UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

REATA PHARMACEUTICALS, INC.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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2801 Gateway Drive, Suite 150

Irving, Texas 75063

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on June 13, 2018
10, 2020

at 8:00 a.m. Central Daylight Time

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders, or the Annual Meeting, of Reata Pharmaceuticals, Inc., a Delaware corporation, or the Company,Company.  Due to the public health impact of the coronavirus pandemic (COVID-19), the increasingly strict protocols that federal, state and local governments have imposed, and to support the health and well-being of our stockholders, employees and their families, this year’s Annual Meeting will be held in a virtual-meeting format only via live webcast on June 13, 2018,10, 2020, at 8:00 a.m. Central Daylight Time, at our principal place of business located at 2801 Gateway Drive, Suite 150, Irving, Texas 75063.Time.  You may attend the Annual Meeting virtually via the Internet by accessing www.proxydocs.com/RETA, where you will find instructions on how to register, vote electronically and submit questions. For additional instructions on how to attend the Annual Meeting, please review the accompanying proxy statement.  Only stockholders who held stock at the close of business on the record date, April 19, 2018,16, 2020, may vote at the Annual Meeting, including any adjournment or postponement thereof.

At the Annual Meeting, you will be asked to consider and vote upon:

(1)

the election of two directors, James E. Bass and R. Kent McGaughy, Jr., to serve as Class II directors until the 2023 annual meeting of stockholders and until their successors are duly elected and qualified, subject to their earlier resignation, removal or death;

(2)

an advisory (non-binding) vote on a resolution to approve the compensation of our named executive officers;

(3)

an advisory (non-binding) vote on the frequency of future advisory votes to approve the compensation of our named executive officers;

(4)

the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020; and

(5)

(1) the election of two directors, William D. McClellan, Jr. and William E. Rose, to serve as Class III directors until the 2021 annual meeting of stockholders and until their successors are duly elected and qualified, subject to their earlier resignation, removal or death;

(2) the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018; and

(3) the transaction of such other business as may properly come before the meeting or at any and all adjournments or postponements thereof.

The accompanying proxy statement more fully describes the details of the business to be conducted at the Annual Meeting.  Proposal 1 relates solely to the election of the two directors nominated by the Board of Directors and does not include any other matters relating to the election of directors, including, without limitation, the election of directors nominated by any stockholder of the Company.  After careful consideration, our Board of Directors has unanimously approved the proposals and recommends that you vote FOR the two director nominees, FOR approval of the resolution to approve the compensation of our named executive officers, to hold future advisory votes to approve the compensation of our named executive officers EVERY YEAR and FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2020.  In accordance with Delaware law, a list of stockholders entitled to vote at the meeting will be accessible during normal business hours at our principal place of businessby appointment for ten days prior to the meeting.meeting by contacting our Investor Relations department at (855) 557-3282. The list of stockholders of record will also be available for review during the Annual Meeting by following the instructions on the meeting website.

i


We are pleased to take advantage of Securities and Exchange Commission rules that allow us to provide our notice of annual meeting, proxy statement and 20172019 annual report to stockholders online, with paper copies available free of charge upon request.  On or about April 30, 2018,29, 2020, we began mailing a Notice of Internet Availability of Proxy Materials, or Notice of Internet Availability, instead of a paper copy of our proxy materials.  The Notice of Internet Availability contains instructions on how to access these documents and how to cast your vote via the Internet.  The Notice of Internet Availability also contains instructions on how to request a paper copy of our proxy materials.  All stockholders who have so requested will receive a paper copy of the proxy materials by mail.  We believe that this process allows us to provide our stockholders with the information they need on a more timely basis, while lowering the costs of printing and distributing our proxy materials.

Your vote is important. Whether or not you are able to attend the meeting in person,Annual Meeting, it is important that your shares be represented.  To ensure your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the meeting,Annual Meeting, by submitting your proxy via the telephone at 1-866-250-6195 or via the Internet at www.proxypush.com/RETA or by completing, signing and dating the proxy card and returning it in the postage-prepaid envelope.

We intend to hold the Annual Meeting virtually. However, in the event it is possible or advisable to hold the Annual Meeting in person, we may hold the meeting in person at our offices located at 5320 Legacy Drive, Plano, Texas 75024. The Company would publicly announce a determination to hold an in-person Annual Meeting in a press release available at www.reatapharma.com as soon as practicable before the meeting.

We look forward to speaking with you at the Annual Meeting.

Sincerely,

J. Warren Huff

Chief Executive Officer

April 30, 201829, 2020

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 13, 201810, 2020

Our notice of annual meeting, proxy statement, form of proxy card or voting instruction form and 20172019 annual report to stockholders are available on the internet at www.proxypush.com/www.proxydocs.com/RETA.

 

 

 

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TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALSSTATEMENT AND THE ANNUAL MEETING

1

 

 

PROPOSAL NO. 1 – ELECTION OF DIRECTORS

56

 

 

PROPOSAL NO. 2 – ADVISORY (NON-BINDING) RESOLUTION TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

9

PROPOSAL NO. 3 – ADVISORY (NON-BINDING) VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

10

PROPOSAL NO. 4 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

811

 

 

CORPORATE GOVERNANCE

913

 

 

BOARD OF DIRECTORS AND COMMITTEES

1115

 

 

EXECUTIVE OFFICERS

1519

 

 

EXECUTIVE COMPENSATION

1621

 

 

DIRECTOR COMPENSATION

2147

 

 

CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

2349

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

2551

 

 

DELINQUENT SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEREPORTS

2955

 

 

REPORT OF THE AUDIT COMMITTEE

3056

 

 

OTHER BUSINESS

3157

 

 

STOCKHOLDER PROPOSALS

3258

 

 

DELIVERY OF PROXY MATERIALS

3359

 

 

 

iiiii


 

2801 Gateway Drive, Suite 150
Irving, Texas 75063

PROXY STATEMENT FOR
2018

2020 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 13, 2018
10, 2020

at 8:00 a.m. Central Daylight Time

via Live Webcast by Accessing

www.proxydocs.com/RETA  

QUESTIONSQuestions AND ANSWERS ABOUT THE PROXY STATEMENT AND THE ANNUAL MEETING

1. What are proxy materials?

The proxy materials are furnished in connection with the solicitation of proxies by the Board of Directors, or our Board, of Reata Pharmaceuticals, Inc., or Reata, the Company, we or us, for use at the Company’s 20182020 Annual Meeting of Stockholders, or Annual Meeting, to be held via live webcast on June 13, 2018,10, 2020, at 8:00 a.m. Central Daylight Time by accessing www.proxydocs.com/RETA, pre-registering prior to the registration deadline on Monday, June 8, 2020 at our principal place of business located at 2801 Gateway Drive, Suite 150, Irving, Texas 75063.5:00 p.m. Eastern Daylight Time, and following the instructions you subsequently receive via e-mail.  The proxy materials include the notice of annual meeting of stockholders, this proxy statement for the Annual Meeting, a 20172019 annual report to stockholders and the proxy card or, for shares held in street name (held for your account by a broker or other nominee), a voting instruction form, for the Annual Meeting.  As a stockholder, you are invited to attend the Annual Meeting and are requested to vote on the items of business described in this proxy statement.  This proxy statement includes information that we are required to provide to you under Securities and Exchange Commission, or SEC, rules and is designed to assist you in voting your shares.

Pursuant to the “notice and access” rules adopted by the SEC, we have elected to provide access to our proxy materials to our stockholders via the Internet.  Accordingly, on or about April 30, 2018,29, 2020, we began mailing a Notice of Internet Availability to stockholders entitled to vote at the Annual Meeting containing instructions on how to access the proxy materials and how to vote online.  Please follow the instructions on the Notice of Internet Availability for requesting paper or e-mail copies of our proxy materials.  In addition, stockholders of record may request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis for future stockholder meetings.  We believe electronic delivery will expedite the receipt of the materials and will help lower the costs of our proxy materials.  Please note that, while our proxy materials are available at the website referenced in the Notice of Internet Availability and on our website, no other information contained on either website is incorporated by reference into or considered to be a part of this document.

2. Who is entitled to vote at the Annual Meeting?

Only holders of record of our Class A common stock and Class B common stock, or our common stock, at the close of business on April 19, 2018,16, 2020, or the Record Date, are entitled to notice of and to vote at the Annual Meeting.  Each share of Class A common stock is entitled to one vote on all matters to be voted upon at the Annual Meeting, and each share of Class B Commoncommon stock is entitled to three votes on all matters to be voted upon at the Annual Meeting.  On the Record Date, 19,991,08228,166,712 shares of Class A common stock were issued and outstanding (constituting 19,991,08228,166,712 votes), and 6,171,5175,070,211 shares of Class B common stock were issued and outstanding (constituting 18,514,55115,210,633 votes).  Holders of shares of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders at the Annual Meeting.  Holders of common stock do not have the right to cumulative voting in the election of directors.  Shares of common stock that are present virtually during the Annual Meeting constitute shares of common stock represented “in person.”


The presence, in person or by proxy, of the holders of a majority of the voting power of outstanding shares of Class A common stock and Class B common stock on the Record Date (constituting 19,252,81721,688,673 votes) will constitute a quorum for the transaction of business at the Annual Meeting and any postponement or adjournment thereof, though the Board may fix a new record date for purposes of a postponed or adjourned meeting.  Abstentions and broker non-votes, each discussed below, will be counted for the purpose of determining the presence or absence of a quorum.

You are a stockholder of record if your shares of our common stock are registered directly in your own name with our transfer agent, American Stock Transfer & Trust Company, LLC, or AST.  You are a beneficial owner of shares of our common stock if a brokerage firm, bank or other agent, called a “nominee,” holds your stock.  This is often called ownership in “street name” because your name does not appear in the records of AST.  If you are a stockholder of record, you have the right to grant your proxy directly to the individuals listed on the proxy card or to vote in person at the Annual Meeting.  If you hold any shares in street name, you have the right to direct your nominee how to vote your shares.  Beneficial owners are also invited to attend the Annual Meeting.  If you hold any shares of common stock in street name, you should receive a voting instruction form from your nominee.

3. How do you vote your shares?

If you are a stockholder of record, there are four ways to vote:

In Person.Virtually During the Meeting.  You may vote in person atonline during the virtual meeting through www.proxydocs.com/RETA. To be admitted to the Annual Meeting. WeMeeting and vote your shares, you must register by 5:00 p.m. Eastern Daylight Time on June 8, 2020 (the “Registration Deadline”) and provide the control number located on the Notice of Internet Availability or proxy card. After completing your registration by the Registration Deadline, further instructions, including a unique link to access the Annual Meeting, will give you a ballot when you arrive.be emailed to you.

Via the Internet.  You may vote by proxy via the internetInternet at www.proxypush.com/RETA until 11:59 p.m. Eastern Time the day before the Annual Meeting by following the instructions provided on the Notice of Internet Availability or proxy card.  You must have the control number that is on the Notice of Internet Availability or proxy card when voting.

By Telephone.  If you live in the United States or Canada, you may vote by proxy via the telephone by calling 1-866-250-6195 until 11:59 p.m. Eastern Time the day before the Annual Meeting.1-866-250-6195.  You must have the control number that is on the Notice of Internet Availability or proxy card when voting.

By Mail.  You may vote by completing, dating and signing the proxy card and returning it in the postage-prepaid envelope provided.

If you are a beneficial owner of shares held in street name, there are four ways to provide voting instructions:

In Person.Virtually During the Meeting.  If you wishYou should follow the instructions provided by your nominee in order to vote in personduring the virtual meeting atwww.proxydocs.com/RETA. To be admitted to the Annual Meeting and vote your shares, you must obtain a legal proxy from your nominee giving you the nominee that holdslegal right to vote the shares. You must also register by the Registration Deadline and provide the control number located on the Notice of Internet Availability or the voting instruction form. After completing your shares. Please contact that nominee forregistration by the Registration Deadline, further instructions, regarding obtainingincluding a legal proxy.unique link to access the Annual Meeting, will be emailed to you.

Via the Internet.  You may provide voting instructions via the internetInternet by following the instructions provided on the Notice of Internet Availability or your voting instruction form.

By Telephone.If it is allowed by your nominee, you may provide voting instructions via the telephone by calling the toll freetoll-free number found on the Notice of Internet Availability or your voting instruction form.

By Mail.You may provide voting instructions by filling out the voting instruction form and returning it in the postage-prepaid envelope provided.


4. What if you receive more than one proxy card or voting instruction form?

This means that you may have more than one account at AST, with a nominee or both.  Please vote all proxy cards and voting instruction forms that you receive so that all the shares that you own will be represented at the Annual Meeting.


5. How may you revoke your proxy or voting instructions?

If you are a stockholder of record, you may revoke or amend your proxy at any time before it is voted at the Annual Meeting by writing to us directly “revoking” your earlier proxy, submitting a new proxy with a later date by mail, by telephone or via the internet or by attending the Annual Meeting and voting in person.  Your last dated proxy timely received prior to the Annual Meeting, or vote cast at the Annual Meeting, will be counted.  If you hold your shares in street name, you must follow the instructions on your voting instruction form to revoke or amend any prior voting instructions.

6. What is discretionary authority?

If you are a stockholder of record and you properly submit your proxy without making any specific selections, your shares will be voted on each matter before the Annual Meeting in the manner recommended by the Board.  If other matters not included in this proxy statement properly come before the Annual Meeting, the persons named on the proxy card, or otherwise designated, will have the authority to vote on those matters for you in their discretion.  At this time, we are not aware of any matters that will come before the Annual Meeting other than those disclosed in this proxy statement.  If you are a beneficial owner of shares held in street name, please see the discussion below regarding broker non-votes and the rules related to voting by nominees.

7. What are abstentions, “withhold” votes and “broker non-votes”?

If you are a stockholder of record and you vote “abstain” on any matter,the resolution to approve the compensation of our named executive officers or the ratification of the appointment of the independent registered public accounting firm, your shares will not be voted on that matter andbut will not be counted as present in person or by proxy and entitled to vote.  Abstentions have the same effect as a vote “against” the resolution to approve the compensation of our named executive officers and the ratification of the appointment of the independent registered public accounting firm.  If you are a stockholder of record and you “abstain” from voting on the frequency of future advisory votes castto approve the compensation of our named executive officers, your shares will be counted as present in person or by proxy and entitled to vote, but will have no effect on the final tallyoutcome, because the frequency period that receives the most votes (every one, two or three years) will be deemed to be the recommendation of votes on that matter.the stockholders.  If you are a stockholder of record and you vote “withhold” in the election of a director, your shares will not be counted as votes castpresent in person or by proxy and entitled to vote, but will have no effect on the outcome, because the director nominees who receive the highest number of “for” votes are elected.  In bothall cases, if you are a stockholder of record, your shares will be counted for purposes of determining whether a quorum is present.  If you are a beneficial owner holding shares through a nominee, you may instruct your nominee that you wish to abstain from voting on a proposal or withhold authority to vote for one or more nominees for director, and your vote will have the same effect as described above.

If you are a beneficial owner holding shares through a nominee and you fail to instruct the nominee how your shares should be voted on a particular matter, then your broker nominee may submit a vote on your behalf on “routine” matters.  A broker nominee generally may not vote on “non-routine” matters without receiving your specific voting instructions.  This is called a “broker non-vote.” Like abstentions and “withhold” votes, brokerBroker non-votes are counted as present and entitled to vote for quorum purposes, but are not counted as votes cast.considered entitled to vote and have no effect on the outcome of any vote.  At the Annual Meeting, your broker nominee will not be able to submit a vote on any matter other than the electionratification of directors,the appointment of the independent registered public accounting firm, unless it receives your specific instructions.  If your nominee does not receive your specific instructions for the election of directors proposal, the resolution to approve the compensation of our named officers or the advisory vote on the frequency of future advisory votes to approve the compensation of our named executive officers, it will submit a broker non-vote.  The broker nominee, however, will be able to vote on the ratification of the appointment of our independent registered public accounting firm even if it does not receive your instructions, so we do not expect any broker non-votes will exist in connection with this proposal.


8. What proposals will be voted on at the Annual Meeting, and what votes are required to approve each of the proposals?

The required vote for each of the proposals expected to be acted upon at the Annual Meeting and the treatment of abstentions and broker non-votes under each proposal are described below:

Proposal No. 1 —Election— Election of directors.Directors are elected by a plurality of the votes cast,voting power of the outstanding shares of the Company that are present in person or represented by proxy and entitled to vote on the election of directors, with the nominees obtaining the most votes being elected.  Because there is no minimum vote required, abstentions and broker non-votes will have no effect on the outcome.

Proposal No. 2 — RatificationAdvisory (non-binding) vote on a resolution to approve the compensation of appointmentour named executive officers.  Because this proposal asks for a non-binding, advisory vote, there is no “required vote” that would constitute approval of independent registered public accounting firm. Thisthe compensation of our named executive officers.  We value the opinions expressed by our stockholders with respect to this advisory vote, and our compensation committee, which is responsible for overseeing and administering our compensation programs, will consider the outcome of the vote, including whether the votes cast “for” this proposal must be approved by arepresent the affirmative vote of the majority of votes castthe voting power of the shares present in person or represented by proxy at the annual meeting and entitled to vote when designing our compensation programs and making future compensation decisions for our named executive officers.  We will consider this advisory proposal approved if it receives the affirmative vote of the majority of the voting power of the shares present in person or represented by proxy at the annual meeting and entitled to vote on the proposal.  As a result, abstentions will have the same effect as a vote “against” the proposal.  Broker non-votes will have no effect on the vote outcome.

Proposal No. 3 — Advisory (non-binding) vote on the frequency of future advisory votes to approve the compensation of our named executive officers.  This advisory vote provides a choice among three frequency periods for future advisory votes to approve the compensation of our named executive officers.  The frequency period receiving a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter will be the recommendation of the stockholders.  Thus, the frequency period that receives the most votes (every one, two or three years) will be deemed to be the recommendation of the stockholders.  Because there is no minimum vote required, abstentions and broker non-votes will have no effect on the vote outcome.


Proposal No. 4 — Ratification of appointment of independent registered public accounting firm.  This proposal must be approved by the affirmative vote of the majority of the voting power of the shares present in person or represented by proxy at the annual meeting and entitled to vote.  As a result, abstentions will have the same effect as a vote “against” the proposal.  Broker non-votes will not be considered entitled to vote on this proposal and will therefore have no effect on the vote outcome.  As discussed above, we do not expect any broker non-votes with respect to this proposal.

9. How does the Board recommend you vote on the proposals?

“FOR” the election of each director nominee.

“FOR” a resolution to approve the compensation of our named executive officers.

To hold future advisory votes to approve the compensation of our named executive officers EVERY YEAR.

“FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2018.2020.

10. What do you need to do to attend the Annual Meeting?

The 2020 Annual Meeting will be a completely virtual meeting.  There will be no physical meeting location, unless we later announce an in-person meeting via press release as described in the question below.  The meeting will only be conducted via live webcast.   We have adopted a virtual format this year for our Annual Meeting in person?light


of the public health impact of the coronavirus pandemic (COVID-19), the increasingly strict protocols that federal, state and local governments have imposed, and to support the health and well-being of our stockholders, employees and their families.  This virtual-meeting format uses technology designed to increase stockholder access and provide stockholders rights and opportunities to participate in the meeting similar to what they would have at an in-person meeting.

ToIn order to attend, you must register in advance atwww.proxydocs.com/RETA prior to the Registration Deadline of June 8, 2020 at 5:00 pm Eastern Daylight Time.  As part of the registration process, you must enter the control number located in your Notice of Internet Availability, proxy card or voting instruction form.  Upon completing your registration, you will receive further instructions via email, including your unique links that will allow you access to the Annual Meeting please bringand will also permit you to submit questions.  Please be sure to follow the following documents:instructions found on your Notice of Internet Availability, proxy card or voting instruction form and subsequent instructions that will be delivered to you via email.

(a)

Valid government photo identification such as a driver’s license or passport; and

(b)

Beneficial stockholders holding their shares through a nominee will need to bring proof of ownership as of April 19, 2018, the Record Date, such as their most recent account statement reflecting their stock ownership prior to the Record Date, a voting instruction card or legal proxy provided by their nominee, or similar evidence of ownership.

11. Could emerging developments regarding the coronavirus affect our decision to hold a virtual Annual Meeting?

We intend to hold the Annual Meeting virtually. However, in the event it is possible or advisable to hold the Annual Meeting in person, we may hold the meeting in person at our offices located at 5320 Legacy Drive, Plano, Texas 75024. The Company would publicly announce a determination to hold an in-person Annual Meeting in a press release available at www.reatapharma.com as soon as practicable before the meeting.

12. You share an address with another stockholder.  Why did you receive only one copy of the proxy materials, and how may you obtain an additional copy of the proxy materials?

The SEC has adopted rules that permit companies and intermediaries, such as brokers, to satisfy the delivery requirements for the proxy materials with respect to two or more stockholders sharing the same address by delivering a single set of the proxy materials addressed to those stockholders.  This process, which is commonly referred to as “householding,” is intended to provide extra convenience for stockholders and cost savings to the companies.

A number of brokers with account holders who are stockholders may be “householding” our proxy materials.  A single set of proxy materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders.  If you have received notice from your broker that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise, until you revoke your consent.  If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate set of materials, please notify your broker or the Company at 2801 Gateway5320 Legacy Drive, Suite 150, Irving,Plano, Texas 7506375024 or (469) 442-4772, in each case Attention: Secretary, and the Company will promptly deliver such additional materials to you.  Stockholders who have multiple accounts in their names or who share an address with other stockholders can request “householding” and authorize your broker to discontinue mailings of multiple annual reports and proxy statements by contacting your broker or the Company at 2801 Gateway5320 Legacy Drive, Suite 150, Irving,Plano, Texas 7506375024 or (469) 442-4772, in each case Attention: Secretary.

12.13. How will the results of voting be announced?

We expect to announce the preliminary voting results at the Annual Meeting.  The final voting results will be tallied by the inspector of elections and published in a Current Report on Form 8-K, which we are required to file with the SEC within four business days after the Annual Meeting.

13.14. Who pays the costs of solicitation?

The Company will pay all of the costs of soliciting proxies.  We will provide copies of our proxy materials to brokerage firms, fiduciaries and custodians for forwarding to beneficial owners who request printed copies of these materials and will reimburse these persons for their costs of forwarding these materials.  We have engaged D. F. King to assist us in soliciting proxies for a fee of $12,500.  Our directors, officers and employees may also solicit proxies by telephone, facsimile or personal solicitation; however, we will not pay these individuals additional compensation for any of these services.

Explanatory Note

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we are an emerging growth company, we will not be required to include a Compensation Discussion and Analysis section in this proxy statement and have elected to comply with the scaled-down executive compensation disclosure requirements applicable to emerging growth companies.


PROPOSAL NO. 1 – ELECTION OF DIRECTORS

Background

The amended and restated certificate of incorporation of the Company provides that the Board is to be divided into three classes as nearly equal in number as reasonably possible, with directors in each class generally serving three-year terms.  The total Board size is currently fixed at seven directors.  Currently, the Class I directors (whose terms expire at the 2019 annual meeting of stockholders) are J. Warren Huff and Jack B. Nielsen. The Class II directors (whose terms expire at the 2020 annual meeting)Annual Meeting) are James E. Bass and R. Kent McGaughy, Jr.  The Class III directors (whose terms expire at the Annual Meeting)2021 annual meeting) are William D. McClellan, Jr. and William E. Rose.  The Class I directors (whose terms expire at the 2022 annual meeting) are J. Warren Huff and Jack B. Nielsen.  The Board currently anticipates filling the remaining vacant board position in the future.  Accordingly, proxies cannot be voted for a greater number of persons than the number of nominees named for Class II directors at the Annual Meeting.  The Class IIIII directors elected at the Annual Meeting will hold office until the 20212023 annual meeting of stockholders and until their successors are elected and qualified, unless they resign or their seats become vacant due to removal or death.

As described below, the Board has nominated Mr. William D. McClellan,James E. Bass and R. Kent McGaughy, Jr. and Mr. William E. Rose for election as Class IIIII directors at the Annual Meeting.  Mr. McClellan, Jr.Bass and Mr. RoseMcGaughy have indicated their willingness to serve if elected.  You may not vote by proxy or in person for a greater number of persons than the two director nominees.

Nomination of Directors

The nominating and corporate governance committee of our Board reviews and recommends to the Board potential nominees for election to the Board.  In reviewing potential nominees, the nominating and corporate governance committee considers the qualifications of each potential nominee in light of the Board’s existing and desired mix of experience and expertise.  Specifically, the nominating and corporate governance committee considers each potential nominee’s personal and professional ethics, integrity and values, and commitment to the representation of the long-term interests of the stockholders.  The Board membership criteria are set forth in our corporate governance guidelines, a copy of which is available under “Investors & News>Corporate Governance>> Documents & Charters” on our website at www.reatapharma.com.  After reviewing the qualifications of potential Board candidates, the nominating and corporate governance committee presents its recommendations to the Board, which selects the final director nominees.  Upon the recommendation of the nominating and corporate governance committee, the Board nominated Mr. McClellan, Jr.Bass and Mr. RoseMcGaughy for election as Class IIIII directors.Mr. McClellan, Jr. was appointed to the Board on March 1, 2017, based upon the recommendation of non-management members of the Board.  The Company did not pay any fees to any third parties to identify or assist in identifying or evaluating nominees for the Annual Meeting.

The nominating and corporate governance committee considers stockholder nominees using the same criteria set forth above.  Stockholders who wish to present a potential nominee to the nominating and corporate governance committee for consideration for election at a future annual meeting of stockholders must provide the nominating and corporate governance committee with notice of the recommendation and certain information regarding the candidate as described in our second amended and restated bylaws and within the time periods set forth on page 33 under the caption “Stockholder Proposals.”

Pursuant to our corporate governance guidelines, the Company endeavors to have a Board representing diverse experience at policy-making levels with a complimentarycomplementary mix of skills and professional experience in areas relevant to the Company’s activities.  The nominating and corporate governance committee will also consider such factors as diversity, including differences in viewpoints, background, education, gender, race or ethnicity, age and other individual qualifications and attributes.  As set forth in our corporate governance guidelines, the Company is committed to considering candidates for the Board regardless of gender, race, ethnicity and national origin.  Any search firm retained to assist the nominating and corporate governance committee in seeking candidates for the Board will affirmatively be instructed to seek to present women and minority candidates.


Nominees and Incumbent Directors

The nominating and corporate governance committee has recommended, and the Board has nominated, Mr. McClellan, Jr.Bass and Mr. RoseMcGaughy to be elected as Class IIIII directors at the Annual Meeting.  The following table sets forth the following information for Mr. McClellan, Jr.Bass and Mr. RoseMcGaughy and the Company’s continuing directors: their respective ages as of the Record Date, the positions currently held with the Company, the year each was first elected or appointed a director of the Company, the year their current term will expire and their current class.

Nominee/Director Name

Age

Position

Director Since

Year Current

Term Expires

Current

Director Class

Nominees for Class III Directors:

William D. McClellan, Jr.*

William E. Rose

58

50

Director

Director

2017

2016

2018

2018

III

III

Continuing Directors:

J. Warren Huff

Jack B. Nielsen

James E. Bass

R. Kent McGaughy, Jr.

64

54

59

46

Chief Executive Officer,

President and Chairman of

the Board

Director

Director

Director

2002

2006

2004

2004

2019

2019

2020

2020

I

I

II

II

Nominee/Director Name

 

Age

 

Position

 

Director Since

 

Year Current

Term Expires

 

Current

Director Class

Nominees for Class II Directors:

 

 

 

 

 

 

 

 

 

 

James E. Bass

 

61

 

Director

 

2004

 

2020

 

II

R. Kent McGaughy, Jr.

 

48

 

Director

 

2004

 

2020

 

II

Continuing Directors:

 

 

 

 

 

 

 

 

 

 

William D. McClellan, Jr.

 

60

 

Director

 

2017

 

2021

 

III

William E. Rose

 

52

 

Director

 

2016

 

2021

 

III

J. Warren Huff

 

66

 

Chief Executive Officer,

President and Chairman of

the Board

 

2002

 

2022

 

I

Jack B. Nielsen

 

56

 

Director

 

2006

 

2022

 

I

*

Mr. McClellan, Jr. was appointed to the Board on March 1, 2017.

Class IIIII Directors Nominated for Election

The following two people have been nominated by the Board to be elected as Class IIIII directors at the 20182020 Annual Meeting.

James E. Bass has served as a member of the Board since July 2004.  For the past five years, Mr. Bass has been managing family assets and investments as his primary business activity.  Mr. Bass is a member of the board of Snowbird Holdings, LLC and Trinity Summits, LLC.  Mr. Bass graduated with a B.A. from Yale University and obtained his J.D. from Stanford University.  Our Board believes that Mr. Bass is qualified to serve on our Board due to his extensive experience investing and extensive service on the boards of directors and boards of managers of other enterprises.

R. Kent McGaughy, Jr. has served as a member of the Board since December 2004.  Mr. McGaughy has been a partner of CPMG, Inc. since 2006.  Prior to joining CPMG’s predecessor, Cardinal Investment Company, Inc., in 1997, he worked at Simmons & Company International.  He currently serves on the boards of Apollo Endosurgery, Inc., a publicly traded company, and several private companies.  Mr. McGaughy received his B.A. from The University of Texas (summa cum laude and member of Phi Beta Kappa) and his M.B.A. from the Harvard Business School.  Our Board believes that Mr. McGaughy is qualified to serve on our Board due to his extensive experience investing and extensive service on the boards of directors of other companies.

Class III Directors Continuing in Office Until 2021

William D. McClellan, Jr. has served as a member of the Board since March 2017.  Mr. McClellan Jr. has served as the Chief Financial Officer of Aerin Medical Inc. since January 2018.  Mr. McClellan Jr. is a financial management consultant to healthcare and life sciences companies, serving as the managing member of Goodwater Consulting, LLC since March 2017.  From June 2004 until June 2016, Mr. McClellan Jr. was the Chief Financial Officer and Executive Vice President, Finance at On-X Life Technologies Holdings, Inc.  Prior to June 2004, Mr. McClellan Jr. held financial and accounting positions at various healthcare and other companies and was a certified public accountant serving as an auditor with PricewaterhouseCoopers for nine years.  He currently serves on the board of directors of Apollo Endosurgery, Inc., a publicly-tradedpublicly traded company, and chairs its audit committee.  Mr. McClellan Jr. received a B.B.A. in accounting from Abilene Christian University and is a certified public accountant.  Our Board believes that Mr. McClellan Jr. is qualified to serve on our Board due to his extensive experience in finance and accounting roles in the healthcare and life sciences industry and in serving as a certified public accountant at a large public accounting firm.


William E. Rose has served as a member of the Board since February 2016.  Mr. Rose is the President of Montrose Capital, Inc.  Prior to Montrose, Mr. Rose was associated with HBK Capital Management from 1991 until 2012, serving in various capacities, including Co-Chief Investment Officer.  He currently serves as the Chairman ofon the Board of Trustees for Greenhill School and is also a member of the Investment Committee for the Dallas Museum of Art.  Mr. Rose received a B.A. in Political Science from Duke University in 1989.  Our Board believes that Mr. Rose is qualified to serve on our Board due to his extensive experience investing, his experience with venture capital investments and his board service for other enterprises.


Class I Directors Continuing in Office Until 20192022

J. Warren Huff is the Chairman, Chief Executive Officer and President of Reata.  He has served as our sole CEO, President and as Chairman of the Board since our founding in 2002.  Prior to founding Reata, Mr. Huff served as CEO in a number of biotechbiotechnology and information technology start-up enterprises.  Mr. Huff started his career as an attorney with Johnson & Gibbs, P.C., where he was a partner and Chairman of the Corporate Securities Practice.  Mr. Huff received a B.B.A. magna(magna cum laudelaude) from the University of Texas at Austin and a J.D. from Southern Methodist University.  Our Board believes that Mr. Huff is qualified to serve on our Board due to his extensive experience investing and working in the pharmaceuticals industry.

Jack B. Nielsenhas served as a member of the Board since June 2006.  Mr. Nielsen is a partner inManaging Director of Vivo Capital, LLC, a healthcare focused investment firm.  Prior to March 1, 2017, Mr. Nielsen worked within the Novo A/S organization and its venture activities since 2001 in several roles, most recently being employed as a Senior Partner based in Copenhagen, Denmark.  From 2006 to 2012, Mr. Nielsen was employed as a Partner at Novo Ventures (US) Inc. in San Francisco, where he established the office which provides certain consultancy services to Novo A/S.  Mr. Nielsen, in the past, has served on the board of directors of Akebia Therapeutics, Inc., Crinetics Pharmaceuticals, Inc., Merus, N.V. and Apollo Endosurgery, Inc., each of which is a publicly-tradedpublicly traded company.  He is also currently a member of the board of directors of a number of private companies.  Mr. Nielsen received a M.Sc. in Chemical Engineering from the Technical University of Denmark and a Masters in Management of Technology from Center for Technology, Economics and Management, Technical University of Denmark.  Our Board believes that Mr. Nielsen is qualified to serve on our Board due to his extensive industry experience, his experience with venture capital investments and his board service for several companies in the biotechnology sector.

Class II Directors Continuing in Office Until 2020

James E. Bass has served as a member of the Board since July 2004. For the past five years, Mr. Bass has been managing family assets and investments as his primary business activity. Mr. Bass is a member of the board of Snowbird Holdings, LLC and Trinity Summits, LLC. He previously served as an executive director of FB Gemini Limited, an Asian regional investment bank based in Hong Kong, prior to which he was an associate attorney and later a partner at Gibson, Dunn & Crutcher LLP. Mr. Bass graduated with a B.A. from Yale University and obtained his J.D. from Stanford University. Our Board believes that Mr. Bass is qualified to serve on our Board due to his extensive experience investing and extensive service on the boards of directors and boards of managers of other enterprises.

R. Kent McGaughy, Jr. has served as a member of the Board since December 2004. Mr. McGaughy, Jr. has been a partner in CPMG, Inc. since 2006. Prior to joining CPMG’s predecessor, Cardinal Investment Company, Inc., in 1997, he worked in mergers and acquisitions at Simmons & Company International. He currently serves on the boards of Apollo Endosurgery, Inc., a publicly-traded company, and several private companies. Mr. McGaughy, Jr. received his B.A. from The University of Texas (summa cum laude and member of Phi Beta Kappa) and his M.B.A. from Harvard Business School. Our Board believes that Mr. McGaughy, Jr. is qualified to serve on our Board due to his extensive experience investing and extensive service on the boards of directors of other companies.

Vote Required

The nominees who receive the greatest number of affirmative votes will be elected as Class IIIII directors.  Any shares that are not voted, whether by abstention,Abstentions and broker non-votes or otherwise, will not affect the election of directors.

Holders of proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is given, then FOR the election of the nominees named in this proxy statement.

THE BOARD RECOMMENDS A VOTE “FOR” THE TWO DIRECTOR NOMINEES IDENTIFIED ABOVE.


PROPOSAL NONO. 2 – ADVISORY (NON-BINDING) vote on a RESOLUTION TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Background

Our Board is committed to excellence in governance.  As part of this commitment, and as required by Rule 14a-21 of the Securities Exchange Act of 1934, or the Exchange Act, our Board is providing our stockholders with an opportunity to cast an advisory (non-binding) vote on a resolution to approve the compensation of our named executive officers.

As described below under “Executive Compensation – Compensation Discussion and Analysis,” we have developed a compensation program that is designed to attract, retain and motivate key executives responsible for our success, to provide incentives that reward achievement of performance goals that directly correlate to the enhancement of stockholder value and to align our executives’ interests with those of our stockholders by rewarding short-term and long-term performance and tying a significant portion of our executive officers’ compensation to increases in stockholder value.  We believe our executive compensation program strikes an appropriate balance between the implementation of responsible, measured compensation practices and the effective provision of incentives for our named executive officers to exert their best efforts for our success.

We are asking for stockholder approval, on an advisory basis, of the compensation of our named executive officers as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K, which includes the disclosures in the “Executive Compensation – Compensation Discussion and Analysis” section below, the compensation tables, the narrative discussion and any related material disclosed in this proxy statement.  This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the policies and practices described in this proxy statement.  For the reasons discussed above, our Board unanimously recommends that our stockholders vote in favor of the following resolution:

“RESOLVED, that the Company’s stockholders hereby approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s proxy statement for the 2020 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables, narrative discussion and any related material disclosed in the proxy statement.”

As this vote is advisory, it will not be binding on our Board or our compensation committee, and neither our Board nor our compensation committee will be required to take any action as a result of the outcome of the vote.  However, our compensation committee will carefully consider the outcome of this vote when considering future executive compensation policies and decisions.

Vote Required

Approval of the resolution to approve the compensation of our named executive officers requires the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the annual meeting and entitled to vote.  As a result, abstentions will have the same effect as a vote “against” this proposal and broker non-votes will have no effect on the vote outcome.

Holders of proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is given, then FOR the approval of the resolution to approve the compensation of our named executive officers.

THE BOARD RECOMMENDS A VOTE “FOR” PROPOSAL NO. 2.


PROPOSAL NO. 3 – advisory (NON-BINDING) vote on the frequency of future advisory votes to approve THE Compensation OF OUR NAMED EXECUTIVE OFFICERS

Background

We are required by Rule 14a-21 of the Exchange Act to provide stockholders with a separate advisory (non-binding) vote for the purpose of asking stockholders to express their preference for the frequency of future advisory votes to approve the compensation of our named executive officers.  Stockholders may indicate whether they would prefer an advisory vote to approve the compensation of our named executive officers every one, two or three years (or abstain from voting).  2We are required to solicit stockholder votes on the frequency of future advisory votes to approve the compensation of our named executive officers at least once every six years, although we may seek stockholder input more frequently.

The frequency period that receives the most votes (every one, two or three years) will be deemed to be the recommendation of the stockholders.  However, because this vote is advisory and not binding on the Board or the compensation committee, the Board may decide that it is in the best interest of our stockholders and the Company to hold an advisory vote to approve the compensation of our named executive officers more or less frequently than the option selected by a plurality of our stockholders.  The Board will, however, carefully consider the outcome of this vote when considering the frequency of future advisory votes to approve the compensation of our named executive officers.

The Board believes there is a reasonable basis for holding the advisory vote to approve the compensation of our named executive officers every year, every two years or every three years; less frequent votes encourage a more long-term analysis of the Company’s executive compensation programs and would avoid the burden that annual votes would impose on stockholders required to evaluate the executive compensation program each year, but more frequent votes provide stockholders with the opportunity to react to emerging trends in compensation and give the Board and the compensation committee the opportunity to evaluate the compensation program each year in light of timely input from stockholders.  The Board believes it is best practice to hold the advisory vote to approve the compensation of our named executive officers every year.

Therefore, the Board recommends that the stockholders vote to hold the advisory vote to approve the compensation of our named executive officers every year.  Stockholders are not voting, however, to approve or disapprove of this particular recommendation.  The proxy card provides four choices, and stockholders are entitled to vote on whether the advisory vote to approve the compensation of our named executive officers shall be held every one, two or three years or to abstain from voting.

Vote Required

The frequency period that receives the most votes (every one, two or three years) will be deemed to be the recommendation of the stockholders.  You may also abstain from voting.  Abstentions and broker non-votes will have no effect on the vote outcome.

Holders of proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is given, then the holders of the proxies will vote for a frequency period of every year.

THE BOARD RECOMMENDS A VOTE TO HOLD FUTURE ADVISORY VOTES TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS EVERY YEAR.


PROPOSAL NO. 4 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Background

Our audit committee has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018,2020 and has further directedrecommended to the Board that we submit the selection of Ernst & Young LLP for ratification by our stockholders at the Annual Meeting.

We are not required to submit the appointment of our independent registered public accounting firm for stockholder approval, but we are submitting the appointment of Ernst & Young LLP for stockholder ratification as a matter of good corporate governance.  If the stockholders do not ratify this appointment, the audit committee will reconsider its appointment of Ernst & Young LLP.  Even if the appointment is ratified, our audit committee may direct the appointment of a different independent registered public accounting firm at any time during the year if the audit committee determines that the change would be in the best interests of the Company.

The audit committee reviews and pre-approves all audit and non-audit services performed by its independent registered public accounting firm.firm, except to the extent the chairman of the audit committee exercises his delegated authority to pre-approve audit and non-audit services.  The audit committee approved all services rendered by Ernst & Young LLP in the fiscal year ended December 31, 2017,2019, in accordance with these policies.

In its review of non-audit services, the audit committee considers, among other things, the possible impact of the performance of such services on the independent registered public accounting firm’s independence.  The audit committee has determined that the non-audit services performed by Ernst & Young LLP in the fiscal year ended December 31, 2017,2019, were compatible with maintaining the independent registered public accounting firm’s independence.  Additional information concerning the audit committee and its activities can be found in the following sections of this proxy statement: “Board of Directors and Committees” and “Report of the Audit Committee.”

Ernst & Young LLP has audited our financial statements since 2002.  Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate stockholder questions.

Fees for Independent Registered Public Accounting Firm

The following is a summary of the aggregate fees billed to the Company for the audit and other services rendered by Ernst & Young LLP, our independent registered public accounting firm, for the fiscal years ended December 31, 20172019 and 2016.2018.

 

 

2017

 

 

2016

 

2019

 

 

2018

 

Audit fees(1)

 

$

533,534

 

 

$

655,485

 

$

758,447

 

 

$

507,359

 

Audit-related fees

 

 

 

 

 

 

 

 

 

 

 

Tax fees(2)

 

 

15,119

 

 

 

36,835

 

 

53,800

 

 

 

43,156

 

All other fees(3)

 

 

1,997

 

 

 

 

 

2,165

 

 

 

2,154

 

Total

 

$

550,650

 

 

$

692,320

 

$

814,412

 

 

$

552,669

 

 

(1)

Audit fees consist of the aggregate fees billed for professional services rendered for the audit of our annual consolidated financial statements, the audit of our internal controls for 2019, the review of our interim consolidated financial statements and assistance with registration statements filed with the SEC, including the issuance of comfort letters and consents.  Included in the 20172019 and 20162018 audit fees are $130,000$125,000 and $304,200$130,000 of fees billed, respectively, in connection with a follow-on public offering that closed in August 2017November 2019 and with our initiala follow-on public offering that closed in June 2016 and a second public offering filing that was subsequently withdrawn in December 2016.July 2018.

(2)

Tax fees principally include fees for tax consulting and compliance.

(3)

All other fees consist of fees for access to Ernst & Young LLP’s online research database.


Vote Required

Ratification of the appointment of the independent registered public accounting firm requires the affirmative vote of a majority of the votes cast. Becausevoting power of the shares present in person or represented by proxy at the annual meeting and entitled to vote. As a result, abstentions will have the same effect as a vote “against” this proposal and broker non-votes are not counted as votes for or against this proposal, they will have no effect on the outcome of the vote.vote outcome.

Holders of proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is given, then FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm.firm for the year ending December 31, 2020.

THE BOARD RECOMMENDS A VOTE “FOR” PROPOSAL NO. 2.4.


CORPORATE GOVERNANCE

Director Independence

Our Board currently consists of six members.  Under the listing requirements and rules of The NASDAQ Stock Market, or NASDAQ,Nasdaq, independent directors must comprise a majority of our Board as a listed company.  Our Board has determined that Mr.Messrs. Bass, Mr. McClellan, Jr., Mr. McGaughy, Jr., Mr. Nielsen and Mr. Rose qualify as “independent” directors in accordance with NASDAQNasdaq listing requirements and rules.  Mr. Huff is not considered independent because he is an employee of Reata.  Under NASDAQNasdaq rules, the Board’s determination of a director’s independence considers objective tests, such as whether the director is, or has been within the last three years, an employee of the Company and whether the director or any of his family members has engaged in certain types of business dealings with the Company. Additionally, under NASDAQNasdaq rules, a director will qualify as an “independent director” only if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.  In making these independence determinations, our Board reviewed and discussed information provided by the directors to us with regard to each director’s business and personal activities and relationships as they may relate to us and our management.  There are no family relationships among any of our directors or executive officers.

In addition, the rules of NASDAQNasdaq require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees must be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, or the Exchange Act.  To be considered to be independent for purposes of Rule 10A-3 of the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee: (1) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries.  Our Board has determined that Mr.each of Messrs. Bass, Mr. McClellan, Jr., Mr. Nielsen and Mr. Rose, who comprise our audit committee, Mr.Messrs. Bass, Mr. McClellan, Jr., Mr. McGaughy, Jr., Mr. Nielsen and Mr. Rose, who comprise our compensation committee, and Mr.Messrs. Bass, Mr. McClellan, Jr., Mr. McGaughy Jr. and Mr. Nielsen, who comprise our nominating and corporate governance committee, satisfy the independence standards for those committees established by applicable rules and regulations of the SEC and the listing requirements of NASDAQ.Nasdaq.  In making this determination, our Board considered the current and prior relationships that each non-employee director has with us and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director and the transactions involving each non-employee director described in “Certain Relationships and Related-Party Transactions.”

Code of Business Conduct and Ethics

We have adopted a Code of Ethics and Business Conduct that applies to all of our employees, officers (including our principal executive officer, principal financial officer and principal accounting officer or controller) or persons performing similar functions and agents and representatives, including directors and consultants.  The full text of our Code of Ethics and Business Conduct is available under “Investors & News>Corporate Governance>> Documents & Charters” on our website at www.reatapharma.com.  The audit committee of our Board is responsible for overseeing the Code of Ethics and Business Conduct, and the Board must approve any waivers of the Code of Ethics and Business Conduct for any executive officers or directors.  We intend to disclose, on our website, future amendments to certain provisions of our Code of Ethics and Business Conduct or waivers of such provisions applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and our directors.


Corporate Governance Guidelines

Our Board has adopted corporate governance guidelines to assist and guide its members in the exercise of its responsibilities.  These guidelines should be interpreted in accordance with any requirements imposed by federal or state laws or regulations, NASDAQ,Nasdaq, our amended and restated certificate of incorporation and our second amended and restated bylaws.  Our corporate governance guidelines are available under “Investors & News>Corporate Governance>> Documents & Charters” on our website at www.reatapharma.com. Although these corporate governance guidelines have been approved by the Board, it is expected that these guidelines will evolve over time as customary practice and legal requirements change.  In particular, guidelines that encompass legal, regulatory or stock exchange requirements as they currently


exist will be deemed to be modified as and to the extent such legal, regulatory or stock exchange requirements are modified.  In addition, the guidelines may also be amended by the Board at any time as it deems appropriate.

Hedging Transactions

Pursuant to the Company’s Insider Trading Policy, all directors, officers and other employees of the Company, and their spouses and all other members of their household, are prohibited from making any short sales of any securities of the Company and from engaging in transactions involving Company-based derivative securities.  This prohibition includes, but is not limited to, trading in Company-based option contracts, transacting in straddles or collars, hedging (generally purchasing any financial instrument or engaging in any transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s securities) and writing puts or calls, but does not include exchange funds.  In addition, pursuant to the Company’s Insider Trading Policy, all directors, officers and other employees of the Company, and their spouses and all other members of their household, are prohibited from entering into a pledge of Company securities as collateral for a loan or holding Company securities in a margin account without advance approval.

Stockholder Communications

Generally, stockholders who have questions or concerns regarding the Company should contact Mr. Vineet Jindal, our Vice President, Corporate Communications & Strategy, at (855) 55-REATA557-3282 or “Contact Us” on our website at ir@reatapharma.comwww.reatapharma.com. However,Also, any stockholder who wishes to address questions regarding the business or affairs of the Company directly with the Board, or any individual director, should direct his or her questions by calling or by e-mail as directed under “Investors & News>Corporate Governance>Contact the Board”contacting us at “Contact Us” on our website at www.reatapharma.com.  Upon receipt of any such communications, the correspondence will be directed to the appropriate person, including individual directors.


BOARD OF DIRECTORS AND COMMITTEES

During the fiscal year ended December 31, 2017,2019, our Board met fiveseven times.  Each director other than Mr. Rose attended at least 75% of the aggregate of the total number of meetings of the Board and meetings of the committees of which he was a member in our last fiscal year.  The Board encourages all directors to attend the annual meeting of stockholders, if practicable.  All of our directors attended the Company’s 2019 annual meeting of stockholders.  The Board has a standing audit committee, compensation committee and nominating and corporate governance committee.  All members of the audit, compensation and nominating and corporate governance committees are non-employee directors whom the Board has determined are independent under the applicable independence standards.

Board Leadership Structure

Our second amended and restated bylaws and our corporate governance guidelines provide our Board with flexibility to combine or separate the positions of Chairman of ourthe Board and Chief Executive Officer and to implement a lead independent director in accordance with its determination that using one or the other structure would be in the best interests of our Company.  Mr. Huff currently serves as the Chairman of ourthe Board, and Mr. Nielsen currently serves as the lead independent director of ourthe Board.  In addition, in his role as lead independent director, Mr. Nielsen presides over the independent director sessions of the Board in which Mr. Huff, as our Chief Executive Officer, does not participate, and Mr. Nielsen serves as a liaison to management on behalf of the non-employee members of the Board.

Our Board has concluded that our current leadership structure is appropriate at this time.  The Board believes at present the combined role of Chairman of ourthe Board and Chief Executive Officer promotes united leadership and direction for the Company, which allows for a single, clear focus for management to execute the Company’s strategy and business plans. As Chief Executive Officer, Mr. Huff is best suited to ensure that critical business issues are brought before the Board, which enhances the Board’s ability to develop and implement business strategies.

Mr. Nielsen, as lead independent director, provides, in connectionconjunction with the Chairman of ourthe Board, leadership and guidance to the Board, and also:

presides at all meetings of the Board at which the Chairman of the Board is not present;

presides at all executive sessions of the independent directors and has the authority to call such executive sessions;

in consultation with the Chairman of the Board, approves the agenda for each meeting of the Board, taking into account suggestions of other directors;

serves as liaison between the Chairman of the Board and the independent directors, although all of the independent directors have complete and open access to the Chairman of ourthe Board and all members of management; and

serves as the Board’s contact for direct employee and stockholder communications with the Board.

In addition, all directors are encouraged to suggest the inclusion of agenda items and meeting materials, and any director is free to raise at any Board meeting items that are not on the agenda for that meeting.

The Board’s independent directors regularly meet in executive session without the presence of any members of management.  The lead independent director presides at these meetings and provides the Board’s guidance and feedback to the Chairman of the Board and the Company’s management team.

Our Board will periodically review our leadership structure and may make such changes in the future as it deems appropriate.  The Board believes that, at the present time, the current arrangement of having strong leadership of the Company’s Chairman of ourthe Board and Chief Executive Officer, the effective counterbalancing role of the lead independent director and a Board composed of strong and independent directors best serves the interest of the Company and its stockholders.


Risk Oversight

The Board has overall responsibility for the oversight of the Company’s risk management process, which is designed to support the achievement of organizational objectives, including strategic objectives, improve long-term organizational performance and enhance stockholder value.  Risk management includes not only understanding Company-specific risks and the steps management implements to manage those risks, but also what level of risk is acceptable and appropriate for the Company.  Management is responsible for establishing our business strategy, identifying and assessing the related risks and implementing appropriate risk management practices.  The Board periodically reviews our business strategy and management’s assessment of the related riskrisks and discusses with management the appropriate level of risk for the Company.  Each of our Board committees also oversees the management of riskrisks that fallsfall within the committee’s areas of responsibility.  In performing this function, each committee has full access to management, as well as the ability to engage advisors.  In connection with its risk management role, our audit committee meets periodically, both in open session or privately, with representatives from our independent registered public accounting firm and privatelyour internal audit firm and with our Chief Financial Officer, Chief Legal Officer and Chief Accounting Officer.  The audit committee oversees the Company’s compliance with legal and regulatory requirements.

Board Committees

Our Board has established an audit committee, a compensation committee and a nominating and corporate governance committee.  Our Board may establish other committees to facilitate the management of our business.  The composition and functions of each committee are described below.  Members serve on these committees until their resignation or until otherwise determined by our Board.

Audit Committee

Our audit committee currently consists of James E. Bass, William D. McClellan, Jr., Jack B. Nielsen and William E. Rose.  Our Board has determined that Messrs. Bass, McClellan, Jr., Nielsen and Rose are independent under NASDAQNasdaq listing standards and Rule 10A-3(b)(1) of the Exchange Act.

The chair of our audit committee is Mr. McClellan, Jr.McClellan.  Our Board has determined that Mr. McClellan Jr. is an “audit committee financial expert” within the meaning of the SEC regulations.  Our Board has also determined that each member of our audit committee can read and understand fundamental financial statements in accordance with applicable requirements.  In arriving at these determinations, the Board has examined each audit committee member’s scope of experience and the nature of their employment in the corporate finance sector.  The functions of the audit committee include:

selecting a qualified firm to serve as the independent registered public accounting firm to audit our financial statements and approving fees payable to that firm;

approving all audit and non-audit services to be performed by the independent registered public accounting firm; provided, however, the audit committee has delegated to the chair of the audit committee the authority to pre-approve any one or more individual audit or permitted non-audit services for which the estimated fees do not exceed $200,000, as well as adjustments to any pre-approved fee thresholds up to $100,000 for any individual services;

assessing the independence and performance of the independent registered public accounting firm;

discussing the scope and results of the audit with the independent registered public accounting firm and reviewing with management and the independent accountants,registered public accounting firm our interim and year-end operating results;

reviewing the adequacy of our internal controls over financial reporting;

developing procedures for employees to submit concerns anonymously about questionable accounting oroverseeing the performance of the Company’s internal audit matters;function and internal auditors;


developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters; and

monitoring compliance with legal and regulatory requirements.


A copy of the audit committee charter is available under “Investors & News>Corporate Governance>> Documents & Charters” on our website at www.reatapharma.com.  The audit committee met eightnine times in the fiscal year ended December 31, 2017.2019.

Compensation Committee

Our compensation committee consists of James E. Bass, William D. McClellan, Jr., R. Kent McGaughy, Jr., Jack B. Nielsen and William E. Rose.  Our Board has determined that Messrs. Bass, McClellan, Jr., McGaughy, Jr., Nielsen and Rose are independent under NASDAQNasdaq listing standards.  The chair of our compensation committee is Mr. Nielsen.  The functions of the compensation committee include:

reviewing and approving, or recommending that our Board approve, the compensation of our chief executive officer;

reviewing and recommending to our Board the compensation of our non-employee directors;

reviewing and approving, or recommending that our Board approve, the terms of compensatory arrangements with our other executive officers;

administering our equity-based incentive plans;

selecting independent compensation consultants, approving fees payable to them and assessing the independence of compensation consultants; and

assessing whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.

TheMeetings of the compensation committee customarily conducts five meetings each year. Meetings may, at the discretion of the compensation committee, include other directors, members of the Company’s management, independent consultants or advisors or such other persons as the compensation committee or its chairperson may determine.  The compensation committee may also exclude from its meetings any person it deems appropriate, other than members of the compensation committee.  The compensation committee charter provides that the compensation committee will review and approve, or recommend that our Board approve, the compensation of our Chief Executive Officer and all other executive officers of the Company and that the compensation committee will review and recommend to our Board the compensation of our non-employee directors.  This authority cannot be delegated.  Mr. Huff, our Chief Executive Officer, recommends to the compensation committee the amount and form of each component of each executive’s compensation, including his own compensation, but does not make any recommendation with respect to director compensation. A subcommittee of the compensation committee approves equity awards to our officers who are subject to Section 16(b) of the Exchange Act.

The compensation committee delegates to our Chief Executive Officer and our Chief Financial Officer the authority to set salaries for the following year for all of our employees who are not executive officers, including newly hired employees, grant year-end cash bonuses to our employees other than our executive officers up to a specified bonus pool amount, grant stock options in December or January to our employees who are not subject to Section 16(b) of the Exchange Act up to a specified option pool amount, and grant options and restricted stock units to newly-hired employees who are not subject to Section 16(b) of the Exchange Act up to a specified option pool amount.amount and restricted stock unit pool amount, grant additional restricted stock units to newly-hired or existing employees who are not subject to Section 16(b) of the Exchange Act up to a specified pool amount, and pay cash sign-on bonuses to newly-hired employees or cash bonuses for retention of existing employees, in each case other than executive officers.


The compensation committee has the authority to retain professional advisors, including special legal counsel or compensation consultants, to advise the compensation committee, all on such terms as the compensation committee deems necessary and advisable.  Prior to 2016, no compensation consultant had been employed by either the compensation committee or management.Beginning in 2016, the compensation committee engaged the Radford division of Aon Consulting, Inc., or Radford, as the compensation committee’s compensation consultant.  Each year, the compensation committee has instructed Radford to develop a peer group of companies in order to assess the competitiveness of our executive salary, bonus and equity compensation programs and our non-employee director compensation program, to present such data to our compensation committee and to make recommendations to the compensation committee regarding executive officer and non-employee director compensation.  Radford reports exclusively to the compensation committee and does not provide any additional services to us.us other than services to the compensation committee.  In selecting Radford as its independent compensation consultant, the compensation committee assessed the independence of Radford pursuant to SEC and NASDAQNasdaq rules.  The compensation committee has concluded that Radford is independent, and that we do not have any conflicts of interest with Radford.  Our compensation committee plans to retain a compensation consultanthas retained Radford to provide similar information and advice in future years2020 for consideration in establishing overall compensation for our executive officers and non-employee directors.

A copy of the compensation committee charter is available under “Investors & News>Corporate Governance>> Documents & Charters” on our website at www.reatapharma.com.  The compensation committee met five times in the fiscal year ended December 31, 2017.2019.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee consists of James E. Bass, William D. McClellan, Jr., R. Kent McGaughy, Jr. and Jack B. Nielsen.  Our Board has determined that Messrs. Bass, McClellan, Jr., McGaughy, Jr. and Nielsen are independent under the current rules and regulations of the SEC and NASDAQ.Nasdaq.  The chair of our nominating and corporate governance committee is Mr. Nielsen.  The functions of the nominating and corporate governance committee include:

identifying, evaluating and selecting, and recommending that our Board approve, nominees for election to our Board and its committees;

considering and making recommendations to our Board of regarding the composition of our Board and its committees;

reviewing developments in corporate governance practices;

reviewing Chief Executive Officer succession plans;

reviewing and approving or disapproving of related party transactions; and

overseeing an annual evaluation of the Board’s and each committee’s performance.

A copy of the nominating and corporate governance committee charter is available under “Investors & News—Corporate Governance—> Documents and& Charters” on our website at www.reatapharma.com.  The nominating and corporate governance committee met fivefour times in the fiscal year ended December 31, 2017.2019.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee has at any time during the prior three years been one of our officers or employees.  None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or compensation committee.  For a description of transactions between us and members of our compensation committee and affiliates of such members, please see “Certain Relationships and Related-Party Transactions.”


EXECUEXECUTIVETIVE OFFICERS

Our current executive officers and their respective ages and positions as of the Record Date are set forth in the following table.  Biographical information regarding each executive officer (other than Mr. Huff) is set forth following the table.  Biographical information for Mr. Huff is set forth above under “Proposal No. 1—Election of Directors.”

Name

 

Age

 

Position

Dawn C. Bir

47

Vice President, Chief Commercial Officer

J. Warren Huff

 

6466

 

Chief Executive Officer, President and Chairman of the Board

Manmeet S. Soni

42

Chief Financial Officer and Executive Vice President

Jason D. Wilson*

50

Executive Vice President, Operations

Dawn C. Bir

49

Chief Commercial Officer and Executive Vice President

Colin J. Meyer, M.D.

 

3941

 

Chief Medical Officer and Executive Vice President, Product Development

Keith W. Ward, Ph.D.

48

Vice President, Chief Development Officer

Jason D. Wilson

48

Chief Financial Officer and Vice President, Strategy

Michael D. Wortley

 

7072

 

Vice President, Chief Legal Officer and Executive Vice President

*

Mr. Wilson will retire effective April 30, 2020.

Manmeet S. Soni is Reata’s Chief Financial Officer and oversees corporate strategy, finance, accounting, treasury, tax, corporate communications, investor relations and information technology.  He joined Reata in August 2019.  Prior to joining Reata, Mr. Soni served as Senior Vice President and Chief Financial Officer of Alnylam Pharmaceuticals, Inc. from May 2017 until August 2019.  From March 2016 to February 2017, Mr. Soni served as the Executive Vice President, Chief Financial Officer and Treasurer of ARIAD Pharmaceuticals, Inc., a publicly held biopharmaceutical company, when ARIAD was acquired by Takeda Pharmaceutical Company Limited.  Mr. Soni continued as an employee of ARIAD through May 2017.  Previously, Mr. Soni served as Chief Financial Officer and Treasurer of Pharmacyclics, Inc., a publicly held biopharmaceutical company, until its acquisition by AbbVie in 2015.  Prior to joining Pharmacyclics, Mr. Soni worked at ZELTIQ Aesthetics Inc., a publicly held medical technology company as corporate controller.  Prior to ZELTIQ, Mr. Soni worked at PricewaterhouseCoopers in their Life Science and Venture Capital Group.  Mr. Soni currently serves as a member of the board of directors of Pulse Biosciences, Inc., Arena Pharmaceuticals, Inc. and Summit Therapeutics plc, each of which is a publicly traded company.  Mr. Soni graduated from Hansraj College at Delhi University in India.  He is a CPA (certified public accountant) and Chartered Accountant from the Institute of Chartered Accountants of India.

Jason D. Wilson is Reata’s Executive Vice President, Operations and oversees program and clinical operations, manufacturing, human resources, bioinformatics, quality and global alliances.  Until August 2019, Mr. Wilson was Reata’s Chief Financial Officer and Executive VP, Strategy.  He joined Reata in 2006.  Prior to joining Reata, he held positions as Vice President, Finance & Corporate Controller at Caris Diagnostics and as a Senior Manager in the health-sciences group at Ernst & Young LLP.  He served on the board of directors of CytoSen Therapeutics, a private company, until its sale to Kiadis Pharmaceuticals.  Mr. Wilson holds a B.B.A. in Accounting from Henderson University and an M.B.A. from University of Central Arkansas.

Dawn C. Bir joined Reata as Chief Commercial Officer in September 2016 to develop and oversee marketing, market access, sales, training and commercial operations.  Prior to joining Reata, Ms. Bir most recently served as Vice President of Sales with Pharmacyclics, LLC.  From February 2013 to September 2016, she built and led their first hematology national sales organization of sales representatives, division managers and regional sales directors responsible for the launch of IMBRUVICA®IMBRUVICA® in the USUnited States and Puerto Rico.  From October 2011 to February 2013, Ms. Bir served as Vice President Sales & Marketing with McKesson US Pharmaceutical, SKY Pharmaceuticals and RxPak.  Prior thereto, she held positions of increasing responsibility within McKesson Corporation, Genentech, Inc. and Bristol-Myers Squibb Company.  She currently serves on the board of directors of Geron Corporation, a publicly traded clinical stage pharmaceutical company.  Ms. Bir holds a B.S. in Biology from Binghamton University.

Colin J. Meyer, M.D. joined Reata as one of our first employees in 2003 and is Reata’s Chief Medical Officer.  Dr. Meyer received a B.S. in chemistry with specialization in biochemistry and a B.A. in biology from the University of Virginia.  He received an M.D. from the University of Texas Southwestern Medical School and an M.B.A. from Southern Methodist University Cox School of Business.


Keith W. Ward, Ph.D. is Reata’s Chief Development Officer and oversees research and development, clinical operations, regulatory affairs, manufacturing and project management. Dr. Ward joined Reata in July 2011. Prior to joining Reata, he developed ophthalmic pharmaceuticals and medical devices in positions of increasing responsibility for Bausch & Lomb Incorporated, including as Global Vice President of Pharmaceutical R&D, from May 2005 to June 2011. Before that, Dr. Ward held positions of increasing responsibility within GlaxoSmithKline PLC and SmithKline Beecham Pharmaceuticals. Dr. Ward earned a B.S. in Toxicology with a minor in Chemistry from Northeast Louisiana University and a Ph.D. in Toxicology from The University of North Carolina at Chapel Hill.

Jason D. Wilson is Reata’s Chief Financial Officer and oversees corporate strategy, finance, accounting and treasury, human resources, business development, investor relations and information technology. He joined Reata in 2006. Prior to joining Reata, he held positions as Vice President, Finance & Corporate Controller at Caris Diagnostics and as a Senior Manager in the health-sciences group at Ernst & Young LLP. Mr. Wilson holds a B.B.A. in Accounting from Henderson University and an M.B.A. from University of Central Arkansas.

Michael D. Wortley joined Reata as Chief Legal Officer in April 2015.  Prior to joining Reata, Mr. Wortley was an attorney at Vinson & Elkins LLPL.L.P. from 1995 to March 2015, serving in various capacities, including Chief Operating Partner of the firm and Managing Partner of the Dallas office, and, prior to 1995, at Johnson & Wortley, P.C., serving as Chairman of the Board and President.  He currently serves on the board of directors of Pioneer Natural Resources Company.Company, a publicly traded company.  Mr. Wortley earned a B.A. in Political Science from Southern Methodist University, a Master’s degree in Regional Planning from the University of North Carolina at Chapel Hill and a J.D. from Southern Methodist University Dedman School of Law.


EXECUTIVE COMPENSATION

We are an “emerging growth company,” as definedCompensation Discussion and Analysis

The following compensation discussion and analysis describes the material elements of compensation earned in 2019 by each of the executive officers identified below in the JOBS Act. As such,Summary Compensation Table, who are referred to collectively as our “named executive officers.” Our named executive officers or NEOs, consist of our principal executive officer andwith respect to the next two most highly compensated executive officers. For the fiscal year that ended on December 31, 2017, our NEOs2019 are:

J. Warren Huff, Chief Executive Officer;Officer (or CEO), President and Chairman of the Board;

Manmeet S. Soni, Chief Financial Officer and Executive Vice President since August 2019;

Jason D. Wilson, Executive Vice President, Operations (Chief Financial Officer until August 2019 and will retire on April 30, 2020);

Dawn C. Bir, Chief Commercial Officer and Executive Vice President;

Colin J. Meyer, M.D., Chief Medical Officer;Officer and Executive Vice President, Product Development; and

Keith W. Ward, Ph.D.,Michael D. Wortley, Chief Development Officer.Legal Officer and Executive Vice President.

Summary These persons constitute our principal executive officer, our two principal financial officers during 2019 and our three other most highly paid executive officers serving during 2019.

Compensation Table  Philosophy and Objectives

Our mission is to identify, develop and commercialize innovative therapies that change patients’ lives for the better.  Our focus is on small-molecule therapeutics with novel methods of action for the treatment of severe, life-threatening diseases with few or no approved therapies.  A long-term commitment to science and innovation is critical to achieve this mission.  Equally important is our ability to engage all of our employees in our mission and to create an ownership culture that encourages our employees to operate for the long term.  We have designed our compensation program with this in mind, which will sustain our business model and drive our multiple product drug pipeline.  We believe that our compensation model has helped us establish a culture where employees focus on our mission and the drug development process.  The emphasis on the long term is a core Company belief.

We award equity-based pay to all employees annually, and newly-hired employees receive an award on the commencement of employment, to ensure that, if we deliver products for our patients and value for our stockholders, all employees share in the potential upside growth.  Our compensation plan includes our reliance on stock options as the primary long-term employee incentive.  We use stock options because we view them as inherently performance-based and aligned with our stockholders’ interests; no amount of time will make a stock option deliver any value unless the Company’s stock price increases.  This is why we have favored stock options over full value equity awards such as restricted stock units, as full value awards provide value to employees even if there is not an increase in stock price over the vesting period.  In addition, stock options reward our employees for increasing stockholder value over the entire 10-year option term, which we believe is consistent with the drug discovery/development cycle.  We also believe that the performance-based nature of stock options is enhanced for companies like Reata whose stock price is directly impacted by pipeline development.  In addition, for executive officers, we believe that a portion of the long-term equity incentive award should be subject to additional performance criteria that is specifically tied to performance targets so that the equity incentive is only valuable if such performance targets are achieved within a certain timeframe.

Beginning in 2020, equity grants to newly-hired employees will include both stock options and restricted stock units, with the restricted stock units constituting a minority portion of the equity grant.  Generally, one restricted stock unit will be awarded in lieu of two stock options that would have otherwise been awarded.  We have begun this approach to reduce the number of awards under our Second Amended and Restated Long Term Incentive Plan, or LTIP, and to enhance our ability to attract highly-qualified personnel in a competitive market.


Our Performance

Our compensation program underpins our strategy of delivering sustainable, long-term growth through continued innovation and other steps to enhance stockholder value.

We have made great strides in the development of bardoxolone methyl.  In 2018, we completed the Phase 2 portion of our CARDINAL clinical trial of bardoxolone methyl in patients with chronic kidney disease, or CKD, caused by Alport syndrome.  In this trial, bardoxolone methyl demonstrated a statistically significant increase from baseline in estimated glomerular filtration rate, or eGFR, after 48 weeks of treatment and a statistically significant increase from baseline in mean eGFR at Week 52 after withdrawal of the drug for four weeks.

In 2019, we completed the first year of the Phase 3 portion of the CARDINAL trial and reported a statistically significant increase in eGFR as compared to placebo after 48 weeks of treatment and a statistically significant increase in eGFR as compared to placebo at Week 52 after withdrawal of the drug for four weeks.  Based on these positive results, and subject to discussions with regulatory authorities, we plan to proceed with the submission of regulatory filings this year for marketing approval in the United States.

In 2018 and 2019, we also collected Phase 2 data in our PHOENIX clinical trial studying bardoxolone methyl in each of IgA nephropathy, type 1 diabetic CKD, focal segmental glomerulosclerosis and autosomal dominant polycystic kidney disease, or ADPKD.  In each of these Phase 2 cohorts, bardoxolone methyl demonstrated a statistically significant increase from baseline in mean eGFR after 12 weeks of treatment.

In 2019, we initiated a Phase 3 trial studying bardoxolone methyl in patients with ADPKD called FALCON.

In 2019, we fully enrolled our Phase 3 trial called CATALYST studying bardoxolone methyl in patients with pulmonary arterial hypertension caused by connective tissue disease.

In 2019, we completed part 2 of our MOXIe clinical trial of omaveloxolone in patients with Friedreich’s ataxia and reported a statistically significant improvement in the modified Friedreich’s ataxia Rating Scale.  Based on these positive results, and subject to discussions with regulatory authorities, we plan to proceed with the submission of regulatory filings this year for marketing approval in the United States.

In 2019, we reacquired from AbbVie, Inc. the development, manufacturing and commercialization rights to our proprietary Nrf2 platform originally licensed to AbbVie in 2010 and 2011.

In 2019, we raised over $500 million in a public offering of our Class A common stock.


Total Stockholder Return

The accomplishments above resulted in the price of our common stock increasing 264.4% and 98.1% during 2019 and 2018, respectively.  Over the two-year period ended December 31, 2019, we delivered stock price appreciation of 621.9% and outperformed both the Nasdaq Composite Index (total stockholder return of 30.0%) and the Nasdaq Biotechnology Index (total stockholder return of 12.8%).  While we cannot predict the performance of our stock price in any particular time period, we believe that, if we can continue to deliver operational and pipeline results, the creation of stockholder value and share price appreciation will follow.

*

Total return data reflect total returns (stock price appreciation and, if applicable, reinvested dividends).

Delivering Growth and Managing Dilution

In 2019, the number of our employees increased from 123 to 220, and we anticipate further hiring in 2020.  In recognition of the impact of growth on the use of equity, commencing in 2020, we started to reduce the number of options granted to our employees, including our named executive officers, by approximately 30% from 2019.  This will allow us to maintain a burn rate at a level considered reasonable for a high-growth company without sacrificing our core business principle that equity participation by all employees supports innovation that drives growth.  In addition, as discussed above under “Compensation Philosophy and Objectives”, beginning in 2020, new hires will receive a portion of the equity grant in restricted stock units, which will further reduce the burn rate.  In 2017, 2018, and 2019, the burn rate was 4.4%, 0.8% and 5.8%, respectively.  The three-year average burn rate through 2019 was 3.7%, which approximates the 25th percentile of burn rates for our peer companies.  Burn rate is calculated by dividing the number of shares subject to equity awards granted during the year by the basic weighted-average number of shares of Class A common stock and Class B common stock outstanding during the year.  We believe that the reduced size of the equity grants in 2020 will continue to provide competitive long-term equity incentive awards as they should provide value comparable to the earlier, larger grants based on valuation models.


Executive Officers

Our philosophy in setting compensation policies for executive officers has three fundamental objectives: (1) to attract, retain and motivate a highly-skilled team of executives, (2) to provide incentives that reward achievement of performance goals that directly correlate to the enhancement of stockholder value and (3) to align our executives’ interests with those of our stockholders by rewarding short-term and long-term performance and tying a significant portion of an executive officer’s compensation to increases in stockholder value.  The compensation committee believes that executive compensation should be directly linked to both continuous improvements in corporate performance and accomplishments that are expected to increase stockholder value.  In furtherance of this goal, the compensation committee has adhered to the following guidelines as a foundation for decisions that affect the levels of executive compensation:

Provide a competitive total compensation package that enables us to attract, retain and motivate highly qualified executives with the skills and experience required for the achievement of business goals;

Align compensation elements with our annual goals and long-term business strategies and objectives;

Promote the achievement of key strategic and financial performance measures by linking short-term and long-term cash and equity incentives to the achievement of measurable corporate goals and objectives; and

Align executives’ incentives with the creation of stockholder value.

The compensation committee has historically compensated executive officers with three main compensation components: a base salary, an annual bonus opportunity and equity-based compensation.  The compensation committee believes that cash compensation in the form of base salary and an annual bonus opportunity provides our executive officers with short-term rewards for success in achieving annual goals and objectives, and that long-term compensation through the award of stock options (which have been the only equity awards to date for executive officers other than one new-hire grant of performance-based restricted stock units), restricted stock units, or other equity awards aligns the objectives of management with those of our stockholders with respect to long-term performance and success of the Company.

In setting compensation levels for our executive officers, the compensation committee does not formulaically benchmark against any one specific reference point.  Instead, it considers a variety of factors, including peer group survey data, tenure, role, responsibilities, performance and local competitive market practices.  Compensation paid to our named executive officers is delivered primarily through at-risk pay, based on both short-term and long-term incentives, including the achievement of corporate goals and objectives.

The compensation committee’s overall philosophy is that the executive officers’ salary and target annual bonus amounts should be at approximately the 50th percentile compared to peer companies, with the ability to achieve annual bonus amounts greater than the 50th percentile based on individual or company performance, and that the executive officers’ equity compensation should be partly or totally performance based which, if the performance conditions are met, will allow the executive offers to realize equity compensation at or above the 75th percentile compared to peer companies.  Radford each year prepares an executive compensation assessment, utilizing the peer group approved by the compensation committee as well as internal market information collected by Radford, that provides the compensation committee with an analysis of the various percentile criteria.

In addition to our compensation elements, the following compensation program features are designed to align our executive officers’ interests with stockholder interests and market best practices:

We prohibit our employees, including our executive officers, from engaging in hedging transactions that transfer, with respect to equity compensation received by an employee, all or a portion of the risk of a decline in the market price of shares of our stock;

We prohibit our employees, including our executive officers, from pledging our securities;

We do not offer our executive officers any substantially enhanced benefits or perquisites when compared with our overall employee population; and


We have established a long-term incentive program applicable to all current employees, including our executive officers, to further tie compensation to performance and focus employee efforts on corporate goals and objectives; see “—Equity Compensation—Equity Grants in 2019”.

Roles in Determining Compensation

Compensation Committee

The Board has delegated to the compensation committee the responsibility to ensure that total compensation paid to our executive officers is consistent with our compensation policy and objectives.  The compensation committee oversees and approves all compensation arrangements and actions for our executive officers.  While the compensation committee draws on a number of resources, including input from the Board, the Chief Executive Officer and its independent compensation consultant, to make decisions regarding our executive compensation program, ultimate decision-making authority rests with the compensation committee.  The compensation committee retains discretion over base salaries, annual bonuses and equity compensation for executive officers.  The compensation committee relies upon the judgment of its members in making compensation decisions, after reviewing our corporate performance and carefully evaluating an executive’s performance during the year against established corporate goals, operational performance and business responsibilities.  In addition, the compensation committee incorporates discretion in the assessment process to respond to and adjust for the evolving business environment.

Compensation Consultant

The compensation committee retains the services of an independent, external compensation consultant, Radford.  The mandate of the consultant is to assist the compensation committee in its review of executive and director compensation practices, including the competitiveness of pay levels, executive compensation design, benchmarking with our peers in the industry and other technical considerations, including tax- and accounting-related matters.  The compensation committee annually evaluates Radford’s performance and determines whether to engage Radford or another compensation consultant and has the final authority to engage and terminate Radford’s services.  Our compensation committee has assessed the independence of Radford consistent with Nasdaq listing standards and has concluded that the engagement of Radford does not raise any conflict of interest.

Chief Executive Officer

The Chief Executive Officer attends compensation committee meetings and works with the compensation committee chairman and Radford to develop compensation recommendations for the executive officers, based upon individual experience and breadth of knowledge, internal considerations, individual performance during the fiscal year, competitive market considerations and other factors deemed relevant by the compensation committee.  The recommendations are then submitted to the compensation committee for review and consideration.  The compensation committee works directly with Radford to evaluate the performance of the Chief Executive Officer and determine compensation for the Chief Executive Officer.

Defining and Comparing Compensation to Market Data

While we do not establish compensation levels based solely on benchmarking, pay practices at other companies are an important factor that the compensation committee considers in assessing the reasonableness of compensation and ensuring that our compensation practices are competitive in the marketplace.  In order to evaluate the level of compensation for our named executive officers, our compensation committee, using information provided by Radford, established a peer group of publicly traded companies in the biopharmaceutical and biotechnology industries based on a balance of the following criteria:

companies with drugs in late-stage development, as well as recently commercial companies;

companies with comparable market capitalization; and

companies with similar employee headcounts.


In the fourth quarter of each year, the compensation committee determines the salaries and target bonuses of our executive officers for the following year and awards equity compensation that is granted at the beginning of the following year.  Additionally, in the fourth quarter of each year, the compensation committee awards cash bonuses to the executive officers that are payable in the fourth quarter.  As a result, the peer group utilized to determine 2019 salaries, target bonus percentages and equity awards for executive officers was established in 2018, and the peer group utilized to determine 2020 salaries, target bonus percentages and equity awards for executive officers, which is discussed under “- Compensation Changes for 2020,” was established in 2019.  The compensation committee also was able to review information with respect to the peer group that was established in 2019 as the compensation committee was deliberating on 2019 cash bonuses payable to the executive officers in December 2019.

Our peer group established in 2018 that was used to evaluate executive compensation actions for 2019 was selected by the compensation committee based on Radford’s recommendation in December 2018 and is comprised of the following 18 publicly-traded companies in the pharmaceutical and biotechnology industries:

Acceleron Pharma Inc.

Global Blood Therapeutics, Inc.

Agios Pharmaceuticals, Inc.

Karyopharm Therapeutics Inc.

Aimmune Therapeutics, Inc.

Loxo Oncology, Inc.

Atara Biotherapeutics, Inc.

MacroGenics Inc

Biohaven Pharmaceutical Holding Co Ltd.

MyoKardia Inc

bluebird bio, Inc.

Revance Therapeutics, Inc.

Blueprint Medicines Corp

Sage Therapeutics, Inc.

Endocyte Inc

Ultragenyx Pharmaceutical Inc.

FibroGen, Inc.

XenCor Inc

At the time that we selected our 2018 peer group in December 2018, we were at approximately the 44th percentile in terms of market capitalization and the 31st percentile in terms of the number of employees relative to the peer group.

Annual Performance Reviews

Our compensation committee conducts an annual performance review of our named executive officers in the fourth quarter of each year.  By the end of the fourth quarter of each year, base salaries, target bonus percentages and equity awards for the following year are approved, and cash bonuses payable in that fourth quarter are approved.  For purposes of determining potential payments under our corporate cash bonus plan, or bonus plan, annual corporate goals are established and set forth in writing prior to the beginning of the year in question.  Our compensation committee determines the amounts that will be paid to our executive officers under our bonus plan after carefully (1) reviewing overall corporate performance against the corporate goals established for the year; (2) evaluating each named executive officer’s annual contribution to the achievement of the established corporate goals; and (3) reviewing any notable positive or negative performance.

At its last regularly scheduled meeting each year, our compensation committee evaluates our Chief Executive Officer’s individual performance, determines whether to adjust his base salary and target bonus percentage for the following year and determines the amount of equity award for the following year and his bonus for the current year, if any, under our bonus plan.

Our compensation committee may also review and adjust the compensation of our executive officers throughout the course of the year.


Base Salary

Overview

The compensation committee believes it is important to provide adequate fixed compensation to our executive officers working in a highly volatile and competitive industry.  The compensation committee’s choice of actual pay levels versus our competitive market reflects consideration of our stockholders’ interests in paying what is necessary to achieve our corporate goals, while conserving cash as much as practicable.  In determining appropriate base salary levels for a given executive officer, the compensation committee considers the following factors:

individual performance of, and overall management of the function by, the executive, as well as our overall corporate performance, during the prior year;

level of responsibility, including breadth, scope and complexity of the position;

level of experience and expertise of the executive;

internal review of the executive’s compensation relative to other executives to ensure internal equity;

executive officer compensation levels at other similar companies to ensure competitiveness; and

recruiting and retention market dynamics.

The effective date of annual merit increases to base salary is January 1.

2019 Base Salaries

The compensation committee engaged Radford to conduct a competitive review and analysis of our current executive compensation program relative to our 2018 peer group.  Radford prepared an executive compensation assessment report that provided a competitive assessment of our executive compensation program as compared to the 2018 peer group data for 2019 base salaries, target cash bonus percentages and equity compensation.

For 2019, increases in base salaries for Mr. Huff, Mr. Wilson, Ms. Bir, Dr. Meyer and Mr. Wortley were approximately 8%, 10%, 10%, 7% and 10% annualized, respectively.  These increases were based primarily on a review of the Radford executive officer assessment material with a view to setting the salaries of the executive officers at approximately the 50th percentile compared to peer companies; provided, however, that the maximum increase was capped at 10%, which resulted in all executive officers except Mr. Huff and Dr. Meyer being below the 50th percentile in salaries compared to peer companies. Mr. Soni joined the Company in August 2019, and his salary was determined based on negotiations between Mr. Soni and the Company.

The following table sets forth all ofshows the compensation awarded to, earned by or granted toincreases in base salaries for our NEOs during the fiscal years ended December 31, 2017named executive officers between 2018 and 2016.

2019:

Name and principal position

 

Year

 

Salary ($)

 

Bonus ($)(1)

 

Option Awards ($)(2)

 

Total ($)

 

J. Warren Huff
Chief Executive Officer

 

2017

 

 

514,000

 

 

385,500

 

4,215,478

 

 

5,114,978

 

 

 

2016

 

 

450,000

 

 

306,000

 

3,798,834

 

 

4,554,834

 

Colin J. Meyer, M.D.
Chief Medical Officer

 

2017

 

 

400,000

 

 

200,000

 

1,483,537

 

 

2,083,537

 

 

 

2016

 

 

325,000

 

 

162,500

 

2,201,378

 

 

2,688,878

 

Keith W. Ward, Ph.D.
Chief Development Officer

 

2017

 

 

360,000

 

 

180,000

 

1,434,480

 

 

1,974,480

 

 

 

2016

 

 

300,000

 

 

150,000

 

2,085,580

 

 

2,535,580

 

Name

 

Title

 

2019

Base Salary

 

 

2018

Base Salary

 

 

Percentage

Increase (%)

 

J. Warren Huff

 

Chief Executive Officer,

President and Chairman of the Board

 

$

578,500

 

 

$

534,000

 

 

 

8

%

Manmeet S. Soni (1)

 

Chief Financial Officer and

Executive Vice President

 

$

530,000

 

 

N/A

 

 

N/A

 

Jason D. Wilson

 

Executive Vice President, Operations

(Chief Financial Officer prior to September 2019)

 

$

408,100

 

 

$

371,000

 

 

 

10

%

Dawn C. Bir

 

Chief Commercial Officer and

Executive Vice President

 

$

375,100

 

 

$

341,000

 

 

 

10

%

Colin J. Meyer, M.D.

 

Chief Medical Officer and

Executive Vice President, Product Development

 

$

445,600

 

 

$

417,000

 

 

 

7

%

Michael D. Wortley

 

Chief Legal Officer and

Executive Vice President

 

$

382,800

 

 

$

348,000

 

 

 

10

%

 

(1)

Amount represents each NEO’s discretionary annual cash bonus paid in the fourth quarter of the year for which it was earned.Mr. Soni commenced employment with us on August 28, 2019.


Annual Bonus

Overview

Our bonus plan, for executive officers as well as all other employees, provides an opportunity for cash bonus awards based upon the attainment of annual corporate goals.  The annual corporate goals for 2019 were approved by our compensation committee in December 2018.  Corporate goals for 2019 included strategic development and clinical proof-of-concept goals, operations and study enrollment goals and corporate and financial goals.  Each goal is allocated a certain number of points, and the achievement of 100 points by achieving a combination of goals would result in establishing a target bonus pool for all employees of 25% of year-end annual salaries of all employees.  The achievement of more or less than 100 points results in prorating the target bonus pool with a maximum cap of 120 points (or a bonus pool equal to 30% of year-end annual salaries of all employees).  The Company achieved almost all of the 2019 corporate goals, resulting in well over 120 points being attained. The compensation committee has the discretion to increase or decrease the bonus pool, and the final amount of the bonus pool does not determine the actual amount of any employee’s bonus, including any named executive officer.

The 2019 corporate goals that were achieved are:

Achieve positive data in either our MOXIe phase 2 trial in patients with Friedreich’s ataxia or our CARDINAL phase 3 trial in patients with chronic kidney disease caused by Alport syndrome (positive data were achieved in both trials);

Achieve proof of concept with RTA 1701 in suppression of IL-17 in the first in man study;

Begin enrollment of our FALCON phase 3 trials in patients with chronic kidney disease caused by ADPKD;

Close a public equity offering of Class A common stock at or above $100 per share;

Reacquire our rights to bardoxolone methyl and omaveloxolone from AbbVie;

Meet the approved budget for 2019 and retain a cash balance at year end in line with the long-term plan; and

Retain, motivate and recruit to ensure all key internal positions are staffed with strong performers.

These achievements resulted in the compensation committee increasing the bonus pool $1 million above the capped amount, $850,000 of which was allocated among the executive officers of the Company.

All executive officers are assigned annual bonus targets, expressed as a percent of base salary, based on each executive officer’s accountability, scope of responsibilities and potential impact on performance, as well as peer group competitive data for similarly situated positions.  Actual payouts are based upon achievement with respect to the established corporate goals as well as any factors deemed relevant by the compensation committee with respect to any individual executive officer.  Executive officer bonuses are not paid on a formulaic basis.

2019 Bonuses

For 2019, our compensation committee set the annual targets for our executive officers’ bonuses as a percent of base salary generally targeting the 50th percentile of our peer group established in 2018, which resulted in no change to the targets from 2018, except Mr. Huff’s target bonus percentage was revised from 55% to 60% to better align with the 50th percentile of our peer group; provided, however, that, at a 60% target bonus, Mr. Huff was still below the 50th percentile in target bonus compared to peer companies.  Mr. Soni commenced service with the Company in August 2019, and his target bonus percentage was established at the level of the executive officers other than Mr. Huff.  The compensation committee utilizes these peer group benchmarks as one factor among many factors in determining the bonus award to each executive officer.  Individual performance and the level of achievement of


corporate goals are also taken into account.  The target bonuses, as a percentage of base salary, for the named executive officers for 2019 are set forth in the following table:

(2)Name

Represents grant date fair value

Title

Target Bonus for 2019

(% of options grantedBase Salary)

J. Warren Huff

Chief Executive Officer,

President and Chairman of the Board

60%

Manmeet S. Soni (1)

Chief Financial Officer and

Executive Vice President

40%

Jason D. Wilson

Executive Vice President, Operations

(Chief Financial Officer prior to Messrs. Huff,September 2019)

40%

Dawn C. Bir

Chief Commercial Officer and

Executive Vice President

40%

Colin J. Meyer, M.D.

Chief Medical Officer and Ward during 2017

Executive Vice President, Product Development

40%

Michael D. Wortley

Chief Legal Officer and 2016, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 Compensation—Stock Compensation, or ASC Topic 718, not including any estimates of forfeiture. See notes 2 and 11 of “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K filed with the SEC on March 2, 2018, for a discussion of assumptions used in determining the grant date fair value of our option awards for fiscal years ended December 31, 2017, and December 31, 2016. Note that amounts reported in this column reflect the accounting cost for these stock options and do not correspond to actual economic value that may be received by the executives from the stock options.

Executive Vice President

40%

Outstanding Equity Awards at December 31, 2017

The following table provides information regarding outstanding equity awards held by each of our NEOs as of December 31, 2017.

 

 

Option Awards

 

Name

 

Vesting
Commencement

Date

 

 

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable

 

 

Number of

Securities

Underlying

Unexercised

Options (#)

Unexercisable

 

 

Option Exercise

Price ($)

 

 

Option

Expiration Date

 

J. Warren Huff

 

12/06/2017(1)

 

 

 

 

 

 

249,200

 

 

 

24.75

 

 

12/06/2027

 

 

 

12/07/2016(2)

 

 

 

39,980

 

 

 

159,920

 

 

 

22.57

 

 

12/07/2026

 

 

 

05/25/2016(1)

 

 

 

32,614

 

 

 

71,022

 

 

 

11.00

 

 

05/25/2026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colin J. Meyer, M.D.

 

12/06/2017 (1)

 

 

 

 

 

 

87,700

 

 

 

24.75

 

 

12/06/2027

 

 

 

12/07/2016(2)

 

 

 

18,000

 

 

 

72,000

 

 

 

22.57

 

 

12/07/2026

 

 

 

05/25/2016(1)

 

 

 

42,614

 

 

 

71,022

 

 

 

11.00

 

 

05/25/2026

 

 

 

06/15/2013(2)

 

 

 

16,390

 

 

 

3,135

 

 

 

11.62

 

 

06/15/2023

 

 

 

02/03/2009(1)

 

 

 

622

 

 

 

 

 

 

8.11

 

 

02/03/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keith W. Ward, Ph.D.

 

12/06/2017(1)

 

 

 

 

 

 

84,800

 

 

 

24.75

 

 

12/06/2027

 

 

 

12/07/2016(2)

 

 

 

17,000

 

 

 

68,000

 

 

 

22.57

 

 

12/07/2026

 

 

 

05/25/2016(1)

 

 

 

40,556

 

 

 

67,594

 

 

 

11.00

 

 

05/25/2026

 

 

 

06/15/2013(2)

 

 

 

66,300

 

 

 

7,367

 

 

 

11.62

 

 

06/15/2023

 

 

 

06/15/2013(2)

 

 

 

7,758

 

 

 

862

 

 

 

11.62

 

 

06/15/2023

 

 

 

07/15/2011(1)

 

 

 

7,640

 

 

 

 

 

 

41.79

 

 

07/15/2021

 

 

 

07/15/2011(1)

 

 

 

4,113

 

 

 

 

 

 

41.79

 

 

07/15/2021

 

 

(1)

Vests in 16 substantially equal quarterly installments over four years; provided that the stock options will generally only vestMr. Soni’s bonus was pro-rated based on such dates if the holder continues to provide services to us or our subsidiaries through the applicable vesting date, subject to the terms of the applicable award agreement and each NEO’s employment agreement.


(2)

Vests in 20 substantially equal quarterly installments over five years; provided that the stock options will generally only vesthis partial-year service beginning on such dates if the holder continues to provide services to us or our subsidiaries through the applicable vesting date, subject to the terms of the applicable award agreement and each NEO’s employment agreement.August 28, 2019.

Annual Bonus ProgramAchievement of Goals and Relationship to Compensation Awarded

We maintain a fully discretionary annual bonus program for our NEOs. ForAs stated above under “Annual Bonuses – Overview”, the fiscal year ended December 31, 2017, Mr. Huff’s target bonus was equal to 55%level of his base salary and the target bonus for each of Dr. Meyer and Dr. Ward was equal to 40% of their respective base salaries. The actual amountattainment of the 2017 annual bonus paid to each of our NEOs was determined2019 corporate goals resulted in the full and absolute discretionachievement of the maximum bonus pool.  In addition, due to the stockholder value created in 2019, the compensation committee increased the bonus pool above the capped amount by $1 million, which resulted in an additional $850,000 being allocated among the executive officers.  The compensation committee also reviewed bonus information with respect to the 2019 peer group in determining the 2019 bonus amounts.  See “Compensation Change for 2020-Peer Group” below.  The compensation committee approved 2019 bonus awards for performance in 2019 as set forth in the following table:

Name

 

Title

 

2019 Target Bonus

 

 

2019 Target Bonus as of Percentage of 2019 Base Salary

 

 

2019 Actual Bonus

 

 

2019 Actual Bonus as of Percentage of 2019 Base Salary

 

J. Warren Huff

 

Chief Executive Officer,

President and Chairman of the Board

 

$

347,100

 

 

60%

 

 

$

600,540

 

 

104%

 

Manmeet S. Soni (1)

 

Chief Financial Officer and

Executive Vice President

 

$

212,000

 

 

40%

 

 

$

258,873

 

 

49%

 

Jason D. Wilson

 

Executive Vice President, Operations

(Chief Financial Officer prior to September 2019)

 

$

163,240

 

 

40%

 

 

$

304,050

 

 

75%

 

Dawn C. Bir

 

Chief Commercial Officer and

Executive Vice President

 

$

150,040

 

 

40%

 

 

$

287,550

 

 

77%

 

Colin J. Meyer, M.D.

 

Chief Medical Officer and

Executive Vice President, Product Development

 

$

178,240

 

 

40%

 

 

$

389,467

 

 

87%

 

Michael D. Wortley

 

Chief Legal Officer and

Executive Vice President

 

$

153,120

 

 

40%

 

 

$

341,400

 

 

89%

 

(1)

Mr. Soni’s bonus was pro-rated based on his partial-year service beginning on August 28, 2019.

The bonuses awarded under our 2019 annual incentive program were paid in December 2019.


Equity Compensation

Overview

As an additional component of our compensation program, executive officers have historically been eligible to receive equity compensation in the form of stock options.  The compensation committee aftergrants stock options annually to executive officers to recognize their contributions to the achievement of corporate objectives, to align their interests with those of our stockholders by creating value tied to the performance of our stock price and for retention and motivation purposes.  In determining the form and value of an annual grant, the compensation committee considers the contributions and responsibilities of each executive officer, appropriate incentives for the achievement of our long-term growth, the size and value of grants made to other executives at peer companies holding comparable positions and our overall performance relative to corporate goals.  The compensation committee also grants stock options and may grant restricted stock units to new executive officer hires, as in the case of Mr. Soni who joined the Company in 2019.  In determining the form and value of a new hire grant to executive officers, the compensation committee considers the expected contributions and responsibilities of each executive officer, appropriate incentives for the achievement of our long-term growth, the size and value of grants made to other new hire executives at peer companies holding comparable positions and the competitive market dynamics at the time of hire.

Under the terms of our LTIP, pursuant to which all equity grants are currently made, the exercise price of any stock options awarded must be equal to at least 100% of the fair market value of our Class B common stock (which is deemed to be the closing sales price on The Nasdaq Global Select Market of our Class A common stock on the date of grant).  We do not have any program, plan or obligation that requires us to grant equity awards on specified dates, although in the last two years we have made the annual equity grants on the first business day of each year.  We also do not have any program, plan or practice to time award dates of stock option grants to our executive officers in coordination with the release of material nonpublic information.  Equity awards may occasionally be granted following a significant change in job responsibilities or to meet special retention or performance objectives.

Authority to make equity grants to executive officers rests with the compensation committee.  Recommendations for equity grant guidelines are made by Radford based on grant values and percentage of company for similarly situated executive positions in our peer group companies and accounting for dilution constraints.  Our CEO recommends grants for individual executives taking into account each NEO’s levelconsideration those guidelines.  The compensation committee then reviews and considers our CEO’s recommendation and recommends the final grant amounts to a subcommittee of responsibilitythe compensation committee, which approves the final grant amounts.  We believe that the annual equity award should be a significant portion of an executive officer’s total compensation.  Furthermore, we believe that a portion of the annual equity award should be time-based awards and contributiona portion should be performance-based awards.  The annual equity awards to executive officers in 2019 were 50% performance-based awards as discussed below under “Equity Grants in 2019”.  For executive officers, the compensation committee has determined to utilize 100% stock options for annual equity grants at this point in the Company’s development, as stock options, as opposed to restricted stock units, reward the executive officers only if the executive officers successfully execute on the Company’s business plan and achieve the corporate goals, thus aligning this portion of the executive officer’s compensation 100% with the Company’s stockholders.

We believe that annual equity awards serve as a useful performance recognition mechanism, encouraging the retention of executive officers by maintaining their focus on our financiallong-term performance, as well as on the achievement of specific performance goals.  Our typical annual time-based option awards to executive officers (including our named executive officers) have a term of 10 years and strategic success duringvest and become exercisable quarterly over a period of four years.  Our typical annual performance-based option awards have a term of 10 years and vest 25% on the year. achievement of the performance standard, which must occur within some set timeframe, with the remainder of the options vesting quarterly thereafter over a three-year period.

The determinations madecompensation committee reviews the Radford peer company information and awards stock options that permit the executive officers to achieve equity value at or above the 75th percentile of the peer group if the performance standards of the performance-based stock options are met.


With respect to the newly-hired executive officers, the grant of stock options may be time-based stock options or performance-based stock options, or a combination thereof.  The typical time-based stock options for a newly-hired executive officer would have a term of 10 years and vest and become exercisable over a period of four years, with 25% of the underlying shares vesting on the first anniversary of the grant date and the remainder vesting quarterly over the next three years.  The terms of any performance-based stock options granted a newly-hired executive officer would be based on negotiations with the newly-hired executive officer.  Newly-hired executive officers may also be granted restricted stock units, whose vesting may be time-based or performance-based, based on negotiations with the newly-hired executive officer.  New hire equity grants to executive officers are recommended by the compensation committee to a subcommittee of the compensation committee which approves the grant and are based on grants to new hire executives at peer companies and the competitive market dynamics at the time.

Equity Grants in 2019

In December 2018, the compensation committee approved the grant of annual equity awards on January 2, 2019 for our named executive officers other than Mr. Soni, who received an initial equity award in connection with his commencement of employment in August 2019.  These annual equity awards were granted as 50% time-based stock options and 50% performance-based stock options.

The table below sets forth all annual and new hire time-based stock options awards in 2019 to our named executive officers:

Name

Date of Grant

Number of Options

J. Warren Huff

January 2, 2019

114,500

Manmeet S. Soni (1)

August 28, 2019

250,000

Jason D. Wilson

January 2, 2019

34,500

Dawn C. Bir

January 2, 2019

34,500

Colin J. Meyer, M.D.

January 2, 2019

35,500

Michael D. Wortley

January 2, 2019

34,500

(1)

Mr. Soni commenced employment with us on August 28, 2019.

The table below sets forth all annual and new-hire performance-based equity awards in 2019 to our named executive officers:

Name

 

Date of Grant

 

Number of Stock

Options

 

 

Number of Restricted

Stock Units

 

J. Warren Huff

 

January 2, 2019

 

 

114,500

 

 

 

-

 

Manmeet S. Soni (1)

 

August 28, 2019

 

 

50,000

 

 

 

50,000

 

Jason D. Wilson

 

January 2, 2019

 

 

34,500

 

 

 

-

 

Dawn C. Bir

 

January 2, 2019

 

 

34,500

 

 

 

-

 

Colin J. Meyer, M.D.

 

January 2, 2019

 

 

35,500

 

 

 

-

 

Michael D. Wortley

 

January 2, 2019

 

 

34,500

 

 

 

-

 

(1)

Mr. Soni commenced employment with us on August 28, 2019.

With respect to the performance-based stock options granted to the named executive officers other than Mr. Soni, (1) 50% of the performance-based stock options would vest 25% on the date the Company publicly announces that a statistically significant improvement in mFARs scores has been observed in the MOXIe clinical trial, but the vesting shall occur only if the public announcement is made after the Board concludes that the overall safety and efficacy results of such clinical trial warrant the filing of a new drug application with the FDA, with the remainder of the stock options vesting one-twelfth on each three-month anniversary date of the first vesting, and (2) the remaining 50% of the performance-based stock options would vest 25% on the date the Company publicly announces that a statistically significant improvement in retained benefit has been observed after 52 weeks in the CARDINAL Phase 3 clinical trial, but the vesting shall occur only if the public announcement is made after the Board concludes that the overall safety and efficacy results of such clinical trial warrant the filing of a new drug application with the FDA, with the remainder of the stock options vesting one-twelfth on each three-month


anniversary date of the first vesting.  In all cases the performance standards had to be met on or before June 30, 2020, to prevent forfeiture of the performance-based stock options.  The performance standard was met on October 14, 2019 with respect to the NEOs’ 2017 annual bonus amountsMOXIe trial and on November 11, 2019 with respect to the CARDINAL trial.  Accordingly, all of the performance-based stock options granted in 2019 have begun vesting.

With respect to the performance-based equity awards to Mr. Soni, the stock options and restricted stock units vest based upon the achievement of pre-established targets for gross product sales revenue over the ten-year performance period for such awards.  One-half of Mr. Soni’s performance-based restricted stock units and one-half of his performance-based stock options will vest on the day (if prior to the 10-year expiration date of the award) that a Form 10-K or Form 10-Q, as applicable, is filed reflecting that, in the immediately preceding calendar quarter and any prior periods, cumulatively, the Company booked $100 million or more of gross product sales revenue, including royalty revenue based on product sales.  The remaining one-half of Mr. Soni’s performance-based restricted stock units and remaining one-half of his performance-based stock options will vest on the day (if prior to the 10-year expiration date of the award) that a Form 10-K or Form 10-Q, as applicable, is filed reflecting that, in the immediately preceding calendar quarter and any prior periods, cumulatively, the Company booked $200 million or more of gross product sales revenue, including royalty revenue based on product sales.

The values of the equity grants awarded to executive officers for 2019, as well as all compensation actions taken with respect to the named executive officers in 2019, are reflected in the Summary Compensation Table.

Compensation Changes for 2020

Peer Group

The compensation committee reviews our list of peer companies annually to determine if revisions are needed to reflect changes in our development status, market capitalization, changes in individual peer companies and other factors.  The compensation committee engaged Radford to assist in reviewing our 2018 peer group and in suggesting revisions, as appropriate.  The changes in our 2019 peer group from our 2018 peer group set forth above under “Defining and Comparing Compensation to Market Data” were made without regard to any specific performance metrics. There were no formulasbased principally on the increase in our market capitalization.

Our 2019 peer group that was used to calculateevaluate compensation for 2020 as well as 2019 cash bonuses was selected by the amountscompensation committee based on Radford’s recommendation in June 2019 and is comprised of the individualfollowing 18 publicly-traded companies in the pharmaceutical and biotechnology industries:

Acceleron Pharma Inc.

Blueprint Medicines Corp

Neurocrine Biosciences, Inc

Agios Pharmaceuticals, Inc.

Exelixis Inc.

Sage Therapeutics, Inc

Alnylam Pharmaceuticals, Inc.

FibroGen, Inc.

Sarepta Therapeutics, Inc

Array Biopharma Inc

Global Blood Therapeutics, Inc.

Seattle Genetics Inc

Biohaven Pharmaceutical Holding Co Ltd.

Insmed Inc

Spark Therapeutics, Inc.

bluebird bio, Inc.

MyoKardia Inc

Ultragenyx Pharmaceutical Inc.

We believe that the compensation practices of our 2019 peer group provided us with appropriate compensation benchmarks for evaluating the salaries, target cash bonus percentages and equity grants our named executive officers for 2020 as well as 2019 cash bonuses.

Base Salaries

For 2020, increases in base salaries for our named executive officers were approximately 3% annualized for Mr. Soni and Mr. Wilson and capped at a 10% annual increase for the other named executive officers.  

Annual Bonuses

For 2020, the compensation committee determined to increase the targets for 2020 bonuses paid to 65% for our NEOsChief Executive Officer and to 45% for all other executive officers to align the bonus opportunity more closely with the 50th percentile of the 2019 peer group.


Equity Compensation

The compensation committee reduced the number of stock options granted to each named executive officer in 2017.2020 from the number granted in 2019 by approximately 30%.  The following number of options were granted on January 2, 2020: Mr. Huff, 160,000; Mr. Soni, 50,000; Mr. Wilson, 30,000; Ms. Bir, 48,000; Dr. Meyer, 50,000; and Mr. Wortley, 48,000. With respect to Mr. Huff, 120,000 of the stock options are performance-based, and, with respect to the other executive officers, 50% of the stock options are performance-based.  With respect to one-half of the performance-based stock options, 25% of the options vest on FDA approval of omaveloxolone for the treatment of Friedreich’s ataxia, and with respect to the remaining 50% of the performance-based stock options, 25% of the options vest on FDA approval of bardoxolone methyl for the treatment of chronic kidney disease caused by Alport syndrome.  The remaining unvested performance-based options in each case vest quarterly over the next three years thereafter.  In all cases, the performance standards must be met within a certain time frame.  The stock options that are not performance-based vest quarterly over four years.

Employment Agreements

We have written employment agreements with each of our executive officers.  The agreements are described under “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards-Employment Arrangements with Our Named Executive Officers” and “Potential Payments Upon Termination or Change in Control.” The agreements with our executive officers provide for at-will employment.  Each agreement sets forth the compensation and other benefits that an executive officer is entitled to receive during employment and the severance and other benefits that an executive officer is entitled to receive in various severance scenarios and upon a change in control.  We believe these employment agreements (i) help us attract highly-qualified executive officers, (ii) help us retain these key employees and (iii) help us maintain the focus of an executive officer on our business and mitigate the distractions caused by the possibility that we may be a target of an acquisition.  Also, agreeing upon severance benefits in advance helps minimize potential disputes on termination of employment.

Employee Benefit Program

Executive officers are eligible to participate in all of our employee benefit plans, including medical, dental, vision, group life, disability and accidental death and dismemberment insurance.  In Septembereach case, participation is on the same basis as other employees, subject to applicable law, except the executive officers have additional company-paid disability insurance and are entitled to an annual Company-paid health exam.  We also provide vacation and other paid holidays to all employees, including executive officers, all of 2015,which we believe to be comparable to those provided at peer companies.  These benefit programs are designed to enable us to attract and retain our workforce in a competitive marketplace.  Reliable and competitive health, welfare and vacation benefits ensure that we have a productive and focused workforce.

The retirement savings plan for which our named executive officers are eligible is a tax-qualified retirement savings plan, or 401(k) Plan, pursuant to which the named executive officers can contribute certain amounts of their annual compensation, subject to limits prescribed by the Internal Revenue Service.  This plan was adopted in 2019.  We make matching contributions of up to 50% of the first 8% of eligible compensation contributed to the plan, with a maximum annual contribution by the Company of $3,500.  The value of this matching benefit for each of our named executive officers is reflected in the “All Other Compensation” column of the Summary Compensation Table.  All of our employees are eligible to participate in the 401(k) Plan on the same terms as the named executive officers.

Indemnification Agreements

Our amended and restated certificate of incorporation contains provisions limiting the liability of directors and our amended and restated certificate of incorporation and our second amended and restated bylaws provide that we will indemnify each of our directors and officers to the fullest extent permitted under Delaware law.  Our amended and restated certificate of incorporation and second amended and restated bylaws also provide our Board with discretion to indemnify our employees and other agents when determined appropriate by our Board.  In addition, we have entered into an indemnification agreement with each of our named executive officers NEOs and directors.


Tax and Accounting Considerations

In making compensation decisions affecting our executive officers, the compensation committee considers our ability to deduct under applicable federal corporate income tax law compensation payments made to executives.  Specifically, the compensation committee considers the requirements and impact of Section 162(m) of the Internal Revenue Code, or Code, which limits the tax deductibility to us of compensation in excess of $1.0 million in any year for certain executive officers.  For tax years beginning prior to December 31, 2017, there was an exception to this deduction limitation for qualified “performance-based compensation” as defined under the Section 162(m) rules then in effect.  Beginning with 2018, this exception was repealed and the list of executive officers covered by Section 162(m) has been expanded.  The compensation committee considers the Section 162(m) rules as a factor in determining compensation but does not limit compensation to amounts deductible under Section 162(m).

Under the Accounting Standards Codification, or ASC, Topic 718, we are required to estimate and record an expense at the measurement date for each award of equity compensation over the vesting period of the award.  Accounting rules also require us to record cash compensation as an expense at the time the obligation is incurred.

Allocation of Compensation

There is no pre-established policy or target percentage for the allocation of compensation, although a majority of an executive’s compensation will be equity awards assuming performance standards are met.  The factors described above, as well as the overall compensation philosophy, are reviewed to determine the appropriate level and mix of compensation.  In 2019, the largest portion of compensation to each of our named executive officers was in the form of equity compensation.

Risk Management and Mitigation

In reviewing the compensation structure in 2019, the compensation committee also considered how our compensation policies may affect our risk profile and how compensation policies may be used to mitigate risks facing us.  More specifically, the compensation committee considered the general design philosophy of our policies for employees whose conduct would be most affected by incentives established by compensation policies.  In considering these issues, the compensation committee believes that the use of performance-based long-term equity awards did not appear to create undue risks for us or encourage excessive risk-taking behavior on the part of employees.

With respect to bonus awards, the amount of an individual’s award depends principally on our overall corporate performance, which reduces the ability and incentive for an individual to take undue risks in an effort to increase the amount of his or her bonus award for a particular year.  For 2019, our corporate goals were reviewed and approved by the compensation committee in late 2018 and are considered to be generally of the nature that would not encourage or reward excessive risk taking.  Additionally, the compensation committee monitors our corporate performance throughout the year and has the ability to intervene in instances where our actions vis-à-vis our performance goal attainment would be considered unduly risky, so that the compensation committee may act to prevent or penalize such actions.

With respect to equity awards, these awards vest over several years, meaning that long-term value creation, contrasted with short-term gain, presents the best opportunity for employees to profit from these awards.

Compensation Committee Report

The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K.  Based on this review and discussion, the compensation committee recommended to the Board that the foregoing Compensation Discussion and Analysis be included in this proxy statement and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Submitted by the compensation committee of the Board of Directors

Jack B. Nielsen, Chairman

James E. Bass

R. Kent McGaughy, Jr.

William D. McClellan, Jr.

William E. Rose


Summary Compensation Table

The following table sets forth the compensation earned by our Chief Executive Officer, each of the two executives who were our Chief Financial Officers during 2019 and our next three highest-paid executive officers, for each year that they were deemed to be named executive officers.

Name and principal position

 

Year

 

Salary

 

 

Bonus(1)

 

 

Stock

Awards(2)

 

 

Option

Awards(3)

 

 

All Other

Compensation(4)

 

 

Total

 

J. Warren Huff

 

2019

 

$

578,500

 

 

$

600,540

 

 

 

 

 

 

$

4,346,850

 

 

$

16,715

 

 

$

5,542,605

 

Chief Executive Officer,

 

2018

 

$

534,000

 

 

$

400,500

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

934,500

 

President and Chairman of the Board

 

2017

 

$

514,000

 

 

$

385,500

 

 

$

-

 

 

$

4,215,475

 

 

$

-

 

 

$

5,114,975

 

Manmeet S. Soni (5)

 

2019

 

$

530,000

 

 

$

408,873

 

 

$

-

 

 

$

11,603,086

 

 

$

70,243

 

 

$

12,612,202

 

Chief Financial Officer and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Vice President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jason D. Wilson

 

2019

 

$

408,100

 

 

$

304,050

 

 

$

-

 

 

$

1,309,749

 

 

$

21,309

 

 

$

2,043,208

 

Executive Vice President, Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Chief Financial Officer prior to September 2019)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dawn C. Bir

 

2019

 

$

375,100

 

 

$

287,550

 

 

$

-

 

 

$

1,309,749

 

 

$

3,500

 

 

$

1,975,899

 

Chief Commercial Officer and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Vice President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colin J. Meyer, M.D.

 

2019

 

$

445,600

 

 

$

389,467

 

 

 

 

 

 

$

1,347,713

 

 

$

-

 

 

$

2,182,780

 

Chief Medical Officer and

 

2018

 

$

417,000

 

 

$

208,500

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

625,500

 

Executive Vice President, Product Development

 

2017

 

$

400,000

 

 

$

200,000

 

 

$

-

 

 

$

1,483,537

 

 

$

-

 

 

$

2,083,537

 

Michael D. Wortley

 

2019

 

$

382,800

 

 

$

341,400

 

 

$

-

 

 

$

1,309,749

 

 

$

-

 

 

$

2,033,949

 

Chief Legal Officer and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Vice President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

The amounts reported in this column represent the amount of the annual cash bonus paid to each named executive officer plus, in the case of Mr. Soni, a $150,000 sign-on bonus.

(2)

Mr. Soni received a grant of 50,000 performance-based restricted stock units on August 28, 2019, the date of the commencement of his employment.  In accordance with ASC Topic 718, the accounting cost of these restricted stock units has not been recorded in the Company’s financial statements as the outcome of the performance condition was not considered probable as of the grant date.  The value of restricted stock units, assuming the performance condition will be achieved, was $3,635,000 as of the date of grant.

(3)

The amounts reported in this column for a fiscal year represent the grant date fair value of the stock options granted to our named executive officers during the fiscal year, as computed in accordance with ASC Topic 718, not including any estimates of forfeitures.  See notes 2 and 12 of “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 19, 2020, for a discussion of assumptions made by us in determining the grant date fair value of our option awards for the fiscal year ended December 31, 2019.  The amounts reported in this column reflect the accounting cost for these stock options and do not correspond to the actual economic value that may be received by the named executive officers from the options.  In accordance with ASC Topic 718, the accounting cost of the performance-based stock options has not been recorded in the Company’s financial statements as the outcome of the performance conditions was not considered probable as of the grant date, therefore only the time-based stock options are reflected within the table above for the 2019 year.  The value of performance-based stock options not reported in this column for 2019, assuming that the highest level of performance conditions were to be achieved, is as follows: Mr. Huff, $4,346,850; Mr. Soni, $2,320,617; Mr. Wilson, $1,309,749; Ms. Bir, $1,309,749; Dr. Meyer, $1,347,713; and Mr. Wortley, $1,309,749. The performance conditions were met in 2019 for all named executives except Mr. Soni.

(4)

For Mr. Huff, the amount represents disability insurance premiums ($5,260), a Company-paid health exam ($7,955) and the Company’s 401(k) Plan matching contribution ($3,500); for Mr. Soni, the amount represents disability insurance premiums ($1,728), temporary housing costs ($46,847), relocation costs ($1,700), and travel costs ($19,968); for Mr. Wilson, the amount represents the Company’s 401(k) Plan matching contribution ($3,500), disability insurance premiums ($4,777) and a Company-paid health exam ($13,032); and for Ms. Bir, the amount represents the Company’s 401(k) Plan matching contribution.

(5)

Mr. Soni commenced employment with us on August 28, 2019.


Grants of Plan-Based Awards

The following table sets forth certain information regarding grants of plan-based awards to the named executive officers during 2019.

Name

 

Date of Grant

 

Estimated Future Payouts Under Equity Incentive Plan Awards

Target (#) (1)

 

 

Option Awards: Number of Securities Underlying Options Granted (#)

 

 

Exercise Price of Option Awards ($/Share)

 

 

Grant Date Fair Value of Stock and Option Awards ($) (2)

 

J. Warren Huff

 

1/2/2019

 

 

-

 

 

 

114,500

 

 

$

55.73

 

 

$

4,346,850

 

 

 

1/2/2019

 

 

57,250

 

 

 

-

 

 

$

55.73

 

 

$

-

 

 

 

1/2/2019

 

 

57,250

 

 

 

-

 

 

$

55.73

 

 

$

-

 

Manmeet S. Soni (3)

 

8/28/2019

 

 

-

 

 

 

250,000

 

 

$

72.70

 

 

$

11,603,086

 

 

 

8/28/2019

 

 

50,000

 

 

 

-

 

 

$

72.70

 

 

$

-

 

 

 

8/28/2019

 

 

50,000

 

 

 

-

 

 

$

-

 

 

$

-

 

Jason D. Wilson

 

1/2/2019

 

 

-

 

 

 

34,500

 

 

$

55.73

 

 

$

1,309,749

 

 

 

1/2/2019

 

 

17,250

 

 

 

-

 

 

$

55.73

 

 

$

-

 

 

 

1/2/2019

 

 

17,250

 

 

 

-

 

 

$

55.73

 

 

$

-

 

Dawn C. Bir

 

1/2/2019

 

 

-

 

 

 

34,500

 

 

$

55.73

 

 

$

1,309,749

 

 

 

1/2/2019

 

 

17,250

 

 

 

-

 

 

$

55.73

 

 

$

-

 

 

 

1/2/2019

 

 

17,250

 

 

 

-

 

 

$

55.73

 

 

$

-

 

Colin J. Meyer, M.D.

 

1/2/2019

 

 

-

 

 

 

35,500

 

 

$

55.73

 

 

$

1,347,713

 

 

 

1/2/2019

 

 

17,750

 

 

 

-

 

 

$

55.73

 

 

$

-

 

 

 

1/2/2019

 

 

17,750

 

 

 

-

 

 

$

55.73

 

 

$

-

 

Michael D. Wortley

 

1/2/2019

 

 

-

 

 

 

34,500

 

 

$

55.73

 

 

$

1,309,749

 

 

 

1/2/2019

 

 

17,250

 

 

 

-

 

 

$

55.73

 

 

$

-

 

 

 

1/2/2019

 

 

17,250

 

 

 

-

 

 

$

55.73

 

 

$

-

 

(1)

The amount represents the performance-based stock options granted to all named executive officers and performance-based restricted stock units granted to Mr. Soni under our LTIP.  The performance-based stock options are reported on two separate lines due to different performance-based vesting conditions, as described within the “Compensation Discussion and Analysis-Equity Compensation-Equity Grants in 2019”.

(2)

This column reflects the aggregate grant date fair value of stock option awards granted in 2019 as computed in accordance with ASC Topic 718, not including any estimates of forfeitures.  The assumptions used in calculating the grant date fair value of the stock option awards reported in this column are set forth in the notes to our financial statements included in our Annual Report.

(3)

Mr. Soni commenced employment with us on August 28, 2019.

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards

Employment Arrangements with Our Named Executive Officers

We have entered into employment agreements with each of the NEOs.named executive officers.  The principal features of these employment agreements are summarized below.below in the section titled “Potential Payment Upon Termination or Change in Control.”  Each agreement has an initial four yearfour-year term that will be automatically extended for successive one year periods unless either party provides written notice at least 30 days prior to the date the then current term of the agreement would otherwise end.  The agreements initially provided for initial annual salaries of at least $450,000, $325,000, and $275,000, respectively, for Mr. Huff, Dr. Meyer, and Dr. Ward, and target annual cash bonuses as a percentage of annual salary of 50%, 37% and 37%, respectively, for Mr. Huff, Dr. Meyer and Dr. Ward.bonuses.  The NEOsnamed executive officers are also able to participate in our equity incentive, retirement, welfare and other benefit plans generally provided to other executives.  The employment agreements provide that any increase in annual base salary will become the minimum annual base salary thereafter.


Outstanding Equity Awards at December 31, 2019

The following table sets forth information concerning the outstanding equity awards held by each of the named executive officers as of December 31, 2019.

 

 

 

 

Option Awards

 

Stock Awards

 

Name

 

Date of Grant

 

Number of Securities Underlying Unexercised Options (#) Exercisable

 

 

Number of Securities Underlying Unexercised Options (#) Unexercisable (1)

 

 

Equity Incentive Plan Awards: Number of Securities Underling Unexercised Unearned Options (#)(1)

 

 

Option Exercise Price ($)

 

 

Option Expiration Date

 

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(1)

 

 

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

 

J. Warren Huff

 

1/2/2019(2)

 

 

21,468

 

 

 

42,938

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

1/2/2019(3)

 

 

14,312

 

 

 

93,032

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

1/2/2019(3)

 

 

14,312

 

 

 

42,938

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

12/6/2017(2)

 

 

124,600

 

 

 

124,600

 

 

 

-

 

 

$

24.75

 

 

12/6/2027

 

 

-

 

 

$

-

 

 

 

12/7/2016(4)

 

 

119,940

 

 

 

79,960

 

 

 

-

 

 

$

22.57

 

 

12/7/2026

 

 

-

 

 

$

-

 

 

 

5/25/2016(2)

 

 

89,432

 

 

 

14,204

 

 

 

-

 

 

$

11.00

 

 

5/25/2026

 

 

-

 

 

$

-

 

Manmeet S. Soni (6)

 

8/28/2019(5)

 

 

-

 

 

 

250,000

 

 

 

-

 

 

$

72.70

 

 

8/28/2029

 

 

-

 

 

$

-

 

 

 

8/28/2019

 

 

-

 

 

 

-

 

 

 

50,000

 

 

$

72.70

 

 

8/28/2029

 

 

-

 

 

$

-

 

 

 

8/28/2019

 

 

-

 

 

 

-

 

 

 

-

 

 

$

-

 

 

8/28/2029

 

 

50,000

 

 

$

10,221,500

 

Jason D. Wilson*

 

1/2/2019(2)

 

 

6,468

 

 

 

12,938

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

1/2/2019(3)

 

 

4,312

 

 

 

12,938

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

1/2/2019(3)

 

 

4,312

 

 

 

28,032

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

12/6/2017(2)

 

 

38,348

 

 

 

38,352

 

 

 

-

 

 

$

24.75

 

 

12/6/2027

 

 

-

 

 

$

-

 

 

 

12/7/2016(4)

 

 

39,000

 

 

 

26,000

 

 

 

-

 

 

$

22.57

 

 

12/7/2026

 

 

-

 

 

$

-

 

 

 

5/25/2016(2)

 

 

22,146

 

 

 

12,735

 

 

 

-

 

 

$

11.00

 

 

5/25/2026

 

 

-

 

 

$

-

 

 

 

6/15/2013(4)

 

 

8,700

 

 

 

-

 

 

 

-

 

 

$

11.62

 

 

6/15/2023

 

 

-

 

 

$

-

 

Dawn C. Bir

 

1/2/2019(2)

 

 

6,468

 

 

 

28,032

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

1/2/2019(3)

 

 

4,312

 

 

 

12,938

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

1/2/2019(3)

 

 

4,312

 

 

 

12,938

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

12/6/2017(2)

 

 

35,648

 

 

 

35,652

 

 

 

-

 

 

$

24.75

 

 

12/6/2027

 

 

-

 

 

$

-

 

 

 

12/7/2016(4)

 

 

24,000

 

 

 

16,000

 

 

 

-

 

 

$

22.57

 

 

12/7/2026

 

 

-

 

 

$

-

 

 

 

9/6/2016(5)

 

 

121,875

 

 

 

28,125

 

 

 

-

 

 

$

21.05

 

 

9/6/2026

 

 

-

 

 

$

-

 

Colin J. Meyer, M.D.

 

1/2/2019(2)

 

 

6,654

 

 

 

13,313

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

1/2/2019(3)

 

 

4,437

 

 

 

13,313

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

1/2/2019(3)

 

 

4,437

 

 

 

28,846

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

12/6/2017(2)

 

 

43,848

 

 

 

43,852

 

 

 

-

 

 

$

24.75

 

 

12/6/2027

 

 

-

 

 

$

-

 

 

 

12/7/2016(4)

 

 

54,000

 

 

 

36,000

 

 

 

-

 

 

$

22.57

 

 

12/7/2026

 

 

-

 

 

$

-

 

 

 

5/25/2016(2)

 

 

99,432

 

 

 

14,204

 

 

 

-

 

 

$

11.00

 

 

5/25/2026

 

 

-

 

 

$

-

 

 

 

6/15/2013(4)

 

 

19,525

 

 

 

-

 

 

 

-

 

 

$

11.62

 

 

6/15/2023

 

 

-

 

 

$

-

 

Michael D. Wortley

 

1/2/2019(2)

 

 

6,468

 

 

 

12,938

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

1/2/2019(3)

 

 

4,312

 

 

 

12,938

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

1/2/2019(3)

 

 

4,312

 

 

 

28,032

 

 

 

-

 

 

$

55.73

 

 

1/2/2029

 

 

-

 

 

$

-

 

 

 

12/6/2017(2)

 

 

30,200

 

 

 

30,200

 

 

 

-

 

 

$

24.75

 

 

12/6/2027

 

 

-

 

 

$

-

 

 

 

12/7/2016(4)

 

 

37,680

 

 

 

25,120

 

 

 

-

 

 

$

22.57

 

 

12/7/2026

 

 

-

 

 

$

-

 

 

 

5/25/2016(2)

 

 

7,347

 

 

 

4,898

 

 

 

-

 

 

$

11.00

 

 

5/25/2026

 

 

-

 

 

$

-

 

 

 

4/22/2015(5)

 

 

39,184

 

 

 

-

 

 

 

-

 

 

$

17.43

 

 

4/22/2025

 

 

-

 

 

$

-

 

(1)

Mr. Soni’s performance-based stock options and performance-based restricted stock units vest as described above under “Compensation Discussion and Analysis—Equity Compensation—Equity Grants in 2019.”  Please see the section entitled “Potential Payments Upon Termination or Change in Control” for accelerated vesting provisions that apply on certain terminations of employment or a change in control.

(2)

Vest in 16 substantially equal quarterly installments over four years from the date of grant; provided that the stock options will generally only vest on such dates if the holder continues to provide services to us or our subsidiaries through the applicable vesting date, subject to the terms of the applicable award agreement and each named executive officer’s employment agreement.  Please see the section entitled “Potential Payments Upon Termination or Change in Control” for accelerated vesting provisions that apply on certain terminations of employment.”


(3)

Vest 25% upon achievement of the performance condition with the remainder vesting 1/12 on each quarterly anniversary date thereafter; provided that the stock options will generally only vest on such dates if the holder continues to provide services to us or our subsidiaries through the applicable vesting date, subject to the terms of the applicable award agreement and each named executive officer’s employment agreement.  Please see the section entitled “Potential Payments Upon Termination or Change in Control” for accelerated vesting provisions that apply on certain terminations of employment.  For awards that were originally granted as performance-based, but for which the performance conditions were satisfied as of December 31, 2019, the awards have been moved out of the “Equity Incentive Plan” column and are now treated as time-based stock option awards.  

(4)

Vest in 20 substantially equal quarterly installments over five years; provided that the stock options will generally only vest on such dates if the holder continues to provide services to us or our subsidiaries through the applicable vesting date, subject to the terms of the applicable award agreement and each named executive officer’s employment agreement.  Please see the section entitled “Potential Payments Upon Termination or Change in Control for accelerated vesting provisions that apply on certain terminations of employment.

(5)

Vest 25% on first anniversary date of grant with the remainder vesting 1/12 on each quarterly anniversary date thereafter provided that the stock options will generally only vest on such dates if the holder continues to provide services to us or our subsidiaries through the applicable vesting date, subject to the terms of the applicable award agreement and each named executive officer’s employment agreement.  Please see the section entitled “Potential Payments Upon Termination or Change in Control” for accelerated vesting provisions that apply on certain terminations of employment.

(6)

Mr. Soni commenced employment with us on August 28, 2019.

Option Exercises

The following table sets forth certain information concerning the option awards exercised for our named executive officers during 2019.

 

 

Option Awards

 

Name

 

Number of Shares

Acquired on

Exercise (#)

 

 

Value Realized

on

Exercise ($)(1)

 

Jason D. Wilson

 

 

94,531

 

 

$

9,224,263

 

Colin J. Meyer, M.D.

 

 

622

 

 

$

41,183

 

Michael D. Wortley

 

 

26,940

 

 

$

2,402,100

 

(1)

Value realized does not represent proceeds from any sale of any common stock acquired upon exercise, but is determined by multiplying the number of shares acquired upon exercise by the difference between the exercise price of the option and the market price of our class A common stock on The Nasdaq Global Select Market at the time of the exercise on each exercise event.

Pension Benefits

We do not have a defined benefit plan.  Our named executive officers did not participate in, or otherwise receive any special benefits under, any pension or defined benefit retirement plan sponsored by us during 2019 or any other time.

Nonqualified Deferred Compensation

During 2019 or any other time, our named executive officers did not contribute to, or earn any amount with respect to, any defined contribution or other plan sponsored by us that provides for the deferral of compensation committee determinedon a basis that it was appropriate to increase base salaries from $514,000is not tax-qualified.

Potential Payments Upon Termination or Change in 2017 to $534,000Control

We maintain employment agreements with each of our executive officers, including our named executive officers, that provide for potential severance and change in 2018 for Mr. Huff, $400,000 in 2017 to $417,000 in 2018 for Dr. Meyer and $360,000 in 2017 to $371,000 in 2018 for Dr. Ward. Our compensation committee also set the target annual cash bonuses for 2018 at the following percentages of base salary: 55% for Mr. Huff, 40% for Dr. Meyer and 40% for Dr. Ward, which amounts are unchanged from 2017.

control benefits.  If an NEO’sa named executive officer’s employment is terminated by us for cause or by the executive without good reason (each as defined below), the executive will receive (i) all accrued salary through the date of termination, any bonus owed for the prior year, any deferred compensation and any accrued and unused vacation pay, referred to collectively as “accrued obligations,” and (ii) all payments and benefits he or his family are entitled to receive under any of our plans, programs, policies or practices, collectively referred to as “other benefits.”

If an NEO’sa named executive officer’s employment is terminated due to a death or disability that occurs prior to, or more than two years after, a change in control (as defined below), the executive or his estate will receive (i) the accrued obligations, (ii) the other benefits, (iii) a lump sum payment equal to the executive’s current annual base salary, (iv) continuation of welfare benefits for up to 12 months following the date of termination and (v) immediate


vesting in full, and lapse of certain repurchase provisions, of any equity awards that the executive holds on the date of termination.

If an NEO’sa named executive officer’s employment is terminated by us without cause or by the executive for good reason, in either case, more than six months prior to, or more than two years after, a change in control, the executive will receive (i) the accrued obligations, (ii) the other benefits, (iii) a lump sum payment equal to the executive’s current annual base salary, (iv) continuation of welfare benefits for up to 12 months following the date of termination, and (v) for Mr. Huff, immediate vesting in full, and lapse of certain repurchase provisions, of any equity awards that the executive holds on the date of termination.termination and (vi) for Mr. Soni, the immediate vesting of the performance-based stock options and performance-based restricted stock units granted to Mr. Soni on his date of employment to the same extent as to which the time-vested stock options granted to Mr. Soni on his date of employment have vested.  Instead of the treatment described in clauseclauses (v) and (vi), outstanding, unvested equity awards held by NEOs othernamed executive officers (other than Mr. HuffHuff) and the remaining unvested equity awards held by Mr. Soni will remain outstanding and unvested and will vest as described below if and only if a change in control occurs during the six month period following the date of termination.

If an NEO’sa named executive officer’s employment is terminated by us without cause, by the executive for good reason, or due to the executive’s death or disability, in each case, within six months prior to (excluding death or disability) or within two years after a change in control, the executive will receive (i) the accrued obligations, (ii) the other benefits, (iii) a lump sum payment equal to two times the executive’s current annual base salary, (iv) continuation of welfare benefits for up to 24 months following the date of termination and (v) immediate vesting in full, and lapse of certain repurchase provisions, of any equity awards that the executive holds on the date of termination.


Receipt of the lump sum severance payments and accelerated equity vesting as applicable under the scenarios described above is subject to an NEO’sa named executive officer’s execution and non-revocation of a release of claims agreement.  The NEOsnamed executive officers are also subject to general confidentiality obligations as well as noncompete and nonsolicitation restrictions for a period of one year following their termination of employment with us for any reason.

Upon a change in control, all unvested equity awards held by Mr. Huff will immediately vest in full and certain repurchase provisions will lapse.  In addition, if an NEO’sa named executive officer’s employment continues after a change in control, any unvested equity awards held by NEOsa named executive officer other than Mr. Huff will vest 1/18 per month unless vesting otherwise occurs earlier under applicable agreements and plans.  With respect to all NEOs,named executive officers, for a period of two years following the change in control, we (or our successor) will continue to provide aggregate welfare benefits that are not materially diminished from those provided immediately prior to the change in control.

In the event that it is determined that any payments provided to the NEOsnamed executive officer will be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code because the payments are found to be contingent upon a change in ownership or control, within the meaning of Section 280G of the Internal Revenue Code, we will provide the NEOnamed executive officer with a payment such that, after payment by the NEOnamed executive officer of all taxes, penalties and interest, including any excise tax imposed pursuant to Section 4999 of the Internal Revenue Code on the gross-up payment itself, the NEOnamed executive officer retains an amount of the gross-up payment equal to the excise tax imposed.  In other words, we have an obligation to pay any excise tax imposed under Section 4999 of the Internal Revenue Code as well as any income, state or local taxes imposed on the amount paid to make the NEOnamed executive officer whole for the excise tax.  The NEOnamed executive officer will remain responsible for all other income, state and local taxes due with respect to the payment.

Under the employment agreements, “cause” generally means (i) the commission by the executive of an act of fraud upon, or willful misconduct toward, us, (ii) a material breach of the noncompete provision of the agreement or of a separate confidentiality and intellectual property agreement between us and the executive, (iii) the conviction of the executive of any felony (or a plea of nolo contendere thereto) or (iv) the executive’s addiction to alcohol, drugs or any other controlled substance.


Under the employment agreements, “good reason” generally means (i) a material diminution in base compensation, (ii) a material diminution in the executive’s authority, duties or responsibilities (including, in the case of Mr. Soni, Mr. Soni not serving as Chief Financial Officer of the Company’s successor or parent company following a change in control), (iii) a material diminution in the authority, duties or responsibilities of the supervisor to whom the executive is required to report, including having to report to an officer of a parent company following a change of control (or, in the case of Mr. Huff, the appointment of an employee to serve as Chairman of the Board), (iv) for executives other than Mr. Huff, a material diminution in the budget over which the executive retains authority, (v) a change in the geographic location at which the executive must perform services of more than 50 miles or (vi) any other action or inaction that constitutes a material breach of the agreement by us.

Amended and Restated 2007 Long Term Incentive PlanUnder the employment agreements, “change in control” means an occurrence of any of the following events:

(1)

The Company is not the surviving entity in any merger or consolidation (or survives only as a subsidiary of an entity other than a previously wholly owned subsidiary of the Company) and as a result of such merger or consolidation, stockholders of the Company immediately prior to such merger or consolidation cease to own more than 50% of the outstanding capital stock of the surviving corporation determined on a fully diluted basis;

(2)

The Company sells, leases or exchanges or agrees to sell, lease or exchange more than 50% of its assets to any other person (other than a wholly owned subsidiary of the Company);

(3)

The Company is to be dissolved and liquidated (in a dissolution taxed under Section 331 of the Internal Revenue Code of 1986, as amended, or the Code);

(4)

Any person or entity, including a “group” as contemplated by Section 13(d)(3) of the Exchange Act, acquires or gains ownership or control (including, without limitation, power to vote, directly, by merger or otherwise) of more than 50% of the outstanding shares of the Company’s voting stock (based upon voting power) and as a result of such acquisition, the stockholders holding a majority of the capital stock of the Company receive cash or marketable securities for their shares of capital stock; or

(5)

As a result of or in connection with a contested election of directors, the persons who were directors before such election will cease to consist a majority of the Board.

Our Amended and Restated 2007 Long Term Incentive Plan,Notwithstanding, the foregoing definition of change in control (other than clause (3) of such definition), a change in control shall only be deemed to occur upon a change in the ownership or 2007 LTIP, was originally adopted by our Board on October 11, 2007 and approved by our stockholders on October 16, 2007, and was last amended by our Board on September 23, 2015 (the “effective date”) and approved by our stockholders on January 4, 2016. The 2007 LTIP provides foreffective control of the discretionary grantCompany or in the ownership of a wide variety of cash and equity awards. The compensation committee of our board of directors administers the 2007 LTIP and the awards granted under the 2007 LTIP; provided, however, a subcommitteesubstantial portion of the compensation committee approves equity awards to our officers who are subject to Section 16(b)assets of the Exchange Act.


Subject to the provisionsCompany under Section 409A of the 2007 LTIP relatingCode.

Quantification of Benefits

The amount of compensation and benefits payable to any capitalization adjustments to reflect any spliteach named executive officer in various termination or change to our commonin control situations has been estimated in the tables below.  The value of the stock option and restricted stock unit vesting acceleration was calculated for each of the maximum number of sharestables below based on the assumption that the change in control and executive’s employment termination occurred on December 31, 2019.  The closing price of our common stock reserved and available for issuanceon The Nasdaq Global Select Market as of the effective date under the 2007 LTIP is 2,758,620 shares (which shares will also be available for issuance pursuant to prior awards outstanding as of the effective date). In addition, beginning January 1, 2017, on January 1 of each calendar year prior to expiration of the 2007 LTIP, the total number of shares of stock reserved and available for issuance shall automatically increase by an amount equal to 3% of the number of shares of common stock (of all classes) outstanding on the immediately preceding December 31, including2019, the last trading day of 2019, was $204.43, which was used as outstanding all securities convertible into shares of common stock on an as converted basis. However, the compensation committee may act prior to January 1 of a given year to provide that there will be no automatic increase in reserved shares for that year or that the increase for such year will be a lesser number of shares that would otherwise be provided by the automatic 3% increase. The full 3% automatic increase took effect on each of January 1, 2017 and January 1, 2018, which added 670,346 and 784,245 shares, respectively, to the number of shares of common stock reserved and available for issuance under the 2007 LTIP. The only shares that will count against the share limit under the 2007 LTIP are sharesvalue of our common stock issued in connection with awards granted on or after the effective date andchange in control.  The value of the option vesting acceleration was calculated by multiplying the number of unvested option shares subject to vesting acceleration as of December 31, 2019 by the difference between the closing price of our common stock issued in connection with awards that were outstanding under the 2007 LTIP immediately prior to such date.

On December 6, 2017, additional options were granted under the 2007 LTIP to Messrs. Huff, Meyer and Ward to purchase 249,200, 87,700 and 84,800 shares of Class B common stock, respectively. These stock options have an exercise price equal to $24.75 per share, which is no less than the fair market value of a share of our Class B common stock on the date of grant. Each stock option has a term of ten years, and vests in 16 equal quarterly installments beginning on March 6, 2018, such that 100% of each grant of stock options will be vested on the four year anniversary of the date of grant; provided that the stock options will generally only vest on such dates if the holder continues to provide services to us or our subsidiaries through the applicable vesting date, subject to the terms of the applicable award agreement and each NEO’s employment agreement.

For treatment of the NEOs’ outstanding stock options in the event of a termination of employment and change in control, please see “—Employment Agreements,” above.

401(k) Plan

We maintain a tax-qualified retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax advantaged basis. Eligible employees may defer eligible compensation subject to applicable annual Internal Revenue Code limits. The 401(k) plan permits participants to make both pre-tax and certain after-tax (Roth) deferral contributions. These contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participant’s directions. Employees are immediately and fully vested in their contributions. We do not make contributions to the 401(k) plan on behalf of our employees.

Indemnification Agreements

Our amended and restated certificate of incorporation contains provisions limiting the liability of directors, and our amended and restated certificate of incorporation and our second amended and restated bylaws provide that we will indemnify each of our directors and officers to the fullest extent permitted under Delaware law. Our amended and restated certificate of incorporation and second amended and restated bylaws also provide our Board with discretion to indemnify our employees and other agents when determined appropriate by our Board. In addition, we have entered into an indemnification agreement with each of our NEOs and directors.

Compensation Committee Report

As an emerging growth company, the Company is not required to include a Compensation Discussion and Analysis section in this proxy statement.


Equity Compensation Plan Information

The table below discloses information as of December 31, 2017,2019 and the exercise price for such unvested option shares.  No unvested stock options subject to acceleration have exercise prices above the closing market price of our common stock as of December 31, 2019.  The value of the restricted stock unit vesting acceleration was calculated by multiplying the number of unvested restricted stock units subject to vesting acceleration as of December 31, 2019 by the closing price of our common stock as of December 31, 2019.

As noted above, if it is determined that any payments to a named executive officer will be subject to the excise tax imposed by Section 4999 of the Code because the payments, called parachute payments, are found to be contingent upon a change in ownership or control, within the meaning of Section 280G of the Code, we will provide the named executive officer with a payment such that, after payment by the named executive officer of all taxes, penalties and interest, including any excise tax imposed pursuant to Section 4999 of the Code on the gross-up


payment itself, the named executive officer retains an amount of the gross-up payment equal to the excise tax imposed.  Thus, the tax gross up payment in the following tables is the amount necessary to offset any excise tax and related income taxes, penalties and interest owed by a named executive officer in connection with the termination of his or her employment in connection with a change in control.  In making the calculation, we used the following assumptions: (1) the excise tax rate under Section 4999 of the Code is 20%, the federal income tax rate is 37%, the applicable Medicare tax rate is 2.35%, and there are no applicable state or local taxes other than a state tax applicable to Mr. Soni at a rate of 5.1%; (2) no amounts will be discounted as attributable to reasonable compensation: (3) all cash payments are contingent upon a change in control; (4) the presumption required under applicable regulations that equity awards granted in 2019 were contingent upon a change in control could be rebutted; and (5) the full value of performance share awards (determined under the respective award) would constitute a parachute payment.  With respect to all named executive officers other than Mr. Huff, the vesting schedules for outstanding equity awards would be modified at the time of a change in control event that is not accompanied by a termination, although this change in vesting would not occur until the one month anniversary of the change in control event.  Assuming that such a change in control event occurred on December 31, 2019 not accompanied by a termination, none of the named executive officers (other than Mr. Huff) would have been eligible to receive vesting acceleration or a potential accompanying gross up payment on December 31, 2019.  Mr. Huff is the only named executive officer who could have received direct change in control payments with respect to his equity awards on December 31, 2019 if the change in control is not accompanied by a termination; therefore, the charts below do not assume a direct change in control benefit without a termination for any executive other than Mr. Huff.

J. Warren Huff

The following table describes the potential payments upon employment termination for J. Warren Huff, our equity compensation plansChief Executive Officer, President and outstanding stock options granted pursuant to individual compensation arrangements.

Chairman of the Board, as if his employment terminated or an applicable change in control event occurred as of December 31, 2019, the last business day of 2019.

Plan Category

 

Number of shares of

Class B common stock

to be Issued on Exercise

of Outstanding Options,

Warrants and Rights(1)

 

 

Weighted Exercise

Price of Outstanding Options,

Warrants and Rights

 

 

Number of securities

remaining available for

future issuance under

Equity Compensation

Plans (excluding

securities reflected

in the first column)(2)

 

Equity compensation plans approved by security holders:

 

 

 

 

 

 

 

 

 

Equity compensation plans not approved by security holders:

 

 

3,251,696

 

 

$

19.83

 

 

 

107,322

 

Total

 

 

3,251,696

 

 

$

19.83

 

 

 

107,322

 

Potential Payments Upon

Termination or Change of Control

 

Termination by Company with Cause or Resignation by the Executive for without Good Reason Prior to a Change in Control

 

 

Termination by Company without Cause or Resignation by the Executive for Good Reason Prior to a Change in Control (1)

 

 

Termination Due to Death or Disability Prior to a Change in Control (2)

 

 

Termination by the Company without Cause, Resignation by the Executive for Good Reason or termination due to Death or Disability, following a Change in Control (3)

 

 

Change in Control, No Termination

 

Base Salary (4)

 

$

-

 

 

$

578,500

 

 

$

578,500

 

 

$

1,157,000

 

 

$

-

 

Acceleration of equity awards (4)

 

$

-

 

 

$

66,280,753

 

 

$

66,280,753

 

 

$

66,280,753

 

 

$

66,280,753

 

Welfare and other benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical (5)

 

$

-

 

 

$

15,528

 

 

$

15,528

 

 

$

31,056

 

 

$

-

 

Health saving (6)

 

$

-

 

 

$

5,275

 

 

$

5,275

 

 

$

10,550

 

 

$

-

 

Life and disability premiums (7)

 

$

-

 

 

$

17,810

 

 

$

416

 

 

$

35,620

 

 

$

-

 

Health exam (8)

 

$

-

 

 

$

4,500

 

 

$

4,500

 

 

$

9,000

 

 

$

-

 

Paid time off (9)

 

$

133,500

 

 

$

133,500

 

 

$

133,500

 

 

$

133,500

 

 

$

-

 

Tax gross up payment

 

$

-

 

 

$

-

 

 

$

-

 

 

$

5,605,005

 

 

$

4,927,649

 

Total

 

$

133,500

 

 

$

67,035,866

 

 

$

67,018,472

 

 

$

73,262,484

 

 

$

71,208,402

 

 

(1)

Represents 3,220,350 stock options outstanding under our 2007 LTIP and 31,346 stock options granted pursuantThe termination is more than six months prior to, individual compensation arrangements. All outstanding stock options were granted with respect to shares of our Class B common stock.or more than two years after, a change in control.

(2)

RepresentsThe termination is prior to, or more than two years after, a change in control.

(3)

The termination is within six months prior to (excluding death or disability), or within two years after, a change in control.

(4)

The executive must sign a release in order to receive this benefit.

(5)

The Company will continue to pay medical, dental and vision insurance premiums, if applicable.*

(6)

The Company will continue to pay a health savings account contribution, if applicable.*

(7)

The Company will continue to pay life and disability insurance premiums, if applicable.*

(8)

The Company will continue to pay health exam costs, if applicable.  Benefit amounts are for one exam, except in the numbercase of securities remaining available under our 2007 LTIPthe last column, the benefits are for two exams.

(9)

The Company will pay the amounts in one lump sum payment.

*

Benefit amounts are for 12 months, except in the case of last column, the benefits are for 24 months.


Manmeet S. Soni

The following table describes the potential payments upon employment termination for Manmeet S. Soni, our Chief Financial Officer and Executive Vice President, as if his employment terminated as of December 31, 2019, the last business day of 2019.

Potential Payments Upon

Termination or Change of Control

 

Termination by Company with Cause or Resignation by the Executive for without Good Reason Prior to a Change in Control

 

 

Termination by Company without Cause or Resignation by the Executive for Good Reason Prior to a Change in Control (1)

 

 

Termination Due to Death or Disability Prior to a Change in Control (2)

 

 

Termination by the Company without Cause, Resignation by the Executive for Good Reason or termination due to Death or Disability, following a Change in Control (3)

 

Base Salary (4)

 

$

-

 

 

$

530,000

 

 

$

530,000

 

 

$

1,060,000

 

Acceleration of equity awards (4)

 

$

-

 

 

$

-

 

 

$

49,740,500

 

 

$

49,740,500

 

Welfare and other benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical (5)

 

$

-

 

 

$

22,504

 

 

$

22,504

 

 

$

45,008

 

Health saving (6)

 

$

-

 

 

$

5,275

 

 

$

5,275

 

 

$

10,550

 

Life and disability premiums (7)

 

$

-

 

 

$

17,056

 

 

$

416

 

 

$

34,112

 

Health exam (8)

 

$

-

 

 

$

4,500

 

 

$

4,500

 

 

$

9,000

 

Paid time off (9)

 

$

17,635

 

 

$

17,635

 

 

$

17,635

 

 

$

17,635

 

Tax gross up payment

 

$

-

 

 

$

-

 

 

$

-

 

 

$

14,150,945

 

Total

 

$

17,635

 

 

$

596,970

 

 

$

50,320,830

 

 

$

65,067,750

 

(1)

The termination is more than six months prior to, or more than two years after, a change in control.

(2)

The termination is prior to, or more than two years after, a change in control.

(3)

The termination is within six months prior to (excluding death or disability), or within two years after, a change in control.  As noted above, in the event of a change in control event without an accompanying termination, the vesting schedule of outstanding equity awards would begin vesting the awards each month following the change in control event.  This could potentially result in the named executive officer becoming eligible for an additional gross-up payment at some point in the future following that change in control event.  If 100% of the named executive officer’s equity were to vest on December 31, 2017. Beginning January 1, 2017, on January 12019 (rather than over time), the amount of each calendar yearthe executive’s potential gross-up payment relating to that acceleration would be $13,493,151.

(4)

The executive must sign a release in order to receive this benefit.

(5)

The Company will continue to pay medical, dental and vision insurance premiums, if applicable.*

(6)

The Company will continue to pay a health savings account contribution, if applicable.*

(7)

The Company will continue to pay life and disability insurance premiums, if applicable.*

(8)

The Company will continue to pay health exam costs, if applicable.  Benefit amounts are for one exam, except in the case of the last column, the benefits are for two exams.

(9)

The Company will pay the amounts in one lump sum payment.

*

Benefit amounts are for 12 months, except in the case of last column, the benefits are for 24 months.


Jason D. Wilson

The following table describes the potential payments upon employment termination for Jason D. Wilson, our Executive Vice President, Operations, as if his employment terminated as of December 31, 2019, the last business day of 2019.

Potential Payments Upon

Termination or Change of Control

 

Termination by Company with Cause or Resignation by the Executive for without Good Reason Prior to a Change in Control

 

 

Termination by Company without Cause or Resignation by the Executive for Good Reason Prior to a Change in Control (1)

 

 

Termination Due to Death or Disability Prior to a Change in Control (2)

 

 

Termination by the Company without Cause, Resignation by the Executive for Good Reason or termination due to Death or Disability, following a Change in Control (3)

 

Base Salary (4)

 

$

-

 

 

$

408,100

 

 

$

408,100

 

 

$

816,200

 

Acceleration of equity awards (4)

 

$

-

 

 

$

-

 

 

$

22,098,898

 

 

$

22,098,898

 

Welfare and other benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical (5)

 

$

-

 

 

$

22,786

 

 

$

22,786

 

 

$

45,572

 

Health saving (6)

 

$

-

 

 

$

5,275

 

 

$

5,275

 

 

$

10,550

 

Life and disability premiums (7)

 

$

-

 

 

$

17,420

 

 

$

416

 

 

$

34,840

 

Health exam (8)

 

$

-

 

 

$

4,500

 

 

$

4,500

 

 

$

9,000

 

Paid time off (9)

 

$

23,544

 

 

$

23,544

 

 

$

23,544

 

 

$

23,544

 

Tax gross up payment

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,912,882

 

Total

 

$

23,544

 

 

$

481,625

 

 

$

22,563,519

 

 

$

24,951,486

 

(1)

The termination is more than six months prior to, expirationor more than two years after, a change in control.

(2)

The termination is prior to, or more than two years after, a change in control.

(3)

The termination is within six months prior to (excluding death or disability), or within two years after, a change in control.  As noted above, in the event of a change in control event without an accompanying termination, the vesting schedule of outstanding equity awards would begin vesting the awards each month following the change in control event.  This could potentially result in the named executive officer becoming eligible for an additional gross-up payment at some point in the future following that change in control event.  If 100% of the 2007 LTIP,named executive officer’s equity were to vest on December 31, 2019 (rather than over time), the total number of shares of stock reserved and available for issuance shall automatically increase by an amount equal to 3% of the numberexecutive’s potential gross-up payment relating to that acceleration would be $1,450,542.

(4)

The executive must sign a release in order to receive this benefit.

(5)

The Company will continue to pay medical, dental and vision insurance premiums, if applicable.*

(6)

The Company will continue to pay a health savings account contribution, if applicable.*

(7)

The Company will continue to pay life and disability insurance premiums, if applicable.*

(8)

The Company will continue to pay health exam costs, if applicable.  Benefit amounts are for one exam, except in the case of sharesthe last column, the benefits are for two exams.

(9)

The Company will pay the amounts in one lump sum payment.

*

Benefit amounts are for 12 months, except in the case of common stock (of all classes)last column, the benefits are for 24 months.


Dawn C. Bir

The following table describes the potential payments upon employment termination for Dawn C. Bir, our Chief Commercial Officer and Executive Vice President, as if her employment terminated as of December 31, 2019, the last business day of 2019.

Potential Payments Upon

Termination or Change of Control

 

Termination by Company with Cause or Resignation by the Executive for without Good Reason Prior to a Change in Control

 

 

Termination by Company without Cause or Resignation by the Executive for Good Reason Prior to a Change in Control (1)

 

 

Termination Due to Death or Disability Prior to a Change in Control (2)

 

 

Termination by the Company without Cause, Resignation by the Executive for Good Reason or termination due to Death or Disability, following a Change in Control (3)

 

Base Salary (4)

 

$

-

 

 

$

375,100

 

 

$

375,100

 

 

$

750,200

 

Acceleration of equity awards (4)

 

$

-

 

 

$

-

 

 

$

22,489,393

 

 

$

22,489,393

 

Welfare and other benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical (5)

 

$

-

 

 

$

22,786

 

 

$

22,786

 

 

$

45,572

 

Health saving (6)

 

$

-

 

 

$

5,275

 

 

$

5,275

 

 

$

10,550

 

Life and disability premiums (7)

 

$

-

 

 

$

15,886

 

 

$

416

 

 

$

31,772

 

Health exam (8)

 

$

-

 

 

$

4,500

 

 

$

4,500

 

 

$

9,000

 

Paid time off (9)

 

$

58,144

 

 

$

58,144

 

 

$

58,144

 

 

$

58,144

 

Tax gross up payment

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,842,428

 

Total

 

$

58,144

 

 

$

481,691

 

 

$

22,955,614

 

 

$

25,237,059

 

(1)

The termination is more than six months prior to, or more than two years after, a change in control.

(2)

The termination is prior to, or more than two years after, a change in control.

(3)

The termination is within six months prior to (excluding death or disability), or within two years after, a change in control.  As noted above, in the event of a change in control event without an accompanying termination, the vesting schedule of outstanding onequity awards would begin vesting the immediately precedingawards each month following the change in control event.  This could potentially result in the named executive officer becoming eligible for an additional gross-up payment at some point in the future following that change in control event.  If 100% of the named executive officer’s equity were to vest on December 31, including as outstanding all securities convertible into shares2019 (rather than over time), the amount of common stock on an as converted basis. The compensation committee retains the authorityexecutive’s potential gross-up payment relating to determine that there willacceleration would be no increase or a lesser increase in reversed shares for any year.$1,397,047.

(4)

The executive must sign a release in order to receive this benefit.

(5)

The Company will continue to pay medical, dental and vision insurance premiums, if applicable.*

(6)

The Company will continue to pay a health savings account contribution, if applicable.*

(7)

The Company will continue to pay life and disability insurance premiums, if applicable.*

(8)

The Company will continue to pay health exam costs, if applicable.  Benefit amounts are for one exam, except in the case of the last column, the benefits are for two exams.

(9)

The Company will pay the amounts in one lump sum payment.

*

Benefit amounts are for 12 months, except in the case of last column, the benefits are for 24 months.


Our only equity compensation plan isColin J. Meyer, M.D.

The following table describes the 2007 LTIP. potential payments upon employment termination for Colin J. Meyer, M.D., our Chief Medical Officer and Executive Vice President, Product Development as if his employment terminated as of December 31, 2019, the last business day of 2019.

Potential Payments Upon

Termination or Change of Control

 

Termination by Company with Cause or Resignation by the Executive for without Good Reason Prior to a Change in Control

 

 

Termination by Company without Cause or Resignation by the Executive for Good Reason Prior to a Change in Control (1)

 

 

Termination Due to Death or Disability Prior to a Change in Control (2)

 

 

Termination by the Company without Cause, Resignation by the Executive for Good Reason or termination due to Death or Disability, following a Change in Control (3)

 

Base Salary (4)

 

$

-

 

 

$

445,600

 

 

$

445,600

 

 

$

891,200

 

Acceleration of equity awards (4)

 

$

-

 

 

$

-

 

 

$

25,422,453

 

 

$

25,422,453

 

Welfare and other benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical (5)

 

$

-

 

 

$

22,786

 

 

$

22,786

 

 

$

45,572

 

Health saving (6)

 

$

-

 

 

$

5,275

 

 

$

5,275

 

 

$

10,550

 

Life and disability premiums (7)

 

$

-

 

 

$

15,990

 

 

$

416

 

 

$

31,980

 

Health exam (8)

 

$

-

 

 

$

4,500

 

 

$

4,500

 

 

$

9,000

 

Paid time off (9)

 

$

102,831

 

 

$

102,831

 

 

$

102,831

 

 

$

102,831

 

Tax gross up payment

 

$

-

 

 

$

-

 

 

$

-

 

 

$

2,176,501

 

Total

 

$

102,831

 

 

$

596,982

 

 

$

26,003,861

 

 

$

28,690,087

 

(1)

The termination is more than six months prior to, or more than two years after, a change in control.

(2)

The termination is prior to, or more than two years after, a change in control.

(3)

The termination is within six months prior to (excluding death or disability), or within two years after, a change in control.  As noted above, in the event of a change in control event without an accompanying termination, the vesting schedule of outstanding equity awards would begin vesting the awards each month following the change in control event.  This could potentially result in the named executive officer becoming eligible for an additional gross-up payment at some point in the future following that change in control event.  If 100% of the named executive officer’s equity were to vest on December 31, 2019 (rather than over time), the amount of the executive’s potential gross-up payment relating to that acceleration would be $1,639,658.

(4)

The executive must sign a release in order to receive this benefit.

(5)

The Company will continue to pay medical, dental and vision insurance premiums, if applicable.*

(6)

The Company will continue to pay a health savings account contribution, if applicable.*

(7)

The Company will continue to pay life and disability insurance premiums, if applicable.*

(8)

The Company will continue to pay health exam costs, if applicable.  Benefit amounts are for one exam, except in the case of the last column, the benefits are for two exams.

(9)

The Company will pay the amounts in one lump sum payment.

*

Benefit amounts are for 12 months, except in the case of last column, the benefits are for 24 months.


Michael D. Wortley

The 2007 LTIP was originally adopted byfollowing table describes the potential payments upon employment termination for Michael D. Wortley, our boardChief Legal Officer and Executive Vice President, as if his employment terminated as of directors on October 11, 2007, and approved by our stockholders on October 16, 2007, and wasDecember 31, 2019, the last amended by our boardbusiness day of directors on September 23, 2015 and approved by our stockholders on January 4, 2016, prior to our initial public offering. A description of the material terms of the 2007 LTIP is available in our prospectus dated May 25, 2016, filed with the SEC pursuant to Rule 424(b)(4) of the Securities Act under the heading “Executive CompensationAmended and restated 2007 Long Term Incentive Plan.”2019.

Potential Payments Upon

Termination or Change of Control

 

Termination by Company with Cause or Resignation by the Executive for without Good Reason Prior to a Change in Control

 

 

Termination by Company without Cause or Resignation by the Executive for Good Reason Prior to a Change in Control (1)

 

 

Termination Due to Death or Disability Prior to a Change in Control (2)

 

 

Termination by the Company without Cause, Resignation by the Executive for Good Reason or termination due to Death or Disability, following a Change in Control (3)

 

Base Salary (4)

 

$

-

 

 

$

382,800

 

 

$

382,800

 

 

$

765,600

 

Acceleration of equity awards (4)

 

$

-

 

 

$

-

 

 

$

18,958,199

 

 

$

18,958,199

 

Welfare and other benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical (5)

 

$

-

 

 

$

1,610

 

 

$

1,610

 

 

$

3,220

 

Health saving (6)

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Life and disability premiums (7)

 

$

-

 

 

$

13,884

 

 

$

416

 

 

$

27,768

 

Health exam (8)

 

$

-

 

 

$

4,500

 

 

$

4,500

 

 

$

9,000

 

Paid time off (9)

 

$

73,615

 

 

$

73,615

 

 

$

73,615

 

 

$

73,615

 

Tax gross up payment

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1,726,001

 

Total

 

$

73,615

 

 

$

476,409

 

 

$

19,421,140

 

 

$

21,563,403

 

(1)

The termination is more than six months prior to, or more than two years after, a change in control.

(2)

The termination is prior to, or more than two years after, a change in control.

(3)

The termination is within six months prior to (excluding death or disability), or within two years after, a change in control.  As noted above, in the event of a change in control event without an accompanying termination, the vesting schedule of outstanding equity awards would begin vesting the awards each month following the change in control event.  This could potentially result in the named executive officer becoming eligible for an additional gross-up payment at some point in the future following that change in control event.  If 100% of the named executive officer’s equity were to vest on December 31, 2019 (rather than over time), the amount of the executive’s potential gross-up payment relating to that acceleration would be $1,293,428.

(4)

The executive must sign a release in order to receive this benefit.

(5)

The Company will continue to pay medical, dental and vision insurance premiums, if applicable.*

(6)

The Company will continue to pay a health savings account contribution, if applicable.*

(7)

The Company will continue to pay life and disability insurance premiums, if applicable.*

(8)

The Company will continue to pay health exam costs, if applicable.  Benefit amounts are for one exam, except in the case of the last column, the benefits are for two exams.

(9)

The Company will pay the amounts in one lump sum payment.

*

Benefit amounts are for 12 months, except in the case of last column, the benefits are for 24 months.


DIRECTOR COMPENSATION

2017 Director Compensation

The following table sets forth a summary of the compensation we paid to our non-employee directors during 2017.2019.  Mr. Huff, our director who also serves as our Chief Executive Officer, did not receive any additional compensation for his service as a director.  The compensation received by Mr. Huff as an employee during 20172019 is presented in “Executive Compensation – Compensation—Summary Compensation Table.”

Name

 

Fees Earned or Paid in Cash ($)(1)

 

Option Awards ($)(1)

 

Total ($)

 

Fees Earned or

Paid in Cash($)(1)

 

 

 

Option

Awards ($)(1)

 

 

Total ($)

 

James E. Bass

 

55,616(2)

 

104,749

 

160,365

 

 

61,333

 

(2)

 

 

518,306

 

 

 

579,639

 

William D. McClellan, Jr.(3)

 

49,625

 

328,146

 

377,771

 

 

81,000

 

 

 

 

518,306

 

 

 

599,306

 

R. Kent McGaughy, Jr.

 

55,605(4)

 

104,749

 

160,354

 

 

51,370

 

(3)

 

 

518,306

 

 

 

569,676

 

Jack B. Nielsen

 

124,818(5)

 

204,306

 

329,854

 

 

93,468

 

(4)

 

 

518,306

 

 

 

611,774

 

William E. Rose

 

51,118(6)

 

104,749

 

155,867

 

 

56,323

 

(5)

 

 

518,306

 

 

 

574,629

 

Dennis Stone, M.D.(7)

 

9,313

 

 

9,313

 

(1)

The amounts reported in the Fees Earned or Paid in Cash column include both director fees paid in cash and, where applicable, the fair value of stock options issued in lieu of cash director fees pursuant to an election made by the director to receive stock options in lieu of cash director fees.  The amounts reported in the Option Awards column include the fair value of stock options issued to directors that were not issued in lieu of cash director fees.  The stock options were granted in accordance with the Second Amended and Restated Non-Employee Directors Compensation Policy discussed below and pursuant to our 2007 LTIP.  The amounts attributable to stock options reported in the Fees Earned or Paid in Cash column and the Option Awards column represent the grant date fair value of the stock options granted to our non-employee directors during 20172019 as computed in accordance with ASC Topic 718, not including any estimated forfeitures.  See notes 2 and 1112 of “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2017,2019, filed with the SEC on March2, 2018,February 19, 2020, for a discussion of assumptions made by us in determining the grant date fair value of our option awards for the fiscal year ended December 31, 2017.2019.  Note that amounts reported in these columns attributable to stock options reflect the accounting cost for these stock options and do not correspond to actual economic value that may be received by the directors from the stock options.  As of December 31, 2017,2019, Mr. Bass had 13,68432,442 stock options outstanding, Mr. McClellan Jr. had 19,50036,500 stock options outstanding, Mr. McGaughy Jr. had 17,95837,694 stock options outstanding, Mr. Nielsen had 18,38340,290 stock options outstanding, and Mr. Rose had 16,68636,622 stock options outstanding.

(2)

Includes 1,0521,065 stock options issued to Mr. Bass in lieu of $18,375$61,375 in director fees.

(3)

Includes 892 stock options issued to Mr. McClellan, Jr. was appointed to the Board on March 1, 2017.McGaughy in lieu of $51,375 in director fees.

(4)

Includes 3,1851,623 stock options issued to Mr. McGaughy, Jr.Nielsen in lieu of $55,625$93,500 in director fees.

(5)

Includes 6,383 stock options issued to Mr. Nielsen in lieu of $105,625 in director fees.

(6)

Includes 2,928978 stock options issued to Mr. Rose in lieu of $51,125$56,375 in directorsdirector fees.

(7)

Dr. Stone resigned from the Board on March 1, 2017.


Director Compensation Arrangements

On December 7, 2016,The Second Amended and Restated Non-Employee Director Compensation Policy, which was approved by the compensation committee and board of directors approved the Non-Employee Director Compensation Policy. The Non-Employee Director Compensation PolicyBoard in December 2018, provides the following compensation for non-employee directors beginning in 2017:directors:

an annual grant of 6,0009,000 stock options at the first regular Board meeting following each annual meeting of stockholders that vests in four equal quarterly installments;

upon a new non-employee director’s initial election or appointment, a one-time grant of 12,00018,000 stock options that vests in three equal annual installments, and, if such new non-employee director was not first elected or appointed at our annual meeting of stockholders, then a pro-rated grant of the annual award of stock options (described in the preceding bullet) equal to 6,0009,000 multiplied by a fraction, the numerator of which is the number of meetings of our board of directors remaining until (and including) the first regular board meeting after the next annual meeting of stockholders and the denominator of which is four, which will vest in the number of equal quarterly installments that is equal to the number of the remaining meetings of the board of directors following the grant through (and including) the first regular board meeting after the next annual meeting of stockholders;

a director fee of $37,250$38,000 per year;year ($40,000 per year beginning with the second regular board of directors meeting held after the 2019 annual meeting of stockholders);

a lead director fee of $20,000 per year;


a compensation committee member fee of $6,375 per year, an audit committee member fee of $7,500 per year and a nominating and corporate governance committee member fee of $4,500 per year; and

a compensation committee member fee of $6,375 per year, an audit committee member fee of $7,500 per year ($10,000 per year beginning with the second regular board of directors meeting held after the 2019 annual meeting of stockholders) and a nominating and corporate governance committee member fee of $4,500 per year ($5,000 per year beginning with the second regular board of directors meeting held after the 2019 annual meeting of stockholders); and

a compensation committee chairman fee of $5,875$7,125 per year, an audit committee chairman fee of $25,000 per year and a nominating and corporate governance committee chairman fee of $3,000$3,500 per year.year ($5,000 per year beginning with the second regular board of directors meeting held after the 2019 annual meeting of stockholders).

On December 6, 2017,11, 2019, the compensation committee and board of directors approved anthe Third Amended and Restated Non-Employee Director Compensation Policy that changed some of the annual cash fees, beginning with the second regular board of directors meeting held after the 20182020 annual meeting of stockholders, the annual grant of stock options, beginning with the first regular board of directors meeting held after the 2020 annual meeting of stockholders and the annualinitial grant of stock options to a new director as follows;follows: the annual director fee will be $38,000,$45,000, the annual lead independent director fee will be $25,000, the annual compensation committee member fee will be $7,500, the annual chairman of the compensation committee fee will be $7,125, the annual chairman of the nominating and corporate governance committee fee will be $3,500,$7,500 and the annual grant of stock options will be 8,0006,300 stock options.  In addition, effective December 6, 2017,11, 2019, upon a new non-employee director’s initial election or appointment, the one-time grant will be 16,00010,000 stock options.

In lieu of future receipt of any or all of the above cash fees, a director may elect to receive an annual grant of stock options with a Black-Scholes value equal to the forfeited cash compensation.  The vesting schedule for these stock options will be the same as the vesting schedule applicable to the regular annual stock compensation grant.  Each member of our Board is also entitled to be reimbursed for reasonable travel and other expenses incurred in conjunction with attending Board and committee meetings.

Indemnification Agreements

Our directors are indemnified by us as described under “Executive Compensation—“Compensation Discussion and Analysis—Indemnification Agreements.”


CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

In addition to the director and executive compensation arrangements discussed above, this section describes transactions since January 1, 2017,2019, to which we have been or will be a participant, in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or holders of more than 5% of any class of our voting stock, or any member of the immediate family of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.

Registration Rights Agreement

We have entered into an amended and restated registration rights agreement with certain of our stockholders, providing for certain rights and restrictions relating to the registration of offers and sales of shares of our common stock.  Holders of more than 67% of the registerable shares, which we refer to as the initiating holders, may twice request that we register at least 50% of the registerable shares held by all holders of registration rights, or a lesser number of shares if the aggregate price to the public of the offering (net of underwriter discounts) will be at least $5,000,000.  Furthermore, if Form S-3 is available for an offering by the initiating holders, the initiating holders may request that we affect an unlimited number of registrations on Form S-3 at an aggregate offering price of at least $1,000,000 per registration on Form S-3.  In addition, the holders of registrable securities have piggyback registration rights if we determine to register any equity securities for our own account or the account of another security holder.  We will pay the registration expenses, other than underwriting fees, discounts or commissions, of the shares registered pursuant to the registrations described above but limited to four registrations on Form S-3.  The amended and restated registration rights agreement terminates with respect to any holder who is permitted to sell, within a 90-day period, all of such holder’s registrable shares in compliance with Rule 144.

The following of our directors and executive officers are parties to the amended and restated registration rights agreement:

J. Warren Huff

R. Kent McGaughy, Jr.

Colin J. Meyer, M.D.

The following persons, or groups of affiliated persons, known by us to beneficially own more than 5% of our shares of Class A common stock are parties to the amended and restated registration rights agreement:

R. Kent McGaughy, Jr.

James W. Traweek, Jr.

Evelyn P. Rose Survivors Trust

J. Warren Huff

During 2017, the amended and restated registration rights agreement terminated with respect to Novo A/S due to the sale of all its registerable shares.

AbbVie Collaboration

During the year ended December 31, 2017, we recorded revenue related to our collaboration agreement with AbbVie Ltd. of $45,067,000 related to the recognition of deferred revenue from upfront, nonrefundable payments that we received in prior years from AbbVie.


Purchase of Novo A/S Stock

In June 2017,November 2019, certain funds managed by Mr. McGaughy, Jr.a director of the Company and a more than 5% beneficial owner of our common stock, and Mr. James W. Traweek, then a more than 5% beneficial owner of our common stock, purchased 742,289in the aggregate 40,128 shares of Classour class A Common Stock and 457,711 sharescommon stock from the Company’s underwriters, for an aggregate purchase price of Class B Common Stock from Novo A/S for a total of $30,000,000. Mr. Rose indirectly provided a portion of the purchase price. As part of the transaction all holders of registration rights agreed to waive registration rights$7,360,000, in connection with the Form S-3 registration statement that we filed withCompany’s public offering of class A common stock.  Our nominating and corporate governance committee reviewed the SEC in June 2017,facts and Novo A/S agreedbenefits of the purchase to certain lock-up provisions with us that restricted further sales of Novo A/S’s remaining shares of common stock for a certain time. Mr. Nielsen also had a pecuniary interest inthe Company and ratified the transaction through interests obtained as an employee of Novo A/S.under our Related Persons Transaction Policy.

Related Persons Transaction Policy

We have adopted a related persons transaction policywritten Related Persons Transaction Policy that sets forth our procedures for the identification, review, consideration and approval or ratification of related person transactions.  For purposes of our policy only, a related person transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which the amount involved exceeds $120,000, in which we are a participant and in which any related person has a direct or indirect interest.  A related person is any senior officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and any entity owned or controlled by such persons.


Upon entering into a related person transaction, our nominating and corporate governance committee will review the material facts of the related person transaction and approve or ratify our entry into the related person transaction, unless such related person transaction falls into one of the categories of transactions that the nominating and corporate governance committee has pre-approved, such as compensation of Board members and executive officers, thatwhich is approved by our compensation committee or the Board.  Generally, transactions involving compensation for services provided to a related person, such as an employee and director are pre-approved under the policy.

In addition, under our Code of Ethics and Business Conduct, our employees and directors have an affirmative responsibility to disclose to our nominating and corporate governance committee any transaction or relationship that reasonably could have been expected to give rise to a conflict of interest.interest involving a director or executive officer of the Company.

In determining whether to approve or ratify a related person transaction, the nominating and corporate governance committee will consider:

whether there is an appropriate business justification for the transaction;

the benefits that accrue to us as a result of the transaction;

whether the related person transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances;

the extent of the related person’s interest in the transaction;

whether the related person transaction is material to us;

the effect of the transaction on a director’s independence (if the related person is a director, an immediate family member of a director or an entity in which a director is a partner, stockholder or executive officer);

the availability of other sources for comparable products or services;

whether it is a single transaction or a series of ongoing related transactions; and

whether entering into the transaction would be consistent with our Code of Ethics and Business Conduct.

All of the transactionsThe registration rights transaction described above except for the Novo A/S stock sale transaction, werewas entered into prior to the adoption of the related persons transaction policy, but all werewas approved by our board of directorsBoard considering similar factors to those described above. The nominating and corporate governance committee approved the Novo A/S stock sale transaction.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the beneficial ownership of our Class A common stock and our Class B common stock as of April 19, 2018,16, 2020, by:

each of our named executive officers;

each of our directors;

all of our directors and executive officers as a group; and

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding shares of Class A common stock or Class B common stock.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power.  Shares of common stock issuable under options or warrants that are exercisable within 60 days after April 19, 2018,16, 2020, are deemed beneficially owned and such shares are used in computing the percentage ownership of the person holding the options or warrants but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.  The information contained in the following table is not necessarily indicative of beneficial ownership for any other purpose, and the inclusion of any shares in the table does not constitute an admission of beneficial ownership of those shares.

Unless otherwise indicated below, to our knowledge, and subject to applicable community property laws, all persons named in the table have sole voting and dispositive power with respect to their shares of common stock, except to the extent authority is shared by spouses under community property laws.

Our calculation of the percentage of beneficial ownership is based on 19,991,08228,166,712 shares of Class A common stock and 6,171,5175,070,211 shares of our Class B common stock outstanding as of April 19, 2018.16, 2020.  Our calculation of beneficial ownership of Class A common stock includes shares of Class B common stock because the shares of Class B common stock are immediately convertible into shares of Class A common stock.


Unless otherwise indicated below, the address of each beneficial owner listed in the table below is c/o Reata Pharmaceuticals, Inc., 2801 Gateway5320 Legacy Drive, Suite 150, Irving, Texas 75063.Plano, TX 75024.

Name of Beneficial Owner

 

Number of Shares of

Common Stock Beneficially

Owned

 

 

Percentage of Shares of

Common Stock Beneficially

Owned

 

 

Percentage of

Voting Power

 

 

 

Class A(a)

 

 

Class B

 

 

Class A(a)

 

 

Class B

 

 

 

 

 

5% Stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R. Kent McGaughy, Jr.(1)

   c/o CPMG, Inc.

   2000 McKinney Ave, Ste 2125

   Dallas TX 75201

 

 

5,018,943

 

 

 

2,073,806

 

 

 

22.7

%

 

 

33.5

%

 

 

23.8

%

James W. Traweek, Jr.(2)

   c/o CPMG, Inc.

   2000 McKinney Ave, Ste 2125

   Dallas TX 75201

 

 

4,940,387

 

 

 

2,000,245

 

 

 

22.5

%

 

 

32.4

%

 

 

23.2

%

CPMG, Inc.(3)

   2000 McKinney Ave, Ste 2125

   Dallas TX 75201

 

 

4,605,380

 

 

 

1,692,857

 

 

 

21.2

%

 

 

27.4

%

 

 

20.8

%

Charles E. Gale(4)

   c/o Cardinal Investment Company, Inc.

   3963 Maple Ave, Ste 200,

   Dallas TX 75219

 

 

2,787,007

 

 

 

1,894,180

 

 

 

12.7

%

 

 

30.7

%

 

 

17.1

%

Evelyn P. Rose(5)

   c/o Cardinal Investment Company, Inc.

   3963 Maple Ave, Ste 200,

   Dallas TX 75219

 

 

2,041,395

 

 

 

1,965,774

 

 

 

9.3

%

 

 

31.9

%

 

 

15.5

%

Evelyn P. Rose Survivors Trust(6)

   c/o Cardinal Investment Company, Inc.

   3963 Maple Ave, Ste 200,

   Dallas TX 75219

 

 

1,945,733

 

 

 

1,877,998

 

 

 

8.9

%

 

 

30.4

%

 

 

14.8

%

William E. Rose (7)

   c/o Cardinal Investment Company, Inc.

   3963 Maple Ave, Ste 200,

   Dallas TX 75219

 

 

1,246,501

 

 

 

234,477

 

 

 

6.2

%

 

 

3.8

%

 

 

4.4

%

BlackRock Inc. (8)

   55 East 52nd Street.

   New York NY 10055

 

 

1,203,993

 

 

 

0

 

 

 

6.0

%

 

 

0

%

 

 

3.1

%

J. Warren Huff(9)

   c/o Reata Pharmaceuticals, Inc.

   2801 Gateway Dr, Ste 150,

   Irving TX 75063

 

 

1,063,801

 

 

 

883,978

 

 

 

5.1

%

 

 

14.0

%

 

 

7.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Directors and Executive Officers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James E. Bass(10)

 

 

123,796

 

 

 

13,684

 

 

 

*

 

 

*

 

 

*

 

J. Warren Huff(9)

 

 

1,063,801

 

 

 

883,978

 

 

 

5.1

%

 

 

14.0

%

 

 

7.3

%

William D. McClellan, Jr.(11)

 

 

11,500

 

 

 

11,500

 

 

 

*

 

 

 

*

 

 

 

*

 

R. Kent McGaughy, Jr.(1)

 

 

5,018,943

 

 

 

2,073,806

 

 

 

22.7

%

 

 

33.5

%

 

 

23.8

%

Colin J. Meyer, M.D.(12)

 

 

271,084

 

 

 

243,912

 

 

 

1.3

%

 

3.9

%

 

2.0

%

Jack Nielsen(13)

 

 

20,163

 

 

 

18,383

 

 

*

 

 

*

 

 

*

 

William E. Rose(7)

 

 

1,246,501

 

 

 

234,477

 

 

 

6.2

%

 

 

3.8

%

 

 

4.4

%

Keith W. Ward, Ph.D (14)

 

 

184,215

 

 

 

184,215

 

 

 

*

 

 

 

2.9

%

 

 

1.4

%

All executive officers and directors as a group (11 persons)(15)

 

 

8,291,815

 

 

 

4,009,997

 

 

 

34.5

%

 

 

57.6

%

 

 

39.9

%

 

 

Number of Shares of

 

 

Percentage of Shares of

 

 

 

 

 

 

 

Common Stock Beneficially

 

 

Common Stock Beneficially

 

 

Percentage of

 

Name of Beneficial Owner

 

Owned

 

 

Owned

 

 

Voting Power

 

 

 

Class A(a)

 

 

Class B

 

 

Class A(a)

 

 

Class B

 

 

 

 

 

5% Stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R. Kent McGaughy, Jr.(1)

   c/o CPMG, Inc.

   2000 McKinney Ave, Ste 2125

   Dallas TX 75201

 

 

5,189,723

 

 

 

2,063,064

 

 

 

17.2

%

 

 

40.4

%

 

 

21.4

%

CPMG, Inc.(2)

   2000 McKinney Ave, Ste 2125

   Dallas TX 75201

 

 

4,756,424

 

 

 

1,692,857

 

 

 

15.9

%

 

 

33.4

%

 

 

18.8

%

William E. Rose(3)

   c/o Cardinal Investment Company, Inc.

   3963 Maple Ave, Ste 200,

   Dallas TX 75219

 

 

3,212,170

 

 

 

2,132,411

 

 

 

10.6

%

 

 

41.8

%

 

 

17.2

%

Wellington Management Group LLP(4)

   c/o Wellington Management Company LLP

   280 Congress Street

   Boston MA 02210

 

 

3,020,924

 

 

 

 

 

 

10.7

%

 

 

0.0

%

 

 

7.0

%

Evelyn P. Rose(5)

   c/o Cardinal Investment Company, Inc.

   3963 Maple Ave, Ste 200,

   Dallas TX 75219

 

 

2,852,941

 

 

 

1,965,774

 

 

 

9.5

%

 

 

38.8

%

 

 

15.6

%

Charles E. Gale(6)

   c/o Cardinal Investment Company, Inc.

   3963 Maple Ave, Ste 200,

   Dallas TX 75219

 

 

2,777,416

 

 

 

1,878,311

 

 

 

9.2

%

 

 

37.0

%

 

 

15.1

%

Evelyn P. Rose Survivors Trust(7)

   c/o Cardinal Investment Company, Inc.

   3963 Maple Ave, Ste 200,

   Dallas TX 75219

 

 

2,757,279

 

 

 

1,877,998

 

 

 

9.2

%

 

 

37.0

%

 

 

15.0

%

BlackRock Inc.(8)

   55 East 52nd Street

   New York NY 10055

 

 

2,243,871

 

 

 

 

 

 

8.0

%

 

 

0.0

%

 

 

5.2

%

The Vanguard Group(9)

   100 Vanguard Blvd.

   Malvern PA 19355

 

 

2,166,886

 

 

 

 

 

 

7.7

%

 

 

0.0

%

 

 

5.0

%

Directors and Executive Officers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James E. Bass(10)

 

 

131,526

 

 

 

32,442

 

 

*

 

 

*

 

 

*

 

Dawn C. Bir (11)

 

 

238,401

 

 

 

238,401

 

 

*

 

 

 

4.5

%

 

 

1.6

%

J. Warren Huff(12)

 

 

1,336,395

 

 

 

1,226,572

 

 

 

4.5

%

 

 

22.1

%

 

 

8.5

%

William D. McClellan, Jr.(13)

 

 

36,500

 

 

 

36,500

 

 

*

 

 

*

 

 

*

 

R. Kent McGaughy, Jr.(1)

 

 

5,189,723

 

 

 

2,063,064

 

 

 

17.2

%

 

 

40.4

%

 

 

21.4

%

Colin J. Meyer, M.D.(14)

 

 

433,712

 

 

 

336,712

 

 

 

1.5

%

 

 

6.3

%

 

 

2.5

%

Jack Nielsen(15)

 

 

42,070

 

 

 

40,290

 

 

*

 

 

*

 

 

*

 

William E. Rose(3)

 

 

3,212,170

 

 

 

2,132,411

 

 

 

10.6

%

 

 

41.8

%

 

 

17.2

%

Manmeet S. Soni(16)

 

 

1,562

 

 

 

1,562

 

 

*

 

 

*

 

 

*

 

Jason D. Wilson(17)

 

 

187,847

 

 

 

174,897

 

 

*

 

 

 

3.3

%

 

 

1.2

%

Michael D. Wortley(18)

 

 

158,355

 

 

 

158,355

 

 

*

 

 

 

3.0

%

 

 

1.1

%

All executive officers and directors as a

   group (11 persons)(19)

 

 

10,968,261

 

 

 

6,441,206

 

 

 

31.7

%

 

 

98.0

%

 

 

49.8

%

 

*

Represents beneficial ownership of less than one percent (1%) of the outstanding common stock or voting power, as applicable.

(a)

Includes all shares of Class B common stock beneficially owned on an as-converted basis.

(1)

As described in that certain Schedule 13D/A, filed with the SEC on July 31, 2018, Form 4s filed with the SEC on December 29, 201712, 2018, June 14, 2019, November 18, 2019 and December 16, 2019, and further based on company records, consists of 25,004 shares of Class A common stock and 278,309 shares of Class B common stock held by R. Kent McGaughy, Jr. over which he has sole voting and investment control, 4,591 shares of Class A common stock and 51,095 shares of Class B common stock held by Lagos Trust, of which Mr. McGaughy Jr. is trustee and has shared voting and investment control with Emily M. McGaughy, Jr., 280 shares of Class A common stock and 3,109 shares of Class B common stock held by Traweek Children’s Trust, of which Mr. McGaughy Jr. is trustee and has sole voting and investment control, 2,73933,217 shares of Class A common stock and 30,478 shares of Class B common stock held in escrow for a charitable donee by AST, of which Mr.


McGaughy Jr. has sole voting control and shared investment control with the donee, an aggregate of 2,912,5233,063,567 shares of Class A common stock and 1,692,857 shares of Class B


common stock held directly by CPMG or in various funds for which CPMG, Inc. is the investment manager and for which Mr. McGaughy Jr. has shared voting and investment control with James W. Traweek, Jr., 15,661CPMG, 35,221 shares of Class B common stock issuable pursuant to currently exercisable stock options and 2,2972,473 shares of Class B common stock issuable pursuant to stock options that will become exercisable within 60 days after April 19, 2018.16, 2020.

(2)

As described in that certain Schedule 13D/A, filed with the SEC on December 29, 2017, consists of 35 shares of Class A common stockJuly 31, 2018 and 380 shares of Class B common stock held by James W. Traweek, Jr. over which he has sole voting and investment control, 16,645 shares of Class A common stock and 185,263 shares of Class B common stock held by JET Land & Cattle Company, Ltd., of which Mr. Traweek, Jr. is the sole owner of the general partner and has sole voting and investment control, 7,056 shares of Class A common stock and 78,539 shares of Class B common stock held by 1 Thessalonians 5:18 Trust, of which Mr. Traweek, Jr. is trustee and has shared voting and investment control with Emily W. Traweek, 572 shares of Class A common stock and 6,364 shares of Class B common stock held by Esme Grace McGaughy Trust, of which Mr. Traweek, Jr. is trustee and has sole voting and investment control, 572 shares of Class A common stock and 6,364 shares of Class B common stock held by Mary Frances McGaughy Trust, of which Mr. Traweek, Jr. is trustee and has sole voting and investment control, 2,739 shares of Class A common stock and 30,478 shares of Class B common stock held in escrow for a charitable donee by AST, of which Mr. Traweek, Jr. has sole voting control and shared investment control with the donee, and an aggregate of 2,912,523 shares of Class A common stock and 1,692,857 shares of Class B common stock held directly by CPMG or in various funds for which CPMG, Inc. is the investment manager and for which Mr. Traweek, Jr. has shared voting and investment control with R. Kent McGaughy, Jr.

(3)

As described in that certain Schedule 13D/A,Form 4s filed with the SEC on December 29, 2017,12, 2018 and November 18, 2019, consists of an aggregate of 2,912,5233,063,567 shares of Class A common stock and 1,692,857 shares of Class B common stock held directly by CPMG or in various funds for which CPMG, Inc. is the investment manager and R. Kent McGaughy, Jr. has shared voting and investment control with James W. Traweek, Jr. R. Kent McGaughy, Jr. and James W. Traweek, Jr. areis the sole stockholdersstockholder and directorsdirector of CPMG, Inc.

(4)(3)

As described in that certain Schedule 13D/A, filed with the SEC on December 7, 2017,November 20, 2019 and further based on Company records, consists of 67,73511,618 shares of Class A common stock and 1,877,998129,308 shares of Class B common stock held by William E. Rose over which he has sole voting and investment control, 20 shares of Class A common stock and 215 shares of Class B common stock held by the Charles Henry Rose 2001 Trust and 45 shares of Class A common stock and 492 shares of Class B common stock held by the John William Rose 2002 Trust, over which Mr. Rose is trustee and over which he has shared voting and investment control with Catherine Marcus, 180,909 shares of Class A common stock held by Montrose Investments I, L.P., of which Mr. Rose is the sole member and manager of Montrose Investments GP, LLC, its general partner, 7,886 shares of Class A common stock and 87,776 shares of Class B common stock held by the Evelyn P. Rose Survivors Trust, forFidelity SEP IRA, which Mr. Gale servesRose may be deemed to beneficially own as a co-trustee withmember of a stockholder group which includes Evelyn P. Rose and over which he has shared votingCharles E. Gale, and investment control, 13,517879,281 shares of Class A common stockCommon Stock and 15,8691,877,998 shares of Class B Common Stock held by the Evelyn Potter Rose Survivor’s Trust (the “Survivor’s Trust”), which Mr. Rose may be deemed to beneficially own as a member of a stockholder group which includes the Survivor’s Trust.  Mr. Rose also has beneficial ownership of 34,127 shares of Class B common stock held by Mr. Gale over which he has sole votingissuable pursuant to currently exercisable stock options and investment control, 811,5462,495 shares of Class B common stock issuable pursuant to stock options that will become exercisable within 60 days after April 16, 2020.

(4)

As described in that certain Schedule 13G, filed with the SEC on April 9, 2020, consists of shares of Class A common stock held by Puffin Partners, L.P.,clients of which Mr. Gale is co-managerone or more of Puffin GP, LLC, its general partner,certain investment advisors directly or indirectly owned by Wellington Management Group LLP. Each of Wellington Management Group LLP, Wellington Group Holdings LLP and 29Wellington Investment Advisors Holdings LLP has shared voting power over 2,796,155 shares of Class A common stock and 313shared dispositive power over 3,020,924 shares of Class B common stock and (ii) Wellington Management Company LLP has shared voting power over 2,782,249 shares of common stock and shared dispositive power over 2,974,684 shares of common stock.  Each of Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP disclaims beneficial ownership of the shares beneficially held in an IRA for Mr. Gale’s benefit.by clients of any of the investment advisors directly or indirectly owned by Wellington Management Group LLP, except to the extent of their respective actual pecuniary interests therein.

(5)

As described in that certain Schedule 13D/A, filed with the SEC on December 7, 2017,November 20, 2019, consists of 67,735879,281 shares of Class A common stock and 1,877,998 shares of Class B common stock held by the Evelyn P. Rose Survivors Trust, for which Ms. Rose serves as co-trustee with Charles E. Gale and over which she has shared voting and investment control, and 7,886 shares of Class A common stock and 87,776 shares of Class B common stock held by the Evelyn P. Rose SEP IRA, for Ms. Rose’s benefit.

(6)

As described in that certain Schedule 13D/A, filed with the SEC on November 20, 2019, and a Form 4 filed with the SEC on December 7, 2017,5, 2019, consists of 67,735879,281 shares of Class A common stock and 1,877,998 shares of Class B common stock held by the Evelyn P. Rose Survivors Trust, for which Mr. Gale serves as a co-trustee with Evelyn P. Rose and over which he has shared voting and investment control, 19,795 shares of Class A common stock held by Mr. Gale over which he has sole voting and investment control, and 29 shares of Class A common stock and 313 shares of Class B common stock held in an IRA for Mr. Gale’s benefit.

(7)

As described in that certain Schedule 13D/A, filed with the SEC on November 20, 2019, consists of 879,281 shares of Class A common stock and 1,877,998 shares of Class B common stock held by the Evelyn P. Rose Survivors Trust, for which Evelyn P. Rose and Charles E. Gale serve as co-trustees over which they share voting and investment control.

(7)(8)

As described in that certain Schedule 13D/13G/A, filed with the SEC on December 7, 2017 and further based on  company records,February 6, 2020, consists of 11,618 shares of Class A common stock and 129,308 shares of Class B common stock held by William E. Rose over which he has sole voting and investment control, 20 shares of Class A common stock and 215 shares of Class B common stock held by the Charlie Henry Rose 2001 Trust and 45 shares of Class A common stock and 492 shares of Class B common stock held by the John William Rose 2002 Trust, over which Mr. Rose is trustee and over which he has shared voting and investment control with Catherine Marcus, 180,909 shares of Class A common stock held by Montrose Investments I, L. P., of which Mr. Rose is the sole member and manager of Montrose Investments GP, LLC, its general partner, 811,546 shares of Class A common stock held by Puffin Partners, L.P., of which Mr. Rose is co-manager of Puffin GP, LLC, its general partner, and 7,886 shares of Class A common stock and 87,776 shares of Class B common stock held by the Evelyn P. Rose SEP IRA, which Mr. Rose may be deemed to beneficially own as a member of a stockholder group which includes Evelyn P. Rose and Charles E. Gale. Mr. Rose also has beneficial ownership of 14,454 shares of Class B common stock issuable pursuant to currently exercisable stock options and 2,232 shares of Class B common stock issuable pursuant to stock options that will become exercisable within 60 days after April 19, 2018.

(8)

As described in that certain Schedule 13G, filed with the SEC on February 1, 2018, consists of 1,203,9932,243,871 shares of Class A common stock held by certain subsidiaries of BlackRock Inc., over which BlackRock Inc. has sole investment control.  Of those shares, BlackRock Inc. has sole voting control over 1,172,8332,182,319 shares of Class A common stock.


(9)

As described in that certain Schedule 13D/13G/A, filed with the SEC on August 1, 2017 and further based on company records,February 12, 2020, consists of 179,8232,166,886 shares of Class A common stock held by Vanguard Group Inc.  Vanguard Group Inc. has sole investment control and 2,133,712 shares of Class A common stock and 883,97833,174 shares of Class B common stock held by Mr. Huff, consisting of 176,657A over which Vanguard Group Inc. has shared investment control.  Of those shares, Vanguard Group Inc. has sole voting control over 32,615 shares of Class A common stock and 710,806 shares of Class B common stockshared voting control over which he exercises sole voting and investment control, 3,1663,093 shares of Class A common stock and 35,234 shares of Class B common stock in a trust for which Mr. Huff has shared voting and investment control with his wife, 105,266 shares of Class B common stock issuable pursuant to currently exercisable stock options and 32,672 shares of Class B common stock issuable pursuant to stock options that will become exercisable within 60 days after April 19, 2018.stock.

(10)

Consists of 110,11299,084 shares of Class A common stock, consisting of 50,65545,479 shares of Class A common stock held individually by Mr. Bass or jointly with Mr. Bass’s wife, 41,902 shares of Class A common stock held in trust for which Mr. Bass and his wife serve as co-trustees and 17,55511,703 shares of Class A common stock held in a trust for the benefit of Mr. Bass, for which he serves as co-trustee, 11,92129,925 shares of Class B common stock issuable pursuant to currently exercisable stock options and 1,7632,517 shares of Class B common stock issuable pursuant to stock options that will become exercisable within 60 days after April 19, 2018.16, 2020.

(11)

Consists of 10,000221,492 shares of Class B common stock issuable pursuant to currently exercisable stock options held by Mr. McClellan, Jr. and 1,50016,909 shares of Class B common stock issuable pursuant to stock options that will become exercisable within 60 days after April 19, 2018.16, 2020.

(12)

ConsistsAs described in that certain Schedule 13D/A, filed with the SEC on July 31, 2018, Form 4s filed with the SEC on January 3, 2019, September 30, 2019, November 12, 2019, and January 6, 2020 and further based on Company records, consists of 27,172109,823 shares of Class A common stock and 128,985746,040 shares of Class B common stock held by Dr. MeyerMr. Huff, consisting of 81,657 shares of Class A common stock and 710,806 shares of Class B common stock over which he hasexercises sole voting and investment control 96,277and 28,166 shares of Class A common stock and 35,234 shares of Class B common stock in four trusts for which Mr. Huff has shared voting and investment control with his wife,  444,282 shares of Class B common stock issuable pursuant to currently exercisable stock options and 18,65036,250 shares of Class B common stock issuable pursuant to stock options that will become exercisable within 60 days after April 19, 2108.16, 2020.

(13)

Consists of 34,250 shares of Class B common stock issuable pursuant to currently exercisable stock options held by Mr. McClellan and 2,250 shares of Class B common stock issuable pursuant to stock options that will become exercisable within 60 days after April 16, 2020.


(14)

Consists of 97,000 shares of Class A common stock and 59,779 shares of Class B common stock held by Dr. Meyer over which he has sole voting and investment control, 258,741 shares of Class B common stock issuable pursuant to currently exercisable stock options and 18,192 shares of Class B common stock issuable pursuant to stock options that will become exercisable within 60 days after April 16, 2020

(15)

Consists of 1,780 shares of Class A common stock held by Mr. Nielsen over which he has sole voting and investment control, 15,67337,634 shares of Class B common stock issuable pursuant to currently exercisable stock options and 2,7102,656 shares of Class B common stock issuable pursuant to stock options that will become exercisable within 60 days after April 19, 2018.16, 2020.

(14)(16)

Consists of 163,7921,562 shares of Class B common stock issuable pursuant to currently exercisable stock options.

(17)

Consists of 12,950 shares of Class A common stock and 13,227 shares of Class B common stock held by Mr. Wilson over which he has sole voting and investment control, 146,180 shares of Class B common stock issuable pursuant to currently exercisable stock options held by Dr. Ward and 20,42315,490 shares of Class B common stock issuable pursuant to stock options that will become exercisable within 60 days after April 19, 2018.16, 2020.

(15)(18)

Consists of 8,291,815147,913 shares of Class B common stock issuable pursuant to currently exercisable stock options and 10,442 shares of Class B common stock issuable pursuant to stock options that will become exercisable within 60 days after April 16, 2020.

(19)

Consists of 4,527,055 shares of Class A common stock and 4,009,9974,940,205 shares of Class B common stock beneficially owned by the directors and executive officers as of April 19, 2018, 669,78116, 2020, 1,391,327 shares of Class B common stock issuable to our directors and officers pursuant to stock options that are currently exercisable and 123,676109,674 shares of Class B common stock issuable to our directors and officers pursuant to stock options that will become exercisable within 60 days after April 19, 2018.16, 2020.


SECTION 16(A) BENEFICIAL OWNDELINQUENT SECTIERSHIP REPORTING COMPLIANCEON 16(a) REPORTS

Under Section 16(a) of the Exchange Act and SEC rules, our directors, executive officers and beneficial owners of more than 10% of any class of equity security are required to file periodic reports of their ownership, and changes in that ownership, with the SEC.  Based on our review of the filed reports, we believe that all Section 16(a) filing requirements were complied with during the fiscal year ended December 31, 2017,2019, except that AbbVie Ltd.(a) J. Warren Huff, Colin J. Meyer, M.D., Dawn C. Bir, Jason D. Wilson and Michael D. Wortley filed Form 4s on November 12, 2019 that were required to be filed on October 16, 2019, (b) Jason D. Wilson filed a Form 4 on February 21, 2017September 25, 2019 that was required to be filed on February 6, 2017.September 15, 2019, and (c) Charles E. Gale filed a Form 4 on December 5, 2019 reporting transactions that were required to be filed on November 12, 2019, November 20, 2019, November 21, 2019, and November 22, 2019.


REPORT OF THE AUDIT COMMITTEE

The audit committee evaluates auditor performance, manages relations with the Company’s independent registered public accounting firm and evaluates policies and procedures relating to internal control systems.  The audit committee operates under a written audit committee charter that has been adopted by the Board, a copy of which is available under “Investors & News>Corporate Governance>> Documents & Charters” on our website at www.reatapharma.com.  All members of the audit committee currently meet the independence and qualification standards for audit committee membership set forth in the listing standards and rules of NASDAQNasdaq and the SEC.

No member of the audit committee is a professional accountant or auditor.  The members’ functions are not intended to duplicate or to certify the activities of management and the independent registered public accounting firm.  The audit committee serves a board-level oversight role in which it provides advice, counsel and direction to management and the auditors on the basis of the information it receives, discussions with management and the auditors and the experience of the audit committee’s members in business, financial and accounting matters.

The audit committee oversees the Company’s financial reporting process on behalf of the Board.  The Company’s management has the primary responsibility for the financial statements and reporting process, including the Company’s system of internal controls over financial reporting.  In fulfilling its oversight responsibilities, the audit committee reviewed with management the audited financial statements included in the Company’s Form 10-K for the fiscal year ended December 31, 2017.2019.  This review included a discussion of the quality and the acceptability of the Company’s financial reporting, including the nature and extent of disclosures in the financial statements and the accompanying notes.

The audit committee also reviewed with the Company’s independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of the audited financial statements with accounting principles generally accepted in the United States of America, their judgments as to the quality and the acceptability of the Company’s financial reporting and such other matters as are required to be discussed with the committee pursuant to Auditing Standard No. 1301, “Communication with Audit Committees,” issued bythe applicable requirements of the Public Company Accounting Oversight Board.Board, or PCAOB, and the SEC.  The audit committee has received the written disclosures and the letter from the independent registered public accounting firm required by the Public Company Accounting Oversight BoardPCAOB regarding the independent accountant’sregistered public accounting firm’s communications with the audit committee concerning independence.  The audit committee discussed with the independent registered public accounting firm their independence from management and the Company, including the matters required by the applicable rules of the Public Company Accounting Oversight Board.PCAOB.  The audit committee also discussed with the independent registered public accounting firm critical audit matters included in the firm’s audit opinion and discussed the firm’s opinion regarding the Company’s internal controls over financial reporting.

In addition to the matters specified above, the audit committee discussed with the Company’s independent registered public accounting firm the overall scope, plans and estimated costs of their audit.  The audit committee met with the independent registered public accounting firm periodically to discuss the results of the independent registered public accounting firm’s examinations, the overall quality of the Company’s financial reporting, internal controls over financial reporting and the independent registered public accounting firm’s reviews of the quarterly financial statements.

In reliance on the reviews and discussions referred to above, the audit committee recommended to the Board that the Company’s audited financial statements should be included in the Company’s Form 10-K for the fiscal year ended December 31, 2017.2019.

The information contained in this report shall not be deemed to be (1) “soliciting material,” (2) “filed” with the SEC, (3) subject to Regulations 14A or 14C of the Exchange Act or (4) subject to the liabilities of Section 18 of the Exchange Act.  This report shall not be deemed incorporated by reference into any other filings under the Exchange Act or the Securities Act of 1933 except to the extent we specifically incorporate it by reference to such filing.

Submitted by the Audit Committee of the Board of Directors

William D. McClellan, Jr., Chairperson

James E. Bass

Jack B. Nielsen

William E. Rose


OTHER OTHER BUSINESS

We know of no other matters to be submitted to a vote of stockholders at the Annual Meeting.  If any other matter is properly brought before the Annual Meeting or any adjournment thereof, it is the intention of the persons named in the enclosed proxy to vote the shares they represent in accordance with their judgment.  In order for any stockholder to nominate a candidate or to submit a proposal for other business to be acted upon at a given annual meeting, he or she must provide timely written notice to our corporate secretary in the form prescribed by our second amended and restated bylaws, as described under “Stockholder Proposals.”


STOCKHOLDER PROPOSALS

Stockholder proposals intended to be included in the proxy materials for the 20192021 annual meeting of stockholders must be received by the Secretary of the Company no later than December 31, 2018,30, 2020, or otherwise as permitted by applicable law.  The form and substance of these proposals must satisfy the requirements established by the Company’s second amended and restated bylaws and the SEC.

Additionally, stockholders seeking to recommend a director candidate or who intend to present a stockholder proposal at the 20192021 annual meeting of stockholders not intended to be included in the proxy materials must provide the Secretary of the Company with written notice of the proposal no earlier than 120 days before the anniversary of the preceding year’s annual meeting of stockholders and no later than 90 days before the anniversary of the preceding year’s annual meeting of stockholders (provided, however, that if the date of the annual meeting is more than 30 days before or more than 60 days after the anniversary of the preceding year’s annual meeting, then such dates shall not be earlier than 120 days before the date of the annual meeting and not later than the later of 100 days before the date of the annual meeting and 10 days after the first public announcement of the date set for the meeting is made, whether or not such first public announcement constitutes notice of the meeting to stockholders).  A stockholder nomination or written notice of a stockholder proposal at the 20192021 annual meeting of the stockholders not intended to be included in the proxy materials must be provided no earlier than February 13, 2019,12, 2021, and no later than March 15, 2019.14, 2021.  Notice must be tendered in the proper form prescribed by our second amended and restated bylaws.  Proposals not meeting the requirements set forth in our second amended and restated bylaws will not be entertained at the annual meeting.

Any stockholder seeking to recommend a director candidate or any director candidate who wishes to be considered by the nominating and corporate governance committee, the committee that recommends nominees to the Board for election at each annual meeting, must provide the Secretary of the Company with the information required by our second amended and restated bylaws, which includes: (a) all information relating to such nominee that would be required to be disclosed in a proxy statement for the election of such nominee as a director and such nominee’s written consent to serve as a director if elected and (b) such other information as the Company may reasonably require to determine the eligibility of the proposed nominee to serve as a director of the Company or that the Company believes could be material to a reasonable stockholder’s understanding of the independence (both from management and from the stockholders or, if the proposal is made on behalf of a beneficial owner other than the stockholder of record, from such beneficial owner), or qualifications of such nominee.  The nominating and corporate governance committee is not required to consider director candidates received after the applicable date or without the required information.  The nominating and corporate governance committee will consider all director candidates who comply with these requirements and will evaluate these candidates using the criteria described above under the caption “Proposal No. 1—Election of Directors—Nomination of Directors.” Director candidates who are then nominated by the Board will be included in the Company’s proxy statement for that annual meeting.


DELIVERY OF PROXY MATERIALS

Our 20172019 annual report to stockholders for the fiscal year ended December 31, 2017,2019, including audited financial statements, accompanies this proxy statement.

Our Annual Report on Form 10-K for the fiscal year ended December 31, 2017,2019, and other information may be obtained without charge upon written request addressed to 2801 Gateway5320 Legacy Drive, Suite 150, Irving,Plano, Texas 7506375024 or by telephone at (469) 442-4772, in each case Attention: Secretary.

EACH STOCKHOLDER IS URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE POSTAGE-PREPAID ENVELOPE PROVIDED.

 

 


EVENT # CLIENT # PROXY TABULATOR FORANNUAL MEETING OF REATA PHARMACEUTICALS, INC. P.O. BOX 8016 CARY, NC 27512-9903Date: June 10, 2020 Time: 8:00 a.m. (Central Daylight Time) Place: Annual meeting to be held live via the Internet – please visit www.proxydocs.com/RETA for more details. Please make your marks like this: Use dark black pencil or pen only Board of Directors Recommends a Vote FOR Proposals 1, 2 and 4, and a vote for EVERY YEAR for Proposal 3. 1: Election of Class II Directors For Withhold Directors Recommend 01 James E. Bass For 02 R. Kent McGaughy, Jr. For For Against Abstain 2: To approve, on an advisory basis, the compensation of our named executive officers. For Every Year Every 2 Years Every 3 Years Abstain 3: To approve, on an advisory basis, the frequency of future advisory votes to approve the compensation of our named executive officers. Every Year For Against Abstain 4: To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020. For 5: The transaction of such other business as may properly come before the meeting or at any and all adjournments or postponements thereof. TO ATTEND the Annual Meeting of Reata Pharmaceuticals, Inc. and vote your shares, please visit www.proxydocs.com/RETA to register for the virtual meeting. Authorized Signatures - This section must be completed for your Instructions to be executed. Please Sign Here Please Date Above Please Sign Here Please Date Above Please sign exactly as your name(s) appears hereon. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing this proxy. Please separate carefully at the perforation and return just this portion in the envelope provided. Annual Meeting of Reata Pharmaceuticals, Inc. to be held on Wednesday, June 10, 2020 8:00 a.m. (Central Daylight Time) for Holders as of April 16, 2020 This Proxy is Solicited on Behalf of the Board of Directors INTERNET VOTE BY: TELEPHONE Call (U.S. and Canada only) 866-250-6195 Go To www.proxypush.com/RETA Cast your vote online. Have your Proxy Card/Voting Instruction Form Ready. View Meeting Documents. OR Use any touch-tone telephone. Have your Proxy Card/Voting Instruction Form ready. Follow the simple recorded instructions. MAIL OR Mark, sign and date your Proxy Card/Voting Instruction Form. Detach your Proxy Card/Voting Instruction Form. Return your Proxy Card/Voting Instruction Form in the postage-paid envelope provided. The undersigned hereby appoints J. Warren Huff and Jason D. Wilson,Manmeet S. Soni, each with full power to act alone and with full power of substitution and revocation, as proxies for the undersigned and authorizes them, and each of them, to attend the Annual Meeting of Stockholders, or the Annual Meeting, on Wednesday, June 13, 201810, 2020 at 8:00 a.m. (Central Daylight Time) atany adjournment or postponement thereof, and to vote the officesnumber of shares of common stock of Reata Pharmaceuticals, Inc. that the undersigned would be entitled to vote if personally present at 2801 Gateway Drive, Suite 150, Irving, Texas 75063the Annual Meeting upon the matters specified herein and to vote in their discretion upon such other matters as may be properly brought before the Annual Meeting, revoking any proxy heretofore given. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS IN ITEM 1, FOR THE PROPOSALS IN ITEMS 2 AND 4, AND EVERY YEAR FOR THE PROPOSAL IN ITEM 3. PROXY TABULATOR FOR REATA PHARMACEUTICALS, INC. P.O. BOX 8016 CARY, NC 27512-9903


Revocable Proxy — Reata Pharmaceuticals, Inc. Annual Meeting of Stockholders June 10, 2020 8:00 a.m. (Central Daylight Time) This Proxy is Solicited on Behalf of the Board of Directors The undersigned hereby appoints J. Warren Huff and Manmeet S. Soni, each with full power to act alone and with full power of substitution and revocation, as proxies for the undersigned and authorizes them, and each of them, to attend the Annual Meeting of Stockholders, or the Annual Meeting, on Wednesday, June 10, 2020 at 8:00 a.m. (Central Daylight Time) and any adjournment or postponement thereof, and to vote the number of shares of common stock of Reata Pharmaceuticals, Inc. that the undersigned would be entitled to vote if personally present at the Annual Meeting upon the matters specified herein and to vote in their discretion upon such other matters as may be properly brought before the Annual Meeting, revoking any proxy heretofore given. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS IN ITEM 1, FOR THE PROPOSALS IN ITEMS 2 AND 4, AND EVERY YEAR FOR THE PROPOSAL IN ITEM 2. All votes must be received by 11:59 P.M., Eastern Time, June 12, 2018. MAIL OR • Mark, sign and date your Proxy Card/Voting Instruction Form. • Detach your Proxy Card/Voting Instruction Form. • Return your Proxy Card/Voting Instruction Form in the postage-paid envelope provided. OR Go To www.proxypush.com/RETA • Cast your vote online. • Have your Proxy Card/Voting Instruction Form Ready. • View Meeting Documents. • Use any touch-tone telephone. • Have your Proxy Card/Voting Instruction Form ready. • Follow the simple recorded instructions. 866-250-6195 INTERNET VOTE BY: TELEPHONE Annual Meeting of Reata Pharmaceuticals, Inc. to be held on Wednesday, June 13, 2018 8:00 a.m (Central Daylight Time) for Holders as of April 19, 2018 This Proxy is Solicited on Behalf of the Board of Directors Please separate carefully at the perforation and return just this portion in the envelope provided. 3: The transaction of such other business as may properly come before the meeting or at any and all adjournments or postponements thereof. To attend the meeting and vote your shares in person, please mark this box. 2: To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018. Date: June 13, 2018 Time: 8:00 a.m. (Central Daylight Time) Place: 2801 Gateway Drive, Suite 150, Irving, TX 75063 ANNUAL MEETING OF REATA PHARMACEUTICALS, INC. Please Sign Here Please Date Above Please Sign Here Please Date Above Please sign exactly as your name(s) appears hereon. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing this proxy. Authorized Signatures - This section must be completed for your Instructions to be executed. For For For For Against Abstain Directors Recommend Withhold Please make your marks like this: Use dark black pencil or pen only 01 William D. McClellan, Jr. 02 William E. Rose Board of Directors Recommends a Vote FOR Proposals 1 and 2. 1: Election of Class III Directors For Call (U.S. and Canada only)


Revocable Proxy — Reata Pharmaceuticals, Inc. Annual Meeting of Stockholders June 13, 2018 8:00 a.m. (Central Daylight Time) This Proxy is Solicited on Behalf of the Board of Directors The undersigned hereby appoints J. Warren Huff and Jason D. Wilson, each with full power to act alone and with full power of substitution and revocation, as proxies for the undersigned and authorizes them, and each of them, to attend the Annual Meeting of Stockholders, or the Annual Meeting, on Wednesday, June 13, 2018 at 8:00 a.m. (Central Daylight Time) at the offices of Reata Pharmaceuticals, Inc. at 2801 Gateway Drive, Suite 150, Irving, Texas 75063 and any adjournment or postponement thereof, and to vote the number of shares of common stock of Reata Pharmaceuticals, Inc. that the undersigned would be entitled to vote if personally present at the Annual Meeting upon the matters specified herein and to vote in their discretion upon such other matters as may be properly brought before the Annual Meeting, revoking any proxy heretofore given. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS IN ITEM 1 AND FOR THE PROPOSAL IN ITEM 2.3. (CONTINUED AND TO BE SIGNED ON REVERSE SIDE) In the event it is possible or advisable to hold the Annual Meeting in person, we may hold the Annual Meeting at our offices located at 5320 Legacy Drive, Plano, Texas 75024. The Company would publicly announce a determination to hold an in-person Annual Meeting in a press release available at www.reatapharma.com as soon as practicable before the Annual Meeting. Please separate carefully at the perforation and return just this portion in the envelope provided.