TABLE OF CONTENTS
Our compensation committee’s role and responsibilities are set forth in the compensation committee’s written charter and include:
reviewing and recommending the compensation arrangements for management, including the compensation for our president and chief executive officer;establishing and reviewing general compensation policies with the objective to attract and retain superior talent, to reward individual performance and to achieve our financial goals;PROPOSAL NO. 2:
AMENDMENT TO THE COMPANY’S RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
FROM 45,000,000 TO 90,000,000
administering our equity incentive plans; and
preparing the report of the compensation committee that the rules of the SEC require to be included in our annual meeting proxy statement.
In respect of the determination of the compensation of our president and chief executive officer, the compensation committee conducts its decision making process without the president and chief executive officer present.
Our compensation committee makes all compensation decisions regarding our executive officers, after which it makes a recommendation to our full board of directors. Our board of directors then approves the compensation for our executive officers.
During the first calendar quarter of each year, we evaluate each executive’s performance for the prior year. In connection with each annual review cycle, Dr. Pruzanski, our president and chief executive officer, meets with our executive officers to discuss our accomplishments during the year and the individual’s performance and contributions over the prior year. Based on these discussions, Dr. Pruzanski, with respect to each executive other than himself, prepares an evaluation of the executive’s performance. Dr. Pruzanski also prepares his own self-assessment as well as a detailed review of company performance against stated corporate goals. This process leads to a recommendation by Dr. Pruzanski to the compensation committee with respect to each executive officer, including himself, as to:
the achievement of stated corporate and individual performance goals;
the level of contributions made to the general management and guidance of our company;
the need for salary increases;
the amount of bonuses to be paid; and
whether or not stock option and/or other equity awards should be made.
These recommendations are reviewed and taken into account by the compensation committee. The compensation committee makes a recommendation regarding executive compensation to the full board of directors, which then approves the compensation of our executive officers.
In designing our executive compensation program, our compensation committee considers publicly available compensation data for U.S. companies in the biopharmaceutical industry to help guide its executive compensation decisions at the time of hiring and for subsequent adjustments in compensation. Our compensation committee also retained the services of Radford, an independent compensation consultant and a division of Aon Hewitt, which is a subsidiary of Aon plc, to provide it with additional comparative data on executive compensation practices in our industry and to advise it on our executive compensation program generally. For 2015, Radford provided advice and data to the compensation committee on executive and director compensation matters, including the selection of our peer group, comparative market pay levels, equity dilution and annual share utilization practices, incentive plan design and emerging market trends. Pearl Meyer & Partners, or PM&P, an independent compensation consultant, also advised the compensation committee in its evaluation and determination of the cash salary and bonus targets for 2015. Although the compensation committee considers the advice and recommendations of the compensation consultants about our executive compensation program, the compensation committee ultimately makes its own decisions about these matters.
TABLE OF CONTENTS
The compensation committee regularly reviews the services provided by its outside consultants and performs an annual assessment on the independence of its compensation consultants to determine whether the compensation consultant is independent. The compensation committee conducted a specific review of its relationship with each of Radford and PM&P in 2015, and determined that each such advisor is independent in providing Intercept with executive and director compensation consulting services and that each such advisor’s work for the compensation committee did not raise any conflicts of interest, consistent with SEC rules and NASDAQ listing standards.
Our compensation committee will also review and discuss annually with management our “Compensation Discussion and Analysis” disclosure to the extent such disclosure is required by SEC rules.
A copy of the compensation committee’s written charter is publicly available in the “Investors” section of our website atwww.interceptpharma.com.
Nominating and Governance Committee. Our nominating and governance committee met five times during fiscal 2015. This committee currently has three members: Daniel Welch (Chairman), Mr. Silverstein and Dr. Benatti. All members of the nominating and governance committee qualify as independent under the definition promulgated by The NASDAQ Stock Market.
Mr. Silverstein, who will not stand for re-election, will also cease to be a member of our nominating and governance committee after our 2016 Annual Meeting of Stockholders. Our board of directors intends to designate a third member to our nominating and governance committee upon the completion of our annual meeting.
The nominating and governance committee’s role and responsibilities are set forth in the nominating and governance committee’s written charter and include:
evaluating and making recommendations to the full board as to the size and composition of the board and its committees;
identifying and nominating members of the board of directors;
developing and recommending to the board of directors a set of corporate governance principles applicable to our company; and
overseeing the evaluation of our board of directors.
Our nominating and governance committee recommended to the board of directors that Mr. Bradbury and Dr. Gottesdiener join the board and upon such endorsement, the board recommended that Mr. Bradbury and Dr. Gottesdiener be nominated as directors at our 2016 Annual Stockholder Meeting.
If a stockholder wishes to nominate a candidate for director who is not to be included in our proxy statement, it must follow the procedures described in our restated by-laws and in “Stockholder Proposals and Nominations for Director” at the end of this proxy statement.
Under our current corporate governance policies, the nominating and governance committee may consider candidates recommended by stockholders as well as from other sources such as other directors or officers, third party search firms or other appropriate sources. The process followed by our nominating and governance committee to identify and evaluate director candidates includes requests to board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the committee and our board. For all potential candidates, the nominating and governance committee may consider all factors it deems relevant, such as a candidate’s personal integrity and sound judgment, business and professional skills and experience, independence, knowledge of the industry in which we operate, possible conflicts of interest, diversity, the extent to which the candidate would fill a present need on the board, and concern for the long-term interests of the stockholders. In general, persons recommended by stockholders will be considered on the same basis as candidates from other sources. If a stockholder wishes to propose a candidate for consideration as a nominee by the nominating and governance committee under our corporate governance policies, it should submit such recommendation in writing c/o Corporate Secretary, Intercept Pharmaceuticals, Inc., 450 West 15th Street, Suite 505, New York, NY 10011.
TABLE OF CONTENTS
A copy of the nominating and governance committee’s written charter is publicly available in the “Investors” section of our website atwww.interceptpharma.com.
Research and Development Committee. Our research and development committee met once during fiscal 2015. This committee currently has three members: Dr. Luca Benatti (Chairman) and Drs. Akkaraju and Veitinger. This committee assists the board of directors in its oversight of our strategic direction and investment in research and development, technology and manufacturing activities. The research and development committee is also responsible for identifying and discussing significant emerging trends and issues in science and technology and considering their potential impact on our company.
Dr. Veitinger, who will not stand for re-election, will also cease to be a member of our research and development committee after our 2016 Annual Meeting of Stockholders. Our board of directors intends to designate a third member to our research and development committee upon the completion of our annual meeting of stockholders.
A copy of the research and development committee’s written charter is publicly available in the “Investors” section of our website atwww.interceptpharma.com.
Board Diversity
Our nominating and governance committee is responsible for reviewing with the board of directors, on an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members), the nominating and corporate governance committee, in recommending candidates for election, and the board of directors, in approving (and, in the case of vacancies, appointing) such candidates, will take into account many factors, including the following:
diversity of personal and professional background, perspective, experience, age, gender, ethnicity and country of citizenship;
personal and professional integrity and ethical values;
experience in one or more fields of business, professional, governmental, scientific or educational endeavors, and a general appreciation of major issues facing public companies similar in scope and size to us;
experience relevant to our industry or with relevant social policy concerns;
relevant academic expertise or other proficiency in an area of our operations;
objective and mature business judgment and expertise; and
any other relevant qualifications, attributes or skills.
Compensation Committee Interlocks and Insider Participation
No member of our compensation committee during fiscal 2015 has at any time been an officer or employee of ours. None of our executive officers serves as a member of another entity’s board of directors or compensation committee, or other committee serving an equivalent function that has one or more executive officers serving as a member of our board of directors or compensation committee.
Board Leadership Structure and Role in Risk Oversight
The positions of chairman of the board and chief executive officer are presently separated at our company. We believe that separating these positions allows our chief executive officer to focus on our day-to-day business, while allowing our chairman of the board to lead the board of directors in its fundamental role of providing advice to, and independent oversight of, management. Our board of directors recognizes the time, effort and energy that the chief executive officer is required to devote to his position in the current business environment, as well as the commitment required to serve as our chairman, particularly as the board of directors’ oversight responsibilities continue to grow. Our board of directors also believes that this structure ensures a greater role for the independent directors in the oversight of our company and active participation of the independent directors in setting agendas and establishing priorities and procedures for the
TABLE OF CONTENTS
work of our board of directors. Our board of directors believes its administration of its risk oversight function has not affected its leadership structure.
While our restated by-laws and corporate governance guidelines do not require that our chairman and chief executive officer positions be separate, our board of directors believes that having separate positions is the appropriate leadership structure for us at this time and demonstrates our commitment to good corporate governance.
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including risks relating to the regulatory approval and commercialization of pharmaceutical products, product candidate development, technological and competitive uncertainty, dependence on collaborative partners and other third parties, uncertainty regarding patents and proprietary rights, comprehensive government regulations and dependence on key personnel, as more fully discussed under Item 1.A. “Risk Factors” in our annual report on Form 10-K as may be periodically updated in our filings under the Exchange Act. Management is responsible for the day-to-day management of risks we face, while our board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, our board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.
Our board of directors is actively involved in oversight of risks that could affect us. This oversight is conducted primarily through the audit committee of our board of directors, but the full board of directors has retained responsibility for general oversight of risks. Our board of directors satisfies this responsibility through full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within our company as our board of directors believes that full and open communication between management and the board of directors is essential for effective risk management and oversight.
Stockholder Communications to the Board
Generally, stockholders who have questions or concerns should contact our Investor Relations department at 646-747-1000. However, any stockholders who wish to address questions regarding our business directly with the board of directors, or any individual director, should direct his or her questions in writing to the chairman of the board or any individual director ATTN: SECURITY HOLDER COMMUNICATION, Board of Directors Intercept Pharmaceuticals, Inc. at 450 West 15th Street, Suite 505, New York, NY 10011 or via e-mail at secretary@interceptpharma.com. Communications willis requesting stockholder approval of an amendment to our Restated Certificate of Incorporation to increase the authorized number of our shares of common stock, par value $0.001 per share, from 45,000,000 to 90,000,000.
The additional shares of common stock that would be
distributedauthorized upon approval of the proposed amendment would have rights identical to our currently outstanding shares of common stock. The approval of the proposed amendment and any future issuance of common stock would not affect the rights of the holders of our currently outstanding common stock, except for effects incidental to the
board, or to any individual director or directors as appropriate, depending on the facts and circumstances outlinedincrease in the
communications. Items that are unrelated to the duties and responsibilities of the board may be excluded, such as:junk mail and mass mailings;
resumes and other forms of job inquiries;
surveys; or
solicitations or advertisements.
In addition, any material that is unduly hostile, threatening, or illegal in nature may be excluded, provided that any communication that is filtered out will be made available to any outside director upon request.
TABLE OF CONTENTS
Executive Officers
The following table sets forth certain information regarding our executive officers who are not also directors.
 | | | | |
Name | | Age | | Position(s) |
Lisa Bright | | 48 | | Chief Commercial and Corporate Affairs Officer |
Barbara Duncan | | 51 | | Chief Financial Officer and Treasurer |
Rachel McMinn, Ph.D. | | 43 | | Chief Business and Strategy Officer |
David Shapiro, M.D. | | 61 | | Chief Medical Officer and Executive Vice President, Development |
Lisa Bright has served as our chief commercial and corporate affairs officer since February 2015. She has over 25 years of experience in the biopharmaceutical industry. Ms. Bright joined Intercept in November 2014 as senior vice president and head of Europe. Prior to joining Intercept, Ms. Bright worked at Gilead Sciences Ltd. starting in 2008, where she held positions of increasing responsibility, including: general manager United Kingdom & Ireland; vice president, Northern Europe; vice president, head of Sovaldi launch planning for Europe, Asia, Middle East and Australasia; and vice president, government affairs Europe, Middle East and Australasia. Prior to holding these positions, Ms. Bright held a range of senior positions at GlaxoSmithKline plc, including vice president and managing director of New Zealand and vice president — sales for the United Kingdom. Ms. Bright has a B.Sc. in pharmacology from University College London.
Barbara Duncan has served as our chief financial officer since May 2009 and as our treasurer since 2010. She has over 15 years of experience in the life sciences industry. From 2001 through April 2009, Ms. Duncan served as chief financial officer and then chief executive officer at DOV Pharmaceutical, Inc., or DOV, a biopharmaceutical company focused on central nervous system disorders, which was sold to Euthymics Bioscience, Inc. in 2010. Prior to joining DOV, Ms. Duncan served as a vice president of Lehman Brothers Inc. in its corporate finance division from August 1998 to August 2001, where she provided financial advisory services primarily to companies in the life sciences and general industrial industries. From September 1994 to August 1998, Ms. Duncan was an associate and director at SBC Warburg Dillon Read, Inc. in its corporate finance group, where she focused primarily on structuring mergers, divestitures and financings for companies in the life sciences and general industrial sectors. She also worked for PepsiCo, Inc. from 1989 to 1992 in its international audit division, and was a certified public accountant in the audit division of Deloitte & Touche LLP from 1986 to 1989. Ms. Duncan received her B.S. from Louisiana State University in 1985 and her M.B.A. from the Wharton School, University of Pennsylvania, in 1994. She previously served as a director of DOV and currently serves on the board of directors of Edgemont Pharmaceuticals, LLC, a privately held, specialty pharmaceutical company with a primary focus in the field of neuroscience, Jounce Therapeutics, Inc., a privately held cancer immunotherapy company, Medgenics, Inc., a public, clinical stage biopharmaceutical company focused on rare diseases, and Adaptimmune Therapeutics plc, a public, clinical stage biopharmaceutical company focused cancer immunotherapy products based on its T-cell platform.
Rachel McMinn, Ph.D. has served as our chief business and strategy officer since March 2015. Dr. McMinn joined Intercept as chief strategy officer in 2014. Since 2009 until joining Intercept, she was a managing director at Bank of America Merrill Lynch, working as the lead research analyst covering the biotechnology industry. Previously, Dr. McMinn worked at Cowen and Company as a lead biotechnology analyst and started her career as a biotechnology analyst at Piper Jaffray & Co. She graduatedmagna cum laude with a Bachelor of Arts degree in chemistry from Cornell University, earned a Ph.D. in molecular and cellular biology and chemistry from The Scripps Research Institute, and was awarded a post-doctoral Miller fellowship at the University of California, at Berkeley.
David Shapiro, M.D. has served as our chief medical officer and executive vice president, development since 2008. He has over 25 years of clinical development experience in the pharmaceutical industry. Dr. Shapiro founded a consulting company, Integrated Quality Resources, that focused on development stage biopharmaceutical companies and was active in this role from 2005 to 2008. From 2000 to 2005, Dr. Shapiro was executive vice president, medical affairs and chief medical officer of Idun Pharmaceuticals, Inc., prior to its acquisition by Pfizer. From 1995 to 1998, he was president of the Scripps Medical Research Center at Scripps Clinic. He also served as vice president, clinical research at Gensia and as director and group leader,
TABLE OF CONTENTS
hypertension clinical research at Merck Research Laboratories from 1985 to 1990. Dr. Shapiro has authored more than 20 peer-reviewed publications and organized and chaired several conferences aimed at improving product development. He received his medical degree from Dundee University & Medical School, and undertook his postgraduate medical training in the university affiliated hospitals in Oxford, United Kingdom and the University of Vermont. Dr. Shapiro served on the board of directors of Altair Therapeutics and served for two terms on the Executive Committee of the Board of the American Academy of Pharmaceutical Physicians. He is an elected Fellow of both the Royal College of Physicians of London and the Faculty of Pharmaceutical Physicians of the United Kingdom.
There are no family relationships between or among any of our executive officers. The principal occupation and employment during the past five years of each of our executive officers was carried on, in each case except as specifically identified above, with a corporation or organization that is not a parent, subsidiary or other affiliate of us. There is no arrangement or understanding between any of our executive officers and any other person or persons pursuant to which he was or is to be selected as an executive officer.
There are no legal proceedings to which any of our executive officers is a party adverse to us or any of our subsidiaries or in which any such person has a material interest adverse to us or any of our subsidiaries.
TABLE OF CONTENTS
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
Executive Summary
Overview
This section discusses the principles underlying our policies and decisions with respect to the compensation of our executive officers and the most important factors relevant to an analysis of these policies and decisions. This section also describes the material elements of compensation awarded to, earned by or paid to each of our named executive officers for 2015. In addition, this section provides qualitative information regarding the manner and context in which compensation is awarded to and earned by our executive officers and is intended to place in perspective the data presented in the tables and narrative that follow. Our “named executive officers” for the year ended December 31, 2015 were as follows:
| | |
Name | | Title |
Mark Pruzanski, M.D. | | Chief Executive Officer and President |
David Shapiro, M.D. | | Chief Medical Officer and Executive Vice President, Development |
Barbara Duncan | | Chief Financial Officer and Treasurer |
Rachel McMinn, Ph.D. | | Chief Business and Strategy Officer |
Lisa Bright | | Chief Commercial and Corporate Affairs Officer(1) |
Daniel Regan | | Chief Commercial Officer(2) |
| (1) | Ms. Bright joined us in November 2014 as our Head of Europe and was named our Chief Commercial and Corporate Affairs Officer in February 2015. |
| (2) | Mr. Regan ceased to be employed with us in March 2015. |
2015 Performance Highlights
In 2015, we successfully achieved multiple important corporate and product development milestones that we believe contributed to enhancing stockholder value. Success in achieving these milestones enabled us to continue to develop obeticholic acid, or OCA, for both primary biliary cirrhosis, recently renamed primary biliary cholangitis, or PBC, and nonalcoholic steatohepatitis, or NASH, and, subject to obtaining required regulatory approvals, prepare for the planned commercial launch of OCA for PBC. In particular:
| • | OcalivaTM (OCA) Program in PBC: We completed the submission of our applications in the United States and Europe for marketing approval of Ocaliva for patients with PBC inadequately treated by, or intolerant of, standard first-line treatment ursodiol. |
| º | United States: In June 2015, we completed our filings for marketing approval of Ocaliva for PBC in the United States under the FDA’s accelerated approval pathway. In August 2015, the FDA accepted for review our New Drug Application, or NDA, and granted Priority Review for Ocaliva for the treatment of PBC. On April 7, 2016, the FDA’s Gastrointestinal Drugs Advisory Committee voted unanimously (17 to 0) to recommend accelerated approval of Ocaliva for the treatment of patients with PBC. On May 27, 2016, the FDA granted accelerated approval of Ocaliva for PBC in combination with ursodiol, in adults with an inadequate response to UDCA or as monotherapy in adults unable to tolerate ursodiol. Ocaliva is expected to be available to PBC patients in the United States within 7 to 10 days from approval and will be distributed through a specialty pharmacy network. |
| º | Europe: In June 2015, we also received notice of the acceptance of the Marketing Authorization Application, or MAA, for review by the European Medicines Agency, or EMA, for use of Ocaliva for PBC. The EMA review process is ongoing. If we are successful in the EMA review process, we anticipate receiving marketing approval in late 2016, with planned commercial launches in certain European countries in 2017. The brand name Ocaliva has been provisionally approved by the EMA for OCA in PBC, but Ocaliva has not been granted marketing authorization or approval by the EMA. |
TABLE OF CONTENTS
| • | OCA Program in NASH: We initiated our Phase 3 clinical trial, known as REGENERATE, in non-cirrhotic NASH patients with liver fibrosis. We also initiated a phase 2 clinical trial, known as the CONTROL trial, which will evaluate the effects of OCA in combination with statin therapy on lipid metabolism in patients with NASH. |
| • | Other OCA Programs: We initiated a phase 2 clinical trial, known as the AESOP trial, to evaluate the effects of varying doses of OCA in patients with primary sclerosing cholangitis, or PSC. We also initiated a Phase 2 clinical trial, referred to as the CARE trial, in pediatric patients with biliary atresia. |
| • | Pipeline Development: In November 2015, we initiated a Phase 1 clinical trial of our second product candidate to enter clinical development, called INT-767, a dual FXR and TGR5 agonist, in healthy volunteers. |
| • | Structure for Success: We substantially completed the build out of our U.S. commercial infrastructure with the hiring of a number of senior leaders in the U.S. commercial organization throughout 2015, along with the hiring of the U.S. territory business managers and other field personnel in October 2015. We also significantly expanded our commercial and other infrastructure internationally in 2015. Furthermore, we have devoted significant resources to building a global medical affairs team over the course of 2015 to support appropriate disease state, medical and scientific interactions with the healthcare and scientific community. We plan on making additional investments over 2016 should key regulatory milestones be achieved on a timely basis. We also believe that we have procured sufficient quantities of bulk commercial supply to initiate our commercial launch for Ocaliva for PBC, starting with the United States in 2016. We ended fiscal 2015 with a strong financial position to support our planned commercial launch of Ocaliva for PBC and our development programs with approximately $628.1 million in cash, cash equivalents and investment securities. |
Executive Compensation Philosophy
The primary objective of our executive compensation policy is to attract, retain and motivate the key executives necessary for our short-term and long-term success. We seek to tie short-term and long-term compensation to employee performance, including the achievement of measurable corporate objectives, and to align executives’ incentives with stockholder value. The compensation committee approves compensation based on certain compensation philosophies, including the following:
| • | Pay-for-performance. Executive compensation should reward achievement of corporate objectives and provide strong alignment with increasing value for shareholders. Our incentive plans deliver greater rewards when corporate and individual performance exceeds objectives, while providing lower compensation levels if performance expectations are not met. |
| • | Attract, retain and motivate. The executive compensation program should be a differentiator that helps Intercept attract, retain and motivate highly-talented individuals with the necessary skills and demonstrated abilities to deliver superior execution of our short- and long-term strategic plans and drive our continued success. |
| • | Competitive with peer group. Executive compensation should be competitive with compensation paid by market peers who compete with us for talent. |
| • | Balanced combination of compensation elements. The executive compensation program should include a balance of cash and equity incentives that reward short- and long-term performance. Our cash compensation provides alignment with the achievement of critical annual objectives, while equity-based compensation aligns the interests of our executive officers more closely with our stockholders. |
| • | Aligned with our corporate culture. The compensation principles for our executive leadership team should be aligned with those for all employees to help create a company-wide performance culture. |
TABLE OF CONTENTS
Components of Our Executive Compensation Program
The primary elements of our executive compensation program are:
base salary;
annual target-based cash bonuses;
equity incentive awards; and
broad-based health and welfare benefits.
The compensation committee believes that a significant amount of executive compensation should be in the form of “at risk” incentives and that the pay mix should be strongly weighted toward equity incentive awards in order to provide alignment with long-term shareholder value. However, we do not have a formal or informal policy for a pre-set allocation between long-term and short-term compensation, between cash and non-cash compensation or among different forms of non-cash compensation. Instead, our compensation committee, after reviewing information provided by our compensation consultant and other relevant data, determines what it believes to be the appropriate level and mix of the various compensation components. We generally strive to provide our named executive officers with a balance of short-term and long-term incentives to encourage consistently strong performance. Ultimately, the objective in allocating between long-term and currently paid compensation is to ensure adequate base compensation to attract and retain personnel, while providing incentives to maximize long-term value for Intercept and our stockholders. Therefore, we provide base salaries that meet competitive salary norms and recognize individual performance on an annual basis. We provide an opportunity to earn annual target-based cash bonuses to incentivize and reward superior short-term performance. To further focus our executives on longer-term performance and the creation of stockholder value, we rely upon equity-based awards that vest over a meaningful period of time. In addition, we provide our executives with benefits that are generally available to our salaried employees.
Base salary
We use base salaries to recognize the experience, skills, knowledge and responsibilities of our employees, including our executive officers. Base salaries for our named executive officers typically are established through an arm’s-length negotiation at the time the executive is hired, taking into account the position for which the executive is being considered and the executive’s qualifications, prior experience and prior salary. None of our executive officers is currently party to an employment agreement that provides for automatic or scheduled increases in base salary. However, on an annual basis, our compensation committee reviews and evaluates, with input from our chief executive officer, the need for adjustment of the base salaries of our executives based on changes and expected changes in the scope of an executive’s responsibilities. The compensation committee also considers promotions, the individual contributions made by and performance of the executive during the prior fiscal year, the executive’s performance over a period of years, overall economic and labor market conditions, the relative ease or difficulty of replacing the executive with a well-qualified person, our overall growth and development as a company, general salary trends in our industry and among our peer group and where the executive’s salary falls in the salary range presented by that data. For more information regarding our peer group, see “Our Compensation Process — Market Benchmarking and Peer Group.” In making decisions regarding salary increases, we may also draw upon the experience of members of our board of directors with other companies. We do not provide for any formulaic base salary increases for our named executive officers.
TABLE OF CONTENTS
For 2015, the compensation committee recommended annual base salaries for each of our named executive officers based on their overall individual performance in 2014, their increased level of experience and to ensure that their salaries remained competitive with those of similarly-situated executives in our peer group. For 2015, the annual base salary for each of our named executive officers was increased from his or her 2014 annual base salary as follows:
| | | | | | |
| Executive | | 2014
Salary | | 2015
Salary | | %
Increase |
| Dr. Mark Pruzanski | | $ | 550,000 | | | $ | 600,000 | | | | 9.09 | % |
| Dr. David Shapiro | | $ | 420,000 | | | $ | 460,000 | | | | 9.52 | % |
| Barbara Duncan | | $ | 385,000 | | | $ | 415,000 | | | | 7.79 | % |
| Dr. Rachel McMinn | | $ | 355,000 | | | $ | 390,000 | | | | 9.86 | % |
| Lisa Bright | | | — | | | $ | 396,000 | | | | — | |
| Daniel Regan | | $ | 360,000 | | | $ | 360,000 | | | | — | |
The change to the base salary of each named executive officer was effective as of January 1, 2015. Mr. Regan left the service of our company in March 2015. His prorated salary for 2015 was $80,539 through his last day of employment. In 2015, Mr. Regan also received other compensation in connection with his separation in accordance with the terms of his employment agreement. Mr. Regan’s employment agreement is described in “— Other Named Executive Officers” under the discussion of “Employment Agreements.” Ms. Bright’s 2014 salary and percentage increase are not listed in the table above because she did not become an executive officer until February 2015.
Please refer to “— Compensation Decisions Relating to Fiscal Year 2016” for a listing of the annual base salaries of each of our named executive officers for 2016.
Annual target-based cash bonuses
As part of our pay-for-performance philosophy, our annual target-based cash bonus program is designed to reward our named executive officers for the achievement of specified annual corporate objectives. At the beginning of each year, the bonus opportunity for each executive officer is established as a target percentage of his or her base salary. The actual annual cash bonus amounts payable to our executive officers are determined after year end based on the compensation committee’s evaluation of performance against the corporate objectives and, in the case of our named executive officers other than Dr. Pruzanski, individual performance levels. Individual performance of the executive officers other than Dr. Pruzanski is determined by the compensation committee after considering the overall performance of the individual executive and taking into account the recommendations of the chief executive officer. The overall assessment by our compensation committee is based on the evaluation of objective metrics, such as the successful achievement of the applicable goal and the weightings ascribed to such goal, which is then adjusted to reflect other factors that may be pertinent to the performance of the company and the individual executive officer.
The annual corporate objectives include achievement of specific clinical, regulatory, commercial and precommercial, operational and/or financial milestones, with a focus on regulatory achievements, commercial and precommercial preparedness, the advancement of our product candidates in clinical development, the pursuit of various internal initiatives and ensuring adequate funding for our growth. The corporate objectives are proposed by senior management each year and reviewed and approved by our compensation committee and board of directors in the beginning of our fiscal year, with such modifications as the compensation committee and board of directors deem appropriate. The corporate objectives are designed to require significant effort and operational success on the part of our executives and Intercept, but also to be achievable with hard work and dedication.
Our compensation committee believes that a bonus program based on the evaluation of multiple corporate objectives and individual performance is best-suited for a biopharmaceutical company at our stage of development due to the uncertainties inherent in development, regulatory approval and commercialization of new drug treatments. Our compensation committee also considers the practices of our peer group and overall industry practices as part of its review of our bonus program. In order to better align bonus payouts with performance, the compensation committee may take additional significant corporate achievements into account for the current year’s bonus calculation that were not contemplated at the time the current year corporate
TABLE OF CONTENTS
objectives were determined. Our compensation committee also has the authority to shift corporate objectives to subsequent fiscal years and to eliminate them for the current year’s bonus calculation if it determines that underachievement of a goal was primarily caused by circumstances that were beyond the executive’s control or if it determines that the business priorities for the year had shifted.
Each of our compensation committee and our board of directors has authority, in its sole discretion, to review and approve management’s evaluation of how our company performed against its corporate objectives and the recommended bonus payout levels. This authority includes the ability to rate the accomplishment of particular objectives at greater than 100% of target based on exceptional company performance. In any year, our executives can achieve up to 125% of target after factoring all potential performance achievements deemed by our compensation committee and our board of directors as exceeding applicable objectives and goals.
The target annual cash bonus for each executive officer is set by the compensation committee as a percentage of each executive officer’s base salary. The target percentages approved by our compensation committee were based on an evaluation of peer group data, as well as consideration of the level of qualification and experience of each executive at Intercept as well as internal pay comparisons.
2015 Bonuses
For 2015, our annual corporate objectives were as follows:
Preparing for the Commercialization of Ocaliva for PBC:
Acceptance of the NDA in the United States and the MAA in Europe;
Preparation of a company-wide plan for the commercial launch of Ocaliva for PBC upon the receipt of marketing authorization in the United States and Europe; and
Obtain sufficient commercial supply of our product for the commercial launches of Ocaliva for PBC.
Advance NASH Program:
Obtain breakthrough therapy designation from the FDA;
Reach a consensus on NASH registration program resulting in the initiation of our Phase 3 REGENERATE trial in non-cirrhotic NASH patients with liver fibrosis; and
Certain clinical development milestones for our NASH program.
Advance Product Pipeline:
Initiate a Phase 1 clinical trial for INT-767;
Certain clinical development milestones for our programs for OCA in indications other than PBC and NASH; and
Prepare a comprehensive development plan to advance our product pipeline.
Build Corporate Infrastructure:
Secure and retain key talent in light of our planned commercial and development activities in the United States and internationally; and
Maintain a strong financial position to support our commercial launch of Ocaliva for PBC and our development programs.
In January 2016, our compensation committee considered the performance of our company in light of the above goals, together with other information available to it, and determined that we achieved our 2015 corporate objectives at a level of 100%.
Our compensation committee did not set any specific individual performance targets for the payment of cash bonuses to our named executive officers in 2015. Instead, the compensation committee reviewed our company performance against our 2015 corporate objectives and also evaluated the individual performance of each named executive officer. Dr. Pruzanski’s bonus is determined solely based on the achievement of corporate goals, whereas the bonus for our other named executive officers is based on both our corporate goals and individual performance.
TABLE OF CONTENTS
The 2015 target and actual bonuses for each named executive officer were:
| | | | |
| Executive | | Target Bonus
as % of
Base Salary | | Actual Bonus
as % of
Target |
| Mark Pruzanski, M.D. | | | 70 | % | | | 100 | % |
| David Shapiro, M.D. | | | 40 | % | | | 100 | % |
| Barbara Duncan | | | 40 | % | | | 100 | % |
| Rachel McMinn, Ph.D. | | | 40 | % | | | 100 | % |
| Lisa Bright | | | 40 | % | | | 100 | % |
| Daniel Regan* | | | — | | | | — | |
| * | Mr. Regan left the service of our Company in March 2015 and therefore did not receive a 2015 bonus. |
Equity incentive awards
Our equity award program is the primary vehicle for offering long-term incentives to our executives. We believe that equity awards provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the long-term interests of our executives and our stockholders. In addition, we believe that equity awards with a time-based or performance-based vesting feature promote executive retention because this feature incentivizes our executive officers to remain in our employment during the vesting period.
To date, we have used equity awards both to compensate our executive officers in the form of new hire grants at their commencement of employment, and to provide ongoing long-term incentives to our named executive officers as our business has developed. We also generally plan to grant equity awards on at least an annual basis to all of our executive officers. Typically, stock options and shares of restricted stock granted to our executive officers vest over a period of four years, subject to continued employment. Subject to the terms of each executive officer’s employment agreement as described below, vesting ceases upon termination of employment, and stock option exercise rights cease shortly after termination of employment. The exercise price for any Intercept stock option is set at no less than the fair market value of our common stock on the date of grant as determined by reference to the closing market price of our common stock on the date of grant.
Annual equity awards
In determining the size of the annual equity awards granted to our named executive officers, our compensation committee considers recommendations developed by our compensation consultant, including information regarding comparative stock ownership of, and equity awards received by, the executives in our peer group and our industry. In addition, our compensation committee considers each executive’s individual performance, the extent to which such executive has vested previous equity awards, as well as our overall corporate performance and the potential for enhancing the long-term creation of value for our stockholders.
Equity awards to our named executive officers are typically granted annually in conjunction with the review of their individual performance and Intercept’s overall performance for the previous year. This review typically occurs at meetings of the compensation committee held during the first quarter of each year, though the equity awards in 2015 were granted in October 2015. This allows the compensation committee to receive audited financial statements of the previous year before making award determinations.
In making annual equity awards for 2015, our compensation committee considered, among other things, the value of the annual equity awards received by executives in our peer group and our industry, the value of the annual equity awards as a percentage of company value and the size of the annual equity awards as a percentage of our company’s outstanding stock, dilution to existing stockholders and the retention value in the outstanding equity program based on the value of outstanding unvested awards, all of which were considered in light of individual and company performance for the previous year, 2014. Based on the recommendation of our chief executive officer, and in consideration of our company’s performance and the market performance of our common stock, our compensation committee determined that it would be appropriate to grant equity awards targeting the 50th percentile range of our peer group and industry, in contrast to a target between the 50th and 75th percentile used for grants made in 2014. To promote our
TABLE OF CONTENTS
pay-for-performance philosophy, individual equity awards were positioned higher or lower within the peer group range based on the individual performance of each named executive officer.
We believe that a mix of compensation components incentivizes consistently strong performance. In 2015, the compensation committee granted equity incentives in a mix of stock options and restricted stock. Our approach reflects what we believe is an appropriate equity mix, providing executives with exposure to downside stock-price risk through stock options while addressing the historically high volatility of our common stock through the restricted stock award component. This approach also helps manage overall dilution levels and the remaining equity pool available under our 2012 Equity Incentive Plan, or 2012 Plan, in light of our significant recent growth and continued expansion in company-wide headcount. We expect these two types of equity incentives to be part of the compensation mix on an annual basis.
2015 Equity Awards
In October 2015, as part of our annual grant process, our compensation committee approved the grant of certain time-based options to purchase shares of our common stock and shares of restricted stock to our named executive officers. Eachoutstanding, such as dilution of the time-based stock option awards and shares of restricted stock vested with respect to 25% of the shares on January 1, 2016, and vest with respect to the remaining shares in approximately equal monthly installments for the stock options and quarterly installments for the restricted stock through January 1, 2019. The time-based stock option awards have an exercise price of $161.16 per share operating results and the last reported sale pricevoting rights of current holders of our common stock onstock. If the NASDAQ Global Select Market onamendment is approved, it will become effective upon the datefiling of grant.
| | | | |
| Name | | Time-Based Awards
(# of Shares) |
| | Options | | Restricted
Stock |
| Mark Pruzanski, M.D. | | | 32,550 | | | | 15,100 | |
| David Shapiro, M.D. | | | 13,100 | | | | 5,150 | |
| Barbara Duncan | | | 10,600 | | | | 4,050 | |
| Rachel McMinn, Ph.D. | | | 10,600 | | | | 4,050 | |
| Lisa Bright | | | 13,450 | | | | 5,200 | |
New hire equity awards
We grantan amendment to our Restated Certificate of Incorporation (in the form of a new hire equity award in connectionCertificate of Amendment to our Restated Certificate of Incorporation) with the commencementSecretary of an executive’s employment as appropriate and necessary to recruit talent, consistent with industry practice. The size of each new hire award is established through arm’s-length negotiation at the time the executive is hired, taking into account the position for which the executive is being considered and the executive’s qualifications, prior experience and compensation including forfeited equity awards, as well as external factors such as competitive market demand. Typically, the time-based stock options and restricted stock we grant to our newly-hired executive officers vest over a period of four years. In each case, subject to the terms of each executive officer’s employment agreement as described below, vesting ceases upon termination of employment, and stock option exercise rights cease shortly after termination of employment.
Benefits and other compensation
We believe that establishing competitive benefit packages for our employees is an important factor in attracting and retaining highly qualified personnel. We maintain broad-based benefits that are provided to all employees, including medical, dental, group life insurance and long- and short-term disability insurance. For our U.S.-based executives, we also provide a 401(k) plan. Under our 401(k) plan, we are permitted to make discretionary contributions and matching contributions, subject to established limits and a vesting schedule. Since 2015, we have matched an employee’s contributions to the 401(k) plan up to the first five percentState of the employee’s salary. We provide pension, insurance and other benefits to executives located outside the United States in line with those provided to similar executives in their respective countries. AllState of our executives are eligible to participate in allDelaware.
As of our employee benefit plans available in their respective countries, in each case on the same basis as other employees. The compensation committee in its discretion may revise, amend or add to the named executive officer’s benefits and perquisites if it deems it advisable.
TABLE OF CONTENTS
In particular circumstances,April 6, 2020, we may agree to reimburse an executive officer for certain expenses, such as commuting or travel expenses, as an additional incentive to join Intercept in a position where there is high market demand. Whether such expenses are covered and the amount of the reimbursement is determined on a case-by-case basis under the specific hiring circumstances. In 2015, we reimbursed Ms. Bright for her commuting costs, which reimbursement is capped at a maximum of £1,080 per month (approximately $1,579), plus gross ups on the applicable tax amounts. Ms. Bright and Dr. Shapiro also received a car allowance in 2015. See “— Summary Compensation Table.”
Severance and change in control benefits
Pursuant to employment agreements or arrangements we have entered into with our executive officers, our executive officers are entitled to specified benefits in the event of the termination of their employment under specified circumstances, including termination following a change in control of Intercept. Please refer to “— Narrative Disclosure to Summary Compensation Table” for a more detailed discussion of these benefits. We have provided estimates of the value of the severance payments and other benefits that would have been made or provided to executive officers under various termination circumstances under the caption “— Potential Payments Upon Termination or Change in Control” below.
We believe that providing these benefits helps us compete for executive talent. After reviewing the practices of companies represented our peer group, we believe that our severance and change in control benefits are generally in line with severance packages offered to executives of the companies in our peer group.
We have structured our change in control benefits as “double trigger” benefits. In other words, the change in control does not itself trigger benefits. Rather, benefits are paid only if the employment of the executive officer is terminated during a specified period after the change in control. We believe that a “double trigger” benefit is protective of stockholder value because it prevents an unintended windfall to executive officers in the event of a friendly change in control, while still providing them appropriate incentives to cooperate in negotiating any change in control in which they believe they may lose their jobs.
Our Compensation Process
The Role of the Compensation Committee
Our compensation committee oversees our policies governing the compensation of our executive officers. In this role, the compensation committee reviews and approves and recommends for approval to our full board of directors (other than our chief executive officer) all compensation decisions relating to our named executive officers. Our compensation committee consists of four members of our board of directors, each of whom has extensive experience in our industry and is an independent director under applicable NASDAQ and SEC rules. The compensation committee uses its judgment and experience to develop and make executive compensation recommendations to our full board of directors for approval, including its recommendation regarding our chief executive officer’s compensation package. In doing so, the compensation committee meets with our independent compensation consultant, in executive session, without our chief executive officer or any other member of management present. The board of directors has full discretion to approve or modify the recommendations of the compensation committee. The compensation committee periodically evaluates the need for revisions to our executive compensation program to ensure our program is competitive with the companies with which we compete for executive talent.
Management’s Involvement in the Executive Compensation Process
A small number of executives, including our chief executive officer, our senior vice president of human resources and our senior vice president of legal affairs, participate in general sessions of our compensation committee. Management does not participate in executive sessions of our compensation committee. At the request of the compensation committee, our chief executive officer provides input and recommendations to the compensation committee on salary adjustments, annual target-based cash bonus amounts and appropriate equity incentive compensation levels. In formulating these recommendations, our chief executive officer may consider data obtained from third-party sources, including data provided by a compensation consultant other than the compensation consultant retained by the compensation committee. Any data provided by separate compensation consultants used by management is either not customized specifically for Intercept or is
TABLE OF CONTENTS
customized based on parameters that are not developed by such compensation consultant and about which such compensation consultant does not provide advice.
Use of Independent Compensation Consultants by the Compensation Committee
In designing our executive compensation program, our compensation committee considers publicly available compensation data for U.S. companies in the biopharmaceutical industry to help guide its executive compensation decisions at the time of hiring and for subsequent adjustments in compensation. Our compensation committee also retained the services of Radford, an independent compensation consultant and a division of Aon Hewitt, which is a subsidiary of Aon plc, to provide it with additional comparative data on executive compensation practices in our industry and to advise it on our executive compensation program generally. For 2015, Radford provided advice and data to the compensation committee on executive and director compensation matters, including the selection of our peer group, comparative market pay levels, equity dilution and annual share utilization practices, incentive plan design and emerging market trends. Pearl Meyer & Partners, or PM&P, an independent compensation consultant, also advised the compensation committee in its evaluation and determination of the cash salary and bonus targets for 2015. Although the compensation committee considers the advice and recommendations of the compensation consultants about our executive compensation program, the compensation committee ultimately makes its own decisions about these matters.
The compensation committee regularly reviews the services provided by its outside consultants and performs an annual assessment on the independence of its compensation consultants to determine whether the compensation consultant is independent. The compensation committee conducted a specific review of its relationship with each of Radford and PM&P in 2015, and determined that each such advisor is independent in providing Intercept with executive and director compensation consulting services and that each such advisor’s work for the compensation committee did not raise any conflicts of interest, consistent with SEC rules and NASDAQ listing standards.
Market Benchmarking and Peer Group
Our compensation committee references a peer group of publicly traded companies in the biopharmaceutical industry for purposes of gathering data to compare with our existing executive compensation levels and practices and as context for future compensation decisions. The compensation committee periodically reviews and updates the compensation peer group, as appropriate, to include companies that the compensation committee believes are competitors for executive talent and that are similar to us in stage of development, market capitalization and number of employees. The compensation committee may consider peer group and other industry compensation data and the recommendations of our compensation consultant when making decisions related to executive compensation, ultimately giving consideration to the competitiveness of our compensation program, internal perceptions of equity and individual performance. The compensation committee also considered peer companies identified by proxy advisory firms in the prior year’s proxy cycle.
The companies included in our peer group for 2015 were: ACADIA Pharmaceuticals Inc., Achillion Pharmaceuticals, Inc., Alnylam Pharmaceuticals, Inc., Clovis Oncology, Inc., Ironwood Pharmaceuticals, Inc., Merrimack Pharmaceuticals, Inc., NPS Pharmaceuticals, Inc., Ophthotech Corporation, Pharmacyclics, Inc., PTC Therapeutics, Inc., Puma Biotechnology, Inc., Receptos, Inc., Relypsa, Inc., Seattle Genetics Inc., Synageva BioPharma Corp. and Tesaro, Inc.
Annual Compensation Review Process
At the end of each calendar year, the compensation committee considers each executive’s performance for the completed year. This process includes the review of recommendations by our chief executive officer to the compensation committee with respect to each executive officer (other than himself) as to:
the achievement of stated corporate performance objectives;
the level of contributions made to the general management and guidance of Intercept; and
the amount of any salary increases, cash bonus payouts and new equity awards.
TABLE OF CONTENTS
The compensation committee takes into consideration these recommendations and other relevant performance and competitive market factors when it makes its determination on executive compensation matters.
Compensation Decisions Relating to Fiscal Year 2016
In February 2016, in order to provide each of our named executive officers with base salaries that are competitive with our publicly traded peer companies, the annual base salaries of our named executive officers were increased as follows, effective January 1, 2016: for Dr. Pruzanski, to $620,000; for Dr. Shapiro, to $475,000; for Ms. Duncan, to $430,000; for Ms. Bright to $430,000 and for Dr. McMinn, to $420,000. In addition, in February 2016, our board of directors approved bonus targets for our named executive officers for 2016 as follows: for Dr. Pruzanski, 70%; for Dr. Shapiro, 50%; for Ms. Duncan, 50%; for Ms. Bright, 50%; and for Ms. McMinn, 50%.
In February 2016, upon the recommendation of the compensation committee of the board of directors, equity grants were made to our named executive officers as follows: for Dr. Pruzanski, stock options to purchase 30,500had 32,943,079 shares of common stock outstanding and 23,300 sharesour Board of restricted stock; for Dr. Shapiro, stock options to purchase 10,200Directors had reserved 3,388,031 shares of common stock and 7,800 shares of restricted stock; for Ms. Duncan, stock options to purchase 8,100 shares of common stock and 6,200 shares of restricted stock; for Ms. Bright, stock options to purchase 10,200 shares of common stock and 7,800 shares of restricted stock; and for Dr. McMinn, stock options to purchase 8,800 shares of common stock and 6,700 shares of restricted stock. The exercise price for the options awarded to our executive officers is $95.74 per share, the last reported sale price of our common stock on the NASDAQ Global Select Market on the date of the grant.
Compensation Committee Report
The compensation committee of the board of directors of Intercept Pharmaceuticals, Inc. has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with Intercept’s management. Based on such review and discussions, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.
By the compensation committee of the board of directors of Intercept Pharmaceuticals, Inc.
| | |
| | Gino Santini
Srini Akkaraju, M.D., Ph.D.
Klaus Veitinger, M.D., Ph.D.
Daniel Welch |
TABLE OF CONTENTS
Summary Compensation Table
The following table sets forth information regarding compensation awarded to, earned by or paid to our named executive officers during the years ended December 31, 2015, 2014 and 2013.
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Name and Principal Position | | Year | | Salary
($) | | Bonus(1)
($) | | Stock
Awards(2)
($) | | Option
Awards(3)(4)
($) | | Non-Equity
Incentive Plan
Compensation
($) | | All Other
Compensation
($) | | Total
($) |
Mark Pruzanski, M.D.
Chief Executive Officer and President | | | 2015 | | | | 600,000 | | | | 420,000 | | | | 2,308,606 | | | | 2,867,210 | | | | — | | | | 4,627 | (5) | | | 6,200,443 | |
| | | 2014 | | | | 537,500 | | | | 327,250 | | | | 1,249,981 | | | | 1,108,935 | | | | — | | | | 4,444 | (5) | | | 3,228,110 | |
| | | 2013 | | | | 459,000 | | | | 475,000 | (6) | | | 245,630 | | | | 2,073,500 | | | | — | | | | 4,200 | (5) | | | 3,257,330 | |
David Shapiro, M.D.
Chief Medical Officer and Executive Vice President, Development | | | 2015 | | | | 460,000 | | | | 184,000 | | | | 787,371 | | | | 1,153,900 | | | | — | | | | 29,877 | (7) | | | 2,615,148 | |
| | | 2014 | | | | 409,250 | | | | 165,900 | | | | 400,079 | | | | 354,945 | | | | — | | | | 15,052 | (7) | | | 1,345,226 | |
| | | 2013 | | | | 377,000 | | | | 249,500 | (10) | | | 95,700 | | | | 717,750 | | | | — | | | | 14,874 | (7) | | | 1,454,824 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Barbara Duncan
Chief Financial Officer and Treasurer | | | 2015 | | | | 415,000 | | | | 166,000 | | | | 619,196 | | | | 933,680 | | | | — | | | | 21,168 | (8) | | | 2,155,044 | |
| | | 2014 | | | | 372,500 | | | | 148,125 | | | | 400,079 | | | | 354,945 | | | | — | | | | 8,527 | (8) | | | 1,284,176 | |
| | | 2013 | | | | 331,000 | | | | 225,875 | (11) | | | 95,700 | | | | 717,750 | | | | — | | | | 8,013 | (8) | | | 1,378,338 | |
Rachel McMinn, Ph.D.
Chief Strategy and Business Officer | | | 2015 | | | | 390,000 | | | | 156,000 | (12) | | | 619,196 | | | | 933,713 | | | | — | | | | 16,508 | (9) | | | 2,115,417 | |
| | | 2014 | | | | 236,667 | | | | 130,169 | (12) | | | 1,300,263 | (13) | | | 1,166,901 | | | | — | | | | 2,560 | (9) | | | 2,836,560 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Lisa Bright(14)
Chief Commercial and Corporate Affairs Officer | | | 2015 | | | | 396,000 | (14) | | | 158,400 | | | | 795,016 | | | | 1,184,830 | | | | — | | | | 140,421 | (15) | | | 2,674,667 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Daniel Regan(16)
Former Chief Commercial Officer | | | 2015 | | | | 350,538 | (17) | | | — | | | | — | | | | — | | | | — | | | | 41,962 | (18) | | | 392,500 | |
| | | 2014 | | | | 372,500 | | | | 129,600 | | | | 375,074 | | | | 332,701 | | | | — | | | | 21,720 | (19) | | | 1,231,595 | |
| | | 2013 | | | | 277,083 | | | | 167,708 | (20) | | | — | | | | 3,980,227 | | | | — | | | | 36,147 | (19) | | | 4,461,165 | |
| (1) | For 2015 and 2014, our named executive officers were granted a target-based bonus. For 2013, Drs. Pruzanski and Shapiro and Ms. Duncan were granted both a target-based bonus and a special bonus for performance. The target-based bonuses were based on a target percentage of each named executive officer’s base salary for the fiscal year and then adjusted based on pre-determined corporate goals as well as on a subjective evaluation of individual performance, except for our chief executive officer whose annual bonus was determined solely based on attainment of our company objectives. In 2015, the target-based bonus was based on the achievement of 100% of corporate goals, in the case of Dr. Pruzanski, and 100% of corporate goals and individual performance, in the case of our other named executive officers. In 2014, the target-based bonus was based on the achievement of 90% of corporate goals, in the case of Dr. Pruzanski, 90% of corporate goals and individual performance, in the case of Mr. Regan, and 98.75% of corporate goals and individual performance, in the case of our other named executive officers (prorated for Dr. McMinn). In 2013, the target-based bonus was based on the achievement of 150% of corporate goals, in the case of Dr. Pruzanski, and 150% of corporate goals and individual performance, in the case of Dr. Shapiro, Ms. Duncan and Mr. Regan (prorated for Mr. Regan). |
| (2) | The amounts in this column represent the aggregate grant date fair value of restricted stock units or restricted stock awards granted to the named executive officer computed in accordance with FASB ASC Topic 718. See Note 12 of the notes to our consolidated financial statements in our annual report on Form 10-K filed with the SEC on February 29, 2016 for a discussion of the assumptions used in determining the grant date fair values of equity awards. These amounts do not correspond to the actual value that will be recognized by the named executive officers. |
| (3) | The amounts in this column represent the aggregate grant date fair value of stock options granted to the named executive officer in the applicable fiscal year computed in accordance with FASB ASC Topic 718. See Note 12 of the notes to our consolidated financial statements in our annual report on Form 10-K filed with the SEC on February 29, 2016 for a discussion of the assumptions used in determining the grant date fair values of equity awards. These amounts do not correspond to the actual value that will be recognized by the named executive officers. |
| (4) | In 2014, our executive officers were granted performance vesting options to purchase our common stock. The value of the awards on the date of grant assuming the achievement of the highest level of |
TABLE OF CONTENTS
| | performance conditions were as follows: Mark Pruzanski ($5,046,700); David Shapiro ($1,816,777); Barbara Duncan ($1,463,545); Daniel Regan ($1,413,146); and Rachel McMinn ($1,412,806). The value of these options is determined as described in footnote 3 above. |
| (5) | Amounts reflect payments made for health insurance coverage of Dr. Pruzanski and his family members, above the amounts generally paid for the coverage of our employees. |
| (6) | For fiscal 2013, Dr. Pruzanski was awarded a target-based bonus of $375,000 and a special bonus of $100,000. |
| (7) | Amounts reflect a monthly car allowance of $1,000 paid to Dr. Shapiro under the terms of his employment agreement, described below, and the payments of $4,627, $3,051 and $2,874 made in 2015, 2014 and 2013, respectively, for health insurance coverage of Dr. Shapiro and his family members, above the amounts generally paid for the coverage of our employees. Also reflects a payment of $13,250 in 2015 for employer matched 401(k) contributions. |
| (8) | Amounts reflect payments of $7,918, $8,527 and $8,013 made in 2015, 2014 and 2013, respectively, for health insurance coverage of Ms. Duncan and her family members, above the amounts generally paid for the coverage of our employees. Also reflects a payment of $13,250 in 2015 for employer matched 401(k) contributions. |
| (9) | Amounts reflect payments of $3,258 and $2,560 made in 2015 and 2014, respectively, for health insurance coverage of Dr. McMinn and her family members, above the amounts generally paid for the coverage of our employees. Also reflects a payment of $13,250 in 2015 for employer matched 401(k) contributions. |
| (10) | For fiscal 2013, Dr. Shapiro was awarded a target-based bonus of $199,500 and a special bonus of $50,000. |
| (11) | For fiscal 2013, Ms. Duncan was awarded a target-based bonus of $175,875 and a special bonus of $50,000. |
| (12) | Dr. McMinn commenced her employment with us in April 2014. Dr. McMinn was awarded a signing bonus of $50,000, of which $25,000 was paid in May 2014 and the remainder was paid in May 2015. |
| (13) | Dr. McMinn’s equity grants for 2014 reflect the larger amounts awarded for initial new-hire grants. |
| (14) | Ms. Bright joined Intercept on November 2014 as the head of Europe. She became an executive officer of our company when she was promoted to the position of Chief Commercial and Corporate Affairs Officer in February 2015. Ms. Bright’s compensation for 2014 is not provided in the table because she was not an executive officer for the 2014 period. Ms. Bright’s cash compensation is paid in the British Pound equivalent of the approved U.S. Dollar amount. |
| (15) | Amounts reflect the following payments: monthly car allowance of $1,725 paid to Ms. Bright under the terms of her employment agreement; employer paid pension compensation of $73,556; supplemental health coverage of $27,217; and monthly commuting costs of $1,579. See “— Narrative Disclosure to Summary Compensation Table” for more information relating to additional compensation made to Ms. Bright. |
| (16) | Mr. Regan departed from the service of our company in March 2015. |
| (17) | Mr. Regan’s prorated annual base salary for 2015 was $80,539 through his last day of employment. Mr. Regan also received other compensation of $269,999 in connection with his separation in accordance with the terms of his employment agreement as described below. See “— Narrative Disclosure to Summary Compensation Table.” |
| (18) | Reflects reimbursement of $9,000 made in 2015 for Mr. Regan’s apartment rent; $7,918 for health insurance coverage of Mr. Regan and his family members, above the amounts generally paid for the coverage of our employees; $14,538 for accrued paid time off and $10,507 in 2015 for employer matched 401(k) contributions. |
| (19) | Reflects payments of $13,194 and $29,427 made in 2014 and 2013, respectively, for Mr. Regan’s commuting costs. Also reflects the payments of $8,526 and $6,720 made in 2014 and 2013, respectively, for health insurance coverage of Mr. Regan and his family members, above the amounts generally paid for the coverage of our employees. |
| (20) | For fiscal 2013, Mr. Regan was awarded a target-based bonus of $167,708, after giving effect to the proration applied to reflect the commencement of his employment with us in March 2013. Mr. Regan was not awarded a special bonus for 2013. |
TABLE OF CONTENTS
Narrative Disclosure to Summary Compensation Table
Employment Arrangements with Our Named Executive Officers
Mark Pruzanski, M.D. Dr. Pruzanski’s employment agreement provides for an initial term of one year with automatic renewal each year thereafter unless terminated by either us or Dr. Pruzanski. Dr. Pruzanski’s base salary, effective as of January 1, 2016, was set at $620,000 per year, subject to annual review and increase (but not decrease), as determined by our board of directors or the compensation committee. Dr. Pruzanski is also eligible to receive an annual bonus payment of up to 70% of his annual base salary, based on achievement of certain performance milestones identified by our board of directors in consultation with Dr. Pruzanski. During 2015 and 2014, Dr. Pruzanski’s base salaries were $600,000 and $550,000, respectively. Dr. Pruzanski’s 2015 salary was effective on January 1, 2015 and his 2014 salary was effective on April 1, 2014.
Dr. Pruzanski is also eligible to participate in our group benefits programs, including but not limited to medical, disability and life insurance, vacation and retirement plans, and a 401(k) plan sponsored by us. We initiated a 401(k) matching program for all of our employees in the United States, including our named executive officers, in 2015. We have agreed to pay 100% of the health insurance premiums of Dr. Pruzanski and his spouse and other dependents and an annual life insurance premium of $10,000. During 2015, 2014 and 2013, although we paid the premium for Dr. Pruzanski’s participation in our group life insurance policy, which is available generally to all employees, we did not purchase or pay premiums for any individual life insurance policy for Dr. Pruzanski. We are also required to purchase short-term and long-term disability policies insuring at least 60% of Dr. Pruzanski’s base salary.
If Dr. Pruzanski terminates his employment with us or we terminate his employment for any reason, in addition to payment of accrued compensation and benefits, Dr. Pruzanski will be entitled to an amount equal to his target bonus for the prior year, if unpaid, and the prorated portion of his target bonus for the year in which his termination occurs. In the event that Dr. Pruzanski does not renew his employment at the end of the employment term, is terminated for cause, is terminated due to death or disability, or he terminates his employment without good reason, Dr. Pruzanski will not be entitled to any severance benefits except as otherwise described below or otherwise required by law.
In the event we do not renew Dr. Pruzanski’s employment at the end of the employment term, Dr. Pruzanski is terminated by us without cause, as defined in the employment agreement, or he resigns with good reason, as defined in the employment agreement, Dr. Pruzanski will be entitled to receive (i) 12 months of his base salary payable according to our company’s payroll, (ii) a lump sum payment equal to the mean bonus earned by him during the prior three years (such payment shall be in lieu of the prorated bonus payment for the year in which the termination occurs described above) and (iii) continuation of participation in our group health and/or dental plan and the payment of his premiums for 12 months from the date of termination (or the cost of COBRA coverage for such period) for Dr. Pruzanski, his spouse and any dependents covered under our group health and/or dental plan prior to termination.
If Dr. Pruzanski is terminated due to disability, he is entitled to (i) 12 months of base salary payable according to our company’s payroll, so long as he is not eligible to participate in a company-sponsored short-term and long-term disability plans that provide for benefits of at least 60% of base salary, and (ii) continued participation in our group health and/or dental plan and the payment of his premiums for 12 months following the date of termination (or the cost of COBRA coverage for such period) for Dr. Pruzanski, his spouse and any dependents covered under our group health and/or dental plan prior to termination.
If we do not renew Dr. Pruzanski’s employment at the end of the employment term, Dr. Pruzanski is terminated by us without cause, he resigns with good reason or Dr. Pruzanski is terminated due to his death or disability, all of Dr. Pruzanski’s stock options and equity awards will vestissuance upon the effectiveness of a release of claims in our favor and his stock options will be exercisable for up to three years from the effective date of termination unless the stock plan pursuant to which the option is granted requires earlier termination. In the event that Dr. Pruzanski does not renew his employment at the end of the employment term, Dr. Pruzanski is terminated for cause or he terminates his employment without good reason, all of his unvested equity awards and stock options will immediately be forfeited upon the effective date of such termination and all of his
TABLE OF CONTENTS
vested stock options will be exercisable for up to three years from the effective date of termination unless the stock plan pursuant to which the option is granted requires earlier termination.
In the event of the termination of Dr. Pruzanski’s employment in anticipation of, and/or within three months before or 12 months following, a change in control, as defined in the employment agreement, (i) by us because we do not renew Dr. Pruzanski’s employment at the end of the employment term, (ii) by us for any reason other than for cause or (iii) by Dr. Pruzanski for good reason, Dr. Pruzanski will be entitled to receive (a) an amount equal to 24 months’ of his then-current monthly base salary payable as a single lump sum, (b) a lump sum payment equal to two times the mean bonus earned during the prior three years (such payment shall be in lieu of the prorated bonus payment for the year in which the termination occurs described above) and (c) continuation of participation in our group health and/or dental plan and the payment of his premiums for up to 24 (but not less than 18) months from the date of termination (or the cost of COBRA coverage for such period) for Dr. Pruzanski, his spouse and any dependents covered under our group health and/or dental plan prior to termination.
Receipt of the severance benefits described above is conditioned upon Dr. Pruzanski entering into a release of claims with us and the release becoming effective and irrevocable within 60 days after termination. Dr. Pruzanski has acknowledged and agreed that the timing of payments may be modified by us to comply with Section 409A of the Internal Revenue Code of 1986, as amended, or the Code.
To the extent that we are required to implement a clawback policy for the incentive compensation paid to Dr. Pruzanski based on erroneous data contained in an accounting statement pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Dr. Pruzanski’s employment agreement contemplates that the terms of such policy will be incorporated into his employment agreement, provided that such policy applies to the other executive officers of our company.
Under Dr. Pruzanski’s employment agreement, “cause” for termination shall be deemed to exist upon (a) a good faith finding by a majority of the members of the board (excluding Dr. Pruzanski) that (i) Dr. Pruzanski has engaged in material dishonesty, willful misconduct or gross negligence, or (ii) Dr. Pruzanski has materially breached the employment agreement, and has failed to cure such conduct or breach within 30 days after his receipt of written notice from us, or (b) Dr. Pruzanski’s conviction or entry of nolo contendere to any crime involving moral turpitude, fraud or embezzlement, or any felony. Under Dr. Pruzanski’s employment agreement, “good reason” is defined as a material change in duties, position, responsibilities or reporting requirements, relocation of Dr. Pruzanski’s place of employment by more than 50 miles from his principal residence or place of employment prior to such change or our material breach of the employment agreement.
Other Named Executive Officers.
The base salary of our named executive officers other than Dr. Pruzanski whom we refer to as the non-CEO named executive officers, is subject to annual review and increase (but not decrease), as determined by our board of directors and the compensation committee. Each of our non-CEO named executive officers is also eligible to receive an annual bonus based on a target percentage set by our board of directors and the compensation committee in consultation with our chief executive officer. During 2015 and 2014, Dr. Shapiro’s base salaries were $460,000 and $420,000, respectively. Dr. Shapiro’s 2015 salary was effective on January 1, 2015 and his 2014 salary was effective on April 1, 2014. During 2015 and 2014, Ms. Duncan’s base salaries were $415,000 and $385,000, respectively. Ms. Duncan’s 2015 salary was effective on January 1, 2015 and her 2014 salary was effective on April 1, 2014.
The following table sets forth the base salary and bonus target percentages for 2016 for each of our non-CEO named executive officers, other than Mr. Regan who ceased to be employed with us in March 2015:
| | | | |
| Name | | 2016
Base Salary | | 2016
Bonus Target |
| David Shapiro, M.D. | | $ | 475,000 | | | | 50 | % |
| Barbara Duncan | | $ | 430,000 | | | | 50 | % |
| Lisa Bright | | $ | 430,000 | | | | 50 | % |
| Rachel McMinn, Ph.D. | | $ | 420,000 | | | | 50 | % |
TABLE OF CONTENTS
We maintain broad-based benefits that are provided to all employees, including our executive officers, such as medical, dental, group life insurance and long- and short-term disability insurance. For our U.S.-based employees, including our U.S.-based executives, we also provide a 401(k) plan. Under our 401(k) plan, we are permitted to make discretionary contributions and matching contributions, subject to established limits and a vesting schedule. Starting in 2015, we generally match an employee’s contributions to the 401(k) plan up to the first five percent of the employee’s salary. We provide pension, insurance and other benefits to employees and executives located outside the United States in line with those provided in their respective countries to personnel of similar level and experience. All of our executives are eligible to participate in all of our employee benefit plans available in their respective countries, in each case on the same basis as other employees. We have agreed to pay 100% of the health insurance premiums of our named executive officers and their respective spouses and other dependents. For Dr. Shapiro, we provide a monthly car allowance of $1,000. For Ms. Bright, we provide a monthly car allowance of £1,180 (approximately $1,725) and we reimburse her £1,080 (approximately $1,579) per month for commuting costs plus gross ups on the applicable tax amounts for commuting. The compensation committee in its discretion may revise, amend or add to the named executive officer’s benefits and perquisites if it deems it advisable.
David Shapiro & Rachel McMinn
The employment agreements of Dr. Shapiro and Dr. McMinn provide for an initial term of one year with automatic renewal each year thereafter unless terminated by either us or them. In the event we do not renew Dr. Shapiro’s or Dr. McMinn’s employment at the end of his or her employment term, such named executive officer is terminated by us without cause, as defined in the employment agreement, or he or she resigns with good reason, as defined in the employment agreement, such named executive officer will be entitled to receive (i) 12 months of his or her base salary (paid in a single lump sum in the case of Dr. Shapiro and in accordance with regular payroll for Dr. McMinn) and (ii) continuation of participation in our group health and/or dental plan and the payment of his or her premiums for 12 months (or the cost of COBRA coverage for such period) for such named executive officer and his or her dependents covered under our group health and/or dental plan prior to termination. In the event that Dr. Shapiro or Dr. McMinn does not renew his or her employment at the end of the employment term, is terminated for cause, is terminated due to death or disability, or terminates his or her employment without good reason, such named executive officer will not be entitled to severance payments unless mutually agreed upon in writing.
If we do not renew the employment of Dr. Shapiro or Dr. McMinn at the end of their respective employment terms, such named executive officer is terminated by us without cause or he or she resigns with good reason, all of such named executive officer’s equity awards and stock options that would have vested within one year of the termination date will vest upon effectiveness of a release of claims in our favor and all vested stock options will be exercisable for up to one year from the effective date of termination unless the stock plan pursuant to which the option is granted requires earlier termination.
In the event of the termination of Dr. Shapiro’s or Dr. McMinn’s employment, in anticipation of, and/or within 12 months following, a change in control (i) by us because we do not renew such named executive officer’s employment at the end of the employment term, (ii) by us without cause or (iii) by such named executive officer for good reason, such named executive officer will be entitled to receive (a) an amount equal to 12 months of his or her then-current monthly base salary payable as a single lump sum and (b) continuation of participation in our group health and/or dental plan and the payment of his or her premiums for 12 months (or the cost of COBRA coverage for such period) for such named executive officer, his or her spouse and any dependents covered under our group health and/or dental plan prior to termination. In such instances of termination, all of such named executive officer’s unvested equity awards and stock options will, upon effectiveness of a release of claims in our favor, become fully vested and all of his or her vested stock options will be exercisable for a period of one year following the effective date of termination unless the stock plan pursuant to which the option is granted requires earlier termination.
In the event that either Dr. Shapiro or Dr. McMinn is terminated for cause or such named executive officer terminates his or her employment without good reason, all unvested equity awards and stock options granted will immediately be forfeited and all vested options will be exercisable for up to 90 days following termination unless the stock plan pursuant to which the option is granted requires earlier termination.
TABLE OF CONTENTS
Receipt of the severance benefits described above is conditioned upon the Dr. Shapiro or Dr. McMinn, as the case may be, entering into a release of claims with us and the release becoming effective and irrevocable within 60 days after termination. Each of Dr. Shapiro or Dr. McMinn has acknowledged and agreed that the timing of payments may be modified by us to comply with Section 409A of the Code.
To the extent that we are required to implement a clawback policy for the incentive compensation paid to executive officers based on erroneous data contained in an accounting statement pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, each of Dr. Shapiro and Dr. McMinn’s employment agreements contemplate that the terms of such policy will be incorporated into his or her employment agreement, provided that such policy applies to the other executive officers of our company.
Under the employment agreements of Dr. Shapiro and Dr. McMinn, “cause” for termination shall be deemed to exist upon (a) a good faith finding by us that (i) the named executive officer has engaged in material dishonesty, willful misconduct or gross negligence, (ii) the named executive officer has materially breached the employment agreement, or (iii) the named executive officer has breached or threatened to breach his or her invention, non-disclosure and non-solicitation agreement, and has failed to cure such conduct or breach within 30 days after his or her receipt of written notice from us, or (b) the named executive officer’s conviction or entry of nolo contendere to any crime involving moral turpitude, fraud or embezzlement, or any felony. Under the employment agreements, “good reason” is defined as a material change in duties, position, responsibilities or reporting requirements, a relocation of the named executive officer’s place of employment by more than 50 miles from his or her principal residence or place of employment immediately prior to such change or our material breach of the employment agreement.
Lisa Bright
Ms. Bright’s employment agreement, which was effective in November 2014, will continue until it is either terminated by Ms. Bright by giving us six months’ written notice, or terminated by us by giving Ms. Bright six months’ written notice. In the event that Ms. Bright is terminated for equity cause, is terminated due to death or disability, or terminates her employment without equity good reason, she will not be entitled to severance payments unless mutually agreed upon in writing.
If Ms. Bright terminates her employment for equity good reason or if she is terminated by us without equity cause, all unvested stock options and other equity awards that would have otherwise vested within one year of Ms. Bright’s termination, shall vest on the date that a settlement agreement between us and Ms. Bright becomes effective, and Ms. Bright shall have until the earlier of the expiration date of the option or one year from her date of termination to exercise all vested options unless the stock plan pursuant to which the option is granted requires earlier termination. In the event that Ms. Bright is terminated for equity cause or she terminates her employment without equity good reason, or if she is terminated by reason of disability, all unvested equity awards and stock options will immediately be forfeited.
In the event of the termination of Ms. Bright’s employment in anticipation of, and/or within 12 months following, a change in control, provided Ms. Bright executes a settlement agreement and the settlement agreement becomes effective and irrevocable within sixty days of termination, all of Ms. Bright’s unvested equity awards and stock options will immediately become fully vested and all of her vested stock options will be exercisable for a period of one year following the effective date of termination, unless the provisions contained in our equity incentive plan require earlier termination in connection with a liquidation or sale of our company.
Under Ms. Bright’s employment agreement, “equity cause” for termination shall be deemed to exist upon (a) a good faith finding by us that (i) Ms. Bright has engaged in material dishonesty, willful misconduct or gross negligence, (ii) Ms. Bright has breached or threatened to breach an agreement between herself and us related to intellectual property, non-disclosure or non-solicitation of our employees or customers, (iii) Ms. Bright has materially breached the employment agreement and failed to cure such breach within thirty (30) days after receipt of written notice of such breach of written notice from us, or (iv) Ms. Bright’s conviction or entry of nolo contendere to any crime involving fraud, bribery, embezzlement or any other criminal offense. Under the employment agreement, “equity good reason” is defined as a material change in duties, position, responsibilities or reporting requirements, a relocation of Ms. Bright’s place of employment
TABLE OF CONTENTS
by more than 50 miles from his or her principal residence or place of employment immediately prior to such change or our material breach of the employment agreement.
Barbara Duncan
The terms of Ms. Duncan’s employment agreement are substantially similar to those of the employment agreements of Dr. Shapiro and Dr. McMinn described above. In January 2016, as previously disclosed, Ms. Duncan announced her planned departure from her role as our chief financial officer and treasurer. In accordance with such planned departure, in February 2016, we entered into a transition agreement and release with Ms. Duncan. Pursuant to the terms of the transition agreement, Ms. Duncan will continue to serve as our chief financial officer until June 30, 2016 or such earlier date determined by our chief executive officer and mutually agreed upon by Ms. Duncan. We refer to the date of her separation as the separation date and the period of her employment as the employment period. The parties may also agree to delay the separation date if no successor chief financial officer is in the office by June 30, 2016. During the employment period, Ms. Duncan will continue to receive her annual base salary and participate in our benefit plans and programs. Ms. Duncan is also eligible for a pro-rated bonus for 2016 equal to 40% of her pro-rated 2016 salary. Additionally, from the separation date through July 1, 2017 or a date that is one year following the separation date beyond June 30, 3016, which one year period we refer to as the consulting period, Ms. Duncan has agreed to provide consulting services to us on an as-requested basis. Compensation for the consulting period will be paid to Ms. Duncan at a rate of $500 per hour (to a maximum of $40,000 per month even if working in excess of 80 hours in such month) upon presentation of invoices in a form reasonably acceptable to us. We plan to enter into a separate consulting agreement with Ms. Duncan on or before the separation date.
In consideration of Ms. Duncan’s release of any claims against us, Ms. Duncan will be entitled to the following severance and other benefits following the end of her employment period: (i) annual base salary paid monthly for 12 months, which payments will be delayed six months in compliance with Section 409A of the Internal Revenue Code; (ii) a lump sum payment of 40% of such base salary; and (iii) reimbursement for the employer portion of the premiums for COBRA coverage for Ms. Duncan and her dependents under our company’s subsidized health benefits for a period of 12 months following the separation date or earlier if Ms. Duncan ceases to be eligible for COBRA, or chooses not to elect such coverage. Ms. Duncan will also be entitled to the following in relation to her equity awards: (a) continued vesting of options until the end of her consulting period, or initial vesting date, and accelerated vesting for all unvested time-based options that were scheduled, by their terms, to vest on or before one year following the end of her consulting period, or the extended vesting date; (b) all unvested performance based options shall be extended through the initial vesting date but will only become vested to the extent that performance targets are satisfied during that time; and (c) restricted stock and restricted stock units will continue to vest through the initial vesting date, and all unvested restricted stock and restricted stock units that were scheduled, by their terms, to vest on or before the extended vesting date, will be accelerated; and (d) if there is a change in control as defined in the respective award agreements, before the end of her consulting period such that the change in control is effective within three months following the conclusion of her consulting period, any unvested options, shares of restricted stock and restricted stock units will be accelerated.
Daniel Regan
Mr. Regan left the service of our company in March 2015. Pursuant to the terms of Mr. Regan’s employment agreement, he received (i) an aggregate cash payment of $360,000 corresponding to his salary for 12 months in accordance with our regular payroll, (ii) reimbursement of $9,000 for his apartment rent, (iii) the premiums for the health and dental insurance for himself and his spouse and dependents, and (iv) the acceleration of 32,500 shares underlying the options granted in 2013, 430 shares underlying the time-vesting options granted in 2014 and 352 shares underlying the restricted stock awards granted in 2014.
Non-Competition, Confidential Information and Assignment of Inventions Agreements
Dr. Pruzanski is a party to a non-competition and non-solicitation agreement with us, which prevents him from competing with us or soliciting our employees or independent contractors during his employment and for a one-year period thereafter. In addition, each of our named executive officers has also entered into an agreement that contains provisions relating to confidential information, non-solicitation and assignment of inventions. Among other things, these provisions obligate each named executive officer to refrain from
TABLE OF CONTENTS
disclosing any of our proprietary information received during the course of employment and soliciting our employees and to assign to us any inventions conceived or developed during the course of employment.
2015 Fiscal Year Grants of Plan-Based Awards
The following table sets forth information regarding grants of plan-based awards to our named executive officers during 2015. All equity awards in 2015 were issued under our 2012 Plan.
| | | | | | | | | | |
| Name | | Grant
Date | | All Other
Stock Awards:
Number of
Shares of
Stock or Units
(#) | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) | | Exercise or
Base Price
of Option
Awards
($/share)(1) | | Grant Date
Fair Value of
Stock and
Option
Awards(2) |
| Mark Pruzanski | | | 10/01/2015 | | | | 15,100 | | | | | | | | — | | | $ | 2,255,185 | |
| | | | 10/01/2015 | | | | | | | | 32,550 | | | $ | 161.16 | | | $ | 2,841,753 | |
| David Shapiro | | | 10/01/2015 | | | | 5,150 | | | | — | | | | — | | | $ | 769,153 | |
| | | | 10/01/2015 | | | | | | | | 13,100 | | | $ | 161.16 | | | $ | 1,143,686 | |
| Barbara Duncan | | | 10/01/2015 | | | | 4,050 | | | | | | | | — | | | $ | 604,868 | |
| | | | 10/01/2015 | | | | | | | | 10,600 | | | $ | 161.16 | | | $ | 925,424 | |
| Rachel McMinn | | | 10/01/2015 | | | | 4,050 | | | | — | | | | — | | | $ | 604,868 | |
| | | | 10/01/2015 | | | | | | | | 10,600 | | | $ | 161.16 | | | $ | 925,424 | |
| Lisa Bright | | | 10/01/2015 | | | | 5,200 | | | | — | | | | — | | | $ | 776,620 | |
| | | | 10/01/2015 | | | | | | | | 13,450 | | | $ | 161.16 | | | $ | 1,174,242 | |
| (1) | Equal to the closing market price of our common stock on the date of grant. |
| (2) | The amounts in the “Grant Date Fair Value of Option Awards” column reflect the grant date fair value of option and restricted stock awards granted in 2015 calculated in accordance with ASC 718. |
2015 Option Exercises and Stock Vested
The following table shows information regarding exercises of options to purchase our common stock and vesting of stock awards held by each of our named executive officer during the year ended December 31, 2015.
| | | | | | | | |
| | Option Awards | | Stock Awards |
| Name | | Number
of Shares
Acquired on
Exercise
(#) | | Value
Realized on
Exercise
($) | | Number
of Shares
Acquired on
Vesting
(#) | | Value Realized
on Vesting
($) |
| Mark Pruzanski | | | 6,561 | | | | — | | | | 23,452 | | | | 4,825,666 | |
| David Shapiro | | | 22,014 | | | | — | | | | 7,898 | | | | 1,625,911 | |
| Barbara Duncan | | | — | | | | — | | | | 6,600 | | | | 1,356,326 | |
| Rachel McMinn | | | — | | | | — | | | | 1,846 | | | | 439,999 | |
| Lisa Bright | | | — | | | | — | | | | 2,097 | | | | 385,051 | |
| Daniel Regan | | | 5,306 | | | | — | | | | 705 | | | | 156,624 | |
TABLE OF CONTENTS
Outstanding Equity Awards at 2015 Fiscal Year-End
The following table shows grants of restricted stock units or awards, stock options and grants of unvested stock awards outstanding on the last day of the fiscal year ended December 31, 2015 to each of our named executive officers.
| | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
| | | Number of
Securities
Underlying
Unexercised
Options | | Option
Exercise
Price
($/share) | | Option
Expiration
Date | | Number of
Stock Units
That Have
Not Vested
(#)(1) | | Market Value
of Stock Units
That Have
Not Vested
($)(2) |
| Name | | Exercisable | | Un-exercisable | | | | | | | | |
| (a) | | (b) | | (c) | | (e) | | (f) | | (g) | | (h) |
| Mark Pruzanski | | | 12,500 | | | | — | | | | 9.83 | | | | 7/18/2016 | | | | | | | | | |
| | | | 8,411 | | | | — | | | | 9.83 | | | | 9/18/2018 | | | | | | | | | |
| | | | 116,628 | | | | — | | | | 8.67 | | | | 8/16/2020 | | | | | | | | | |
| | | | 34,404 | | | | — | | | | 8.67 | | | | 10/13/2021 | | | | | | | | | |
| | | | 46,158 | | | | 1,082 | (3) | | | 21.50 | | | | 11/16/2022 | | | | | | | | | |
| | | | 47,396 | | | | 13,845 | (4) | | | 31.90 | | | | 5/7/2023 | | | | | | | | | |
| | | | 2,747 | | | | 2,654 | (7) | | | 266.01 | | | | 4/11/2024 | | | | | | | | | |
| | | | — | | | | 22,931 | (11) | | | 266.01 | | | | 4/11/2024 | | | | | | | | | |
| | | | — | | | | 32,550 | (12) | | | 161.16 | | | | 10/01/2025 | | | | | | | | | |
| | | | — | | | | — | | | | — | | | | — | | | | 4,868 | (5) | | | 727,036 | |
| | | | — | | | | — | | | | — | | | | — | | | | 2,406 | (6) | | | 359,336 | |
| | | | — | | | | — | | | | — | | | | — | | | | 2,643 | (8) | | | 394,732 | |
| | | | — | | | | — | | | | — | | | | — | | | | 15,100 | (13) | | | 2,255,185 | |
| David Shapiro | | | 2,235 | | | | — | | | | 8.67 | | | | 10/13/2021 | | | | | | | | | |
| | | | 9,475 | | | | 361 | (3) | | | 21.50 | | | | 11/16/2022 | | | | | | | | | |
| | | | 16,187 | | | | 6,094 | (4) | | | 31.90 | | | | 5/7/2023 | | | | | | | | | |
| | | | 879 | | | | 956 | (7) | | | 266.01 | | | | 4/11/2024 | | | | | | | | | |
| | | | — | | | | 8,255 | (11) | | | 266.01 | | | | 4/11/2024 | | | | | | | | | |
| | | | — | | | | 13,100 | (12) | | | 161.16 | | | | 10/01/2025 | | | | | | | | | |
| | | | — | | | | — | | | | — | | | | — | | | | 1,623 | (5) | | | 242,395 | |
| | | | — | | | | — | | | | — | | | | — | | | | 937 | (6) | | | 139,941 | |
| | | | — | | | | — | | | | — | | | | — | | | | 846 | (8) | | | 126,350 | |
| | | | — | | | | — | | | | — | | | | — | | | | 5,100 | (13) | | | 769,153 | |
| Barbara Duncan | | | 19,520 | | | | — | | | | 9.82 | | | | 5/18/2019 | | | | | | | | | |
| | | | 6,940 | | | | — | | | | 8.67 | | | | 8/16/2020 | | | | | | | | | |
| | | | 13,413 | | | | — | | | | 8.67 | | | | 10/13/2021 | | | | | | | | | |
| | | | 8,077 | | | | 288 | (3) | | | 21.50 | | | | 11/16/2022 | | | | | | | | | |
| | | | 8,781 | | | | 6,094 | (4) | | | 31.90 | | | | 5/7/2023 | | | | | | | | | |
| | | | 879 | | | | 956 | (7) | | | 266.01 | | | | 4/11/2024 | | | | | | | | | |
| | | | — | | | | 6,650 | (11) | | | 266.01 | | | | 4/11/2024 | | �� | | | | | | | |
| | | | — | | | | 10,600 | (12) | | | 161.16 | | | | 10/01/2025 | | | | | | | | | |
| | | | — | | | | — | | | | — | | | | — | | | | 1,298 | (5) | | | 193,856 | |
| | | | — | | | | — | | | | — | | | | — | | | | 937 | (6) | | | 139,941 | |
| | | | — | | | | — | | | | — | | | | — | | | | 846 | (8) | | | 126,350 | |
| | | | — | | | | — | | | | — | | | | — | | | | 4,050 | (13) | | | 604,868 | |
TABLE OF CONTENTS
| | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
| | | Number of
Securities
Underlying
Unexercised
Options | | Option
Exercise
Price
($/share) | | Option
Expiration
Date | | Number of
Stock Units
That Have
Not Vested
(#)(1) | | Market Value
of Stock Units
That Have
Not Vested
($)(2) |
| Name | | Exercisable | | Un-exercisable | | | | | | | | |
| (a) | | (b) | | (c) | | (e) | | (f) | | (g) | | (h) |
| Rachel McMinn | | | 2,502 | | | | 3,502 | (9) | | | 264.12 | | | | 4/30/2024 | | | | | | | | | |
| | | | — | | | | 6,467 | (11) | | | 264.12 | | | | 4/30/2024 | | | | | | | | | |
| | | | — | | | | 10,600 | (12) | | | 161.16 | | | | 10/01/2025 | | | | | | | | | |
| | | | — | | | | — | | | | — | | | | — | | | | 3,077 | (10) | | | 459,550 | |
| | | | — | | | | — | | | | — | | | | — | | | | 4,050 | (13) | | | 604,868 | |
| Lisa Bright | | | 2,771 | | | | 7,461 | (14) | | | 155.00 | | | | 11/24/2024 | | | | | | | | | |
| | | | — | | | | 10,839 | (11) | | | 155.00 | | | | 11/24/2024 | | | | | | | | | |
| | | | — | | | | 13,450 | (12) | | | 161.16 | | | | 10/01/2025 | | | | | | | | | |
| | | | — | | | | — | | | | — | | | | — | | | | 6,290 | (15) | | | 939,412 | |
| | | | — | | | | — | | | | — | | | | — | | | | 5,200 | (13) | | | 776,620 | |
| Daniel Regan | | | 37,969 | | | | — | | | | 37.69 | | | | 5/7/2023 | | | | | | | | | |
| | | | 932 | | | | — | | | | 266.01 | | | | 4/11/2025 | | | | | | | | | |
| (1) | Represents either restricted stock awards or restricted stock units, or RSUs. Each RSU represents the contingent right to receive one share of common stock upon vesting of the unit. All restricted stock awards and RSUs were granted under the 2012 Plan. |
| (2) | Computed in accordance with SEC rules as the number of unvested restricted stock awards or RSUs multiplied by the closing market price of our common stock at the end of the 2015 fiscal year, which was $149.35 on December 31, 2015 (the last business day of the 2015 fiscal year). This amount does not represent our accounting expense for these awards during the year and does not correspond to the actual cash value that may be recognized. The actual value (if any) to be realized by the officer depends on whether the restricted stock awards or RSUs vest and the future performance of our common stock. |
| (3) | Shares underlying these options vested fully on January 1, 2016. |
| (4) | Shares underlying the options vest pro rata on a monthly basis through January 1, 2017, subject to the terms and conditions of the award and the 2012 Plan. |
| (5) | The remainder of the shares underlying the RSUs were fully vested on January 1, 2016. |
| (6) | The remainder of the shares underlying the RSUs vest pro rata on a quarterly basis through January 1, 2017, subject to the terms and conditions of the award and the 2012 Plan. |
| (7) | The remainder of the shares underlying this option vest pro rata on a monthly basis through January 1, 2018, subject to the terms and conditions of the award and the 2012 Plan. |
| (8) | The remainder of the shares underlying the restricted stock awards vest pro rata on every subsequent three-month anniversary of the initial vesting date through January 1, 2018, subject to the terms and conditions of the award and the 2012 Plan. |
| (9) | The remainder of the shares underlying this option vest pro rata on a monthly basis through April 30, 2018, subject to the terms and conditions of the award and the 2012 Plan. |
| (10) | 25% of the shares underlying these restricted stock awards vested on April 30, 2015, and the remainder of the shares underlying the restricted stock awards vest pro rata on each three-month anniversary thereof through April 30, 2018, subject to the terms and conditions of the award and the 2012 Plan. |
| (11) | The shares underlying this option to purchase common stock vest upon the achievement of certain regulatory milestones related to OCA at future dates. |
| (12) | 25% of the shares underlying this option vested on January 1, 2016, and the remainder of the shares underlying this option vest pro rata on a monthly basis through January 1, 2019, subject to the terms and conditions of the award and the 2012 Plan. |
| (13) | 25% of the shares underlying these restricted stock awards vested on January 1, 2016, and the remainder |
TABLE OF CONTENTS
| | of the shares underlying the restricted stock awards vest pro rata on each three-month anniversary thereof through January 1, 2019, subject to the terms and conditions of the award and the 2012 Plan. |
| (14) | 25% of the shares underlying this option vested on November 24, 2015, and the remainder of the shares underlying this option vest pro rata on a monthly basis through November 24, 2018, subject to the terms and conditions of the award and the 2012 Plan. |
| (15) | 25% of the shares underlying these restricted stock awards vested on November 24, 2015, and the remainder of the shares underlying the restricted stock awards vest pro rata on every subsequent three-month anniversary of the initial vesting date through November 24, 2018, subject to the terms and conditions of the award and the 2012 Plan. |
Potential Payments Upon Termination or Change in Control
The following tables set forth information regarding potential payments that each named executive officer who was serving as an executive officer as of December 31, 2015 would have received if the named executive officer’s employment had terminated as of December 31, 2015 under the circumstances set forth below. See “Narrative Disclosure to Summary Compensation Table” for a narrative description of the compensation to which any of our named executive officers would be entitled to upon termination.
The value of stock options with accelerated vesting represents the value of unvested stock options, calculated by multiplying the number of shares subject to the accelerated portion of the option by the amount (if any) by which $149.35, the closing market price of our common stock on December 31, 2015, exceeds the exercise price of such option. The value of RSUs and restricted stock grants is calculated by multiplying the number of shares subject to acceleration by $149.35, the closing price of our common stock on December 31, 2015.
Non-Renewal by Company or Termination Without Cause or For Good Reason Without Change in Control
| | | | | | |
| Name | | Cash
Payment | | Value of
Equity
Accelerated | | Other
Benefits |
| Mark Pruzanski | | | 1,104,617 | | | | 5,942,213 | | | | 4,627 | |
| David Shapiro | | | 531,583 | | | | 1,453,859 | | | | 4,627 | |
| Barbara Duncan | | | 450,083 | | | | 1,324,150 | | | | 7,918 | |
| Rachel McMinn | | | 413,190 | | | | 448,498 | | | | 3,258 | |
| Lisa Bright | | | 201,718 | | | | 652,958 | | | | — | |
Termination Due to Disability Without Change in Control
| | | | | | |
| Name | | Cash
Payment | | Value of
Equity
Accelerated | | Other
Benefits |
| Mark Pruzanski | | | 697,200 | | | | 5,942,213 | | | | 4,627 | |
| David Shapiro | | | 71,583 | | | | — | | | | — | |
| Barbara Duncan | | | 35,083 | | | | — | | | | — | |
| Rachel McMinn | | | 23,190 | | | | — | | | | — | |
| Lisa Bright | | | 201,718 | | | | — | | | | — | |
Termination Due to Death Without Change in Control
| | | | | | |
| Name | | Cash
Payment | | Value of
Equity
Accelerated | | Other
Benefits |
| Mark Pruzanski | | | 97,200 | | | | 5,942,213 | | | | — | |
| David Shapiro | | | 71,583 | | | | — | | | | — | |
| Barbara Duncan | | | 35,083 | | | | — | | | | — | |
| Rachel McMinn | | | 23,190 | | | | — | | | | — | |
| Lisa Bright | | | 3,718 | | | | — | | | | — | |
TABLE OF CONTENTS
Non-Renewal by Company or Termination Without Cause or For Good Reason Upon Change in Control
| | | | | | |
| Name | | Cash
Payment | | Value of
Equity
Accelerated | | Other
Benefits |
| Mark Pruzanski | | | 2,112,034 | | | | 5,942,213 | | | | 9,254 | |
| David Shapiro | | | 531,583 | | | | 2,039,733 | | | | 4,627 | |
| Barbara Duncan | | | 450,083 | | | | 1,762,492 | | | | 7,918 | |
| Rachel McMinn | | | 413,190 | | | | 1,064,417 | | | | 3,258 | |
| Lisa Bright | | | 201,718 | | | | 1,716,032 | | | | — | |
Director Compensation
The following table sets forth the compensation we paid to our non-employee directors during 2015.
| | | | | | | | |
| Name(1) | | Fees Earned
or Paid in
Cash(2) | | Stock
Awards(3)(4) | | Option
Awards(3)(5) | | Total |
| Srinivas Akkaraju, M.D., Ph.D.(6)(8) | | $ | 52,473 | | | $ | 116,525 | | | $ | 172,347 | | | $ | 341,345 | |
| Luca Benatti, Ph.D.(6)(8) | | | 47,240 | | | | 116,525 | | | | 172,347 | | | | 336,112 | |
| Paolo Fundaro(6)(8) | | | 53,140 | | | | 116,525 | | | | 172,347 | | | | 342,012 | |
| Sanj K. Patel(8) | | | 40,531 | | | | — | | | | — | | | | 40,531 | |
| Gino Santini(7)(8) | | | 5,555 | | | | 227,599 | | | | 349,360 | | | | 582,514 | |
| Glenn Sblendorio(6)(8) | | | 48,193 | | | | 116,525 | | | | 172,347 | | | | 337,065 | |
| Jonathan T. Silverstein(6)(8) | | | 66,749 | | | | 116,525 | | | | 172,347 | | | | 355,621 | |
| Klaus Veitinger, M.D.(6)(8) | | | 47,860 | | | | 116,525 | | | | 172,347 | | | | 336,732 | |
| Daniel Welch(7)(8) | | | 5,118 | | | | 227,599 | | | | 349,360 | | | | 582,077 | |
| Nicole S. Williams(8) | | | 49,538 | | | | — | | | | — | | | | 49,538 | |
| (1) | Dr. Pruzanski has been omitted from this table because he received no compensation for serving on our board of directors. Dr. Pruzanski’s compensation as President and Chief Executive Officer for 2015 is detailed in “— Summary Compensation Table” above. Messrs. Santini and Welch joined our board of directors in November 2015. Mr. Patel and Ms. Williams left the service of our board of directors in November 2015 upon the completion of our 2015 annual meeting of stockholders. |
| (2) | Includes the annual retainer paid to each director. |
| (3) | The amounts in these columns represent the aggregate grant date fair value of stock awards and option awards granted to the director during 2015 computed in accordance with FASB ASC Topic 718. See Note 12 of the notes to our consolidated financial statements in our annual report on Form 10-K filed with the SEC on February 29, 2016 for a discussion of assumptions made by us in determining the grant date fair value of our equity awards. |
| (4) | During the year ended December 31, 2015, the above-listed directors received restricted stock awards for the following number of shares of our common stock: Dr. Akkaraju (650); Dr. Benatti (650); Mr. Fundaro (650); Mr. Santini (1,300); Mr. Sblendorio (650); Mr. Silverstein (650); Dr. Veitinger (650); and Mr. Welch (1,300). The restricted stock grants in 2015 to our outside directors were made under the 2012 Plan. |
| (5) | During the year ended December 31, 2015, we granted to our non-employee directors options to purchase common stock at an exercise price of $183.62 per share in the following amounts: Dr. Akkaraju (1,750); Dr. Benatti (1,750); Mr. Fundaro (1,750); Mr. Santini (3,500); Mr. Sblendorio (1,750); Mr. Silverstein (1,750); Dr. Veitinger (1,750); and Mr. Welch (3,500). The options grants in 2015 to our outside directors were made under the 2012 Plan. |
| (6) | All of the shares of common stock underlying the options and restricted stock awards will vest in July 2016, subject to the terms and conditions of the 2012 Plan; provided, however, that if the 2016 annual meeting of stockholders is held prior to the one year anniversary date from the grant, the equity grants will vest as of the close of business on the day immediately preceding such annual meeting date. The grants will vest in full immediately prior to a change in control of our company. |
| (7) | All of the shares of common stock underlying the options and restricted stock awards will vest annually over three years on the anniversary date the director was first elected or appointed to our board of directors, subject to the terms and conditions of the 2012 Plan and our non-employee director |
TABLE OF CONTENTS
| | compensation policy; provided, however, if the next subsequent annual stockholder meeting date (starting from the annual stockholder meeting date in the year after the initial equity grants are made) is held prior to the anniversary in that year, the annual vesting for such year will occur on the day immediately preceding the date of the annual stockholder meeting date in such year, subject to the non-employee director’s continued service on our board. The grants will vest in full immediately prior to a change in control of our company. |
| (8) | As of December 31, 2015, our directors and former directors had outstanding options to purchase common stock and outstanding restricted stock units or awards as set forth below: |
| | | | |
| Name | | Stock
Options | | Restricted
Stock |
| Srinivas Akkaraju, M.D., Ph.D. | | | 8,004 | | | | 650 | |
| Luca Benatti | | | 2,301 | | | | 951 | |
| Paolo Fundaro | | | 10,754 | | | | 650 | |
| Sanj K. Patel | | | 184 | | | | — | |
| Gino Santini | | | 3,500 | | | | 1,300 | |
| Glenn Sblendorio | | | 2,301 | | | | 951 | |
| Jonathan Silverstein | | | 15,327 | | | | 650 | |
| Klaus Veitinger, M.D., Ph.D. | | | 9,977 | | | | 650 | |
| Daniel Welch | | | 3,500 | | | | 1,300 | |
| Nicole Williams | | | 20,070 | | | | — | |
All directors are eligible to receive reimbursement for reasonable out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors, and our non-employee directors are also eligible to receive reimbursement, upon approval of the board of directors or a committee thereof, for reasonable out-of-pocket expenses incurred in connection with attendance at various conferences or meetings with our management.
In February 2016, our board of directors adopted a revised non-employee director compensation policy. Pursuant to the revised policy, our non-employee directors will receive the following cash compensation for service on our board of directors and our board committees effective as of the date of adoption:
| | | | |
| Board of Directors or Committee of Board of Directors | | Annual
Retainer
Amount for
Chair | | Annual
Retainer
Amount for
Other
Members |
| Board of Directors | | $ | 75,000 | | | $ | 50,000 | |
| Audit Committee | | $ | 20,000 | | | $ | 10,000 | |
| Compensation Committee | | $ | 15,000 | | | $ | 7,500 | |
| Nominating and Governance Committee | | $ | 10,000 | | | $ | 5,000 | |
| R&D Committee | | $ | 10,000 | | | $ | 5,000 | |
In addition, our non-employee directors who have served on our board of directors for at least six months prior to an annual meeting of stockholders will receive options to purchase common stock and shares of restricted stock based on the following valuations:
| | | | |
| | Stock Options | | Restricted Stock |
| | | | $232,045 | | | | $174,787 | |
The equity grants will vest on the one-year anniversary of the date of grant, subject to the non-employee director’s continued service on our board of directors;provided, however, that if the next subsequent annual meeting of stockholders is held prior to the one year anniversary date from the grant, the equity grants shall vest as of the close of business on the day immediately preceding such annual meeting date, subject to the non-employee director’s continued service on our board. The grants will vest in full immediately prior to a change in control of our company.
TABLE OF CONTENTS
Newly appointed non-employee directors will be granted a non-qualified stock option under the 2012 Plan to purchase shares of our common stock equivalent to $464,090 in value and shares of restricted stock equivalent to $349,575 in value. The grant will be made automatically and without any action on the part of our board of directors on the first annual meeting of stockholders immediately following the appointment of the new non-employee director;provided, however, that if the new non-employee director is initially elected at an annual meeting, the date of grant will be the annual meeting date upon which the non-employee director was initially elected to our board of directors. The equity grants will vest annually over three years on the anniversary of the date the non-employee director was first elected or appointed to our board of directors, subject to the non-employee director’s continued service on our board of directors;provided, however, if the next subsequent annual meeting date (starting from the annual meeting date in the year after the initial equity grants are made) is held prior to the anniversary date in that year, the annual vesting for such year will occur on the day immediately preceding the date of the annual meeting in such year, subject to the non-employee director’s continued service on our board of directors. The grants will vest in full immediately prior to a change in control of our company.
Equity Compensation Plan Information
The following table provides certain aggregate information with respect to all of the Company’s equity compensation plans in effect as of December 31, 2015.
| | | | | | |
| Plan Category | | Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights | | Weighted-average
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
Second Column) |
| Equity compensation plans approved by security holders | | | 1,541,164 | (1) | | $ | 108.49 | | | | 1,223,693 | (2) |
| Equity compensation plans not approved by security holders | | | — | | | | — | | | | — | |
| Total | | | 1,541,164 | | | | 108.49 | | | | 1,223,693 | |
| (1) | Consists of options to purchase 257,837 shares of common stock under our 2003 Stock Incentive Plan, or 2003 Plan, and options to purchase 1,104,747 shares of common stock and RSUs and restricted stock awards for 178,580 shares of common stock under our 2012 Plan. |
| (2) | Consists of shares available under our 2012 Plan, as no shares are available under our 2003 Plan. Our 2012 Plan contains an “evergreen” provision, which allows for an annual increase in the number of shares of our common stock available for issuance under the plan on the first day of each fiscal year. The annual increase in the number of shares shall be equal to the lowest of: (i) 1,211,533 shares of our common stock; (ii) 4% of the number of shares of our common stock outstanding as of such date; and (iii) an amount determined by our board of directors or compensation committee. On January 1, 2016, pursuant to the evergreen provision, the number of available shares under the 2012 Plan was increased by 976,101 shares. |
Compensation Committee Interlocks and Insider Participation
Until Mr. Patel’s departure from our board of directors in November 2015 after our annual meeting, our compensation committee was composed of Drs. Akkaraju and Veitinger and Messrs. Fundaro and Patel. Since December 2015, our compensation committee has been composed of Drs. Akkaraju and Veitinger and Messrs. Santini and Welch. No member of our compensation committee during fiscal 2015 has at any time been an officer or employee of ours. None of our executive officers serves as a member of another entity’s board of directors or compensation committee, or other committee serving an equivalent function that has one or more executive officers serving as a member of our board of directors or compensation committee.
TABLE OF CONTENTS
Risk Considerations in Our Compensation Program
Our compensation committee has reviewed and evaluated the philosophy and standards on which our compensation plans have been developed and implemented across our company. It is our belief that our compensation programs do not encourage inappropriate actions or risk taking by our executive officers. We do not believe that any risks arising from our employee compensation policies and practices are reasonably likely to have a material adverse effect on our company. In addition, we do not believe that the mix and design of the components of our executive compensation program encourage management to assume excessive risks.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code generally restricts deductibility for federal income tax purposes of annual individual compensation in excess of $1 million paid to each of the chief executive officer and the three other most highly compensated executive officers (other than the chief financial officer) if certain conditions are not satisfied. Qualified “performance-based compensation” is not subject to the deduction limitation if specified requirements are met. The compensation committee is informed about the tax deductibility and accounting treatment of compensation when making its compensation determinations. The compensation committee’s general policy is to develop and maintain compensation programs that effectively attract, motivate and retain exceptional executives in a highly competitive environment, which may include payments that might not be deductible if the compensation committee believes they are in the best interests of our company and our stockholders.
TABLE OF CONTENTS
REPORT OF AUDIT COMMITTEE
The audit committee of the board of directors has furnished the following report:
The audit committee assists the board in overseeing and monitoring the integrity of our financial reporting process, compliance with legal and regulatory requirements and the quality of internal and external audit processes. This committee’s role and responsibilities are set forth in our charter adopted by the board, which is available in the “Investors” section of our website atwww.interceptpharma.com. This committee reviews and reassesses our charter annually and recommends any changes to the board for approval. The audit committee is responsible for overseeing our overall financial reporting process, and for the appointment, compensation, retention, and oversight of the work of KPMG LLP. In fulfilling its responsibilities for the financial statements for fiscal year 2015, the audit committee took the following actions:
Reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2015 with management and KPMG LLP, our independent registered public accounting firm;
Discussed with KPMG LLP the matters required to be discussed in accordance with Statement on Auditing Standards No. 61, as amended, (AICPA, Professional Standards, Vol 1. AU Section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and
Received written disclosures and the letter from KPMG LLP regarding its independence as required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG LLP communications with the audit committee and the audit committee further discussed with KPMG LLP their independence.
The audit committee also considered the status of pending litigation, taxation matters and other areas of oversight relating to the financial reporting and audit process that the committee determined appropriate.
Based on the audit committee’s review of the audited financial statements and discussions with management and KPMG LLP, the audit committee recommended to the board that the audited financial statements be included in our annual report on Form 10-K for the fiscal year ended December 31, 2015 for filing with the SEC.
In 2015, the audit committee reviewed KPMG LLP’s work relating to our annual and quarterly financial statements, along with KPMG LLP’s work relating to our public offerings completed in 2015. Based on KPMG LLP’s performance, the audit committee recommends that our stockholders ratify the appointment of KPMG LLP as our auditors for fiscal 2016.
Members of the Audit Committee
Glenn Sblendorio, Chairperson
Jonathan Silverstein
Gino Santini
TABLE OF CONTENTS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To our knowledge, based solely on a review of the reports furnished to us and written representations that no other reports were required, during the fiscal year 2015, all reports which were required to be filed pursuant to Section 16(a) of the Exchange Act were filed on a timely basis, except for the following Forms 4 which were inadvertently filed late: Form 4 of Srinivas Akkaraju filed on May 22, 2015 reporting the exercise of stock options and the salevesting of other equity awards outstanding under our equity plans. In addition, the Board of Directors had reserved up to 5,823,784 shares of common stock on May 19, 2015; Forms 4for issuance upon conversion of Luciano Adorini, Barbara Duncan, Mark Pruzanskiour 3.25% Convertible Senior Notes due 2023 and David Shapiro filed on July 7, 2015 reporting the vestingour 2.00% Convertible Senior Notes due 2026. As a result, as of restricted stock units and the issuance ofApril 6, 2020, we had only 2,845,106 shares of common stock on July 1, 2015 with respect thereto; and Form 4available for issuance for other purposes. If the proposed amendment to our Restated Certificate of Rachel McMinn filed on July 17, 2015 reportingIncorporation to increase the mandatory saleauthorized number of our shares of common stock to cover the withholding tax amounts upon the vestingis not approved, we may not have sufficient shares of restrictedcommon stock awards on May 1, 2015.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
In addition to the director and executive officer compensation arrangements discussed above in “Executive and Director Compensation,” since January 1, 2015, we have engaged in the following transactions in which the amount involved exceeded $120,000 and in which any director, executive officer or holder of more than 5% of our voting securities, whom we refer to as our principal stockholders, or affiliates or immediate family members of our directors, executive officers and principal stockholders, had or will have a material interest. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties.
Some of our directors are affiliated with our principal stockholders as indicated in the table below:
| | |
Director | | Affiliation with Principal Stockholder |
Paolo Fundaro | | | Mr. Fundaro is the chief financial officer of Genextra S.p.A., which is one of our principal stockholders. | |
Jonathan Silverstein | | | Mr. Silverstein is a member of OrbiMed Advisors LLC, whose affiliated fund is one of our principal stockholders. | |
Indemnification Agreements
We have entered into indemnification agreements with each of our directors and officers. The indemnification agreements and our restated certificate of incorporation and restated by-laws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.
Policyavailable for Approval of Related Person Transactions
Pursuant to the written charter of our audit committee, the audit committee is responsibleissuance for reviewing and approving, prior to our entry into any such transaction, all transactions in which we are a participant and in which any parties related to us, including our executive officers, our directors, beneficial owners of more than 5% of our securities, immediate family members of the foregoing persons and any other persons whom our board of directors determines may be considered related parties under Item 404 of Regulation S-K, has or will have a direct or indirect material interest.
In reviewing and approving such transactions, the audit committee shall obtain, or shall direct our management to obtain on its behalf, all information that the committee believes to be relevant and important to a review of the transaction prior to its approval. Following receipt of the necessary information, a discussion shall be held of the relevant factors ifpurposes deemed to be necessary by the committee prior to approval. If a discussion is not deemed to be necessary, approval may be given by written consent of the committee. This approval authority may also be delegated to the chair of the audit committee in some circumstances. No related party transaction shall be entered into prior to the completion of these procedures.
The audit committee or its chair, as the case may be, shall approve only those related party transactions that are determined to be in, or not inconsistent with, the best interests of us and our stockholders, taking into account all available facts and circumstances as the committee or the chair determines in good faith to be necessary in accordance with principles of Delaware law generally applicable to directors of a Delaware corporation. These facts and circumstances will typically include, but not be limited to, the benefits of the transaction to us; the impact on a director’s independence in the event the related party is a director, an
TABLE OF CONTENTS
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; the terms of the transaction; and the terms of comparable transactions that would be available to unrelated third parties or to employees generally. No member of the audit committee shall participate in any review, consideration or approval of any related party transaction with respect to which the member or any of his or her immediate family members has an interest.
TABLE OF CONTENTS
ELECTION OF DIRECTORS
(Proposal 1)
Upon recommendation of the nominating and governance committee, the board of directors has nominated Srinivas Akkaraju, M.D., Ph.D., Luca Benatti, Ph.D., Daniel Bradbury, Paolo Fundaro, Keith Gottesdiener, M.D., Mark Pruzanski, M.D., Gino Santini, Glenn Sblendorio and Daniel Welch for election at the annual meeting. If they are elected, they will serve on our board of directors until the 2017 annual meeting of stockholders and until their respective successors have been elected and qualified, or until their earlier death, resignation or removal.
Unless authority to vote for any of these nominees is withheld, the shares represented by the enclosed proxy will be voted FOR the election as directors of the nominees listed above. If any nominee should be unable or unwilling to serve on our board of directors, the shares represented by the enclosed proxy will be voted for the election of such other person as the board of directors may recommend in that nominee’s place. We have no reason to believe that any nominee will be unable or unwilling to serve as a director.
A plurality of the shares voted FOR each nominee at the meeting is required to elect each nominee as a director.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF SRINIVAS AKKARAJU, M.D., PH.D., LUCA BENATTI, PH.D., DANIEL BRADBURY, PAOLO FUNDARO, KEITH GOTTESDIENER, M.D., MARK PRUZANSKI, M.D., GINO SANTINI, GLENN SBLENDORIO, AND DANIEL WELCH AS DIRECTORS, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
TABLE OF CONTENTS
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(Proposal 2)
Introduction
Our board of directors has unanimously determined that it is in the best interests of Interceptthe Company by our Board of Directors.
Although at present the Board of Directors has no plans to issue the additional shares of common stock, the Board of Directors believes it would be prudent and its stockholdersadvisable to amendhave those shares available for issuance to provide additional flexibility for future business and financial purposes. If the proposed amendment to our Restated Certificate of Incorporation is approved, additional shares may be issued for various purposes without further stockholder approval. These purposes may include: raising capital; granting equity incentive awards to employees, officers or directors; strategic partnerships; acquisitions, licensing arrangements or other transactions; and other business purposes approved by our Board of Directors.
Although the proposed amendment is not intended as
amended (the “Charter”), to increasean anti-takeover provision, the
number of authorized shares of our common stock from 35,000,000 shares to 45,000,000 shares, which will result in an increase of the total number of authorized shares of our capital stock from 40,000,000 shares to 50,000,000 shares.Currently, our Charter authorizes an aggregate of 40,000,000 shares of capital stock, consisting of 35,000,000 shares of authorized common stock and 5,000,000 shares of authorized preferred stock. No shares of preferred stock are issued and outstanding and we are not proposing to increase the number of authorized preferred stock. As of May 23, 2016, we had 24,600,161additional shares of common stock issued and outstanding and 1,913,481 shares subjectultimately could be used to outstanding stock options and restricted stock units. As of May 23, 2016, we had 661,251 shares of common stock reserved for future issuance under our 2012 Equity Incentive Plan,oppose a hostile takeover attempt or 2012 Plan. Accordingly, approximately 77.6% of our authorized shares of common stock has been issuedto delay or reserved for issuance.
No otherprevent changes to the Charter have been approvedin control or are being proposed by our board of directors. To effectuate the increasemanagement of the number of authorized shares of our common stock,Company.
If the proposed amendment is approved and becomes effective, Article FOURTH, Paragraph A of
the Charter is proposed toour Restated Certificate of Incorporation, which sets forth our currently authorized capital stock, will be amended
as set forth belowto read in its
entirety:entirety as follows:
“The total number of shares of all classes of stock
whichthat the Corporation shall have the authority to issue is
50,000,00095,000,000 shares, consisting of
45,000,00090,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”), and 5,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”).
The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock designation.”
A copy of the
![[GRAPHIC MISSING]](https://files.docoh.com/PRE 14A/0001144204-16-107334/logo_intercept-new.jpg){kind=logo}
![[MISSING IMAGE: lg_intercept-new.jpg]](https://files.docoh.com/PRE 14A/0001104659-20-046996/lg_intercept-new.jpg)
![[GRAPHIC MISSING]](https://files.docoh.com/PRE 14A/0001144204-16-107334/sig_mpruzanski.jpg)
![[MISSING IMAGE: sg_mark-pruzanski.jpg]](https://files.docoh.com/PRE 14A/0001104659-20-046996/sg_mark-pruzanski.jpg)
![[GRAPHIC MISSING]](https://files.docoh.com/PRE 14A/0001144204-16-107334/sig_bryan-yoon.jpg)
![[MISSING IMAGE: tm2014047d1-line_perf.jpg]](https://files.docoh.com/PRE 14A/0001104659-20-046996/tm2014047d1-line_perf.jpg)
![[MISSING IMAGE: tm2014047d1-pc_breakdown4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-20-046996/tm2014047d1-pc_breakdown4c.jpg)
![[MISSING IMAGE: tm2014047d1_pc1.jpg]](https://files.docoh.com/PRE 14A/0001104659-20-046996/tm2014047d1_pc1.jpg)
![[MISSING IMAGE: tm2014047d1_pc2.jpg]](https://files.docoh.com/PRE 14A/0001104659-20-046996/tm2014047d1_pc2.jpg)