PROPOSAL 2
APPROVAL OF AMENDED 2011 EQUITY INCENTIVE PLAN
In January 2016, our Board amended our 2011 Plan, subject to stockholder approval, to increase the number of shares of common stock authorized for issuance under the 2011 Plan by 2,150,000 shares. We refer to the 2011 Plan, as amended by the Board in January 2016, as the “Amended 2011 Plan” throughout this proxy statement. A description of the material terms of the Amended 2011 Plan are summarized below.
Our Board is requesting stockholder approval of the Amended 2011 Plan to increase the number of shares of common stock authorized for issuance under the 2011 Plan by 2,150,000 shares. Our Board believes that the Amended 2011 Plan is an integral part of our long-term compensation philosophy and the Amended 2011 Plan is necessary to continue providing the appropriate levels and types of equity compensation for our employees.
Why we are asking our stockholders to approve the Amended 2011 Plan
Our Board believes it is in the best interests of the Company and our stockholders to approve the Amended 2011 Plan to increase the number of shares available for issuance by an additional 2,150,000 shares. If the Amended 2011 Plan is not approved, we will not have a sufficient amount of authorized shares for future issuances under the 2011 Plan. Prior to the Board approving the Amended 2011 Plan, 11,100,000 shares of common stock were authorized for issuance under the 2011 Plan. As of March 1, 2016, stock options covering an aggregate of 12,054,547 shares of common stock had been granted under the 2011 Plan (including 997,845 shares that had been returned to the 2011 Plan as a result of cancellations or expirations of awards) and only 43,298 shares of common stock (plus any shares that might be returned to the 2011 Plan in the future as a result of cancellation or expiration of awards) remained available for future grant under the 2011 Plan. If this Proposal 2 is approved, an additional 2,150,000 shares will become available for future grant under the 2011 Plan, which, as discussed below,
will, together with the
2000 Equity Incentive Plan (the "2000 Plan"),
enable us to make anticipated stock option grants through the end of 2018.
Equity Awards are an Integral Component of our Compensation Program
Equity awards have been historically and, we believe, will continue to be an integral component of our overall compensation program for all of our employees and officers. Approval of the Amended 2011 Plan will allow us to continue to grant stock options and other equity awards at levels
our Compensation Committee determines to be appropriate in order to attract new employees, retain our existing employees and to provide incentives for such persons to exert maximum efforts for the Company's success and ultimately increase stockholder value. In addition, to the extent that we expand our business or product lines through the acquisition of other businesses, we anticipate that we would need to provide competitive equity compensation packages to any newly acquired employees. The Amended 2011 Plan allows the Company to continue to utilize a broad array of equity incentives with flexibility in designing such incentives, including traditional option grants, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance stock awards.
As of
March 1, 2016
, approximately
51
% of our outstanding equity awards granted pursuant to the Amended 2011 Plan were held by non-executive employees and consultants. We believe it is critical for our long-term success that our employees' interests are tied to the success of the Company as “owners” of our business. The equity incentive programs we have in place have worked to build stockholder value by attracting and retaining extraordinarily talented employees. We believe, and the industry benchmarks that we compare ourselves to support the belief, that we must continue to offer competitive equity compensation packages in order to attract and motivate the talent necessary for our continued growth and success.
Our Compensation Committee carefully monitors our annual burn rate, total dilution and equity compensation expense in an effort to maximize stockholder value by granting only the appropriate number and type of equity awards necessary to attract, reward and retain key employees. In addition, we use industry benchmarks to monitor and evaluate the effectiveness and reasonableness of the equity compensation we offer to our employees and prospective employees, with the goal of attracting and retaining our most valuable human assets while staying within reasonable bounds of what the market requires in a competitive environment. We use a nationally-recognized compensation market intelligence provider in the technology and life sciences industries to benchmark the equity required to remain competitive for non-executive employees and attempt to stay in the middle bands of those benchmarks. Also as discussed in our “Compensation Discussion and Analysis,” our Compensation Committee benchmarks the equity expense associated with equity awards granted to our executive officers against a group of comparable publicly-traded companies, based on such factors as
product range, product development stage, market capitalization, number of employees and public status
.
The following table provides certain additional information regarding our equity incentive plans, as of March 1, 2016:
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As of March 1, 2016(1)
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Total number of shares of common stock subject to outstanding stock options
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21,837,571
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Weighted-average exercise price of outstanding stock options
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$
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6.45
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Weighted-average remaining term of outstanding stock options
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6.40 year
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Total number of shares of common stock subject to outstanding full value awards
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—
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Total number of shares of common stock outstanding
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90,556,255
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Per-share closing price of common stock as reported on NASDAQ Global Market
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$
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2.32
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(1)
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Includes option awards granted under our 2011 Plan, 2000 Plan and Directors’ Plan.
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Equity Plan Utilization
The 2000 Equity Incentive Plan (the "2000 Plan") and 2011 Plan are, collectively, the source of all equity compensation for both our executives and our non-executive employees. The remaining number of shares in the 2000 and 2011 Plans, combined, is about 2,270,181 shares. The additional shares added to the Amended 2011 Plan would provide for a pool of available shares under both the 2000 Plan and the 2011 Plan that the Board estimates would cover equity grants until the end of 2018, based on the anticipated grants.
Burn Rate and Overhang
We manage our long-term stockholder dilution by limiting the number of equity incentive awards granted annually. The Board monitors our annual stock award burn rate, dilution and overhang, among other factors, in its efforts to maximize stockholders’ value by granting what, in the Board’s judgment, are the appropriate number of equity incentive awards necessary to attract, reward, and retain employees, consultants and directors. The table below illustrates our burn rate, dilution, and overhang for the past three fiscal years for all of our equity incentive plans combined with details of each calculation noted below the table.
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2015
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2014
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2013
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Burn Rate
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0.044
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0.040
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0.036
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Dilution
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0.212
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0.218
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0.219
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Overhang
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0.166
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0.175
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0.139
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(1)
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Burn Rate is (number of shares subject to equity awards granted during a fiscal year)/weighted average common shares outstanding for that fiscal year).
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(2)
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Dilution is (number of shares subject to equity awards + the number of shares available for future awards at the end of a fiscal year) /(number of shares outstanding at the end of the fiscal year + number of share subject to equity awards + number of shares available for future awards).
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(3)
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Overhang is (number of shares subject to equity awards at the end of a fiscal year)/(number of shares outstanding at the end of the fiscal year + number of shares subject to equity awards + number of shares available for future awards).
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Important Aspects of our Amended 2011 Plan Designed to Protect our Stockholders' Interests
The Amended 2011 Plan includes certain provisions that are designed to protect our stockholders' interests and to reflect corporate governance best practices including:
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·
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Stockholder approval is required for additional shares.
The Amended 2011 Plan does not contain an annual “evergreen” provision. Thus, stockholder approval is required each time we need to increase the share reserve allowing our stockholders the ability to have a say on our equity compensation programs.
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·
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No liberal change in control provisions.
The definition of change in control in our Amended 2011 Plan requires the consummation of an actual transaction so that no vesting acceleration benefits may occur without an actual corporate transaction or change in control occurring.
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·
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Repricing is not allowed.
The Amended 2011 Plan prohibits the repricing of outstanding equity awards and the cancelation of any outstanding equity awards that have an exercise price or strike price greater than the current fair market value of our common stock in exchange for cash or other stock awards under the Amended 2011 Plan.
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·
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Share counting provisions.
The share reserve under the Amended 2011 Plan is reduced one share for each share of common stock issued pursuant to an option or stock appreciation right and 1.64 shares for each share of common stock issued pursuant to a Full-Value Award. This helps to ensure that management and our Compensation Committee is using the share reserve effectively and with regard to the value of each type of equity award.
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·
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Submission of amendments to Amended 2011 Plan to stockholders.
The Amended 2011 Plan requires stockholder approval for material amendments to the Amended 2011 Plan, including as noted above, any increase in the number of shares reserved for issuance under the Amended 2011 Plan.
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·
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Flexibility in designing equity compensation scheme.
The Amended 2011 Plan allows us to provide a broad array of equity incentives, including traditional option grants, stock bonus awards, restricted stock awards, stock unit awards, stock appreciation rights and performance stock awards. By providing this flexibility we can quickly and effectively react to trends in compensation practices and continue to offer competitive compensation arrangements to attract and retain the talent necessary for the success of our business.
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Broad-based eligibility for equity awards.
We grant equity awards to a large portion of our employees. By doing so, we tie our employees' interests with stockholder interests and motivate our employees to act as owners of the business.
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·
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Limit on equity awards.
The Amended 2011 Plan limits the number of shares of common stock available for equity awards such that no employee may be granted options covering more than to 1,500,000 shares in a calendar year and performance stock awards covering more than to 1,500,000 shares in a calendar year.
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DESCRIPTION OF THE AMENDED 2011 PLAN
The material terms of the Amended 2011 Plan are outlined below. The following description is a summary only and is qualified in its entirety by reference to the complete text of the Amended 2011 Plan. Stockholders are urged to read the actual text of the Amended 2011 Plan, in its entirety, which is appended to this Proxy Statement as
Appendix A
.
GENERAL
The Amended 2011 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock bonus awards, restricted stock awards, stock unit awards, stock appreciation rights and performance stock awards (collectively “awards”). Incentive stock options granted under the Amended 2011 Plan are intended to qualify as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (“Code”). Nonstatutory stock options granted under the Amended 2011 Plan are not intended to qualify as incentive stock options under the Code. See “Federal Income Tax Information” for a discussion of the tax treatment of awards. To date, we have granted only stock options under the Amended 2011 Plan.
PURPOSE OF THE AMENDED 2011 PLAN
The Amended 2011 Plan provides a means by which employees, directors and consultants of the Company and our affiliates may be given an opportunity to purchase our stock, to assist in retaining the services of such persons, to secure and retain the services of persons capable of filling such positions and to provide incentives for such persons to exert maximum efforts for the success of the Company and our affiliates. All of our approximately 186 employees (132), directors (6) and consultants (48) are eligible to participate in the Amended 2011 Plan.
ADMINISTRATION
Our Board has the authority to administer the Amended 2011 Plan. Subject to the provisions of the Amended 2011 Plan, the Board has the power to construe and interpret the Amended 2011 Plan and to determine the persons to whom and the dates on which awards will be granted, what types or combinations of types of awards will be granted, the number of shares of common stock to be subject to each award, the time or times during the term of each award within which all or a portion of such award may be exercised, the exercise, purchase or strike price of each stock award, the types of consideration permitted to exercise or purchase each stock award, and other terms of the awards.
Repricing.
In the event of a decline in the value of our common stock, our Board does not have the authority to offer participants the opportunity to reduce the exercise price of outstanding options or to replace outstanding options with new options and/or cash without obtaining stockholder approval within 12 months prior to such event.
The Board has the power to delegate administration of the Amended 2011 Plan to a committee composed of not fewer than two members of the Board. In the discretion of the Board, a committee may consist solely of two or more “outside directors” in accordance with Section 162(m) of the Code or solely of two or more “non-employee directors” in accordance with Rule 16b-3 of the Exchange Act. This limitation excludes from the committee directors who are (i) current employees of the Company or an affiliate, (ii) former employees of the Company or an affiliate receiving compensation for past services (other than benefits under a tax-qualified pension plan), (iii) current and former officers of the Company or an affiliate, (iv) directors currently receiving direct or indirect remuneration from the Company or an affiliate in any capacity (other than as a director) in excess of the Code or Exchange Act limits and (v) any other person who is otherwise not considered an “outside director” for purposes of Section 162(m) of the Code.
Our Board has delegated administration of the Amended 2011 Plan to the Compensation Committee of the Board. As used herein with respect to the Amended 2011 Plan, the “Board” refers to any committee the Board appoints as well as to our Board itself. All determinations, interpretations and constructions made by the Board in good faith will be final, binding and conclusive on all persons.
STOCK SUBJECT TO THE AMENDED 2011 PLAN
Subject to any adjustments for changes in our capitalization, if this Proposal 4 is approved by our stockholders, an aggregate of 13,250,000 shares of common stock will be reserved for issuance under the Amended 2011 Plan. The shares of common stock subject to the Amended 2011 Plan may be unissued shares or reacquired shares, bought on the market or otherwise.
The number of shares available for issuance under the Amended 2011 Plan are reduced by (i) one share for each share of common stock issued pursuant to an option grant or stock appreciation right with a strike price of at least 100% of the fair market value of the underlying common stock on the date of grant, and (ii) 1.64 shares for each share of common stock issued pursuant to stock bonus awards, restricted stock awards, stock unit awards, performance stock awards, or other stock awards granted under the Amended 2011 Plan.
If awards granted under the Amended 2011 Plan expire or otherwise terminate without being exercised, the shares of common stock not acquired pursuant to such awards again become available for issuance under the Amended 2011 Plan. If unvested shares of common stock issued pursuant to stock awards under the Amended 2011 Plan are forfeited or repurchased by us, the forfeited or repurchased stock will again become available for issuance under the Amended 2011 Plan. If a stock award granted under the Amended 2011 Plan is settled in cash, then the shares of common stock not issued under such stock award will again become available for issuance under the Amended 2011 Plan.
To the extent there is a share of common stock issued pursuant to a stock award that counted as 1.64 shares against the number of shares available for issuance under the Amended 2011 Plan and such share of common stock again becomes available for issuance under the Amended 2011 Plan, then the number of shares of common stock available for issuance under the Amended 2011 Plan will increase by 1.64 shares.
If shares of common stock subject to an award are not delivered to a participant because such shares instead are withheld for payment of taxes or the stock award is exercised through a reduction of shares subject to the stock award, then the number of shares that are not delivered will not again be available for issuance under the Amended 2011 Plan. In addition, if the exercise price of any award is satisfied by the tender of shares of common stock to us (whether by actual delivery or attestation), the shares tendered will not again be available for issuance under the Amended 2011 Plan.
ELIGIBILITY
Incentive stock options may be granted under the Amended 2011 Plan only to employees (including officers) of the Company and our affiliates. Employees (including officers), directors and consultants of both the Company and our affiliates are eligible to receive all other types of awards under the Amended 2011 Plan.
No incentive stock option may be granted under the Amended 2011 Plan to any person who, at the time of the grant, owns (or is deemed to own) stock possessing more than 10% of the total combined voting power of the Company or any affiliate of the Company, unless the exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant and the term of the option does not exceed five years from the date of grant. In addition, the aggregate fair market value, determined at the time of
grant, of the shares of common stock with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year (under the Amended 2011 Plan and any other such plans of the Company and our affiliates) may not exceed $100,000.
No employee may be granted options under the Amended 2011 Plan covering more than 1,500,000 shares of common stock during any calendar year (the “Section 162(m) Limitation”).
TERMS OF OPTIONS
Options may be granted under the Amended 2011 Plan pursuant to stock option agreements. The following is a description of the permissible terms of options under the Amended 2011 Plan. Individual option grants may be more restrictive as to any or all of the permissible terms described below.
Exercise Price; Payment.
The exercise price of incentive stock options may not be less than 100% of the fair market value of the stock subject to the option on the date of the grant and, in some cases (see “Eligibility” above), may not be less than 110% of such fair market value. The exercise price of nonstatutory options may not be less than 100% of the fair market value of the stock on the date of grant, which is defined under the Amended 2011 Plan to be the closing price of our common stock on the day immediately preceding the grant date. As of March 1, 2016, the closing price of our common stock as reported on the Nasdaq Global Market was $2.32 per share.
The exercise price of options granted under the Amended 2011 Plan must be paid either in cash at the time the option is exercised or, at the discretion of the Board, (i) by delivery of other the Company common stock owned by the participant, (ii) pursuant to a deferred payment arrangement, (iii) pursuant to a net exercise arrangement or (iv) in any other form of legal consideration acceptable to the Board.
Vesting.
Options granted under the Amended 2011 Plan may become exercisable, or “vest,” in cumulative increments, as determined by the Board. Shares covered by currently outstanding options under the Amended 2011 Plan typically vest monthly during the participant's employment by, or service as a director or consultant to, the Company or an affiliate (collectively, “service”), and certain options do not begin to vest until the first anniversary of the grant date. In the last 2 years, performance milestone-contingent options have also been grant to executives. Shares covered by options granted in the future under the Amended 2011 Plan may be subject to different vesting terms. Our Board has the power to accelerate the time during which an option may vest or be exercised. In addition, options granted under the Amended 2011 Plan may permit exercise prior to vesting, but in such event the participant may be required to enter into an early exercise stock purchase agreement that allows the Company to repurchase unvested shares, generally at their exercise price, should the participant's service terminate before vesting.
Tax Withholding.
To the extent provided by the terms of an option, a participant may satisfy any federal, state or local tax withholding obligation relating to the exercise of such option by a cash payment upon exercise, by authorizing the Company to withhold a portion of the stock otherwise issuable to the participant, by delivering already-owned the Company common stock or by a combination of these means.
Term; Termination of Service.
The maximum term of options under the Amended 2011 Plan is 10 years, except that in certain cases (see “Eligibility” above) the maximum term is five years. Options under the
Amended 2011 Plan generally terminate upon the earlier to occur of the original expiration date of the option and three months after termination of the participant's service. However, in the event that (i) a participant's termination is due to the participant's permanent and total disability (as defined in the Code), the option may, but need not, provide that it may be exercised (to the extent the option was exercisable at the time of the termination of service) at any time within 12 months of such termination (but in no event beyond the original expiration date of the option); or (ii) the participant dies before the participant's service has terminated or within the period (if any) specified in the stock option agreement after termination of such service for a reason other than death, the option may, but need not, provide that it may be exercised (to the extent the option was exercisable at the time of the participant's death) within 18 months following the participant's death by the person or persons to whom the rights to such option pass by will or by the laws of descent and distribution (but in no event beyond the original expiration date of the option). A participant may designate a beneficiary who may exercise the option following the participant's death. Individual option grants by their terms may provide for exercise within a longer period of time following termination of service; provided, that the option may not, in any event, be exercised beyond the original expiration date of the option.
A participant's option agreement may provide that if the exercise of the option following the termination of the participant's service would be prohibited because the issuance of stock would violate the registration requirements under the Securities Act, then the option will terminate on the earlier of (i) the expiration of the term of the option or (ii) three months (that need not be consecutive)
after the termination of the participant's service during which the exercise of the option would not be in violation of such registration requirements.
RESTRICTIONS ON TRANSFER
Typically, the participant may not transfer an option other than by will or by the laws of descent and distribution or a domestic relations order. However, to the extent permitted under the terms of the applicable stock option agreement, a participant may designate a beneficiary who may exercise the stock option following the participant's death. Shares subject to repurchase by the Company under an early exercise stock purchase agreement may be subject to restrictions on transfer that the Board deems appropriate.
TERMS OF STOCK BONUS AWARDS AND RESTRICTED STOCK AWARDS
Stock bonus awards may be granted under the Amended 2011 Plan pursuant to stock bonus agreements. Restricted stock awards may be granted under the Amended 2011 Plan pursuant to restricted stock purchase agreements. No stock bonus awards or restricted stock awards have been granted under any equity plan of the Company.
Payment.
Our Board determines the purchase price under a restricted stock purchase agreement, but the purchase price may not be less than 85% of the fair market value of our common stock on the date the award is made or the date of purchase. Our Board may award stock bonuses in consideration of past services without a purchase payment.
The purchase price of stock acquired pursuant to a restricted stock purchase agreement under the Amended 2011 Plan must be paid either in cash at the time of purchase or, at the discretion of the Board, (i) pursuant to a deferred payment arrangement (except with respect to payment of par value) or (ii) in any other form of legal consideration acceptable to the Board.
Vesting.
Shares of stock sold or awarded under the stock bonus agreement or restricted stock purchase agreement may, but need not, be subject to a repurchase option in favor of the Company in accordance with a vesting schedule as determined by the Board. Our Board has the power to accelerate the vesting of stock acquired pursuant to a restricted stock purchase agreement under the Amended 2011 Plan.
Termination of Service.
Upon termination of a participant's service, the Company may repurchase or otherwise reacquire any shares of stock that have not vested as of such termination under the terms of the restricted stock purchase agreement.
Restrictions on Transfer.
Rights under a stock bonus or restricted stock bonus agreement may not be transferred except where such transfer is expressly authorized by the terms of the applicable stock bonus or restricted stock purchase agreement.
TERMS OF STOCK APPRECIATION RIGHTS
Stock appreciation rights may be granted under the Amended 2011 Plan pursuant to stock appreciation rights agreements. No stock appreciation rights have been granted under any equity plan of the Company.
Exercise.
Each stock appreciation right is denominated in shares of common stock equivalents. Upon exercise of a stock appreciation right, we will pay the participant an amount equal to the excess of the aggregate fair market value of our common stock on the date of exercise over the strike price, determined by the Board on the date of grant.
Settlement of Awards.
The appreciation distribution upon exercise of a stock appreciation right may be paid in cash, shares of our common stock, any combination of these means, or any other form of consideration determined by the Board.
Vesting.
Stock appreciation rights vest and become exercisable at the rate specified in the stock appreciation right agreement as determined by the Board.
Term.
Upon termination of a participant's service, the participant generally may exercise any vested stock appreciation right for three months (or such longer or shorter period specified in the stock appreciation right agreement) after the date such service relationship ends. In no event may a stock appreciation right be exercised beyond the expiration of its term, which will be no greater than 10 years according to our policy.
TERMS OF STOCK UNIT AWARDS
Stock unit awards may be granted under the Amended 2011 Plan pursuant to stock unit award agreements. No stock unit awards have been granted under any equity plan of the Company.
Consideration.
The purchase price, if any, for stock unit awards may be paid in any form of legal consideration acceptable to the Board.
Settlement of Awards.
A stock unit award may be settled by the delivery of shares of our common stock, in cash, or by any combination of these means, as determined by the Board.
Vesting.
Stock unit awards vest at the rate specified in the stock unit award agreement, as determined by the Board. However, at the time of grant, the Board may impose additional restrictions or conditions that delay the delivery of stock or cash subject to the stock unit award after vesting.
Dividend Equivalents.
Dividend equivalent rights may be credited with respect to shares covered by a stock unit award. We do not anticipate paying cash dividends on our common stock for the foreseeable future, however.
Termination of Service.
Except as otherwise provided in the applicable award agreement, stock units that have not vested will be forfeited upon the participant's termination of service.
PERFORMANCE-BASED STOCK AWARDS
Under the Amended 2011 Plan, a stock award may be granted, vest or be exercised based upon certain service conditions or upon the attainment during a certain period of time of certain performance goals. All employees of the Company and its affiliates and directors of the Company are eligible to receive performance-based stock awards under the Amended 2011 Plan. The length of any performance period, the performance goals to be achieved during the performance period, and the measure of whether and to what degree such performance goals have been attained will be determined by the Board. The maximum amount to be received by any individual in any calendar year attributable to such performance-based stock awards may not exceed the value of 1,500,000 shares of the Company's common stock.
Section 162(m) of the Code disallows a deduction to any publicly held corporation and its affiliates for certain compensation paid to “covered employees” in a taxable year to the extent that compensation to a covered employee exceeds $1 million. However, some kinds of compensation, including qualified “performance-based compensation,” are not subject to this deduction limitation. While we believe it is in the best interests of the Company and our stockholders to preserve the ability to grant “performance-based compensation” under Section 162(m) of the Code, in certain circumstances, we may determine to grant compensation to covered employees that will not qualify as “performance-based compensation” for purposes of Section 162(m) of the Code. Moreover, even if we intend to grant compensation that qualifies as “performance-based compensation,” we cannot guarantee that such compensation ultimately will be deductible by us. For the grant of awards under a plan to qualify as “performance-based compensation” under Section 162(m) of the Code, among other things, the plan must (i) describe the employees eligible to receive such awards, (ii) provide a per-person limit on the number of shares subject to stock options and performance stock awards, and the amount of cash that may be subject to performance cash awards, granted to any employee under the plan in any year, and (iii) include one or more pre-established business criteria upon which the performance goals for performance awards may be granted (or become vested and/or exercisable).
In granting a performance-based stock award, the Board will set a period of time (a “performance period”) over which the attainment of one or more goals (“performance goals”) will be measured for the purpose of determining whether the award recipient has a vested right in or to such stock award. If the award is intended to qualify as “performance-based compensation” under Section 162(m) of the Code, within the time period prescribed by Section 162(m) of the Code (typically before the 90th day of a performance period), the Board will establish the performance goals, based upon one or more pre-established criteria (“performance criteria”) enumerated in the Amended 2011 Plan and described below. As soon as administratively practicable following the end of the performance period, the Board will certify (in writing) whether the performance goals have been satisfied.
Performance goals under the Amended 2011 Plan will be determined by the Board, based on a service condition or on one or more of the following performance criteria: (i) earnings per share; (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization (“EBITDA”); (iv) net earnings; (v) total stockholder return; (vi) return on equity; (vii) return on assets, investment, or capital employed; (viii) operating margin; (ix) gross margin; (x) operating income; (xi) net income (before or after taxes); (xii) net operating income; (xiii) net operating income after tax; (xiv) pre- and after-tax income;
(xv) pre-tax profit; (xvi) operating cash flow; (xvii) sales or revenue targets; (xviii) increases in revenue or product revenue; (xix) expenses and cost reduction goals; (xx) improvement in or attainment of expense levels; (xxi) improvement in or attainment of working capital levels; (xxii) economic value added (or an equivalent metric); (xxiii) market share; (xxiv) cash flow; (xxv) cash flow per share; (xxvi) share price performance; (xxvii) debt reduction; (xxviii) implementation or completion of projects or processes; (xxix) customer satisfaction; (xxx) stockholders' equity; and (xxxi) other measures of performance selected by the Board.
The Board is authorized, at any time in its sole discretion, to adjust or modify the calculation of a performance goal for a performance period in order to prevent the dilution or enlargement of the rights of participants, (I)
in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (II) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting Rigel, or the financial statements of Rigel, or
in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; or (III) in view of the Board's assessment of the business strategy of the Company, performance of comparable organizations, economic and business conditions, and any other circumstances deemed relevant. Specifically, the Board is authorized to make adjustment in the method of calculating attainment of performance goals and objectives for a performance period as follows: (a) to exclude the dilutive effects of acquisitions or joint ventures; (b) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; and (c) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends. In addition, the Board is authorized to make adjustment in the method of calculating attainment of performance goals and objectives for a performance period as follows: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; (iv) to exclude the effects to any statutory adjustments to corporate tax rates; (v) to exclude the
impact of any "extraordinary items"
as determined under generally accepted accounting principles
; and (vi) to exclude any other unusual, non-recurring gain or loss or other extraordinary item
.
Compensation attributable to performance-based stock awards under the Amended 2011 Plan may qualify as performance-based compensation, provided that: (i) the award is granted by a Compensation Committee comprised solely of “outside directors,” (ii) the award is granted (or exercisable) only upon the achievement of an objective performance goal established in writing by the Compensation Committee while the outcome is substantially uncertain, and (iii) the Compensation Committee certifies in writing, prior to the granting (or exercisability) of the award, that the performance goal has been satisfied.
ADJUSTMENT PROVISIONS
If any change is made to the outstanding shares of the Company's common stock without the Company's receipt of consideration (whether through merger, consolidation, reorganization, stock dividend or stock split, or other specified change in the capital structure of the Company), appropriate adjustments will be made to the type(s), class(es) and number of shares of common stock subject to the Amended 2011 Plan and outstanding awards. In that event, the Amended 2011 Plan will be appropriately adjusted as to the type(s), class(es) and the maximum number of shares of common stock subject to the Amended 2011 Plan and the Section 162(m) Limitation, and outstanding awards will be adjusted as to the type(s), class(es), number of shares and price per share of common stock subject to such awards.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of (i) a sale, lease or other disposition of all or substantially all of the Company's securities or assets, (ii) a merger or consolidation in which the Company is not the surviving corporation or (iii) a reverse merger in which the Company is the surviving corporation but the shares of common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, any surviving or acquiring corporation may continue or assume awards outstanding under the Amended 2011 Plan or may substitute similar
awards. If any surviving or acquiring corporation does not assume such awards or substitute similar awards, then with respect to awards held by participants whose service with the Company or an affiliate has not terminated as of the effective date of the corporate transaction, the vesting of such awards (and, if applicable, the time during which such awards may be exercised) will be accelerated in full, and the awards will terminate if not exercised (if applicable) at or prior to such effective date.
The Amended 2011 Plan provides that, in the event of a dissolution or liquidation of the Company, all outstanding awards under the Amended 2011 Plan will terminate prior to such event and shares of common stock subject to the Company's repurchase option may be repurchased by the Company, notwithstanding whether the holder is still providing services to the Company.
The acceleration of an award in the event of a corporate transaction may be viewed as an anti-takeover provision, which may have the effect of discouraging a proposal to acquire or otherwise obtain control of the Company.
DURATION, AMENDMENT AND TERMINATION
Our Board may suspend or terminate the Amended 2011 Plan without stockholder approval or ratification at any time or from time to time. Unless sooner terminated, the Amended 2011 Plan will terminate on March 22, 2021.
Our Board generally may amend the Amended 2011 Plan at any time or from time to time; provided, that no amendment may impair the rights under existing awards without the participant's written consent. In addition, no amendment will be effective unless approved by our stockholders within 12 months before or after its adoption by the Board if the amendment would: (i) modify the requirements as to eligibility for participation (to the extent such modification requires stockholder approval in order for the Amended 2011 Plan to satisfy Section 422 of the Code, if applicable, or Rule 16b-3 of the Exchange Act); (ii) increase the number of shares reserved for issuance upon exercise of awards; or (iii) change any other provision of the Amended 2011 Plan in any other way if such modification requires stockholder approval in order to comply with Rule 16b-3 of the Exchange Act or satisfy the requirements of Section 422 of the Code or any securities exchange listing requirements. Our Board may submit any other amendment to the Amended 2011 Plan for stockholder approval, including, but not limited to, amendments intended to satisfy the requirements of Section 162(m) of the Code regarding the exclusion of performance-based compensation from the limitation on the deductibility of compensation paid to certain employees.
In the event of a decline in the value of our common stock, our Board does not have the authority to offer participants the opportunity to reduce the exercise price of any outstanding stock awards or to replace any outstanding stock awards with new stock awards without obtaining stockholder approval within 12 months prior to such event.
FEDERAL INCOME TAX INFORMATION
The following is a summary of the principal United States federal income tax consequences to employees and the Company with respect to participation in the Amended 2011 Plan. This summary is not intended to be exhaustive, and does not discuss the income tax laws of any city, state or foreign jurisdiction in which a participant may reside. The information is based upon current federal income tax rules and therefore is subject to change when those rules change. Because the tax consequences to any participant may depend on his or her particular situation, each participant should consult the participant's tax adviser regarding the federal, state, local, and other tax consequences of the grant or exercise of an award or the disposition of stock acquired under the Amended 2011 Plan. The Amended 2011 Plan is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974, as amended. Our ability to realize the benefit of any tax deductions described below depends on our generation of taxable income as well as
the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of our tax reporting obligations.
Incentive Stock Options.
Incentive stock options under the Amended 2011 Plan are intended to be eligible for the favorable federal income tax treatment accorded “incentive stock options” under the Code. There generally are no federal income tax consequences to the participant or the Company by reason of the grant or exercise of an incentive stock option. However, the exercise of an incentive stock option may increase the participant's alternative minimum tax liability, if any.
If a participant holds stock acquired through exercise of an incentive stock option for more than two years from the date on which the option was granted and more than one year after the date the option was exercised for those shares, any gain or loss on a disposition of those shares (a “qualifying disposition”) will be a long-term capital gain or loss. Upon such a qualifying disposition, the Company will not be entitled to any income tax deduction.
Generally, if the participant disposes of the stock before the expiration of either of these holding periods (a “disqualifying disposition”), then at the time of the disqualifying disposition the participant will realize taxable ordinary income equal to the lesser of (i) the excess of the stock's fair market value on the date of exercise over the exercise price, or (ii) the participant's actual gain, if any, on the purchase and sale. The participant's additional gain or any loss upon the disqualifying disposition will be a capital gain or loss, which will be long-term or short-term depending on whether the stock was held for more than one year.
To the extent the participant recognizes ordinary income by reason of a disqualifying disposition, the Company will generally be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation) to a corresponding business expense deduction in the tax year in which the disqualifying disposition occurs.
Nonstatutory Stock Options, Restricted Stock Purchase Awards and Stock Bonuses.
Nonstatutory stock options, restricted stock purchase awards and stock bonuses granted under the Amended 2011 Plan generally have the following federal income tax consequences.
There are no tax consequences to the participant or the Company by reason of the grant. Upon acquisition of the stock, the participant normally will recognize taxable ordinary income equal to the excess, if any, of the stock's fair market value on the acquisition date over the purchase price. However, to the extent the stock is subject to certain types of vesting restrictions, the taxable event will be delayed until the vesting restrictions lapse unless the participant elects to be taxed on receipt of the stock. Upon the receipt of shares under a restricted stock award, the participant normally will recognize ordinary income equal to the excess of the stock's fair market value over the purchase price, if any, for the restricted stock. However, an exception to this general rule may apply if the stock is subject to certain types of vesting restrictions such that it is subject to a “substantial risk of forfeiture” (as defined in Section 83 of the Code). In such event, unless the participant makes a Section 83(b) election under the Code within 30 days after the acquisition of the restricted stock, he or she generally will not recognize any income until such “substantial risk of forfeiture” lapses, and the income recognized will be based on the fair market value of the stock on such future date. In addition, the participant's holding period for purposes of determining the long-term or short-term nature of any capital gain or loss recognized on a subsequent disposition of the stock will begin on the date the “substantial risk of forfeiture” lapses. If a participant files a Section 83(b) election, he or she must report ordinary income equal to the difference between the stock's fair market value and the purchase price, if any. When the participant later sells such shares, any additional gain or any loss will be characterized as capital gain or loss, which will be long-term or short-term depending on the length of time the shares are held.
With respect to employees, the Company is generally required to withhold from regular wages or supplemental wage payments an amount based on the ordinary income recognized. Subject to the
requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, the Company will generally be entitled to a business expense deduction equal to the taxable ordinary income realized by the participant.
Upon disposition of the stock, the participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock plus any amount recognized as ordinary income upon acquisition (or vesting) of the stock. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year. Slightly different rules may apply to participants who acquire stock subject to certain repurchase options or who are subject to Section 16(b) of the Exchange Act.
Stock Appreciation Rights.
No taxable income is realized upon the receipt of a stock appreciation right, but upon exercise of the stock appreciation right the fair market value of the shares (or cash in lieu of shares) received must be treated as compensation taxable as ordinary income to the participant in the year of such exercise. Generally, with respect to employees, we are required to withhold from the payment made on exercise of the stock appreciation right, or from regular wages or supplemental wage payments, an amount based on the ordinary income recognized. Subject to the requirement of reasonableness, Section 162(m) of the Code and the satisfaction of a reporting obligation, we will be entitled to a business expense deduction equal to the taxable ordinary income recognized by the participant.
Restricted Stock Bonus Awards.
Upon receipt of a restricted stock bonus award, the participant will recognize ordinary income equal to the excess, if any, of the fair market value of the shares on the date of issuance over the purchase price, if any, paid for those shares. The Company will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation) to a corresponding income tax deduction in the tax year in which such ordinary income is recognized by the participant.
However, if the shares issued upon the grant of a restricted stock bonus award are unvested and subject to reacquisition or repurchase by the Company in the event of the participant's termination of service prior to vesting in those shares, the participant will not recognize any taxable income at the time of issuance, but will have to report as ordinary income, as and when the Company's reacquisition or repurchase right lapses, an amount equal to the excess of the fair market value of the shares on the date the reacquisition or repurchase right lapses over the purchase price, if any, paid for the shares. The participant may, however, elect under Section 83(b) of the Code to include as ordinary income in the year of issuance an amount equal to the excess of the fair market value of the shares on the date of issuance, over the purchase price, if any, paid for such shares. If the Section 83(b) election is made, the participant will not recognize any additional income as and when the reacquisition or repurchase right lapses.
Upon disposition of the stock acquired upon the receipt of a restricted stock bonus award, the participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock plus any amount recognized as ordinary income upon issuance (or vesting) of the stock. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year.
Stock Unit Awards.
No taxable income is recognized upon receipt of a stock unit award. The participant will recognize ordinary income in the year in which the vested shares subject to that unit are actually issued to the participant, in an amount equal to the fair market value of the shares on the date of issuance. The participant and we will be required to satisfy certain tax withholding requirements applicable to such income. Subject to the requirement of reasonableness, Section 162(m) of the Code and the satisfaction of a tax reporting obligation, we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the participant at the time the shares are issued. In
general, the deduction will be allowed for the taxable year in which such ordinary income is recognized by the participant.
Potential Limitation on Company Deductions.
Section 162(m) of the Code denies a deduction to any publicly held corporation for compensation paid to certain “covered employees” in a taxable year to the extent that compensation to such covered employee exceeds $1 million. It is possible that compensation attributable to awards, when combined with all other types of compensation received by a covered employee from the Company, may cause this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified “performance-based compensation,” are disregarded for purposes of the deduction limitation. In accordance with Treasury Regulations issued under Section 162(m) of the Code, compensation attributable to stock options and stock appreciation rights will qualify as performance-based compensation if the award is granted by a Compensation Committee solely comprising “outside directors” and either (i) the plan contains a per-employee limitation on the number of shares for which such awards may be granted during a specified period, the per-employee limitation is approved by the stockholders, and the exercise price of the award is no less than the fair market value of the stock on the date of grant, or (ii) the award is granted (or exercisable) only upon the achievement (as certified in writing by the Compensation Committee) of an objective performance goal established in writing by the Compensation Committee while the outcome is substantially uncertain, and the award is approved by stockholders.
Awards to purchase restricted stock and stock bonus awards will qualify as performance-based compensation under the Treasury Regulations issued under Section 162(m) of the Code only if (i) the award is granted by a Compensation Committee solely comprising “outside directors,” (ii) the award is granted (or exercisable) only upon the achievement of an objective performance goal established in writing by the Compensation Committee while the outcome is substantially uncertain, (iii) the Compensation Committee certifies in writing prior to the granting (or exercisability) of the award that the performance goal has been satisfied and (iv) prior to the granting (or exercisability) of the award, stockholders have approved the material terms of the award (including the class of employees eligible for such award, the business criteria on which the performance goal is based, and the maximum amount—or formula used to calculate the amount—payable upon attainment of the performance goal).
NEW PLAN BENEFITS
Awards under the Amended 2011 Plan are discretionary, and we have not approved any awards that are conditioned on stockholder approval of the Amended 2011 Plan. Accordingly, we cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to executive officers and employees under the Amended 2011 Plan.
OPTION TRANSACTIONS
The following table presents certain information with respect to options granted under the 2011 Plan as of March 1, 2016 to (i) our Named Executive Officers, (ii) all current executive officers as a
group, (iii) all current directors who are not executive officers as a group, and (iv) all current employees and consultants, including officers who are not executive officers, as a group.
|
Name
|
|
Number of
Options
Granted as of
March 1, 2016
|
|
|
Raul R. Rodriguez
|
|
1,500,000
|
|
|
Donald G. Payan, M.D.
|
|
1,100,000
|
|
|
Dolly A. Vance
|
|
900,000
|
|
|
Elliott B. Grossbard, M.D.
|
|
950,000
|
|
|
Ryan D. Maynard
|
|
900,000
|
|
|
All Current Executive Officers as a Group (5 individuals)
|
|
5,350,000
|
|
|
All Current Directors who are not Executive Officers as a Group (6 individuals)
|
|
—
|
|
|
All Current Employees and consultants, excluding Executive Officers, as a Group (126 individuals)
|
|
5,454,991
|
|
|
Each Other Current 5% Holder or Future 5% Recipient
|
|
—
|
|
|
Total
|
|
10,804,991
|
|
No shares have been issued under the 2011 Plan to any associate of any director, nominee or executive officer.
REQUIRED VOTE
Stockholders are requested in this Proposal 2 to approve the Amended 2011 Plan described above. The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting will be required to approve the Amended 2011 Plan. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this matter has been approved. The Amended 2011 Plan will not go into effect if our stockholders do not vote “FOR” the approval of the amendments to the 2011 Plan. A copy of the Amended 2011 Plan is appended to this proxy statement as
Appendix A
.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
PROPOSAL 5
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has selected Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016 and has further directed that management submit the selection of independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has audited the Company’s financial statements since its inception in 1996. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Neither the Company’s Bylaws nor other governing documents or law require stockholder ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm. However, the Audit Committee of the Board is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee of the Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee of the Board, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting will be required to ratify the selection of Ernst & Young LLP. Abstentions will be counted toward the tabulation of votes cast on this proposal and will have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this proposal has been approved.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES
In connection with the audit of the 2015 financial statements, the Company entered into an engagement agreement with Ernst & Young LLP that sets forth the terms by which Ernst & Young LLP will perform audit and interim review services for the Company, which engagement agreement is subject to alternative dispute resolution procedures.
The following table represents aggregate fees billed to the Company for the fiscal years ended December 31, 2015 and December 31, 2014 by Ernst & Young LLP, the Company’s independent registered public accounting firm (in thousands).
|
|
Fiscal Year Ended
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Audit fees
|
$
845
|
|
$
684
|
|
Audit-related fees
|
—
|
|
—
|
|
Tax fees
|
—
|
|
—
|
|
All other fees
|
—
|
|
—
|
|
Total fees
|
$
845
|
|
$
684
|
“Audit fees” consist of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by Ernst & Young LLP in connection with statutory and regulatory filings or engagements. Audit fees in 2015 included $117,500 fees associated with our “at-the-market" public offering in 2015.
“Audit-related fees” consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” No such fees were billed during either fiscal year 2015 or 2014.
“Tax fees” include fees for tax compliance, tax planning and tax advice. No tax fees were billed in 2015 or 2014.
“All other fees” consist of fees for products and services other than the services described above. No such fees were billed during either fiscal year 2015 or 2014.
All fees described above were approved by the Audit Committee.
PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee pre-approves all audit and permissible non-audit services rendered by our independent registered public accounting firm, Ernst & Young LLP. These services may include audit services, audit-related services, tax services and other services. Pre-approval may be given as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm, or on an individual, explicit case-by-case basis, before the independent registered public accounting firm is engaged to provide each service. The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision must be reported to the full Audit Committee at its next scheduled meeting.
The Audit Committee has determined that the rendering of the services other than audit services by Ernst & Young LLP is compatible with maintaining the principal accountant’s independence.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 5.
MANAGEMENT
EXECUTIVE OFFICERS
Set forth below is the name, age, position and a brief summary of the business experience of each of our executive officers as of March 1, 2016.
|
|
|
|
|
Name
|
Age
|
Position
|
|
Raul R. Rodriguez
|
55
|
President and Chief Executive Officer and Director
|
|
Donald G. Payan, M.D.
|
67
|
Executive Vice President and President of Discovery and Research and Director
|
|
Ryan D. Maynard
|
46
|
Executive Vice President and Chief Financial Officer
|
|
Elliott B. Grossbard, M.D.
|
68
|
Executive Vice President and Chief Medical Officer
|
|
Dolly A. Vance
|
51
|
Executive Vice President, Corporate Affairs, General Counsel and Corporate Secretary
|
Raul R. Rodriguez
’s biography is set forth under the heading “Proposal 1—Election of Directors” above.
Donald G. Payan’s
biography is set forth under the heading “Proposal 1—Election of Directors” above.
Ryan Maynard
has served as our Executive Vice President and Chief Financial Officer since May 2010. Mr. Maynard is also a member of the board of directors of Lion Biotechnologies, Inc., a biotechnology company. He joined Rigel in September 2001 as Corporate Controller and was appointed Assistant Secretary in October 2001. In June 2006 he became Vice President of Finance and Acting Chief Financial Officer and became our Vice President and Chief Financial Officer in January 2007. Prior to joining Rigel, Mr. Maynard was Corporate Controller and Director of Finance and Accounting for Personify, Inc., an e-commerce software company, from November 1999 to April 2001. From July 1998 to October 1999 he served as Controller of General Magic, Inc. and from July 1994 to June 1998 he held various positions at Siliconix, Inc., most recently as Senior Finance Manager. He previously worked at Ernst & Young, LLP, where he became a certified public accountant. Mr. Maynard holds a B.S. in Commerce—Accounting from Santa Clara University.
Elliott B. Grossbard, M.D.
has served as our Executive Vice President, Chief Medical Officer since February 2008. He joined Rigel in 2002 as our Senior Vice President of Medical Development. Prior to joining Rigel, Dr. Grossbard was Vice President, Clinical Affairs for Avigen Inc., an Alameda-based gene therapy products company. Before that, Dr. Grossbard served as Senior Vice President of Development and Vice President of Medical and Regulatory Affairs at Scios, Inc. During his tenure there, he oversaw several operational areas, including pharmacology/toxicology, quality control/quality and manufacturing/process sciences. He was also integral in the clinical development of Scios' lead compound Natrecor® ("nesiritide"), which was approved by the FDA in 2001 for the treatment of acute heart failure, and the preclinical development of a variety of proteins, peptides and small molecules. From 1982 through 1990, Dr. Grossbard held the positions of Associate Director, Clinical Research, and Director, Clinical Research at Genentech Inc. At Genentech, he directed the development of the thrombolytic agent Activase® tissue plasminogen activator ("TPA") from the earliest preclinical studies.
Dolly A. Vance
has served as our Executive Vice President, Corporate Affairs, General Counsel and Corporate Secretary since May 2010. Ms. Vance had been serving as Senior Vice President, General Counsel and Corporate Secretary since January 2007 and Vice President and General Counsel since January 2003. She joined Rigel in September 2000 as Rigel's first in-house counsel. Until September 2000, she was at the law firm of Flehr Hohbach Test Albritton & Herbert LLP (now Dorsey & Whitney LLP), where she was a partner. Prior to law school she worked in various research laboratories, including the laboratory of Norman Davidson at California Institute of Technology. She holds a Bachelor's degree from University of California, San Diego and a J.D. from Boston University School of Law.
Our executive officers are appointed by our Board and serve until their successors are elected or appointed. There are no family relationships among any of our directors or executive officers.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
As of March 1, 2016, stock options covering an aggregate of 21,837,571 shares of common stock were outstanding under the 2011 Equity Incentive Plan (the “2011 Plan”), the 2000 Equity Incentive Plan (the “2000 Plan”) and the 2000 Non-Employee Directors’ Plan (the “Directors’ Plan”) (10,819,628 under the 2011 Plan, 10,072,792 under the 2000 Plan and 945,151 under the Directors’ Plan), and 2,513,212 shares of common stock (plus any shares that might in the future be returned to the 2011 Plan, the 2000 Plan and the Directors’ Plan as a result of the repurchase of shares or the cancellation or expiration of options) remained available for future grant under the 2011 Plan, the 2000 Plan and the Directors’ Plan (43,298 shares under the 2011 Plan, 2,226,883 shares under the 2000 Plan and 243,031 shares under the Directors’ Plan). The weighted average exercise price of all options outstanding as of March 1, 2016 was approximately $6.45 ($4.07 for shares under the 2011 Plan, $8.98 for shares under the 2000 Plan and $6.68 for shares under the Directors’ Plan), and the weighted average remaining term of such options was approximately 6.40 years (7.88 years under the 2011 Plan, 4.83 years under the 2000 Plan and 6.25 years under the Directors’ Plan). Except as set forth above, as of March 1, 2016, 200,000 shares of common stock were subject to issuance upon the exercise of outstanding non-compensatory warrants and no other shares were subject to issuance upon the conversion of any convertible securities. A total of 90,556,255 shares of common stock were outstanding as of the record date.
The following table provides certain information with respect to all of the Company’s equity compensation plans in effect as of December 31, 2015.
EQUITY COMPENSATION PLAN INFORMATION
|
Plan Category
|
|
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
|
|
Weighted-average exercise
price of outstanding options,
warrants and rights
(b)
|
|
Number of securities
remaining available for
issuance under equity
compensation plans
(excluding securities
reflected in column (a))
(c)
|
|
Equity compensation plans approved by security holders
|
|
19,306,472
|
|
$
7.08
|
|
8,247,593(1)
|
|
Equity compensation plans not approved by security holders
|
|
—
|
|
—
|
|
—
|
|
Total
|
|
19,306,472
|
|
$
7.08
|
|
8,247,593(1)
|
(1)
Includes 3,001,616 shares of common stock authorized for future issuance under the Purchase Plan.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of the Company’s common stock as of March 1, 2016 by: (i) each director and nominee for director; (ii) each of the executive officers named in the Summary Compensation Table; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than five percent of its common stock. Unless otherwise indicated, the address for each beneficial owner listed below is: c/o Rigel Pharmaceuticals, Inc., 1180 Veteran Boulevard, South San Francisco, CA 94080.
|
|
|
|
|
|
Beneficial Ownership(1)
|
|
Beneficial Owner
|
Number of Shares
|
Percent of Total
|
|
Five percent stockholders
|
|
|
|
Entities Affiliated with FMR LLC(2)
245 Summer Street
Boston, MA 02109
|
13,278,884
|
14.66%
|
|
Entities Affiliated with BlackRock, Inc.(3)
40 East 52nd Street
New York, New York 10022
|
7,522,041
|
8.31%
|
|
Wellington Management Company, LLP(4)
348 Congress Street
Boston, MA 02210
|
6,082,344
|
6.72%
|
|
Palo Alto Investors, LLC(5)
470 University Ave.
Palo Alto, CA 94301
|
5,239,119
|
5.79%
|
|
Entities Affiliated with Oppenheimer Funds, Inc.(6)
Two World Financial Center
New York, NY 10022
|
5,000,000
|
5.52%
|
|
Directors and executive officers
|
|
|
|
Donald G. Payan, MD(7)
|
1,242,527
|
1.35%
|
|
Raul Rodriguez(8)
|
1,491,552
|
1.62%
|
|
Elliott B. Grossbard, M.D.(9)
|
1,047,278
|
1.14%
|
|
Ryan D. Maynard (10)
|
1,114,647
|
1.22%
|
|
Walter H. Moos, Ph.D.(11)
|
170,000
|
*
|
|
Stephen A. Sherwin, M.D.(12)
|
170,705
|
*
|
|
Peter S. Ringrose, Ph.D.(13)
|
166,666
|
*
|
|
Bradford S. Goodwin(14)
|
186,666
|
*
|
|
Gary A. Lyons(15)
|
166,666
|
*
|
|
Keith A. Katkin (16)
|
80,000
|
*
|
|
Dolly A. Vance(17)
|
1,047,852
|
1.14%
|
|
All executive officers and directors as a group (11 persons)(18)
|
6,884,559
|
7.07%
|
*
Less than one percent.
|
|
(1)
|
|
This table is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G filed with the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 90,556,255 shares of the common stock of the Company outstanding on March 1, 2016, adjusted as required by rules.
|
|
|
(2)
|
|
Fidelity has sole voting power with respect to 1,535,495 shares and sole dispositive power with respect to all of the shares. Fidelity, a wholly owned subsidiary of FMR LLC, is the beneficial owner of 1,535,495 shares. The ownership of one investment company, Fidelity Growth Company Fund, amounted to 4,871,611 shares of the common stock outstanding. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders' voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders' voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies
|
|
registered under the Investment Company Act ("Fidelity Funds") advised by Fidelity, a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds' Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established by the Fidelity Funds' Boards of Trustees.
|
|
|
(3)
|
|
The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10022. BlackRock, Inc. possesses sole voting power over 7,316,343 shares and sole dispositive power over 7,522,041 shares.
|
|
|
(4)
|
|
Wellington Management Group LLP, formerly known as Wellington Management Company, LLP, (“Wellington Management”), an investment adviser in accordance with Rule 13d-1(b)(1)(ii)(E) promulgate under the Exchange Act, may be deemed to have beneficial ownership of 6,082,344 shares of the common stock of the Company that are held of record by clients of Wellington Management. Those clients have the right to receive, or the power to direct the receipt of, dividends or the proceeds from the sale of such securities. No such client is known to have such right or power with respect to more than five percent of the Company’s common stock.
|
|
|
(5)
|
|
Palo Alto Investors, LLC is a registered investment advisor and is the general partner and investment advisor of investment limited partnerships, and is the investment advisor to other investment funds. PAI’s clients have the right to receive or the power to direct the receipt of dividends from or the proceeds from the sale of, the Stock. No individual client separately holds more than five percent of the outstanding Stock. Patrick Lee, MD and Anthony Joonkyoo Yun, MD co-manage PAI. Dr. Lee and Dr. Youn expressly disclaim membership in a group and disclaim beneficial ownership of the stock except to the extent of their pecuniary interest therein.
|
|
|
(6)
|
|
Oppenheimer Funds, Inc., an investment advisor in accordance with Rule 13d-1(b)(1)(ii)(E) promulgated under the Exchange Act, beneficially owns 5,000,000 shares of the common stock of the Company, 5,000,000 shares of which are beneficially owned by Oppenheimer Global Opportunities Fund, an investment company registered under section 8 of the Investment Company Act. For purposes of the reporting requirements of the Exchange Act, Oppenheimer Funds, Inc. may be deemed to be a beneficial owner of such securities.
|
|
|
(7)
|
|
Includes 1,184,193 shares subject to stock options that are exercisable within 60 days.
|
|
|
(8)
|
|
Includes 1,444,513 shares subject to stock options that are exercisable within 60 days.
|
|
|
(9)
|
|
Includes 1,045,278 shares subject to stock options that are exercisable within 60 days.
|
|
|
(10)
|
|
Includes 1,114,647 shares subject to stock options that are exercisable within 60 days.
|
|
|
(11)
|
|
Includes 167,778 shares subject to stock options that are exercisable within 60 days.
|
|
|
(12)
|
|
Includes 170,705 shares subject to stock options that are exercisable within 60 days.
|
|
|
(13)
|
|
Includes 166,666 shares subject to stock options that are exercisable within 60 days.
|
|
|
(14)
|
|
Includes 176,666 shares subject to stock options that are exercisable within 60 days.
|
|
|
(15)
|
|
Includes 166,666 shares subject to stock options that are exercisable within 60 days.
|
|
|
(16)
|
|
Includes 80,000 shares subject to stock options that are exercisable within 60 days.
|
|
|
(17)
|
|
Includes 1,045,473 shares subject to stock options that are exercisable within 60 days.
|
|
|
(18)
|
|
Includes shares owned by and granted to executive officers and directors. Includes 6,762,585 shares subject to stock options that are exercisable within 60 days, as described in the notes above.
|
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of our company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2015, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATIO
N
COMPENSATION DISCUSSION AND ANALYSIS
This section explains our executive compensation program and philosophy, our compensation-setting process, our executive compensation program components, and the decisions made in 2015 and early 2016 with respect to the compensation of each
of the following executive officers, who are referred to in this Compensation Discussion and Analysis and in the subsequent tables as our “Named Executive Officers”:
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|
·
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Raul R. Rodriguez, our President and Chief Executive Officer;
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·
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Donald G. Payan, M.D., our Executive Vice President and President of Discovery and Research;
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·
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Elliott B. Grossbard, M.D., our Executive Vice President and Chief Medical Officer (until March 31, 2016);
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·
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Ryan D. Maynard, our Executive Vice President and Chief Financial Officer; and
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·
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Dolly A. Vance, our Executive Vice President, Corporate Affairs, General Counsel and Corporate Secretary.
|
Overview of Compensation Program and Philosophy
Our executive officer compensation program is intended to meet three principal objectives:
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·
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Retain key executive talent and motivate our management team to create long-term value for our stockholders by achieving our strategic business objectives;
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·
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Effectively manage the risks and challenges inherent in a clinical stage biotechnology company; and
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·
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Ensure that a material portion of compensation is tied to company performance, including the achievement of strategic business objectives, product development and financial performance and cash position.
|
Based on this philosophy,
our performance-driven compensation program consists of three components: base salary, short-term cash incentive compensation, and long-term equity incentive compensation. Our Compensation Committee has determined that these three components, with a substantial portion of total compensation allocated to “at-risk” performance-based incentives through the use of short-term and long-term incentive compensation, best align the interests of our executive officers with those of our stockholders. While our Compensation Committee does not have any formal policies for allocating compensation among the three components, our Compensation Committee reviews relevant market compensation data and uses its judgment to determine the appropriate level and mix of compensation on an annual basis to ensure that compensation is competitive and that we are able to attract and retain capable executive officers to work for our long-term prosperity and stockholder value, without taking unnecessary or excessive risks.
The following key governance features underlie our compensation program:
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·
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Our executive compensation programs are administered by our Compensation Committee comprised solely of independent directors.
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·
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Our executive compensation programs are structured to avoid inappropriate risk taking by our executive officers. Please see the discussion entitled “Risk Assessment of Compensation Policies and Practices” beginning on page
12
for more information on how our Compensation Committee concluded that the risks arising from our employee compensation programs do not encourage excessive risk-taking or create risks that are reasonably likely to have a material adverse effect on us and instead encourage behaviors that support sustainable value generation.
|
Process for Setting Executive Compensation
We seek to foster a performance-oriented culture, where individual performance is aligned with organizational objectives. In order to achieve this, we evaluate and reward our executive officers based on their contributions to the achievement of annual goals and objectives set early in the year. Performance is reviewed at least annually through processes discussed further below, with a focus on our research, clinical, regulatory, financial and operational performance, and in view of economic and financial conditions affecting the performance period.
Role of Our Compensation Committee
Our Compensation Committee reviews and approves our executive compensation philosophy, objectives and methods, evaluates our performance and the performance of our executive officers, and either approves executive compensation or makes recommendations for ratification by our independent Board members. Between Board meetings, our Compensation Committee consults with various members of management, other committees of the Board or other members of the Board and independent third party consultants, where appropriate, and reviews management’s compensation recommendations. The members of our Compensation Committee are appointed by our Board, and each member is an independent director (as “independence” is currently defined in Rule 5605(a)(2) of the Nasdaq listing rules). The members of our Compensation Committee are Mr. Gary A. Lyons, Dr. Walter H. Moos and Mr. Keith A. Katkin. Dr. Peter Ringrose was a member of our Compensation Committee in 2015 until he was replaced in August by Mr. Katkin. Mr. Lyons was the Chair of our Compensation Committee for the first meeting of 2015; Dr. Moos was made Chair of our Compensation Committee in January 2015 and served as Chair for the remainder of 2015.
Our Compensation Committee typically meets at least quarterly, and with greater frequency if necessary, to evaluate the performance of our executive officers and the impact that performance had on the achievement of our corporate strategies, business objectives and the long-term interests of our stockholders by:
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·
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carefully reviewing our corporate objectives and the scientific and business opportunities identified by our senior management and directors;
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·
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updating, from time to time, our compensation and benefit plan policies;
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·
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receiving updates on the various compensation options, emerging topics and best practices and customizing those compensation options to our business goals and objectives; and
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·
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|
either approving executive compensation arrangements or taking its recommendations to the independent members of the Board for approval.
|
Typically, such evaluations are made throughout the year, with compensation packages awarded by our Compensation Committee or Board at quarterly meetings planned in advance. Awards of performance-based compensation for the previous year are typically made at the first-scheduled Compensation Committee meeting of the year, although circumstances may warrant a later determination if events of the previous year’s work have not fully unfolded. Adjustments to base salary, if any, are also typically made in the first quarter of a calendar year.
Role of Management in Executive Compensation
For executive compensation decisions, our Compensation Committee considers the recommendations of our President and Chief Executive Officer, Raul R. Rodriguez, but Mr. Rodriguez does not participate in the deliberations or determination of his own compensation. Mr. Rodriguez annually leads the development of our corporate objectives and goals, which are typically reviewed and recommended by our Compensation Committee and approved by the Board. Alternatively, our Compensation Committee may set the corporate objectives and goals pursuant to the powers delegated under the charter of our Compensation Committee. Mr. Rodriguez provided the Company’s business and operations perspective for our Compensation Committee’s final review of progress made on the goals set for 2015. Dolly Vance, our General Counsel, also provides our Compensation Committee with general and company-specific information regarding compensation matters, as well as updates on compensation of our peer companies, as public information becomes available, if requested by the Compensation Committee. Other than as described above, no other executive officers participate in the determination or recommendation of the amount or form of executive officer compensation. Our Compensation Committee does not delegate any of its functions to others in determining or recommending executive officer compensation and, except as described below, we have not engaged any consultants with respect to executive compensation matters.
Role of our Compensation Committee’s Compensation Consultant in Executive Compensation
From time to time, our Compensation Committee engages a well-established consulting firm to analyze our executive officers’ compensation against the compensation of executive officers at comparable companies to ensure that our compensation is competitive with our peers, with the goal of retaining and adequately motivating our senior management. In November 2014, our Compensation Committee engaged Radford to make recommendations for updating our peer group, and to review and make recommendations regarding our executive and director compensation for 2015. Radford was invited to attend a Compensation Committee meeting where they presented and discussed their analysis and findings. For 2015, based on the recommendations from Radford, our Compensation Committee established a new peer group, described below in the section entitled “Competitive Market Review and Benchmarking.”
Competitive Market Review and Benchmarking
When considering compensation decisions, our Compensation Committee reviews the compensation of similarly-situated executive officers at companies that we consider to be our peers when such information is available and determined to be meaningful, taking into consideration the experience, position and functional role, level of responsibility and uniqueness of applicable skills of both our executive officers and those of our peers, and the demand and competitiveness for attracting and retaining an individual with each executive officer’s specific expertise and experience in the biotechnology industry. While benchmarking analysis is helpful in determining market-competitive compensation for senior management, leading to better attraction and retention of top-quality executive officers, it is only one factor in determining our executive officers’ compensation, and our Compensation Committee has discretion in determining the nature and extent of its use.
In November 2014, after considering various firms, our Compensation Committee engaged Radford to review and identify a new peer group of companies, to assess our 2015 executive compensation packages, and to review and analyze our non-employee director compensation program. Based on that review, and after taking into consideration such factors as product range, product development stage, market capitalization, number of employees and public status, the following companies were identified by our Compensation Committee as our peer group for 2015 compensation determinations:
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•
Agenus Inc.
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•
Amicus Therapeutics, Inc.
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•
ArQule, Inc.
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•
Array Biopharma Inc.
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•
Cytokinetics, Incorporated
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•
Dynavax Technologies Corporation
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•
Exelixis, Inc.
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•
Geron Corporation
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•
Infinity Pharmaceuticals, Inc.
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•
Orexigen Therapeutics, Inc.
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•
Peregrine Pharmaceuticals, Inc.
|
•
Sangamo Biosciences, Inc.
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•
Sarepta Therapeutics, Inc.
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•
Sunesis Pharmaceuticals, Inc.
|
•
Synta Pharmaceuticals Corp.
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|
•
Threshold Pharmaceuticals, Inc.
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•
Vical Incorporated
|
•
XOMA Corporation
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•
ZIOPHARM Oncology, Inc.
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|
Prior to engagement of Radford, our Compensation Committee analyzed whether the work of Radford as a compensation consultant raised any conflict of interest, taking into consideration the following factors: (i) the provision of other services to our company by Radford, including any business from or related to their parent company, Aon
Hewitt
; (ii) the amount of fees from our company paid to Radford as a percentage of the firm’s total revenue; (iii) Radford’s policies and procedures that are designed to prevent conflicts of interest; (iv) any business or personal relationship of Radford or the individual compensation advisors employed by the firm with an executive officer of our company; (v) any business or personal relationship of the individual compensation advisors with any member of our Compensation Committee; and (vi) any stock of our company owned by the individual compensation advisors employed by Radford. Our Compensation Committee determined, based on its analysis of the above factors, that the work of Radford and the individual compensation advisors employed by Radford as compensation consultants has not created any conflict of interest and our Compensation Committee is satisfied with the independence of Radford. In 2015, our Compensation Committee did a similar analysis of Radford, and was again satisfied with the independence of Radford. Going forward, our Compensation Committee intends to assess the independence of any of our compensation advisers by reference to the foregoing factors, consistent with applicable NASDAQ listing standards.
Response to 2015 Say-on-Pay Vote
Our Compensation Committee values the opinions of our stockholders and considers the outcome of each non-binding advisory stockholder vote on the compensation program for our named executive officers, commonly referred to as a "say on pay" vote, when we make compensation decisions for the members of our executive team, including the Named Executive Officers.
We held a
"say-on-pay" vote
on executive compensation at our annual stockholder meeting in 2015. Our stockholders approved, on an advisory basis,
the "say-on-pay" vote
proposal, with approximately 99% of stockholders voting on such matter voting in favor of the proposal.
In evaluating our compensation practices in early 2015, we were mindful of the support our stockholders expressed for our philosophy of linking compensation to our operating and organizational objectives and the enhancement of stockholder value. As a result, our Compensation Committee retains our general approach to executive compensation, and continued to apply the same general principles and philosophy as in the prior fiscal year in determining executive compensation. Our Compensation Committee will continue to consider stockholder concerns and feedback in the future.
Executive Compensation Program Components
Base Salary.
The base salaries that we pay to our executive officers and other employees are designed to compensate them for day-to-day services rendered during the fiscal year. Appropriate base salaries are used to recognize the experience, skills, knowledge and responsibilities required of each executive officer and to allow us to attract and retain officers capable of leading us to achieve our business goals in competitive market conditions. The base salaries of our executive officers are reviewed on at least an
annual basis and adjustments are made to reflect performance-based factors, for the Company as well as the individual, and competitive market conditions, as discussed under “Competitive Market Review and Benchmarking” above. Our Compensation Committee also takes into account subjective performance criteria, such as an executive officer’s ability to lead, organize and motivate others, develop the skills necessary to mature with the Company, set realistic goals to be achieved in his or her respective area, and recognize and pursue new business opportunities that enhance our growth and success. Our Compensation Committee does not apply specific formulas to determine increases, but instead makes an evaluation of each executive officer’s contribution to our long-term success. Annual adjustments to salaries are effective as of January 1 of each year, with mid-year adjustments to salaries made under special circumstances, such as promotions or increased responsibilities, or in order to align certain salaries with those of individuals in peer companies.
Short-Term Cash Incentive Compensation.
Annual cash incentive compensation is designed both to motivate our executive officers to achieve specified short-term company goals and objectives, and to reward our executive officers when those goals are achieved. The goals and objectives on which the cash incentive compensation is based are also designed to reflect progress towards achieving long-term value for the Company and its stockholders and, as a result, may fluctuate from year to year to reflect our Compensation Committee’s determination of the progress made in that year. Therefore, our Compensation Committee views cash incentive compensation as an important component of both our short-term and long-term compensation packages.
Awards under the cash incentive program are based on a thorough quantitative and qualitative review of facts and circumstances related to company, department, function and individual performance, as compared to the corporate goals approved by our Compensation Committee or the Board during the first part of the performance year. When establishing awards, our Compensation Committee also considers, among other things, general market and industry conditions and economic changes during the relevant performance year.
Each year, our Compensation Committee establishes a target bonus payout based on a percentage of the applicable individual’s base salary. The target bonus payout for an individual varies depending on the individual’s position and responsibilities. The corporate goals established by our Compensation Committee, or recommended by our Compensation Committee for approval by the Board, are designed to be aggressive, but are goals that our Compensation Committee believes can be attained if the Company performs according to plan. In the event the Company or an individual displays exemplary performance for the year, our Compensation Committee, in exercising its discretion, may grant or recommend bonuses in excess of the target bonus levels, up to a maximum of 120% of the individual’s base salary. Alternatively, in the event the Company or an individual displays inadequate performance for the year, our Compensation Committee, in exercising its discretion, may grant or recommend cash bonuses that are less than the target bonus levels or no bonuses at all. Our Compensation Committee uses a threshold of “40% completion of corporate goals” to determine whether bonuses should be received by the executive officers. Generally, in order to be eligible to receive the maximum bonus payout, the Company’s performance must not only exceed the targets established by our Compensation Committee, but the individual’s contribution to that achievement must exceed the contribution expected of that individual in the course of performing his or her duties at the level expected of someone in that individual’s position.
Long-Term Incentive Compensation.
Our long-term incentive compensation is in the form of stock option awards and is designed to align a component of our executive officers’ compensation packages with the interests of our stockholders to create long-term value in the Company, as demonstrated through stock price performance. Our Compensation Committee grants options to purchase our common stock to our executive officers that are subject to time-based vesting, in order to tie this element of our compensation program to the long-term appreciation of our stock value, which is dependent on us achieving our corporate goals. Our Compensation Committee has also granted stock options with performance-based vesting to our executive officers, to provide further incentive to achieve important business goals for the Company. Employees in more senior roles have an increasing proportion of their compensation tied to long-term performance, because they are in a position to have greater influence on longer-term results. The value of these options is contingent on company performance and the resulting increase in our stock’s value over time.
We believe that granting equity awards as a significant component of the compensation of our executive officers not only provides a retention incentive during the applicable vesting periods but also aligns the interests of our executive officers with those of our stockholders. While we have not adopted formal stock ownership or holding guidelines, our executive officers generally have held a substantial portion of the equity awards they have received, even long after the awards have vested, which shows the executives’ confidence in our long-term prospects and maintains the alignment between the interests of our executive officers and those of our stockholders over the longer term.
In general, stock options are granted periodically to existing employees, including our executive officers, and upon a new hire or promotion, and are subject to vesting over time, based on the individual’s continued employment. Generally, options granted to an executive officer who became an officer for the first time will vest monthly over a four year period and are not available for exercise until after the first full year of employment, in any position. The exercise price of an option is equal to the fair market value of our common stock on the date of grant, which is equal to the closing price of our stock on the date immediately preceding the grant
date. Typically, stock option grants are made to our existing executive officers during the first quarter of each fiscal year, but grants may be made by the Board or our Compensation Committee at other times if, for example, outstanding grants expire unexercised, a mid-year promotion is made or additional responsibilities are taken on or objectives achieved, meriting a supplemental grant, or an equity plan that is low in available shares at the time of grant is replenished later in the year, making available shares to which the individual would otherwise have been entitled.
The factors considered in determining the size of option grants include the executive officer’s position within the Company, the percentage ownership of the Company that the options represent on a fully-diluted basis, the executive officer’s percentage ownership in the Company as compared to the executive officer’s peers both internally and externally at other comparable companies in the biotechnology industry, the vesting status of options already held by the executive officer, if any, and the executive officer’s contributions to both the creation of value and the long-term success of the Company. The Board and Compensation Committee also consider the total option pool available in a given year and the total number of options that may be granted to all employees, including the executive officers.
We grant stock options under our 2000 Plan and 2011 Plan. The 2000 Plan and 2011 Plan prohibit the repricing, exchange or cashing out of stock awards, including stock options, without stockholder approval within 12 months prior to such repricing. We did not reprice any stock options in 2015, despite the fact that our executives hold a significant amount of stock options that are underwater. This reflects our commitment to our pay-for-performance philosophy.
2015 Executive Compensation
We believe that our 2015 executive compensation packages were reasonable and consistent with our financial performance, the individual performance of each of our Named Executive Officers and the overall achievement of the goals that we believe create and enhance stockholder value.
Base Salary.
As discussed under “Competitive Market Review and Benchmarking” above, when establishing base salaries of our executive officers, our Compensation Committee primarily reviews the base salaries of similarly-situated executive officers at companies that we consider to be our peers. In addition to competitive market conditions, our Compensation Committee also took into account a number of performance-based factors in establishing the 2015 base salaries of the Named Executive Officers, including: each executive officer’s experience, position and functional role, level of responsibility, uniqueness of applicable skills, and the demand and competitiveness for attracting and retaining an individual with each Named Executive Officer’s specific expertise and experience in the biotechnology industry. Our Compensation Committee also assessed each Named Executive Officer’s contributions to the achievement of our corporate goals, as well as the individual’s personal performance.
Our Compensation Committee did not establish individual 2015 personal performance criteria for any of our Named Executive Officers, but considered subjective performance-based factors, including: an executive officer’s ability to lead, organize and motivate teams and instill loyalty, develop the skills necessary to mature with the Company, set realistic goals to be achieved in his or her respective area, and recognize and pursue new business opportunities that enhance our growth and success. Our Compensation Committee also considered turnover trends within a group, meeting deadlines and the results of certain projects. In establishing the 2015 base salaries of our Named Executive Officers, our Compensation Committee assessed each Named Executive Officer’s individual performance against these subjective performance-based factors and determined that each Named Executive Officer performed at or above expectations during 2014.
In 2015, other than Mr. Rodriguez, our Named Executive Officers did not receive salary increases, for the second consecutive year. Mr. Rodriguez received a salary increase in January 2015, to reflect his increased responsibility as President and Chief Executive Officer, his first salary increase since 2013, despite being appointed to this position in 2014.
The 2014 and 2015 base salaries for our Named Executive Officers, along with the percentage increases from 2014 to 2015, are set forth in the table below.
|
Named Executive Officer
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|
2014 Base
Salary
|
|
2015 Base
Salary
|
|
% Increase
from
Final 2014
Base Salary
|
|
|
Raul R. Rodriguez
|
|
$
|
551,720
|
|
$
|
600,000
|
|
8.75
|
%
|
|
James M. Gower
|
|
$
|
695,118
|
|
|
—
|
|
—
|
|
|
Donald G. Payan, M.D.
|
|
$
|
559,571
|
|
$
|
559,571
|
|
—
|
|
|
Elliott B. Grossbard, M.D.
|
|
$
|
521,339
|
|
$
|
521,339
|
|
—
|
|
|
Ryan D. Maynard
|
|
$
|
441,345
|
|
$
|
441,345
|
|
—
|
|
|
Dolly A. Vance
|
|
$
|
475,548
|
|
$
|
475,548
|
|
—
|
|
In determining the 2015 base salary for each of our Named Executive Officers, our Compensation Committee did an analysis of competitive market salaries of similarly-situated executive officers at companies within our peer group, which does not take into account certain attributes such as tenure and experience, as well as the base salaries of the Named Executive Officers relative to each other. Our Compensation also considered the Company’s cash position and market conditions. Based on this analysis, similar to 2014, other than Mr. Rodriguez, our Named Executive Officers did not receive salary increases in 2015.
Short Term Cash Incentive Compensation.
Our Named Executive Officers’ short-term cash incentive compensation is dependent upon the achievement of specific and objective company performance goals that focus on creating incentives for management to achieve strategically important operational goals designed to translate into longer-term financial performance, as well as specific annual financial goals instrumental to achieving these operational goals and to the overall success of the Company. As reflected by the goals established under our 2015 Cash Incentive Plan (which was attached as an exhibit to our current report on Form 8-K filed on January 30, 2015) we continue to believe that executive compensation should be tied to goals related to clinical development and regulatory approval with respect to current or potential product candidates, business development, our cash position, and our pipeline of potential product candidates—that is, goals that help increase stockholder value and contribute to the long-term stockholder return and prosperity of the Company, particularly given the volatile nature of our industry.
For performance in fiscal year 2015, an individual was eligible to receive a cash incentive award equal to a percentage of his or her 2015 base salary, based on the achievement of specific corporate goals recommended by our Compensation Committee and approved by the Board at the beginning of fiscal year 2015, pursuant to our 2015 Cash Incentive Plan. Under the 2015 Cash Incentive Plan, target bonus levels for our executive officers, if we performed at plan, range from 40% to 60% of such executive officer’s 2015 base salary, based on position and responsibilities of the executive. The maximum bonus that an executive officer would be eligible to receive is 120% of the executive officer’s 2015 base salary.
The corporate goals established under the 2015 Cash Incentive Plan include:
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|
·
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|
initiating clinical development of a product candidate (the “Pipeline Expansion Goal”) (weighted at 10%),
|
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·
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|
establishing a business partnership to advance a pre-clinical program (the “Partnership Goal”) (weighted at 10%),
|
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·
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advancing the development of a product candidate in phase 2 (the “Phase 2 Goal”) (weighted at 10%),
|
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·
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advancing the development of a product candidate in phase 3 clinical trials and initiating processes required for commercialization of a product candidate (the “Phase 3 Goal”) (weighted at 60%), and
|
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|
·
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|
maintaining a viable cash position for the Company at December 31, 2015 (the “Cash Position Goal”) (weighted at 10%).
|
Pursuant to its discretionary authority, our Compensation Committee also considered other performance goals, current economic conditions and exceptional and/or inadequate performances by each executive officer when evaluating whether and to what extent to award bonuses.
Since the beginning of 2015, we have experienced the following business events:
|
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·
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|
In February 2016, we announced initiation of a phase 2 clinical trial to evaluate fostamatinib as a potential treatment for autoimmune hemolytic anemia.
|
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|
·
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|
In January 2016, we completed patient enrollment of the first of two phase 3 studies with fostamatinib for the treatment of immune thrombocytopenic purpura (ITP) and expect to report results from the first study in the middle of 2016.
|
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·
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|
Also in January 2016, we announced that the phase 2 study of fostamatinib in IgA nephropathy continues to enroll patients for the first cohort in various centers throughout Asia, the U.S. and Europe, and that the study is on track to report top line results in the second half of 2016;
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·
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|
In September 2015, we announced an exclusive, worldwide license agreement with Aclaris Therapeutics International Limited for the development and commercialization of certain JAK inhibitors for the treatment of alopecia areata and other dermatological conditions.
|
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·
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|
In September 2015, we announced that the U.S. Food and Drug Administration granted Orphan Drug designation to fostamatinib for the treatment of ITP.
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·
|
|
In June 2015, we announced that Keith A. Katkin, president and chief executive officer of Avanir Pharmaceuticals, was appointed to our board of directors.
|
|
|
·
|
|
In February 2015, we announced the collaboration agreement with Bristol-Myers Squibb Company (BMS) for the discovery, development and commercialization of cancer immunotherapies based on our extensive portfolio of small molecule TGF beta receptor kinase inhibitors, in which BMS paid us an upfront payment of $30.0 million.
|
|
|
·
|
|
In January 2015, we announced that in December 2014 we earned a non
‑refundable payment of $5.8 million from AstraZeneca resulting from AstraZeneca’s continued development of R256 in asthma as of December 2014, which we received in the first quarter of 2015.
|
After consideration of the goals set and the accomplishments achieved by the Company, our Compensation Committee approved a payout for each of the Named Executives at 85% of each executive’s target. Our Compensation Committee determined that: the progress made in the IRAK program to expand the pipeline available for initiating clinical development of a product candidate satisfied the Pipeline Expansion Goal and would be weighted at 10%; the completion of the licensing deal with Aclaris and the collaboration with Bristol-Meyers Squibb, as well as other income-producing deals, satisfied or exceeded the Partnership Goal and would be weighted at 10%; the progress made in the phase 2 trial in IgA nephropathy, together with the protocol development, IND filing and establishment of clinical sites to initiate a phase 2 trial in AIHA, both for fostamatinib, exceeded the Phase 2 Goal of advancing product candidates in phase 2 and would be weighted at 15%; completion of enrollment of the first of two phase 3 trials, as well as progress made in preparation of the NDA for fostamatinib in ITP, qualified for about two-thirds of the Phase 3 Goal, or 40%; and the 2015 year-end cash position satisfied or exceeded the Cash Position Goal and would be weighted at 10%.
The following table sets forth the target bonus levels (each expressed as a percentage of base salary), and the actual amounts paid, for each of our Named Executive Officers for fiscal year 2015:
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Target Bonus
Level as % of
Base Salary
|
|
Max. Bonus
Level
|
|
Target
Bonus ($)
|
|
Actual
Payment
($)
|
|
|
Raul R. Rodriguez
|
|
60
|
%
|
120
|
%
|
$
|
360,000
|
|
$
|
306,000
|
|
|
Donald G. Payan, M.D.
|
|
50
|
%
|
120
|
%
|
$
|
279,786
|
|
$
|
237,818
|
|
|
Elliott B. Grossbard, M.D.
|
|
50
|
%
|
120
|
%
|
$
|
260,670
|
|
$
|
221,570
|
|
|
Ryan D. Maynard
|
|
50
|
%
|
120
|
%
|
$
|
220,673
|
|
$
|
187,572
|
|
|
Dolly A. Vance
|
|
50
|
%
|
120
|
%
|
$
|
237,774
|
|
$
|
202,108
|
|
Long-Term Incentive Compensation.
As discussed above, we carefully consider the appropriate amount of stock options to grant our Named Executive Officers, based on each executive’s individual contributions and past performance, percentage ownership of the Company, position with the Company and comparison to the equity ownership of the corresponding executives of our peer companies, and we typically grant stock options in January or February of each year, based on these considerations and in light of the events of the preceding year. In January 2015, after considering each of these factors, our Compensation Committee granted stock options to each of our Named Executive Officers as set forth in the table below. 50% of each Named Executive Officer’s options are subject to two-year time-based vesting, and 50% of each Named Executive Officer’s options are subject to performance-based vesting criteria related to the execution of the phase 3 clinical trials in ITP.
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Number of
Performance-Based
Stock Options
Awarded
|
|
Number of Time-
Based Stock Options
Awarded
|
|
|
Raul R. Rodriguez
|
|
450,000
|
|
450,000
|
|
|
Donald G. Payan, M.D.
|
|
200,000
|
|
200,000
|
|
|
Elliott B. Grossbard, M.D.
|
|
175,000
|
|
175,000
|
|
|
Ryan D. Maynard
|
|
175,000
|
|
175,000
|
|
|
Dolly A. Vance
|
|
175,000
|
|
175,000
|
|
Severance and Change of Control Benefits.
Our Named Executive Officers are entitled to certain severance and change of control benefits pursuant to our Severance Plan and, in the case of Dr. Payan, his employment agreement, as described in more detail below in the sections entitled “Employment, Severance and Change of Control Agreements” and “2015 Potential Payments Upon Termination or Change of Control Table.” These arrangements provide for a combination of a lump-sum cash severance payment, continued benefits and acceleration of vesting on outstanding equity-based awards upon termination, in the case of Dr. Payan, and in connection with a change of control, in the case of all our Named Executive Officers. The change of control provisions contained in these arrangements include a “double trigger,” meaning that they do not become operative in the event of a change of control unless
the executive's employment is terminated involuntarily without cause by the Company, or voluntarily resigns with good reason, in connection with the transaction.
Given the nature of the industry in which we participate and the range of strategic initiatives that we may explore, we believe these severance and change of control benefits are an essential element of our executive compensation package and assist us in recruiting and retaining talented individuals. In addition, since we believe it may be difficult for our executive officers to find comparable employment following a termination without cause or resignation with good reason in connection with or following a change of control, these severance and change of control benefits are intended to ease the consequences to an executive officer of an unexpected termination of employment. By establishing these severance and change of control benefits, we believe we can mitigate the distraction and loss of executive officers that may occur in connection with rumored or actual fundamental corporate changes and thereby protect shareholder interests while a transaction is under consideration or pending.
Perquisites and Other Benefits.
We provide general employment benefits to our executive officers on the same basis as the benefits provided to all of our employees, including health, vision and dental insurance, term life insurance, and short-and long-term disability insurance. We do not have programs in place to provide personal perquisites for any employee.
Total Compensation.
For further information regarding the 2015 compensation for our Named Executive Officers, see the “Summary Compensation Table” and the “Grants of Plan-Based Awards” table below.
Tax and Accounting Impact on Compensation
The accounting and tax consequences to the Company of certain compensation elements are important considerations for our Compensation Committee when evaluating and recommending compensation packages for our executive officers. Generally, our Compensation Committee seeks to balance its objective to create an effective compensation program that attracts, retains and rewards executives in order to maximize the return to stockholders with the need for appropriate accounting and tax consequences of such compensation.
We believe it is in our best interest, to the extent practical, to have executive officer compensation be fully deductible under Section 162(m) of the Code, which generally provides that a publicly-held company may not deduct compensation paid to certain of its top executive officers to the extent that such compensation exceeds $1 million per officer in a calendar year. Compensation that is “performance-based compensation” within the meaning of the Code does not count toward the $1 million deduction limit.
We have taken steps to structure payments to executive officers to meet the Section 162(m) requirements, where feasible. Executive compensation at the Company has historically met the annual compensation limit of Section 162(m). Our Compensation Committee, nevertheless, retains the discretion to provide compensation that potentially may not be fully deductible to reward performance or enhance retention. Accordingly, we may grant awards and/or enter into compensation arrangements under which payments are not deductible under Section 162(m).
SUMMARY COMPENSATION TABLE(1)
The following table shows, for the fiscal years ended December 31, 2013, 2014 and 2015, compensation awarded to or paid to or earned by our Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Option Awards
($)(2)
|
|
Non-Equity Incentive Plan Compensation ($)
|
|
All Other Compensation ($)
|
|
Total
($)
|
|
Raul R. Rodriguez
|
|
2015
|
|
600,000
|
|
1,225,890
|
|
306,000
|
|
3,897
|
|
2,135,787
|
|
President and Chief Executive
|
|
2014
|
|
551,720
|
|
784,290
|
|
—
|
|
2,155
|
|
1,338,165
|
|
Officer
|
|
2013
|
|
551,720
|
|
669,900
|
|
—
|
|
1,794
|
|
1,223,414
|
|
Donald G. Payan, M.D.
|
|
2015
|
|
559,571
|
|
544,840
|
|
237,817
|
|
9,906
|
|
1,352,134
|
|
Executive Vice President,
|
|
2014
|
|
559,571
|
|
784,290
|
|
—
|
|
9,906
|
|
1,353,767
|
|
of Discovery and Research
|
|
2013
|
|
559,571
|
|
893,200
|
|
—
|
|
9,906
|
|
1,462,677
|
|
Elliott B. Grossbard, M.D.
|
|
2015
|
|
521,339
|
|
476,735
|
|
221,569
|
|
9,906
|
|
1,229,548
|
|
Former Executive Vice President,
|
|
2014
|
|
521,339
|
|
784,290
|
|
—
|
|
11,406
|
|
1,317,035
|
|
Chief Medical Officer
|
|
2013
|
|
521,339
|
|
669,900
|
|
—
|
|
9,906
|
|
1,201,145
|
|
Ryan D. Maynard
|
|
2015
|
|
441,345
|
|
476,735
|
|
187,571
|
|
1,170
|
|
1,106,821
|
|
Executive Vice President, Chief
|
|
2014
|
|
441,345
|
|
653,575
|
|
—
|
|
3,006
|
|
1,097,925
|
|
Financial Officer
|
|
2013
|
|
441,345
|
|
669,900
|
|
__
|
|
780
|
|
1,112,025
|
|
Dolly A. Vance
|
|
2015
|
|
475,548
|
|
476,735
|
|
202,108
|
|
2,344
|
|
1,156,734
|
|
Executive Vice President, Corporate Affairs, General Counsel and Corporate Secretary
|
|
2014
|
|
475,548
|
|
653,575
|
|
—
|
|
3,042
|
|
1,132,165
|
(1)
See “Compensation Discussion and Analysis” above for complete description of compensation plans pursuant to which the amounts listed under the Summary Compensation Table were paid or awarded and the criteria for such payment, including payment of annual incentives, as well as performance criteria on which such payments were based.
(2)
Reflects the aggregate grant date fair value of option awards, computed in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718,
Compensation—Stock Compensation
, for option awards granted in 2015, 2014 and 2013, respectively. The amounts shown exclude the impact of estimated forfeiture related to service-based vesting conditions. For additional information on the valuation assumptions with respect to these grants, refer to Note 4 “Stock-Based Compensation” in our Annual Report on Form 10-K for the year ended December 31, 2015.
GRANTS OF PLAN-BASED AWARDS
The following table shows for the fiscal year ended December 31, 2015, certain information regarding grants of plan-based awards to the Named Executive Officers:
|
|
|
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
|
Exercise
or Base
Price of
Option
Awards
($/Sh) (2)
|
Closing
Market
Price on
Grant
Date
($/Sh)
|
Grant Date
Fair Value of
Stock and
Option
Awards ($)(3)
|
|
Name
|
Grant Date
|
Estimated Possible Payouts Under Non-
Equity Incentive Plan Awards(1)
|
|
Threshold ($)
|
Target
($)
|
Maximum ($)
|
|
Raul R. Rodriguez
|
|
|
|
|
|
|
|
|
|
2011 Plan
|
1//26/15
|
—
|
—
|
—
|
900,000
|
2.14
|
2.21
|
1,225,890
|
|
2015 Cash Incentive Plan
|
—
|
—
|
360,000
|
720,000
|
—
|
—
|
—
|
—
|
|
Donald G. Payan, M.D.
|
|
|
|
|
|
|
|
|
|
2011 Plan
|
1/26/15
|
—
|
—
|
—
|
400,000
|
2.14
|
2.21
|
544,840
|
|
2015 Cash Incentive Plan
|
—
|
—
|
279,786
|
671,485
|
—
|
—
|
—
|
—
|
|
Elliott B. Grossbard, M.D.
|
|
|
|
|
|
|
|
|
|
2011 Plan
|
1/26/15
|
—
|
—
|
—
|
350,000
|
2.14
|
2.21
|
476,735
|
|
2015 Cash Incentive Plan
|
—
|
—
|
260,670
|
625,607
|
—
|
—
|
—
|
—
|
|
Ryan D. Maynard
|
|
|
|
|
|
|
|
|
|
2011 Plan
|
1/26/15
|
—
|
—
|
—
|
350,000
|
2.14
|
2.21
|
476,745
|
|
2015 Cash Incentive Plan
|
—
|
—
|
220,673
|
529,614
|
—
|
—
|
—
|
—
|
|
Dolly A. Vance
|
|
|
|
|
|
|
|
|
|
2011 Plan
|
1/26/15
|
—
|
—
|
—
|
350,000
|
2.14
|
2.21
|
476,735
|
|
2015 Cash Incentive Plan
|
—
|
—
|
237,774
|
570,658
|
—
|
—
|
—
|
—
|
________________________
(1)
The amounts shown reflect estimated payouts for the fiscal year ended December 31, 2015 under the 2015 Cash Incentive Plan based on the Company’s performance. See “2015 Executive Compensation—Short-Term Cash Incentive Compensation” for a complete description of the 2015 Cash Incentive Plan and the related performance criteria. There are no set thresholds (or equivalent items) with respect to payouts under the 2015 Cash Incentive Plan. Maximum amounts represent the maximum range of discretion of the Compensation Committee to grant bonuses in excess of the target bonus levels.
(2)
The exercise price of options under our 2000 Plan and 2011 Plan, pursuant to which option grants were made to our Named Executive Officers in 2015, is set at the fair market value of our common stock on the date of grant, which is defined as the closing price of our common stock on the date immediately preceding the grant date.
(3)
Reflects the aggregate grant date fair value of the awards, computed in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718,
Compensation—Stock Compensation
. We calculated the estimated fair value of each stock award using the fair value of our common stock on the date of the grant. For additional information on the valuation assumptions with respect to these grants, refer to Note 4 “Stock-Based Compensation” in our Annual Report on Form 10-K for the year ended December 31, 2015.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table shows for the fiscal year ended December 31, 2015, certain information regarding outstanding equity awards at fiscal year end for the Named Executive Officers.
|
|
|
|
|
|
|
|
Option Awards
|
|
Name
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
|
Raul R. Rodriguez
|
65,000
|
—
|
7.40
|
01/25/16
|
|
|
43,889
|
—
|
9.56
|
08/07/16
|
|
|
80,000
|
—
|
11.73
|
01/31/17
|
|
|
125,000
|
—
|
26.45
|
01/31/18
|
|
|
115,000
|
—
|
6.49
|
03/30/19
|
|
|
125,000
|
—
|
9.62
|
01/20/20
|
|
|
175,000
|
—
|
6.55
|
05/27/20
|
|
|
65,000
|
—
|
6.73
|
02/01/21
|
|
|
150,000
|
—
|
8.15
|
01/25/22
|
|
|
150,000
|
—
|
6.51
|
01/30/23
|
|
|
71,875
|
78,125(1)
|
3.59
|
02/27/24
|
|
|
—
|
150,000(2)
|
3.59
|
02/27/24
|
|
|
206,250
|
243,750(3)
|
2.14
|
01/26/25
|
|
|
—
|
450,000(2)
|
2.14
|
01/26/25
|
|
|
|
|
|
|
|
Donald G. Payan, M.D.
|
55,000
|
—
|
7.40
|
01/25/16
|
|
|
80,000
|
—
|
11.73
|
01/31/17
|
|
|
140,000
|
—
|
26.45
|
01/31/18
|
|
|
145,000
|
—
|
6.49
|
03/30/19
|
|
|
165,000
|
—
|
9.62
|
01/20/20
|
|
|
65,000
|
—
|
6.73
|
02/01/21
|
|
|
200,000
|
—
|
8.15
|
01/25/22
|
|
|
200,000
|
—
|
6.51
|
01/30/23
|
|
|
71,875
|
78,125(1)
|
3.59
|
02/27/24
|
|
|
—
|
150,000(2)
|
3.59
|
02/27/24
|
|
|
50,000
|
108,334(3)
|
2.14
|
01/26/25
|
|
|
—
|
200,000(2)
|
2.14
|
01/26/25
|
|
|
|
|
|
|
|
Elliott B. Grossbard, M.D.
|
60,000
|
—
|
7.40
|
01/25/16
|
|
|
27,778
|
—
|
9.56
|
08/07/16
|
|
|
80,000
|
—
|
11.73
|
01/31/17
|
|
|
130,000
|
—
|
26.45
|
01/31/18
|
|
|
115,000
|
—
|
6.49
|
03/30/19
|
|
|
115,000
|
—
|
9.62
|
01/20/20
|
|
|
65,000
|
—
|
6.73
|
02/01/21
|
|
|
150,000
|
—
|
8.15
|
01/25/22
|
|
|
150,000
|
—
|
6.51
|
01/30/23
|
|
|
71,875
|
78,125(1)
|
3.59
|
02/27/24
|
|
|
—
|
150,000(2)
|
3.59
|
02/27/24
|
|
|
80,208
|
94,792(3)
|
2.14
|
01/26/25
|
|
|
—
|
175,000(2)
|
2.14
|
01/26/25
|
|
|
|
|
|
|
|
Ryan D. Maynard
|
4,600
|
—
|
7.88
|
01/18/16
|
|
|
90,000
|
—
|
10.20
|
05/30/16
|
|
|
1,000
|
—
|
9.56
|
08/07/16
|
|
|
106,911
|
—
|
11.73
|
01/31/17
|
|
|
75,000
|
—
|
26.45
|
01/31/18
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Name
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
|
|
73,300
|
—
|
6.49
|
03/30/19
|
|
|
85,000
|
—
|
9.62
|
01/20/20
|
|
|
120,000
|
—
|
6.55
|
05/27/20
|
|
|
65,000
|
—
|
6.73
|
02/01/21
|
|
|
150,000
|
—
|
8.15
|
01/25/22
|
|
|
150,000
|
—
|
6.51
|
01/30/23
|
|
|
59,895
|
65,105(1)
|
3.59
|
02/27/24
|
|
|
—
|
125,000(2)
|
3.59
|
02/27/24
|
|
|
80,208
|
94,792(3)
|
2.14
|
01/26/25
|
|
|
—
|
175,000(2)
|
2.14
|
01/26/25
|
|
|
|
|
|
|
|
Dolly A. Vance
|
45,000
|
—
|
7.40
|
01/25/16
|
|
|
16,249
|
—
|
9.56
|
08/07/16
|
|
|
103,788
|
—
|
11.73
|
01/31/17
|
|
|
90,000
|
—
|
26.45
|
01/31/18
|
|
|
100,000
|
—
|
6.49
|
03/30/19
|
|
|
105,000
|
—
|
9.62
|
01/20/20
|
|
|
67,000
|
—
|
6.55
|
05/27/20
|
|
|
65,000
|
—
|
6.73
|
02/01/21
|
|
|
150,000
|
—
|
8.15
|
01/25/22
|
|
|
150,000
|
—
|
6.51
|
01/30/23
|
|
|
59,895
|
65,105(1)
|
3.59
|
02/27/24
|
|
|
—
|
125,000(2)
|
3.59
|
02/27/24
|
|
|
80,208
|
94,792(3)
|
2.14
|
01/26/25
|
|
|
—
|
175,000(2)
|
2.14
|
01/26/25
|
|
|
(1)
|
|
Vests monthly over four (4) years from January 1, 2014.
|
|
|
(2)
|
|
Vests upon achievement of certain performance-based milestones.
|
|
|
(3)
|
|
Vests monthly over two (2) years from January 1, 2015.
|
OPTION EXERCISES AND STOCK VESTED
The following table shows for the fiscal year ended December 31, 2015, certain information regarding option exercises and stock vested during the last fiscal year with respect to the Named Executive Officers:
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
|
Name
|
Number of
Shares
Acquired on
Exercise(#)
|
Value
Realized on
Exercise($)
|
Number of
Shares
Acquired on
Vesting(#)
|
Value
Realized on
Vesting($)
|
|
Raul R. Rodriguez
|
—
|
—
|
—
|
—
|
|
Donald G. Payan, M.D.
|
41,666
|
—
|
—
|
—
|
|
Elliott B. Grossbard, M.D.
|
—
|
—
|
—
|
—
|
|
Ryan D. Maynard
|
—
|
—
|
—
|
—
|
|
Dolly A. Vance
|
—
|
—
|
—
|
—
|
EMPLOYMENT, SEVERANCE AND CHANGE OF CONTROL AGREEMENTS
On December 17, 2007, our Board approved our Severance Plan. The Severance Plan provides for the payment of certain benefits to certain eligible employees serving as an executive officer at the time of termination, which includes the Named Executive Officers, in exchange for an effective release of claims if such officer’s employment with us is involuntarily terminated by us or our successor without Cause (as defined in the Severance Plan) or due to a Resignation for Good Reason (as defined in the Severance Plan), in either case, on or within 18 months following the effective date of a Change of Control (as defined in the Severance Plan). The severance compensation includes a lump sum cash severance payment calculated using a multiple of the aggregate amount of the eligible employee’s base salary (which is equal to the greater of such eligible employees base salary in effect immediately prior to the Change of Control or the termination) and the average percentage of the target bonus earned over the last two years applied to the current target bonus (referred to as the Eligible Bonus). The multiple ranges from 2.0 for senior vice presidents and vice presidents to 2.5 for any executive vice presidents, President and the Chief Executive Officer. If the plan had been triggered in 2015, each of our Named Executive Officers would have each received a lump sum cash payment equal to 2.5 times the sum of his or her base salary and Eligible Bonus. In November 2008, our Compensation Committee approved and we adopted amendments to the Severance Plan to reflect the requirements of the final regulations of Section 409A of the Code. Among the changes were revised definitions of “qualifying termination,” elimination of the participants’ discretion to choose the order of reduction of benefits if a reduction is necessary under the parachute payment provisions, and addressing the timing of payments in connection with the execution and effectiveness of a general waiver and release. In December 2010, the Compensation Committee approved, and we adopted, an amendment and restatement of the Severance Plan, effective January 1, 2011, to, among other things, (i) replace the Severance Plan’s parachute payment gross-up provision with a best-after-tax provision, (ii) extend the term of the Severance Plan so that it automatically renews on January 1, 2012 and each subsequent January 1 thereafter and (iii) revise the Severance Plan’s COBRA premium benefit provision. As revised, the Severance Plan provides for continued health benefit eligibility, taxed payment to the executive for COBRA premiums for continuation coverage (including coverage for his or her eligible dependents) for up to 18 months, full accelerated vesting and exercisability of all of his or her then-outstanding equity awards, and an extended period of one-year from termination to exercise his or her non-expired stock options.
In November 2008, we entered into an amended and restated employment agreement with our Executive Vice President and President of Discovery and Research, Dr. Donald Payan, which provides for severance compensation to be paid in exchange for an effective release of claims if Dr. Payan’s employment is terminated by Rigel without Cause (as defined in the employment agreement) or by Dr. Payan due to a Resignation for Good Reason (as defined in the employment agreement), in either case, other than on or within 18 months following a Change of Control (as defined in the employment agreement). Also included in Dr. Payan’s employment agreement are changes approved by our Compensation Committee in November 2008 reflecting the requirements of the final regulations of Section 409A of the Code, including revised definitions of “qualifying termination,” revisions to provide for direct payment of COBRA premiums to an insurer, and addressing the timing of payments in connection with the execution and effectiveness of a general waiver and release. In December 2010, the Compensation Committee approved an amendment and restatement of Dr. Payan’s employment agreement, effective January 1, 2011, to (i) extend the term of the employment agreement such that it automatically renews on January 1, 2012 and each subsequent January 1 thereafter and (ii) revise the COBRA premium benefit provision set forth in the employment agreement. The severance payment to Dr. Payan under his employment agreement includes a lump sum cash severance payment equal to 2.0 times the aggregate amount of his then-current base salary and his Eligible Bonus, taxed payment to the executive for COBRA premiums for continued health benefits (including coverage for his eligible dependents) for up to 18 months, full accelerated vesting and exercisability of all of his then-outstanding equity awards, and an extended period of one-year from termination to exercise his non-expired stock options. Dr. Payan is eligible to participate in the Severance Plan in the event his employment is terminated as specified in the Severance Plan in connection with a Change of Control (as defined in the Severance Plan).
2015 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
The following table provides information on severance benefits that would have become payable under the existing employment, severance and change in control agreements if the employment of the indicated named executive officer had terminated on December 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination for Good Reason or Involuntary Termination
Without Cause After a Change of Control
|
Voluntary Termination for Good Reason or
Involuntary Termination Without Cause other
than after a Change of Control
|
|
Name and Principal Position
|
Health Care
Benefits ($)(1)
|
Salary and
Bonus ($)
|
Equity
Acceleration
($)(2)
|
Estimated
Excise Tax
Gross-Up
($)(3)
|
Health Care
Benefits ($)(1)
|
Salary and
Bonus ($)
|
Equity
Acceleration
($)(2)
|
|
Raul R. Rodriguez
|
21,762
|
1,500,000(4)
|
617,438
|
—
|
—
|
—
|
—
|
|
Donald G. Payan, M.D.
|
2,226
|
1,398,928(4)
|
274,417
|
—
|
2,226
|
1,119,142(5)
|
274,417
|
|
Elliott B. Grossbard, M.D.
|
49,742
|
1,303,348(4)
|
240,115
|
—
|
—
|
—
|
—
|
|
Ryan D. Maynard
|
77,595
|
1,103,363(4)
|
240,115
|
—
|
—
|
—
|
—
|
|
Dolly A. Vance
|
33,349
|
1,188,870(4)
|
240,115
|
—
|
—
|
—
|
—
|
|
|
(1)
|
|
Represents the full amount of premiums for continued coverage under our group health plans for each executive office and his eligible dependents for 18 months following termination of service, provided the executive officer timely elects continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”).
|
|
|
(2)
|
|
Represents the spread value of the outstanding unvested options with accelerated vesting benefits that were in the money on December 31, 2015, calculated based on the closing price of our common stock of $3.03 on December 31, 2015, the last trading day of fiscal 2015, over the exercise price of such unvested options subject to vesting acceleration.
|
|
|
(3)
|
|
Effective January 1, 2011, we replaced the Severance Plan’s parachute payment gross-up provision with a best-after-tax provision, pursuant to an amendment and restatement of the Severance Plan, as further described in this section above. Accordingly, no gross-up amounts would have been paid as of December 31, 2015.
|
|
|
(4)
|
|
Represents the lump sum cash severance benefit equal to 2.5 × (2015 base salary + an amount equivalent to the Expected Percentage of 2015 target bonus, where Expected Percentage equals the average percentage such officer actually received of his or her target bonus for the previous two years).
|
|
|
(5)
|
|
Represents the lump sum cash severance benefit equal to 2.0 × (2015 base salary + an amount equivalent to the Expected Percentage of 2015 target bonus, where Expected Percentage equals the average percentage such officer actually received of his or her target bonus for the previous two years).
|
DIRECTOR COMPENSATION
For services provided in 2015, each non-employee director received, paid on a quarterly basis for quarters served, a yearly retainer of $45,000, the Audit Committee chair received an additional yearly retainer of $22,000, the Nominating and Corporate Governance Committee chair received an additional yearly retainer of $10,000, the Compensation Committee chair received an additional yearly retainer of $15,000, the Finance Committee chair received an additional yearly retainer of $10,000. Each non-chair member of the Audit Committee received an additional yearly retainer of $12,000. Each non-chair member of the Compensation Committee received an additional yearly retainer of $10,000. Each non-chair member of the Nominating and Corporate Governance Committee, and Finance Committee received an additional yearly retainer of $5,000. In 2015, the Scientific Advisor received the equivalent of a yearly retainer of $10,000, distributed quarterly. In August 2015, the Board established a Scientific and Clinical Trial Advisory Committee, the chair of which receives a yearly retainer of $15,000 and each additional member received a yearly retainer of $10,000, each paid on a quarterly basis for quarters served.
In the fiscal year ended December 31, 2015, the total cash compensation earned by non-employee directors was $422,750, all of which was paid in 2015. In 2015, each non-employee director who continued to serve as a non-employee director automatically received, under the Directors’ Plan, an annual option grant to purchase 40,000 shares of common stock, as further described below. In addition, each person elected or appointed for the first time to be a non-employee director automatically was eligible to receive, upon the date of his or her initial election or appointment to be a non-employee director by the Board or our stockholders, an initial grant to purchase 80,000 shares of common stock on the terms and conditions set forth in the Directors’ Plan.
In November 2014, upon the resignation of Mr. Gower as CEO and Chairman of the Board, Mr. Lyons was appointed Chairman of the Board by the remaining members of the Board. In January 2015, taking into consideration the recommendations of Radford regarding director compensation benchmarks, and policies of our peer company group with respect to director compensation, the Board approved an annual retainer of $40,000 for Independent Chairman of the Board. The Chairman abstained from voting on this matter.
In January 2015, the Board of Directors, taking into consideration the recommendations of Radford regarding director compensation benchmarks, the recommendations of the Compensation Committee, as well as considering the practices and policies of our peer company group with respect to director equity compensation, approved amending the Directors’ Plan to increase the number of shares automatically granted to continuing non-employee directors to 40,000 shares. In June 2015, The Compensation Committee, taking into consideration the recommendations of Radford regarding director compensation benchmarks, as well as considering the practices and policies of our peer company group with respect to director equity compensation, approved amending the Directors’ Plan to increase the number of shares automatically granted to new non-employee directors to 80,000 shares. A copy of the Directors’ Plan, as amended, was filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended June 30, 2015.
Each of our non-employee directors receives stock option grants under our Directors’ Plan. Only non-employee directors are eligible to receive options under the Directors’ Plan. Options granted under the Directors’ Plan are not intended to qualify as incentive stock options under the Code. Option grants under the Directors’ Plan are non-discretionary. No other options may be granted at any time under the Directors’ Plan. The exercise price of options granted under the Directors’ Plan is 100% of the fair market value of our common stock on the date of the option grant. The Board administers the Directors’ Plan such that (a) initial option grants vest in equal monthly installments over the shorter of three years from the date of grant or the period beginning on the date the director is appointed to the Board and ending on the date of the annual meeting at which the director is first considered for election by the stockholders, provided that the non-employee director continues to provide services to us and (b) annual option grants vest in equal monthly installments over three years from the date of grant. Beginning in 2009, annual grants vested over one year. The term of options granted under the Directors’ Plan is 10 years. In the event of a merger of Rigel with or into another corporation or a consolidation, acquisition of assets or other change of control transaction involving us, each option either will continue in effect, if we are the surviving entity, or, if neither assumed nor substituted, will accelerate and the option will terminate if not exercised prior to the consummation of the transaction.
As noted above, on May 13, 2015, pursuant to the Directors’ Plan, we granted options to purchase 40,000 shares of common stock to each of Bradford S. Goodwin, Gary A. Lyons, Walter H. Moos, Peter S. Ringrose and Stephen A. Sherwin, each at an exercise price of $3.96 per share. These options vest in 12 equal monthly installments beginning on the grant date. On June 29, 2015, Keith A. Katkin received an initial grant to purchase 80,000 shares of common stock on the terms and conditions set forth in the Directors’ Plan upon his appointment to be a non-employee director by the Board, at an exercise price of $3.26 per share and vesting in equal amounts monthly between the date of his appointment to the Board and
the date of the Annual Meeting at which he is first scheduled to be considered for election to be a Non-Employee Director by the stockholders of the Company (i.e., May 10, 2016)
.
DIRECTOR COMPENSATION FOR FISCAL YEAR 2015
The following table shows the compensation of all non-employee directors of the Company for the fiscal year ended December 31, 2015:
|
|
|
|
|
|
|
|
Name
|
Fees Earned or
Paid in Cash
($)
|
|
Option Awards
($)(1)
|
|
Total($)
|
|
Bradford S. Goodwin
|
74,500
|
|
158,400
|
|
232,900
|
|
Gary A. Lyons
|
110,250
|
|
158,400
|
|
268,650
|
|
Walter H. Moos, Ph.D.
|
67,500
|
|
158,400
|
|
225,900
|
|
Keith A. Katkin(2)
|
31,000
|
|
260,800
|
|
291,800
|
|
Peter S. Ringrose, Ph.D.
|
72,500
|
|
158,400
|
|
230,900
|
|
Stephen A. Sherwin, M.D.
|
67,000
|
|
158,400
|
|
225,400
|
|
Total
|
422,750
|
|
1,052,800
|
|
1,475,550
|
(1)
Reflects the aggregate grant date fair value of option awards, computed in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation—Stock Compensation. For additional information on the valuation assumptions with respect to these grants, refer to Note 4 “Stock-Based Compensation” in our Annual Report on Form 10-K for the year ended December 31, 2015.
(2)
Mr. Katkin was appointed to the Board effective June 29, 2015.
TRANSACTIONS WITH RELATED PERSONS
Related-Person Transactions Policy and Procedures
The Company has adopted a written Related-Person Transactions Policy that sets forth the Company’s policies and procedures regarding the identification, review, consideration and approval or ratification of “related-person transactions.” For purposes of the Company’s policy only, a “related-person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which the Company and any “related person” are participants involving an amount that exceeds $120,000. Transactions involving compensation for services provided to the Company as an employee, consultant or director by a related person are not covered by this policy. A related person is any executive officer, director, nominee to become a director or more than 5% stockholder of the Company, including any of their immediate family members, and any entity in which such persons have a 5% or greater beneficial ownership interest.
Under the policy, where a transaction has been identified as a related-person transaction, management must present information regarding the proposed related-person transaction to the Audit Committee (or, where Audit Committee approval would be inappropriate, to another independent body of the Board) for consideration and approval or ratification. The presentation must include, to the extent reasonably available, a description of, among other things, the parties to the transaction, the interests, direct and indirect, of the related persons, a description of the purpose of the transaction, all of the material facts of the proposed transaction, the benefits to the Company of the transaction and whether any alternative transactions were available, whether the proposed transaction is on terms comparable to terms available to or from an unrelated third party and management’s recommendation regarding the proposed transaction.
To identify related-person transactions in advance, the Company relies on information supplied by its executive officers, directors and certain significant stockholders. In considering related-person transactions, the Committee takes into account the relevant available facts and circumstances including, but not limited to (a) the risks, costs and benefits to the Company, (b) the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated, (c) the terms of the transaction, (d) the availability of other sources for comparable services or products and (e) the terms available to or from, as the case may be, unrelated third parties or to or from employees generally. In the event a director has an interest in the proposed transaction, the director must recuse himself or herself from the deliberations and approval. The policy requires that, in determining whether to approve, ratify or reject a related-person transaction, the Committee considers, in light of known circumstances, whether the transaction is in, or is not inconsistent with, the best interests of the Company and its stockholders, as the Committee determines in the good faith exercise of its discretion.
Certain Transactions
The Company has entered into indemnity agreements with certain officers and directors which provide, among other things, that the Company will indemnify such officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as a director, officer or other agent of the Company, and otherwise to the fullest extent permitted under Delaware law and the Company’s Bylaws.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Notices of Internet Availability of Proxy Materials or other Annual Meeting materials with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials or other Annual Meeting materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are Rigel stockholders will be “householding” our proxy materials. A single Notice of Internet Availability of Proxy Materials and/or other Annual Meeting materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate Notice of Internet Availability of Proxy Materials or other Annual Meeting materials, please notify your broker, or, if you are currently receiving multiple copies of the Notice of Internet Availability of Proxy Materials or other Annual Meeting materials at your address and would like to request “householding” of their communications, please contact your broker(s).
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.
|
|
|
|
|
By Order of the Board of Directors,
|
|
|
|
|
|
Dolly A. Vance
|
|
|
Corporate Secretary
|
March 28, 2016
A COPY OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015 IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: INVESTOR RELATIONS, RIGEL PHARMACEUTICALS, INC., 1180 VETERANS BOULEVARD, SOUTH SAN FRANCISCO, CA 94080.
Appendix A
RIGEL PHARMACEUTICALS, INC.
2011 EQUITY INCENTIVE PLAN
ADOPTED: MARCH 23, 2011
APPROVED BY STOCKHOLDERS MAY 19, 2011
AMENDED FEBRUARY 3, 2012
APPROVED BY STOCKHOLDERS MAY 22, 2012
AMENDED FEBRUARY 8, 2013
APPROVED BY STOCKHOLDERS MAY 14, 2013
AMENDED January 26, 2016
APPROVED BY STOCKHOLDERS MAY 10, 2016
TERMINATION DATE: MARCH 22, 2021
1.
PURPOSES.
(a)
The persons eligible to receive Stock Awards are the Employees, Directors and Consultants of the Company and its Affiliates.
(b)
The purpose of the Plan is to provide a means by which eligible recipients of Stock Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c)
The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive Stock Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.
2.
DEFINITIONS.
(a)
“Affiliate”
means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act. The Board shall have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.
(b)
“Board”
means the Board of Directors of the Company.
(c)
“Code”
means the Internal Revenue Code of 1986, as amended.
(d)
“Committee”
means a committee of one or more members of the Board appointed by the Board in accordance with subsection 3(c).
(e)
“Common Stock”
means the common stock of the Company.
(f)
“Company”
means Rigel Pharmaceuticals, Inc., a Delaware corporation.
(g)
“Consultant”
means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (ii) who is a member of the Board of Directors of an Affiliate. However, the term “Consultant” shall not include either Directors who are not compensated by the Company for their services as Directors or Directors who are merely paid a director’s fee by the Company for their services as Directors.
(h)
“Continuous Service”
means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no
interruption or termination of the Participant’s service. For example, a change in status without interruption from an Employee of the Company to a Consultant of an Affiliate or a Director will not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.
(i)
“Covered Employee”
means the chief executive officer and the four (4) other highest compensated officers of the Company for whom total compensation is required to be reported to stockholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.
(j)
“Director”
means a member of the Board of Directors of the Company.
(k)
“Disability”
means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.
(l)
“Employee”
means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
(m)
“Exchange Act”
means the Securities Exchange Act of 1934, as amended.
(n)
“
Fair Market Value”
means, as of any date, the value of the Common Stock determined as follows:
(i)
If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in
The Wall Street Journal
or such other source as the Board deems reliable.
(ii)
In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board.
(o)
“Incentive Stock Option”
means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(p)
“Non-Employee Director”
means a Director who either (i) is not a current Employee or Officer of the Company or its parent or a subsidiary, does not receive compensation (directly or indirectly) from the Company or its parent or a subsidiary for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.
(q)
“Nonstatutory Stock Option”
means an Option not intended to qualify as an Incentive Stock Option.
(r)
“Officer”
means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(s)
“Option”
means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.
(t)
“Option Agreement”
means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.
(u)
“Optionholder”
means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
(v)
“Outside Director”
means a Director who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” receiving compensation for prior services (other than benefits under a tax qualified pension plan), was not an officer of the Company or an “affiliated corporation” at any time and is not currently receiving direct or indirect remuneration from the Company or an “affiliated corporation” for services in any capacity other than as a Director or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code.
(w)
“Participant”
means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.
(x)
“Performance Criteria”
means the one or more criteria that the Board shall select for purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that shall be used to establish such Performance Goals may be based on any one of, or combination of, the following: (i) earnings per share; (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization (EBITDA); (iv) net earnings; (v) total stockholder return; (vi) return on equity; (vii) return on assets, investment, or capital employed; (viii) operating margin; (ix) gross margin; (x) operating income; (xi) net income (before or after taxes); (xii) net operating income; (xiii) net operating income after tax; (xiv) pre- and after-tax income; (xv) pre-tax profit; (xvi) operating cash flow; (xvii) sales or revenue targets; (xviii) increases in revenue or product revenue; (xix) expenses and cost reduction goals; (xx) improvement in or attainment of expense levels; (xxi) improvement in or attainment of working capital levels; (xxii) economic value added (or an equivalent metric); (xxiii) market share; (xxiv) cash flow; (xxv) cash flow per share; (xxvi) share price performance; (xxvii) debt reduction; (xxviii) implementation or completion of projects or processes; (xxix) customer satisfaction; (xxx) total stockholder return; (xxxi) stockholders’ equity; and (xxxii) other measures of performance selected by the Board. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock Award Agreement. The Board shall, in its sole discretion, define the manner of calculating the Performance Criteria it selects to use for such Performance Period.
(y)
“Performance Goals”
means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria. The Board is authorized at any time in its sole discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants, (a) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (b) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements of the Company in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; or (c) in view of the Board’s assessment of the business strategy of the Company, performance of comparable organizations, economic and business conditions, and any other circumstances deemed relevant. Specifically, the Board is authorized to make adjustment in the method of calculating attainment of Performance Goals and objectives for a Performance Period as follows: (i) to exclude the dilutive effects of acquisitions or joint ventures; (ii) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; and (iii) to exclude the effect of any change in the outstanding shares
of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends. In addition, the Board is authorized to make adjustment in the method of calculating attainment of Performance Goals and objectives for a Performance Period as follows: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; (iv) to exclude the effects to any statutory adjustments to corporate tax rates; (v) to exclude the impact of any “extraordinary items” as determined under generally accepted accounting principles; and (vi) to exclude any other unusual, non-recurring gain or loss or other extraordinary item.
(z)
“Performance Period”
means the one or more periods of time, which may be of varying and overlapping durations, as the Board may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Stock Award.
(aa)
“Plan”
means this Rigel Pharmaceuticals, Inc. 2011 Equity Incentive Plan.
(bb)
“Rule 16b-3”
means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
(cc)
“Securities Act”
means the Securities Act of 1933, as amended.
(dd)
“Stock Award”
means any right granted under the Plan, including an Option, a stock bonus, a right to acquire restricted stock, a stock unit award and a stock appreciation right.
(ee)
“Stock Award Agreement”
means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.
(ff)
“Ten Percent Stockholder”
means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.
3.
ADMINISTRATION.
(a) Administration by Board.
The Board shall administer the Plan unless and until the Board delegates administration to a Committee, as provided in subsection 3(c).
(b) Powers of Board.
The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:
(i)
To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; what type or combination of types of Stock Award shall be granted; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Common Stock pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person.
(ii)
To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
(iii)
To amend the Plan or a Stock Award as provided in Section 12.
(iv)
To terminate or suspend the Plan as provided in Section 13.
(v)
Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan.
(c) Delegation to Committee.
(i) General.
The Board may delegate administration of the Plan to a Committee or Committees of one (1) or more members of the Board, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.
(ii) Committee Composition when Common Stock is Publicly Traded.
At such time as the Common Stock is publicly traded, in the discretion of the Board, a Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such authority, the Board or the Committee may (1) delegate to a committee of one or more members of the Board who are not Outside Directors the authority to grant Stock Awards to eligible persons who are either (a) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Stock Award or (b) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code and/or (2) delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Stock Awards to eligible persons who are not then subject to Section 16 of the Exchange Act.
(d) Effect of Board’s Decision.
All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.
(e) Cancellation and Re-Grant of Stock Awards.
Notwithstanding anything to the contrary in the Plan, neither the Board nor any Committee shall have the authority to: (i) reprice any outstanding Stock Awards under the Plan, (ii) cancel any outstanding Options or Stock Appreciation Rights that have an exercise price or strike price greater than the current Fair Market Value of the Common Stock in exchange for cash or other Stock Awards under the Plan, or (iii) effect any other action that is treated as a repricing
under generally accepted accounting principles unless, in each case, the stockholders of the Company have approved such an action within twelve (12) months prior to such an event.
4.
SHARES SUBJECT TO THE PLAN.
(a) Share Reserve.
Subject to the provisions of subsection 11(a) relating to adjustments upon changes in Common Stock, the shares of Common Stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate 13,250,000 shares of Common Stock, which number consists of (i) 3,500,000 shares of Common Stock initially reserved for issuance under the Plan plus (ii) 600,000 shares of Common Stock approved by the Board in February 2012 and subsequently approved by the Company’s stockholders plus (iii) 7,000,000 shares of Common Stock approved by the Board in February 2013 and subsequently approved by the Company’s stockholders plus (iii) 2,150,000 shares of Common Stock approved by the Board in January 2016 and subsequently approved by the Company’s stockholders..
(b)
Subject to subsection 4(c), the number of shares available for issuance under the Plan shall be reduced by: (i) one (1) share for each share of stock issued pursuant to (A) an Option granted under Section 6, or (B) a Stock Appreciation Right granted under subsection 7(d) with respect to which the strike price is at least one hundred percent (100%) of the Fair Market Value of the underlying Common Stock on the date of grant; and (ii) one and sixty-four hundredths (1.64) shares for each share of Common Stock issued pursuant to a Stock Bonus Award, Restricted Stock Award, Stock Unit Award or Performance Stock Award.
(c) Reversion of Shares to the Share Reserve.
(i) Shares Available For Subsequent Issuance.
If any (i) Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, (ii) shares of Common Stock issued to a Participant pursuant to a Stock Award are forfeited to or repurchased by the Company, including any repurchase or forfeiture caused by the failure to meet a contingency or condition required for the vesting of such shares, or (iii) Stock Award is settled in cash, then the shares of Common Stock not issued under such Stock Award, or forfeited to or repurchased by the Company, shall revert to and again become available for issuance under the Plan. To the extent there is issued a share of Common Stock pursuant to a Stock Award that counted as one and sixty-four hundredths (1.64) shares against the number of shares available for issuance under the Plan pursuant to subsection 4(b) and such share of Common Stock again becomes available for issuance under the Plan pursuant to this subsection 4(c)(i), then the number of shares of Common Stock available for issuance under the Plan shall increase by one and sixty-four hundredths (1.64) shares.
(ii) Shares Not Available For Subsequent Issuance.
If any shares subject to a Stock Award are not delivered to a Participant because the Stock Award is exercised through a reduction of shares subject to the Stock Award (
i.e
., “net exercised”), the number of shares that are not delivered to the Participant shall not remain available for issuance under the Plan. If any shares subject to a Stock Award are not delivered to a Participant because such shares are withheld in satisfaction of the withholding of taxes incurred in connection with the exercise of an Option or stock appreciation right, or the issuance of shares under a stock bonus award, restricted stock award or stock unit award, the number of shares that are not delivered to the Participant shall not remain available for subsequent issuance under the Plan. If the exercise price of any Stock Award is satisfied by tendering shares of Common Stock held by the Participant (either by actual delivery or attestation), then the number of shares so tendered shall not remain available for subsequent issuance under the Plan.
(d) Source of Shares.
The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.
5.
ELIGIBILITY.
(a) Eligibility for Specific Stock Awards.
Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and (f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants;
provided, however
, Nonstatutory Stock Options and stock appreciation rights may not be granted to Employees, Directors, and Consultants who are providing Continuous Services only to any “parent” of the Company, as such term is defined in Rule 405 promulgated under the Securities Act, unless such Stock Awards comply with the distribution requirements of Section 409A of the Code.
(b) Ten Percent Stockholders.
A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of
the Fair Market Value of the Common Stock at the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.
(c) Section 162(m) Limitation.
Subject to the provisions of Section 11 relating to adjustments upon changes in the shares of Common Stock, no Employee shall be eligible to be granted Options covering more than one million five hundred thousand (1,500,000) shares of Common Stock during any calendar year.
(d) Consultants.
(i)
A Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is not available to register either the offer or the sale of the Company’s securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (i) that such grant (A) shall be registered in another manner under the Securities Act (
e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (ii) that such grant complies with the securities laws of all other relevant jurisdictions.
(ii)
Form S-8 generally is available to consultants and advisors only if (i) they are natural persons; (ii) they provide bona fide services to the issuer, its parents, its majority-owned subsidiaries or majority-owned subsidiaries of the issuer’s parent; and (iii) the services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the issuer’s securities.
6.
OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
(a) Term.
Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders, no Option shall be exercisable after the expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option.
Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.
(c) Exercise Price of a Nonstatutory Stock Option.
The exercise price of each Nonstatutory Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.
(d) Consideration.
The purchase price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised or (ii) at the discretion of the Board (1) by delivery to the Company of other Common Stock; (2) according to a deferred payment or other similar arrangement with the Optionholder; (3) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price;
provided, however,
that the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such holding back of whole shares;
provided, further, however,
that shares of Common Stock will no longer be outstanding under an Option and will not be exercisable thereafter to the extent that (i) shares are used to pay the exercise price pursuant to the “net exercise,” (ii) shares are delivered to the Participant as a result of such exercise, and (iii) shares are withheld to satisfy tax withholding obligations; or (4) in any other form of legal consideration that may be acceptable to the Board. At any time that the Company is incorporated in Delaware, payment of the Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid (1) the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement and (2) the treatment of the Option as a variable award for financial accounting purposes.
(e) Transferability of Options.
The Board may, in its sole discretion, impose such limitations on the transferability of Options, as the Board shall determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply:
(i) Restrictions on Transfer.
An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder;
provided, however
, that the Board may, in its sole discretion, permit transfer of the Option in a manner that is not prohibited by applicable tax and securities laws upon the Optionholder’s request. Except as explicitly provided herein, an Option may not be transferred for consideration.
(ii) Domestic Relations Orders.
Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order;
provided, however
, that if an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.
(iii) Beneficiary Designation.
Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect Option exercises, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, the executor or administrator of the Optionholder’s estate shall be entitled to exercise the Option and receive the Common Stock or other consideration resulting from such exercise.
(f) Vesting Generally.
The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this
subsection 6(g) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.
(g) Termination of Continuous Service.
In the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.
(h) Extension of Termination Date.
An Optionholder’s Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in the Option Agreement or (ii) the expiration of a total period of three (3) months (that need not be consecutive) after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.
(i) Disability of Optionholder.
In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement) or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate.
(j) Death of Optionholder.
In the event (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s death pursuant to subsection 6(e) or 6(f), but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement) or (2) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.
(k) Early Exercise.
The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate. The Company will not exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option.
(l) Non-Exempt Employees
. No Option granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option. Notwithstanding the foregoing, consistent with the provisions of the Worker Economic Opportunity Act, (i) in the event of the Participant’s death or Disability, (ii) upon a Corporate Transaction (as defined in section 11(c)) in which such Option is not assumed, continued, or substituted, or (iii) upon the Participant’s retirement (as such term may be defined in the Participant’s Option Agreement or in another applicable agreement or in accordance with the Company’s then current employment policies and guidelines), any such vested Options may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay.
7.
PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) Stock Bonus Awards.
Each stock bonus agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of stock bonus agreements may change from time to time, and the terms and conditions of separate stock bonus agreements need not be identical, but each stock bonus agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
(i) Consideration.
A stock bonus may be awarded in consideration for past services actually rendered to the Company or an Affiliate for its benefit.
(ii) Vesting.
Shares of Common Stock awarded under the stock bonus agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board.
(iii) Termination of Participant’s Continuous Service.
In the event a Participant’s Continuous Service terminates, the Company may reacquire any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination under the terms of the stock bonus agreement.
(iv) Transferability.
Rights to acquire shares of Common Stock under the stock bonus agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the stock bonus agreement, as the Board shall determine in its discretion, so long as Common Stock awarded under the stock bonus agreement remains subject to the terms of the stock bonus agreement.
(b) Restricted Stock Awards.
Each restricted stock purchase agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of the restricted stock purchase agreements may change from time to time, and the terms and conditions of separate restricted stock purchase agreements need not be identical, but each restricted stock purchase agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
(i) Purchase Price.
The purchase price under each restricted stock purchase agreement shall be such amount as the Board shall determine and designate in such restricted stock purchase agreement. The purchase price shall not be less than eighty-five percent (85%) of the Common Stock’s Fair Market Value on the date such award is made or at the time the purchase is consummated.
(ii) Consideration.
The purchase price of Common Stock acquired pursuant to the restricted stock purchase agreement shall be paid either: (i) in cash at the time of purchase; (ii) at
the discretion of the Board, according to a deferred payment or other similar arrangement with the Participant; or (iii) in any other form of legal consideration that may be acceptable to the Board in its discretion;
provided, however,
that at any time that the Company is incorporated in Delaware, then payment of the Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall not be made by deferred payment.
(iii) Vesting.
Shares of Common Stock acquired under the restricted stock purchase agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board.
(iv) Termination of Participant’s Continuous Service.
In the event a Participant’s Continuous Service terminates, the Company may repurchase or otherwise reacquire any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination under the terms of the restricted stock purchase agreement.
(v) Transferability.
Rights to acquire shares of Common Stock under the restricted stock purchase agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the restricted stock purchase agreement, as the Board shall determine in its discretion, so long as Common Stock awarded under the restricted stock purchase agreement remains subject to the terms of the restricted stock purchase agreement.
(c) Stock Unit Awards.
Each stock unit award agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of stock unit award agreements may change from time to time, and the terms and conditions of separate stock unit award agreements need not be identical,
provided, however,
that each stock unit award agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
(i) Consideration.
At the time of grant of a stock unit award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the stock unit award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a stock unit award may be paid in any form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.
(ii) Vesting.
At the time of the grant of a stock unit award, the Board may impose such restrictions or conditions to the vesting of the stock unit award as it, in its sole discretion, deems appropriate.
(iii) Payment.
A stock unit award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the stock unit award agreement.
(iv) Additional Restrictions.
At the time of the grant of a stock unit award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a stock unit award after the vesting of such stock unit award.
(v) Dividend Equivalents.
Dividend equivalents may be credited in respect of shares of Common Stock covered by a stock unit award, as determined by the Board and contained in the stock unit award agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the stock unit award in such manner as determined by the Board. Any additional shares covered by the stock unit award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying stock unit award agreement to which they relate.
(vi) Termination of Participant’s Continuous Service.
Except as otherwise provided in the applicable stock unit award agreement, such portion of the stock unit award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.
(d) Stock Appreciation Rights.
Each stock appreciation right agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of stock appreciation right agreements may change from time to time, and the terms and conditions of separate stock appreciation right agreements need not be identical;
provided, however
, that each stock appreciation right agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
(i) Strike Price and Calculation of Appreciation.
Each stock appreciation right will be denominated in shares of Common Stock equivalents. The appreciation distribution payable on the exercise of a stock appreciation right will be not greater than an amount equal to the excess of (i) the aggregate Fair Market Value (on the date of the exercise of the stock appreciation right) of a number of shares of Common Stock equal to the number of shares of Common Stock equivalents in which the Participant is vested under such stock appreciation right, and with respect to which the Participant is exercising the stock appreciation right on such date, over (ii) an amount (the strike price) that will be determined by the Board at the time of grant of the stock appreciation right.
(ii) Vesting.
At the time of the grant of a stock appreciation right, the Board may impose such restrictions or conditions to the vesting of such stock appreciation right as it, in its sole discretion, deems appropriate.
(iii) Exercise.
To exercise any outstanding stock appreciation right, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the stock appreciation right agreement evidencing such stock appreciation right.
(iv) Payment.
The appreciation distribution in respect to a stock appreciation right may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the stock appreciation right agreement evidencing such stock appreciation right.
(v) Termination of Continuous Service.
In the event that a Participant’s Continuous Service terminates, the Participant may exercise his or her stock appreciation right (to the extent that the Participant was entitled to exercise such stock appreciation right as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the stock appreciation right agreement), or (ii) the expiration of the term of the stock appreciation right as set forth in the stock appreciation right agreement. If, after termination, the Participant does not exercise his or her stock appreciation right within the time specified herein or in the stock appreciation right agreement (as applicable), the stock appreciation right shall terminate.
8.
COVENANTS OF THE COMPANY.
(a) Availability of Shares.
During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Stock Awards.
(b) Securities Law Compliance.
The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards;
provided, however,
that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained.
(c) No Obligation to Notify or Minimize Taxes.
The Company shall have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award.
9.
USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.
10.
MISCELLANEOUS.
(a) Corporate Action Constituting Grant of Stock Awards.
Corporate action constituting a grant by the Company of a Stock Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant.
(b) Acceleration of Exercisability and Vesting.
The Board shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.
(c) Stockholder Rights.
No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms.
(d) No Employment or other Service Rights.
Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
(e) Incentive Stock Option $100,000 Limitation.
To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options.
(f) Investment Assurances.
The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act or (2) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.
(g) Withholding Obligations.
To the extent provided by the terms of a Stock Award Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Stock Award,
provided, however,
that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid variable award accounting); or (iii) delivering to the Company (either by actual delivery or attestation) owned and unencumbered shares of Common Stock of the Company.
(h) Performance Stock Awards.
A Stock Award may be granted, may vest, or may be exercised based upon service conditions, upon the attainment during a Performance Period of certain Performance Goals, or both. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be conclusively determined by the Board in its sole discretion. The maximum benefit to be received by any individual in any calendar year attributable to Stock Awards described in this subsection 10(h) shall not exceed the value of one million five hundred thousand (1,500,000) shares of Common Stock.
(i) Electronic Delivery.
Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet.
(j) Compliance with Section 409A.
To the extent that the Board determines that any Stock Award granted hereunder is subject to Section 409A of the Code, the Stock Award Agreement evidencing such Stock Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code. Notwithstanding anything to the contrary in this Plan (and unless the Stock Award Agreement specifically provides otherwise), if the Shares are publicly traded and a Participant holding a Stock Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount shall be made upon a “separation from service” before a date that is six (6) months following the date of such Participant’s “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s death.
11.
ADJUSTMENTS UPON CHANGES IN STOCK.
(a) Capitalization Adjustments.
If any change is made in the Common Stock subject to the Plan, or subject to any Stock Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Board shall appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to subsection 4(a) and the maximum number of securities subject to award to any person pursuant to subsection 5(c) and 10(h) and (ii) the class(es) and number of securities and price per share of Common Stock subject to such outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.)
(b) Dissolution or Liquidation.
In the event of a dissolution or liquidation of the Company, then all outstanding Stock Awards shall terminate immediately prior to such event, and shares of Common Stock subject to the Company’s repurchase option may be repurchased by the Company notwithstanding the fact that the holder of such stock is still in Continuous Service. Notwithstanding the foregoing, Options granted under the 1997 Stock Option Plan shall be subject to subsection 11(c) below in the event of a dissolution or liquidation of the Company.
(c) Corporate Transaction.
In the event of (i) a sale, lease or other disposition of all or substantially all of the securities or assets of the Company, (ii) a merger or consolidation in which the Company is not the surviving corporation or (iii) a reverse merger in which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, then any surviving corporation or acquiring corporation may assume any Stock Awards outstanding under the Plan or may substitute similar stock awards (including an award to acquire the same consideration paid to the stockholders in the transaction described in this subsection 11(c)) for those outstanding under the Plan. In the event any surviving corporation or acquiring corporation does not assume such Stock Awards or substitute similar stock awards for those outstanding under the Plan, then with respect to Stock Awards held by Participants whose Continuous Service has not terminated, the vesting of such Stock Awards (and, if applicable, the time during which such Stock Awards may be exercised) shall be accelerated in full, and the Stock Awards shall terminate if not exercised (if applicable) at or prior to such event. With respect to any other Stock Awards outstanding under the Plan, such Stock Awards shall terminate if not exercised (if applicable) prior to such event.
12.
AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) Amendment of Plan.
The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 11 relating to adjustments upon changes in Common Stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing requirements.
(b) Stockholder Approval.
The Board may, in its sole discretion, submit any other amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers.
(c) Contemplated Amendments.
It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the
maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights.
Rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.
(e) Amendment of Stock Awards.
The Board at any time, and from time to time, may amend the terms of any one or more Stock Awards;
provided, however,
that the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.
13.
TERMINATION OR SUSPENSION OF THE PLAN.
(a) Plan Term.
Unless sooner terminated by the Board pursuant to Section 3, the Plan shall automatically terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights.
Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the Participant.
14.
EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon its adoption by the Board, but no Stock Award shall be exercised (or, in the case of a stock bonus, shall be granted) unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.
15.
CHOICE OF LAW.
The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of laws rules.
Appendix B
RIGEL PHARMACEUTICALS, INC.
2000 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN
ADOPTED AUGUST 18, 2000
APPROVED BY STOCKHOLDERS SEPTEMBER 11, 2000
EFFECTIVE DATE: DECEMBER 4, 2000
AMENDED AND RESTATED APRIL 24, 2003
AMENDED AND RESTATED JUNE 20, 2003
APPROVED BY STOCKHOLDERS JUNE 20, 2003
AMENDED AND RESTATED APRIL 22, 2005
APPROVED BY STOCKHOLDERS JUNE 2, 2005
AMENDED AND RESTATED JANUARY 31, 2007
APPROVED BY STOCKHOLDERS MAY 31, 2007
AMENDED AND RESTATED SEPTEMBER 18, 2007
AMENDED AND RESTATED FEBRUARY 21, 2008
APPROVED BY STOCKHOLDERS MAY 29, 2008
AMENDED AND RESTATED MAY 19, 2009
AMENDED AND RESTATED JANUARY 28, 2010
APPROVED BY STOCKHOLDERS MAY 27, 2010
AMENDED AND RESTATED JANUARY 28, 2010
APPROVED BY STOCKHOLDERS MAY 27, 2010
AMENDED AND RESTATED FEBRUARY 4, 2011
APPROVED BY STOCKHOLDERS MAY 19, 2011
AMENDED AND RESTATED FEBRUARY 8, 2013
APPROVED BY STOCKHOLDERS MAY 14, 2013
AMENDED BY THE COMPENSATION COMMITTEE FEBRUARY 27, 2014
AMENDED BY THE BOARD JANUARY 27, 2015
AMENDED BY THE COMPENSATION COMMITTEE JUNE 16, 2015
AMENDED AND RESTATED JANUARY 26, 2016
APPROVED BY STOCKHOLDERS MAY 10, 2016
1.
PURPOSES.
(a)
Eligible Option Recipients
. The persons eligible to receive Options are the Non-Employee Directors of the Company.
(b)
Available Options
. The purpose of the Plan is to provide a means by which Non-Employee Directors may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Nonstatutory Stock Options.
(c)
General Purpose
. The Company, by means of the Plan, seeks to retain the services of its Non-Employee Directors, to secure and retain the services of new Non-Employee Directors and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.
2.
DEFINITIONS.
(a)
“
Affiliate
”
means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act. The Board shall have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition
.
(b)
“Annual Grant”
means an Option granted annually to all Non-Employee Directors who meet the criteria specified in subsection 6(b) of the Plan.
(c)
“Annual Meeting”
means the annual meeting of the stockholders of the Company.
(d)
“
Board
” me
ans the Board of Directors of the Company.
(e)
A
“Change in Control,”
with respect to Options granted on or after the effective date of the Plan, will be deemed to have occurred upon the first to occur of an event set forth in any one of the following paragraphs:
(i)
the acquisition (other than from the Company, by any person (as such term is defined in Section 13(c) or 14(d) of the Exchange Act of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more of the combined voting power of the Company’s then outstanding voting securities;
(ii)
the individuals who, as of the effective date of the Plan, are members of the Board (the
“Incumbent Board”
), cease for any reason to constitute at least a majority of the Board, unless the
election, or nomination for election by the Company’s stockholders, of any new director was approved by a vote of at least a majority of the Incumbent Board, and such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; or
(iii)
the closing of:
(1)
a merger or consolidation involving the Company if the stockholders of the Company, immediately before such merger or consolidation, do not, as a result of such merger or consolidation, own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Company outstanding immediately before such merger or consolidation; or
(2)
a complete liquidation or dissolution of the Company or an agreement for the sale or other disposition of all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries or (ii) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the Company immediately prior to such acquisition.
For the avoidance of doubt, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.
Notwithstanding the foregoing or any other provision of this Plan, the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Optionholder shall supersede the foregoing definition with respect to Options subject to such agreement;
provided, however,
that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply.
(f)
“
Code
” means the Internal Revenue Code of 1986, as amended.
(g)
“
Common Stock
” means the common stock of the Company.
(h)
“
Company
” means Rigel Pharmaceuticals, Inc., a Delaware corporation.
(i)
“
Consultant
” means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (ii) who is a member of the Board of Directors of an Affiliate. However, the term “Consultant” shall not include either Directors of the Company who are not compensated by the Company for their services as Directors or Directors of the Company who are merely paid a director’s fee by the Company for their services as Directors.
(j)
“
Continuous Service
” means that the Optionholder’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The Optionholder’s
Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Optionholder renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Optionholder renders such service, provided that there is no interruption or termination of the Optionholder’s service. For example, a change in status without interruption from a Non-Employee Director of the Company to a Consultant of an Affiliate or an Employee of the Company will not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.
(k)
“
Director
” means a member of the Board of Directors of the Company.
(l)
“Disability”
means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.
(m)
“
Employee
” means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
(n)
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended.
(o)
“
Fair Market Value
” means, as of any date, the value of the Common Stock determined as follows:
(i)
If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable.
(ii)
In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board.
(p)
“Initial Grant”
means an Option granted to a Non-Employee Director who meets the criteria specified in subsection 6(a) of the Plan.
(q)
“IPO Date”
means the effective date of the initial public offering of the Common Stock.
(r)
“
Non-Employee Director
” means a Director who is not an Employee.
(s)
“
Nonstatutory Stock Option
” means an Option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(t)
“
Officer
” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(u)
“
Option
” means a Nonstatutory Stock Option granted pursuant to the Plan.
(v)
“
Option Agreement
” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.
(w)
“
Optionholder
” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
(x)
“
Plan
” means this Rigel Pharmaceuticals, Inc. 2000 Non-Employee Directors’ Stock Option Plan.
(y)
“
Rule 16b-3
” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
(z)
“
Securities Act
” means the Securities Act of 1933, as amended.
3.
ADMINISTRATION.
(a)
Administration by Board
. The Board shall administer the Plan. The Board may not delegate administration of the Plan to a committee.
(b)
Powers of Board
. The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:
(i)
To determine the provisions of each Option to the extent not specified in the Plan.
(ii)
To construe and interpret the Plan and Options granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Option Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
(iii)
To amend the Plan or an Option as provided in Section 12.
(iv)
To terminate or suspend the Plan as provided in Section 13.
(v)
Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company that are not in conflict with the provisions of the Plan.
(c)
Effect of Board’s Decision.
All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.
(d)
Cancellation and Re-Grant of Options
. Notwithstanding anything to the contrary in the Plan, neither the Board nor any Committee shall have the authority to: (i) reprice any outstanding Option under the Plan, (ii) cancel and re-grant any outstanding Option under the Plan, or (iii) effect any other action that is treated as a repricing under generally accepted accounting principles unless, in each case, the stockholders of the Company have approved such an action within twelve (12) months prior to such an event.
4.
SHARES SUBJECT TO THE PLAN.
(a)
Share Reserve
. Subject to the provisions of Section 11 relating to adjustments upon changes in the Common Stock, the Common Stock that may be issued pursuant to Options shall not exceed in the aggregate 1,235,000 shares of Common Stock, which number consists of (i) 33,333 shares of Common stock initially reserved for issuance under the Plan plus (ii) 66,667 shares of Common stock approved by the Board in April 2003 and subsequently approved by the Company’s stockholders plus (iii) 225,000 shares of Common Stock approved by the Board in April 2005 and subsequently approved by the Company’s stockholders plus (iv) 110,000 shares of Common Stock approved by the Board in January 2007 and subsequently approved by the Company’s stockholders plus (v) 100,000 shares of Common Stock approved by the Board in February 2008 and subsequently approved by the Company’s stockholders plus (vi) 350,000 shares of Common Stock approved by the Board in January 2010 and subsequently approved by the Company’s stockholders plus (vii) 250,000 shares of Common Stock approved by the Board in February 2011 and subsequently approved by the Company’s stockholders plus (viii) 100,000 shares of Common Stock approved by the Board in February 2013 and subsequently approved by the Company’s stockholders plus 350,000 shares of Common Stock approved by the Board in January 2016 and subsequently approved by the Company’s stockholders.
(b)
Reversion of Shares to the Share Reserve
. If any Option shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the shares of Common Stock not acquired under such Option shall revert to and again become available for issuance under the Plan. If any shares subject to an Option are not delivered to an Optionholder because the Option is exercised through a reduction
of shares subject to the Option (
i.e
., “net exercised”), the number of shares that are not delivered to the Optionholder shall not remain available for issuance under the Plan. If any shares subject to an Option are not delivered to an Optionholder because such shares are withheld in satisfaction of the withholding of taxes incurred in connection with the exercise of an Option, the number of shares that are not delivered to the Optionholder shall not remain available for subsequent issuance under the Plan. If the exercise price of any Option is satisfied by tendering shares of Common Stock held by the Optionholder (either by actual delivery or attestation), then the number of shares so tendered shall not remain available for subsequent issuance under the Plan.
(c)
Source of Shares
. The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.
5.
ELIGIBILITY.
The Options as set forth in section 6 automatically shall be granted under the Plan to all Non-Employee Directors who meet the specified criteria.
6.
NON-DISCRETIONARY GRANTS.
(a)
Initial Grants.
Without any further action of the Board, each person who is elected or appointed for the first time to be a Non-Employee Director automatically shall, upon the date of his or her initial election or appointment to be a Non-Employee Director by the Board or stockholders of the Company, be granted an Initial Grant to purchase eighty thousand (80,000) shares of Common Stock on the terms and conditions set forth herein.
(b)
Annual Grants.
Without any further action of the Board, a Non-Employee Director shall be granted an Annual Grant as follows: On the day following each Annual Meeting commencing with the Annual Meeting in 2014, each person who is then a Non-Employee Director automatically shall be granted an Annual Grant to purchase forty thousand (40,000) shares of Common Stock on the terms and
conditions set forth herein;
provided, however
, that if the person has not been serving as a Non-Employee Director for the entire period since the preceding Annual Meeting, then the number of shares subject to the Annual Grant shall be reduced pro rata for each full quarter prior to the date of grant during which such person did not serve as a Non-Employee Director.
7.
OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and conditions as required by the Plan. Each Option shall contain such additional terms and conditions, not inconsistent with the Plan, as the Board shall deem appropriate. Each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
(a)
Term
. No Option shall be exercisable after the expiration of ten (10) years from the date it was granted.
(b)
Exercise Price
. The exercise price of each Option shall be one hundred percent (100%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.
(c)
Consideration
. The purchase price of stock acquired pursuant to an Option may be paid, to the extent permitted by applicable statutes and regulations, in any combination of the following methods:
(i)
By cash or check.
(ii)
Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in
The Wall Street Journal
, by delivery to the Company of shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes shall include delivery to the Company of the Optionholder’s attestation of ownership of such shares of Common Stock in a form approved by the Company.
Notwithstanding the foregoing, the Optionholder may not exercise the Option by tender to the Company of Common
Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.
(iii)
Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in
The Wall Street Journal
, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.
(iv)
By a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price;
provided, however,
that the Company shall accept a cash or other payment from the Optionholder to the extent of any remaining balance of the aggregate exercise price not satisfied by such holding back of whole shares;
provided, further, however,
that shares of Common Stock will no longer be outstanding under an Option and will
not be exercisable thereafter to the extent that (i) shares are used to pay the exercise price pursuant to the “net exercise,” (ii) shares are delivered to the Optionholder as a result of such exercise, and (iii) shares are withheld to satisfy tax withholding obligations.
(d)
Transferability
.
The Board may, in its sole discretion, impose such limitations on the transferability of Options as the Board shall determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply:
(i) Restrictions on Transfer.
An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder;
provided, however
, that the Board may, in its sole discretion, permit transfer of the Option in a manner that is not prohibited by applicable tax and securities laws upon the Optionholder’s request. Except as explicitly provided herein, an Option may not be transferred for consideration.
(ii) Domestic Relations Orders.
Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order.
(iii) Beneficiary Designation.
Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect Option exercises, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, the executor or administrator of the Optionholder’s estate shall be entitled to exercise the Option and receive the Common Stock or other consideration resulting from such exercise.
(e)
Exercise Schedule
. The Option shall be exercisable as the shares of Common Stock subject to the Option vest.
(f)
Vesting Schedule.
(i)
Each Option granted as an initial grant shall vest in accordance with the schedule set forth below that results in a shorter period of full vesting:
(1)
1/36
th
of the shares of Common Stock subject to the Option shall vest each month after the date of grant over a period of three (3) years; or
(2)
the Option shall vest in equal monthly installments after the date of grant over a period commencing on the date that the Optionholder is appointed for the first time to be a Non-Employee Director by the Board and ending on the date of the Annual Meeting at which the Optionholder is first scheduled to be considered for election to be a Non-Employee Director by the stockholders of the Company.
(ii)
Each Option granted as an annual grant before the Annual Meeting in 2008 shall vest such that 1/36
th
of the shares of Common Stock subject to such Option shall vest each month after the date of grant over a
period of three (3) years; and each Option granted as an annual grant on or after the Annual Meeting in 2008
shall vest such that 1/12
th
of the shares of Common Stock subject to such Option shall vest each month after the date of grant over a period of one (1) year.
(g)
Termination of Continuous Service
. In the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise it as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.
(h)
Extension of Termination Date
. If the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in subsection 7(a) or (ii) the expiration of a total period of three (3) months (that need not be consecutive) after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.
(i)
Disability of Optionholder
. In the event an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise it as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate.
(j)
Death of Optionholder
. In the event (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the three-month period after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise the Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s death, but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death or (2) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.
8.
COVENANTS OF THE COMPANY.
(a)
Availability of Shares
. During the terms of the Options, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Options.
(b)
Securities Law Compliance
. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Options and to issue and sell shares of Common Stock upon exercise of the Options; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Option or any stock issued or issuable pursuant to any such Option. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such Options unless and until such authority is obtained.
9.
USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute general funds of the Company.
10.
MISCELLANEOUS.
(a)
Stockholder Rights
. No Optionholder shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Option unless and until such Optionholder has satisfied all requirements for exercise of the Option pursuant to its terms.
(b)
No Service Rights
. Nothing in the Plan or any instrument executed or Option granted pursuant thereto shall confer upon any Optionholder any right to continue to serve the Company as a Non-Employee Director or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or
(iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
(c)
Investment Assurances
. The Company may require an Optionholder, as a condition of exercising or acquiring stock under any Option, (i) to give written assurances satisfactory to the Company as to the Optionholder’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company stating that the Optionholder is acquiring the stock subject to the Option for the Optionholder’s own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (iii) the issuance of the shares upon the exercise or acquisition of stock under the Option has been registered under a then currently effective registration statement under the Securities Act or (iv) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock.
(d)
Withholding Obligations
. The Optionholder may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of stock under an Option by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Optionholder by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares from the shares of the Common Stock otherwise issuable to the Optionholder as a result of the exercise or acquisition of stock under the Option, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered shares of the Common Stock.
(e)
Electronic Delivery
. Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet.
11.
ADJUSTMENTS UPON CHANGES IN STOCK.
(a)
Capitalization Adjustments
. If any change is made in the stock subject to the Plan, or subject to any Option, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Board shall appropriately and proportionately adjust (i) the class(es) and maximum number of securities subject both to the Plan pursuant to subsection 4(a) and to the nondiscretionary Options specified in Section 5, (ii) the class(es) and number of securities and price per share of stock subject to outstanding Options. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.)
(b)
Corporate Transaction
. In the event of (i) a sale, lease or other disposition of all or substantially all of the securities or assets of the Company, (ii) a merger or consolidation in which the Company is not the surviving corporation or (iii) a reverse merger in which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, then any surviving corporation or acquiring corporation may assume any Options outstanding under the Plan or may substitute similar Options (including an option to acquire the same consideration paid to the stockholders in the transaction described in this subsection 11(b)) for those outstanding under the Plan. In the event no surviving corporation or acquiring corporation assumes such Options or substitutes similar Options for those outstanding under the Plan, then with respect to Options held by Optionholders who are in Continuous Service immediately prior to such an event, the vesting of such Options
(and the time during which such Options may be exercised) shall be accelerated in full, and the Options shall terminate if not exercised at or prior to such event. With respect to any other Options outstanding under the Plan, such Options shall terminate if not exercised prior to such event.
(c) Change in Control
.
Upon a Change in Control, all Options held by each Optionholder whose Continuous Service has not terminated immediately prior to the Change in Control shall become fully vested and exercisable immediately prior to the effectiveness of such Change in Control.
12.
AMENDMENT OF THE PLAN AND OPTIONS.
(a)
Amendment of Plan
. The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 11 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or securities exchange listing requirements.
(b)
Stockholder Approval
. The Board may, in its sole discretion, submit any other amendment to the Plan for stockholder approval.
(c)
No Impairment of Rights
. Rights under any Option granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Optionholder and (ii) the Optionholder consents in writing.
(d)
Amendment of Options
. The Board at any time, and from time to time, may amend the terms of any one or more Options
including, but not limited to, amendments to provide terms more favorable than previously provided in the agreement evidencing an Option, subject to any specified limits in the Plan that are not subject to Board discretion
; provided, however, that the rights under any Option shall not be impaired by any such amendment unless (i) the Company requests the consent of the Optionholder and (ii) the Optionholder consents in writing.
13.
TERMINATION OR SUSPENSION OF THE PLAN.
(a)
Plan Term
. The Board may suspend or terminate the Plan at any time. No Options may be granted under the Plan while the Plan is suspended or after it is terminated.
(b)
No Impairment of Rights
. Suspension or termination of the Plan shall not impair rights and obligations under any Option granted while the Plan is in effect except with the written consent of the Optionholder.
14.
EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the IPO Date, but no Option shall be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.
15.
CHOICE OF LAW.
All questions concerning the construction, validity and interpretation of this Plan shall be governed by the law of the State of Delaware, without regard to such state’s conflict of laws rules.
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VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 9, 2016. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. RIGEL PHARMACEUTICALS, INC. ATTN: INVESTOR RELATIONS 1180 VETERANS BLVD. SOUTH SAN FRANCISCO, CA 94080 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May 9, 2016. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E03833-P73860 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. RIGEL PHARMACEUTICALS, INC. The Board of Directors recommends you vote FOR the following proposals: 1. Election of Directors Nominees: For Withhold 1a. Peter S. Ringrose, Ph.D. 1b. Bradford S. Goodwin 1c. Keith Katkin For Against Abstain ! ! ! ! ! ! ! ! ! ! ! ! 2. Approval of the 2011 equity incentive plan, as amended. 3. Approval of the 2000 non-employee directors stock option plan, as amended. 4. Advisory vote on executive compensation. 5. Ratification of the selection of Ernst & Young LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2016. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com. E03834-P73860 RIGEL PHARMACEUTICALS, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS WITH RESPECT TO THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 10, 2016 The undersigned stockholder hereby appoints Raul R. Rodriguez and Dolly A. Vance, or either of them, as proxies, each with the power to appoint his/her substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of Rigel Pharmaceuticals, Inc. that the stockholder is entitled to vote at the Annual Meeting of Stockholders to be held at 10:00 a.m., Pacific Time on Tuesday, May 10, 2016, at 1180 Veterans Boulevard, South San Francisco, California 94080, and any continuation, adjournment or postponement thereof. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER. IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS AND FOR PROPOSALS 2, 3, 4 AND 5. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE. Continued and to be signed on reverse side
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