeting under the “IR Events” heading of the proxy materials“Investors” section of our website at www.zogenix.com. Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once. In order to promote fairness, efficient use of time and in order to ensure all stockholders are responded to, we will respond to up to two questions from a single stockholder.
Technical Assistance. Beginning 30 minutes prior to the start of and during the virtual annual meeting, we will have technicians ready to assist stockholders with any technical difficulties they may have accessing or hearing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Internet to help reduce the environmental impact of our annual meeting.meeting website log-in page.
With respect to the election of
each director, youdirectors, shareholders may
(a) vote “For”
oreach of the nominees; (b) vote “Against” each of the
nomineesnominees; or
(c) abstain from voting on the election of one or more of the nominees. With respect to the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm, you may vote “For” or “Against” or abstain from voting. With respect to the advisory vote on the compensation of our named executive officers, you may vote “For” or “Against” or abstain from voting. With respect to the
vote to approve an amendment toapproval of the
Company’s Amended and Restated Certificate of Incorporation to increase the authorized number of shares of common stock, you may vote “For” or “Against” or abstain from voting. With respect to the vote to approve an amendment and restatement
of the Company’s 2010 Equity Incentive Awardto our Employee Stock Purchase Plan, you may vote “For” or “Against” or abstain from voting.
The manner in which your shares may be voted depends on how your shares are held.
Stockholders of Record: Shares Registered in Your Name
If you are a stockholder of record
(i.e. you hold shares directly in your name), there are several ways for you to vote your shares. Whether or not you
planexpect to attend the
virtual annual meeting, we urge you to vote by proxy to ensure that your vote is counted.
Vote by Internet:
–Before the Annual Meeting. You may vote at www.proxyvote.com, 24 hours a day, seven days a week. Use the Company Number and Account Number shown on your Notice, proxy card or voting instructions form that is sent to you. Votes submitted through the internet must be received by 11:59 p.m., Eastern Time, on May 28, 2020.
–During the Virtual Annual Meeting. You may still attend the virtual annual meeting and vote during the meeting even if you have already voted by proxy. To vote during the meeting, visit www.virtualshareholdermeeting.com/ZGNX2020 on the
day of the meeting; you will need the 16-digit control number provided on your Notice or proxy card (if applicable).
Vote By Telephone: You may vote using a touch-tone telephone by calling 1-800-690-6903, 24 hours a day, seven days a week. Use the Company Number and Account Number shown on your Notice, proxy card or voting instructions form that was sent to you. Votes submitted by telephone must be received by 11:59 p.m., Eastern Time, on May 28, 2020.
Vote by Mail: If you are a stockholder of record, and you elect to receive your proxy materials by mail, you may vote using your proxy card by completing, signing, dating and returning the proxy card in theself-addressed,postage-paid envelope provided. You should mail the proxy card in plenty of time to allow delivery prior to the meeting. Do not mail the proxy card if you are voting overvia the Internetinternet or by telephone. If you properly complete your proxy card and send it in time to vote, your proxy (one of the individuals named on your proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your shares, as permitted, will be voted as recommended by our board of directors. If any other matter is presented at the annual meeting, your proxy (one of the individuals named on your proxy card) will vote in accordance with his or her best judgment. As of the date of this proxy statement, we knew of no matters that needed to be acted on at the meeting, other than those discussed in this proxy statement.Via the Internet: You may vote at www.proxyvote.com, 24 hours a day, seven days a week. Use the Company Number and Account Number shown on your Notice of Internet Availability of Proxy Materials, proxy card or voting instructions form that is sent to you. Votes submitted through the Internet must be received by 11:59 p.m., Eastern Time, on May 21, 2019.
By Telephone: You may vote using atouch-tone telephone by calling1-800-690-6903, 24 hours a day, seven days a week. Use the Company Number and Account Number shown on your Notice of Internet Availability of Proxy Materials, proxy card or voting instructions form that is sent to you. Votes submitted by telephone must be received by 11:59 p.m., Eastern Time, on May 21, 2019.
In Person: You may still attend the meeting and vote in person even if you have already voted by proxy. To vote in person, come to the annual meeting and we will give you a ballot at the annual meeting.
Beneficial Owners: Shares Registered in the name of a Broker or Banks
If
on April 9, 2020 your shares were held, not in your name, but rather in an account at a brokerage firm, bank, agent or other similar organization, then you are
athe beneficial owner of shares
registeredheld in
the name of your broker, bank or other agent, you should have received“street name” and the Notice
of Internet Availability of Proxy Materials or, ifis being forwarded to you
have requested physical copies, a proxy card and voting instructions with these proxy materials fromby that organization rather than
directly from
us.Zogenix. Simply
complete and mailfollow the
proxy cardvoting instructions in the Notice to ensure that your vote is counted. You
are also invited to virtually attend the annual meeting. However, since you are not the stockholder of record, you may
be eligible tonot vote your shares
electronically overvia the
Internet or by telephone. A large number of banks and brokerage firms offer Internet and telephone voting. If your bank or brokerage firm does not offer Internet or telephone voting information, please complete and return your proxy card in theself-addressed,postage-paid envelope provided.To vote in person atinternet during the annual meeting unless you mustrequest and obtain a valid proxy from your broker bank or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.
If you give us your proxy, you may revoke it at any time before it is exercised. You may revoke your proxy in any one of the three following ways:
•you may send in another signed proxy with a later date,
•you may notify our corporate secretary, Michael P. Smith, in writing before the annual meeting that you have revoked your proxy, or
•you may notify our corporate secretary in writing before the annual meeting and vote in person atduring the virtual annual meeting.
What constitutes a quorum?
The presence at the annual meeting, in person or by proxy, of holders representing a majority of our outstanding common stock as of March 26, 2019,April 9, 2020, or 21,303,480approximately 27,670,346 shares, constitutes a quorum at the meeting, permitting us to conduct our business. Holders will be deemed present “in person” at the annual meeting by visiting
www.virtualshareholdermeeting.com/ZGNX2020 on the day of the annual meeting and properly registering their attendance by using the 16-digit control number provided on the Notice or your proxy card (if applicable). What vote is required to approve each proposal?
Proposal 1: Election of Directors. The twothree nominees who receive the most “For” votes (among votes properly cast in person or by proxy) will be elected. Only votes “For” or “Withheld” will affect the outcome.
Proposal 2: Ratification of Independent Registered Public Accounting Firm. The ratification of the appointment of Ernst & Young LLP must receive “For” votes from the holders of a majority of the shares of common stock present in person or represented by proxy and entitled to vote at the annual meeting.
Proposal 3: Approval of the Compensation of the Named Executive Officers. The approval on an advisory basis, of the compensation of the named executive officersmustofficers must receive “For” votes from the holders of a majority of the shares of common stock present in person or represented by proxy and entitled to vote at the annual meeting.
Proposal 4: Approval of an Amendment and Restatement to the Company’s Amended and Restated Certificate of Incorporation to Increase the Authorized Number of Shares of CommonEmployee Stock. The approval of an amendment to the Amended and Restated Certificate of Incorporation must receive “For” votes, either in person or by proxy, from the holders of a majority of the outstanding shares of common stock.
Proposal 5: Approval of the Amendment and Restatement of the Company’s 2010 Equity Incentive Award Plan. Purchase Plan. The approval of the amendment and restatement of the Company’s 2010 Equity Incentive AwareEmployee Stock Purchase Plan must receive “For” votes, either in person or by proxy, from the holders of a majority of the shares of common stock present in person or represented by proxy and entitled to vote at the annual meeting.
Voting results will be tabulated and certified by Broadridge Financial
Solutions.Solutions, Inc. (“Broadridge”), an independent agent retained by our board of directors to tabulate stockholder votes.
What is the effect of abstentions and broker non-votes?
Shares of common stock held by persons attending the annual meeting but not voting, and shares represented by proxies that reflect abstentions as to a particular proposal, will be counted as present for purposes of determining the presence of a quorum. Abstentions are treated as shares present in person or by proxy and entitled to vote, so abstaining has the same effect as a negative vote for purposes of determining whether our stockholders have ratified the appointment of Ernst & Young LLP, our independent registered public accounting firm, whether our stockholders have approved the compensation of the named executive officers,
the amendment to our Amended and Restated Certificate of Incorporation to increase the authorized number of shares of our common stock, and the amendment and restatement of
the Company’s 2010 Equity Incentive Awardour Employee Stock Purchase Plan. However, because the election of directors is determined by a plurality of votes cast, abstentions will not be counted in determining the outcome of such proposal.
Shares represented by proxies that reflect a “broker
non-vote” will be counted for purposes of determining whether a quorum exists. A “broker
non-vote” occurs when a nominee holding shares for a beneficial owner has not received instructions from the beneficial owner and does not have discretionary authority to vote the shares for certain
non-routine matters. With regard to the election of directors and the advisory vote to approve the compensation of the named executive officers, broker
non-votes, if any, will not be counted as votes cast and will have no effect on the result of the vote. However, ratification of the appointment of Ernst & Young LLP and the
approval of an amendment
to our Amended and
Restated Certificate of Incorporation to increase the authorized number of sharesrestatement of our
common stockEmployee Stock Purchase Plan are considered routine matters on which a broker or other nominee has discretionary authority to vote. As a result, broker
non-votes will be counted for purposes of these proposals.
Who is paying the costs of soliciting these proxies?
We will pay all of the costs of soliciting these proxies. Our directors, officers and other employees may solicit proxies in person or by telephone, fax or email. We will not pay our directors, officers or other employees any additional compensation for these services. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their expenses. Our costs for forwarding proxy materials will not be significant.
How do I obtain an Annual Report on Form
10-K?If you would like a copy of our annual report on Form
10-K for the fiscal year ended December 31,
20182019 that we filed with the SEC on
February 28, 2019,March 2, 2020, we will send you one without charge. Please write to:
5959 Horton Street, Suite 500
Emeryville, California 94608
Attn: Corporate Secretary
All of our SEC filings are also available free of charge in the investor relations section of our website at www.zogenix.com.
How can I find out the results of the voting at the annual meeting?
Preliminary voting results will be announced at the annual meeting. Final voting results will be published in our current report on Form8-K to be filed with the SEC within four business days after the annual meeting. If final voting results are not available to us in time to file aForm 8-K within four business days after the meeting, we intend to file aForm 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additionalForm 8-K to publish the final results.
Our board of directors is divided into three classes, with one class of our directors standing for election each year, generally for a
three-year term. The current term of
the company’sour Class
IIII directors,
RogerLouis C. Bock, Cam L.
Hawley, Erle T. MastGarner and
Renee P. Tannenbaum, Pharm.D.Mark Wiggins will expire at the
20192020 annual meeting.
On March 26, 2019, Mr. Hawley resigned as a Class III director effective March 31, 2019 and, as a result, the board decreased the size of the board to seven members and decreased the Class III director class to two members.The nominees for Class
IIII director for election at the
20192020 annual meeting are
Erle T. MastLouis C. Bock, Cam L. Garner and
Renee P. Tannenbaum, Pharm.D.Mark Wiggins. If
Mr. Mast,Messrs. Bock, Garner or
Dr. TannenbaumWiggins is elected at the
20192020 annual meeting, such individual will be elected to serve for a term of three years that will expire at our
20222023 annual meeting of stockholders and until such individual’s successor is elected and qualified.
If no contrary indication is made, proxies in the accompanying form will be voted for the nominees, or in the event that any nominee is not a candidate or is unable to serve as a director at the time of the election (which is not currently expected), for any nominee who is designated by our board of directors to fill the vacancy.
Mr. MastMessrs. Bock, Garner and
Dr. TannenbaumWiggins are currently members of our board of directors.
All of our directors bring to the board of directors significant leadership experience derived from their professional experience and service as executives or board members of other corporations and/or venture capital firms. The process undertaken by the nominating/corporate governance committee in recommending qualified director candidates is described below under “Director Nominations Process.” Certain individual qualifications and skills of our directors that contribute to the board of directors’ effectiveness as a whole are described in the following paragraphs.
Information Regarding Directors
The information set forth below as to the directors and nominees for director has been furnished to us by the directors and nominees for director:
Nominees for Election to the Board of Directors
For a
Three-Year Term Expiring at the
2022
2023 Annual Meeting of Stockholders (Class
III)I) | | | | | | | | | | | | | | |
Name | | Age | | | Present Position with Zogenix, Inc.
Position(s) |
Louis C. Bock | | 55 | | Director, Chairman of Nominating/Corporate Governance Committee |
| Cam L. Garner | | 71 | | Chairman of the Board of Directors |
| Mark Wiggins | | 64 | | Director, Chairman of Compensation Committee |
Louis C. Bock has served as a member of our board of directors since August 2006. Since August 2014, Mr. Bock has served as a Venture Partner at Santé Ventures, a venture capital firm. From September 1997 to July 2014, he was Managing Director of Scale Venture Partners, a venture capital firm. Previously, Mr. Bock held various positions in research, project management, business development and sales at Gilead Sciences, Inc., from September 1989 to September 1997. Prior to Gilead, he was a research associate at Genentech, Inc. from November 1987 to September 1989. From May 2005 to July 2018, Mr. Bock served as a director of Orexigen Therapeutics, Inc., and from September 2013 to April 2016, he served as a director of Heat Biologics, Inc., both biotechnology companies. In addition, Mr. Bock is responsible for Scale Venture Partners’ prior investments in Seattle Genetics, Prestwick Pharmaceuticals, Inc. and Somaxon Pharmaceuticals, Inc. Mr. Bock received his B.S. in Biology from California State University, Chico and his M.B.A. from California State University, San Francisco. Mr. Bock’s extensive clinical and leadership experience in the biotechnology and biopharmaceutical industries, including experience in research, project management, business development and sales, and his membership on other companies’ boards of directors, including positions on other audit and nominating/corporate governance committees, contributed to our board of directors’ conclusion that he should serve as a director of our company.
Cam L. Garner is one of our co-founders and has served as chairman of our board of directors since August 2006. Mr. Garner co-founded specialty pharmaceutical companies Cadence Pharmaceuticals, Inc. (acquired by Mallinckrodt plc in March 2014), Somaxon Pharmaceuticals, Inc. (sold to Pernix Therapeutics in March 2013), Evoke Pharma, Inc., Elevation Pharmaceuticals, Inc. (sold to Sunovion Pharmaceuticals Inc. in 2012), DJ Pharma (sold to Biovail Corporation in 2000), Verus Pharmaceuticals, Inc., Xcel Pharmaceuticals, Inc. (acquired by Valeant Pharmaceuticals International in 2005), Neurelis, Inc., Meritage Pharma, Inc. (sold to Shire plc in February 2015), and most recently, Kalyra Pharmaceuticals, Inc., OrPro Therapeutics, Inc., Alastin SkinCare and Zavante, Inc. He previously served as chairman of Cadence from May 2004 until March 2014, and served as chairman of Verus, Elevation and
Meritage until their acquisition and Evoke since January 2007. Mr. Garner was Chief Executive Officer of Dura Pharmaceuticals, Inc. from 1989 to 1995 and its Chairman and Chief Executive Officer from 1995 to 2000, when it was sold to Elan. In addition to Zogenix, Mr. Garner currently serves as Chairman of Evoke Pharma, a publicly-traded company, Kalyra Pharamaceuticals, OrPro, Alastin and Zavante, and serves on the Board of Directors of Aegis and Neurelis. Mr. Garner is also Chairman-elect and serves on the Executive Committee of UCSD Moores Cancer Center, San Diego. Mr. Garner earned his B.A. in Biology from Virginia Wesleyan College and an M.B.A. from Baldwin-Wallace College. As one of our co-founders and having served as our chairman since August 2006, Mr. Garner’s extensive knowledge of our business, history and culture, his extensive experience as a board member of multiple publicly-traded and privately-held companies, and expertise in developing, financing and providing strong executive leadership to numerous biopharmaceutical companies, contributed to our board of directors’ conclusion that he should serve as a director of our company.
Mark Wiggins has served as a member of our board of directors since May 2011. Until 2015 Mr. Wiggins was Senior Vice President of Business Development with Elcelyx Therapeutics, Inc., a biotechnology company. Previously, he served as Chief Business Officer with Mpex Pharmaceuticals, a biopharmaceutical company, until its acquisition by Axcan Pharma, Inc. in 2011. From May 1998 to February 2009, Mr. Wiggins was employed at Biogen Idec, Inc., and its predecessor Idec Pharmaceuticals Corp., biotechnology companies, where he most recently served as Executive Vice President of Business Development. At Idec Pharmaceuticals, Mr. Wiggins was a member of the management committee for the collaboration with Genentech Inc. on Rituxan®. Prior to Biogen Idec, Mr. Wiggins spent fifteen years in a number of positions of increasing responsibility in marketing, marketing research and business development at Hybridon, Inc., Schering-Plough Corporation (now Merck), Johnson & Johnson and Pfizer, Inc. Mr. Wiggins’ business development transaction experience includes closing over 20 licensing deals and several global corporate partnerships and company acquisitions. Mr. Wiggins earned his B.S. degree in Finance from Syracuse University and his M.B.A. from the University of Arizona. Mr. Wiggins’ expertise in business development activities and the marketing of pharmaceutical products, as well as his extensive management experience within the biopharmaceutical industry, contributed to our board of directors’ conclusion that he should serve as a director of our company.
Members of the Board of Directors Continuing in Office
Term Expiring at the
2021 Annual Meeting of Stockholders (Class II)
| | | | | | | | | | | | | | |
| Name | | Age | | Position(s) |
| James B. Breitmeyer, M.D., Ph.D. | | 66 | | Director |
| Stephen J. Farr, Ph.D. | | 61 | | Chief Executive Officer, President and Director |
James B. Breitmeyer, M.D., Ph.D. has served as a member of our board of directors since March 2014. Since August 2015, Dr. Breitmeyer has served as President, CEO and Director of Oncternal Therapeutics, Inc. a clinical-stage oncology biotechnology company. Previously, he served as President of Bavarian Nordic, Inc. and Executive Vice President of Bavarian A/S, a multinational corporation headquartered in Denmark, from February 2013 to July 2015. He previously served as the acting Chief Medical Officer of our company from August 2012 to February 2013 in an advisory capacity, the Executive Vice President of Development and Chief Medical Officer of Cadence Pharmaceuticals Inc., from August 2006 to August 2012, and the Chief Medical Officer of Applied Molecular Evolution Inc., a wholly-owned subsidiary of Eli Lilly and Co. from December 2001 to August 2006. Dr. Breitmeyer has also served as President and Chief Executive Officer of the Harvard Clinical Research Institute and held a variety of positions at Serono Laboratories Inc. Dr. Breitmeyer served as a founding collaborator and scientific advisor to Immunogen Inc., and held clinical and teaching positions at the Dana Farber Cancer Institute and Harvard Medical School. Dr. Breitmeyer earned his B.A. in Chemistry from the University of California, Santa Cruz and his M.D. and Ph.D. from Washington University School of Medicine and is Board Certified in Internal Medicine and Oncology. Dr. Breitmeyer’s extensive experience in the biopharmaceutical industry, including providing strong executive leadership to numerous biopharmaceutical companies, and significant expertise in the medical field, contributed to our board of directors’ conclusion that he should serve as a director of our company.
Stephen J. Farr, Ph.D. is one of our co-founders and has served as our President and as a member of our board of directors since our inception in May 2006. Dr. Farr has served as our Chief Executive Officer since April 2015 and served as our Chief Operating Officer from our inception to March 2013. From 1995 to August 2006, Dr. Farr held positions of increasing responsibility within Aradigm Corporation, and he served most recently as Senior Vice President and Chief Scientific Officer with responsibility for research and development as well as business development. From 1986 to 1994, Dr. Farr was a tenured professor at the Welsh School of Pharmacy, Cardiff University, United Kingdom, concentrating in the area of biopharmaceutics. Dr. Farr currently serves on the board of directors of SteadyMed Therapeutics, Inc., a publicly-traded company, as well as Oscillari, LLC and Flow Pharma, Inc. Dr. Farr is an adjunct Professor in the Department of Pharmaceutics, School of Pharmacy, Virginia Commonwealth University. Dr. Farr is a registered pharmacist in the United Kingdom and obtained his Ph.D. degree in Pharmaceutics from the University of Wales. As one of our co-founders and having served as our President since May 2006, Dr. Farr’s extensive knowledge of our business, history and culture, as well as his significant experience in research and development and thorough knowledge of the pharmaceutical product development process, contributed to our board of directors’ conclusion that he should serve as a director of our company.
Term Expiring at the
2022 Annual Meeting of Stockholders (Class III)
| | | | | | | | | | | | | | |
| Name | | Age | | Position(s) |
| Erle T. Mast | | 57 | 56 | | | Director, Chairman of Audit Committee |
Renee P. Tannenbaum, Pharm.D. | | 68 | 67 | | | Director |
Erle T. Mast has served as a member of our board of directors since May 2008. Mr. Mast was aco-founder of and served as Executive Vice President, Chief Financial Officer with Clovis Oncology, Inc., a biotechnology company, from May 2009 through March 2016. From July 2002 to May 2008, Mr. Mast served as Executive Vice President and Chief Financial Officer of Pharmion Corporation, until its acquisition by Celgene Corporation. From 2000 to 2002, after Elan Pharma International Ltd. acquired Dura Pharmaceuticals, Inc., Mr. Mast served as Chief Financial Officer for the Global Biopharmaceuticals business unit of Elan. From 1997 to 2000, Mr. Mast served as Vice President of Finance for Dura Pharmaceuticals. From 1984 to 1997, Mr. Mast held positions of increasing responsibility at Deloitte & Touche, LLP, serving most recently as partner, where he provided accounting, auditing and business consulting services to companies in various industries, including the healthcare, pharmaceutical, biotech and manufacturing industries. Mr. Mast served as a director for Sienna Biopharmaceuticals, Inc. from 2017 to 2018, for Somaxon Pharmaceuticals, Inc. from 2008 to 2013 and for Receptos Inc. from 2013 to 2015, each publicly traded biotechnology companies. As previously disclosed in
September 2018, the SEC entered into a settlement with Clovis and certain of its executive officers, including Mr. Mast, relating to an SEC investigation into whether Clovis had violated federal securities laws in connection with Clovis’ disclosure in November 2015 that the FDA had requested additional clinical data on the efficacy and safety of a product under development by Clovis. Pursuant to the settlement, without admitting or denying the SEC’s allegations, Mr. Mast paid a civil penalty and disgorgement and agreed to a standard injunction against future violations of those provisions of the federal securities laws. The settlement agreement did not allege that Clovis or any of its current or former officers, including Mr. Mast, engaged in any intentional fraud or misconduct and it does not preclude Mr. Mast from continuing to serve as a director or officer of a public company. Mr. Mast received his degree in Business Administration from California State University, Bakersfield. Mr. Mast’s experience as a chief financial officer of various companies in the healthcare industry and in providing accounting, auditing and consulting services while at Deloitte & Touche, LLP, as well as his expertise in management, accounting, treasury, and finance functions, contributed to our board of directors’ conclusion that he should serve as a director of our company.
Renee P. Tannenbaum, Pharm.D. has served as a member of our board of directors since February 2015. Dr. Tannenbaum currently serves as Vice President of Global Alliances at Halozyme, Inc., where she is responsible for leading the team that executes the company’s alliances through partnerships and collaborations. Dr. Tannenbaum was previously Head of Global Customer Excellence at AbbVie from October 2012 to January 2016, where she was responsible for building commercial capabilities for the organization. Previously, Dr. Tannenbaum served as President of Myrtle Potter & Company, LLC, a global life sciences consulting and advisory firm from April 2011 to October 2012 and Executive Vice President and Chief Commercial Officer at Elan Pharmaceuticals, Inc., from May 2009 to January 2011, where she was responsible for revenue generation for Elan’s marketed products, preparing for the commercialization of the company’s pipeline, including its Alzheimer’s portfolio, and strengthening the company’s overall commercial capabilities. Prior to her role at Elan, Dr. Tannenbaum was at Novartis Pharma AG for three years, where she led the Global Commercial Operations organization. Prior to that, Dr. Tannenbaum spent nine years at Bristol Myers Squibb and 16 years at Merck and Company, Inc. where she held a variety of leadership positions in operations and general management. Dr. Tannenbaum served as a director to Nordic Nanovector ASA, apublicly-traded company in Norway, and Cipher Pharmaceuticals, Inc. a Canadianpublicly-traded company, from April to August 2016, Sharps Compliance Inc. from November 2012 to November 2014 and Immune Pharmaceuticals, Inc., apublicly-traded company, from August 2011 to October 2012. Dr. Tannenbaum retains a faculty position at the University of the Sciences’ Mayes College of Healthcare Business and Policy and serves as the Dean’s Professor. Dr. Tannenbaum received her Doctor of Pharmacy degree from the Philadelphia College of Pharmacy and Sciences, her MBA from Temple University, and her Bachelor of Science degree in Pharmacy from the University of Connecticut. Dr. Tannenbaum’s extensive experience in the biopharmaceutical industry, including providing strong executive leadership to numerous biopharmaceutical companies, contributed to our board of directors’ conclusion that she should serve as a director of our company.Members of the Board of Directors Continuing in Office
Term Expiring at the
2020 Annual Meeting of Stockholders (Class I)
| | | | | | |
Name
| | Age | | | Present Position with Zogenix, Inc.
|
Louis C. Bock
| | | 54 | | | Director, Chairman of Nominating/Corporate Governance Committee |
Cam L. Garner
| | | 70 | | | Chairman of the Board of Directors, Chair of Compensation Committee |
Mark Wiggins
| | | 63 | | | Director
|
Louis C. Bock has served as a member of our board of directors since August 2006. Since August 2014, Mr. Bock has served as a Venture Partner at Santé Ventures, a venture capital firm. From September 1997 to July 2014, he was Managing Director of Scale Venture Partners, a venture capital firm. Previously, Mr. Bock held various positions in research, project management, business development and sales at Gilead Sciences, Inc., from September 1989 to September 1997. Prior to Gilead, he was a research associate at Genentech, Inc. from November 1987 to September 1989. He currently serves as a director of Orexigen Therapeutics, Inc., apublicly-traded biotechnology company, as well as several private companies including Ascenta Therapeutics, Inc. and Cardiokinetics, Inc. Mr. Bock served as a director for Heat Biologics, Inc., apublicly-traded biotechnology company, from September 2013 to April 2016. In addition, Mr. Bock is responsible for Scale Venture Partners’ prior investments in Seattle Genetics, Prestwick Pharmaceuticals, Inc. and Somaxon Pharmaceuticals, Inc. Mr. Bock received his B.S. in Biology from California State University, Chico and his M.B.A. from California State University, San Francisco. Mr. Bock’s extensive clinical and leadership experience in the biotechnology and biopharmaceutical industries, including experience in research, project management, business development and sales, and his membership on other companies’ boards of directors, including positions on other audit and nominating/corporate governance committees, contributed to our board of directors’ conclusion that he should serve as a director of our company.
Cam L. Garner is one of ourco-founders and has served as chairman of our board of directors since August 2006. Mr. Garnerco-founded specialty pharmaceutical companies Cadence Pharmaceuticals, Inc. (acquired by Mallinckrodt plc in March 2014), Somaxon Pharmaceuticals, Inc. (sold to Pernix Therapeutics in March 2013), Evoke Pharma, Inc., Elevation Pharmaceuticals, Inc. (sold to Sunovion Pharmaceuticals Inc. in 2012), DJ Pharma (sold to Biovail Corporation in 2000), Verus Pharmaceuticals, Inc., Xcel Pharmaceuticals, Inc. (acquired by Valeant Pharmaceuticals International in 2005), Neurelis, Inc., Meritage Pharma, Inc. (sold to Shire plc in February 2015), and most recently, Kalyra Pharmaceuticals, Inc., OrPro Therapeutics, Inc., Alastin SkinCare and Zavante, Inc. He previously served as chairman of Cadence from May 2004 until March 2014, and served as chairman of Verus, Elevation and Meritage until their acquisition and Evoke since January 2007. Mr. Garner was Chief Executive Officer of Dura Pharmaceuticals, Inc. from 1989 to 1995 and its Chairman and Chief Executive Officer from 1995 to 2000, when it was sold to Elan. In addition to Zogenix, Mr. Garner currently serves as Chairman of Evoke Pharma, apublicly-traded company, Kalyra Pharamaceuticals, OrPro, Alastin and Zavante, and serves on the Board of Directors of Aegis and Neurelis. Mr. Garner is alsoChairman-elect and serves on the Executive Committee of UCSD Moores Cancer Center, San Diego. Mr. Garner earned his B.A. in Biology from Virginia Wesleyan College and an M.B.A. fromBaldwin-Wallace College. As one of ourco-founders and having served as our chairman since August 2006, Mr. Garner’s extensive knowledge of our business, history and culture, his extensive experience as a board member of multiplepublicly-traded andprivately-held companies, and expertise in developing, financing and providing strong executive leadership to numerous biopharmaceutical companies, contributed to our board of directors’ conclusion that he should serve as a director of our company.
Mark Wiggins has served as a member of our board of directors since May 2011. Until 2015 Mr. Wiggins was Senior Vice President of Business Development with Elcelyx Therapeutics, Inc., a biotechnology company. Previously, he served as Chief Business Officer with Mpex Pharmaceuticals, a biopharmaceutical company, until its acquisition by Axcan Pharma, Inc. in 2011. From May 1998 to February 2009, Mr. Wiggins was employed at Biogen Idec, Inc., and its predecessor Idec Pharmaceuticals Corp., biotechnology companies, where he most recently served as Executive Vice President of Business Development. At Idec Pharmaceuticals, Mr. Wiggins was a member of the management committee for the collaboration with Genentech Inc. on Rituxan®. Prior to Biogen Idec, Mr. Wiggins spent fifteen years in a number of positions of increasing responsibility in marketing, marketing research and business development at Hybridon, Inc.,Schering-Plough Corporation (now Merck), Johnson & Johnson and Pfizer, Inc. Mr. Wiggins’ business development transaction experience includes closing over 20 licensing deals and several global corporate partnerships and company acquisitions. Mr. Wiggins earned his B.S. degree in Finance from Syracuse University and his M.B.A. from the University of Arizona. Mr. Wiggins’ expertise in business development activities and the marketing of pharmaceutical products, as well as his extensive management experience within the biopharmaceutical industry, contributed to our board of directors’ conclusion that he should serve as a director of our company.
Term Expiring at the
2021 Annual Meeting of Stockholders (Class II)
| | | | | | |
Name
| | Age | | | Present Position with Zogenix, Inc.
|
James B. Breitmeyer, M.D., Ph.D.
| | | 65 | | | Director
|
Stephen J. Farr, Ph.D.
| | | 60 | | | Chief Executive Officer, President and Director
|
James B. Breitmeyer, M.D., Ph.D. has served as a member of our board of directors since March 2014. Since August 2015, Dr. Breitmeyer has served as President, CEO and Director of Oncternal Therapeutics, Inc. aclinical-stage oncology biotechnology company. Previously, he served as President of Bavarian Nordic, Inc. and Executive Vice President of Bavarian A/S, a multinational corporation headquartered in Denmark, from February 2013 to July 2015. He previously served as the acting Chief Medical Officer of our company from August 2012 to February 2013 in an advisory capacity, the Executive Vice President of Development and Chief Medical Officer of Cadence Pharmaceuticals Inc., from August 2006 to August 2012, and the Chief Medical Officer of Applied Molecular Evolution Inc., awholly-owned subsidiary of Eli Lilly and Co. from December 2001 to August 2006. Dr. Breitmeyer has also served as President and Chief Executive Officer of the Harvard Clinical Research Institute and held a variety of positions at Serono Laboratories Inc. Dr. Breitmeyer served as a founding collaborator and scientific advisor to Immunogen Inc., and held clinical and teaching positions at the Dana Farber Cancer Institute and Harvard Medical School. Dr. Breitmeyer earned his B.A. in Chemistry from the University of California, Santa Cruz and his M.D. and Ph.D. from Washington University School of Medicine and is Board Certified in Internal Medicine and Oncology. Dr. Breitmeyer’s extensive experience in the biopharmaceutical industry, including providing strong executive leadership to numerous biopharmaceutical companies, and significant expertise in the medical field, contributed to our board of directors’ conclusion that he should serve as a director of our company.
Stephen J. Farr, Ph.D. is one of ourco-founders and has served as our President and as a member of our board of directors since our inception in May 2006. Dr. Farr has served as our Chief Executive Officer since April 2015 and served as our Chief Operating Officer from our inception to March 2013. From 1995 to August 2006, Dr. Farr held positions of increasing responsibility within Aradigm Corporation, and he served most recently as Senior Vice President and Chief Scientific Officer with responsibility for research and development as well as business development. From 1986 to 1994, Dr. Farr was a tenured professor at the Welsh School of Pharmacy, Cardiff University, United Kingdom, concentrating in the area of biopharmaceutics. Dr. Farr currently serves on the board of directors of SteadyMed Therapeutics, Inc., apublicly-traded company, as well as Oscillari, LLC and Flow Pharma, Inc. Dr. Farr is an adjunct Professor in the Department of Pharmaceutics, School of Pharmacy, Virginia Commonwealth University. Dr. Farr is a registered pharmacist in the United Kingdom and obtained his Ph.D. degree in Pharmaceutics from the University of Wales. As one of ourco-founders and having served as our President since May 2006, Dr. Farr’s extensive knowledge of our business, history and culture, as well as his significant experience in research and development and thorough knowledge of the pharmaceutical product development process, contributed to our board of directors’ conclusion that he should serve as a director of our company.
Independence of the Board of Directors
As required under the Nasdaq Stock Market (“Nasdaq”) listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. In addition, Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating committees be independent within the meaning of Nasdaq rules. Audit committee members must also satisfy the independence criteria set forth in Rule
10A-3 under the Exchange Act.
Our Board undertook a review of the independence of each director and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board determined that each of our current directors, other than Stephen J. Farr, Ph.D.,
our Chief Executive Officer and President, qualifies as an
“independent” “independent” director within the meaning of the Nasdaq rules. Accordingly, a majority of our directors are independent, as required under Nasdaq rules.
Board Leadership Structure
Our board of directors is currently led by its chairman, Cam L. Garner. Our board of directors recognizes that it is important to determine an optimal board leadership structure to ensure the independent oversight of management as the company continues to grow. We separate the roles of chief executive officer and chairman of the board in recognition of the differences between the two roles. The chief executive officer is responsible for setting the strategic direction for the company and the
day-to-day leadership and performance of the company, while the chairman of the board of directors provides guidance to the chief executive officer and presides over meetings of the full board of directors. We believe that this separation of responsibilities provides a balanced approach to managing the board of directors and overseeing the company.
The Board’s Role in Risk Oversight
Our board of directors has responsibility for the oversight of the company’s risk management processes and, either as a whole or through its committees, regularly discusses with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight process includes receiving regular reports from board committees and members of senior management to enable our board to understand the company’s risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, strategic and reputational risk.
The audit committee reviews information regarding liquidity and operations, and oversees our management of financial risks. Periodically, the audit committee reviews our policies with respect to risk assessment, risk management, loss prevention and regulatory compliance. Oversight by the audit committee includes direct communication with our external auditors, and discussions with management regarding significant risk exposures and the actions management has taken to limit, monitor or control such exposures. The compensation committee is responsible for assessing whether any of our compensation policies or programs has the potential to encourage excessive
risk-taking. The nominating/corporate governance committee manages risks associated with the independence of the board, corporate disclosure practices, and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire board is regularly informed through committee reports about such risks. Matters of significant strategic risk are considered by our board as a whole.
Board of Directors Meetings
During
2018,2019, our board of directors met
sevensix times, including telephonic meetings, and in that year,
each directorall incumbent directors attended at least 75% of the aggregate number of meetings of the board and the committees on which they served, during the periods in which they served.
Committees of the Board of Directors
We have three standing committees: the audit committee, the compensation committee and the nominating/corporate governance committee. Each of these committees has a written charter approved by our board of directors. A copy of each charter can be found under the Investor
Relations-Corporate Governance section of our website at www.zogenix.com.
The audit committee of our board of directors currently consists of Mr.Messrs. Mast (chairman and audit committee financial expert), Mr. Bock and Mr. Wiggins. The audit committee met fourfive times during 2018,2019, including telephonic meetings. Our board of directors has determined that all members of the audit committee are independent directors,
as defined in the Nasdaq qualification standards and by Section 10A of the Exchange Act. In addition, our board of directors has determined that Mr. Mast qualifies as an “audit committee financial expert” as that phrase is defined under the regulations promulgated by the SEC. The audit committee is governed by a written charter adopted by our board of directors. The audit committee’s main function is to oversee our accounting and financial reporting processes, internal systems of control, independent registered public accounting firm relationships and the audits of our financial statements. The audit committee’s responsibilities include, among other things:
•selecting and engaging our independent registered public accounting firm;
•evaluating the qualifications, independence and performance of our independent registered public accounting firm;
•approving the audit andnon-audit services to be performed by our independent registered public accounting firm;
•reviewing the design, implementation, adequacy and effectiveness of our internal controls and our critical accounting policies;
•discussing with management and the independent registered public accounting firm the results of our annual audit and the review of our quarterly unaudited financial statements;
•reviewing, overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;
•reviewing with management and our auditors any earnings announcements and other public announcements regarding our results of operations;
•preparing the report that the SEC requires in our annual proxy statement;
•reviewing and approving any related party transactions and reviewing and monitoring compliance with our code of conduct and ethics; and
•reviewing and evaluating, at least annually, the performance of the audit committee and its members including compliance of the audit committee with its charter.
Both our external auditor and internal financial personnel meet privately with the audit committee and have unrestricted access to this committee.
The compensation committee of our board of directors currently consists of Mr.
GarnerWiggins (chairman),
Drs. Breitmeyer and Tannenbaum. During 2019, Mr.
WigginsGarner (former chairman and
committee member) served on the compensation committee until Dr.
Breitmeyer.Tannenbaum was appointed by our board of directors in September 2019 to be his successor. The compensation committee met three times during
2018,2019, including telephonic meetings. Our board of directors has determined that all members of the compensation committee are independent directors, as defined in the Nasdaq qualification standards. The compensation committee is governed by a written charter approved by our board of directors. The compensation committee’s purpose is to assist our board of directors in determining the development plans and compensation for our senior management and directors and recommend these plans to our board of directors. The compensation committee’s responsibilities include, among other things:
•reviewing our compensation philosophy, including our policies and strategy relative to executive compensation;
•reviewing and recommending to the full board for approval the compensation of our Chief Executive Officer;
•reviewing and approving the compensation of our other executive officers, including executive employment and severance agreements;
•reviewing and recommending to the full board for approval the compensation policies for members of our board of directors and board committees;
•reviewing, approving and administering our benefit plans and the issuance of stock options and other awards under our equity incentive plans (other than any such awards that must be approved by the full board);
•reviewing and discussing with management our compensation discussion and analysis to be included in our annual proxy report or annual report on Form10-K and producing the report that the SEC requires in our annual proxy statement; and
•reviewing and evaluating, at least annually, the performance of the compensation committee and its members including compliance of the compensation committee with its charter.
Nominating/Corporate Governance Committee
The nominating/corporate governance committee of our board of directors currently consists of
Mr.Messrs. Bock (chairman),
Garner and Mast. During 2019, Dr. Tannenbaum served on the nominating/corporate governance committee until Mr.
Mast and Dr. Tannenbaum.Garner was appointed by our board of directors in September 2019 to be her successor. This committee
acted only by written consentmet twice during
2018.2019. Our board of directors has determined that all members of the nominating/corporate governance committee are independent directors, as defined in the Nasdaq qualification standards. The nominating/corporate governance committee is governed by a written charter approved by our board of directors. The nominating/corporate governance committee’s purpose is to assist our board of directors by identifying individuals qualified to become members of our board of directors, consistent with criteria set by our board, and to develop our corporate governance principles. The nominating/corporate governance committee’s responsibilities include, among other things:
•evaluating the composition, size and governance of our board of directors and its committees and making recommendations regarding future planning and the appointment of directors to our committees;
•administering a policy for considering stockholder nominees for election to our board of directors;
•evaluating and recommending candidates for election to our board of directors;
•developing guidelines for board compensation;
•overseeing our board of directors’ performance and self-evaluation process;
self-evaluation• process;
reviewing our corporate governance principles and providing recommendations to the board regarding possible changes; and
•reviewing and evaluating, at least annually, the performance of the nominating/corporate governance committee and its members including compliance of the nominating/corporate governance committee with its charter.
Report of the Audit Committee of the Board of Directors
The audit committee oversees the company’s financial reporting process on behalf of our board of directors. Management has the primary responsibility for the financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. In fulfilling its oversight responsibilities, the audit committee reviewed the audited financial statements in the company’s annual report with management, including a discussion of any significant changes in the selection or application of accounting principles, the reasonableness of significant judgments, the clarity of disclosures in the financial statements and the effect of any new accounting initiatives.
The audit committee reviewed with Ernst & Young LLP, which is responsible for expressing an opinion on the conformity of the company’s audited financial statements with generally accepted accounting principles in the United States of America, its judgments as to the quality, not just the acceptability, of the company’s accounting principles and such other matters as are required to be discussed with the audit committee by the standards of the Public Company Accounting Oversight Board (the “PCAOB”). In addition, the audit committee has received the written disclosures and the letter from Ernst & Young LLP required by PCAOB Ethics and
Independence Rule 3526, “Communication with Audit Committees Concerning Independence”, and the audit committee has discussed with Ernst & Young LLP their independence from Zogenix, Inc. and its management.
The audit committee met with Ernst & Young LLP to discuss the overall scope of its services, the results of its audit and reviews, its evaluation of the company’s internal controls including internal control over financial reporting and the overall quality of the company’s financial reporting. Ernst & Young LLP, as the company’s independent registered public accounting firm, also periodically updates the audit committee about new accounting developments and their potential impact on the company’s reporting. The audit committee’s meetings with Ernst & Young LLP were held with and without management present. The audit committee is not employed by the company, nor does it provide any expert assurance or professional certification regarding the company’s financial statements. The audit committee relies, without independent verification, on the accuracy and integrity of the information provided, and representations made, by management and the company’s independent registered public accounting firm.
In reliance on the reviews and discussions referred to above, the audit committee has recommended to the company’s board of directors that the audited financial statements and management’s assessment of the effectiveness of the company’s internal control over financial reporting be included in our annual report on
Form 10-K for the year ended December 31,
20182019 filed by the company with the Securities and Exchange Commission. The audit committee and the company’s board of directors also have recommended, subject to stockholder approval, the ratification of the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for
2019.the year ending December 31, 2020.
This report of the audit committee is not “soliciting material,” shall not be deemed “filed” with the SEC and shall not be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
The foregoing report has been furnished by the audit committee.
The Audit Committee of the Board of Directors
Compensation Committee Interlocks and Insider Participation
Mr. Garner
(former chairman and committee member), Mr. Wiggins
(current chairman) and
Dr.Drs. Breitmeyer
and Tannenbaum served on
ourthe compensation committee during
2018.2019. None of the members of our compensation committee has ever been one of our officers or employees. None of our executive officers currently serves, or has 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 our board of directors or compensation committee.
Director Nomination Process
In evaluating director nominees the nominating/corporate governance committee will consider among other things the following factors:
•personal and professional integrity, ethics and values;
•experience in corporate management, such as serving as an officer or former officer of a publicly-held company;
publicly-held• company;
commercialization experience in large pharmaceutical companies;
•strong finance experience;
•experience relevant to our industry;
•experience as a board member of another publicly held company;
•diversity of expertise and experience in substantive matters pertaining to our business relative to other board members;
•diversity of background and perspective, including with respect to age, gender, race, place of residence and specialized experience; and
•practical and mature business judgment.
The nominating/corporate governance committee’s goal is to assemble a board of directors that brings to the company a variety of perspectives and skills derived from high quality business and professional experience. Moreover, the nominating/corporate governance committee believes that the background and qualifications of the board of directors, considered as a group, should provide a significant mix of experience, knowledge and abilities that will allow the board of directors to fulfill its responsibilities. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by law.
Other than the foregoing criteria for director nominees, the nominating/corporate governance committee has not adopted a formal policy with respect to a fixed set of specific minimum qualifications for its candidates for membership on the board of directors. The nominating/corporate governance committee may consider such other facts, including, without limitation, diversity, as it may deem are in the best interests of the company and its stockholders. The nominating/corporate governance committee does, however, believe it is appropriate for at least one, and, preferably, several, members of our board of directors to meet the criteria for an “audit committee financial expert” as defined by SEC rules, and that a majority of the members of our board of directors be independent as required under the Nasdaq qualification standards. The nominating/corporate governance committee also believes it is appropriate for our President and Chief Executive Officer to serve as a member of our board of directors. Our directors’ performance and qualification criteria are reviewed annually by the nominating/corporate governance committee.
Identification and Evaluation of Nominees for Directors
The nominating/corporate governance committee identifies nominees for director by first evaluating the current members of our board of directors willing to continue in service. Current members with qualifications and skills that are consistent with the nominating/corporate governance committee’s criteria for board of director service and who are willing to continue in service are considered for
re-nomination, balancing the value of continuity of service by existing members of our board of directors with that of obtaining a new perspective or expertise.
If any member of our board of directors does not wish to continue in service or if our board of directors decides not tore-nominate a member forre-election, the nominating/corporate governance committee may identify the desired skills and experience of a new nominee in light of the criteria above, in which case, the nominating/corporate governance committee would generally poll our board of directors and members of management for their recommendations. The nominating/corporate governance committee may also review the composition and qualification of the boards of directors of our competitors, and may seek input from industry experts or analysts. The nominating/corporate governance committee reviews the qualifications, experience and background of the candidates. Final candidates are interviewed by the members of the nominating/corporate governance committee and by certain of our other independent directors and executive management. In making its determinations, the nominating/corporate governance committee evaluates each individual in the context of
our board of directors as a whole, with the objective of assembling a group that can best contribute to the success of our company and represent stockholder interests through the exercise of sound judgment. After review and deliberation of all feedback and data, the nominating/corporate governance committee makes its recommendation to our board of directors. The nominating/corporate governance committee has utilized thethird-party search firm of Spencer Stuart to assist with the identification of qualified board of director candidates.
The nominating/corporate governance committee evaluates nominees recommended by stockholders in the same manner as it evaluates other nominees. We have not received director candidate recommendations from our stockholders and do not have a formal policy regarding consideration of such recommendations. However, any recommendations received from stockholders will be evaluated in the same manner that potential nominees suggested by board members, management or other parties are evaluated. We do not intend to treat stockholder recommendations in any manner different from other recommendations.
Under our amended and restated bylaws, stockholders wishing to suggest a candidate for director should write to our corporate secretary and provide such information about the stockholder and the proposed candidate as is set forth in our amended and restated bylaws and as would be required by SEC rules to be included in a proxy statement. In addition, the stockholder must include the
consent of the candidate and describe any arrangements or undertakings between the stockholder and the candidate regarding the nomination. In order to give the nominating/corporate governance committee sufficient time to evaluate a recommended candidate and/or include the candidate in our proxy statement for the
20202021 annual meeting, the recommendation should be received by our corporate secretary at our principal executive offices in accordance with our procedures detailed in the section below entitled “Stockholder Proposals.”
Director Attendance at Annual Meetings
Although our company does not have a formal policy regarding attendance by members of our board of directors at our annual meeting, we encourage all of our directors to attend. All directors attended the
20182019 annual meeting of stockholders held on May
23, 2018,22, 2019, either in person or by telephone.
Communications with our Board of Directors
Stockholders seeking to communicate with our board of directors should submit their written comments to our corporate secretary at Zogenix, Inc., Attn: Corporate Secretary, 5959 Horton Street, Suite 500, Emeryville, California 94608. The corporate secretary will forward such communications to each member of our board of directors; provided that, if in the opinion of our corporate secretary it would be inappropriate to send a particular stockholder communication to a specific director, such communication will only be sent to the remaining directors (subject to the remaining directors concurring with such opinion).
Our company’s Code of Business Conduct and Ethics, Corporate Governance Guidelines, Audit Committee Charter, Compensation Committee Charter and Nominating/Corporate Governance Committee Charter are available, free of charge, on our website at www.zogenix.com. Please note, however, that the information contained on the website is not incorporated by reference in, or considered part of, this proxy statement. We will also provide copies of these documents, as well as our company’s other corporate governance documents, free of charge, to any stockholder upon written request to Zogenix, Inc., Attention: Corporate Secretary, 5959 Horton Street, Suite 500, Emeryville, California 94608.
We compensatenon-employee members of the board of directors. Directors who are also employees do not receive cash or equity compensation for service on the board of directors in addition to compensation payable for their service as our employees.
Under ournon-employee director compensation policy, we provide cash compensation in the form of an annual retainer of $40,000 for eachnon-employee director. We also pay an additional annual retainer of $60,000 to the chairman of our board of directors (however the total cash compensation paid to the chairman of the board in all capacities cannot exceed $100,000 in any calendar year), $25,000 to the chair of our audit committee, $15,000 to the chair of our compensation committee, and $10,000 to the chair of our nominating/corporate governance committee. We also pay an additional $10,000 per year to members of the audit committee, an additional $7,500 per year to members of our compensation committee and an additional $5,000 per year to members of our nominating/corporate governance committee. There was no change to the cash compensation paid to ournon-employee directors when ournon-employee director compensation policy was amended and restated in March 2018, as described below.
2019.
We have reimbursed and will continue to reimburse our
non-employee directors for their reasonable expenses incurred in attending meetings of our board of directors and committees of the board of directors.
In March 2018, after consultation with the compensation committee’s independent compensation consultant, our board of directors approved an amendment and restatement of our
non-employee director compensation policy, pursuant to which any
non-employee director who is first elected to the board of directors is granted an option to purchase 20,000 shares of our common stock on the date of his or her initial election to the board of directors. In addition, on the date of each annual meeting of our stockholders,
including thecommencing with our 2018 annual meeting, each
non-employee director is eligible to receive an option to purchase 15,000 shares of common stock. Our
non-employee director compensation policy was further amended in March 2019 to provide that, on the date of each annual meeting of our stockholders, commencing with the 2019 annual meeting, each
non-employee director is eligible to receive an option to purchase 13,000 shares of common stock.
No otherThere have been no changes
were made to our
non-employee director compensation
program forsubsequent to our last amendment and restatement in March 2019.
The initial options granted to
non-employee directors will vest over three years in 36 equal monthly installments, subject to the director’s continuing service on our board of directors on those dates. The annual options granted to
non-employee directors described above will vest over one year in 12 equal monthly installments, subject to the director’s continuing service on our board of directors on those dates. The term of each option granted to a
non-employee director will be ten years and will remain exercisable for a period of 12 months following a director’s termination of service. These options
will beare granted under the amended and restated 2010 Equity Incentive Award Plan. All options have an exercise price per share equal to the fair market value of our common stock on the date of grant.
Summary
Director Compensation
for 2019
The following table summarizes
cash and stockthe compensation
received by ourearned or paid to non-employee directors during
the year ended December 31, 2018.2019. Dr. Farr is not included in the following table as he served as an executive officer during
20182019 and his compensation is included in the Summary Compensation Table in the “Executive Compensation and Other Information” section below.
| | | | | | | | | | | | |
Name | | Fees Earned
or Paid in
Cash
($) | | | Option
Awards
($)(1) | | | Total
($) | |
Louis C. Bock | | | 60,000 | | | | 417,899 | | | | 477,899 | |
James B. Breitmeyer, M.D., Ph.D. | | | 47,500 | | | | 417,899 | | | | 465,399 | |
Cam L. Garner | | | 100,000 | | | | 417,899 | | | | 517,899 | |
Roger L. Hawley(2) | | | 40,000 | | | | 417,899 | | | | 457,899 | |
Erle T. Mast | | | 70,000 | | | | 417,899 | | | | 487,899 | |
Renee P. Tannenbaum, Pharm.D. | | | 45,000 | | | | 417,899 | | | | 462,899 | |
Mark Wiggins | | | 57,500 | | | | 417,899 | | | | 475,399 | |
(1) | The amounts are valued based on the aggregate grant date fair value of the option award in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. See Note 10 to our
|
Dr. Farr does not receive any compensation for his service as a member of the board of directors. | consolidated financial statements in our 2018 Annual Report on Form10-K for a discussion of the relevant assumptions used in determining the grant date fair value pursuant to ASC 718. These amounts do not reflect whether the recipient has actually realized or will realize a financial benefit from the awards (such as by exercising stock options). Whether, and to what extent, anon-employee director realizes a financial benefit from the awards will depend on our actual operating performance, stock price fluctuations and thenon-employee director’s continued service on our board.
|
(2) | Mr. Hawley resigned from our board of directors effective as of March 31, 2019.
|
| | | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees Earned or
Paid in Cash
($) | | Option
Awards
($)(1) | | | | Total
($) |
| Louis C. Bock | | 60,000 | | 326,018 | | | | 386,018 |
| James B. Breitmeyer, M.D., Ph.D. | | 47,500 | | 326,018 | | | | 373,518 |
| Cam L. Garner | | 100,000 | | 326,018 | | | | 426,018 |
| Roger L. Hawley (2) | | 10,000 | | — | | | | 10,000 |
| Erle T. Mast | | 70,000 | | 326,018 | | | | 396,018 |
| Renee P. Tannenbaum, Pharm.D. (3) | | 46,875 | | 326,018 | | | | 372,893 |
| Mark Wiggins (3) | | 59,375 | | 326,018 | | | | 385,393 |
————————————
(1)The amounts in this column represent the grant-date fair value of option awards made to each board member during 2019. The applicable grant-date fair value of each option award was calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“ASC 718”) using the Black-Scholes valuation model. For a discussion of the valuation assumptions used, see Note 12 to our consolidated financial statements for the year ended December 31, 2019 included in our Annual Report on Form 10-K filed with the SEC on March 2, 2020. These amounts do not reflect whether the recipient has actually realized or will realize a financial benefit from the awards (such as by exercising stock options). Whether, and to what extent, a non-employee director realizes a financial benefit from the awards will depend on our actual operating performance, stock price fluctuations and the non-employee director’s continued service on our board.
(2)Mr. Hawley resigned from our board of directors effective as of March 31, 2019 so his annual retainer is reflective of his partial year service.
(3)The cash annual retainer fees reflect a proration due to change in committee membership during 2019.
The aggregate number of shares subject to stock options outstanding at December 31,
20182019 for each
non-employee director was as follows:
| | | | | | | | |
Name | | Number of
Securities Underlying
Underlying Options
Outstanding at
December 31, 2018 | 2019 |
Louis C. Bock | | | 64,000 | 77,000 |
James B. Breitmeyer, M.D., Ph.D. | | | 79,625 | 82,625 |
Cam L. Garner | | | 88,280 | 68,000 |
Roger L. Hawley(1) Hawley (1) | | | 299,498 | 199,957 |
Erle T. Mast | | | 91,717 | 104,717 |
Renee P. Tannenbaum, Pharm.D. | | | 73,375 | 31,000 |
Mark Wiggins | | | 89,625 | 96,375 |
(1) | Mr. Hawley resigned from our board of directors effective as of March 31, 2019.
|
————————————
(1)Mr. Hawley resigned from our board of directors effective as of March 31, 2019.
Vote Required; Recommendation of the Board of Directors
If a quorum is present and voting at the annual meeting, the
twothree nominees receiving the highest number of votes will be elected to our board of directors. Votes withheld from any nominee, abstentions and broker
non-votes will be counted only for purposes of determining a quorum. Broker
non-votes will have no effect on this proposal as brokers or other nominees are not entitled to vote on such proposals in the absence of voting instructions from the beneficial owner.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF LOUIS C. BOCK, CAM L. GARNER AND MARK WIGGINS FOR ELECTION TO THE ELECTIONBOARD OF ERLE T. MAST AND RENEE P. TANNENBAUM, PHARM.D.DIRECTORS. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE ON YOUR PROXY CARD.
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee has selected Ernst & Young LLP as the company’s independent registered public accounting firm for the year ending December 31,
20192020 and has further directed that management submit the selection of the independent registered public accounting firm for ratification by the stockholders at the annual meeting. Ernst & Young LLP has served as Zogenix, Inc.’s independent registered public accounting firm since 2007. Representatives of Ernst & Young LLP are expected to be present at the annual meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the company’s independent registered public accounting firm is not required by Delaware law, the company’s amended and restated certificate of incorporation or the company’s amended and restated bylaws. However, the audit committee is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the audit committee will reconsider whether to retain the firm. Even if the selection is ratified, the audit committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the audit committee determines that such a change would be in the best interests of the company and its stockholders.
Independent Registered Public Accounting Firm’s Fees
The following table represents aggregate fees billed to us for services related to the fiscal years ended December 31,
20182019 and
20172018 by Ernst & Young LLP, our independent registered public accounting firm.
| | | | | | | | |
| | | Year Ended December 31, | |
| | | 2018 | | | 2017 | |
| | | (in thousands) | |
Audit Fees(1) | | $ | 1,418 | | | $ | 1,429 | |
Audit Related Fees(2) | | | — | | | | — | |
Tax Fees(3) | | | — | | | | — | |
All Other Fees(4) | | | 2 | | | | 2 | |
| | | | | | | | |
Total | | $ | 1,420 | | | $ | 1,431 | |
| | | | | | | | |
(1) | Audit Fees consist of fees billed for professional services performed by Ernst & Young LLP for the audit of our annual financial statements, review of our quarterly reports on Form10-Q, services in connection with securities offerings, review of our registration statements onForm S-3 and related services that are normally provided in connection with statutory and regulatory filings or engagements.
|
(2) | Audit Related Fees consist of fees billed by Ernst & Young LLP for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. There were no such fees incurred during 2018 or 2017.
|
(3) | Tax Fees consist of fees for professional services, including tax consulting and compliance performed by Ernst & Young LLP. There were no such fees incurred during 2018 or 2017.
|
(4) | All Other Fees consist of fees billed in the indicated year for an annual subscription to Ernst & Young LLP’s online resource library.
|
| | | | | | | | | | | |
| Year Ended December 31, | | |
| 2019 | | 2018 |
| (in thousands) | | | |
| Audit Fees (1) | $ | 2,110 | | | | $ | 1,418 | |
| Audit Related Fees (2) | — | | | | — | |
| Tax Fees (3) | — | | | | — | |
| All Other Fees (4) | 4 | | | | 2 | |
| Total | $ | 2,114 | | | $ | 1,420 | |
————————————
(1)Audit Fees consist of fees billed for professional services performed by Ernst & Young LLP for the audit of our annual financial statements, review of our quarterly reports on Form 10-Q, services in connection with securities offerings, review of our registration statements on Form S-3 and related services that are normally provided in connection with statutory and regulatory filings or engagements.
(2)Audit Related Fees consist of fees billed by Ernst & Young LLP for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. There were no such fees incurred during 2019 or 2018.
(3)Tax Fees consist of fees for professional services, including tax consulting and compliance performed by Ernst & Young LLP. There were no such fees incurred during 2019 or 2018.
(4)All Other Fees consist of fees billed in the indicated year for an annual subscription to Ernst & Young LLP’s online resource library.
The audit committee has considered whether the provision of
non-audit services is compatible with maintaining the independence of Ernst & Young LLP, and has concluded that the provision of such services is compatible with maintaining the independence of our auditors.
Pre-Approval Policies and Procedures
Our audit committee has established a policy that all audit and permissiblenon-audit services provided by our independent registered public accounting firm will bepre-approved by the audit committee, and all such
services werepre-approved in accordance with this policy during the fiscal years ended December 31, 20182019 and 2017.2018. These services may include audit services,audit-related services, tax services and other services. The audit committee considers whether the provision of eachnon-audit service is compatible with maintaining the independence of our auditors.Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Our independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with thispre-approval, and the fees for the services performed to date.
Vote Required; Recommendation of the Board of Directors
The affirmative vote of a majority of the shares of common stock present or represented by proxy and entitled to vote at the meeting will be required to ratify the selection of Ernst & Young LLP. Abstentions will be counted toward the tabulation of votes cast on this proposal and will have the same effect as negative votes. The approval of proposal 2 is a routine proposal on which a broker or other nominee has discretionary authority to vote. Accordingly, no broker
non-votes will likely result from this proposal.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.2020. PROXIES SOLICITED BY OUR BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS.
APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
Under the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the
Dodd-Frank Act, and Section 14A of the Exchange Act, our stockholders are entitled to vote at the annual meeting to provide advisory approval of the compensation of our named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC. Pursuant to the
Dodd-Frank Act, the stockholder vote on executive compensation is an advisory vote only, and it is not binding on us or our board of directors.
Although the vote is
non-binding, our compensation committee and board of directors value the opinions of the stockholders and will consider the outcome of the vote when making future compensation decisions. As described more fully in the Compensation Discussion and Analysis section of this proxy statement, our executive compensation program is designed to attract, retain and motivate individuals with superior ability, experience and leadership capability to deliver on our annual and
long-term business objectives necessary to create stockholder value. We urge stockholders to read the Compensation Discussion and Analysis section of this proxy statement, which describes in detail how our executive compensation policies and procedures operate and are intended to operate in the future. The compensation committee and the board of directors believe that our executive compensation program fulfills these goals and is reasonable, competitive and aligned with our performance and the performance of our executives.
We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a
“say-on-pay” “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we ask that our stockholders vote “FOR” the following resolution:
“RESOLVED, that Zogenix, Inc.’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in Zogenix, Inc.’s Proxy Statement for the
20192020 Annual Meeting of Stockholders, pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the
20182019 Summary Compensation Table and the other related tables and disclosure.”
Vote Required; Recommendation of the Board of Directors
The affirmative vote of a majority of the shares of common stock present or represented by proxy and entitled to vote at the meeting will be required to approve the advisory vote regarding the compensation of the named executive officers. Abstentions will be counted toward the tabulation of votes cast on this proposal and will have the same effect as negative votes. Broker
non-votes will have no effect on this proposal as brokers or other nominees are not entitled to vote on such proposals in the absence of voting instructions from the beneficial owner. At our 2017 annual meeting, the stockholders recommended that stockholders vote on the compensation of our named executive officers each year, and the board has determined that we will conduct an annual
“say-on-pay” “say-on-pay” vote.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR“FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC.
PROPOSAL 4:
APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
Our board of directors is requesting stockholder approval of an amendment to our Amended and Restated Certificate of Incorporation to increase our authorized number of shares of common stock from 50,000,000 shares to 100,000,000 shares.
The additional common stock to be authorized by adoption of the amendment would have rights identical to our currently outstanding common stock. Adoption of the proposed amendment and issuance of the common stock would not affect the rights of the holders of our currently outstanding common stock, except for effects incidental to increasing the number of shares of our common stock outstanding, such as dilution of the voting rights of current holders of common stock. If the amendment is adopted, it will become effective upon filing of a Certificate of Amendment of our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware.
In addition to the 42,406,959 shares of common stock outstanding on March 26, 2019, our board of directors has reserved an aggregate of 4,612,625 shares of common stock for issuance upon exercise of options and rights granted under our stock option plans.
Although, at present, our board of directors has no plans to issue the additional shares of common stock, it desires to have the shares available to provide additional flexibility to use our capital stock for business and financial purposes in the future. The additional shares may be used for various purposes without further stockholder approval, except as may be required in certain cases by law or the rules of the Nasdaq Stock Market. These purposes may include expanding our business or product lines through the acquisition of other businesses or products; raising capital; providing equity incentives to employees, officers or directors; establishing strategic relationships with other companies; and other purposes.
Our audited consolidated financial statements, management’s discussion and analysis of financial condition and results of operations, and certain supplementary financial information are incorporated by reference to our Annual Report on Form10-K for the fiscal year ended December 31, 2018.
Vote Required; Recommendation of the Board of Directors
The affirmative vote of the holders of a majority of the outstanding shares of our common stock will be required to approve this amendment to our Amended and Restated Certificate of Incorporation. Abstentions will be counted toward the tabulation of votes cast on this proposal and will have the same effect as negative votes. The approval of Proposal 4 is a routine proposal on which a broker or other nominee has discretionary authority to vote. Accordingly, no brokernon-votes will likely result from this proposal.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK.
PROPOSAL 5:
APPROVAL OF AMENDMENT AND RESTATEMENT OF
2010 EQUITY INCENTIVE AWARD
EMPLOYEE STOCK PURCHASE PLAN
Our stockholders are being asked to approve thean amendment and restatement of our 2010 Equity Incentive AwardEmployee Stock Purchase Plan or the 2010 Plan.(the “Existing ESPP”). The proposed amended and restated 2010 Planplan is referred to herein as the “Restated Plan.ESPP.” Our board of directors approved the Restated PlanESPP on March 27, 2019,April 14, 2020, subject to stockholder approval. The Restated PlanESPP will become effective asupon stockholder approval.
The Restated ESPP is being submitted for stockholder approval in order to ensure that the Section 423 Component of the
date our stockholders approveRestated ESPP (as described below) meets the
Restated Plan.requirements of Section 423 of the Internal Revenue Code (the “Code”). If the Restated
PlanESPP is
not approved by our stockholders,
our board of directors will not grant any future awards under our Employment Inducement Equity Incentive Award Plan, or the Inducement Plan. In the event that our stockholders do not approve the Restated
Plan, then itESPP will not become effective,
and the
2010 PlanExisting ESPP will continue in full force and effect,
in accordance with its terms as previously approved by our stockholders, and we may continue to grant awards under the
2010 Plan,Existing ESPP, subject to its terms, conditions and limitations, using the shares available for issuance thereunder.
If the Restated Plan is not approved by our stockholders, we will also continue to grant awards under the Inducement Plan.The principal features of the Restated Plan are summarized below, but the summary is qualified in its entirety by reference to the Restated Plan itself, which is attached as Appendix A to this proxy statement.
Overview of Proposed Amendments
Increase in Share Reserve; Elimination of Evergreen and Increase in Share ReserveProvision. We strongly believe that an employee equity compensationstock purchase program is a necessary and powerfulimportant incentive and retention tool that benefits all stockholders.tool. The Existing ESPP was first adopted by our board of directors and approved by our stockholders in 2010 in connection with our initial public offering. As of March 22, 2019,31, 2020, a total of 7,500,000375,000 shares of our common stock were reserved under the 2010 Plan, the aggregate number of shares of common stock subject to awards under the 2010 Plan was 3,977,685Existing ESPP and a total of 1,301,91149,597 shares of common stock remained available under the 2010 PlanExisting ESPP for future issuance. In addition, the 2010 Plan containsThe Existing ESPP contained an “evergreen provision”evergreen provision that allowsprovided for an annual increase in the number of shares available for issuance under the 2010 PlanExisting ESPP on January 1 of each year during the ten year term of the 2010 Plan. The annual increase in the number of shares under the 2010 Plan isExisting ESPP, beginning on January 1, 2011, equal to the least of:4%of 1% of our outstanding capital stock on the first day of the applicable fiscal year; and
anyear, or 31,250 shares (or a lesser amount determined by our board of directors.
directors). The 2010 Plan also provides thatautomatic increases pursuant to the number of shares reserved for issuance under the 2010 Plan may be increased from time to time by the number of shares of common stock related to options granted under our 2006 Equity Incentive Award Plan, or the 2006 Plan, that are repurchased, forfeited, expire or are cancelled on or after the effective dateevergreen provision of the 2010 Plan. As of March 22, 2019, options to purchase 43,758Existing ESPP since 2011 and through and including January 1, 2020 were 31,250 shares remained outstanding undereach, and these increases are included in the 2006 Plan.
Notwithstanding the foregoing, the number of shares of stock that may be issued or transferred pursuant to awards under the 2010 Plan may not exceed an aggregate of 7,500,000 shares. As a result, there will be no further evergreen increases under the 2010 Plan, and no further shares will become available for issuance under the 2010 Plan due to forfeitures of 2006 Plan awards since the aggregate limit on thecurrent share reserve under the 2010 Plan has already been met.
Pursuant to the Restated Plan, anExisting ESPP set forth above.
An additional
4,000,000500,000 shares
arewill be reserved for issuance under the Restated
PlanESPP over the
existingcurrent share reserve under the
2010 Plan. Additionally, the evergreen provision has been removed from the Restated Plan such that any increase the total numberExisting ESPP, all of
shares of common stock thatwhich may be issued under the
Restated Plan must be approved by our stockholders. In addition,Section 423 Component or the Non-Section 423 Component (each as further described below). The evergreen provision under the
Restated Plan, forfeited 2006 Plan awards will no longer be added toExisting ESPP terminated with the
share reserve underfinal increase on January 1, 2020, and the Restated
Plan.ESPP will not include an evergreen provision.
All of the foregoing share numbers may be adjusted
for changes in our capitalization and certaincorporate transactions, as described below under the heading “Adjustments.”
Limit on Incentive Stock Options. Under the Restated Plan, no more than 11,500,000 shares may be issued upon the exercise of incentive stock options, or ISOs, subject to adjustment for changes in our capitalization and certain corporate transactions, as described below under the heading “Adjustments.”
Extension
Removal of Term.Fixed Term. The Existing ESPP will expire in October 2020. The Restated PlanESPP will expire,not have a fixed term and in no event may any awards be granted under, the Restated Plan after the tenth (10th) anniversary of the datewill continue until terminated by our board of directors adoptedor the share reserve thereunder is exhausted.
Addition of Non-Section 423 Component. The Restated Plan.Prohibition on Repricing.The 2010 Plan permitsESPP will have two components in order to give us increased flexibility in the repricinggranting of outstanding options or SARs without stockholder approval. Other than pursuant to the provisions of the Restated Plan described below under the headings “Adjustments” and “Corporate Transactions,”purchase rights under the Restated Plan,ESPP to U.S. and to non-U.S. employees. Specifically, the Restated ESPP authorizes the grant of options that are intended to qualify for favorable U.S. federal tax treatment (the “Section 423 Component”) under Section 423 of the Code. To facilitate participation for employees located outside of the U.S. in light of non-U.S. law and other considerations, the Restated ESPP also provides for the grant of options that are not intended to be tax-qualified under Code Section 423 (the “Non-Section 423 Component”). The plan administrator may not withoutwill designate offerings made under the approval ofNon-Section 423 Component and, except as otherwise noted below or provided in the Company’s stockholders (1) lowerRestated ESPP, we expect that the exercise price of an option or SAR after it is granted or (2) cancel an option or SAR whenSection 423 Component and the exercise price exceedsNon-Section 423 Component generally will be operated and administered in the fair market value of the underlying shares in exchange for cash or another award.
Limitations on Dividend Payments on Unvested Awards. same way.
The Restated
Plan provides that dividends and dividend equivalents may not be paid on awards subject to vesting conditions unless and until such conditions are met. Under the Restated Plan, dividend equivalents may not be paid on stock options or SARs.Removal of Section 162(m) Provisions. Section 162(m) of the Internal Revenue Code, or the Code, prior to the Tax Cuts and Jobs Act of 2017 (the “TCJA”), allowed performance-based compensation that met certain requirements to be tax deductible regardless of amount. This qualified performance-based compensation exception was repealed as part of the TCJA. We have removed certain provisions from the Restated Plan which were otherwise required for awards to qualify as performance-based compensation under the Section 162(m) exception prior to its repeal, including, without limitation, the limit on the number of awards that could be granted to an individual in any calendar year.
Limitations on Grants to Directors. The Restated Plan provides for limitations on grants tonon-employee directors such that the sum of cash compensation, or other compensation, and the value of awards granted to anon-employee director as compensation for services as anon-employee director during any fiscal year of the Company may not exceed $750,000 (increased to $1,000,000 with respect to anynon-employee director serving as Chairman of the Board or in the fiscal year of anon-employee director’s initial service as anon-employee director). The board of directors may make exceptions to this limit for individualnon-employee directors in extraordinary circumstances, as the board of directors may determine in its discretion,provided that thenon-employee director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involvingnon-employee directors.
Tax Withholding. The Restated Plan permits the plan administrator to allow for the withholding or surrender of shares in satisfaction of tax withholding with respect to awards with a value up to the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America).
The Restated PlanESPP is not being amended in any material respect other than to reflect the changes described above.
Equity Incentive Awards Are Critical
Determination to
Long-Term Stockholder Value CreationWe believe that the adoption of theApprove Restated Plan is essential to our success. Equity awards are intended to motivate high levels of performance, align the interests of our directors, employees and consultants with those of our stockholders by giving directors, employees and consultants the perspective of an owner with an equity stake in our company and providing a means of recognizing their contributions to the success of our company. Our board of directors and management believe that equity awards are necessary to remain competitive in our industry and are essential to recruiting and retaining the highly qualified employees who help our company meet its goals.
ESPP Our equity incentive program is broad-based. As of March 22, 2019, all 96 of our employees had received grants of equity awards, none of our approximately 50 current consultants had received grants of equity awards and all 7 of ournon-employee directors had received grants of equity awards. We believe we must continue to offer a competitive equity compensation plan in order to attract, retain and motivate the industry-leading talent imperative to our continued growth and success.
Outstanding Awards Under Existing Plans — Ability to Grant Future Equity Awards is Limited
The table below presents information about the number of shares that were subject to various outstanding equity awards under our equity incentive plans and the shares remaining available for issuance under each such plan,those plans, each at March 22, 2019. The existing 2010 Plan31, 2020, and the Inducementproposed increase in shares authorized for issuance under the Restated ESPP.
The Existing ESPP and our 2010 Equity Incentive Award Plan (the “2010 Plan”) are the only equity incentive plans we currently have in place underpursuant to which we can grant awards (other than the shares available for purchasemay still be granted. Two of our named executive officers still hold outstanding stock options and restricted stock units granted under our Employee Stock Purchase Plan). As noted above, if2006 Equity Incentive Plan and our Employment Inducement Equity Incentive Award Plan, but no additional awards may be granted under those plans.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | Number of
Shares | | As a % of
Shares
Outstanding
(1) | | Dollar Value (2) |
| 2006 Plan | | | | | | |
| Options outstanding | | 5,343 | | | * | | $ | 132,132 | |
| Weighted average exercise price of outstanding options | | $ | 33.65 | | | | | |
| Weighted average remaining term of outstanding options | | 0.2 years | | | | |
| Shares available for grant under the 2006 Plan | | — | | | — | | | — | |
| 2010 Plan | | | | | | |
| Options outstanding | | 4,225,929 | | | 7.6 | % | | $ | 104,507,224 | |
| Weighted average exercise price of outstanding options | | $ | 29.10 | | | | | |
| Weighted average remaining term of outstanding options | | 7.4 years | | | | |
| Restricted stock units outstanding | | 564,561 | | | 1.0 | % | | $ | 13,961,594 | |
| Shares available for grant under the 2010 Plan | | 3,937,186 | | | 7.1 | % | | $ | 97,366,610 | |
| Inducement Plan | | | | | | |
| Options outstanding | | 568,175 | | | 1.0 | % | | $ | 14,050,968 | |
| Weighted average exercise price of outstanding options | | $ | 38.26 | | | | | |
| Weighted average remaining term of outstanding options | | 7.2 years | | | | |
| Restricted stock units outstanding | | 11,250 | | | * | | $ | 278,213 | |
| Shares available for grant under the Inducement Plan | | — | | | — | | | — | |
| Employee Stock Purchase Plan | | | | | | |
| Shares available for grant under the Existing ESPP | | 49,597 | | | * | | $ | 1,226,534 | |
| Proposed increase to share reserve | | 500,000 | | | * | | $ | 12,365,000 | |
————————————
*Represents less than 1% of our common stock outstanding as of March 31, 2020.
(1)Based on 55,340,691 shares of our common stock outstanding as of March 31, 2020.
(2)Based on the Restated Plan is approved byclosing price of our stockholders pursuant to this Proposal 5, our boardcommon stock on March 31, 2020, of directors will not grant any future awards under the Inducement Plan. As a result, assuming approval of this Proposal 5, the only shares we will have available for future issuance of equity awards will be the shares reserved for issuance under the Restated Plan (other than the shares available for purchase under our Employee Stock Purchase Plan). | | | | | | | | | | | | |
| | | Number of
Shares | | | As a % of Shares
Outstanding(1) | | | Dollar Value(2) | |
2006 Plan | | | | | | | | | | | | |
Options outstanding | | | 43,718 | | | | * | | | $ | 2,302,190 | |
Weighted average exercise price of outstanding options | | $ | 28.12 | | | | | | | | | |
Weighted average exercise remaining term of outstanding options | | | 0.9 years | | | | | | | | | |
Shares available for grant under the 2006 Plan | | | — | | | | — | | | | — | |
2010 Plan | | | | | | | | | | | | |
Options outstanding | | | 3,568,784 | | | | 8.4 | % | | $ | 187,932,165 | |
Weighted average exercise price of outstanding options | | | 25.59 | | | | | | | | | |
Weighted average exercise remaining term of outstanding options | | | 7.3 years | | | | | | | | | |
Restricted stock units outstanding | | | 402,901 | | | | 1.0 | % | | $ | 21,216,767 | |
Shares available for grant under the 2010 Plan | | | 1,301,911 | | | | 3.1 | % | | | 68,558,633 | |
Proposed increase to share reserve | | | 4,000,000 | | | | 9.4 | % | | $ | 210,640,000 | |
Inducement Plan | | | | | | | | | | | | |
Options outstanding | | | 595,800 | | | | 1.4 | % | | $ | 31,374,828 | |
Weighted average exercise price of outstanding options | | $ | 34.21 | | | | | | | | | |
Weighted average exercise remaining term of outstanding options | | | 8.4 years | | | | | | | | | |
Restricted stock units outstanding | | | 15,000 | | | | * | | | $ | 789,900 | |
Shares available for grant under the Inducement Plan | | | 24,925 | (3) | | | * | | | | 1,312,551 | |
Employee Stock Purchase Plan | | | | | | | | | | | | |
Shares available for grant under the Employee Stock Purchase Plan | | | 46,493 | | | | * | | | $ | 2,448,321 | |
* | Less than 1% of outstanding shares of our Common Stock outstanding as of March 22, 2019.
|
(1) | Based on 42,392,631 shares of our Common Stock outstanding as of March 22, 2019.
|
$24.73 per share. (2) | Based on the closing price of our Common Stock on March 22, 2019, of $52.66 per share.
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(3) | Effective March 27, 2019, our board of directors approved an increase to the share reserve under the Inducement Plan of 100,000 shares. This increase represents less than 1% of our outstanding Common Stock as of March 22, 2019 and has an aggregate value of $5,266,000 based on the closing price of our Common Stock on March 22, 2019, of $52.66 per share.
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Background for the Determination of the Share Reserve under the Restated Plan
In determining whether to approve the Restated Plan,ESPP, our board of directors considered that:
The shares to be initially reserved•Unless the Restated ESPP is authorized and approved by our stockholders, we will lose a powerful incentive and retention tool for issuanceemployees that benefits all of our stockholders. We expect the share reserve increase under the Restated Plan represent an increase of 4,000,000 shares over the aggregate number of shares reserved for issuance and available for future grant under the existing 2010 Plan and the Inducement Plan as of March 22, 2019 (after giving effectExisting ESPP, prior to the increase included in the Restated ESPP, may be insufficient for the next scheduled offering period. The increase will enable us to continue our policy of equity ownership by employees as an incentive to contribute to our success.
•Based on the three-year historical average share usage under the Existing ESPP described below, we expect the proposed aggregate share reserve under the Inducement Plan approved effective March 27, 2019 described above). IfRestated ESPP will be sufficient for the next several years of purchases, assuming employee participation in the Restated PlanESPP is approved, it will representconsistent with historical levels, and further dependent on the only equity plan underchanges in our stock price and future hiring activity, which we will be able to grant future equity awards (other than the shares available for purchase under our Employee Stock Purchase Plan) and we will no longer grant awards under the Inducement Plan.
Based on the compensation needscannot predict with any degree of the company and our historical equity compensation practices, we would expect to exhaust the remaining available shares under the existing 2010 Plan within the next twelve months. Also, because the aggregate limit on the shares issuable under the 2010 Plan has been met, there will be no further evergreen increases under the 2010 Plan nor will any additional shares subject to forfeited awards under the 2006 Plan become available for issuance under the 2010 Plan.
Although we have additional shares available for issuance under the Inducement Plan, pursuant to Nasdaq Marketplace Rule 5635(c), awards under the Inducement Plan generally may only be granted to an individual who has not previously been an employee of our company or a member of our board of directors, and such awards must be granted in connection with such individual’s commencement of employment with our company and as an inducement material to his or her entering into employment with our company. Combining the outstandingcertainty at this time. The share reserve under the Inducement Plan (and discontinuing the use of the Inducement Plan) with the reservation of additional shares under our existing 2010 Plan will allow us more flexibility in our equity grant practices and ensure that we retain an important compensation toolRestated ESPP could last for all employees, not just new employees.
a shorter or longer time.•In setting the size of the share reserve under the Restated Plan,ESPP, as described above, our board of directors also considered the historical amounts of equity awards granted by our company in the past three years. In 2016, 2017, 2018 and 2018,2019, equity awards representing a total of approximately 1,014,0001,172,000 shares, 1,136,0001,068,000 shares, and 1,035,0001,510,000 shares, respectively, were granted under all of our equity plans, for an annual equity burn rate of 4.1%3.4%, 3.3%2.5% and 2.5%3.3%, respectively. This level of equity awards represents a3-year average burn rate of 3.3%3.1% of common shares outstanding. Equity burn rate is calculated by dividing the number of shares subject to equity awards granted during the fiscal year (including shares issued under the Existing ESPP) by the number of common shares outstanding at the end of the fiscal year.
We expect the In 2017, 2018 and 2019, share authorizationpurchases representing 35,934 shares, 32,679 shares, and 28,146 shares, respectively, were issued under the Restated Plan to provide us with enough shares for awards for approximately three to four years, assuming we continue to grant awards consistent with our current practices and historical usage, as reflected in our historicalExisting ESPP, which issuances represent an annual burn rate of 0.1% for all three years, solely with respect to the Existing ESPP.
•In 2017, 2018 and further dependent on the price of our shares and hiring activity during the next few years, forfeitures of outstanding awards, and noting that future circumstances may require us to change our current equity grant practices. We cannot predict our future equity grant practices, the future price of our shares or future hiring activity with any degree of certainty at this time, and the share reserve under the Restated Plan could last for a shorter or longer time.
In 2016, 2017 and 2018,2019, our end of year overhang rate was 13.7%13.0%, 10.5%13.6% and 9.6%21.2%, respectively. If the Restated PlanESPP is approved, we expect our overhang at the end of 20192020 will be approximately 19%16%. Overhang is calculated by dividing (1) the sum of the number of shares subject to equity awards
outstanding at the end of the fiscal year plus shares remaining available for future award grants at the end of the fiscal year by (2) the number of common shares outstanding at the end of the fiscal year.
| outstanding at the end of the fiscal year plus shares remaining available for issuance for future awards at the end of the fiscal year by (2) the number of shares outstanding at the end of the fiscal year.
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•In light of the factors described above, and the fact that the ability to continue to grant equity compensation is vital to our ability to continue to attract and retain employees in the extremely competitive labor markets in which we compete, our board of directors has determined that the size of the share reserve under the Restated PlanESPP is reasonable and appropriate at this time. Our board of directors will not create a subcommittee to evaluate the risk and benefits for issuing shares under the Restated Plan.ESPP.
Key Features
Summary of the Restated
PlanESPP
The Restated Plan reflects a broad range of compensation and governance best practices, with some of the keyprincipal features of the Restated PlanESPP are summarized below, but the summary is qualified in its entirety by reference to the Restated ESPP itself, which is attached as follows: | • | | No Increase to Shares Available for Issuance without Stockholder Approval. Without stockholder approval, the Restated Plan prohibits any alteration or amendment that operates to increase the total number of shares of common stock that may be issued under the Restated Plan (other than adjustments in connection with certain corporate reorganizations and other events).
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| • | | No Repricing of Awards. Other than pursuant to the provisions of the Restated Plan described below under the headings “Adjustments” and “Corporate Transactions,” the plan administrator may not without the approval of the Company’s stockholders (1) lower the exercise price of an option or SAR after it is granted or (2) cancel an option or SAR when the exercise price exceeds the fair market value of the underlying shares in exchange for cash or another award.
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| • | | Limitations on Dividend Payments on Unvested Awards. Dividends and dividend equivalents may not be paid on awards subject to vesting conditions unless and until such conditions are met. Dividend equivalents may not be paid on stock options or SARs.
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| • | | NoIn-the-Money Option or Stock Appreciation Right Grants. The Restated Plan prohibits the grant of options or SARs with an exercise or base price less than 100% of the fair market value of our Common Stock on the date of grant.
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| • | | Independent Administration. The compensation committee of our board of directors, which consists of two or morenon-employee directors, generally will administer the Restated Plan. The full board of directors will administer the Restated Plan with respect to awards granted to members of the board. The compensation committee may delegate certain of its duties and authorities to a committee of one or more directors or officers of the Company for awards to certain individuals, within specific guidelines and limitations. However, no delegation of authority is permitted with respect to awards made to individuals who (1) are subject to Section 16 of the Exchange Act, or (2) are officers of the Company and have been delegated authority to grant or amend awards under the Restated Plan.
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Appendix A to this proxy statement. Purpose
The purpose of the Restated ESPP is to assist our eligible employees in acquiring a stock ownership interest in our company and to help our eligible employees provide for their future security and to encourage them to remain in our employment.
Securities Subject to the Restated
PlanAs of March 22, 2019, aESPP
A total of 7,500,000875,000 shares of our common stock are currently authorized for issuance under the 2010 Plan and will be reserved for issuanceRestated ESPP (after taking into account the increase of 500,000 shares added to the existing share reserve under the Restated Plan. Pursuant toExisting ESPP in connection with this amendment and restatement). All of the foregoing share numbers may be adjusted for changes in our capitalization and certain corporate transactions, as described below under the heading “Adjustments.”
Administration
Our board of directors administers the Restated
Plan,ESPP and has the
numberfinal power to construe and interpret both the Restated ESPP and the rights granted under it. Our board of
shares that will be reserved for issuance as of the effective datedirectors has delegated administration of the Restated
Plan will be increasedESPP to
11,500,000. In no event may more than 11,500,000 shares be issued uponour compensation committee. Our board of directors or compensation committee (the “plan administrator”) has the
exercise of ISOs under the Restated Plan.To the extent that an award expires or is forfeited or an award is settled for cash, any sharespower, subject to the award will, to the extentprovisions of such expiration, forfeiture or cash settlement, be available for future grant or sale under the Restated Plan. In addition,ESPP, to determine when and how rights to purchase shares of common stock which are delivered bywill be granted and the holder or withheld by us in paymentprovisions of each offering of such rights. For purposes of the grant or exercise price or tax withholding obligation of any awardRestated ESPP, the plan administrator may designate separate offerings under the Restated PlanESPP, the terms of which need not be identical, in which eligible employees of one or more designated subsidiaries will
again be available for future grant or sale under participate, even if the dates of the applicable offering periods in each such offering are identical, provided, however, that all participants granted purchase rights in an offering which are intended to comply with Section 423 of the Code will have the same rights and privileges within the meaning of Section 423 of the Code. In addition, the plan administrator have the power to settle all controversies regarding the Restated Plan. If any shares of restricted stock are forfeited by a participant or repurchased by us pursuantESPP and purchase rights granted under it.
The plan administrator may adopt sub-plans, appendices, rules and procedures relating to the
Restated Plan, such shares shall again be available for future grant or sale underoperation and administration of the Restated
Plan. The payment of dividend equivalentsESPP to facilitate participation in
cash in conjunction with any outstanding awards shall not be counted against the shares of stock available for issuance under the Restated
Plan.ESPP by employees who are foreign nationals or employed outside the U.S. To the extent permitted by applicable lawany sub-plan or appendix is inconsistent with the requirements of Section 423 of the Code, it will be considered part of the Non-Section 423 Component. The provisions of the Restated ESPP will govern any exchange rule, and subject to certain other restrictions, shares issued in assumption of, or in substitution for, any outstanding awards or shares available under apre-existing plan of an entity acquiredsub-plan unless superseded by the Company orterms of such sub-plan.
Eligibility
Only employees of Zogenix, Inc. (or any of its subsidiaries
that was approveddesignated by
shareholders and not adoptedthe plan administrator) may participate in
contemplation of such acquisition will not be counted against the shares available for grant under the Restated
Plan.Administration
The compensation committeeESPP. Only employees of our boardmajority-owned subsidiary corporations (within the meaning of directors will generally administer the Restated Plan (except with respect to any award granted tonon-employee directors, which must be administered by our full board of directors). To the extent necessary to comply with Rule16b-3Section 423 of the Exchange Act,Code) may participate in the members of the compensation committee must each be a“non-employee director” for purposes of Rule16b-3 under the Exchange Act. In addition, to the extent required by applicable law, each member of the compensation committee shall be an “independent director” under the rules of any securities exchange on which the shares of our common stock are listed.Section 423 Component. The compensation committee may delegate certain of its duties and authorities to a committee of one or more directors or officers of the Company for awards to certain individuals, within specific guidelines and limitations. However, no delegation of authority is permitted with respect to awards made to individuals who (1) are subject to Section 16 of the Exchange Act, or (2) are officers of the Company and have been delegated authority to grant or amend awards under the Restated Plan. The compensation committee, the board of directors or any such subcommittee to which authority to grant awards has been delegated are referred to herein as the “plan administrator.” Subject to the terms and conditions of the Restated Plan, the plan administrator has the authority to selectlimit participation to those individuals who have been customarily employed more than 20 hours per week and more than five months per calendar year on the personsfirst day of an offering. In addition, the plan administrator may require that each employee has been continuously employed for such period preceding the grant as the plan administrator may require, but in no event will the required period of continuous employment be greater than two years. Finally, the plan administrator also has the power to whom awardsexclude our officers who are “highly compensated” as defined in the Code. No employee is eligible to be made, to determineparticipate in the typeRestated ESPP if, immediately after the grant of purchase rights, the employee would own, directly or typesindirectly, stock possessing 5% or more of awards to be granted to each person, the numbertotal combined voting power or value of awards to grant,all classes of stock of Zogenix, Inc. or any of its parent or subsidiary corporations. Participation in the number of shares to beSection 423 Component is further subject to such awards, and the terms and conditionseligibility requirements of Section 423 of the Code.
If the grant of a purchase right under the Restated ESPP to any employee of a designated subsidiary who is a citizen or resident of a foreign jurisdiction would be prohibited under the laws of such awards, andforeign jurisdiction or the grant of a purchase right to make all other determinations and decisions andsuch employee in compliance with the laws of such foreign jurisdiction would cause the Restated ESPP to take all other actions necessary or advisable forviolate the administrationrequirements of Section 423 of the Code, as determined by the plan administrator in its sole discretion, such employee will not be permitted to participate in the Section 423 Component of the Restated Plan. TheESPP. In addition, with respect to the Non-Section 423 Component, all of the foregoing rules will apply in determining who is an eligible employee, except the plan administrator is also authorizedmay limit eligibility further within a participating company so as to establish, adopt, amend or reviseonly designate some employees of a participating company as eligible employees, and to the extent the foregoing eligibility rules relating to administration ofare not consistent with applicable local laws.
Eligible employees become participants in the Restated
Plan. Our boardESPP by enrolling and authorizing payroll deductions by the deadline established by the plan administrator prior to the relevant offering date. Directors who are not employees are not eligible to participate. Employees who choose not to participate, or are not eligible to participate at the start of
directorsan offering period but who become eligible thereafter, may
atenroll in any
time revest in itself the authority to administer the Restated Plan.Eligibility
Options, SARs, restricted stock and other awardssubsequent offering period.
As of December 1, 2019 (the last enrollment date under the Restated Plan may be grantedExisting ESPP), there were 140 employees who were eligible to individualsparticipate in the Existing ESPP and who are then our officers or employees or are the officers or employees of any of our subsidiaries. Such awards may also be granted to ournon-employee directors and consultants but only employees may be granted ISOs. As of March 22, 2019, we had 7non-employee directors, 96 employees and approximately 50 consultants, each of whom would have been eligible for awards underto participate in the Restated PlanESPP if it had it been in effect on such date.date and had the subsidiaries for whom such employees work been designated as designated subsidiaries under the Restated ESPP as of such date, 89 of whom had elected to participate.
Participation in an Offering
Offering Periods and Purchase Periods. The closing share price per shareRestated ESPP is implemented by offerings of rights to all eligible employees from time to time. Under applicable law and the terms of the Restated ESPP, the maximum length for an offering period under the Restated ESPP is 27 months. Each offering period consists of one or more purchase dates as determined by the plan administrator. Pursuant to the terms of our common stockcurrent offering periods under the Restated ESPP, a new offering period will automatically begin on each June 1 and December 1 over the term of the Restated ESPP and will be 12 months in duration. Each new offering period shall consist of two purchase periods of six months in length ending on May 31 and November 30 each year, with purchases occurring on the Nasdaq Global Market on March 22, 2019 was $52.66.Awards
The Restated Plan provides that the plan administrator may grant or issue stock options, SARs, restricted stock, restricted stock units, dividend equivalents, stock payments, and other incentive awards, or any combination thereof. The plan administrator will consider each award grant subjectively, considering factors such as the individual performancelast trading day of the recipient and the anticipated contribution of the recipient to the attainment of our long-term goals. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.
Nonqualified stock options, or NQSOs, provide for the right to purchase shares of our common stock at a specified price which may not be less thanperiod. If the fair market value of a share of our common stock on the
| date of grant, and usually will become exercisable (at the discretion of the plan administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with us and/or subject to the satisfaction of performance targets established by the plan administrator. NQSOs may be granted for any term of up to ten years after the date of grant.
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Incentive stock options, or ISOs, are designed to comply with the provisions first day of the Internal Revenue Code and are subject to specified restrictions contained in the Internal Revenue Code. Among such restrictions, ISOs must have an exercise price of nota later offering period is less than or equal to the fair market value on the start date of an ongoing offering period, then such ongoing offering period will terminate immediately following the purchase of shares on the purchase date and the participants in the terminated offering period will automatically be enrolled in the new offering period. The Restated ESPP allows for concurrent offerings, but an eligible employee may enroll in only one offering at a time.
Enrollment in the Restated ESPP. Eligible employees enroll in the Restated ESPP by delivering to us an agreement authorizing payroll deductions in an amount up to the maximum amount approved by the plan administrator. Pursuant to the Restated ESPP, such payroll deductions will be limited to up to 20% of an employee’s eligible cash compensation during the offering. A participant may increase or decrease his or her participation level at any time with such change to be effective commencing as of the next offering period. A participant may also increase or decrease his or her participation level to be effective in a subsequent purchase period of an ongoing offering in accordance with procedures established by us. A participant may decrease, but not increase, his or her participation level during a purchase period. The plan administrator may determine in its sole discretion at any time, including at any time following the commencement of an offering period or purchase period, that it will no longer accept participant requests to increase participation levels during such offering period or purchase period, as applicable. All payroll deductions made for a participant are credited to the participant’s account under the Restated ESPP and are included with the general funds of the Company, unless otherwise required by applicable law. Funds received upon sales of stock under the Restated ESPP are used for general corporate purposes. In general, no interest will be paid on participant accounts. With respect to the Non-Section 423 Component, interest may apply to participant accounts to the extent required by applicable law and approved by the plan administrator. In non-U.S. jurisdictions where participation in the Restated ESPP through payroll deductions is prohibited, the plan administrator may provide that an eligible employee may elect to participate through contributions to the participant’s account under the Restated ESPP in a form acceptable to the administrator in lieu of or in addition to payroll deduction.
Purchase Price. Unless otherwise determined by the plan administrator, the purchase price of the shares will be 85% of the lower of the fair market value of our common stock on the first day of the offering period or on the applicable purchase date (provided that the purchase price will not be less than 85% of the lower of the fair market value of our common stock on the first day of the offering period or on the applicable purchase date). The fair market value per share of our common stock under the Restated ESPP is generally the closing sale price of our common stock on the Nasdaq Stock Market on the date for which fair market value is being determined, or if there is no closing sales price for a share of our common stock on the date in question, the closing sales price for a share of common stock on the last preceding date for which such quotation exists. The closing price per share of grant,our common stock on the Nasdaq Stock Market on March 31, 2020, was $24.73.
Purchase of Stock.In connection with offerings made under the Restated ESPP, the plan administrator may onlyspecify from time to time a maximum number of shares of common stock an employee may be granted the right to employees, must expire within a specified periodpurchase and the maximum aggregate number of time following the optionee’s terminationshares of employment, and mustcommon stock that may be exercised within the ten years after the date of grant.purchased pursuant to such offering by all participants. In the case of an ISO granted to an individual who owns (or is deemed to own)addition, no employee may purchase more than 10%$25,000 worth of the total combined voting power of all classes of our capitalcommon stock the Restated Plan provides that the exercise price must be(determined at least 110% of the fair market value of the shares at the time such rights are granted) under all employee stock purchase plans (intended to qualify as such under Section 423(b) of the Code) of our company and its parent and subsidiary corporations for each calendar year in which the purchase rights are outstanding at any time. Pursuant to the Restated ESPP, the maximum number of shares that may be purchased by any single participant during any offering period or on any given purchase date is 5,000 shares. If the aggregate number of shares to be purchased upon exercise of all outstanding purchase rights would exceed the foregoing limits, the plan administrator may make a shareuniform and equitable allocation of available shares.
Participation in and Withdrawal from the Restated ESPP. Enrolled employees will automatically participate in subsequent offerings, provided the participant has not withdrawn from the Restated ESPP, continues to meet the eligibility requirements, and has not terminated employment with us. A participant may withdraw from a given offering without affecting his or her eligibility to
participate in future offerings under the Restated ESPP. Upon any withdrawal from an offering by the participant, we will distribute to the participant his or her accumulated payroll deductions without interest, less any accumulated deductions previously applied to the purchase of shares of common stock on the dateparticipant’s behalf during such offering, and such employee’s rights in the offering will be automatically terminated.
Termination of grant and the ISO must expire upon the fifth anniversary of the date of its grant.
Restricted stock may be granted to participants and made subject to such restrictions as may be determinedEmployment. Unless otherwise specified by the plan administrator. Typically, restricted stock may be forfeited for no consideration if the conditions or restrictions are not met, and it may not be sold or otherwise transferred to third parties until restrictions are removed or expire. Recipients of restricted stock, unlike recipients of options, may have votingadministrator, a participant’s rights and may receive dividends, ifunder any prior to the time when the restrictions lapse, provided that any dividends paid on unvested shares will be subject to the same vesting conditions as the underlying unvested shares.
Restricted stock units may be awarded to participants, typically without payment of consideration or for a nominal purchase price, but subject to vesting conditions including continued employment or on performance criteria established by the plan administrator. Like restricted stock, restricted stock units may not be sold or otherwise transferred or hypothecated until vesting conditions are removed or expire. Unlike restricted stock, stock underlying restricted stock units will not be issued until the restricted stock units have vested, and recipients of restricted stock units generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied.
SARs grantedoffering under the Restated Plan typically provideESPP terminate immediately upon cessation of an employee’s employment for paymentsany reason (subject to any post-employment participation period required by law), and we will distribute to such employee all of his or her accumulated payroll deductions, without interest.
Adjustments
In the holder based upon increasesevent of any dividend or other distribution, change in the pricecontrol, reorganization, merger, amalgamation, consolidation, combination, repurchase, recapitalization, liquidation, dissolution, sale of securities, or other similar corporate transaction or event, affects our common stock over the exercise pricesuch that an adjustment is determined to be appropriate in order to prevent dilution or enlargement of the SAR. The exercise price of a SAR may not be less than the fair market value of a share of common stock on the date of grant. There are no restrictions specified inbenefits under the Restated Plan onESPP, the exercise of SARs or the amount of gain realizable therefrom, other than a SAR may not have a term in excess of ten years from the date of grant. The plan administrator may elect to pay SARs in cash or in common stock or in a combination of both.
Dividend equivalents represent the value of the dividends,shall make equitable adjustments, if any, per share paid by us, calculated with reference to reflect such changes in the number of shares covered byreserved under the awards held byRestated ESPP, the participant. Dividendsper offering period and dividend equivalents may not be paid on awards subject to vesting conditions unlessper purchase period share limits and until such conditions are met. Dividend equivalents may not be paid on stock options or SARs.
Stock payments may be authorized by the plan administrator in the form of common stock or an option or other right to purchase common stock as part of a deferred compensation arrangement, made in lieu of all or any part of compensation, including bonuses, that would otherwise be payable to employees, consultants or members of our board of directors.
Other incentive awards may be authorized by the plan administrator and may provide participants with shares of common stock or the right to purchase shares of common stock or may have a value derived from the value of, or an exercise or conversion privilege at a price related to shares of common stock or a cash value, or otherwise be payable in shares of common stock or cash. Other incentive awards may be linked to the attainment of specific performance goals determined appropriate by the plan
| administrator. Other incentive awards may be paid in cash, common stock or other property, or a combination thereof, as determined by the plan administrator.
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Performance Criteria
The plan administrator may grant awards that are paid, vest or become exercisable upon the attainment of company performance criteria which may be related to one or more performance criteria as applicable to our performance or the performance of a division, business unit or an individual, measured either in absolute terms, on a same-property basis, as compared to any incremental increase or as compared to results of a peer group, which performance criteria may include, but are not limited to: operating or other costs and expenses, improvements in expense levels, cash flow (including, but not limited to, operating cash flow and free cash flow), return on net assets, stockholders’ equity, return on stockholders’ equity, return on sales, gross or net profit or operating margin, working capital, net earnings (either before or after interest, taxes, depreciation and amortization), gross or net sales or revenue, net income (either before or after taxes), adjusted net income, operating earnings, earnings per share of stock, adjusted earnings per share of stock, price per share of stock, capital raised in financing transactions or other financing milestones, market recognition (including but not limited to awards and analyst ratings), financial ratios, implementation or completionnumber of critical projects, comparisons with various stock market indices, and implementation, completion or attainment of objectively determinable objectives relating to research, development, regulatory, commercial or strategic milestones or development. These performance criteria may be measured in absolute terms or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices.
The plan administrator may provide for adjustments for such items as it determines are appropriate, in its discretion, which may include, but are not limited to, one or more of the following: items related to a change in accounting principle, items relating to financing activities, expenses for restructuring or productivity initiatives, othernon-operating items, items related to acquisitions, items attributable to the business operations of any entity acquired by us during the performance period, items related to the disposal of a business of segment of a business, items related to discontinued operations that do not qualify as a segment of a business under applicable accounting standards, items attributable to any stock dividend, stock split, combination or exchange of shares occurring during the performance period, any other items of significant income or expense which are determined to be appropriate adjustments, items relating to unusual, infrequently occurring ornon-recurring charges, events or developments, items related to amortization of acquired intangible assets, items that are outside the scope of our core,on-going business activities, items relating to changes in tax laws, items relating to gains or losses for litigation, arbitration and contractual settlements, or items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions.
Tax Withholding
The Restated Plan permits the plan administrator to allow for the withholding or surrender of shares in satisfaction of tax withholding with respect to awards with a value up to the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America).
Transferability of Awards
Unless the plan administrator provides otherwise, the Restated Plan generally does not allow for the transfer of awards, and only the recipient of an option or SAR may exercise such an award during his or her lifetime.
Forfeiture, Recoupment and Clawback Provisions
Pursuant to its general authority to determine the terms and conditions applicable to awards under the Restated Plan, the plan administrator has the right to provide, in an award agreement or otherwise, that an award
shall be subject to the provisions of any recoupment or clawback policies implemented by us, including, without limitation, any recoupment or clawback policies adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder.
Adjustments
If there is any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of our assets to stockholders, or any other change affecting the shares of our common stock covered by each outstanding right . Such adjustments will be made by the plan administrator of the Restated ESPP, whose determination in that respect will be final, binding and conclusive (provided that no adjustment will be permitted if it would cause the Section 423 Component to fail to satisfy the requirements of Section 423 of the Code).
In the event of certain significant transactions or
the share price of our common stock other than an equity restructuringa change in control (as defined in the Restated
Plan)ESPP), the
plan administrator
will make such equitable adjustments,of the Restated ESPP may provide for (1) either the replacement or termination of outstanding rights in exchange for cash, (2) the assumption or substitution of outstanding rights by the successor or survivor corporation or parent or subsidiary thereof, if any,
as(3) the
plan administratoradjustment in
its discretion may deem appropriate to reflect such change with respect to (1) the
aggregate number and type of shares
that may be issuedof stock subject to outstanding rights, (4) the use of participants’ accumulated payroll deductions to purchase stock on a new purchase date prior to the next purchase date and termination of any rights under
ongoing offering periods or (5) the termination of all outstanding rights. Under the Restated
Plan and the limit on ISOs under the Restated Plan, (2) the terms and conditions of any outstanding awards (including, without limitation, any applicable performance targets or criteria with respect thereto), and (3) the grant or exercise price per share for any outstanding awards under the plan. If there is any equity restructuring, (1) the number and type of securities subject to each outstanding award and the grant or exercise price per share for each outstanding award, if applicable, will be proportionately adjusted, and (2) the plan administrator will make proportionate adjustments to reflect such equity restructuring with respect to the aggregate number and type of shares that may be issued under the Restated Plan and the limit on ISOs under the Restated Plan. Adjustments in the event of an equity restructuring will not be discretionary. The plan administrator also has the authority under the Restated Plan to take certain other actions with respect to outstanding awards in the event of a corporate transaction, including provision for thecash-out, termination, assumption or substitution of such awards.Corporate Transactions
In the event ofESPP, a change in control wherehas the acquirer doessame definition as given to such term in the Existing ESPP.
Transferability. A participant may not assume awardstransfer rights granted under the Restated Plan, awards issued under the Restated Plan will be subject to accelerated vesting such that 100% of the awards will become vested and exercisable or payable, as applicable. Under the Restated Plan, a change in control is generally defined as:a transaction or series of related transactions (other than an offering of our stock to the general public through a registration statement filed with the Securities and Exchange Commission, or SEC) whereby any person or entity or related group of persons or entities (other than us, our subsidiaries, an employee benefit plan maintained by us or any of our subsidiaries or a person or entity that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, us) directly or indirectly acquires beneficial ownership (within the meaning of Rule13d-3 under the Exchange Act) of more than 50% of the total combined voting power of our securities outstanding immediately after such acquisition;
during anytwo-year period, individuals who, at the beginning of such period, constitute our board of directors together with any new director(s) whose election by our board of directors or nomination for election by our stockholders was approved by a vote of at leasttwo-thirds of the directors then still in office who either were directors at the beginning of thetwo-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of our board of directors; or
our consummation (whether we are directly or indirectly involved through one or more intermediaries) of (1) a merger, consolidation, reorganization, or business combination or (2) the sale, exchange or transfer of all or substantially all of our assets in any single transaction or series of transactions or (3) the acquisition of assets or stock of another entity, in each caseESPP other than a transaction:
which results in our voting securities outstanding immediately beforeby will, the transaction continuing to represent (either by remaining outstanding or by being converted into our voting securities or the voting securitieslaws of the person that, as a result of the transaction, controls us, directly or indirectly, or
descent and distribution. | owns, directly or indirectly, all or substantially all of our assets or otherwise succeeds to our business (we or such person being referred to as a successor entity)) directly or indirectly, at least a majority of the combined voting power of the successor entity’s outstanding voting securities immediately after the transaction, and
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after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the successor entity; provided, however, that no person or group is treated as beneficially owning 50% or more of combined voting power of the successor entity solely as a result of the voting power held in us prior to the consummation of the transaction.
Amendment and Termination. The plan administrator of the Restated Plan
Our compensation committeeESPP may amend, suspend or board of directors may terminate amend or modify the Restated Plan.ESPP. However, stockholder approval of any amendment to the Restated PlanESPP will be obtained for any amendment which changes the aggregate number or type of shares that may be sold pursuant to rights under the extent necessary and desirableRestated ESPP, changes the corporations or classes of corporations whose employees are eligible to comply withparticipate in the Restated ESPP, changes the Restated ESPP in any manner that would cause the Section 423 Component of the Restated ESPP to no longer be an employee stock purchase plan within the meaning of Section 423(b) of the Code, or is required under applicable law regulation or stock exchange rule, or for any amendment to therules. The Restated Plan that increases the number of shares available under the Restated Plan.
Unless earlierESPP will continue in effect until terminated by our board of directors or the Restated Plan will terminate on the tenth anniversary of the date our board of directors adopted the Restated Plan.
Repricing Prohibited
Other than pursuant to the provisions of the Restated Plan described above under the headings “Adjustments” and “Corporate Transactions,” the plan administrator may not without the approval of the Company’s stockholders (1) lower the exercise price of an option or SAR after itshare reserve is granted or (2) cancel an option or SAR when the exercise price exceeds the fair market value of the underlying shares in exchange for cash or another award.
Securities Laws
The Restated Plan is intended to conform with all provisions of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule16b-3.exhausted. The Restated Plan will be administered, and options will be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations.
Federal Income Tax Consequences Associated with the Restated
PlanESPP
The material federal income tax consequences of the Restated PlanESPP under current U.S. federal income tax law are summarized in the following discussion, which deals with the general tax principles applicable to the Restated Plan and is intended for general information only.ESPP. The following discussion of federal income tax consequences does not purport to be a complete analysis of all of the potential tax effects of the Restated Plan. It is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. This summary is not intended to be complete and does not describe foreign,Foreign, state and local tax laws, and employment, estate orand gift tax considerations.considerations are not discussed due to the fact that they may vary depending on individual circumstances and from locality to locality.
As described above, the Restated ESPP has a Section 423 Component and a Non-Section 423 Component. The tax information summarizedconsequences for a U.S. taxpayer will depend on whether he or she participates in the Section 423 Component or the Non-Section 423 Component.
Tax Consequences to U.S. Participants in the Section 423 Component. The Section 423 Component of the Restated ESPP, and the right of participants to make purchases thereunder, is not tax advice.Stock Options and Stock Appreciation Rights. Aintended to qualify under the provisions of Section 423 of the Code. Under the applicable Code provisions, no income will be taxable to a participant until the sale or other disposition of the shares purchased under the Section 423 Component of the Restated Plan participant generallyESPP. This means that an eligible employee will not recognize taxable income and we generallyon the date the employee is granted an option under the Section 423 Component of the Restated ESPP (i.e., the first day of the offering period). In addition, the employee will not be entitled to a tax deduction upon the grant of a stock option or stock appreciation right. The tax consequences of exercising a stock option and the subsequent disposition of the shares received upon exercise will depend upon whether the option qualifies as an “incentive stock option” as defined in Section 422 of the Internal Revenue Code. The Restated Plan permits the grant of options that are intended to qualify as incentive stock options as well as options that are not intended to so qualify; however, incentive stock
options generally may be granted only to our employees and employees of our parent or subsidiary corporations, if any. Upon exercising an option that does not qualify as an incentive stock option when the fair market value of our stock is higher than the exercise price of the option, a Restated Plan participant generally will recognize taxable income atupon the purchase of shares. Upon such sale or disposition, the participant will generally be subject to tax in an amount that depends upon the length of time such shares are held by the participant prior to disposing of them. If the shares are sold or disposed of more than two years from the first day of the offering period during which the shares were purchased and more than one year from the date of purchase, or if the participant dies while holding the shares, the participant (or his or her estate) will recognize ordinary income tax rates equal tomeasured as the lesser of (1) the excess of the fair market value of the stock onshares at the datetime of exercisesuch sale or disposition over the purchase price and we (or our subsidiaries, if any) generally will be entitled to a corresponding tax deduction for compensation expense, in theor (2) an amount equal to the amount by whichapplicable discount from the fair market value of the shares purchased exceedsas of the date of grant. Any additional gain will be treated as long-term capital gain. If the shares are held
for the holding periods described above but are sold for a price that is less than the purchase price, there is no ordinary income and the participating employee has a long-term capital loss for the shares. Upon a subsequentdifference between the sale price and the purchase price.
If the shares are sold or
other dispositionotherwise disposed of before the expiration of the
option shares,holding periods described above, the participant will recognize
a short term or long term capital gain or loss in the amount of the difference between the sales price of the shares and the participant’s tax basis in the shares.Upon exercising an incentive stock option, a Restated Plan participantordinary income generally will not recognize taxable income, and we will not be entitled to a tax deduction for compensation expense. However, upon exercise, the amount by which the fair market value of the shares purchased exceeds the purchase price will be an item of adjustment for alternative minimum tax purposes. The participant will recognize taxable income upon a sale or other taxable disposition of the option shares. For federal income tax purposes, dispositions are divided into two categories: qualifying and disqualifying. A qualifying disposition generally occurs if the sale or other disposition is made more than two years after the date the option was granted and more than one year after the date the shares are transferred upon exercise. If the sale or disposition occurs before these two periods are satisfied, then a disqualifying disposition generally will result.
Upon a qualifying disposition of incentive stock option shares, the participant will recognize long term capital gain in an amount equal to the excess of the amount realized upon the sale or other disposition of the shares over their purchase price. If there is a disqualifying disposition of the shares, thenmeasured as the excess of the fair market value of the shares on the exercise date (or, if less, the price at which the shares are sold)purchased over theirthe purchase price will be taxable as ordinary income to the participant. If there is a disqualifying disposition in the same year of exercise, it eliminates the item of adjustment for alternative minimum tax purposes. Any additional gain or loss recognized upon the disposition will be recognized as a capital gain or loss by the participant.
We will not be entitled to any tax deduction if the participant makes a qualifying disposition of incentive stock option shares. If the participant makes a disqualifying disposition of the shares,and we shouldwill be entitled to a tax deduction for compensation expense in the amount of the ordinary income recognized by the participant.
Upon exercisingemployee. Any additional gain or settlingloss on such sale or disposition will be long-term or short-term capital gain or loss, depending on how long the shares were held following the date they were purchased by the participant prior to disposing of them. If the shares are sold or otherwise disposed of before the expiration of the holding periods described above but are sold for a stock appreciation right, a Restated Planprice that is less than the purchase price, the participant will recognize taxable income at ordinary income tax rates, and we should be entitledequal to a corresponding tax deduction for compensation expense, in the amount paid or valueexcess of the shares issued upon exercise or settlement. Payments in shares will be valued at the fair market value of the shares aton the timedate of purchase over the payment, and upon the subsequent disposition of the sharespurchase price (and we will be entitled to a corresponding deduction), but the participant generally will recognizebe able to report a short term or long term capital gain or loss in the amount ofequal to the difference between the sales price of the shares and the participant’s tax basis in the shares.
Restricted Stock and Restricted Stock Units. A Restated Plan participant generally will not recognize taxable income at ordinary income tax rates and we generally will not be entitled to a tax deduction upon the grant of restricted stock or restricted stock units. Upon the termination of restrictions on restricted stock or the payment of restricted stock units, the participant will recognize taxable income at ordinary income tax rates, and we should be entitled to a corresponding tax deduction for compensation expense, in the amount paid to the participant or the amount by which the then fair market value of the shares received byon the date of purchase.
We are not entitled to a deduction for amounts taxed as ordinary income or capital gain to a participant exceedsexcept to the amount, if any, paid for them. Upon the subsequentextent of ordinary income recognized upon a sale or disposition of any shares prior to the expiration of the holding periods described above.
Tax Consequences to U.S. Participants in the Non-Section 423 Component. A U.S. participant in the Non-Section 423 Component will recognize a short term or long term capital gain or loss in the amount of the difference between the sales price of the shares and the participant’s tax basis in the shares. However, a Restated Plan participant granted restricted stock that is subject to forfeiture or repurchase through a vesting schedule such that it is subject to a “risk of forfeiture” (as defined in Section 83 of the Internal Revenue Code) may make an election under Section 83(b) of the Internal Revenue Code to recognize taxable income at ordinary income tax rates, at the time of the grant, in an amount equal to the fair market value of the shares of common stock on the date of grant, less the amount paid, if any, for such
shares. We will be entitled to a corresponding tax deduction for compensation, inshares are purchased over the amount recognized as taxable income by the participant. If a timely Section 83(b) election is made,purchase price.
When the participant
sells the shares he or she purchased under the Non-Section 423 Component of the Restated ESPP, he or she also will
not recognize any additional ordinary income on the termination of restrictions on restricted stock, and we will not be entitled to any additional tax deduction.Dividend Equivalents, Stock Payment Awards and Other Incentive Awards. A Restated Plan participant will not recognize taxable income and we will not be entitled tohave a tax deduction upon the grant of dividend equivalents, stock payment awardscapital gain or other incentive awards until cash or shares are paid or distributedloss equal to the participant. At that time, any cash payments ordifference between the fair market value of shares that the participant receives will be taxable to the participant at ordinary income tax ratessales proceeds and we should be entitled to a corresponding tax deduction for compensation expense. Payments in shares will be valued at the fair market value of the shares aton the timedate of the payment, and upon the subsequent disposition of the shares, the participant will recognize a short term or long termpurchase. This capital gain or loss inon such sale or disposition will be long-term or short-term capital gain or loss, depending on how long the amountshares were held following the date they were purchased by the participant prior to disposing of them.
Any compensation income that the participant receives upon the purchase of shares of common stock under the Non-Section 423 Component of the
difference betweenRestated ESPP is subject to applicable tax withholding. In addition, the
sales price ofcompensation income is required to be reported as ordinary income to the
sharesparticipant on his or her annual Form W-2, and the
participant’s tax basis in the shares.Section 409A of the Internal Revenue Code. Certain types of awards under the Restated Plan may constitute,participant is responsible for ensuring that this income is reported on his or provide for, a deferral of compensation under Section 409A. Unless certain requirements set forth in Section 409A are complied with, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% federalher individual income tax (and, potentially, certain interest penalties). To the extent applicable, the Restated Plan and awards granted under the Restated Planreturn.
With respect to U.S. participants, we will
be structured and interpreted to comply with Section 409A and the Department of Treasury regulations and other interpretive guidance that may be issued pursuant to Section 409A.Tax Consequences to the Company.To the extent that a participant recognizes ordinary income in the circumstances described above, the Company or the subsidiary for which the participant performs services shouldgenerally be entitled to a corresponding deduction provided that, among other things, the amount (1) meets the test of reasonableness, (2) is anfor amounts taxed as ordinary and necessary business expense, (3) is not an “excess parachute payment” within the meaning of Section 280G of the Code, and (4) is not disallowed by the $1 million limitation on certain executive compensation under Section 162(m) of the Code.
Section 162(m) Limitation. In general, under Section 162(m), income tax deductions of publicly-held corporations may be limitedto a participant to the extent total compensation (including base salary, annual bonus, stock option exercises andnon-qualified benefits paid) for covered employees, generally all named executive officers and any covered employee fromof ordinary income recognized upon a previous year, exceeds $1 million in any one year.
purchase made under the Non-Section 423 Component.
New Plan Benefits
Ournon-employee directors will
Because the number of shares that may be eligible to receive automatic option grantspurchased under the Restated ESPP will depend on each employee’s voluntary election to participate and on the fair market value of our common stock at various future dates, the actual number of shares that may be purchased by any individual cannot be determined in advance.
Plan as described above under “Director Compensation.” All other future grantsBenefits under the Restated Plan are within the discretion of the plan administrator and the benefits of such grants are, therefore, not determinable.Existing ESPP
Plan Benefits
As of March 22,December 31, 2019, each of our named executive officers and the other groups identified below have receivedpurchased the following option and RSU grantsshares under the 2010 Plan since its inception:
| | | | | | | | |
| | | Stock Options
Granted (#) | | | Restricted Stock
Units Granted (#) | |
Stephen J. Farr, Ph.D. Chief Executive Officer and President | | | 1,041,869 | | | | 73,750 | |
Michael P. Smith Executive Vice President, Chief Financial Officer, Treasurer and Secretary | | | 101,250 | | | | 14,375 | |
Bradley S. Galer, M.D. Executive Vice President and Chief Medical Officer | | | 286,000 | | | | 24,375 | |
Gail M. Farfel, Ph.D. Executive Vice President and Chief Development Officer | | | 271,750 | | | | 23,375 | |
Ashish M. Sagrolikar Executive Vice President, Chief Commercial Officer | | | 63,750 | | | | 8,125 | |
All current executive officers as a group (5 persons) | | | 1,764,619 | | | | 144,000 | |
All current directors who are not executive officers as a group (7 persons) | | | 938,617 | | | | 7,500 | |
Erle T. Mast, director nominee | | | 91,499 | | | | — | |
Renee P. Tannenbaum, PharmD., director nominee | | | 73,375 | | | | — | |
All employees who are not executive officers as a group (91 persons) | | | 1,598,612 | | | | 399,266 | |
Vote Required; Recommendation of the Board of Directors
The affirmative vote of the holders of a majority of the shares of common stock present or represented by proxy and entitled to vote at the annual meeting is required to approve the Restated Plan.
Existing ESPP:
| | | | | | | | | | | | | | |
| | Shares
Purchased
(#) | | Aggregate
Purchase
Price
($) |
Stephen J. Farr, Ph.D. Chief Executive Officer and President | | 11,483 | | 132,002 |
Michael P. Smith Executive Vice President, Chief Financial Officer, Treasurer and Secretary | | 493 | | 16,039 |
Bradley S. Galer, M.D. Executive Vice President and Chief Medical Officer | | 4,106 | | 79,072 |
Gail M. Farfel, Ph.D. Executive Vice President and Chief Development Officer | | 8,053 | | 93,022 |
Ashish M. Sagrolikar Executive Vice President, Chief Commercial Officer | | 849 | | 27,199 |
| All current executive officers as a group (5 persons) | | 24,984 | | 347,334 |
| All current directors who are not executive officers as a group (6 persons) | | — | | — |
| All employees who are not executive officers as a group (141 persons) | | 132,801 | | 1,784,542 |
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR"FOR" THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE 2010 EQUITY INCENTIVE AWARD PLAN.RESTATED ESPP.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information about the beneficial ownership of our common stock at
March 26, 2019April 9, 2020 for:
•each person, or group of affiliated persons, known to us to be the beneficial owner of more than 5% of our common stock;
•each of our named executive officers;
•each of our directors; and
•all of our executive officers and directors as a group.
Unless otherwise noted below, the address of each beneficial owner listed on the table is c/o Zogenix, Inc., 5959 Horton Street, Suite 500, Emeryville, California 94608. We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us by the stockholders, that each person or group named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.
For each person and group included in the table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group as described above by the sum of the
42,406,95955,340,691 shares of common stock outstanding on
March 26, 2019April 9, 2020 and the number of shares of common stock that such person or group had the right to acquire on or within 60 days of that date, including, but not limited to, upon the exercise of stock options. Beneficial ownership representing less than 1% is denoted with an asterisk (*).
| | | | | | | | |
| | | Shares Beneficially Owned | |
Beneficial Owner | | Number | | | Percentage | |
5% or Greater Stockholders: | | | | | | | | |
FMR LLC(1)
245 Summer Street
Boston, MA 02210 | | | 4,556,283 | | | | 10.7 | % |
Perceptive Advisors LLC(2)
51 Astor Place, 10th Floor
New York, NY 10003 | | | 3,790,216 | | | | 8.9 | % |
Blackrock, Inc.(3)
55 East 52nd Street
New York, NY 10055 | | | 3,582,746 | | | | 8.4 | % |
Scopia Capital Management LP(4)
152 West 57th Street, 33rd Floor
New York, NY 10019 | | | 2,985,834 | | | | 7.0 | % |
Cadian Capital Management, LP(5)
535 Madison Avenue
36th Floor
New York, NY 10022 | | | 2,718,946 | | | | 6.4 | % |
The Bank of New York Mellon Corporation(6)
240 Greenwich Street
New York, NY 10286 | | | 2,509,486 | | | | 5.9 | % |
RA Capital Management, LLC(7)
20 Park Plaza, Suite 1200
Boston, MA 02116 | | | 2,382,168 | | | | 5.6 | % |
| | | | | | | | |
| | | Shares Beneficially Owned | |
Beneficial Owner | | Number | | | Percentage | |
Named Executive Officers and Directors: | | | | | | | | |
Stephen J. Farr, Ph.D.(8) | | | 640,125 | | | | 1.5 | % |
Michael P. Smith(9) | | | 93,604 | | | | * | |
Bradley S. Galer, M.D.(10) | | | 217,253 | | | | * | |
Gail Farfel, Ph.D.(11) | | | 128,919 | | | | * | |
Ashish M. Sagrolikar(12) | | | 2,656 | | | | * | |
James B. Breitmeyer, M.D., Ph.D.(13) | | | 80,875 | | | | * | |
Louis C. Bock (14) | | | 64,000 | | | | * | |
Cam L. Garner(15) | | | 95,843 | | | | * | |
Roger L. Hawley(16) | | | 365,773 | | | | * | |
Erle T. Mast(17) | | | 94,744 | | | | * | |
Renee P. Tannenbaum, Pharm.D.(18) | | | 65,872 | | | | * | |
Mark Wiggins(19) | | | 89,625 | | | | * | |
All directors and current executive officers as a group (12 persons)(20) | | | 1,939,289 | | | | 4.4 | % |
(1) | Based on information contained in Schedule 13G/A filed with the SEC on February 11, 2019 by, FMR LLC and Abigail P. Johnson. The Schedule 13G, as amended, states that FMR LLC has sole power to vote 85,386 shares and sole dispositive power over all the reported shares. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC.
|
(2) | Based on information contained in Schedule 13G/A filed with the SEC on February 14, 2019 by, Perceptive Advisors LLC, Joseph Edelman and Perceptive Life Sciences Master Fund, Ltd. The Schedule 13G, as amended, states that Perceptive Advisors LLC and Joseph Edelman have shared voting and dispositive power over all such shares. Perceptive Life Sciences Master Fund Ltd directly holds all such shares. Perceptive Advisors LLC serves as the investment manager for Perceptive Life Sciences Master Fund Ltd. Mr. Edelman is the managing member of Perceptive Advisors LLC.
|
(3) | Based on information contained in Schedule 13G/A filed with the SEC on February 6, 2019 by Blackrock, Inc. The Schedule 13G, as amended, states that Blackrock, Inc. has sole voting power over 3,458,241 shares and sole dispositive power over all the reported shares.
|
(4) | Based on information contained in Schedule 13G/A filed with the SEC on January 10, 2019 by Scopia Capital Management LP, Scopia Management, Inc., Matthew Sirovich and Jeremy Mindich. The Schedule 13G, as amended, states that the reporting persons have shared voting and dispositive power over all the reported shares and all such shares are directly held by advisory clients of Scopia Capital Management LP, and none of such advisory clients individually holds more than 5% of Zogenix’s outstanding shares of common stock.
|
(5) | Based on information contained in Schedule 13G filed with the SEC on February 13, 2019 by Cadian Capital Management, LP, Cadian Capital Management GP, LLC and Eric Bannasch. The Schedule 13G states that the reporting persons have shared voting and dispositive power over all the reported shares and all such shares are directly held by advisory clients of Cadian Capital Management, LP, and none of such advisory clients individually holds more than 5% of Zogenix’s outstanding shares of common stock.
|
(6) | Based on information contained in Schedule 13G filed with the SEC on February 4, 2019 by The Bank of New York Mellon Corporation, BNY Mellon IHC, LLC and MBC Investments Corporation. The Schedule 13G states that (a) The Bank of New York Mellon Corporation has sole power to vote 2,341,786 of the shares and dispose of 2,360,283 shares and shared power to dispose of 75,125 shares and (b) that each of BNY Mellon IHC, LLC and MBC Investments Corporation have sole power to vote 2,006,007 shares and dispose of 2,024,504 shares and shared power to dispose of 75,125 shares. All of the shares are beneficially owned by The Bank of New York Mellon Corporation and its direct or indirect subsidiaries in their various fiduciary capacities. No individual accounts holds 5% or more of Zogenix’s outstanding shares of common stock.
|
| | | | | | | | | | | | | | |
| | Shares Beneficially Owned | | |
| Beneficial Owner | | Number | | Percentage |
Perceptive Advisors LLC (1) 51 Astor Place, 10th Floor New York, NY 10003 | | 3,709,152 | | 6.7 | % |
Blackrock, Inc. (2) 55 East 52nd Street New York, NY 10055 | | 3,534,636 | | 6.4 | % |
The Vanguard Group (3) 100 Vanguard Blvd. Malvern, PA 19355 | | 3,177,976 | | 5.7 | % |
Eventide Asset Management, LLC (4) One International Place, Suite 4210 Boston, MA 02110 | | 2,841,300 | | 5.1 | % |
| Stephen J. Farr, Ph.D. (5) | | 758,707 | | 1.4 | % |
| Michael P. Smith (6) | | 98,063 | | * |
| Bradley S. Galer, M.D. (7) | | 275,922 | | * |
| Gail M. Farfel, Ph.D. (8) | | 201,854 | | * |
| Ashish M. Sagrolikar (9) | | 79,441 | | * |
| Louis C. Bock (10) | | 77,000 | | * |
| James B. Breitmeyer, M.D., Ph.D. (11) | | 83,875 | | * |
| Cam L. Garner (12) | | 116,843 | | * |
| Erle T. Mast (13) | | 107,744 | | * |
| Renee P. Tannenbaum, Pharm.D. (14) | | 78,872 | | * |
| Mark Wiggins (15) | | 98,875 | | * |
| All current directors and executive officers as a group (11 persons) (16) | | 1,977,196 | | 3.5 | % |
(7) | Based on information contained in Schedule 13G/A filed with the SEC on February 14, 2019 by RA Capital Management, LLC (“RAC Management”) and Peter Kolchinsky, The Scehdule 13G, as amended, states that the reporting persons have shared voting and dispositive power over all the reported shares and that 2,030,395 of the shares are held by RA Capital Healthcare Fund, L.P. (the “RAC Fund”) for which RAC Management acts as the general partner, and that 351,773 shares are held in a separately managed account for which the RAC Fund serves as the investment adviser. The RAC Fund has delegated to RAC Management the sole power to vote and the sole power to dispose of all securities held in the Fund’s portfolio, including all of the reported shares. Dr. Kolchinsky is the manager of RAC Management.
|
(8) | Includes 585,410 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019 and 54,715 shares held directly by Dr. Farr.
|
(9) | Includes 92,344 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019 and 1,260 shares held directly by Mr. Smith.
|
(10) | Includes 211,470 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019 and 5,783 shares held directly by Dr. Galer.
|
(11) | Includes 120,582 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019 and 8,337 shares held directly by Dr. Farfel.
|
(12) | Consists solely of 2,656 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019.
|
(13) | Includes 79,625 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019 and 1,250 shares held directly by Dr. Breitmeyer.
|
(14) | Consists solely of 64,000 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019.
|
(15) | Includes 55,000 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019 and 40,843 shares held by Garner Investments, LLC, of which Mr. Garner is the managing member.
|
(16) | Includes 295,198 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019 and 90,575 shares held directly by Mr. Hawley. Mr. Hawley resigned from our board of directors effective as of March 31, 2019.
|
(17) | Includes 91,717 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019 and 3,027 shares held directly by Mr. Mast.
|
(18) | Includes 18,000 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019 and 47,872 shares held directly by Dr. Tannenbaum.
|
(19) | Consists solely of 89,625 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019.
|
(20) | Includes 1,705,627 shares issuable pursuant to stock options exercisable within 60 days of March 26, 2019 and 232,402 shares beneficially owned by the directors and current executive officers.
|
————————————(1)Based on information contained in Schedule 13G/A filed with the SEC on February 14, 2020 by, Perceptive Advisors, LLC, Joseph Edelman and Perceptive Life Sciences Master Fund Ltd. The Schedule 13G, as amended, states that Perceptive Advisors LLC and Joseph Edelman have shared voting and dispositive power over all such shares. Perceptive Life Sciences Master Fund, Ltd directly holds all such shares. Perceptive Advisors, LLC serves as the investment manager for Perceptive Life Sciences Master Fund, Ltd. Mr. Edelman is the managing member of Perceptive Advisors, LLC.
(2)Based on information contained in Schedule 13G/A filed with the SEC on February 5, 2020 by Blackrock, Inc. The Schedule 13G, as amended, states that Blackrock, Inc. has sole voting power over 3,462,485 shares and sole dispositive power over all the reported shares.
(3)Based on information contained in Schedule 13G filed with the SEC on February 10, 2020 by The Vanguard Group. The Schedule 13G states that The Vanguard Group has sole voting power over 88,366 shares of our common stock, shared voting power over 8,124 shares of our
common stock, sole dispositive power over 3,086,056 shares of our common stock, and shared dispositive power over 91,920 shares of our common stock. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 83,796 shares of our common stock as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 12,694 shares of our common stock as a result of its serving as investment manager of Australian investment offerings.
(4)Based on information contained in Schedule 13G filed with the SEC on February 4, 2020 by Eventide Asset Management, LLC. The Schedule 13G states that Eventide Asset Management, LLC has sole voting and dispositive power over all the reported shares of common stock held by registered investment companies, for which Eventide Asset Management LLC serves as investment adviser.
(5)Includes 637,866 shares issuable pursuant to stock options exercisable within 60 days of April 9, 2020 and 120,841 shares held directly by Dr. Farr.
(6)Includes 85,532 shares issuable pursuant to stock options exercisable within 60 days of April 9, 2020 and 12,531 shares held directly by Mr. Smith.
(7)Includes 265,907 shares issuable pursuant to stock options exercisable within 60 days of April 9, 2020 and 10,015 shares held directly by Dr. Galer.
(8)Includes 172,821 shares issuable pursuant to stock options exercisable within 60 days of April 9, 2020 and 29,033 shares held directly by Dr. Farfel.
(9)Includes 69,011 shares issuable pursuant to stock options exercisable within 60 days April 9, 2020 and 10,430 shares held directly by Mr. Sagrolikar.
(10)Consists solely of 77,000 shares issuable pursuant to stock options exercisable within 60 days of April 9, 2020.
(11)Includes 82,625 shares issuable pursuant to stock options exercisable within 60 days of April 9, 2020 and 1,250 shares held directly by Dr. Breitmeyer.
(12)Includes 68,000 shares issuable pursuant to stock options exercisable within 60 days of April 9, 2020, 40,843 shares held by Garner Investments, LLC, an entity Mr. Garner serves as managing member, and 8,000 shares held by Garner Family Trust for which Mr. Garner serves as trustee.
(13)Includes 104,717 shares issuable pursuant to stock options exercisable within 60 days of April 9, 2020 and 3,027 shares held directly by Mr. Mast.
(14)Includes 31,000 shares issuable pursuant to stock options exercisable within 60 days of April 9, 2020 and 47,872 shares held directly by Dr. Tannenbaum.
(15)Includes 96,375 shares issuable pursuant to stock options exercisable within 60 days of April 9, 2020 and 2,500 shares held directly by Mr. Wiggins.
(16)Includes 1,690,854 shares issuable pursuant to stock options exercisable within 60 days of April 9, 2020 and 286,342 shares beneficially owned by current directors and executive officers.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Officers
The following table sets forth certain information about our executive officers as of
March 26, 2019:April 9, 2020: | | | | | | | | | | | | | | |
Name | | Age | | | Position |
Executive Officers:
| | | | | | |
Stephen J. Farr, Ph.D. | | 60 | 59 | | | Chief Executive Officer, President and Director |
Michael P. Smith | | 51 | 50 | | | Executive Vice President, Chief Financial Officer, Treasurer and Secretary |
Bradley S. Galer, M.D. | | 57 | 56 | | | Executive Vice President, Chief Medical Officer |
Gail M. Farfel, Ph.D. | | 55 | 54 | | | Executive Vice President, Chief Development Officer |
Ashish M. Sagrolikar | | 53 | 52 | | | Executive Vice President, Chief Commercial Officer |
The biography of Stephen J. Farr, Ph.D. can be found above under the “Board of Directors” heading.
Michael P. Smithhas served as our Executive Vice President, Chief Financial Officer, Treasurer and Secretary since January 2017. From January 2015 through December 2016, Mr. Smith served as Chief Financial Officer of Raptor Pharmaceutical Corp., a global biopharmaceutical company focused on the development and commercialization of transformative therapeutics for rare diseases that was acquired by Horizon Pharma plc. in October 2016. In this role, he was responsible for the finance, accounting, corporate development, corporate strategy, intellectual property, and information management business functions. From May 2012 to January 2015, Mr. Smith served as Chief Financial and Business Advisor at Catalyst Biosciences. Prior to that role, from September 2010 to April 2011, he was Vice President of Business Development at iPierian, Inc., and from June 2006 to July 2009, he served as Head of Business Development and Chief Financial Officer of Memory Pharmaceuticals Corporation. Mr. Smith received his B.S. in Commerce from the University of Virginia and his M.B.A. from the Haas School of Business at the University of California, Berkeley.
Bradley S. Galer, M.D.has served as our Executive Vice President and Chief Medical Officer since December 2013. Prior to joining the company, Dr. Galer served as President of the Pain Group at Nuvo Research, Inc., a specialty pharmaceutical company with three commercialized topically delivered pain products from December 2009 to December 2013. In this position, he oversaw the strategy and operations of the Pain Group, including its commercialization, drug development activities, business development and licensing opportunities and liaising with partners. Prior to joining Nuvo, Dr. Galer was employed at Endo Pharmaceuticals Inc., as Senior Medical Officer and Group Vice President, Scientific Affairs from August 2002 to October 2005, where he was responsible for the departments of Clinical and Biostatistics, Medical Affairs, Pharmacovigilance, Medical Liaison and Medical Information. He and his team provided clinical and scientific leadership for the development and marketing of analgesic and migraine products, including Lidoderm, Percocet, Opana, Opana ER and Frova. Dr. Galer has also held numerous other industry positions, along with academic and clinical appointments. He has published over 200 articles on pain management in peer review journals and textbooks. Dr. Galer received his medical doctorate and a neurology residency from Albert Einstein in New York and two Pain Fellowships, at MemorialSloane-Kettering in New York and University of California San Francisco, as well as headache training at Montefiore Headache Clinic in New York and University of California San Francisco.
Gail M. Farfel, Ph.D.has served as our Executive Vice President and Chief Development Officer since July 2015. From December 2012 to June 2015, Dr. Farfel was Chief Clinical and Regulatory Officer of Marinus Pharmaceuticals, establishing and overseeing clinical, medical and regulatory strategies for adult and pediatric seizure disorders, including a pediatric epileptic orphan disease. From May 2008 until December 2012, Dr. Farfel
served as President of G. Meredith Consulting LLC, a firm providing strategic consulting and support to biopharmaceutical and software development companies. Dr. Farfel was Vice President, Therapeutic Area and Head for Neuroscience Clinical Development and Medical Affairs at Novartis Pharmaceuticals Corporation, where she oversaw a portfolio of products including Gilenya®Gilenya® for multiple sclerosis, Exelon®Exelon® and the Exelon®Exelon® Patch for Alzheimer’s disease and Parkinson’s disease, and the antidepressant, agomelatine. Dr. Farfel began her career in pharmaceutical drug development at Pfizer, Inc., where she worked in Clinical Development and Global Medical Affairs, directing programs through all stages of clinical development and regulatory submissions. Dr. Farfel is the author of over 50 scientific articles in the areas of neuropsychopharmacology and drug effects, and earned her Ph.D. in Neuropsychopharmacology from the University of Chicago, where she received the Ginsburg Prize for Dissertation Excellence. Dr. Farfel also holds a Bachelor’s degree in Biochemistry from the University of Virginia.
Ashish M. Sagrolikarhas served as our Executive Vice President and Chief Commercial Officer since July 2018. Mr. SagrolikarhasSagrolikar has over twenty five years of global pharmaceutical sales, marketing and operations experience. Mr. Sagrolikar previously served as Vice President, Marketing at GlaxoSmithKline plc from April 2014 through June 2018 after joining GlaxoSmithKline plc as Commercial Leader, Rare Diseases in June 2013. From November 2009 through June 2013, Mr. Sagrolikar served in various sales, marketing and business development roles at Baxter International Inc. Mr. Sagrolikar earned his MBA at the Institute of Management Development (IMD) in Lausanne, Switzerland, in 2000, and a Bachelor of Pharmacy from the Government College of Pharmacy, Karad, India, in 1987. Compensation Discussion and Analysis
This compensation discussion and analysis provides information about the material components of our executive compensation program for our “named executive officers” for
2018,2019, consisting of the following persons:
•Stephen J. Farr, Ph.D., our Chief Executive Officer and President;
•Michael P. Smith, our Executive Vice President, Chief Financial Officer, Treasurer and Secretary
•Bradley S. Galer, M.D., our Executive Vice President and Chief Medical Officer;
•Gail M. Farfel, Ph.D., our Executive Vice President, Chief Development Officer; and
•Ashish M. Sagrolikar, our Executive Vice President, Chief Commercial Officer.
Specifically, this compensation discussion and analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program, and each compensation component that we provide. In addition, we explain how and why the compensation committee and our board of directors arrived at specific compensation policies and decisions involving our executive officers during the
fiscal year ended December 31,
2018.2019.
We recognize that the ability to excel depends on the integrity, knowledge, imagination, skill, diversity and teamwork of our employees. To this end, the key objectives of our executive compensation program are:
•To attract, engage and retain an executive team who will provide leadership for our future success by providing competitive total pay opportunities.
•To establish a direct link between our business results, individual executive performance and total executive compensation.
•To align the interests of our executive officers with those of our stockholders.
The primary elements of our executive compensation program are (1) base salary, (2) annualshort-term cash incentives,(3) long-term equity incentives,(4) post-termination benefits, and (5) other benefits, such as health insurance and retirement benefits. We believe that each component aligns the interests of our named executive officers with the interests of our stockholders in different ways, whether through focusing onshort-term andlong-term performance goals, promoting an ownership mentality toward one’s job, or linking individual performance to our performance.
In general, the majority of our named executive officers’ total compensation is tied directly to corporate and individual performance, increases in our stock price, or both. Specific elements of our executive compensation program that demonstrate our
pay-for-performance philosophy include:
•The performance measures in ourshort-term cash incentive program are linked to key corporate objectives.
•Corporate achievement represents the majority of each executive’snamed executive officer’s annual bonus opportunity.
•Ourlong-term equity incentives are primarily grantedprovided to named executive officers in the form of service-based equity awards, including a mix of stock options which provide value to our executives only if ourand restricted stock price increases.
units (“RSUs”).This mix of compensation is intended to ensure that total compensation reflects our overall success or failure and to motivate executive officers to meet appropriate performance measures. In determining each element of compensation for any given year, our board of directors and our compensation committee consider and determine each element individually and then review the resulting total compensation and determine whether it is reasonable and competitive. We do not have a
pre-established policy or target for the allocation between either cash and
non-cash or
short-term and
long-term incentive compensation.
We believe that the total compensation received by our named executive officers relating to
20182019 was appropriate when viewed in light of our corporate achievements during
20182019 and the individual performance of our named executive officers.
Compensation Determination Process
The compensation committee of our board of directors develops, reviews and approves each of the elements of our executive compensation program. The compensation committee also regularly assesses the effectiveness and competitiveness of our compensation programs.
In the first quarter of each year, the compensation committee reviews the performance of each of our named executive officers during the previous year. At this time the compensation committee also reviews our performance relative to the corporate performance objectives set by the board of directors for the year under review and makes the final bonus payment determinations based on our
overall corporate performance and,
with respect to the named executive officers other than our Chief Executive Officer, the compensation committee’s evaluation of each named executive officer’s performance for the year under review. In connection with this review, the compensation committee also reviews and adjusts, as appropriate, annual base salaries for our named executive officers and grants, as appropriate, additional
stock optionequity awards to our named executive officers and certain other eligible
employees for thethen-current fiscal year.employees.
During the fourth quarter of each year our compensation committee also reviews the corporate performance objectives for purposes of our performance bonus programs for the following year, but such objectives historically have been recommended to the full board of directors for approval. Our Chief Executive Officer, with the assistance and support of our Chief Financial Officer and our human resources department, aids the compensation committee by providing annual recommendations regarding the compensation of all of our named executive officers, other than himself. The compensation committee also, on occasion, meets with our Chief Executive Officer to obtain recommendations with respect to our compensation programs and practices generally. The compensation committee considers, but is not bound to accept, the Chief Executive Officer’s recommendations with respect to named executive officer compensation. In the beginning of each year, our
named executive officers work with our Chief Executive Officer to establish their individual performance goals for the year, based on their respective roles within the company.
Our Chief Executive Officer generally attends all of the compensation committee meetings, but the compensation committee also holds executive sessions that are not attended by any members of management or
non-independent directors, as needed from time to time. Any deliberations or decisions regarding our Chief Executive Officer’s compensation are made without him present.
Role of Compensation Consultant and Comparable Company Information
Our compensation committee has not historically established compensation levels based on benchmarking. Our compensation committee has instead relied upon the judgment of its members in making compensation decisions, after reviewing our
overall corporate performance and
carefully evaluating aconducting an in-depth, comprehensive evaluation of each named executive officer’s performance during the year against established goals, leadership qualities, operational performance, business responsibilities, career with our company, current compensation arrangements and
long-term potential to enhance stockholder value.
The compensation committee is authorized to retain the services ofthird-party compensation consultants and other outside advisors, from time to time, asto assist in its evaluation of executive compensation, including the committee sees fit, in connection with compensation matters. Compensation consultantsauthority to approve the consultant’s reasonable fees and other advisors retained byretention terms.
In 2019, the compensation committee
will report directly to the compensation committee which has the authority to select, retain and terminate any such consultants or advisors.In 2018, the compensation committee determined to engageagain retained Radford, as itsa business unit of AON plc (“Radford”), an independent compensation consultant to providethird-party compensation consulting services.firm for guidance in making compensation decisions. Specifically, for 2018,2019, the compensation committee requested Radford to advise it on a variety ofcompensation-related issues, including:
compiling, analyzing•conducting market research and presentingthird-party survey data regardinganalysis of current practices of comparable public companies to assist the compensation of executivescommittee in developing director andnon-employee directors at comparable companies;
evaluating our current equity executive compensation program relative tolevels;
•reviewing our peer group includingto determine whether additional or different peer companies or groups are necessary to provide appropriate information on market practices and compensation levels;
•advising with regard to the amendment and restatement of our equity ownership levels,plan during 2019; and advising on a potential stock option repricing program, that was not ultimately undertaken; and
•providing general information concerning director and executive compensation trends and developments.
Radford did not provide any other services to us in
20182019 beyond its engagement as an advisor to the compensation committee on
director and executive compensation matters.
After review, theThe compensation committee
has determinedassessed the independence of Radford pursuant to SEC and Nasdaq rules and concluded that
there is no conflict of interest
resultingexisted that would have prevented Radford from
retaining Radfordserving as an independent consultant to the compensation committee currently or during
the year ended December 31, 2018. In reaching these conclusions, the compensation committee considered the factors set forth in Exchange Act Rule10C-1.2019.
For
2018,2019, Radford assisted the compensation committee in
confirming aidentifying an appropriate peer group of companies
to be used in the compensation setting process. For 2018,for use as a
reference when determining 2019 director and executive compensation. The identified peer group
consisted of 24 life sciences companies in similar phases of development as us with the following characteristics was selected based on the following parameters and not on the basis of executive compensation levels:
•Market capitalization less than $1.0$6.0 billion, (averagewith a 30-day average market capitalization being $2.119 billion as of $1.382 billion) (as of November 24, 2017,October 28, 2018, when the peer group was first approved by the compensation committee for 20182019 compensation purposes)).purposes. Zogenix had a30-day average market capitalization of $1.339$1.787 billion as of such date, and ranked in the 58th46th percentile relative to the peer group on this metric;
•Annual revenuesrevenue of less than $100.0 million, (withwith the average annual revenuestrailing twelve months revenue as of $16.6 million) (asOctober 28, 2018 being $26.4 million. Zogenix did not generate any revenue during the same period; and
•Less than 600 employees, with an average of November 24, 2017, when the peer group was first approved by the compensation committee for 2018 compensation purposes)).173 employees as of December 31, 2017. Zogenix had trailing twelve-month revenues of approximately $27.4 million68 employees as of suchthe same date and ranked in the 78th14th percentile relative to the peer group on this metric; andmetric.
Less than 400 employees (with an average of 134 employees (as of November 24, 2017, when the peer group was first approved by the compensation committee for 2018 compensation purposes)). Zogenix had 67 employees as of such time and ranked in the 4th percentile relative to the peer group onFor 2019, this metric.
Our 2018 peer group consisted of the following companies:
| | | | | | | | |
| Acceleron Pharma | | Flexion Therapeutics |
AchaogenAerie Pharmaceuticals | | Global Blood Therapeutics |
Adamas PharmaceuticalsAimmune Therapeutics | | Heron Therapeutics |
Aerie PharmaceuticalsAlder BioPharmaceuticals | | Insmed |
AkebiaAmicus Therapeutics | | La Jolla Pharmaceutical CompanyIntra-Cellular Therapies |
Alder BioPharmaceuticalsArena Pharmaceuticals | | Loxo Oncology |
Amicus Therapeutics | | Prothena |
| Array BioPharma | | MyoKardia |
| Atara Biotherapeutics | | Rigel Pharmaceuticals |
Atara BiotherapeuticsBiohaven Pharmaceutical | | Sage Therapeutics |
CytokineticsBlueprint Medicines | | Sangamo Therapeutics |
DermiraDeciphera Pharmaceuticals | | Ultragenyx Pharmaceutical |
| Dynavax Technologies | | Xencor |
Although we maintain the peer group for executive compensation purposes, the peer group compensation data is limited to publicly available information and therefore does not necessarily provide comparisons for all officers by position as is offered by more comprehensive survey data, which has the advantage of including data on executive positions beyond what is available in public filings. In light of this, during
2018,2019, the compensation committee also reviewed data from The Radford Global Life Sciences Compensation Survey, which included compensation data for public companies throughout the United States primarily from the life sciences industry, with under
500600 employees and market capitalizations of between
$400$500 million and
$3.5$6 billion. With respect to the survey data presented to the compensation committee, the identities of the individual companies included in the survey were not provided to the compensation committee, and the compensation committee did not refer to individual compensation information for such companies. We believe that by utilizing both sets of data, which are weighted equally in determining the final comparable company information reviewed by our compensation committee, our compensation committee is able to review an appropriate set of competitive data for use in making compensation decisions. We believe that by utilizing both publicly available peer group data and the survey data from the published surveys, we are able to develop the best set of competitive data for use in making compensation decisions.
Our compensation committee reviewed the foregoing comparable company data in connection with its determinations of the
20182019 base salaries, target bonuses and equity awards for our named executive officers. However, our committee did not attempt to set our compensation levels or awards at a certain target percentile with respect to the comparable company data or otherwise rely entirely on that data to determine named executive officer compensation. Instead, as described above and consistent with past practice, the compensation committee members relied on their judgment and experience in setting those compensation levels and making those awards.
However, the compensation committee generally strives to set cash compensation and target cash compensation at or below the 50th percentile of the peer company data for comparable positions and total annual equity award value at approximately the 75th percentile, but variations on this pay positioning occur from year to year.
We expect that the compensation committee will continue to review comparable company data in connection with setting the compensation we offer our named executive officers to help ensure that our compensation programs are competitive and fair.
We strive to achieve an appropriate mix between equity incentive awards and cash payments in order to meet our objectives. Any apportionment goal is not applied rigidly and does not control our compensation decisions, and our compensation committee does not have any formal policies for allocating compensation betweenlong-term andshort-term compensation or cash andnon-cash compensation.
The compensation levels of the named executive officers reflect to a significant degree the varying roles and responsibilities of such executives. As a result of the compensation committee’s and the board of director’s assessment of our Chief Executive Officer’s and President’s roles and responsibilities within our company, there are significant compensation differentials between these named executive officers and our other named executive officers.
We do not yet have a formal policy to adjust or recover awards or payments if the relevant performance measures upon which they are based are restated or are otherwise adjusted in a manner that would otherwise reduce the size of the initial payment or award.
Executive Compensation Components
The following describes each component of our executive compensation program, the rationale for each, and how compensation amounts are determined.
In general, base salaries for our named executive officers are initially established through arm’s length negotiation at the time the executive is hired, taking into account such executive’s qualifications, experience and prior salary. Base salaries of our named executive officers are approved and reviewed annually by our compensation committee and adjustments to base salaries are based on the scope of an executive’s responsibilities, individual contribution, prior experience and sustained performance. Decisions regarding salary increases may take into account an executive officer’s current salary, equity ownership, and the amounts paid to an executive officer’s peers inside our company by conducting an internal analysis, which compares the pay of an executive officer to other members of the management team. Base salaries are also reviewed in the case of promotions or other significant changes in responsibility. Base salaries are not automatically increased if the compensation committee believes that other elements of the named executive officer’s compensation are more appropriate in light of our stated objectives. This strategy is consistent with our intent of offering compensation that is
cost-effective, competitive and contingent on the achievement of performance objectives.
Our Chief Executive Officer’s base salary is based upon the same policies and criteria used for other named executive officers as described above. Each year the compensation committee reviews the Chief Executive Officer’s compensation arrangements and his individual performance for the previous fiscal year, as well as our
overall corporate performance,
as a whole, and makes recommendations to the full board of directors of adjustments to such compensation, if appropriate.
In
February 2018,March 2019, the compensation committee reviewed the base salaries of our named executive officers. The compensation committee, in consultation with our Chief Executive Officer (with respect to the salaries of our other named executive officers) and its independent compensation consultant, determined that the base salaries of our named executive officers would be as follows, which increases were effective April 1,
2018:2019: Dr. Farr,
$560,000;$585,000; Mr. Smith,
$400,000;$412,200; Dr. Galer, $427,500; Dr. Farfel,
$400,000;$412,000; and
Dr. Galer, $415,000.Mr. Sagrolikar, $390,800. These increases represented
increasesan annual increase of approximately
12%3%,
4%, 5% and 8%, respectively, overwith the
named executive officers’ 2017 salary levels. The increases forexception of Dr. Farr,
andwhose annual increase was approximately 4%. Dr.
Farfel wereFarr’s increase was higher
than those for the other named executive officers as
their 2017his 2018 base
salaries remainedsalary was significantly below the 50th percentile of
similarly-situated executives. executives and the compensation committee determined a larger increase was appropriate to bring him closer into line with the company's pay positioning philosophy. The 3% annual increase for the named executive officers other than Dr. Farr were consistent with the merit-based increases for all of our employees generally. In general,
for 2019, the base salaries of our named executive officers
are set betweengenerally approximated the 25th
and 50th percentiles ofsimilarly-situated executives among our peer group, although Dr. Farr’s salary remained near the 25th percentile for 2018.In connection with his commencement of employment, the compensation committee established the initial base salary for Ashish M. Sagrolikar at $385,000, which approximates the 50th percentile of similarly-situated executives among our peer group.
The actual base salaries paid to all of our named executive officers for 20182019 are set forth in the “Summary Compensation Table” below.
Each named executive officer is also eligible for a performance bonus based upon the achievement of certain corporate performance goals and objectives approved by our board of directors and, with respect to our named executive officers other than Dr. Farr, individual performance.
Bonuses are set based on the executive’s base salary as of the end of the bonus year, and are expected to be paid out in the first quarter of the following year. The target levels for executive bonuses for
20182019 were as follows: 60% of base salary for our President and Chief Executive Officer (100% of which is based on corporate objectives) and 45% of base salary for our other named executive officers (90% of which is based on corporate objectives and 10% of which is based on individual performance). In general, the target bonuses of our named executive
officersfall betweenofficers approximate the 50th
and 75th percentilespercentile of
similarly-situated executives among our peer group, which
generally results in target total cash compensation for our named executives at
betweenapproximately the
25th and 50th
percentilespercentile of
similarly-situated executives,
in our peer group (although Dr. Farr’salthough target total
cash compensation
remained nearfor our named executives for 2019 fell below the
25th50th percentile
for 2018).across the board.
At the beginning of each year, the board of directors (considering the recommendations of the compensation committee and management) sets corporate goals and milestones for the year. These goals and milestones and the proportional emphasis placed on each are set by the board of directors after considering management input and our overall strategic objectives. These goals generally relate to factors such as financial targets, achievement of product development objectives and establishment of new collaborative arrangements. The board of directors, upon recommendation of the compensation committee, determines the level of achievement of the corporate goals for each year. The individual component of each named executive’s bonus award is not necessarily based on the achievement of any predetermined criteria or guidelines but rather on the compensation committee’s subjective assessment of the officer’s overall performance of his or her duties. In coming to this determination, our compensation committee does not follow any guidelines, nor are there such standing guidelines regarding the exercise of such discretion.
All final bonus payments to our named executive officers are determined by our compensation committee. The actual bonuses awarded in any year, if any, may be more or less than the target, depending on individual performance and the achievement of corporate objectives and may also vary based on other factors at the discretion of the compensation committee (or the full board of directors, with respect to our Chief Executive Officer). Under our annual incentive plan, the maximum bonus payable to an executive is 125% of his or her target bonus.
2018
2019 Performance Bonuses. For 2018,2019, corporate objectives fell into the following fourthree categories: clinical development of Fintepla in the Dravet Syndrome indication (40%); preparation for commercialization of Fintepla (25%for Dravet syndrome (55%); clinical development of Fintepla in the Lennox Gastaut indicationfor Lennox-Gastaut syndrome (25%); and pipeline expansion (10%(20%). Objectives were weighted based on their level of importance to theour business plan. In evaluating management’s performance against our 20182019 corporate goals, our compensation committee determined to award a corporate achievement level of 95%80% relative to those goals. Both qualitative and quantitative guidelines were established for purposes of evaluating performance relative to the corporate objectives during 2018.2019. These performance objectives were used as a guide by the compensation committee in subjectively determining overall corporate performance as they represented those areas in which the named executive officers and our employees generally were expected to focus their efforts. The compensation committee believed that it was better to evaluate our overall performance in these areas throughout the year in light of the general economic and industry conditions in which we operate. In coming to its final determination regarding the overall corporate achievement percentage, our compensation committee awarded 96%61% credit for corporate performance relative to the first objective, noting that significant progress was achievedafter taking into account the FDA refusal-to-file letter and subsequent successful resubmission of the Fintepla new drug application in the clinical development of Fintepla.September 2019. With respect to the second objective, our compensation committee awarded 98%101% credit, noting that the Company had made significant progress in preparation for commercializationthe clinical development of Fintepla.the Lennox-Gastaut Syndrome indication. With respect to the third objective, our compensation committee awarded 96%108% credit, noting the significant progress incompany expanded its pipeline through the Lennox Gastaut Syndrome indication. With
respect to the fourth objective, our compensation committee awarded 78% credit, noting we advanced our efforts to expand our pipelineacquisition of Modis Therapeutics and ended the year in a strong cash position.MT1621. This overall 95%80% achievement level was then used to determine each named executive officer’s bonus. For the named executive officers other than Dr. Farr, each of his or her target bonus was split into its corporate and individual components, based on the weighting applicable to such named executive officer as described above.
The compensation committee’s determination of the individual components of the
20182019 bonus awards for our named executive officers was not based on the achievement of any predetermined individual performance objectives, criteria or guidelines, but rather on the compensation committee’s subjective assessment of each officer’s overall performance of their duties during
2018.2019. Dr. Galer and Mr.
Smith received a 95% individual achievement level, Dr. GalerSagrolikar each received a 100% individual achievement level, Dr. Farfel received
a 115%an 80% individual achievement level and Mr.
SagrolikarSmith received a
100% individual125% achievement level.
The annual performance bonuses paid to our named executive officers for
20182019 are set forth in the “Summary Compensation Table” below.
Long-Term Equity Incentives
The goals of ourlong-term,equity-based incentive awards are to align the interests of our named executive officers and other employees,non-employee directors and consultants with the interests of our stockholders. Because vesting is based on continued employment, ourequity-based incentives also encourage the retention of our named executive officers through the vesting period of the awards. In determining the size of thelong-term equity incentives to be awarded to our named executive officers, we take into account a number of internal factors, such as the relative job scope, the value of existinglong-term incentive awards, individual performance history, prior contributions to us and the size of prior grants. For 2018,2019, while our compensation committee reviewed competitive market data prepared by Radford in connection with its grant oflong-term equity incentive awards to the named executive officers, such awards were not determined by reference to any specific target level of compensation or benchmarking. Based upon
these factors, the compensation committee determines the size of the
long-term equity incentives at levels it considers appropriate to create a meaningful opportunity for reward predicated on the creation of
long-term stockholder value.
During 2018, we granted stock options and restricted stock units to the named executive officers.To reward and retain our named executive officers in a manner that best aligns employees’ interests with stockholders’ interests, we use stock options as the primary incentive vehicles for
long-term compensation. We believe that stock options are an effective tool for meeting our compensation goal of increasing
long-term stockholder value by tying the value of the stock options to our future performance. Because employees are able to profit from stock options only if our stock price increases relative to the stock option’s exercise price, we believe stock options provide meaningful incentives to employees to achieve increases in the value of our stock over time.
The exercise price of each stock option grant is the fair market value of our common stock on the grant date, as determined by our board of directors from time to time. Stock option awards granted in connection with an employee’s commencement of employment generally vest over a
four-year period as follows: 25% of the shares underlying the option vest on the first anniversary of the date of the vesting commencement date and the remainder of the shares underlying the option vest in equal monthly installments over the remaining 36 months thereafter. Annual stock option awards to our named executive officers vest monthly over a
four-year period. From time to time, our compensation committee may, however, determine that a different vesting schedule is appropriate.
In 2018,2019, the compensation committee also granted restrictedservice-based stock unitsoptions and RSUs to our named executive officers, with the split between stock options and restricted stock unitsRSUs set at approximately 75% of the total equity award value in the form of stock options and 25% of the total equity award value in the form of restricted stock units. Restricted stock unitsRSUs. The RSUs were introduced as part of ourlong-term equity incentive program during 20182017 to add an additional vehicle for use in our incentive and retention valueprogram and to tie a portion of our named executive officers’ incentive compensation to our program.long-term performance.
We use stockequity awards to compensate our named executive officers both in the form of initial grants in connection with the commencement of employment and annual refresher grants. Annual grants of stockequity awards are typically approved by the compensation committee during the first quarter of each year. While we intend that the majority of stock awards to our employees be made pursuant to initial grants or our annual grant program, the compensation committee retains discretion to make stockequity awards to employees at other times, including in connection with the promotion of an employee, to reward an employee, for retention purposes or for other circumstances recommended by management or the compensation committee. We do not have any stock ownership requirements for our named executive officers.
In March
2018,2019, the compensation committee awarded
the following63,750 stock options to
each of our named executive
officers:officers (other than Dr. Farr). Dr. Farr
options to purchasewas awarded 160,000
shares; Mr. Smith, options to purchase 37,500 shares; Dr. Galer, options to purchase 37,500 shares; and Dr. Farfel, options to purchase 40,000 shares.stock options. Each of these option awards vests monthly over a
four-year period. period from the date of grant.
Also in March
2018,2019, the compensation committee awarded
the following restricted stock units8,125 RSUs to
each of our named executive
officers:officers (other than Dr. Farr). Dr. Farr
was awarded 20,000
restricted stock units; Mr. Smith, 6,250 restricted stock units; Dr. Galer, 6,250 restricted stock units; and Dr. Farfel, 6,500 restricted stock units.RSUs. The
restricted stock units shallRSUs vest in four equal annual installments on
each of the first four anniversaries of the date of grant.Upon the commencement of Mr. Sagrolikar’s employment with the Company, he was granted options to purchase 100,000 shares of common stock pursuant to our Employment Inducement Equity Incentive Award Plan (the “Inducement Plan”), which provides for the granting of equity awards to new employees of the Company. The options have aten-year termMarch 15, 2021, 2022, 2023 and an exercise price equal to the fair market value of the Company’s common stock on the date of grant. The options will vest over a four-year period, with 25% of the options vesting on the first anniversary of the date of grant and the remainder vesting in equal monthly installments over the three years thereafter. Mr. Sagrolikar was also granted 15,000 restricted stock units pursuant to the Inducement Plan. The restricted stock units will vest over a four-year period at the rate of 25% of the restricted stock units on each of the first four anniversaries of Mr. Sagrolikar’s commencement of employment.
2024.
The compensation committee’s recommendation regarding each named executive officer’s award amount was not based on any quantifiable factors, but instead was based on the compensation committee’s subjective analysis of the award levels the committee deemed appropriate for each executive in light of various factors, including the dilution created as a result of our public offerings and the need to continue to incentivize our executives. Each of these factors was taken into consideration by the compensation committee for each executive, as was management’s recommendations regarding the appropriate award levels. The final award levels, however, were entirely based on the compensation committee’s subjective analysis of these general factors and internal pay equity considerations. In general, the target total value of the equity incentives granted to our named executive officers in
20182019 approximated the
75th75th percentile of
similarly-situated executives among our peer group.
For a description of certain accelerated vesting provisions applicable to the stock awards granted to our named executive officers, see “— Post Termination and Change in Control Benefits” and “— Employment Agreements” below.
We have had no program, plan or practice pertaining to the timing of stock option grants to named executive officers coinciding with the release of material
non-public information.
All ourfull-time employees in the United States, including our named executive officers, are eligible to participate in our 401(k) plan. Pursuant to our 401(k) plan, employees may elect to reduce their current compensation by up to the statutorily prescribed annual limit ($18,50019,000 in 2018)2019), with additional salary deferrals
not to exceed $6,000 available to those employees 50 years of age or older, and to have the amount of this reduction contributed to our 401(k) plan. Our 401(k) Plan permits us to make discretionary matching contributions, and in 20182019 we made individually de minimis matching contributions for all plan participants, including our named executive officers.
Health and Welfare Benefits, Perquisites and Other Compensation
The establishment of competitive benefit packages for our employees is an important factor in attracting and retaining highly qualified personnel.
Health and Welfare Benefits. Our named executive officers are eligible to participate in all our employee benefit plans, including our medical, dental, vision, group life and disability insurance plans, in each case on the same basis as other employees. We believe that these health and welfare benefits help ensure that we have a productive and focused workforce through reliable and competitive health and other benefits.
Perquisites. We do not provide significant perquisites or personal benefits to our named executive officers. Pursuant to his employment agreement, Mr. Sagrolikar is entitled to relocation benefits in connection with his future relocation to the San Francisco Bay Area, which is expected to occur in 2019.2020.
Post Termination and Change in Control Benefits
We have entered into employment agreements which provide for certain severance benefits in the event a named executive officer’s employment is involuntarily or constructively terminated. Such severance benefits are intended and designed to alleviate the financial impact of an involuntary termination and maintain a stable work environment through salary continuation and equity award vesting acceleration. We provide severance benefits because they are essential to help us fulfill our objective of attracting and retaining key managerial talent. While these arrangements form an integral part of the total compensation provided to these individuals and are considered by the compensation committee when determining executive officer compensation, the decision to offer these benefits did not influence the compensation committee’s determinations concerning other direct compensation or benefit levels. The compensation committee has determined that such arrangements offer protection that is competitive within our industry and for our company size and are designed to attract highly qualified individuals and maintain their employment with us. In determining the severance benefits payable pursuant to the executive employment agreements, the compensation committee considered what level of severance benefits would be sufficient to retain our current executive team and to recruit talented executives in the future, which determination was based in part on input from management and our board of directors. For a description of these employment agreements, see “— Employment Agreements” below.
Prohibition on Certain Transactions in Zogenix Securities
Our insider trading policy prohibits officers, directors and employees, and entities controlled by such individuals and members of their households, from making short sales in our equity securities, transacting in puts, calls or other derivative securities involving our equity securities, on an exchange or in any other organized market, engaging in hedging or monetization transactions, such as zero-cost collars and forward sale contracts, purchasing our securities on margin or pledging our securities as collateral for a loan.
Response to
2018 Say on Pay2019 Say-on-Pay Vote
In May
2018,2019, we held a stockholder advisory vote on the compensation of our named executive officers, commonly referred to as a
say-on-pay vote. Our stockholders overwhelmingly approved the compensation of our named executive officers, with over
99%93% of stockholder votes cast in favor of our
20182019 say-on-pay resolution (excluding abstentions and broker
non-votes). As we evaluated our compensation practices and talent needs throughout
2018,2019, we were mindful of the strong support our stockholders expressed for our compensation philosophy. As a result, the compensation committee has decided to generally retain our existing approach to executive compensation for our continuing executives, with an emphasis on
short- and
long-term incentive compensation that rewards our senior executives for corporate and individual performance.
Tax Deductibility of Executive Compensation
The compensation committee and our board of directors have considered the potential future effects of Section 162(m) of the Internal Revenue Code on the compensation paid to our executive officers. Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1.0 million
in any taxable year for “covered employees.” Prior to the Tax Cuts and Jobs Act of 2017, covered employees generally consisted of a company’s chief executive officer and its three most highly compensated executive officers serving at the end of the taxable year (other than its chief financial officer), and compensation that qualified as“performance-based” “performance-based” under Section 162(m) was exempt from this $1 million deduction limitation. As part of the Tax Cuts and Jobs Act of 2017, the ability to rely on this exemption was, with certain limited exceptions, eliminated; in addition, the definition of covered employees was expanded to generally include all named executive officers. Although we historically maintained plans that were intended to permit the payment of deductible compensation under Section 162(m) of the Code if the requirements of Section 162(m) were satisfied, subject to the limited transition relief rules in the Tax Cuts and Jobs Act of 2017, we may no longer be able to take a deduction for any compensation in excess of $1 million that is paid to a covered employee. While we consider the tax deductibility of each element of executive compensation as a factor in our overall compensation program, the compensation committee, however, retains the discretion to approve compensation that may not qualify for the compensation deduction if, considering all applicable circumstances, it would be in our best interest for such compensation to be paid without regard to whether it may be tax deductible.
Accounting for
Stock-Based Compensation
We follow Financial Accounting Standards Board Accounting Standards Codification Topic
Under FASB ASC 718, or ASC Topic 718, for ourstock-based compensation awards. ASC Topic 718 requires companieswe are required to calculateestimate the grant date “fair value” for each grant of theirstock-based awardsequity award using a variety ofvarious assumptions. This calculation is performed for accounting purposes and reported in the compensation tables below, even though
recipients may never realize any value from their awards. ASC
Topic 718 also requires
companiesus to recognize the compensation cost of
theirstock-based awards in
theirour income statements over the period that an employee is required to render service in exchange for the award.
Report of the Compensation Committee of the Board of Directors
The compensation committee of
the company’sour board of directors has submitted the following report for inclusion in this proxy statement:
The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based on such review and discussions, the compensation committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement and in the Annual Report on Form
10-K for the year ended December 31,
2018,2019, filed by us with the SEC.
This report of the compensation committee is not “soliciting material,” shall not be deemed “filed” with the SEC and shall not be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
The foregoing report has been furnished by the compensation committee.
The Compensation Committee of the Board of Directors
Cam L. Garner (Chairman)
James B. Breitmeyer, M.D., Ph.D.
Renee P. Tannenbaum, Pharm.D.
Summary Compensation Table
The following table shows information regarding the compensation earned by our named executive officers during the
fiscal years ended December 31,
2019, 2018
2017 and
2016. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Annual
Compensation | | | Long Term
Compensation | | | | | | | | | | |
Name and Principal Position | | Year | | | Salary
($) | | | Bonus
($) | | | Stock
Awards
($)(1) | | | Option
Awards
($)(1) | | | Non-Equity
Incentive Plan
Compensation
($)(2) | | | All Other
Compensation
($)(4) | | | Total
($) | |
Stephen J. Farr, Ph.D. | | | 2018 | | | | 545,000 | | | | — | | | | 853,000 | | | | 4,927,552 | | | | 319,200 | | | | 5,500 | | | | 6,650,252 | |
Chief Executive Officer and | | | 2017 | | | | 493,750 | | | | — | | | | — | (3) | | | 1,136,883 | | | | 345,000 | | | | 5,001 | | | | 1,980,634 | |
President | | | 2016 | | | | 468,750 | | | | — | | | | — | | | | 1,394,640 | | | | 205,200 | | | | 3,943 | | | | 2,072,533 | |
| | | | | | | | |
Michael P. Smith(5) | | | 2018 | | | | 396,250 | | | | — | | | | 266,563 | | | | 1,154,895 | | | | 171,000 | | | | 5,080 | | | | 1,993,788 | |
Executive Vice President, Chief Financial Officer, Treasurer and Secretary | | | 2017 | | | | 368,958 | | | | — | | | | — | | | | 944,055 | | | | 189,676 | | | | 1,928 | | | | 1,504,617 | |
| | | | | | | | |
Bradley S. Galer, M.D. | | | 2018 | | | | 409,648 | | | | — | | | | 266,563 | | | | 1,700,357 | | | | 178,300 | | | | — | | | | 2,554,868 | |
Executive Vice President | | | 2017 | | | | 390,733 | | | | — | | | | — | (3) | | | 413,412 | | | | 202,799 | | | | 962 | | | | 1,007,906 | |
and Chief Medical Officer | | | 2016 | | | | 376,722 | | | | — | | | | — | | | | 418,392 | | | | 129,485 | | | | 4,018 | | | | 928,617 | |
| | | | | | | | |
Gail M. Farfel, Ph.D. | | | 2018 | | | | 391,477 | | | | — | | | | 277,225 | | | | 1,504,619 | | | | 174,600 | | | | 8,019 | | | | 2,355,940 | |
Executive Vice President | | | 2017 | | | | 363,250 | | | | — | | | | — | (3) | | | 361,735 | | | | 191,004 | | | | 1,188 | | | | 917,177 | |
and Chief Development Officer | | | 2016 | | | | 353,937 | | | | — | | | | — | | | | 313,794 | | | | 119,577 | | | | 3,547 | | | | 790,855 | |
| | | | | | | | |
Ashish M. Sagrolikar (6) | | | 2018 | | | | 192,500 | | | | — | | | | 655,500 | | | | 3,138,210 | | | | 165,500 | | | | 5,080 | | | | 4,156,790 | |
Executive Vice President and Chief Commercial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | The amounts shown in these columns constitute restricted stock units and options, as applicable, granted under our equity incentive programs. The amounts are valued based on the aggregate grant date fair value of the award in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 718. See Note 10 to our consolidated financial statements in our 2018 Annual Report on Form10-K for a discussion of the relevant assumptions used in determining the grant date fair value pursuant to ASC 718. The aggregate grant date fair value for restricted stock units, as determined in accordance with ASC 718, was based on the number of units awarded multiplied by the closing market price of our common stock on the date of grant. These amounts do not reflect whether the recipient has actually realized or will realize a financial benefit from the awards (such as by exercising stock options). Whether, and to what extent, a named executive officer realizes a financial benefit from the awards will depend on our actual operating performance, stock price fluctuations and the named executive officer’s continued service to us.
|
2017.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Annual Compensation | | | | Long Term Compensation | | | | | | | | |
| Name and Principal Position | | Year | | Salary ($) | | Bonus
($) | | Stock
Awards
($)(1) | | Option
Awards
($)(1) | | Non-Equity Incentive Plan Compensation ($)(2) | | All Other
Compensation
($)(3) | | Total
($) |
| Stephen J. Farr, Ph.D. | | 2019 | | 578,750 | | — | | 1,053,200 | | | 8,425,600 | | 280,800 | | 8,400 | | 10,346,750 |
| Chief Executive Officer and President | | 2018 | | 545,000 | | — | | 853,000 | | | 4,927,552 | | 319,200 | | 5,500 | | 6,650,252 |
| | 2017 | | 493,750 | | — | | — | (4) | 1,136,883 | | 345,000 | | 5,001 | | 1,980,634 |
| Michael P. Smith (5) | | 2019 | | 409,000 | | — | | 427,863 | | | 3,357,075 | | 156,700 | | 7,639 | | 4,358,277 |
| Executive Vice President, Chief Financial Officer, Treasurer and Secretary | | 2018 | | 396,250 | | — | | 266,563 | | | 1,154,895 | | 171,000 | | 5,080 | | 1,993,788 |
| | 2017 | | 368,958 | | — | | — | | | 3,357,075 | | 189,676 | | 1,928 | | 3,917,637 |
| Bradley S. Galer, M.D. | | 2019 | | 424,375 | | — | | 427,863 | | | 3,357,075 | | 157,700 | | — | | 4,367,013 |
| Executive Vice President and Chief Medical Officer | | 2018 | | 409,648 | | — | | 266,563 | | | 1,700,357 | | 178,300 | | — | | 2,554,868 |
| | 2017 | | 390,733 | | — | | — | (4) | 413,412 | | 202,799 | | 962 | | 1,007,906 |
| Gail M. Farfel, Ph.D. | | 2019 | | 409,000 | | — | | 427,863 | | | 3,357,075 | | 148,300 | | 11,200 | | 4,353,438 |
| Executive Vice President and Chief Development Officer | | 2018 | | 391,477 | | — | | 277,225 | | | 1,504,619 | | 174,600 | | 8,019 | | 2,355,940 |
| | 2017 | | 363,250 | | — | | — | (4) | 361,735 | | 191,004 | | 1,188 | | 917,177 |
| Ashish M. Sagrolikar (6) | | 2019 | | 389,350 | | — | | 427,863 | | | 3,357,075 | | | 144,200 | | | 7,687 | | 4,326,175 |
| Executive Vice President and Chief Commercial Officer | | 2018 | | 192,500 | | — | | 655,500 | | | 3,138,210 | | | 165,500 | | | 4,018 | | 4,155,728 |
(1)The amounts shown in these columns constitute stock options and RSUs, as applicable, granted under our equity incentive programs. The amounts are valued based on the aggregate grant date fair value of the award in accordance with ASC 718. See Note 12 to our consolidated financial statements in our 2019 Annual Report on Form 10-K filed with the SEC on March 2, 2020 for a discussion of the relevant assumptions used in determining the grant date fair value of equity awards pursuant to ASC 718. These amounts do not reflect whether the recipient has actually realized or will realize a financial benefit from the awards (such as by exercising stock options). Whether, and to what extent, a named executive officer realizes a financial benefit from the awards will depend on our actual operating performance, stock price fluctuations and the named executive officer’s continued service to us.
Each of Drs. Galer and Farfel were granted performance-based stock options in October 2015 that were scheduled to vest upon the acceptance by the FDA of the NDA for Fintepla, provided such event occurred on or before the third anniversary of the date of grant. On September 28, 2018, prior to the date the options would have otherwise expired, our compensation committee accelerated the vesting of 90% of such stock options held by Drs. Galer and Farfel (13,500 and 6,750 options, respectively), in recognition of our significant progress towards the performance goal and their dedicated service for the three years since the grant date. Pursuant to SEC rules, for 2018, amounts reflected in the option column above for Drs. Galer and Farfel also include the fair value of modification to the vesting schedule for such awards equal to the incremental expense arising from the modification (computed in accordance with ASC 718) ($545,462 for Dr. Galer and $272,731 for Dr. Farfel).
(2) | These amounts represent performance bonuses earned under our executive bonus program, which is described above under “Compensation Discussion and Analysis — Performance Bonuses.”
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(3) | In March 2017, we granted performance-based restricted stock units to our named executive officers (other than Mr. Smith). The vesting of these performance-based restricted stock units is predicated on the approval by the FDA of a NDA for Fintepla, provided such approval occurs within five years following the grant date, assuming the recipient remains continuously employed by us on the vesting date. In accordance with ASC 718, the grant date fair value to be reported for performance-based restricted stock units in the Stock Awards column is determined based on the probable outcome of the performance condition as of the grant date. Due to the uncertainties associated with the FDA approval process, we determined approval is not yet probable, as such term is used for accounting purposes, prior to the occurrence of the event. Accordingly, we assigned a grant-date fair value of $0 in the Stock Awards column based on this evaluation. However, if we had determined that as of the date of the grant it was probable that the performance condition would be achieved, we would have assigned the following grant date fair value for the performance-based restricted stock units awards in the Stock Awards column, measured based on the closing market price of our common stock on the date of grant made to our named executive officers (other than Mr. Smith) as follows: Dr. Farr, $280,500; Dr. Galer, $102,000 and Dr. Farfel, $89,250.
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(4) | The amounts represent 401(k) plan matching contributions paid by us and generally available to allfull-time(2)These amounts represent performance bonuses earned under our executive bonus program, which is described above under “Compensation Discussion and Analysis — Performance Bonuses.” U.S. employees.
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(5) | Amounts reported for Mr. Smith’s 2017 salary and bonus received werepro-rated for his January 16, 2017 start date. Mr. Smith’s option awards were granted in connection with his new hire compensation package.
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(6) | Amounts reported for Mr. Sagrolikar’s 2018 salary received waspro-rated for his July 2, 2018 start date. Pursuant to his employment agreement, his bonus was not pro-rated for 2018. Mr. Sagrolikar’s stock and option awards were granted in connection with his new hire compensation package.
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(3)The amounts represent 401(k) plan matching contributions paid by us and generally available to all full-time U.S. employees.
(4)In March 2017, we granted performance-based restricted stock units (“PSUs”) to our named executive officers (other than Messrs. Smith and Sagrolikar). The vesting of these performance-based RSUs is predicated on the approval by the U.S. Food and Drug Administration of a New Drug Application for Fintepla, provided such approval occurs within five years following the grant date, subject to the recipient’s continuous service to us on the vesting date. In accordance with ASC 718, the grant date fair value to be reported for PSUs in the Stock Awards column is determined based on the probable outcome of the performance condition as of the grant date. Due to the uncertainties associated with the FDA approval process, we determined approval is not yet probable, as such term is used for accounting purposes, prior to the occurrence of the event. Accordingly, we have reported a grant date fair value of $0 for these awards based on this evaluation. If we had determined that as of the date of the grant it was probable that the performance condition would be achieved, we would have reported the grant date fair value of these awards as follows: Dr. Farr, $280,500; Dr. Galer, $102,000 and Dr. Farfel, $89,250.
(5)Amounts reported for Mr. Smith’s 2017 salary and bonus received reflect pro-rated amounts for his January 16, 2017 start date. Mr. Smith’s option awards were granted in connection with his new hire compensation package.
(6)Amounts reported for Mr. Sagrolikar’s 2018 salary received reflect pro-rated amounts for his July 2, 2018 start date. Pursuant to his employment agreement, his bonus received was not subject to proration for 2018. Mr. Sagrolikar’s 2018 stock and option awards were granted in connection with his new hire compensation package.
2019 Grants of
Plan-Based Awards
The following table sets forth summary information regarding grants of
plan-based awards made to our named executive officers during the year ended December 31,
2018.Estimated Future Payouts
Under2019.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Grant
Date | | Date of
Approval
of Equity
Awards | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1) | | | | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(2) | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(3) | Exercise
or Base
Price of
Option
Awards
($/sh) | Grant Date
Fair Value of
Stock and
Option
Awards
($)(4) |
| Name | | | | | | Threshold
($) | Target
($) | Maximum
($) | | | | | |
| Stephen J. Farr, Ph.D. | | — | | — | | — | 351,000 | 438,750 | | — | — | — | — |
| | 3/22/2019 | | 3/20/2019 | | — | — | — | | — | 160,000 | 52.66 | 5,640,016 |
| | 3/22/2019 | | 3/20/2019 | | — | — | — | | 20,000 | — | — | 1,053,200 |
| Michael P. Smith | | — | | — | | — | 185,400 | 231,750 | | — | — | — | — |
| | 3/22/2019 | | 3/20/2019 | | — | — | — | | — | 63,750 | 52.66 | 2,675,056 |
| | 3/22/2019 | | 3/20/2019 | | — | — | — | | 8,125 | — | — | 427,863 |
| Bradley S. Galer, M.D. | | — | | — | | — | 192,375 | 240,469 | | — | — | — | — |
| | 3/22/2019 | | 3/20/2019 | | — | — | — | | — | — | — | 2,247,194 |
| | 3/22/2019 | | 3/20/2019 | | — | �� | — | | 8,125 | 63,750 | 52.66 | 427,863 |
| Gail M. Farfel, Ph.D. | | — | | — | | — | 185,400 | 231,750 | | — | — | — | — |
| | 3/22/2019 | | 3/20/2019 | | — | — | — | | — | — | — | 2,247,194 |
| | 3/22/2019 | | 3/20/2019 | | — | — | — | | 8,125 | 63,750 | 52.66 | 427,863 |
| Ashish M. Sagrolikar | | — | | — | | — | 175,860 | 219,825 | | — | — | — | — |
| | 3/22/2019 | | 3/20/2019 | | — | — | — | | — | 63,750 | 52.66 | 2,247,194 |
| | 3/22/2019 | | 3/20/2019 | | — | — | — | | 8,125 | — | — | 427,863 |
————————————
Non-Equity(1) IncentivePlan Awards(1)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Type of
Award | | Grant
Date | | | Approval
Date | | | Threshold
($) | | | Target
($) | | | Maximum
($) | | | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#) | | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) | | | Exercise or
Base Price
of Option
Awards
($/Sh) | | | Grant Date
Fair Value
of Stock
and Option
Awards
($)(2) | |
Stephen J. Farr | | RSU(3) | | | 3/15/2018 | | | | 2/23/2018 | | | | | | | | | | | | | | | | 20,000 | | | | | | | | | | | | 853,000 | |
| | Options(4) | | | 3/15/2018 | | | | 2/23/2018 | | | | | | | | | | | | | | | | | | | | 160,000 | | | | 42.65 | | | | 4,927,552 | |
| | Incentive
Cash | | | 2/23/2018 | | | | 2/23/2018 | | | | — | | | | 336,000 | | | | 420,000 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Michael P. Smith | | RSU(3) | | | 3/15/2018 | | | | 2/23/2018 | | | | | | | | | | | | | | | | 6,250 | | | | | | | | | | | | 266,563 | |
| | Options(4) | | | 3/15/2018 | | | | 2/23/2018 | | | | | | | | | | | | | | | | | | | | 37,500 | | | | 42.65 | | | | 1,154,895 | |
| | Incentive
Cash | | | 2/23/2018 | | | | 2/23/2018 | | | | — | | | | 180,000 | | | | 225,000 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Bradley S. Galer | | RSU(3) | | | 3/15/2018 | | | | 2/23/2018 | | | | | | | | | | | | | | | | 6,250 | | | | | | | | | | | | 266,563 | |
| | Options(4) | | | 3/15/2018 | | | | 2/23/2018 | | | | | | | | | | | | | | | | | | | | 37,500 | | | | 42.65 | | | | 1,154,895 | |
| | Modified
Options(5) | | | 9/28/2018 | | | | 9/28/2018 | | | | | | | | | | | | | | | | | | | | 13,500 | | | | | | | $ | 545,462 | |
| | Incentive
Cash | | | 2/23/2018 | | | | 2/23/2018 | | | | — | | | | 186,750 | | | | 233,438 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Gail M. Farfel, | | RSU(3) | | | 3/15/2018 | | | | 2/23/2018 | | | | | | | | | | | | | | | | 6,500 | | | | | | | | | | | | 277,225 | |
| | Options(4) | | | 3/15/2018 | | | | 2/23/2018 | | | | | | | | | | | | | | | | | | | | 40,000 | | | | 42.65 | | | | 1,231,888 | |
| | Modified
Options(5) | | | 9/28/2018 | | | | 9/28/2018 | | | | | | | | | | | | | | | | | | | | 6,750 | | | | | | | $ | 272,731 | |
| | Incentive
Cash | | | 2/23/2018 | | | | 2/23/2018 | | | | — | | | | 180,000 | | | | 225,000 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Ashish M. Sagrolikar | | RSU(3) | | | 7/2/2018 | | | | 5/31/2018 | | | | | | | | | | | | | | | | 15,000 | | | | | | | | | | | | 655,500 | |
| | Options(4) | | | 7/2/2018 | | | | 5/31/2018 | | | | | | | | | | | | | | | | | | | | 100,000 | | | | 43.70 | | | | 3,138,210 | |
| | Incentive
Cash | | | 7/2/2018 | | | | 5/31/2018 | | | | — | | | | 173,250 | | | | 216,563 | | | | | | | | | | | | | | | | | |
(1) | These amounts represent the target and maximum 2018 performance bonusesAmounts in this column represent target and maximum cash performance bonus opportunities for the named executive officers in 2019 under our executive bonus program, which is described above under “— Compensation Discussion and Analysis — Performance Bonuses.”
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(2) | Except as described in footnote (5) below, the amounts in this column are value based on the aggregate grant date fair value of the stock and option awards in accordance with ASC 718. See Note 10 to our consolidated financial statements in our 2018 Annual Report on Form10-K for a discussion of the relevant assumptions used in determining the grant date fair value pursuant to ASC 718. The aggregate grant date fair value for stock awards consisting of restricted stock units, as determined in accordance with ASC 718, was based on the number of units awarded multiplied by the closing market price of our common stock on the date of grant. These amounts do not reflect whether the recipient has actually realized or will realize a financial benefit from the awards (such as by exercising stock options). Whether, and to what extent, a named executive officer realizes a financial benefit from the awards will depend on our actual operating performance, stock price fluctuations and the named executive officer’s continued service to us.
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(3) | The restricted stock units vest over a four-year period at the rate of 25% of the restricted stock units on each of the first four anniversaries of the grant date. For a description of the accelerated vesting applicable to the foregoing equity awards, see “Employment Agreements” below.
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(4) | Other than the options granted to Mr. Sagrolikar, the options vest in equal monthly installments over thefour-year period of continuous service following the grant date. The options granted to Mr. Sagrolikar vest as to 25% of the shares underlying the options on the first anniversary of the date of grant and the remaining 75% vest in successive equal monthly installments over the following 36 months of continuous service. All options have a10-year term from the date of grant. For a description of the accelerated vesting applicable to the foregoing equity awards, see “Employment Agreements” below.
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(5) | Each of Drs. Galer and Farfel were granted performance-based stock options in October 2015 that were scheduled to vest upon the acceptance by the FDA of the NDA for Fintepla, provided such event occurred on or before the third anniversary of the date of grant. On September 28, 2018, prior to the date the options would have otherwise expired, our compensation committee accelerated the vesting of 90% of such stock options held by Drs. Galer and Farfel (13,500 and 6,750 options, respectively), in recognition of our significant progress towards the performance goal and their dedicated service for the three years since the grant date. Pursuant to SEC rules, these modified option awards are reflected in the table above and the amounts in the right hand column represent the incremental fair value attributable to the modification of the option award, in each case computed in accordance with ASC 718. See Note 10 to our consolidated financial statements in our 2018 Annual Report on Form10-K for a discussion of the relevant assumptions used in determining the fair value on the date of modification pursuant to ASC 718.
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(2)The restricted stock units vest over a four-year period at the rate of 25% of the restricted stock units on each of March 15, 2020, 2021, 2022 and 2023, subject to continuous service through each vesting date. For a description of the accelerated vesting applicable to the foregoing equity awards, see “Employment Agreements” below.
(3)The option awards vest in equal monthly installments over the four-year period of continuous service following the grant date. All option awards have a 10-year term from the grant date. For a description of the accelerated vesting applicable to the foregoing equity awards, see “Employment Agreements” below.
(4)The applicable grant-date fair value of each option and RSU award was calculated in accordance with ASC 718. For a discussion of our valuation methodology used, see Note 12 to our consolidated financial statements for the year-end December 31, 2019 included in our Annual Report on Form 10-K filed with the SEC on March 2, 2020. These amounts do not reflect whether the recipient has actually realized or will realize. Whether, and to what extent, a named executive officer realizes a financial benefit from the awards will depend on our actual operating performance, stock price fluctuations and the named executive officer’s continued service to us.
Discussion of Summary Compensation and Grants
Plan-Based Awards Tables
Our executive compensation policies and practices, pursuant to which the compensation set forth in the Summary Compensation Table and the
20182019 Grants of
Plan-Based Awards table was paid or awarded, are described above under “Compensation Discussion and Analysis.” A summary of certain material terms of our employment agreements and compensation plans and arrangements is set forth below.
Employment Agreements
We have entered into an
Pursuant to the employment
agreementagreements with each of our executive
officers.Pursuant to each of the employment agreements,officers, if we terminate such officer’s employment without cause (as defined below) or such officer resigns for good reason (as defined below) or such officer’s employment is terminated as a result of his or her death or following his or her permanent disability, the executive officer or his or her estate, as applicable, is entitled to the following payments and benefits: (1) his or her fully earned but unpaid base salary through the date of termination at the rate then in effect, plus all other benefits, if any, under any group retirement plan, nonqualified deferred compensation plan, equity award or agreement, health benefits plan or other group benefit plan to which he or she may be entitled to under the terms of such plans or agreements; (2) a lump sum cash payment in an amount equal to 12 months of his or her base salary as in effect immediately prior to the date of termination; (3) continuation of health benefits for a period of 12 months following the date of termination; and (4) the automatic acceleration of the vesting and exercisability of outstanding unvested stock awards as to the number of stock awards that would have vested over the12-month period following termination had such officer remained continuously employed by us during such period.
If a named executive officer is terminated without cause or resigns for good reason during the period commencing 60 days prior to a change in control (as defined below) or 12 months following a change in control, such officer shall be entitled to receive, in addition to the severance benefits described above, a lump sum cash payment in an amount equal to his or her bonus (as defined below) for the year in which the termination of employment occurs. In addition, with the exception of the
performance-based restricted stock units PSUs granted in March 2017 (the accelerated vesting of which is described below), in the event of a change in control, the vesting and exercisability of 50% of the executive officer’s outstanding unvested stock awards shall be automatically accelerated and, in the event an executive officer is terminated without cause or resigns for good reason within three months prior to or 12 months following a change in control, the vesting and exercisability of 100% of the executive officer’s outstanding unvested
stockequity awards shall be automatically accelerated (although the service-based
restricted stock unitsRSUs granted to the executives will not be eligible to receive the enhanced change in control vesting pursuant to this provision based on an involuntary termination
without cause or resignation for good reason preceding a change in control, in which case the standard acceleration upon an involuntary termination will apply). The
performance-based restricted stock units PSUs granted in March 2017 are not eligible for vesting on an accelerated basis pursuant to the terms of any of the employment agreements; provided that they will vest on an accelerated basis
underpursuant to the
employment agreementsterms of the PSU agreement, including (1)
as a resultthe vesting of
a50% of the outstanding PSUs shall be automatically accelerated effective immediately prior to change in control
orand (2)
as a resultthe automatic acceleration of
anany remaining outstanding PSUs upon involuntary termination within
60 days prior to or 12 months after a change in control. For a further description of the potential compensation payable to our named executive officers under their employment agreements, please see “— Potential Payments Upon Termination or Change in Control” below.
Dr. Farfel’s employment agreement also provides that she was entitled to aone-time signing bonus of $50,000, subject to a right of repayment should she leave the company which lapsed on June 29, 2016. Dr. Farfel was also entitled to reimbursement for legal expenses of up to $5,000 in connection with the negotiation of her employment agreement.
Mr. Sagrolikar’s employment agreement provides that he will be eligible to receive relocation assistance (and related
tax-gross ups to the extent such relocation payments are taxable income to him) up to an aggregate of $220,000, plus temporary housing at our expense until his relocation to the San Francisco Bay Area (but in no event beyond
September 1, 2019)December 31, 2020).
For purposes of the employment agreements, “cause” generally means an executive officer’s (1) commission of an act of fraud, embezzlement or dishonesty or some other illegal act that has a material
adverse impact on us or any successor or affiliate of ours, (2) conviction of, or entry into a plea of “guilty” or “no contest” to, a felony, (3) unauthorized use or disclosure of our confidential information or trade secrets or any successor or affiliate of ours that has, or may reasonably be expected to have, a material adverse impact on any such entity, (4) gross negligence, insubordination or material violation of any duty of loyalty to us or any successor or affiliate of ours, or any other material misconduct on the part of the executive officer, (5) ongoing and repeated failure or refusal to perform or neglect of his or her duties as required by his or her employment agreement, which failure, refusal or neglect continues for 15 days following his or receipt of written notice from our board of directors, Chief Executive Officer or supervising officer, as
applicable, stating with specificity the nature of such failure, refusal or neglect, or (6) breach of any policy of ours or any material provision of his or her employment agreement.
For purposes of the employment agreements, “good reason” generally means (1) a material diminution in the executive officer’s authority, duties or responsibilities, (2) a material diminution in the executive officer’s base compensation, unless such a reduction is imposed
across-the-board to senior management of the company, (3) a material change in the geographic location at which the executive officer must perform his or her duties, or (4) any other action or inaction that constitutes a material breach by us or any successor or affiliate of ours of its obligations to the executive officer under his or her employment agreement.
For purposes of the employment agreements, “bonus” generally means an amount equal to the average of the bonuses awarded to the named executive officer for each of the three fiscal years prior to the date of his or her termination of employment, or such lesser number of years as may be applicable if the executive officer has not been employed for three full years on the date of termination of employment. For any partial fiscal year occurring because the executive commenced employment during that year, the executive’s “bonus” for that year shall be annualized as part of the bonus calculation.
For purposes of the employment agreements, “change in control” has the same meaning as such term is given under the terms of our 2010 Equity Incentive Award Plan. Under the plan, a change in control is generally defined as:
•the acquisition by any person or entity or related group of persons or entities (other than us, our subsidiaries, an employee benefit plan maintained by us or any of our subsidiaries or a person or entity that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, us) of beneficial ownership (within the meaning of Rule13d-3 under the Exchange Act) of more than 50% of the total combined voting power of our securities outstanding immediately after such acquisition;
•during anytwo-year period, individuals who, at the beginning of such period, constitute our board of directors together with any new director(s) whose election by our board of directors or nomination for election by our stockholders was approved by a vote of at leasttwo-thirds of the directors then still in office who either were directors at the beginning of thetwo-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of our board of directors; or (1) a merger, consolidation, reorganization, or business combination or (2) the sale, exchange or transfer of all or substantially all of our assets in any single transaction or series of transactions or (3) the acquisition of assets or stock of another entity, in each case other than a transaction:
◦which results in our voting securities outstanding immediately before the transaction continuing to represent, directly or indirectly, at least a majority of the combined voting power of the successor entity’s outstanding voting securities immediately after the transaction, and
◦after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of us or our successor; provided, however, that no person or group is treated as beneficially owning 50% or more of combined voting power of us or our successor solely as a result of the voting power held in us prior to the consummation of the transaction.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth specified information regarding the outstanding equity awards held by our named executive officers at December 31,
2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Option Awards | | | Stock Awards | |
Name | | Grant
Date | | | Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#) | | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(1) | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | | | Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(2) | | | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3) | | | Equity
Incentive
Plan:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)(4) | | | Equity
Incentive
Plan:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
Have Not
Vested
($)(3) | |
Stephen J. Farr | | | 3/15/18 | | | | 30,000 | | | | 130,000 | | | | 42.65 | | | | 3/15/2028 | | | | | | | | | | | | | | | | | |
| | | 3/15/18 | | | | | | | | | | | | | | | | | | | | 20,000 | | | | 729,200 | | | | | | | | | |
| | | 03/14/17 | | | | 72,188 | | | | 92,812 | | | | 10.20 | | | | 3/14/2027 | | | | | | | | | | | | | | | | | |
| | | 03/14/17 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 27,500 | | | | 1,002,650 | |
| | | 03/14/16 | | | | 137,500 | | | | 62,500 | | | | 10.35 | | | | 3/14/2026 | | | | | | | | | | | | | | | | | |
| | | 05/13/15 | | | | 85,043 | | | | 8,707 | | | | 11.04 | | | | 5/13/2025 | | | | | | | | | | | | | | | | | |
| | | 03/17/15 | | | | 29,295 | | | | 1,954 | | | | 10.64 | | | | 3/17/2025 | | | | | | | | | | | | | | | | | |
| | | 03/25/14 | | | | 43,749 | | | | — | | | | 24.56 | | | | 3/25/2024 | | | | | | | | | | | | | | | | | |
| | | 03/15/13 | | | | 69,373 | | | | — | | | | 15.92 | | | | 3/15/2023 | | | | | | | | | | | | | | | | | |
| | | 04/27/12 | | | | 87,499 | | | | — | | | | 15.04 | | | | 4/27/2022 | | | | | | | | | | | | | | | | | |
| | | 03/01/11 | | | | 31,249 | | | | — | | | | 33.92 | | | | 3/1/2021 | | | | | | | | | | | | | | | | | |
| | | 05/25/10 | | | | 12,500 | | | | — | | | | 32.00 | | | | 5/25/2020 | | | | | | | | | | | | | | | | | |
| | | 09/01/09 | | | | 5,312 | | | | — | | | | 20.00 | | | | 9/1/2019 | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Michael P. Smith | | | 3/15/18 | | | | 7,031 | | | | 30,469 | | | | 42.65 | | | | 3/15/2028 | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | 3/15/18 | | | | | | | | | | | | | | | | | | | | 6,250 | | | | 227,875 | | | | | | | | | |
| | | 01/16/17 | | | | 64,688 | | | | 70,312 | (5) | | | 10.35 | | | | 1/16/2027 | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Bradley S. Galer | | | 3/15/18 | | | | 7,031 | | | | 30,469 | | | | 42.65 | | | | 3/15/2028 | | | | | | | | | | | | | | | | | |
| | | 3/15/18 | | | | | | | | | | | | | | | | | | | | 6,250 | | | | 227,875 | | | | | | | | | |
| | | 03/14/17 | | | | 26,250 | | | | 33,7500 | | | | 10.20 | | | | 3/14/2027 | | | | | | | | | | | | | | | | | |
| | | 03/14/17 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,000 | | | | 364,600 | |
| | | 03/14/16 | | | | 41,250 | | | | 18,750 | | | | 13.32 | | | | 3/14/2026 | | | | | | | | | | | | | | | | | |
| | | 10/05/15 | | | | 28,500 | | | | — | | | | 13.32 | | | | 10/5/2025 | | | | | | | | | | | | | | | | | |
| | | 03/17/15 | | | | 26,367 | | | | 1,758 | | | | 10.64 | | | | 3/17/2025 | | | | | | | | | | | | | | | | | |
| | | 06/02/14 | | | | 8,125 | | | | — | | | | 16.64 | | | | 6/2/2024 | | | | | | | | | | | | | | | | | |
| | | 12/17/13 | | | | 53,125 | | | | — | | | | 24.16 | | | | 12/17/2023 | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Gail M. Farfel | | | 3/15/18 | | | | 7,500 | | | | 32,500 | | | | 42.65 | | | | 3/15/2028 | | | | | | | | | | | | | | | | | |
| | | 3/15/18 | | | | | | | | | | | | | | | | | | | | 6,500 | | | | 236,990 | | | | | | | | | |
| | | 03/14/17 | | | | 22,969 | | | | 29,531 | | | | 10.20 | | | | 3/14/2027 | | | | | | | | | | | | | | | | | |
| | | 03/14/17 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 8,750 | | | | 319,025 | |
| | | 03/14/16 | | | | 30,938 | | | | 14,062 | | | | 10.35 | | | | 3/14/2026 | | | | | | | | | | | | | | | | | |
| | | 07/01/15 | | | | 23,256 | | | | 7,033 | | | | 13.96 | | | | 6/30/2025 | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Ashish M. Sagrolikar | | | 7/2/18 | | | | | | | | 100,000 | (5) | | | 43.70 | | | | 7/2/2028 | | | | | | | | | | | | | | | | | |
| | | 7/2/18 | | | | | | | | | | | | | | | | | | | | 15,000 | | | | 546,900 | | | | | | | | | |
(1) | Except as described below, all options have a term of ten years from the date of grant and vest in successive equal monthly installments over afour-year period of continuous service following the grant date. For a description of the accelerated vesting applicable to the foregoing equity awards, see “— Employment Agreements” above.
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2019.(2) | The restricted stock units vest over a four-year period at the rate of 25% of the restricted stock units on each of the first four anniversaries of the grant date. For a description of the accelerated vesting applicable to the foregoing equity awards, see “Employment Agreements” below.
|
(3) | Market value is calculated based on the closing price of our common stock of $36.46 per share on December 31, 2018, times the number of shares subject to the restricted stock unit awards.
|
(4) | Theseperformance-based restricted stock units granted on March 14, 2017 are subject to achievement of the performance condition described above in footnote (3) to the “Summary Compensation Table.” For a description of the accelerated vesting applicable to the foregoing equity awards, see “— Employment Agreements” above.
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(5) | 25% of the shares underlying the options vest on the first anniversary of the grant date and the remaining 75% vest in successive equal monthly installments over the following 36 months of continuous service. For a description of the accelerated vesting applicable to the foregoing equity awards, see “— Employment Agreements” above.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | | | | | Stock Awards | | | |
| Name | | Grant
Date | Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#) | Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(1)(2) | Option Exercise Price ($) | Option Expiration Date | | Number of
Shares or
Units of Stock
That Have
Not Vested
(#)(1)(3) | Market Value
of Shares or
Units of Stock
That Have
Not Vested
($)(4) | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#)(5) | Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)(4) |
| Stephen J. Farr, Ph.D. | | 3/22/2019 | 30,000 | 130,000 | 52.66 | 3/22/2029 | | — | — | — | — |
| | 3/22/2019 | — | — | — | — | | 20,000 | 1,042,600 | — | — |
| | 3/15/2018 | 70,000 | 90,000 | 42.65 | 3/15/2028 | | — | — | — | — |
| | 3/15/2018 | — | — | — | — | | 15,000 | 781,950 | — | — |
| | 3/14/2017 | 34,375 | 51,562 | 10.20 | 3/14/2027 | | — | — | — | — |
| | 3/14/2017 | — | — | — | — | | — | — | 27,500 | 1,433,575 |
| | 3/14/2016 | 117,487 | 12,500 | 10.35 | 3/14/2026 | | — | — | — | — |
| | 5/13/2015 | 93,750 | — | 11.04 | 5/13/2025 | | — | — | — | — |
| | 3/17/2015 | 31,249 | — | 10.64 | 3/17/2025 | | — | — | — | — |
| | 3/25/2014 | 43,749 | — | 24.56 | 3/25/2024 | | — | — | — | — |
| | 3/15/2013 | 69,373 | — | 15.92 | 3/15/2023 | | — | — | — | — |
| | 4/27/2012 | 87,499 | — | 15.04 | 4/27/2022 | | — | — | — | — |
| | 3/01/2011 | 31,249 | — | 33.92 | 3/1/2021 | | — | — | — | — |
| | 5/25/2010 | 3,125 | — | 32.00 | 5/25/2020 | | — | — | — | — |
| Michael P. Smith | | 3/22/2019 | 11,953 | 51,797 | 52.66 | 3/22/2029 | | — | — | — | — |
| | 3/22/2019 | — | — | — | — | | 8,125 | 423,556 | — | — |
| | 3/15/2018 | 16,406 | 21,094 | 42.65 | 3/15/2028 | | — | — | — | — |
| | 3/15/2018 | — | — | — | — | | 4,687 | 244,333 | — | — |
| | 1/16/2017(6) | 53,438 | 36,562 | 10.35 | 1/16/2027 | | — | — | — | — |
| Bradley S. Galer, M.D. | | 3/22/2019 | 11,953 | 51,797 | 52.66 | 3/22/2029 | | — | — | — | — |
| | 3/22/2019 | — | — | — | — | | 8,125 | 423,556 | — | — |
| | 3/15/2018 | 16,406 | 21,094 | 42.65 | 3/15/2028 | | — | — | — | — |
| | 3/15/2018 | — | — | — | — | | 4,687 | 244,333 | — | — |
| | 3/14/2017 | 41,250 | 18,750 | 10.20 | 3/14/2027 | | — | — | — | — |
| | 3/14/2017 | — | — | — | — | | — | — | 10,000 | 521,300 |
| | 3/14/2016 | 56,250 | 3,750 | 10.35 | 3/14/2026 | | — | — | — | — |
| | 10/05/2015 | 28,500 | — | 13.32 | 10/5/2025 | | — | — | — | — |
| | 3/17/2015 | 28,125 | — | 10.64 | 3/17/2025 | | — | — | — | — |
| | 6/02/2014 | 8,125 | — | 16.64 | 6/2/2024 | | — | — | — | — |
| | 12/17/2013 | 53,125 | — | 24.16 | 12/17/2023 | | — | — | — | — |
| Gail M. Farfel, Ph.D. | | 3/22/2019 | 11,953 | 51,797 | 52.66 | 3/22/2029 | | — | — | — | — |
| | 3/22/2019 | — | — | — | — | | 8,125 | 423,556 | — | — |
| | 3/15/2018 | 17,500 | 22,500 | 42.65 | 3/15/2028 | | — | — | — | — |
| | 3/15/2018 | — | — | — | — | | 4,875 | 254,134 | — | — |
| | 3/14/2017 | 36,094 | 16,406 | 10.20 | 3/14/2027 | | — | — | — | — |
| | 3/14/2017 | — | — | — | — | | — | — | 8,750 | 456,138 |
| | 3/14/2016 | 42,188 | 2,812 | 10.35 | 3/14/2026 | | — | — | — | — |
| | 10/05/2015 | 14,250 | — | 13.32 | 10/5/2025 | | — | — | — | — |
| | 7/01/2015 | 30,289 | — | 13.96 | 7/1/2025 | | — | — | — | — |
| Ashish M. Sagrolikar | | 3/22/2019 | 11,953 | 51,797 | 52.66 | 3/22/2029 | | — | — | — | — |
| | 3/22/2019 | — | — | — | — | | 8,125 | 423,556 | — | — |
| | 7/2/2018(6) | 35,417 | 64,583 | 43.70 | 7/2/2028 | | — | — | — | — |
| | 7/2/2018(7) | — | — | — | — | | 11,250 | 586,463 | — | — |
(1)Vesting of each stock option and stock award is contingent upon the named executive officer’s continued service, except as may be accelerated on certain events described above under “—Employment Agreements” and under “—Potential Payments Upon Termination or Change in Control” described below.
(2)Except as described below in footnote 6, all option awards have a term of ten years from the date of grant and vest in successive equal monthly installments over a four-year period of continuous service following the grant date.
(3)Except as described below in footnote 7, the RSUs vest in a series of four successive equal annual installments on each March 15 of the first four calendar years following the calendar year in which the grant date occurs.
(4)Market value is calculated based on the closing price of our common stock of $52.13 per share on December 31, 2019 times the number of shares subject to the stock award.
(5)These PSUs granted on March 14, 2017 are subject to achievement of the performance condition described above in footnote (4) to the “Summary Compensation Table.”
(6)25% of the shares underlying the options vest on the first anniversary of the grant date and the remaining 75% vest in successive equal monthly installments over the following 36 months of continuous service.
(7)The RSUs vest over a four-year period at the rate of 25% of the stock award on each of the first four anniversaries of the grant date.
Option Exercises and Stock Vested
Stock options exercised
The following table sets forth information regarding option exercises and restricted stock unitsawards that vested during 2019 with respect to our named executive officers.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | | | Stock Awards | | |
| Name | | Number of
Shares
Acquired
on Exercise
(#) | | Value
Realized
on Exercise
($)(1) | | Number of
Shares
Acquired
on Vesting
(#) | | Value
Realized
on Vesting
($)(2) |
| Stephen J. Farr, Ph.D. | | 163,763 | | 5,700,278 | | 5,000 | | 259,400 |
| Michael P. Smith | | 45,000 | | 1,699,050 | | 1,563 | | 81,088 |
| Bradley S. Galer, M.D. | | — | | — | | 1,563 | | 81,088 |
| Gail M. Farfel, Ph.D. | | — | | — | | 1,625 | | 84,305 |
| Ashish M. Sagrolikar | | — | | — | | 3,750 | | 182,700 |
————————————
(1)The amount shown for value realized on exercise of stock options equals (i) the Named Executives duringnumber of shares of our common stock to which the year ended December 31, 2018 are outlined below. | | | | | | | | | | | | | | | | |
| | | Option Awards | | | Stock Awards | |
Name | | Number of shares
acquired on
exercise (#) | | | Value realized on
exercise ($)(1) | | | Number of shares
acquired on
vesting (#) | | | Value realized on
vesting ($) | |
Stephen J. Farr | | | 937 | | | | 12,509 | | | | — | | | | — | |
Michael P. Smith | | | — | | | | — | | | | — | | | | — | |
Bradley S. Galer | | | — | | | | — | | | | — | | | | — | |
Gail M. Farfel | | | 25,961 | | | | 867,893 | | | | | | | | | |
Ashish M. Sagrolikar | | | — | | | | — | | | | — | | | | — | |
(1) | Represents the amounts realized based on the excess of the fair market value of our common stock on the date of exercise over the option’s exercise price.
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exercise of the stock option related, multiplied by (ii) the difference between the per-share market price of the shares on the date of exercise and the per-share exercise price of the option. If the stock acquired upon exercise was sold on the day of exercise, the market price was determined as the actual sales price of the stock. If the stock acquired upon exercise was not sold on the day of exercise, the market price was determined as the closing price of the stock on the Nasdaq Stock Market on the exercise date. (2)The value realized is based on the closing price of our common stock on the vesting date as reported on the Nasdaq Stock Market multiplied by the number of RSUs vested.
Potential Payments Upon Termination or Change in Control
The following table summarizes the potential payments to our named executive officers in four scenarios: (1) upon termination by us without cause or the executive’s resignation for good reason apart from a change in
control;control (“CIC”); (2) upon termination by us following the executive’s permanent disability or as a result of the executive’s death; (3) upon termination by us without cause or the executive’s resignation for good reason within
60 daysthree months prior to or 12 months following a
change in control;CIC; or (4) in the event of a
change in controlCIC without a termination of employment. The table assumes that the termination of employment or
change in control,CIC, as applicable, occurred on December 31,
2018.2019. The definitions of “cause”, “good reason” and “bonus” are contained in the applicable employment agreement for each of our named executive officers, which are described above under the heading “— Employment Agreements.”
| | | | | | | | | | | | | | | | | | |
Name and Position | | Benefit Type | | Payment in the
Event of a
Termination by the
Company Without
Cause or by
Executive for Good
Reason Apart
from a Change in
Control
($)(1)(2) | | | Payment in the
Event of a
Termination by the
Company
following
Executive’s
Permanent
Disability or as a
Result of
Executive’s
Death
($)(1)(2) | | | Payment in the
Event of a
Termination by the
Company Without
Cause or by
Executive for Good
Reason Within 60
Days Prior to or
12 Months Following
a Change in
Control
($)(3)(4) | | | Payment in
the Event of
a Change in
Control
Without
Termination
($)(5) | |
Stephen J. Farr, Ph.D. | | Severance | | | 560,000 | | | | 560,000 | | | | 849,733 | | | | — | |
Chief Executive Officer | | Benefits(6) | | | 24,145 | | | | 24,145 | | | | 24,145 | | | | — | |
and President | | Equity Awards | | | 2,979,534 | | | | 2,979,534 | | | | 6,072,752 | | | | 2,535,051 | |
| | | | | |
Michael P. Smith | | Severance | | | 400,000 | | | | 400,000 | | | | 584,461 | | | | — | |
Executive Vice President, | | Benefits(6) | | | 32,414 | | | | 32,414 | | | | 32,414 | | | | — | |
Chief Financial Officer, Treasurer and Secretary | | Equity Awards | | | 980,098 | | | | 980,908 | | | | 2,063,721 | | | | 1,031,860 | |
| | | | | |
Bradley S. Galer, M.D. | | Severance | | | 415,000 | | | | 415,000 | | | | 585,195 | | | | — | |
Executive Vice President | | Benefits(6) | | | 32,414 | | | | 32,414 | | | | 32,414 | | | | — | |
and Chief Medical Officer | | Equity Awards | | | 930,637 | | | | 930,637 | | | | 2,013,704 | | | | 824,552 | |
| | | | | |
Gail M. Farfel, Ph.D. | | Severance | | | 400,000 | | | | 400,000 | | | | 561,727 | | | | — | |
Executive Vice President | | Benefits(6) | | | 23,565 | | | | 23,565 | | | | 23,565 | | | | — | |
and Chief Development Officer | | Equity Awards | | | 900,326 | | | | 900,326 | | | | 1,856,900 | | | | 768,938 | |
| | | | | |
Ashish M. Sagrolikar | | Severance | | | 385,000 | | | | 385,000 | | | | 550,500 | | | | — | |
Executive Vice President | | Benefits(6) | | | 19,052 | | | | 19,052 | | | | 19,052 | | | | — | |
and Chief Commercial Officer | | Equity Awards | | | 193,694 | | | | 193,694 | | | | 546,900 | | | | 273,450 | |
(1) | Cash severance represents 12 months of base salary for each named executive officer, payable in cash in a lump sum.
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(2) | Value of equity award acceleration represents the value of those options that would immediately vest as a result of the named executive officer’s termination or as a result of the named executive officer’s death or disability. The value attributable to the options represents the excess of the fair market value of our common stock of $36.46 on December 31, 2018 over the exercise price of the unvested options the vesting of which accelerates in connection with the specified event.
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(3) | Cash severance represents the sum of the following, payable in a lump sum cash payment: (a) 12 months of base salary for each executive officer payable in a lump sum cash payment, plus (b) the average of the bonuses awarded to the executive officer for the fiscal years 2018, 2017 and 2016 (or, for Mr. Smith, 2018 and for 2017, on an annualized basis). The bonus amount for Mr. Sagrolikar reflects his bonus amount for
|
| 2018, which was notpro-rated based on his start date pursuant to his employment agreement. Please see the definition of “bonus” under the heading “Employment Agreements” above.
|
(4) | A named executive officer’s equity awards will vest in full in the event he or she is terminated without cause or he or she resigns for good reason within three months prior to or 12 months following a change in control, which is a slightly different trigger than applies to eligibility for cash severance (provided that restricted stock units will only vest upon an involuntary termination following a change in control, not before). The value attributable to the restricted stock units that would vest represents the fair market value of our common stock of $36.46 on December 31, 2018 multiplied by the number of restricted stock units the vesting of which accelerates in connection with the specified event. The value attributable to the options that would vest represents the excess of the fair market value of our common stock of $36.46 on December 31, 2018 over the exercise price of unvested options the vesting of which accelerates in connection with the specified event.
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(5) | Value of equity award acceleration represents the value of those stock awards that would immediately vest upon a change in control without a termination of employment. The value attributable to the restricted stock units that would vest represents the fair market value of our common stock of $36.46 on December 31, 2018 multiplied by the number of restricted stock units the vesting of which accelerates in connection with the specified event. The value attributable to the options that would vest represents the excess of the fair market value of our common stock of $36.46 on December 31, 2018 over the exercise price of the unvested options the vesting of which accelerates in connection with the specified event.
|
(6) | Represents the value of the continuation of health benefits for a period of 12 months following the date of the named executive officer’s termination.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Triggering Event | | Lump Sum
Cash Severance
($)(1) | | Accelerated
Options
($)(2) | | Accelerated
RSUs
($)(3) | | Accelerated
PSUs
($)(4) | | Health
Benefits
($)(5) | | Total
($) |
| Stephen J. Farr, Ph.D. | | | | | | | | | | | | |
| Involuntary Termination Without Cause/Resignation for Good Reason Apart from a CIC | | 585,000 | | 798,859 | | 863,377 | | — | | 26,777 | | 2,274,013 |
| Death/Disability | | 585,000 | | 798,859 | | 863,377 | | | — | | 26,777 | | 2,274,013 |
| Involuntary Termination Without Cause/Resignation for Good Reason in Connection with a CIC | | 900,000 | | 3,537,445 | | 1,010,019 | | 1,433,575 | | 26,777 | | 6,907,816 |
| CIC Only (Continued Employment) | | — | | 1,768,723 | | 505,009 | | 716,788 | | — | | 2,990,520 |
| Michael P. Smith | | | | | | | | | | | | |
| Involuntary Termination Without Cause/Resignation for Good Reason Apart from a CIC | | 412,000 | | 81,797 | | 312,624 | | — | | 21,748 | | 828,169 |
| Death/Disability | | 412,000 | | 81,797 | | 312,624 | | — | | 21,748 | | 828,169 |
| Involuntary Termination Without Cause/Resignation for Good Reason in Connection with a CIC | | 587,208 | | 1,727,531 | | 667,890 | | — | | 21,748 | | 3,004,377 |
| CIC Only (Continued Employment) | | — | | 863,766 | | 333,945 | | — | | — | | 1,197,711 |
| Bradley S. Galer, M.D. | | | | | | | | | | | | |
| Involuntary Termination Without Cause/Resignation for Good Reason Apart from a CIC | | 427,500 | | 874,500 | | 312,624 | | — | | 36,850 | | 1,651,474 |
| Death/Disability | | 427,500 | | 874,500 | | 312,624 | | — | | 36,850 | | 1,651,474 |
| Involuntary Termination Without Cause/Resignation for Good Reason in Connection with a CIC | | 607,100 | | 1,142,834 | | 667,890 | | 521,300 | | 36,850 | | 2,975,974 |
| CIC Only (Continued Employment) | | — | | 571,417 | | 333,945 | | 260,650 | | — | | 1,166,012 |
| Gail M. Farfel, Ph.D. | | | | | | | | | | | | |
| Involuntary Termination Without Cause/Resignation for Good Reason Apart from a CIC | | 412,000 | | 762,617 | | 317,680 | | — | | 26,777 | | 1,519,074 |
| Death/Disability | | 412,000 | | 762,617 | | 317,680 | | — | | 26,777 | | 1,519,074 |
| Involuntary Termination Without Cause/Resignation for Good Reason in Connection with a CIC | | 583,301 | | 1,018,689 | | 677,690 | | 456,138 | | 26,777 | | 2,762,595 |
| CIC Only (Continued Employment) | | — | | 509,345 | | 338,845 | | 228,069 | | — | | 1,076,259 |
| Ashish M. Sagrolikar | | | | | | | | | | | | |
| Involuntary Termination Without Cause/Resignation for Good Reason Apart from a CIC | | 390,800 | | 210,750 | | 341,556 | | — | | 23,380 | | 966,486 |
| Death/Disability | | 390,800 | | 210,750 | | 341,556 | | — | | 23,380 | | 966,486 |
| Involuntary Termination Without Cause/Resignation for Good Reason in Connection with a CIC | | 545,650 | | 544,435 | | 1,010,019 | | — | | 23,380 | | 2,123,484 |
| CIC Only (Continued Employment) | | — | | 272,218 | | 505,009 | | — | | — | | 777,227 |
(1)Lump sum cash severance amount represents 12 months of base salary for each named executive officer (except in the event of an involuntary termination without cause or resignation for good reason within 60 days prior to, or 12 months following a change in control, in which case each named executive officer is entitled to receive 12 months of base salary plus the average of his or her bonus awarded for fiscal 2019, 2018 and 2017 (or such lesser number of years he or she has been employed by us)). The definition of “bonus” is described above under the heading “Employment Agreements.”
(2)The value attributable to the accelerated options represents the excess of the fair market value of our common stock of $52.13 on December 31, 2019 over the exercise price of the unvested options the vesting of which accelerates in connection with the specified event. In the event of an involuntary termination without cause or resignation for good reason apart from a CIC and death/disability, shares subject to acceleration represent the vesting and exercisability of outstanding unvested option awards as to the number of option awards that would have vested over the 12-month period following termination had such officer remained continuously employed by us during such period. In the event of a change in control, shares subject to acceleration represent the vesting and exercisability of 50% of all outstanding unvested option awards and, in the event an executive officer is terminated without cause or resigns for good reason within three months prior to (as opposed to 60 days prior to for cash severance) or 12 months following a change in control, shares subject to acceleration represent the vesting and exercisability of 100% of all outstanding unvested option awards.
(3)Represents the aggregate value of the accelerated vesting of RSU awards, calculated by multiplying the fair market value of our common
stock of $52.13 on December 31, 2019 by the number of RSUs the vesting of which accelerates in connection with the applicable triggering event. In the event of an involuntary termination without cause or resignation for good reason apart from a CIC and death/disability, shares subject to acceleration represent the vesting and exercisability of outstanding unvested RSUs as to the number of RSUs that would have vested over the 12-month period following termination had such officer remained continuously employed by us during such period. In the event of a change in control, shares subject to acceleration represent the vesting and exercisability of 50% of all outstanding unvested RSU awards and, in the event an executive officer is terminated without cause or resigns for good reason within 12 months following a change in control, shares subject to acceleration represent the vesting and exercisability of 100% of all outstanding unvested RSUs.
(4)Represents the aggregate value of the accelerated vesting of PSU awards, calculated by multiplying the fair market value of our common stock of $52.13 on December 31, 2019 by the number of PSUs the vesting of which accelerates in connection with the applicable triggering event. These PSU awards were granted in March 2017 and are not eligible for vesting on an accelerated basis pursuant to the terms of the employment agreements; provided that they will vest on an accelerated basis under the underlying PSU agreement as follows: (1) in the event of a change in control, the vesting of 50% of the executive officer’s outstanding unvested PSUs shall be automatically accelerated and (2) as a result of an involuntary termination without cause or resignation for good reason within 12 months after a change in control, the vesting of 100% of the executive officer’s outstanding unvested PSUs shall be automatically accelerated.
(5)Represents the value of the continuation of health benefits for a period of 12 months following the date of the named executive officer’s termination.
Risk Assessment of Compensation Program
In
March 2019,April 2020, management assessed our compensation program for the purpose of reviewing and considering any risks presented by our compensation policies and practices that are reasonably likely to have a material adverse effect on us. As part of that assessment, management reviewed the primary elements of our compensation program, including base salary,
short-term incentive compensation and
long-term incentive compensation. Management’s risk assessment included a review of the overall design of each primary element of our compensation program, and an analysis of the various design features, controls and approval rights in place with respect to compensation paid to management and other employees that mitigate potential risks to us that could arise from our compensation program. Following the assessment, management determined that our compensation policies and practices did not create risks that were reasonably likely to have a material adverse effect on us and reported the results of the assessment to our compensation committee.
CEO Pay Ratio
Pursuant to SEC rules,
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providingrequired to disclose the following information regarding the relationshipratio of the annual total compensation of our employees andCEO to the annual total
compensation of
Stephen Farr, Ph.D., our
Chief Executive Officer and President.median compensated employee, using the required calculations. The pay ratio included in this information is a reasonable estimate calculated in a manner that is intended to be consistent with Item 402(u) of Regulation
S-K.For 2018,
As of December 31, 2019, our
last completed fiscal year:employee population consisted of 141 individuals, as compared to 68 individuals when we initially identified the median of the annual total compensation of all our employees (other than Dr. Farr) was $312,870; and
the annual total compensation of Dr. Farr, our Chief Executive Officer and President, as reported in the Summary Compensation Table included elsewhere in this Proxy Statement, was $6,650,252.
Based on this information, the ratio of the 2018 annual total compensation of Dr. Farr, our Chief Executive Officer and President, to the median of the 2018 annual total compensation of all our employees (other than Dr. Farr), was 21 to 1.
The median employee that was used for purposes of calculating the ratio of the 2018 annual total compensation of our CEO to the median of the 2018 annual total compensation of all other employees is the same median employee that was identified for purposes of the pay ratio disclosed in our 2018 proxy statement, with the same median employee also used in our 2019 proxy statement. There has been noAccordingly, we determined that we had experienced a significant change in our employee population or employee compensation arrangements or inand needed to re-identify the median employee’s circumstances since that median employee was identified that we believe would significantly impact our pay ratio disclosure.
employee. To identify the “median employee”median employee for purposesfiscal 2019, we looked at our employee population as of our 2018 proxy statement pay ratio disclosure, we includedDecember 31, 2019 and determined each such employee’s 2017fiscal 2019 compensation consisting of base salary and performance bonus, our consistently applied compensation measure. Additional information regarding our methodology includes the bonus awarded to the employee following:
•for performance in 2017. For employees who were hired in 2017,2019, but did not work for us for the entire fiscal year, we annualized their compensation as if they had been employed by us for all of 2017. This methodology2019;
•no cost of living adjustments were applied;
•for an employee paid in a currency other than U.S. dollars, their compensation was consistently applied to our 68 employeesconverted into U.S. dollars, using exchange rates as of December 31, 2017. We did not make any2019; and
cost-of-living• adjustmentssix employees working in identifyingGermany, Italy and Ireland (consisting of two employees in each country) for our newly created subsidiaries in 2019 were excluded from our employee population, as permitted under SEC rules, because they represented less than 5% of our employee population.
Once we identified the
“median employee.” Compensation paid to ournon-U.S. employees was converted to U.S. dollars based onmedian employee, we calculated the
exchange rate in effect ascomponents of
December 31, 2017.Thethe median employee’s compensation for 2018 for purposes of the ratio disclosed above was calculated2019 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K.
For 2019, our last completed fiscal year:
S-K,• resulting in theour CEO’s annual total compensation, reflected above of $312,870.as reported in the Summary Compensation Table included elsewhere in this Proxy Statement, was $10,346,750; and
•our median employee’s annual total compensation was $337,830.
Based on this information, our 2019 CEO to median employee pay ratio was 31 to 1.
This pay ratio disclosure is a reasonable estimate. Because the SEC rules for identifying the median employee and calculating the pay ratio permit companies to use various methodologies and assumptions, to apply certain exclusions and to make reasonable estimates that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable with the pay ratio that we have reported.
Equity Compensation Plan Information
The following table summarizes securities available under our equity compensation plans as of December 31,
20182019 (in thousands, except per share data).
| | | | | | | | | | | | |
| | | (A) Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights(3) | | | (B) Weighted
average per share
exercise price of
outstanding options,
warrants and
rights(4) | | | (C) Number of
Securities
remaining
available under
equity
compensation plans
(excluding
securities reflected
in column (A)) | |
Equity compensation plans approved by security holders: | | | | | | | | | | | | |
2006 Equity Incentive Plan(1) | | | 47,529 | | | $ | 28.32 | | | | — | |
2010 Equity Incentive Plan(1) | | | 3,467,822 | | | $ | 18.80 | | | | 1,550,351 | |
Total Equity Incentive Plans | | | 3,515,351 | | | $ | 19.98 | | | | 1,550,351 | |
2010 Employee Stock Purchase Plan(1) | | | — | | | | — | | | | 15,243 | (5) |
Total equity compensation plans approved by security holders | | | 3,515,351 | | | | — | | | | 1,565,594 | |
Equity compensation plans not approved by security holders: | | | | | | | | | | | | |
Employment Inducement Equity Incentive Award Plan (2) | | | 617,400 | | | $ | 26.66 | | | | 118,325 | |
(1) | The material features of our 2006 Equity Incentive Plan, our 2010 Equity Incentive Plan, including the evergreen provision under the 2010 Equity Incentive Plan, and our 2010 Employee Stock Purchase Plan, including the evergreen provision under the 2010 Employee Stock Purchase Plan, are described in Note 10 to our consolidated financial statements included in our Annual Report on Form10-K for the year ended December 31, 2018, which was filed with the SEC on February 28, 2019.
|
(2) | The material features of our Employment Inducement Equity Incentive Award Plan are described in Note 10 to our consolidated financial statements included in our Annual Report on Form10-K for the year ended December 31, 2018, which was filed with the SEC on February 28, 2019.
|
(3) | Includes shares subject to outstanding options and restricted stock units granted under our equity compensation plans.
|
(4) | Theweighted-average exercise price is calculated based solely on the exercise prices of the outstanding stock options and does not reflect the shares that will be issued upon the vesting of outstanding awards of restricted stock units, which have no exercise price.
|
(5) | With respect to the 2010 Employee Stock Purchase Plan, represents 15,243 shares available for issuance under such plan as of December 31, 2018, all of which were eligible to be purchased during the offering period in effect on such date. This number does not include the increase to the 2010 Employee Stock Purchase Plan pursuant to the evergreen provision of such plan effective January 1, 2019.
|
| | | | | | | | | | | | | | | | | | | | |
| | | (A)
Number of Securities
To Be Issued
Upon Exercise
Outstanding Options,
Warrants and Rights(2) | | (B)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Right(3) | | (C)
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (Excluding
Securities Reflected
in Column (A)) |
| Equity compensation plans approved by security holders: | | | | | | |
| 2006 Equity Incentive Plan | | 20 | | | $ | 32.00 | | | — | |
| 2010 Equity Incentive Plan | | 4,070 | | | $ | 28.34 | | | 4,908 | |
| Total Equity Incentive Plans (1) | | 4,090 | | | | | 4,908 | |
| Employee Stock Purchase Plan (1)(4) | | — | | | — | | | 18 | |
| Total equity compensation plans approved by security holders | | 4,090 | | | — | | | 4,926 | |
| Equity compensation plans not approved by security holders: | | | | | | | |
| Employment Inducement Equity Incentive Award Plan (1) | | 602 | | | $ | 37.19 | | | — | |
(1)The material features of our equity incentive plans are more fully described in Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 2, 2020. For a summary of the material terms of our Employee Stock Purchase Plan, see Proposal 4.
(2)Includes shares subject to outstanding options and restricted stock units granted under our equity compensation plans.
(3)The weighted-average exercise price is calculated based solely on the exercise prices of the outstanding stock options and does not reflect the shares that will be issued upon the vesting of outstanding awards of restricted stock units, which have no exercise price.
(4)Represents 18,347 shares available for issuance under the Existing ESPP as of December 31, 2019, all of which were eligible to be purchased during the offering period in effect on such date. This number does not include the automatic increase in share reserve of 31,250 on January 1, 2020 pursuant to the Existing ESPP.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a summary of transactions and series of similar transactions, since the beginning of fiscal year
2018,2019, to which we were a party or will be a party, in which:
•the amounts involved exceeded or will exceed $120,000; and
•a director, executive officer, holder of more than 5% of our common stock or any member of their immediate family had or will have a direct or indirect material interest.
We also describe below certain other transactions with our directors, executive officers and stockholders. We have a written policy which requires that any transaction with a related party required to be reported under applicable SEC rules, other than
compensation-related matters, be reviewed and approved by our audit committee. We have not and will not adopt written procedures for review of, or standards for approval of, these transactions, but instead we intend to review such transactions on a case by case basis. In addition, our compensation committee will approve all
compensation-related policies.
Employment and Release Agreements
We have entered into employment agreements all of our named executive officers. For further information, see “Compensation Discussion and Analysis
- — Employment Agreements.”
Indemnification of Officers and Directors
Our amended and restated certificate of incorporation and our amended and restated bylaws provide that we will indemnify each of our directors and officers to the fullest extent permitted by the Delaware General Corporation Law. Further, we have entered into indemnification agreements with each of our directors and officers, and we have purchased a policy of directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment under certain circumstances.
DELINQUENT SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE16(a) REPORTS
Under Section 16(a) of the Exchange Act, directors, executive officers and beneficial owners of 10% or more of our common stock, or reporting persons, are required to report to the SEC on a timely basis the initiation of their status as a reporting person and any changes with respect to their beneficial ownership of our common stock. Based solely on our review of copies of such forms that we have received, or written representations from reporting persons, we believe that during the fiscal year ended December 31, 2018, all executiveSection 16(a) reporting requirements applicable to our officers, directors and greater than 10% stockholdersbeneficial owners during 2019 were complied with, all applicable filing requirements.except as set forth herein. The Form 4s to report the annual option awards made pursuant to our director compensation policy on the date of our 2019 annual meeting of stockholders to Drs. Breitmeyer and Tannenbaum, Messrs. Bock, Garner, Mast and Wiggins were inadvertently filed late on their behalf on May 28, 2019, which reports were due on May 24, 2019. Each such Form 4 related to one transaction: an annual option award made pursuant to our director compensation policy on the date of our 2019 annual meeting of stockholders.
Proposals of stockholders intended to be presented at our annual meeting of stockholders to be held in 2020,2021, including any stockholder nominations for election to the board of directors, must be received by us no later than December 11, 2019,18, 2020, which is 120 days prior to the first anniversary of the mailing date of this proxy, in order to be included in our proxy statement and form of proxy relating to that meeting. These proposals must comply with the requirements as to form and substance established by the SEC for such proposals in order to be included in the proxy statement. In addition, our amended and restated bylaws establish an advance notice procedure with regard to certain matters, including stockholder proposals not included in our proxy statement, to be brought before an annual meeting of stockholders. In general, notice must be received at our principal executive offices not less than 90 calendar days before nor more than 120 calendar days before the one year anniversary of the date of the previous year’s annual meeting of stockholders. Therefore, to be presented at our 20202021 annual meeting of stockholders, such a proposal must be received by us no earlier than January 23, 202029, 2021 and no later than February 22, 2020.28, 2021. However, if the date of the annual meeting is more than 30 days earlier or more than 60 days later than such anniversary date, notice must be received not less than 90 calendar days before nor more than 120 calendar days in advance of such annual meeting, or if later, ten calendar days following the date on which public announcement of the date of the meeting is first made. If the stockholder fails to give notice by these dates, then the persons named as proxies in the proxies solicited by the board of directors for the 20202021 annual meeting may exercise discretionary voting power regarding any such proposal. Stockholders are advised to review our amended and restated bylaws which also specify requirements as to the form and content of a stockholder’s notice.
Any person who was a beneficial owner of our common stock on the record date may request a copy of our annual report, and it will be furnished without charge upon receipt of a written request identifying the person so requesting a report as a stockholder of our company at such date. Requests should be directed to Zogenix, Inc., 5959 Horton Street, Suite 500, Emeryville, California 94608, Attention: Corporate Secretary.
We do not know of any business other than that described in this proxy statement that will be presented for consideration or action by the stockholders at the annual meeting. If, however, any other business is properly brought before the meeting, shares represented by proxies will be voted in accordance with the best judgment of the persons named in the proxies or their substitutes. All stockholders are urged to complete, sign and return the accompanying proxy card in the enclosed envelope.
| | | | | |
| By Order of the Board of Directors, |
|
| /s/ Stephen J. Farr, Ph.D. | |
| |
Stephen J. Farr, Ph.D. |
Chief Executive Officer and Director | |
April 9, 201917, 2020
ZOGENIX, INC.
2010 EQUITY INCENTIVE AWARD
EMPLOYEE STOCK PURCHASE PLAN
(As Amended and Restated Effective May 22, 2019)29, 2020
) The purposepurposes of this Zogenix, Inc. Employee Stock Purchase Plan (the “Plan”) are to assist Eligible Employees of Zogenix, Inc., a Delaware corporation (the “Company”) and its Designated Subsidiaries in acquiring a stock ownership interest in the Company, and to help Eligible Employees provide for their future security and to encourage them to remain in the employment of the Zogenix, Inc. 2010 Equity Incentive Award Plan, as amendedCompany and restated (the “Plan”) is to promote the success and enhance the value of Zogenix, Inc. (the “Company”) by linking the personal interests of the members of the Board, Employees, and Consultants to those of Company stockholders and by providing such individuals with an incentive for performance to generate returns to Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.Designated Subsidiaries. This Plan constitutes an amendment and restatement of the Zogenix, Inc. 2010 Equity Incentive AwardEmployee Stock Purchase Plan as amended and restated (the “Prior 2010 Plan”), which was approved by the Board on April 16, 2012October 25, 2010 and by the Company’s stockholders on June 6, 2012.November 2, 2010. In the event that the Company’s stockholders do not approve the Plan, the Prior 2010 Plan will continue in full force and effect on its terms and conditions as in effect immediately prior to the date the Plan is approved by the Board. This Plan includes two components: the Section 423 Component and the Non-Section 423 Component (each as defined below). It is the intention of the Company to have the Section 423 Component qualify as an “employee stock purchase plan” under Section 423 of the Code. The provisions of the Section 423 Component, accordingly, shall be construed so as to extend and limit participation on a uniform and nondiscriminatory basis consistent with the requirements of Section 423 of the Code. In addition, this Plan authorizes the grant of purchase rights under the Non-Section 423 Component, which may not qualify as an “employee stock purchase plan” under Section 423 of the Code; such purchase rights granted under the Non-Section 423 Component shall be granted pursuant to separate Offerings containing such sub-plans, appendices, rules or procedures as may be adopted by the Administrator and designed to achieve tax, securities laws or other objectives for Eligible Employees and the Designated Subsidiaries in locations outside of the U.S. Except as otherwise provided by the Administrator or permitted herein, the Non-Section 423 Component will operate and be administered in the same manner as the Section 423 Component. Offerings intended to be made under the Non-Section 423 Component will be designated as such by the Administrator at or prior to the time of such Offering.
For purposes of this Plan, the Administrator may designate separate Offerings under the Plan in which Eligible Employees will participate. The terms of these Offerings need not be identical, even if the dates of the applicable Offering Period(s) in each such Offering are identical, provided that the terms of participation are the same within each separate Offering under the Section 423 Component (as determined under Section 423 of the Code). Solely by way of example and without limiting the foregoing, the Company could, but shall not be required to, provide for simultaneous Offerings under the Section 423 Component and the Non-Section 423 Component of the Plan.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.
2.1“Administrator” meansshall mean the entity or person that conducts the general administration of the Plan as provided herein. With reference to the administration of the Plan with respect to Awards granted to Independent Directors, theThe term “Administrator” shall refer to the Board. With reference to the administration of the Plan with respect to any other Award, the term “Administrator” shall“Administrator” shall refer to the Committee unless the Board has assumed the authority for administration of the Plan generally as provided in Section 11.1. With reference to the duties of the Committee under the Plan which have been delegated to one or more persons pursuant to Section 11.5 of the Plan, the term “Administrator” shall refer to such person(s) unless the Committee or the Article 3.
2.2“Board has revoked such delegation.2.2 “Applicable Accounting Standards
”shall mean Generally Accepted Accounting Principles in the United States, International Financial Reporting Standards or such other accounting principles or standards as may apply to the Company’s financial statements under United States federal securities laws from time to time.2.3 “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right award, a Dividend Equivalents award, a Stock Payment award, a Restricted Stock Unit award, or an Other Incentive Award granted to a Participant pursuant to the Plan.
2.4 “Award Agreement” means any written notice, agreement, terms and conditions, contract, or other instrument or document evidencing an Award, including through electronic medium.
2.5 “Board” means the Board of Directors of the Company.
2.6 2.3“Change in Control” means shall mean and includesinclude each of the following:
(a)A transaction or series of transactions (other than an offering of Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its subsidiaries,Subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiariesSubsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or (b)During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with
the Company to effect a transaction described in
Section 2.6(a)clause (a) above or
Section 2.6(c))clause (c) below) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at the beginning of the two year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(c)The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction: (i)Which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”“Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and (ii)After which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity;provided, however,however, that no person or group shall be treated for purposes of this Section 2.6(c)clause (ii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction.In addition, if a Change in Control constitutes a payment event with respect to any Award which provides for the deferral of compensation and is subject to Section 409A of the Code, the transaction or event described in subsection (a), (b) or (c) with respect to such Award must also constitute a “change in control event,” as defined in Treasury Regulation§1.409A-3(i)(5) to the extent required by Section 409A.
The Administrator shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto.
2.7
2.4“Code” meansCode” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations issued thereunder.2.8
2.5“Committee” meansCommittee” shall mean the committee of the Board described in Article 11.3.
2.9 2.6“Consultant” means any consultant or adviser engaged to provideCompany” shall mean Zogenix, Inc., a Delaware corporation.
2.7“Compensation” of an Eligible Employee shall mean the gross base compensation received by such Eligible Employee as compensation for services to the Company or any ParentDesignated Subsidiary, excluding overtime payments, sales commissions, incentive compensation, bonuses, expense reimbursements, fringe benefits and other special payments, or, Subsidiary that qualifies as a consultant under the applicable rules of the Securities and Exchange Commission for registration of shares on a FormS-8 Registration Statement.2.10 “Director” means a member of the Board, as constituted from time to time.
2.11 “Disability” means “disability,” as such term is definedParticipants in Section 22(e)(3) of the Code.
2.12 “Dividend Equivalent” means a right granted to a Participant pursuant to Section 8.1 to receive thenon-U.S. jurisdictions, equivalent value (in cash or Stock) of dividends paid on Stock.
2.13 “DRO” means a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended from time to time, or the rules thereunder.
2.14 “Eligible Individual” means any person who is an Employee, a Consultant or a Director,amounts as determined by the Administrator.
2.15 The Administrator, in its discretion, may establish a different definition of Compensation on a prospective basis, which definition must be implemented on a uniform and nondiscriminatory basis for each Offering in the Section 423 Component
. 2.8“Designated Subsidiary” shall mean any Subsidiary designated by the Administrator in accordance with Section 3.3(b), such designation to specify whether such participation is in the Section 423 Component or Non-Section 423 Component; provided, however, that at any given time, a Subsidiary Corporation that is a Designated Subsidiary participating in the Section 423 Component will not be a Designated Subsidiary participating in the Non-Section 423 Component. The designation by the Administrator of Designated Subsidiaries and changes in such designations by the Administrator shall not require stockholder approval. Only Subsidiary Corporations may be designated as Designated Subsidiaries for purposes of the Section 423 Component, and if an entity does not so qualify, it shall automatically be deemed to be a Designated Subsidiary in the Non-Section 423 Component.
2.9“Eligible Employee” meansshall mean an Employee of the Company or a Designated Subsidiary who does not, immediately after any officerrights under this Plan are granted, own (directly or through attribution) stock possessing 5% or more of the total combined voting power or value of all classes of Stock or other stock of the Company, a Parent or a Subsidiary Corporation (as determined under Section 423(b)(3) of the Code). For purposes of the foregoing sentence, the rules of Section 424(d) of the Code with regard to the attribution of stock ownership shall apply in determining the stock ownership of an individual, and Stock that an Employee may purchase under outstanding options shall be treated as stock owned by the Employee. Notwithstanding the foregoing, the Administrator may provide in an Offering Document that an Employee shall not be eligible to participate in an Offering if: (a) such Employee's customary employment is for twenty hours or less per week; (b) such Employee's customary employment is for less than five months in any calendar year; (c) such Employee is a highly compensated employee within the meaning of Section 423(b)(4)(D) of the Code, (d) such Employee has not met a service requirement designated by the Administrator pursuant to Section 423(b)(4)(A) of the Code (which service requirement may not exceed two years); and/or (e) such Employee is a citizen or resident of a foreign jurisdiction if the grant of a right to purchase Stock under the Plan to such Employee would be prohibited under the laws of such foreign jurisdiction or the grant of an option to such Employee in compliance with the laws of such foreign jurisdiction would cause the Plan or any Offering to violate the requirements of Section 423 of the Code, as determined by the Administrator in its sole discretion; provided, further, that any exclusion in clauses (a), (b), (c), (d) or (e) shall be applied in an identical manner under each
Offering to all Employees of the Designated Subsidiaries in such Offering, in accordance with Treasury Regulation Section 1.423-2(e). With respect to the Non-Section 423 Component, all of the foregoing rules shall apply in determining who is an “Eligible Employee,” except (A) the Administrator may limit eligibility further within the Company or a Designated Subsidiary so as to only designate some Employees of the Company or a Designated Subsidiary as Eligible Employees, and (B) to the extent the foregoing eligibility rules are not consistent with applicable local laws, the applicable local laws shall control.
2.10“Employee” shall mean an individual who renders services to a Designated Subsidiary in the status of an employee, and, with respect to the Section 423 Component, a person who is an employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Designated Subsidiary. The Company shall determine in good faith and in the exercise of any Parentits discretion whether an individual has become or Subsidiary.2.16 “Equity Restructuring” means a nonreciprocal transaction betweenhas ceased to be an Employee and the effective date of such individual’s attainment or termination of such status. For purposes of an individual’s participation in, or other rights under the Plan, all such determinations by the Company shall be final, binding and its stockholders, such asconclusive, notwithstanding that any court of law or governmental agency subsequently makes a stock dividend, stock split,spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the shares of Stock (or other securitiescontrary determination. For purposes of the Company)Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the share price of Stock (or other securities) and causesCompany or a change in the per share valueDesignated Subsidiary (which, for purposes of the Stock underlying outstanding Awards.
2.17 Section 423 Component, must meet the requirements of Treasury Regulation Section 1.421-7(h)(2)). For purposes of the Section 423 Component, where the period of an approved leave of absence exceeds three months, or such other period specified in Treasury Regulation Section 1.421-1(h)(2), and the individual’s right to reemployment is not provided either by statute or contract, the employment relationship shall be deemed to have terminated for purposes of the Plan on the first day immediately following such three-month period, or such other period specified in Treasury Regulation Section 1.421-1(h)(2).
2.11“Enrollment Date” shall mean the first day of each Offering Period.
2.12“Exchange Act” meansAct” shall mean the Securities Exchange Act of 1934, as amended from time to time.2.18
2.13“Expiration Date” has the meaning set forth in Section 12.2.2.19 “Fair Market Value”Value”
means, as of any given date, the fair market value of a share of Stock on the date determined as follows: (a)If the Stock is listed on any (i) established securities exchange (such as the New York Stock Exchange, the NASDAQ Global Market and the NASDAQ Global SelectNasdaq Stock Market), (ii) national market system or (iii) automated quotation system on which the Stock is listed, quoted or traded, its Fair Market Value shall be the closing sales price for a share of Stock as quoted on such exchange or system for such date or, if there is no closing sales price for a share of Stock on the date in question, the closing sales price for a share of Stock on the last preceding date for which such quotation exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (b) If the Stock is not listed on an established securities exchange, national market system or automated quotation system, but the Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid and low asked prices for a share of Stock on such date, the high bid and low asked prices for a share of Stock on the last preceding date for which such information exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (c)If the Stock is neither listed on an established securities exchange, national market system or automated quotation system nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be established by the Administrator in good faith, as of any given date, the fair market value of a share of Stock on the date determined by such methods or procedures as may be established from time to time by the Administrator.
2.20 2.14“Incentive Stock OptionNon-Section 423 Component” means an Optionshall mean those Offerings under the Plan, together with the sub-plans, appendices, rules or procedures, if any, adopted by the Administrator as a part of this Plan, in each case pursuant to which purchase rights that is intended to be an incentive stock option and meetsdo not satisfy the requirements offor “employee stock purchase plans” that are set forth under Section 422423 of the Code or any successor provision thereto.
2.21 may be granted pursuant to Offerings to Eligible Employees.
2.15“Independent DirectorOffering” meansshall mean an offer under the Plan of a Directorright to purchase Stock that may be exercised during an Offering Period. Unless otherwise specified by the Administrator, each Offering to the Eligible Employees of the Company who is not an Employee.2.22 “Misconduct” meansor a Designated Subsidiary shall be deemed a separate Offering, even if the occurrence of any of, but not limited to, the following: (i) convictiondates and other terms of the Participantapplicable Offering Periods of any felony or any crime involving fraud or dishonesty; (ii)each such Offering are identical and the Participant’s participation (whether by affirmative act or omission) in a fraud, act or dishonesty or other act of misconduct against the Company and/or any Parent or Subsidiary; (iii) conduct by the Participant which, based upon a good faith and reasonable factual investigation by the Company (or, if the Participant is an executive officer, by the Board), demonstrates the Participant’s unfitness to serve; (iv) the Participant’s violation of any statutory or fiduciary duty, or duty of loyalty owed to the Company and/or any Parent or Subsidiary; (v) the Participant’s violation of state or federal law in connection with the Participant’s performance of his or her job which has an adverse effect on the Company and/or any Parent or Subsidiary; and (vi) the Participant’s violation of Company policy which has a material adverse effect on the Company and/or any Parent or Subsidiary. Notwithstanding the foregoing, the Participant’s Disability shall not constitute Misconduct as set forth herein. The determination that a termination is for Misconduct shall be by the Administrator it its sole and exclusive judgment and discretion. Notwithstanding the foregoing, if a Participant is a party to an employment or severance agreement with the Company, the Partnership or any Subsidiary in effect as of the date of grant of an Award which defines “Misconduct” or “Cause” or a similar term, “Misconduct” for purposesprovisions of the Plan will separately apply to each Offering. To the extent permitted by U.S. Treasury Regulation Section 1.423-2(a)(1), the terms of each separate Offering under the Section 423 Component need not be identical, provided that the terms of the Section 423 Component and such Awardan Offering together satisfy U.S. Treasury Regulation Section 1.423-2(a)(2) and (a)(3)
2.16“Offering Document” shall have the meaning given to such term in such employment or severance agreement.2.23 Section 5.1.
2.17“Offering Period”Non-Employee Director” means a Director of shall mean each Offering Period designated by the
Company who qualifies as a“Non-Employee Director” as definedAdministrator in
Rule 16b-3(b)(3) of the
Exchange Act, or any successor definition.2.24 “Non-Qualified Stock Option” means an Option that is not intended to be or otherwise does not qualify as an Incentive Stock Option.
2.25 “Option” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of shares of Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or aNon-Qualified Stock Option.
2.26 “Other Incentive Award” means an Award granted or denominated in Stock or units of Stock or a cash value or otherwise as providedapplicable Offering Document pursuant to Section 8.4 hereof.
2.27 5.1.
2.18“Parent” means any “parent corporation, as defined in Section 424(e) of the Code and any applicable regulations promulgated thereunder, of the Company or any other entity which beneficially owns, directly or indirectly, a majority of the outstanding voting stock or voting power of the Company.2.28 “Participant” means any Eligible Individual who, as a member of the Board, Consultant or Employee, has been granted an Award pursuant to the Plan.
2.29 “Performance-Based Compensation”Parent”
shall mean any compensation granted undercorporation, other than the Plan prior to November 2, 2017 that is intended to qualify as “performance-based compensation’ as describedCompany, in Section 162(m)(4)(C)an unbroken chain of corporations ending with the Company if, at the time of the Code prior to its repeal.2.30 “Performance Criteria” meansdetermination, each of the criteria (and adjustments) thatcorporations other than the Administrator selects for an Award for purposes of establishing the Performance Goal or Performance Goals for a Performance Period, determined as follows:
(a) The Performance Criteria that shall be used to establish Performance Goals may include, but are not limited to, the following: (i) net earnings (either before or after oneCompany owns stock possessing 50% or more of the following: (A) interest,
(B) taxes, (C) depreciation and (D) amortization); (ii) gross or net sales or revenue; (iii) net income (either before or after taxes); (iv) adjusted net income; (v) operating earnings; (vi) cash flow (including, but not limited to, operating cash flow and free cash flow); (vii) return on assets; (viii) return on capital; (ix) return on stockholders’ equity; (x) return on sales; (xi) gross or net profit or operating margin; (xii) operating or other costs and expenses; (xiii) improvementstotal combined voting power of all classes of stock in expense levels; (xiv) working capital; (xv) earnings per share; (xvi) adjusted earnings per share; (xvii) price per share of Stock; (xviii) implementation or completion of critical projects; (xix) comparisons with various stock market indices; (xx) capital raised in financing transactions or other financing milestones; (xxi) stockholders’ equity; (xxii) market recognition (including but not limited to awards and analyst ratings); (xxiii) financial ratios; and (xxiv) implementation, completion or attainment of objectively determinable objectives relating to research, development, regulatory, commercial or strategic milestones or developments; in each case as determined in accordance with Applicable Accounting Standards, if applicable, any of which may be measured either in absolute terms or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices.
(b) The Administrator may, in its sole discretion, provide that adjustments may be made to one or more of the Performance Goals. Such adjustments may include, but are not limitedother corporations in such chain.
2.19“Participant” shall mean any Eligible Employee who has executed a subscription agreement and been granted rights to one or more of the following: (i) items related to a change in accounting principle; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) othernon-operating items; (v) items related to acquisitions; (vi) items attributablepurchase Stock pursuant to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to the disposal of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under Applicable Accounting Standards; (ix) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual, infrequently occurring orPlan.
non-recurring2.20 charges, events or developments, (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core,on-going“Plan” business activities; (xiv) items relating to changes in tax laws; (xv) items relating to gains or losses for litigation, arbitration and contractual settlements; or (xvi) items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions.2.31 “Performance Goals” means, for a Performance Period, the goals established in writing by the Administrator for the Performance Period. Performance Goals may be expressed in terms of overall Company performance or the performance of a Subsidiary, division or other operational unit, or an individual.
2.32 “Performance Period” means the one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, an Award.
2.33 “Permitted Transferee” means, with respect to a Participant, any “family member” of the Participant, as defined under the instructions to use of the FormS-8 Registration Statement under the Securities Act or any other transferee specifically approved by the Administrator.
2.34 “Plan” means shall mean this amended and restated Zogenix, Inc. 2010 Incentive AwardEmployee Stock Purchase Plan, as it may be further amended from time to time, including both the Section 423 Component and the Non-Section 423 Component and any other sub-plans or appendices hereto, as amended from time to time.
2.35
2.21“Prior 2010 Plan”Purchase Date” shall mean the last Trading Day of each Purchase Period.
2.22“Purchase Period” shall mean each Purchase Period designated by the Administrator in the applicable Offering Document pursuant to Section 5.1.
2.23“Purchase Price” shall mean the purchase price designated by the Administrator in the applicable Offering Document (which purchase price shall not be less than 85% of the Fair Market Value of a share of Stock on the Enrollment Date or on the Purchase Date, whichever is lower); provided, however, that, in the event no purchase price is designated by the Administrator in the applicable Offering Document, the purchase price for the Offering Periods covered by such Offering Document shall be 85% of the Fair Market Value of a share of Stock on the Enrollment Date or on the Purchase Date, whichever is lower; provided, further, that the Purchase Price may be adjusted by the Administrator pursuant to Article 9; provided, further, that the Purchase Price shall not be less than the par value of a share of Stock.
2.24“Restatement Effective Date” shall have the meaning set forth in Article 1.2.36 11.
2.25“RestatementEffective Date” has the meaning set forth in Section 12.1.2.37 “Restricted Stock423 Component
” means Stock awarded tothose Offerings under the Plan, together with the sub-plans, appendices, rules or procedures, if any, adopted by the Administrator as a Participantpart of this Plan, in each case, pursuant to Article 6 that is subject to certain restrictions andwhich purchase rights may be subjectgranted to risk of forfeiture or repurchase.2.38 “Restricted Stock Unit” means a rightEligible Employees that are intended to receive a share of Stock or cash during specified time periodssatisfy the requirements for rights to purchase Shares granted pursuant to an “employee stock purchase plan” that are set forth under Section 8.3.
423 of the Code. 2.39 2.26“Securities Act” meansAct” shall mean the Securities Act of 1933, as amended.
2.40 amended from time to time.
2.27“Stock” meansshall mean the common stock of the Company par value $0.001 per share, and such other securities of the Company that may be substituted for such common stockStock pursuant to Article 10.2.41 9.
2.28“Stock Appreciation RightSubsidiary” means a stock appreciation right grantedshall mean (a) any Subsidiary Corporation, and (b) with respect to any Offering pursuant to Article 7.2.42 the Non-Section 423 Component only, Subsidiary may also include any corporate or noncorporate entity in which the Company has a direct or indirect equity interest or significant business relationship.
2.29“Stock PaymentSubsidiary Corporation” means (a) a paymentshall mean any corporation, other than the Company, in an unbroken chain of corporations beginning with the form of shares of Stock, or (b) an option or other right to purchase shares of Stock, as part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portionCompany if, at the time of the compensation, granted pursuant to Section 8.2.2.43 “Subsidiary” means (a) any “subsidiary corporation”determination, each of the Company as definedcorporations other than the last corporation in Section 424(f) of the Code and any applicable regulations promulgated thereunder, (b) any other entity of which a majority of the outstanding votingan unbroken chain owns stock or voting power is beneficially owned directly or indirectly by the Company, or (c) any partnership or limited liability company of whichpossessing 50% or more of the capital and profits interest is owned, directly or indirectly, by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries.
2.44 “Substitute Award” shall mean an Award granted under the Plan in connection with a corporate transaction, such as a merger, combination, consolidation or acquisitiontotal combined voting power of property orall classes of stock in any case, uponone of the assumption of,other corporations in such chain, or in substitution for, outstanding equity awards previously granted by a company orany other entity that is a party to such transaction;provided,however, that in no event shallsubsidiary corporation of the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of an Option or Stock Appreciation Right.
2.45 “Successor Entity” hasCompany within the meaning set forth inof Section 2.6.
2.46 “Termination of Consultancy” means the time when the engagement of a Participant as a Consultant to the Company or to a Parent or Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement, but excluding: (a) terminations where there is a simultaneous employment or continuing employment424 of the Participant byCode.
2.30“TradingDay” shall mean a day on which national stock exchanges in the Company or any Parent or Subsidiary, and (b) terminations where there is a simultaneous reestablishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any Parent or Subsidiary.United States are open for trading.
ARTICLE III
ADMINISTRATION
3.1Administrator. The Administrator in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of the Plan shall be the CompanyCompensation Committee of the Board (or another committee or any Parenta subcommittee of the Board to which the Board delegates administration of the Plan) (such committee, the “Committee”), which Committee shall consist solely of two or Subsidiarymore members of the Board each of whom is a “non-employee director” within the meaning of Rule 16b-3 which has an absolutebeen adopted by the Securities and unrestricted rightExchange Commission under the Exchange Act and which Committee is otherwise constituted to terminate a Consultant’s servicecomply with applicable law. The Board may abolish the Committee at any time forand vest in the Board the administration of the Plan.
3.2Action by the Administrator. A majority of the Administrator shall constitute a quorum. The acts of a majority of the members present at any reason whatsoever, with or without cause, exceptmeeting at which a quorum is present, and, subject to the extent expressly provided otherwise in writing.2.47 “Termination of Directorship” means the time when a Participant, if he or she is or becomes an Independent Director, ceases to be a Director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Independent Directors.
2.48 “Termination of Employment” means the time when the employee-employer relationship between a Participantapplicable law and the Company or any Parent or Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, Disability or retirement; but excluding: (a) terminations where there is a simultaneous reemployment or continuing employment of the Participant by the Company or any Parent or Subsidiary, and (b) terminations where there is a simultaneous establishment of a consulting relationship or continuing consulting relationship between the Participant and the
Company or any Parent or Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Employment.
2.49 “Termination of Service” shall mean the last to occur of a Participant’s Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable. A Participant shall not be deemed to have a Termination of Service merely because of a change in the capacity in which the Participant renders service to the Company or any Parent or Subsidiary (i.e., a Participant who is an Employee becomes a Consultant) or a change in the entity for which the Participant renders such service (i.e., an EmployeeBylaws of the Company, becomes an Employeeacts approved in writing by a majority of the Administrator in lieu of a Subsidiary), unless following such changemeeting, shall be deemed the acts of the Administrator. Each member of the Administrator is entitled to, in capacitygood faith, rely or service the Participant is no longer serving as an Employee, Independent Directoract upon any report or Consultantother information furnished to that member by
any officer or other employee of the Company or any ParentDesignated Subsidiary, the Company’s independent certified public accountants, or Subsidiary. In addition, ifany executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.
3.3Authority of Administrator. The Administrator shall have the power, subject to, and within the limitations of, the express provisions of the Plan:
(a)To determine when and how rights to purchase Stock shall be granted and the provisions of each offering of such rights (which need not be identical).
(b)To designate from time to time which Subsidiaries of the Company shall be Designated Subsidiaries, or terminate the designation of a TerminationSubsidiary, which designation may be made without the approval of Service constitutesthe stockholders of the Company, and to determine whether such Designated Subsidiaries shall participate in the Non-Section 423 Component or the Section 423 Component.
(c)To construe and interpret the Plan and rights granted under it, and to establish, amend and revoke rules and regulations for its administration. The Administrator, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a payment eventmanner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
(d)To amend the Plan as provided in Article 10.
(e)Generally, to exercise such powers and to perform such acts as the Administrator deems necessary or expedient to promote the best interests of the Company and its Subsidiaries and to carry out the intent that the Section 423 Component of the Plan be treated as an “employee stock purchase plan” within the meaning of Section 423 of the Code.
3.4Decisions Binding. The Administrator’s interpretation of the Plan, any rights granted pursuant to the Plan, any subscription agreement and all decisions and determinations by the Administrator with respect to any Award which provides for the deferral of compensationPlan are final, binding, and is subject to Section 409A of the Code, the Termination of Service must also constitute a “separation from service,” as defined in Treasury RegulationSection 1.409A-1(h),conclusive on all parties. to the extent required by Section 409A of the Code. SHARES SUBJECT TO THE PLAN
3.1
4.1Number of Shares.(a)Shares.
Subject to Article 10 and Section 3.1(b),9, the aggregate number of shares of Stock which may be issued or transferred pursuant to Awards under the Plan shall be 11,500,000 shares of Stock (which number is equal to the 7,500,000 shares of Stock reserved for issuance under the Prior 2010 Plan plus an additional 4,000,000 shares of Stock to be added to the share reserve pursuant to this amended and restated Plan). Solely for purposes of determining whether shares of Stock are available for the grant of Incentive Stock Options under the Plan, the maximum aggregate number of shares of Stock that may be issued pursuant to Incentive Stock Optionsrights granted under the Plan shall be 11,500,000 shares875,000 shares. All or any portion of Stock, subject to adjustment as provided in Section 10.1.(b) If any shares of Stock subject to an Award are forfeited or expire or such Award is settled for cash (in whole or in part), the shares of Stock subject to such Award shall, to the extent of such forfeiture, expiration or cash settlement, again be available for future grants of Awards under the Plan and shall be added back to the share limit set forth in this Section 3.1(b) in the same number of shares as were debited from the share limit in respect of the grant of such Award (as may be adjusted in accordance with Section 10.1 hereof). Additionally, any shares of Stock tendered or withheld by the Company in payment of the grant or exercise price or tax withholding obligation pursuant to any Award shall again be available for the grant of an Award pursuant to the Plan. If any shares of Restricted Stock are forfeited by a Participant or repurchased by the Company pursuant to Article 6 hereof, such shares shall again be available for the grant of an Award pursuant to the Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the shares of Stock available for issuance under the Plan.
(c) Substitute Awards may be granted on such terms as the Administrator deems appropriate, notwithstanding limitations on Awards in the Plan. Substitute Awards shall not reduce the shares of Stock authorized for grant under the Plan (except that shares of Stock acquired by exercise of substitute Incentive Stock Options will count against the maximum number of shares of Stock that may be issued pursuant to the exercise of Incentive Stock Options under the Plan), and shares of Stock subject to such Substitute Awards shall not be added to the shares of Stock available for AwardsSection 423 Component. If any right granted under the Plan as provided in Section 3.1(b) above. Additionally, inshall for any reason terminate without having been exercised, the event that a company acquired by the Company or any Parent or Subsidiary or with which the Company or any Parent or Subsidiary combines has shares availableStock not purchased under apre-existing plan approved by its stockholders and not adopted in contemplation of such acquisition or combination, the sharesright shall again become available for grant
pursuant to the terms of suchPlan.
pre-existing4.2 plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the shares of Stock authorized for grant under the Plan (and Shares subject to such Awards shall not be added to the shares of Stock available for Awards under the Plan as provided in Section 3.1(b) above);provided that Awards using such available shares of Stock shall not be made after the date awards or grants could have been made under the terms of theDistributed.pre-existing plan, absent the acquisition or combination, grants of Awards using such available shares are permitted without stockholder approval under the rules of the principal securities exchange on which the Stock is then listed and such grants shall only be made to individuals who were not employed by or providing services to the Company or any Parent or Subsidiary immediately prior to such acquisition or combination.(d) Notwithstanding the provisions of this Section 3.1, no shares of Stock may again be optioned, granted or awarded if such action would cause an Incentive Stock Option that is to be granted (as opposed to those that were already granted) to fail to qualify as an incentive stock option under Section 422 of the Code.3.2Stock Distributed. Any shares of Stock distributed pursuant to an Awardthe Plan may consist, in whole or in part, of authorized and unissued Stock, treasury Stockstock or Stock purchased on the open market.
ARTICLE
4ELIGIBILITY AND PARTICIPATION
4.1Eligibility. Each Eligible Individual shall be eligible to be granted one or more Awards pursuant to the Plan.
4.2Participation. Subject to the provisions of the Plan, theV
OFFERING PERIODS; OFFERING DOCUMENTS; PURCHASE DATES
5.1Offering Periods. The Administrator may from time to time select from among all Eligible Individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No Eligible Individual shall have any right to be granted an Award pursuant to this Plan.4.3Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the discretion of the Administrator, be granted either alone, in addition to,grant or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time fromprovide for the grant of rights to purchase Stock of the Company under the Plan to Eligible Employees in an Offering during one or more periods (each, an
“Offering Period”) selected by the Administrator commencing on such other Awards.4.4Award Agreement. Awardsdates (each, an
“Enrollment Date”) selected by the Administrator. The terms and conditions applicable to each Offering during an Offering Period shall be set forth in an “Offering Document” adopted by the Administrator, which Offering Document shall be in such form and shall contain such terms and conditions as the Administrator shall deem appropriate and shall be incorporated by reference into and made part of the Plan and shall be attached hereto as part of the Plan. The Administrator shall establish in each Offering Document one or more dates during an Offering Period (the “Purchase Date(s)”) on which rights granted under the Plan shall be evidencedexercised and purchases of Stock carried out during such Offering Period in accordance with such Offering Document and the Plan. The provisions of separate Offerings or Offering Periods under the Plan need not be identical. 5.2Offering Documents. Each Offering Document with respect to an Offering Period shall specify (through incorporation of the provisions of this Plan by Award Agreementsreference or otherwise):
(a)the length of the Offering Period, which period shall not exceed twenty-seven months;
(b)the Enrollment Date for such Offering Period;
(c)the Purchase Date(s) during such Offering Period;
(d)the maximum number of shares that may be purchased by any Eligible Employee during such Offering Period, which, in the absence of a contrary designation by the Administrator, shall be 5,000 shares;
(e)in connection with each Offering Period that contains more than one Purchase Date, the maximum aggregate number of shares which may be purchased by any Eligible Employee on any given Purchase Date during the Offering Period, which, in the absence of a contrary designation by the Administrator, shall be 5,000 shares; and
(f)such other provisions as the Administrator determines are appropriate, subject to the Plan.
ARTICLE VI
PARTICIPATION
6.1Eligibility. Any Eligible Employee who shall be employed by the Company or a Designated Subsidiary on the day immediately preceding a given Enrollment Date for an Offering Period shall be eligible to participate in the Plan during such Offering Period, subject to the requirements of this Article 6 and, for the Section 423 Component, the limitations imposed by Section 423(b) of the Code.
6.2Enrollment in Plan. Except as otherwise set forth in an Offering Document, an Eligible Employee may become a Participant in the Plan for an Offering Period by delivering a subscription agreement to the Company prior to the Enrollment Date for such Offering Period (or such other date specified in the Offering Document), in such form as the Administrator provides. Except as provided in Section 6.7, each such agreement shall designate a whole percentage of such Eligible Employee’s Compensation to be withheld by the Company or the Designated Subsidiary employing such Eligible Employee on each payday during the Offering Period as payroll deductions under the Plan. Except as provided in Section 6.7, an Eligible Employee may designate any whole percentage of Compensation which is not less than 1% and not more than the maximum percentage specified by the Administrator in the applicable Offering Document (which percentage shall be 20% in the absence of any such designation) as payroll deductions. A Participant may reduce or increase the percentage of Compensation designated in his or her subscription agreement, or may suspend his or her payroll deductions, subject to the limits of this Section 6.2 at any time during an Offering Period; provided, however, that the Administrator may limit the number of changes a Participant may make to his or her payroll deduction elections during each Offering Period and/or Purchase Period in the applicable Offering Document (and in the absence of any specific designation by the Administrator, a Participant shall be allowed two changes to his or her payroll deduction elections during each Offering Period); provided, further, that in no event may an Eligible Employee increase the percentage of Compensation designated in his or her subscription agreement more than once during an Offering Period and any such increase shall be permitted only at such times as specified by the Administrator in the applicable Offering Document. Any such change to payroll deductions shall be effective with the first full payroll period following five business days after the Company’s receipt of the new subscription agreement (or such shorter or longer period as may be specified by the Administrator in the applicable Offering Document). Except as otherwise set forth in an Offering Document, a Participant may participate in the Plan only by means of payroll deduction and may not make contributions by lump sum payment for any Offering Period (and if contributions are permitted, the foregoing provisions shall apply to such contributions). In the event a Participant suspends his or her payroll deductions, such Participant’s cumulative payroll deductions prior to the suspension shall remain in his or her account and shall be applied to the purchase of shares of Stock on the next occurring Purchase Date and shall not be paid to such Participant unless he or she withdraws from participation in the Plan pursuant to Article 8.
6.3Payroll Deductions. Except as otherwise provided in the applicable Offering Document, payroll deductions for a Participant shall commence on the first payroll following the Enrollment Date and shall end on the last payroll in the Offering Period to which his or her authorization is applicable, unless sooner terminated by the Participant as provided in Article 9 or suspended by the Participant as provided in Section 6.2 or the Administrator as provided in Section 6.6. The payroll deductions made for each Participant shall be credited to an account for such Participant under the Plan and shall be deposited with the general funds of the Company.
6.4Effect of Enrollment. A Participant’s completion of a subscription agreement will enroll such Participant in the Plan for each successive Purchase Period and each subsequent Offering Period on the terms conditions and limitationscontained therein until the Participant either submits a new subscription agreement, withdraws from participation under the Plan as provided in Article 8 or otherwise becomes ineligible to participate in the Plan.
6.5Limitation on Purchase of Stock. An Eligible Employee may be granted rights under the Plan only if such rights, together with any other rights granted to such Eligible Employee under “employee stock purchase plans” of the Company, any Parent or any Subsidiary Corporation, as specified by Section 423(b)(8) of the Code, do not permit such employee’s rights to purchase stock of the Company or any Parent or Subsidiary Corporation to accrue at a rate which exceeds $25,000 of fair market value of such stock (determined as of the first day of the Offering Period during which such rights are granted) for each Awardcalendar year in which such rights are outstanding at any time. This limitation shall be applied in accordance with Section 423(b)(8) of the Code.
6.6Decrease or Suspension of Payroll Deductions. Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 6.5 or the other limitations set forth in this Plan, a Participant’s payroll deductions may includebe suspended by the termAdministrator at any time during an Offering Period. The balance of the amount credited to the account of each Participant which has not been applied to the purchase of shares of Stock by reason of Section 423(b)(8) of the Code, Section 6.5 or the other limitations set forth in this Plan shall be paid to such Participant in one lump sum in cash as soon as reasonably practicable after the Purchase Date.
6.7Foreign Employees.
(a)In order to facilitate participation in the Plan, the Administrator may provide for such special terms applicable to Participants who are citizens or residents of a foreign jurisdiction, or who are employed by a Designated Subsidiary outside of the United States, as the Administrator may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Except as permitted by Section 423 of the Code, with respect to Offerings under the Section 423 Component, such special terms may not be more favorable than the terms of rights granted under the Section 423 Component to Eligible Employees who are residents of the United States. Such special terms may be set forth in an Award,addendum to the Plan in the form of a sub-plan, addendum or appendix to this Plan, which sub-plan, addendum or appendix may be designed to govern Offerings under the Section 423 Component or the Non-Section 423 Component, as determined by the Administrator. Such sub-plans, addendums or appendices may take precedence over other provisions of this Plan, with the exception of Sections 4.1 and 10.1 and Article 11, but unless otherwise expressly superseded thereby, the provisions applicableof this Plan shall govern the operation of such sub-plans, addendums or appendices; provided, however, that no action under this Section 6.7 shall be effective if it would cause the Section 423 Component to fail to continue to constitute an “employee stock purchase plan” within the meaning of Section 423(b) of the Code. Without limiting the generality of the foregoing, the Administrator is specifically authorized to adopt rules and procedures, with respect to Participants who are foreign nationals or employed in non-U.S. jurisdictions, regarding the exclusion of particular Subsidiaries from participation in the eventPlan, eligibility to participate, the Participant’s employmentdefinition of Compensation, handling of payroll deductions or service terminates,other contributions by Participants, payment of interest, conversion of local currency, data privacy security, payroll tax, withholding procedures, establishment of bank or trust accounts to hold payroll deductions or contributions, determination of beneficiary designation requirements, and handling of stock certificates. The Administrator also is authorized to determine that, to the Company’s authorityextent permitted by U.S. Treasury Regulation Section 1.423-2(f), the terms of a purchase right granted under the Plan or an Offering to unilaterallycitizens or bilaterally amend, modify, suspend, cancelresidents of a non-U.S. jurisdiction will be less favorable than the terms of purchase rights granted under the Plan or rescind an Award.4.5Foreign Participants. the same Offering to Employees resident solely in the U.S. To the extent any sub-plan, addendum or appendix or other changes approved by the Administrator are inconsistent with the requirements of Section 423 of the Code or would jeopardize the tax-qualified status of the Section 423 Component, the change shall cause the Designated Subsidiaries affected thereby to be considered Designated Subsidiaries in a separate Offering under the Non-Section 423 Component instead of the Section 423 Component. To the extent any Employee of a Designated Subsidiary in the Section 423 Component is a citizen or resident of a foreign jurisdiction (without regard to whether they are also a U.S. citizen or a resident alien (within the meaning of Section 7701(b)(1)(A) of the Code)) and compliance with the laws of the foreign jurisdiction would cause the Section 423 Component or any Offering to violate the requirements of Section 423 of the Code, such Employee shall be considered a Participant in a separate Offering under the Non-Section 423 Component. Unless specifically required under Article 11, the Administrator shall not be required to obtain the approval of the stockholders of the Company prior to the adoption, amendment or termination of any such sub-plan, appendix, rules or procedures.
(b)Notwithstanding any provisionother provisions of the Plan to the contrary, in ordernon-U.S. jurisdictions where participation in the Plan through payroll deductions is prohibited, the Administrator may provide that an Eligible Employee may elect to comply withparticipate through contributions to his or her account under the lawsPlan in other countries in which the Company and its Subsidiaries operate or have Eligible Individuals, or in ordera form acceptable to comply with the requirements of any foreign securities exchange, the Administrator in its sole discretion,lieu of or in addition to payroll deductions; provided, however, that, for any Offering under the Section 423 Component, the Administrator shall haveensure that any alternative method of contribution is applied on an equal and uniform basis to all Eligible Employees in the power and authority to: (a) determine which SubsidiariesOffering in compliance with Section 423 of the Code.
ARTICLE VII
GRANT AND EXERCISE OF RIGHTS
7.1Grant of Rights. On the Enrollment Date of each Offering Period, each Eligible Employee participating in such Offering Period shall be covered by the Plan; (b) determine which Eligible Individuals outside the United States are eligiblegranted a right to participate in the Plan; (c) modify the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply with applicable foreign laws or listing requirements of any such foreign securities exchange; (d) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such subplans and/or modifications shall be attached to the Plan as appendices);provided,however, that no such subplans and/or modifications shall increase the share limitations contained in Section 3.1 (includingpurchase the maximum number of shares of Stock that may be issued pursuant to Incentive Stock Optionsspecified under the Plan); and (e) take any action, before or after an Award is made, that it deems advisable to
obtain approval or comply with any necessary local governmental regulatory exemptions or approvals or listing requirements of any such foreign securities exchange. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the Code, the Exchange Act, the Securities Act, any other securities law or governing statute, the rules of the securities exchange or automated quotation system on which the Stock is listed, quoted or traded or any other applicable law.
4.6Director Limit. Notwithstanding any provision to the contrary in the Plan, the Board may establish compensation for Independent Directors from time to time,Section 5.2(d), subject to the limitationslimits in Section 6.5, and shall have the right to buy, on each Purchase Date during such Offering Period (at the applicable Purchase Price), such number of shares of the Company’s Stock as is determined by dividing (a) such Participant’s payroll deductions accumulated prior to such Purchase Date and retained in the Plan. The Board will from time to time determine the terms, conditions and amounts of all such Independent Director compensation in its discretion and pursuant to the exercise of its business judgment, taking intoParticipant’s account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that the sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of Awards granted to an Independent Director as compensation for services as an Independent Director during any fiscal yearPurchase Date, by (b) the applicable Purchase Price. The right shall expire on the last day of the Company may not exceed $750,000 (increased to $1,000,000 with respect to any Independent Director serving as ChairmanOffering Period.
7.2Exercise of the Board or in the fiscal year of an Independent Director’s initial service as an Independent Director) (with any compensation that is deferred counting towards this limit for the year in which the compensation is first earned, and not a later year of settlement). The Board may make exceptions to this limit for individual Independent Directors in extraordinary circumstances, as the Board may determine in its discretion, provided that the Independent Director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving Independent Directors.ARTICLE 5
STOCK OPTIONS
5.1General. The Administrator is authorized to grant Options to Eligible Individuals on the following terms and conditions:
(a)Exercise Price. The exercise price per share of Stock subject to an Option shall be determined by the Administrator and set forth in the Award Agreement;provided that, subject to Section 5.2(e), the exercise price for any Option shall not be less than 100% of the Fair Market Value of a share of Stock on the date the Option is granted (or, as to Incentive Stock Options, on the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code).
(b)Time and Conditions of Exercise. The Administrator shall determine the time or times at which an Option may be exercised in whole or in part. The Administrator shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.
(c)Manner of Exercise. All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Secretary of the Company, or such other person or entity designated by the Administrator, or his, her or its office, as applicable:
(i) A written or electronic notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Participant or other person then entitled to exercise the Option or such portion of the Option;
(ii) Such representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities ActRights.
On each Purchase Date, each Participant’s accumulated payroll deductions and any other federal, state or foreign securities laws or regulations, the rules of any securities exchange or automated quotation system on which the shares of Stock are listed, quoted or traded or any other applicable law. The Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars;
(iii) In the event that the Option shall be exercised pursuant to Section 9.3 by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Option, as determinedpayments specifically provided for in the sole discretion of the Administrator; and
(iv) Full payment of the exercise price and applicable withholding taxesOffering Document will be applied to the stock administratorpurchase of the Company for thewhole shares of Stock with respect to which the Option, or portion thereof, is exercised, in a manner permitted by Section 9.1 and 9.2.
(d)Option Term. Subject to Section 5.2(e), the term of each Option shall be fixed by the Administrator in its sole discretion;provided that no Option shall be exercisable after the expiration of ten (10) years from the date the Option is granted.
5.2Incentive Stock Options. The terms of any Incentive Stock Options granted pursuant to the Plan must comply with the conditions and limitations contained in this Section 5.2.
(a)Eligibility. Incentive Stock Options may be granted only to employees (as defined in accordance with Section 3401(c) of the Code) of the Company or a Subsidiary which constitutes a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code or a Parent which constitutes a “parent corporation” of the Company within the meaning of Section 424(e) of the Code.
(b)Exercise Price. The exercise price per share of Stock shall be set by the Administrator;provided that subject to Section 5.2(e) the exercise price for any Incentive Stock Option shall not be less than 100% of the Fair Market Value on the date of grant.
(c)Expiration. Subject to Section 5.2(e), an Incentive Stock Option may not be exercised to any extent by anyone after the tenth (10th) anniversary of the date it is granted, unless an earlier time is set in the Award Agreement.
(d)Individual Dollar Limitation. The aggregate Fair Market Value (determined as of the time the Option is granted) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall be consideredNon-Qualified Stock Options.
(e)Ten Percent Owners. An Incentive Stock Option shall be granted to any individual who, at the date of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of Stock of the Company, or any “subsidiary corporation”up to the maximum number of shares permitted pursuant to the terms of the Company or “parent corporation” of the Company (each within the meaning of Section 424 of the Code) only if such Option is granted at an exercise price per share that is not less than 110% of the Fair Market Value per share of the Stock on the date of grantPlan and the Option is exercisable for no more than five (5) years fromapplicable Offering
Document, at the
datePurchase Price. No fractional shares shall be issued upon the exercise of
grant.(f)Noticerights granted under the Plan, unless the Offering Document specifically provides otherwise. Any cash in lieu of Disposition. The Participant shall give the Company prompt notice of any disposition offractional shares of Stock acquired by exercise of an Incentive Stock Option within (i) two years from the date of grant of such Incentive Stock Option or (ii) one yearremaining after the transferpurchase of suchwhole shares of Stock to the Participant.
(g)Transferability; Right to Exercise. An Incentive Stock Option shall not be transferable by the Participant other than by will or by the laws of descent or distribution, or pursuant to a DRO. During a Participant’s lifetime, unless such Incentive Stock Option is transferred pursuant to a DRO, an Incentive Stock Option may be exercised only by the Participant.
(h)Failure to Meet Requirements. Any Option (or portion thereof) purported to be an Incentive Stock Option, which, for any reason, fails to meet the requirements of Section 422 of the Code shall be considered aNon-Qualified Stock Option.
5.3Substitute Awards. Notwithstanding the foregoing provisions of this Article 5 to the contrary, in the case of an Option that is a Substitute Award, the exercise price per share of the Stock subject to such Option may be less than the Fair Market Value per share on the date of grant;provided that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Sections 424 and 409A of the Code.
5.4Substitution of Stock Appreciation Rights. The Administrator may provide in the Award Agreement evidencing the grant of an Option that the Administrator, in its sole discretion, shall have the right to substitute a Stock Appreciation Right for such Option at any time prior to or upon exercise of such Option, subjecta purchase right will be credited to a Participant’s account and carried forward and applied toward the provisionspurchase of Section 7.2 hereof;provided that such Stock Appreciation Right shall be exercisable with respect to the same number ofwhole shares of Stock for which such substituted Option would have been exercisable.
ARTICLE 6
RESTRICTED STOCK AWARDS
6.1Grantthe next following Offering Period. Shares of Restricted Stock. The Administrator is authorized to make Awards of Restricted Stock to any Eligible Individual selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator.
6.2Issuance and Restrictions. Restricted Stock shall be subject to such repurchase restrictions, forfeiture restrictions, restrictions on transferability and other restrictions as the Administrator may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Administrator determines at the time of the grant of the Award or thereafter. In addition, notwithstanding anything to the contrary herein, with respect to a share of Restricted Stock, dividends which are paid prior to vesting shall only be paid out to the Participant to the extent that the share of Restricted Stock vests.
6.3Repurchase or Forfeiture. Except as otherwise determined by the Administrator at the time of the grant of the Award or thereafter, upon Termination of Service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited or subject to repurchase by the Company (or its assignee) under such terms as the Administrator shall determine;provided, however, that the Administrator may (a) provide in any Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of a Participant’s Termination of Service under certain circumstances, and (b) in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.
6.4Certificates or Book Entries for Restricted Stock. Restricted Stock grantedissued pursuant to the Plan may be evidenced in such manner as the Administrator shall determine. Certificates or book entries evidencing shares of Restricted Stock must include an appropriate legend referring to the terms, conditions,may determine and restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of any stock certificate until such time as all applicable restrictions lapse or the Award Agreement may provide that the shares shall be held in escrow by an escrow agent designated by the Company.
6.5Section 83(b) Election. If a Participant makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Participant would otherwise be taxable under Section 83(a) of the Code, the Participant shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.
ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1Grant of Stock Appreciation Rights. A Stock Appreciation Right may be grantedissued in certificated form or issued pursuant to any Eligible Individual selected by the Administrator. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan asbook-entry procedures.
7.3Pro Rata Allocation of Shares. If the Administrator shall impose and shall be evidenced by an Award Agreement.7.2Stock Appreciation Rights.
(a) The term of each Stock Appreciation Right shall be fixed by the Administrator in its sole discretion;provideddetermines that, no Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date the Stock Appreciation Right is granted. A Stock Appreciation Right shall be exercisable in such installments as the Administrator may determine. A Stock Appreciation Right shall cover such number of shares of Stock as the Administrator may determine. The exercise price per share of each Stock Appreciation Right shall be determined by the Administrator and set forth in the Award Agreement;provided that the exercise price per share for any Stock Appreciation Right shall not be less than 100% of the Fair Market Value ofon a share of Stock on the date the Stock Appreciation Right is granted.
(b) A Stock Appreciation Right shall entitle the Participant (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying (i) the amount (if any) by which the Fair Market Value of a share of Stock on the date of exercise of the Stock Appreciation Right exceeds the exercise price per share of the Stock Appreciation Right, by (ii)given Purchase Date, the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised, subject to any limitations the Administrator may impose.
7.3Payment and Limitations on Exercise.
(a) Payment of the amounts determined under Section 7.2(b) above shall be in cash, in Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Administrator.
(b) To the extent any payment under Section 7.2(b) is effected in Stock it shall be made subject to satisfaction of all provisions of Article 5 above pertaining to Options.
7.4Substitute Awards. Notwithstanding the foregoing provisions of this Article 7 to the contrary, in the case of a Stock Appreciation Right that is a Substitute Award, the exercise price per share of the Stock subject to such Stock Appreciation Right may be less than the Fair Market Value per share on the date of grant;provided that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Section 409A of the Code.
ARTICLE 8
OTHER TYPES OF AWARDS
8.1Dividend Equivalents.
(a) Any Eligible Individual selected by the Administrator may be granted Dividend Equivalents based on the dividends on the shares of Stock thatrights are subject to any Award, to be credited as of dividend payment
dates, during the period between the date the Award is granted and the date the Award is exercised vests or expires, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional shares of Stock by such formula and at such time and subject to such limitations as may be determined by the Administrator.
(b) Notwithstanding anything to the contrary in the Plan, dividends or Dividend Equivalents with respect to an Award that is subject to vesting that are based on dividends paid prior to the vesting of such Award shall only be paid out to the Participant to the extent that the vesting conditions are subsequently satisfied and the Award vests.
(c) Notwithstanding the foregoing, no Dividend Equivalents shall be payable with respect to Options or Stock Appreciation Rights.
8.2Stock Payments. Any Eligible Individual selected by the Administrator may receive Stock Payments in the manner determined from time to time by the Administrator. The number of shares of Stock or the number of options or other rights to purchase shares of Stock subject to a Stock Payment shall be determined by the Administrator and may be based upon the attainment of Performance Goals that are established by the Administrator and relate to one or more of the Performance Criteria or other specific performance goals determined appropriate by the Administrator.
8.3Restricted Stock Units. The Administrator is authorized to make Awards of Restricted Stock Units to any Eligible Individual selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator. At the time of grant, the Administrator shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of grant, the Administrator shall specify the maturity date applicable to each grant of Restricted Stock Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the Eligible Individual to whom the Award is granted. On the maturity date, the Company shall, subject to Section 9.5(b), transfer to the Participant one unrestricted, fully transferable share of Stock for each Restricted Stock Unit that is vested and scheduled to be distributed on such date and not previously forfeited. The Administrator shall specify the purchase price, if any, to be paid by the Participant to the Company for such shares of Stock. Restricted Stock Units may also provide for settlement in cash, in the discretion of the Administrator.
8.4Other Incentive Awards. Any Eligible Individual selected by the Administrator may be granted one or more Awards that provide Participants with shares of Stock or the right to purchase shares of Stock or that have a value derived from the value of, or an exercise or conversion privilege at a price related to shares of Stock or a cash value, or that are otherwise payable in shares of Stock or cash and which may be linked to the attainment of Performance Goals that are established by the Administrator and relate to one or more of the any one or more of the Performance Criteria or other specific performance goals determined appropriate by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. In making such determinations, the Administrator shall consider (among such other factors as it deems relevant in light of the specific type of Award) the contributions, responsibilities and other compensation of the particular Participant. Other Incentive Awards may be paid in cash, Stock or other property, or a combination thereof, as determined by the Administrator.
8.5Term. Except as otherwise provided herein, the term of any Award of Dividend Equivalents, Stock Payments, Restricted Stock Units or Other Incentive Award shall be set by the Administrator in its discretion.
8.6Exercise or Purchase Price. The Administrator may establish the exercise or purchase price, if any, of any Award of any Stock Payments, Restricted Stock Units or Other Incentive Awards;provided, however, that the value of the consideration for any shares of Stock issued pursuant to such Awards shall not be less than the par value of a share of Stock on the date of grant, unless otherwise permitted by applicable state law.
ARTICLE 9
PROVISIONS APPLICABLE TO AWARDS
9.1Payment. The Administrator shall determine the methods by which payments by any Participant with respect to any Awards granted under the Plan shall be made, including, without limitation:exceed (a) cash or check, (b) shares of Stock (including, in the case of payment of the exercise price of an Award, shares of Stock issuable pursuant to the exercise of the Award) or shares of Stock held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences, in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required, (c) delivery of a written or electronic notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise or vesting of an Award, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate payments required;provided, that payment of such proceeds is then made to the Company upon settlement of such sale, or (d) other form of legal consideration acceptable to the Administrator. The Administrator shall also determine the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
9.2Tax Withholding. The Company or any Parent or Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company or such Parent or Subsidiary an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s employment tax obligations) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The Administrator may in its discretion and in satisfaction of the foregoing requirement elect to have the Company or any Parent or Subsidiary, as applicable, withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a Fair Market Value equal to the sums required to be withheld (or allow the Participant to make such an election). Notwithstanding any other provision of the Plan, the number of shares of Stock which may be withheld (or which may be deliveredthat were available for issuance under the Plan on the Enrollment Date of the applicable Offering Period, or returned by the Participant) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of an Award shall be limited to(b) the number of shares of Stock which have a Fair Market Valueavailable for issuance under the Plan on the date of withholding, delivery or return equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income or such higher rate as may approved byPurchase Date, the Administrator (which rates shallmay in no event exceed the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America));provided,however, unless otherwise approved by the Administrator, to the extent such shares of Stock were acquired by the Participant fromits sole discretion provide that the Company as compensation,shall make a pro rata allocation of the shares of Stock must have been heldavailable for purchase on such Enrollment Date or Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all Participants for whom rights to purchase Stock are to be exercised pursuant to this Article 7 on such Purchase Date, and shall either (a) continue all Offering Periods then in effect, or (b) terminate any or all Offering Periods then in effect pursuant to Article 10. The Company may make pro rata allocation of the minimum period required byshares available on the Enrollment Date of any applicable accounting rules to avoid a chargeOffering Period pursuant to the preceding sentence, notwithstanding any authorization of additional shares for issuance under the Plan by the Company’s earnings for financial reporting purposes;provided,further, thatstockholders subsequent to such Enrollment Date. The balance of the numberamount credited to the account of each Participant which has not been applied to the purchase of shares of Stock withheld, delivered or returned shall be rounded uppaid to such Participant in one lump sum in cash as soon as reasonably practicable after the nearestPurchase Date.
7.4Withholding. At the time a Participant’s rights under the Plan are exercised, in whole share sufficient to coveror in part, or at the applicable tax withholding obligation to the extent rounding up to the nearest whole share does not result in the liability classification of the applicable Award under generally accepted accounting principles in the United States of America. The Administrator shall determine the fair market valuetime some or all of the Stock consistent with applicable provisionsissued under the Plan is disposed of, the Code,Participant must make adequate provision for the Company’s (or any Parent's or Subsidiary’s) federal, state, foreign or other tax withholding obligations, due in connection with a broker-assisted cashless Option or Stock Appreciation Right exercise involving the sale of shares of Stock to payif any, which arise upon the exercise price or any tax withholding obligation.
9.3Limits on Transfer.
(a) Except as otherwise provided in Section 9.3(b):
(i) Noof the right or interest of a Participant in any Award may be sold, pledged, assigned, or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consentdisposition of the Administrator, pursuant to a DRO, unless and until such Award has been exercised, orStock. At any time, the shares underlying such Award have been issued, and all restrictions applicable to such shares have lapsed;
(ii) No Award or interest or right therein shall be liable for the debts, contracts or engagements of the Participant or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by Section 9.3(a)(i); and
(iii) During the lifetime of the Participant, only the ParticipantCompany may, exercise an Award (or any portion thereof) granted to him under the Plan, unless it has been disposed of pursuant to a DRO; after the death of the Participant, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Award Agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.
(b) Notwithstanding Section 9.3(a), the Administrator, in its sole discretion, may determine to permit a Participant to transfer an Award other than an Incentive Stock Option to any one or more Permitted Transferees, subject to the following terms and conditions: (i) an Award transferred to a Permitted Transfereebut shall not be assignableobligated to, withhold from the Participant’s compensation the amount necessary for the Company (or any Parent or transferableSubsidiary) to meet applicable withholding and/or social insurance obligations, including any withholding required to make available to the Company (or any Parent or Subsidiary) any tax deductions or benefits attributable to sale or early disposition of Stock by the Permitted Transferee other than by will or the lawsParticipant.
7.5Conditions to Issuance of descent and distribution; (ii) any Award which is transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the Award as applicable to the original Participant (other than the ability to further transfer the Award); and (iii) the Participant and the Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under applicable federal, state and foreign securities laws and (C) evidence the transfer.9.4Beneficiaries. Notwithstanding Section 9.3(a), a Participant may, in the manner determined by the Administrator, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his or her beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written or electronic consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Administrator prior to the Participant’s death.
9.5Stock Certificates; Book Entry Procedures.
(a) Notwithstanding anything herein to the contrary, theStock.
The Company shall not be required to issue or deliver any certificate or certificates for, or make any book entries evidencing, shares of Stock pursuant topurchased upon the exercise of any Award, unless and untilrights under the Board has determined, with advicePlan prior to fulfillment of counsel, thatall of the issuance and deliveryfollowing conditions:
(a)The admission of such certificates is in compliance withshares to listing on all applicable laws, regulations of governmental authorities and,stock exchanges, if applicable, the requirements of any, exchange on which the shares of Stock are listed or traded. All Stock certificates delivered pursuant to the Plan and all shares issued pursuant to book-entry procedures are subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted,then listed; and
(b)The completion of any registration or traded. other qualification of such shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable; and
(c)The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable; and
(d)The payment to the Company of all amounts which it is required to withhold under federal, state, foreign or local law upon exercise of the rights, if any; and
(e)The lapse of such reasonable period of time following the exercise of the rights as the Administrator may place legends onfrom time to time establish for reasons of administrative convenience.
ARTICLE VIII
WITHDRAWAL; TERMINATION OF EMPLOYMENT OR ELIGIBILITY
8.1Withdrawal. A Participant may withdraw all but not less than all of the payroll deductions credited to his or her account and not yet used to exercise his or her rights under the Plan at any Stock certificate or book-entry to reference restrictions applicabletime by giving written notice to the Stock. In additionCompany in a form acceptable to the Administrator no later than one (1) week prior to the end of the Offering Period (or such shorter or longer period as the Administrator may provide). All of the Participant’s payroll deductions credited to his or her account during an Offering Period shall be paid to such Participant as soon as reasonably practicable after receipt of notice of withdrawal and such Participant’s rights for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of shares shall be made for such Offering Period. If a Participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the next Offering Period unless the Participant delivers to the Company a new subscription agreement.
8.2Future Participation. A Participant’s withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or a Designated Subsidiary or in subsequent Offering Periods which commence after the termination of the Offering Period from which the Participant withdraws.
8.3Cessation of Eligibility. Upon a Participant’s ceasing to be an Eligible Employee for any reason, he or she shall be deemed to have elected to withdraw from the Plan pursuant to this Article 8 and the payroll deductions credited to such Participant’s account during the Offering Period shall be paid to such Participant or, in the case of his or her death, to the person or persons entitled thereto under Section 12.4, as soon as reasonably practicable, and such Participant’s rights for the Offering Period shall be automatically terminated.
8.4Transfer of Employment. A transfer of employment from one Designated Subsidiary to another shall not be treated as a termination of employment. If a Participant transfers employment from the Company or any Designated Subsidiary participating in the Section 423 Component to a Designated Subsidiary participating in the Non-Section 423 Component, he or she shall immediately cease to participate in the Section 423 Component; however, any payroll deductions made for the Offering Period in which such transfer occurs shall be transferred to the Non-Section 423 Component, and such Participant shall immediately join the then-current Offering under the Non-Section 423 Component upon the same terms and conditions provided herein,in effect for his or her participation in the Board may require thatSection 423 Component, except for such modifications otherwise applicable for Participants in such Offering. A Participant who transfers employment from a Designated Subsidiary participating in the Non-Section 423 Component to the Company or any Designated Subsidiary participating in the Section 423 Component shall remain a Participant makein the Non-Section 423 Component until the earlier of (i) the end of the current Offering Period under the Non-Section 423 Component, or (ii) the Enrollment Date of the first Offering Period in which he or she is eligible to participate following such reasonable covenants, agreements,transfer. Notwithstanding the foregoing, the Administrator may establish different rules to govern transfers of employment between companies participating in the Section 423 Component and representations as the Board,Non-Section 423 Component, consistent with the applicable requirements of Section 423 of the Code.
ARTICLE IX
ADJUSTMENTS UPON CHANGES IN STOCK
9.1.Changes in its discretion, deems advisableCapitalization. Subject to Section 9.3, in order to comply withthe event that the Administrator determines that any such laws, regulations, or requirements. The Administrator shall have the right to require any Participant to comply with any timingdividend or other restrictions with respect to the settlement or exercise of any Award, including awindow-period limitation, as may be imposeddistribution (whether in the discretionform of cash, Stock, other securities, or other property), Change in Control, reorganization, merger, amalgamation, consolidation, combination, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the Administrator.(b) Notwithstanding any other provisionassets of the Plan, unless otherwiseCompany, or sale or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, or other similar corporate transaction or event, as determined by the Administrator, affects the Stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or required by any applicable law, rule or regulation, the Company shall not deliver to any Participant certificates evidencing shares of Stock issued in connection with any Award and instead such shares of Stock shall be recorded in the booksenlargement of the Company (or, as applicable, its transfer agentbenefits or stock plan administrator).
9.6Paperless Administration. In the event that the Company establishes for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Participant may be permitted through the use of such an automated system.
9.7Forfeiture and Clawback Provisions. All Awards (including any proceeds, gains or other economic benefit actually or constructively received by a Participant upon any receipt or exercise of any Award or upon the receipt or resale of any shares of Stock underlying the Award and any payments of a portion of anincentive-based bonus pool allocated to a Participant) shall be subject to the provisions of any claw-back policy implementedpotential benefits intended by the Company including, without limitation,to be made available under the Plan or with respect to any claw-back policy adopted to comply withoutstanding purchase rights under the requirements of applicable laws, regulations or requirements, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, whether or not suchclaw-back policy was in place at the time of grant of an Award, to the extent set forth in such claw-back policy and/or in the applicable Award Agreement.
ARTICLE 10
CHANGES IN CAPITAL STRUCTURE
10.1Adjustments.
(a) In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, distribution of Company assets to stockholders (other than normal cash dividends), or any other corporate event affecting the Stock or the share price of the Stock other than an Equity Restructuring,Plan, the Administrator shall make equitable adjustments, if any, as the Administrator in its discretion may deem appropriate to reflect such changeschange with respect to (i)(a) the aggregate number and type of shares of Stock (or other securities or property) that may be issued under the Plan (including, but not limited to, adjustments of the limitationlimitations in Section 3.14.1 and the limitationlimitations established in each Offering Document pursuant to Section 5.2 on the maximum number of shares of Stock that may be issued pursuant to Incentive Stock Options underpurchased); (b) the Plan); (ii) theclass(es) and number and type of shares and price per share of Stock subject to outstanding Awards; (iii)rights; and (c) the terms and conditions ofPurchase Price with respect to any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (iv) the grant or exercise price per share for any outstanding Awards under the Plan. Any adjustment affecting an Award intended asrights.
Performance-Based9.2. Compensation shall be made consistent with the requirements ofOther Adjustments. Subject to Section 162(m)(4)(c) of the Code prior to its repeal unless otherwise determined by the Administrator.
(b) In9.3, in the event of any transaction or event described in Section 10.1(a)9.1 or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate (including without limitation any Change in Control), or of changes in applicable laws, regulations or accounting principles, the Administrator, in its sole discretion and on such terms and conditions as it deems appropriate, either by amendment of the terms of any outstanding Awards or by action taken prior to the occurrence of such transaction or event, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent the dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Awardright under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:
(i) principles, the Administrator, in its sole discretion and on such terms and conditions as it deems appropriate, is hereby authorized to take any one or more of the following actions:
(a)To provide for either (A)(i) termination of any such Awardoutstanding right in exchange for an amount of cash, and/or other property, if any, equal to the amount that would have been receivedobtained upon the exercise of such Awardright had such right been currently exercisable or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 10.1(b) the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment) or (B)(ii) the replacement of such Awardoutstanding right with other rights or property selected by the Administrator in its sole discretion; and(ii)
(b)To provide that such Awardthe outstanding rights under the Plan shall be assumed by the successor or survivor entity,corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor entity,corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; and(iii)
(c)To make adjustments in the number and type of shares of Stock (or other securities or property) subject to outstanding Awards, and inrights under the number and kind of outstanding Restricted Stock or Restricted Stock Unit AwardsPlan and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards and options, rights and awards which may be granted in the future; and(iv)
(d)To provide that such Award shallParticipants’ accumulated payroll deductions may be exercisable or payable or fully vested with respectused to all shares covered thereby, notwithstanding anythingpurchase Stock prior to the contrarynext occurring Purchase Date on such date as the Administrator determines in its sole discretion and the Plan orParticipants’ rights under the applicable Award Agreement;ongoing Offering Period(s) terminated; and(v)
(e)To provide that the Award cannot vest, be exercised or become payable after such event.(c) In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 10.1(a) and 10.1(b):
(i) The number and type of securities subject to eachall outstanding Award and the exercise price or grant price thereof, if applicable, will be proportionately adjusted. The adjustments provided under this Section 10.1(c)(i)rights shall be nondiscretionary and shall be final and binding on the affected Participant and the Company.
(ii) The Administrator shall make such proportionate adjustments, if any, as the Administrator in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitation in Section 3.1 and the maximum number of shares of Stock that may be issued pursuant to Incentive Stock Options under the Plan).
10.2Acceleration Upon a Change in Control. Notwithstanding Section 10.1, and except as may otherwise be provided in any applicable Award Agreement or other written agreement entered into between the Company, a Parent, a Subsidiary, or other Company affiliate and a Participant, if a Change in Control occurs and a
Participant’s Awards are not continued, converted, assumed, or replaced by (i) the Company or a Parent or Subsidiary of the Company, or (ii) a Successor Entity, then immediately prior to the Change in Control such Awards shall become fully exercisable and/or payable, as applicable, and all forfeiture, repurchase and other restrictions on such Awards shall lapse. Upon, or in anticipation of, a Change in Control, the Administrator may cause any and all Awards outstanding hereunder to terminate at a specific time in the future, including but not limited to the date of such Change in Control, and shall give each Participant the right to exercise such Awards during a period of time as the Administrator, in its sole and absolute discretion, shall determine.
10.3without being exercised.
9.3.No Adjustment Under Certain Limitations on Adjustments. With respect to Awards which are intended to qualify as Performance-Based Compensation, no adjustment or action described in this Article 10 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause such Award to fail to so qualify as Performance-Based Compensation, unless the Administrator determines that the Award should not so qualify.Circumstances. No adjustment or action described in this Article 109 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Section 423 Component of the Plan to violatefail to satisfy the requirements of Section 422(b)(1)423 of the Code. Furthermore, no such adjustment or action shall be authorized with respect to any Award to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions of Rule
16b-39.4. unless the Administrator determines that the Award is not to comply with such exemptive conditions.10.4No Other Rights.Rights. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Administrator under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to an Awarda Participant’s right to purchase or the grant or exercise price of any Award.
10.5Restrictions on Exercise. In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assetssuch right to stockholders, or any other change affecting thepurchase shares of StockStock.
ARTICLE X
AMENDMENT, MODIFICATION AND TERMINATION
10.1Amendment, Modification and Termination. The Administrator may amend, suspend or the share price of the Stock including any Equity Restructuring, for reasons of administrative convenience, the Company in its sole discretion may refuse to permit the exercise of any Award during a period of 30 days prior to the consummation of any such transaction.ARTICLE 11
ADMINISTRATION
11.1Administrator. The “Administrator” ofterminate the Plan shall be a Committee of the Board, which shall consist solely of two or more members of the Board each of whom is an Independent Director and aNon-Employee Director;provided that any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 11.1 or otherwise provided in any charter of the Committee. Additionally, to the extent required by applicable law, each of the individuals constituting the Committee (or another committee or subcommittee of the Board assuming the functions of the Committee under the Plan) shall be an “independent director” under the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded. Notwithstanding the foregoing: (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to all Awards granted to Independent Directors and for purposes of such Awards the term “Administrator” as used in this Plan shall be deemed to refer to the Board and (b) the Board or the Committee may delegate its authority hereunder to the extent permitted by
Section 11.5. In addition, in its sole discretion, the Board may at any time and from time to time exercise any and all rights and dutiestime; provided, however, that approval by a vote of the Administratorholders of the outstanding shares of the Company’s capital stock entitled to vote shall be required to amend the Plan to: (a) increase the aggregate number, or change the type, of shares that may be sold pursuant to rights under the Plan except with respect to matters which are required tounder Section 4.1 (other than any adjustment as provided by Article 9); (b) change the corporations or classes of corporations whose employees may be determinedgranted rights under the Plan; (c) change the Plan in any manner that would cause the sole discretionSection 423 Component of the Committee underRule 16b-3 of the Exchange Act, or any regulations or rules issued thereunder. Except as may otherwisePlan to no longer be provided in any charter of the Committee, appointment of Committee members shall be effective upon acceptance of appointment; Committee members may resign at any time by delivering written notice to the Board; and vacancies in the Committee may only be filled by the Board. Should any Awards made under the Plan prior to November 2, 2017, be intended to qualify as Performance-Based Compensationan “employee stock purchase plan” within the meaning of Section 162(m)(4)(C)423(b) of the Code prior to its repeal, then all such determinations regarding such Awards will be made solely by a Committee comprised solely of two of more “outside directors” withinCode; or (d) amend the meaning of Section 162(m)Plan in any manner that would require the approval of the Code.
11.2ActionCompany’s stockholders under applicable law or the rules of the stock exchange on which the shares of Stock are listed.
10.2Rights Previously Granted. Except as provided in Article 9 or this Article 10, no termination, amendment or modification may make any change in any right theretofore granted which adversely affects the rights of any Participant without the consent of such Participant, provided that an Offering Period may be terminated, amended or modified by the Administrator. Unless otherwise established by if the BoardAdministrator determines that the termination of the Offering Period or the Plan is in any charterthe best interests of the Company orand its stockholders.
10.3Certain Changes to Plan. Without stockholder consent and without regard to whether any Participant rights may be considered to have been adversely affected (and, with respect to the Committee, a majoritySection 423 Component, to the extent permitted by Section 423 of the Code), the Administrator shall constitutebe entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a quorum and the acts of a majoritycurrency other than U.S. dollars, permit payroll withholding in excess of the members present at any meeting at which a quorum is present, and acts approved in writingamount designated by a majorityParticipant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Stock for each Participant properly correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Administrator in lieu of a meeting, shall be deemed the acts of the Administrator. Each member of the Administrator is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or of any Parent or Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company or any Parent or Subsidiary to assist in the administration of the Plan.11.3Authority of Administrator. Subject to any specific designation in the Plan, including Section 13.1, the Administrator has the exclusive power, authority and discretion to:
(a) Designate Eligible Individuals to receive Awards;
(b) Determine the type or types of Awards to be granted to each Participant;
(c) Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, any provisions related tonon-competition and recapture of gain on an Award, based in each case on such considerations as the Administratordetermines in its sole discretion determines;
(e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement,advisable which need not be identical for each Participant;
(g) Decide all other matters that must be determined in connection with an Award;
(h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
(i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and
(j) Make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan.
11.4Decisions Binding. The Administrator’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties.
11.5Delegation of Authority. To the extent permitted by applicable law, the Board or the Committee may from time to time delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards to Participants other than (a) Employees who are subject to Section 16 of the Exchange Act or (b) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Board or the Committee specifies at the time of such delegation, and the Board or the Committee may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 11.5 shall serve in such capacity at the pleasure of the Board or the Committee.
11.6Prohibition on Repricing. Subject to Section 10.1, the Administrator shall not, without the approval of the stockholders of the Company, (a) authorize the amendment of any outstanding Option or Stock Appreciation Right to reduce its price per share, or (b) cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying shares of Stock. Subject to Section 10.1, the Administrator shall have the authority, without the approval of the stockholders of the Company, to amend any outstanding Award to increase the price per share or to cancel and replace an Awardconsistent with the grant of an Award having a price per share that is greater than or equal to the price per share of the original Award.
Plan.
ARTICLE
12EFFECTIVE AND EXPIRATION DATE
12.1Effective Date. XI
TERM OF PLAN
This amended and restated Plan shall be effective on the date it is approved by the stockholders of the Company (the “Restatement Effective Date”).12.2Expiration Date. The Plan will expire on, and no Awardshall be in effect until terminated under Article 10. No rights may be granted pursuant tounder the Plan on or after, the tenth (10th) anniversaryduring any period of the date this amended and restated Plan was initially approved by the Board (the “Expiration Date”). Any Awards that are outstanding on the Expiration Date shall remain in force according to the termssuspension of the Plan andor after termination of the applicable Award Agreement.
12.3Approval of Plan by Stockholders.Plan. This amended and restated Plan will be submitted for the approval of the Company’s stockholders within twelve (12) months after the date of the Board’s initial adoption of this amended and restatedthe Plan. If this amended and restated Plan is not approved by the Company’s stockholders, it will not become effective and the Prior 2010 Plan will continue in full force and effect in accordance with its terms. Upon
ARTICLE XII
MISCELLANEOUS
12.1Restriction upon Assignment. A right granted under the approvalPlan shall not be transferable other than by will or the laws of descent and distribution, and is exercisable during the Participant’s lifetime only by the Participant. Except as provided in Section 12.4 hereof, a right under the Plan may not be exercised to any extent except by the Participant. The Company shall not recognize and shall be under no duty to recognize any assignment or alienation of the Participant’s interest in the Plan, by the Company’s stockholders, any awards outstandingParticipant’s rights under the Prior 2010 Plan or any rights thereunder.
12.2Rights as a Stockholder. With respect to shares of Stock subject to a right granted under the Plan, a Participant shall not be deemed to be a stockholder of the Company, and the Participant shall not have any of the rights or privileges of a stockholder, until such shares have been issued to the Participant or his or her nominee following exercise of the Participant’s rights under the Plan. No adjustments shall be made for dividends (ordinary or extraordinary, whether in cash securities, or other property) or distribution or other rights for which the record date occurs prior to the date of such approvalissuance, except as otherwise expressly provided herein.
12.3Use of Funds; Interest. All funds received or held by the Company under the Plan shall remain outstandingbe included in the general funds of the Company free of any trust or other restriction and if applicable, exercisable pursuantmay be used for any corporate purpose, except for funds contributed under Offerings in which the local law of a non-U.S. jurisdiction requires that contributions to the termsPlan by Participants be segregated from the Company’s general corporate funds and/or deposited with an independent third party for Participants in non-U.S. jurisdictions. No interest shall accrue on the payroll deductions or lump sum contributions of such individual grants.ARTICLE 13
AMENDMENT, MODIFICATION, AND TERMINATION
13.1Amendment, Modification, And Termination. The Committee or Board may terminate, amend or modifya Participant under the Plan, atexcept as may be required by local law in a non-U.S. jurisdiction. If the segregation of funds and/or payment of interest on any time and from timeParticipant’s account is so required, such provisions shall apply to time;provided, however, that (a)all Participants in the relevant Offering except to the extent necessaryotherwise permitted by U.S. Treasury Regulation Section 1.423-2(f). With respect to any Offering under the Non-Section 423 Component, the payment of interest shall apply as determined by the Administrator (but absent any such determination, no interest shall apply).
12.4Designation of Beneficiary.
(a)A Participant may, in the manner determined by the Administrator, file a written designation of a beneficiary who is to receive any shares and desirable to comply withcash, if any, applicable law, regulation, or stock exchange rule,from the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) stockholder approval shall be required for any amendment to the Plan that increases the number of shares of Stock availableParticipant’s account under the Plan orin the event of such Participant’s death subsequent to takea Purchase Date on which the Participant’s rights are exercised but prior to delivery to such Participant of such shares and cash. In addition, a Participant may file a written designation of a beneficiary who is to receive any action prohibitedcash from the Participant’s account under Section 11.6.
13.2Awards Previously Granted. No termination, amendment, or modificationthe Plan in the event of such Participant’s death prior to exercise of the PlanParticipant’s rights under the Plan. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his or her beneficiary shall adversely affect in any material way any Award previously granted pursuant to the Plannot be effective without the prior written consent of the Participant.
ARTICLE 14
GENERAL PROVISIONS
14.1No RightsParticipant’s spouse.
(b)Such designation of beneficiary may be changed by the Participant at any time by written notice to Awards. No Eligible Individualthe Company. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
12.5Notices. All notices or other person shall have any claim to be granted any Award pursuantcommunications by a Participant to the Company under or in connection with the Plan and neithershall be deemed to have been duly given when received in the form specified by the Company norat the location, or by the person, designated by the Company for the receipt thereof.
12.6Equal Rights and Privileges. All Eligible Employees of the Company or any Designated Subsidiary under the Section 423 Component will have equal rights and privileges under this Plan so that the Section 423 Component of the Plan qualifies as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Any provision of the Section 423 Component of the Plan that is inconsistent with Section 423 of the Code will, without further act or amendment by the Company, the Board or the Administrator, is obligatedbe reformed to treat Eligible Individuals, Participants or any other persons uniformly.14.2No Stockholders Rights. Except as otherwise provided herein, a Participant shall have nonecomply with the equal rights and privileges requirement of Section 423 of the Code. Participants participating in the Non-Section 423 Component need not have the same rights and privileges as Eligible Employees participating in the Section 423 Component or other Eligible Employees participating in the Non-Section 423 Component.
12.7Reports. Statements of a stockholder with respectaccount shall be given to participating Employees at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares of Stock covered by any Award untilpurchased and the Participant becomes the record owner of such shares of Stock.14.3remaining cash balance, if any.
12.8No Right to Employment or Services.Rights. Nothing in the Plan shall be construed to give any person (including any Eligible Employee or Participant) the right to remain in the employ of the Company or any Award Agreement shall interfere withParent or limit in any waySubsidiary or to affect the right of the Company or any Parent or Subsidiary to terminate the employment of any Participant’s employmentperson (including any Eligible Employee or servicesParticipant) at any time, nor confer upon anywith or without cause.
12.9Notice of Disposition of Shares. Each Participant any right to continue in the employSection 423 Component shall give prompt notice to the Company of any disposition or serviceother transfer of any shares of Stock purchased upon exercise of a right under the Plan if such
disposition or transfer is made: (a) within two years from the Enrollment Date of the
CompanyOffering Period in which the shares were purchased or
any Parent(b) within one year after the Purchase Date on which such shares were purchased. Such notice shall specify the date of such disposition or
Subsidiary.14.4Unfunded Statusother transfer and the amount realized, in cash, other property, assumption of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Planindebtedness or any Award Agreement shall giveother consideration, by the Participant any rights that are greater than those of a general creditor of the Company or any Parent or Subsidiary.
14.5Indemnification. To the extent allowable pursuant to applicable law, each member of the Administrator or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit,disposition or proceeding against him or her;provided he or she gives the Company an opportunity, at its own expense, to handleother transfer.
12.10Governing Law. The validity and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing rightenforceability of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.14.6Relationship to Other Benefits. No payment pursuant to thethis Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Parent or Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
14.7Expenses. The expenses of administering the Plan shall be bornegoverned by the Company and its Subsidiaries.
14.8Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
14.9Fractional Shares. No fractional shares of Stock shall be issued and the Administrator shall determine, in its discretion, whether cash shall be given in lieu of fractional shares of Stock or whether such fractional shares of Stock shall be eliminated by rounding up or down as appropriate.
14.10Limitations Applicable toSection 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
14.11Government and Other Regulations. The obligation of the Company to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register pursuant to the Securities Act any of the shares of Stock paid pursuant to the Plan. If the shares of Stock paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act, the Company may restrict the transfer of such shares of Stock in such manner as it deems advisable to ensure the availability of any such exemption.
14.12Section 409A. To the extent that the Administrator determines that any Award granted under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the adoption of the Plan. Notwithstanding any provision of the Plan to the contrary, in the event that following the adoption of the Plan the Administrator determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the adoption of the Plan), the Administrator may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.
14.13Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of California without regard to theotherwise governing principles of conflicts of law principles thereof.
14.14Provisions Applicable to Certain Performance-Based Awardslaw.
12.11Electronic Forms. Notwithstanding any other provision of the Plan or any Award, with respect to any Award which is intended to continue to qualify as Performance-Based Compensation (as described in Section 162(m)(4)(C) of the Code prior to its repeal) pursuant to the transition relief rules in the Tax Cuts and Jobs Act of 2017, to the extent any of the provisions of the Plan or any Award (or any amendments hereto pursuant to this amendment and restatement of the Plan) would cause such Awards to fail to so qualify, any such provisions shall not apply to such Awards to the extent necessary to ensure the such Awards continue to so qualify. In addition, any Award which is intended to continue to qualify as Performance-Based Compensation (as described in Section 162(m)(4)(C) of the Code prior to its repeal) pursuant to the transition relief rules in the Tax Cuts and Jobs Act of 2017 shall be subject to any additional limitations as the Administrator determines necessary for such Award to continue to so qualify. To the extent permitted by applicable law and in the discretion of the Administrator, an Eligible Employee may submit any form or notice as set forth herein by means of an electronic form approved by the Administrator. Before the commencement of an Offering Period, the Administrator shall prescribe the time limits within which any such electronic form shall be submitted to the Administrator with respect to such Offering Period in order to be a valid election.
ZOGENIX, INC.
EMPLOYEE STOCK PURCHASE PLAN
SUB-PLAN FOR
INTERNATIONAL PARTICIPANTS
1.APPLICATION
This Sub-Plan for International Participants in the Zogenix, Inc. Employee Stock Purchase Plan (this “Sub-Plan”) sets forth additional terms and conditions applicable to the rights granted to, and the shares of Stock purchased by, Eligible Employees in the countries set forth below.
The Plan and this Sub-Plan are complimentary to each other and shall be deemed as one. In any case of contradiction between the provisions of this Sub-Plan and the Plan, the provisions set out in the Sub-Plan shall prevail. Any capitalized terms used in this Sub-Plan but not defined shall have the meaning given to those terms in the Plan.
2.GLOBAL PROVISIONS
(a)Data Protection. It shall be a term and condition for participation in the Plan that a Participant explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of a Participant’s personal “Data” (as defined below) by and among, as applicable, the Company, any Parent or Subsidiary and a Participant’s employing entity (the “Employer”), if different, and their affiliates (collectively, the “Company Group”) for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan. The Company Group holds certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, e-mail address, date of birth, employee identification number, NRIC or passport number or equivalent, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor, for the purpose of implementing, administering and managing the Plan (“Data”). Data will be transferred to such stock plan service providers, as may be prudently selected by the Company, which are assisting the Company with the implementation, administration and management of the Plan. The recipients of the Data may be located in the United States of America or elsewhere (and, if the Participant is a resident of a member state of the European Union, may be outside the European Economic Area) and that the recipient’s country (e.g., the United States of America) may have different data privacy laws and protections than the Participant’s country. The Participant may request a list with the names and addresses of all recipients of the Data by contacting his or her local human resources representative. Each Participant hereby authorizes the Company Group and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Participant’s participation in the Plan. Data will be held only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan. The Company will also make the Data available to public authorities where required under locally applicable law. A Participant may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case, without cost, by contacting in writing the Participant’s local human resources representative. A Participant’s refusal to provide consent or withdrawal of consent may affect the Participant’s ability to participate in the Plan. This section applies to information held, used or disclosed in any medium.
If Participant resides in the UK or the European Union, the Company Group will hold, collect and otherwise process certain Data as set out in the applicable Company’s GDPR-compliant data privacy notice, which will be or has been provided to the Participant separately. All personal data will be treated in accordance with applicable data protection laws and regulations.
(b)Acknowledgment of Nature of Plan and Rights. In participating in the Plan, each Participant acknowledges that:
(i)for employment and labor law purposes, the rights granted and the shares of Stock purchased under the Plan are an extraordinary item that do not constitute wages of any kind for services of any kind rendered to the Company, any Parent or Subsidiary or the Employer, and the award of rights is outside the scope of Participant’s service contract, if any;
(ii)for employment and labor law purposes, the rights granted and the Stock purchased under the Plan are not part of normal or expected wages or salary for any purposes, including, but not limited to, calculation of any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, holiday pay, long-service awards, pension or retirement benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company, the Employer, its Parent or any Subsidiary of the Company;
(iii)the rights and the shares of Stock purchased under the Plan are not intended to be an integral component of compensation or to replace any pension rights or compensation;
(iv)neither the rights nor any provision of Plan or the policies adopted pursuant to the Plan confer upon any Participant any right with respect to service or continuation of current service and shall not be interpreted to form a service contract or relationship with the Company or any Subsidiary;
(v)the future value of the underlying shares of Stock is unknown and cannot be predicted with certainty;
(vi)if the underlying shares of Stock do not increase in value, the right may have no value; and
(vii)if a Participant acquires shares of Stock, the value of the shares of Stock acquired upon purchase may increase or decrease in value, even below the original price paid.
ZOGENIX, INC.
EMPLOYEE STOCK PURCHASE PLAN
SUB-PLAN FOR
INTERNATIONAL PARTICIPANTS
UNITED KINGDOM
1.APPLICATION
This section sets forth additional terms and conditions applicable to the rights granted to, and the shares of Stock purchased by, Eligible Employees who are (or are deemed to be) resident in the United Kingdom for the purpose of payment of taxes or who exercise all of their employment duties in the United Kingdom and forms an integral part of the Plan and Sub-Plan.
2.TAX CONSEQUENCES
(a)The Eligible Employee agrees to indemnify and keep indemnified the Company Group from and against any such Awards shallliability for or obligation to pay any tax liability that is attributable to: (i) the grant or exercise of a right under the Plan; (ii) the acquisition by the Eligible Employee of shares of Stock on exercise of the right; or (iii) the disposal of any shares of Stock (each, a “Tax Liability”).
(b)At the discretion of the Administrator, purchase rights granted under the Plan cannot be deemed amendedexercised until the Eligible Employee has entered into an election with the Company or the Employer as appropriate (in a form approved by the Employer and HMRC) (a “joint election”) under which any liability of the Company Group for Employer’s National Insurance Contributions arising in respect of the grant, exercise of or other dealing in the rights granted under the Plan, or the acquisition of shares of Stock on exercise of the right, is transferred to and met by the Eligible Employee.
(c)Without prejudice to the extent necessaryterms of the Plan, rights cannot be exercised until the Eligible Employee has made such arrangements as the Company Group may require for the satisfaction of any Tax Liability that may arise in connection with the exercise of the right and/or the acquisition of the shares of Stock by the Eligible Employee. Where any Tax Liability is likely to conformarise, the Company Group may recover from the Eligible Employee an amount of money sufficient to meet the Tax Liability by any of the following arrangements:
(i)deduction from salary or other payments due to the Eligible Employee;
(ii)withholding the issue, allotment or transfer to the Eligible Employee of that number of shares of Stock (otherwise to be acquired by the Eligible Employee on the exercise of the right) whose aggregate market value on date of exercise is, so far as possible, equal to, but not less than, the amount of Tax Liability (together with the fees and expenses incurred in the sale of the shares of Stock, where the Company intends to sell the shares to meet the Tax Liability);
(iii)withholding the issue, allotment or transfer to the Eligible Employee of the shares of Stock otherwise to be acquired by the Eligible Employee pursuant to the right until the Eligible Employee has demonstrated to the satisfaction of the Company Group that he has given irrevocable instructions to a third party (for example, a broker) satisfactory to the Company Group to sell a sufficient number of those shares to ensure the net proceeds are so far as possible, equal to but not less than, the amount of the Tax Liability; or
(iv)where the Tax Liability arises as a result of a release or assignment by the Eligible Employee of the right, a deduction from the payment made to him as consideration for such requirements.release or assignment.
(d)Section 2(c) of this Sub-Plan will not apply where the Eligible Employee has, before the allotment, issuance or transfer of the shares of Stock to be issued or transferred to the Eligible Employee as a result of the exercise of the right, paid to the Company Group, in cleared funds a sum equal to the Tax Liability arising on the exercise of the right.
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5959 HORTON STREET, SUITE 500
EMERYVILLE, CA 94608 | |
VOTE BY INTERNET
Before The Meeting -Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M.p.m. Eastern Time the day before thecut-off date or meeting date.on May 28, 2020. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like
During The Meeting - Go to reducewww.virtualshareholdermeeting.com/ZGNX2020 You may attend the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronicallymeeting via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and when prompted, indicatevote during the meeting. Have the information that you agree to receive or access proxy materials electronicallyis printed in future years.the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M.p.m. Eastern Time the day before thecut-off date or meeting date.on May 28, 2020. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL Mark, sign and date your proxy card and return it in thepostage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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ZOGENIX, INC.
5959 Horton Street, Suite 500,
Emeryville, California 94608
| | VOTE BY INTERNET - www.proxyvote.com |
| Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
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| | VOTE BY PHONE - 1-800-690-6903 |
| | Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. |
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| | VOTE BY MAIL |
| | Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
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| DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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| The Board of Directors recommends you vote FOR the following: | | | | | | | | | | | | | | | | | | | | | |
| 1. | | | | Election of Directors | | | | | | | | | | | | | | | | | |
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| | | | | Nominees | | | | For | | | | Against | | | Abstain | | | | | | |
| 1A | | The Board of Directors recommends you vote FOR the
following: | | Louis C. Bock | | | | o | | | | o | | | | o | | | | | |
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| | 1. | | Election of Directors | | | | | | | | | | |
| 1B | | | | Cam L. Garner | | | | o | | | | o | | | | o | | | | | |
| | | | Nominees
| | For
| | Against
| | Abstain
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| 1C | | | | Mark Wiggins | | | | o | | | | o | | | | o | | | | | |
| | 1A
| | Erle T. Mast
| | ☐
| | ☐
| | ☐
| | | | For
| | Against
| | Abstain
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| 1B
| | Renee P. Tannenbaum, Pharm D.
| | For
☐
| | Against
☐
| | Abstain
☐
| | 4
| | Approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 50,000,000 to 100,000,000.
| | ☐
| | ☐
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| The Board of Directors recommends you vote FOR proposals 2, 3 4 and 5. 4. | | For
| | Against
| | Abstain
| | 5
| | Approval of an amendment and restatement of the Company’s 2010 Equity Incentive Award Plan.
| | ☐
| | ☐
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| | | | | | | | For | | | | Against | | | Abstain | | | | | | |
| 2 | 2
| | | Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019. 2020. | | | | o | | | | o | | | | o | | | | | |
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| | NOTE: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof.
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| 3 | | | | |
| 3
| | Approval, on an advisory basis, of the compensation of the named executive officers as disclosed in the proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission. | | | | o | | | | o | | | | o | | | | | |
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| 4 | | | | To approve an amendment and restatement of the Zogenix, Inc. Employee Stock Purchase Plan. | | | | o | | | | o | | | | o | | | | | |
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NOTE: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof. | | | | | | | | | | | | | | | | | | | | | |
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| For address change/comments, mark here. (see reverse for instructions) | | | | | | | | | | | | | | | | ☐
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| (see reverse for instructions) | | Yes | | No | | | | | | | | | | | | | | |
| Please indicate if you plan to attend this meeting
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| Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such.
Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by
authorized officer. |
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| | Signature [PLEASE SIGN WITHIN BOX] | | Date | | | | Signature (Joint Owners) | | | | Date | | |
0000415093_1 R1.0.1.18
ImportantNoticeRegardingthe AvailabilityofProxyMaterialsfor the AnnualMeeting: The Notice & Proxy Statement and Annual Report are available atwww.proxyvote.com
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| Signature [PLEASE SIGN WITHIN BOX] | | | | Date | | | | | | | | Signature (Joint Owners) | | | | | | | Date | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice & Proxy Statement and Annual Report are available at www.proxyvote.com.
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| ZOGENIX, INC. |
| Annual Meeting of Stockholders |
May 22, 201929, 2020 9:00 AM, Pacific Time |
| This proxy is solicited by the Board of Directors |
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The stockholder(s)undersigned stockholder hereby appoint(s)appoints Stephen J. Farr, Ph.D. and Michael P. Smith, and eachor either of them, as proxies, each with the power to appoint (his/her)his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of ZOGENIX, INC. that the stockholder(s) is/areundersigned stockholder is entitled to vote at the Annual Meeting of Stockholder(s)Stockholders to be held at 9:00 AM, local time,a.m. Pacific Time on May 22, 2019,29, 2020, virtually at 5959 Horton Street, Suite 500, Emeryville, California, 94608www.virtualshareholdermeeting.com/ZGNX2020, and any adjournment or postponement thereof. This proxy when properly executed will be voted in the manner directed, or if no choice is specified, “FOR” the proposal listed on the reverse side. Discretionary authority is hereby conferred as to all other matters that may come before the meeting. | | | |
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| | | | | | (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side | | | |
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0000415093_2 R1.0.1.18
