ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers of Threshold
As of
April 1, 2017, the executive officers of Threshold were as follows:
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Name
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Age
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Position(s)
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Wilfred E. Jaeger,
M.D
.
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61
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Interim Chief Executive Officer and Director
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Joel A. Fernandes
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47
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Senior Vice President, Finance and Controller
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Tillman Pearce,
M.D.
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60
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Chief Medical Officer
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Background of Executive Officers
Biographical information for Dr. Jaeger is included under the heading
Background of Directors
beginning on
page 2 of this Amendment No. 1 to Annual Report on Form
10-K/A.
Joel A.
Fernandes
joined Threshold in April 2006 and has served as Thresholds Senior Vice President, Finance and Controller since March 2016. Prior to March 2016, Mr. Fernandes served as Thresholds Vice President, Finance and
Controller. Prior to May 2011, Mr. Fernandes had served as Thresholds Senior Director, Finance and Controller. Mr. Fernandes served as Associate Director of Finance at Theravance, Inc. from January 2005 to March 2006, Senior Manager
of Corporate Finance at
KLA-Tencor
from August 2002 to January 2005 and Assistant Controller of ALZA Corporation from 1999 to 2002. Mr. Fernandes has been a Certified Public Accountant since 1996 and has
a Masters in Accountancy from Manchester College, Indiana.
Tillman Pearce, M.D.
joined Threshold in February 2012 as Chief Medical
Officer. Dr. Pearce served as Chief Medical Officer of KaloBios Pharmaceuticals, Inc., from 2007 through 2011, where he where he oversaw the design and execution of clinical programs for three antibody therapeutics in the fields of infectious
disease, inflammation (asthma and rheumatoid arthritis and hematologic malignancies), and since 2011 and prior to joining Threshold, he had been an oncology consultant. Prior to KaloBios, Dr. Pearce was a Senior Director at PDL BioPharma, Inc.
from 2002 to 2007 and a Medical Director in the Oncology Business Unit at Sanofi-Synthelabo from 1997 to 2002. He has also held research positions in oncology at Sandoz and Novartis. Dr. Pearce holds a B.A. in philosophy from Tulane University
and an M.D. from the Medical College of Georgia.
1
Directors of Threshold
As of April 1, 2017, Thresholds directors were as follows:
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Name
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Age
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Position
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Term Expires
on the
Annual Meeting
held in
the Year
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Jeffrey W. Bird,
M.D., Ph.D
.(1)(3)
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56
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Director
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2017
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Harold E. Selick,
Ph.D
.
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62
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Chairman and Director
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2017
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Wilfred E. Jaeger,
M.D
.
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61
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Interim Chief Executive Officer and Director
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2018
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David R. Parkinson,
M.D
.(3)
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66
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Director
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2018
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Bruce C. Cozadd(2)
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53
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Director
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2019
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David R. Hoffmann(1)(3)
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72
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Director
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2019
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George G.C. Parker,
Ph.D
.(1)(2)
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78
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Director
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2019
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(1)
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Member of the audit committee
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(2)
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Member of the compensation committee
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(3)
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Member of the nominating and governance committee
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Our Certificate of Incorporation divides
our board of directors into three classes, with staggered three-year terms. The Class I directors, whose terms expire at the 2017 annual meeting, are Jeffrey W. Bird and Harold E. Selick. The Class II directors, whose term expires at the
2018 annual meeting, are Wilfred E. Jaeger and David R. Parkinson. The Class III directors, whose terms expire at the 2019 annual meeting, are Bruce C. Cozadd, David R. Hoffmann and George G.C. Parker. Only one class of directors is elected at
each annual meeting. The directors in the other classes continue to serve for the remainder of such class three-year term.
Background of
Directors
The information presented includes information each director has given us about all positions he holds, his principal
occupation and business experience for the past five years, and the names of other publicly-held companies of which he currently serves as a director or has served as a director during the past five years. In addition to the information presented
below regarding each directors specific experience, qualifications, attributes and skills that led our board of directors to the conclusion that he should serve as a director, our board of directors also believes that all of our directors have
demonstrated a depth and breadth of experience, integrity, ability to make independent analytical inquiries, understanding of our business environment and willingness to devote adequate time to their board duties.
Bruce C. Cozadd
has served as a member of Thresholds board of directors since December 2005. Mr. Cozadd is a
co-founder
of Jazz Pharmaceuticals, Inc. and has served as its Chairman and Chief Executive Officer since April 2009. In January 2012, Mr. Cozadd became the Chairman and Chief Executive Officer of Jazz
Pharmaceuticals plc, the successor to Jazz Pharmaceuticals, Inc. From 2003 until April 2009, he served as Executive Chairman of Jazz Pharmaceuticals, Inc. Prior to
co-founding
Jazz Pharmaceuticals, Inc.,
Mr. Cozadd served in various executive management positions with ALZA Corporation from 1991 until its acquisition by Johnson & Johnson in 2001. At the time of the Merger, Mr. Cozadd was serving as Executive Vice President and
Chief Operating Officer of ALZA, with responsibility for research and development, manufacturing, and sales and marketing. Prior to joining ALZA, he was in the Corporate Finance Health Care group at Smith Barney, Harris Upham & Co. Inc. He
serves on the Board of directors of Jazz Pharmaceuticals plc, Cerus Corporation and The Nueva School. He received his B.S. from Yale University and his M.B.A. from Stanford University. Thresholds board of directors believes that
Mr. Cozadds leadership experience at other life sciences companies gives him a breadth of knowledge and a unique perspective on the industry.
David R. Hoffmann
has served as a member of Thresholds board of directors since April 2007. Mr. Hoffmann is retired from
ALZA Corporation (now a Johnson & Johnson company) where he held the positions of Vice President and Treasurer from 1992 to until his retirement in October 2002, Vice President of Finance from 1982 to 1992 and Director of Accounting/Finance
from 1976 to 1982. Mr. Hoffmann is currently Chief Executive Officer of Hoffmann Associates, a multi-group company specializing in cruise travel and financial and benefit consulting. He serves on the Board of directors of DURECT Corporation.
Mr. Hoffmann holds a B.S. in Business Administration from the University of Colorado. Thresholds board of directors believes that Mr. Hoffmanns financial knowledge and industry experience are valuable to the Board, particularly
with respect to his service on the audit committee. Thresholds board of directors has determined that Mr. Hoffmann qualifies as an audit committee financial expert as defined by the rules of the SEC.
George G.C. Parker, Ph.D.
has served as a member of Thresholds board of directors since October 2004. Dr. Parker is the Dean
Witter Distinguished Professor of Finance (Emeritus) and previously Senior Associate Dean for Academic Affairs and Director of the MBA Program, Graduate School of Business, Stanford University. Dr. Parker joined the faculty at Stanford
University in 1973. He serves on the Board of directors of Colony Financial, Inc. and First Republic Bank and a number of private companies, and was formerly a director of Continental Airlines, Inc., Netgear, Inc., Tejon Ranch, and former Chairman
of iShares Mutual Funds. Dr. Parker received his B.A. from Haverford College and his M.B.A. and Ph.D. from Stanford University. Thresholds board of directors believes it is well served by Dr. Parkers extensive financial and
leadership experience, including his compensation committee experience.
2
Jeffrey W. Bird
,
M.D., Ph.D.
has served as a member of Thresholds board of
directors since November 2008. Dr. Bird is a Managing Director of Sutter Hill Ventures, a venture capital firm based in Palo Alto, California. Dr. Bird was previously Senior Vice President, Business Operations at Gilead Sciences, where he
oversaw business development and commercial activities. Dr. Bird received a degree in Biological Sciences from Stanford in 1982, a Ph.D. in Cancer Biology in 1988 and a M.D. in 1992 from Stanford Medical School. Dr. Bird is currently a
Board member of Portola Pharmaceuticals, Inc., a public company, and a number of private biotechnology companies. Dr. Bird was formerly a Board member of Horizon Pharma, Inc., a public company. Thresholds board of directors believes it
benefits from Dr. Birds financial and medical knowledge and experience, which are valuable to the Board.
Harold E. Selick,
Ph.D.
served as Thresholds Chief Executive Officer from June 2002 until March 31, 2017. He is currently Chairman of Thresholds board of directors, on which he has served as a member since joining the company in June 2002. From
June 2002 until July 2007, Dr. Selick was also a Venture Partner of Sofinnova Ventures, Inc., a venture capital firm. From January 1999 to April 2002, he was Chief Executive Officer of Camitro Corporation, a biotechnology company. From 1992 to
1999, he was at Affymax Research Institute, the drug discovery technology development center for Glaxo Wellcome plc, most recently as Vice President of Research. Prior to working at Affymax he held scientific positions at Protein Design Labs, Inc.
and Anergen, Inc. As a staff scientist at Protein Design Labs, Inc. (now PDL BioPharma, Inc., or PDL) he
co-invented
the technology underlying the creation of fully humanized antibody therapeutics and applied
that to PDLs first product, Zenapax (daclizumab), which was developed and commercialized by Roche for preventing kidney transplant rejection. Dr. Selick serves as Lead Director of PDL, a public company, serves as Chairman of the Board of
directors of Catalyst Biosciences, a public drug discovery and development company, and also serves as Chairman of the Board of directors of Protagonist Therapeutics, a privately-held biotechnology company. Dr. Selick received his B.A. in
Biophysics and Ph.D. in Biology from the University of Pennsylvania and was a Damon Runyon-Walter Winchell Cancer Fund Fellow and an American Cancer Society Senior Fellow at the University of California, San Francisco. Thresholds board of
directors believes that Dr. Selicks extensive experience with Threshold and his industry knowledge provide an invaluable insight to Thresholds board of directors on issues involving Threshold and its goals.
Wilfred E. Jaeger, M.D.
was appointed as Thresholds interim Chief Executive Officer, effective April 1, 2017 and has served
as a member of Thresholds board of directors since 2001. He has been a Partner of Three Arch Partners, a venture capital firm, since 1993. Dr. Jaeger serves on the Board of directors of a number of private companies, as well as Concert
Pharmaceutical, Inc., a public pharmaceutical company. Dr. Jaeger received his B.S. from the University of British Columbia, his M.D. from the University of British Columbia, School of Medicine and his M.B.A. from Stanford University.
Thresholds board of directors believes that Dr. Jaegers financial and medical knowledge and experience are valuable to the Board, particularly with respect to his past service on the audit and compensation committees.
David R. Parkinson, M.D.
has served as a member of Thresholds board of directors since 2010. Dr. Parkinson is the Chief
Executive Officer of ESSA Pharma and Venture Advisor to New Enterprise Associates (NEA). From 2007 until 2012, Dr. Parkinson served as president and Chief Executive Officer of Nodality, a South San Francisco-based biotechnology company focused
on the biological characterization of signaling pathways in patients with malignancy to enable more effective therapeutics development and clinical decision making. Until October 2007, Dr. Parkinson was Senior Vice President, Oncology Research
and Development, at Biogen, Idec., where he oversaw all oncology discovery research efforts and the development of the oncology pipeline. Previously he had served as Vice President, Oncology Development, at Amgen and Vice President, Global Clinical
Oncology Development, at Novartis. During his tenures at Amgen, a public biotechnology company, and Novartis, a public biotechnology company, Dr. Parkinson was responsible for clinical development activities leading to a series of successful
global drug registrations for important cancer therapeutics, including Gleevec, Femara, Zometa, Kepivance, and Vectibix. Prior to working in the biotechnology industry, Dr. Parkinson worked at the National Cancer Institute from 1990 to 1997,
serving as Chief of the Investigational Drug Branch, then as acting associate director of the Cancer Therapy Evaluation Program. Dr. Parkinson is a past Chairman of the FDA Biologics Advisory Committee and is a recipient of the FDAs Cody
Medal. He is a past president of the International Society of Biological Therapy, and a past editor of the Journal of Immunotherapy. He has served on the National Cancer Policy Forum of the Institute of Medicine and is a past
co-chair
of the Cancer Steering Committee of the NIH Foundation Biomarkers Consortium. He has also served as a member of the FDAs Science Board, as an elected director on the Board of directors of the American
Association of Cancer Research, and as a director on the Board of the Ontario Institute for Cancer Research. He currently serves as a Board Director for the Multiple Myeloma Research Foundation and as the Chairperson of the American Association of
Cancer Research (AACR) Finance and Audit Committee. Dr. Parkinson was formerly a Director of Facet Biotech, Inc., a public biopharma company which was acquired by Abbott Pharmaceuticals as well as a director of Ambit Biosciences, a public
biopharma company recently acquired by Daiichi Sankyo. He currently serves as director on the Board of directors of Cerulean Pharma, Inc., a public biopharma company focused on the discovery and development of anti-cancer drugs. Dr. Parkinson
received his medical degree as gold medalist from the University of Toronto Faculty of Medicine in 1977. He completed a Hematology Fellowship at Royal Victoria Hospital at McGill University in Montreal and was a Research Fellow at the New England
Medical Center at Tufts University in Boston. He has held academic positions both at Tufts and the University of Texas MD Anderson Cancer Center, and has authored over 100 peer-reviewed publications in the fields of cancer immunobiology and immune
oncology as well as therapeutics and diagnostic development. Thresholds board of directors believes that Dr. Parkinsons medical, regulatory and industry knowledge and experience are valuable to the Board.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, and the rules promulgated by the SEC, our directors, executive officers and beneficial owners of
more than 10% of any class of equity security are required to file periodic reports of their ownership of our equity securities, and changes in that ownership, with the SEC. To our knowledge, based solely on our review of the copies of such reports
received or written representations from such persons that no other reports were required, we believe that our directors, executive officers and beneficial owners of more than 10% of our equity securities complied with all applicable filing
requirements during 2016.
3
Certain Corporate Governance Matters
Audit Committee.
Thresholds audit committee currently consists of Mr. Hoffmann (chair), Dr. Bird and Dr. Parker.
Thresholds board of directors has determined that all members of the audit committee are independent directors under the NASDAQ listing standards applicable SEC requirements and each of them is able to read and understand fundamental financial
statements. Thresholds board of directors has determined that Mr. Hoffmann qualifies as an audit committee financial expert as defined by the rules of the SEC.
The purpose of the audit committee is to oversee Thresholds accounting and financial reporting processes and audits of its financial
statements. Although management has primary responsibility for the system of internal controls and the financial reporting process, the responsibilities of the audit committee include appointing and approving the compensation of the independent
registered public accounting firm to conduct the annual audit of Thresholds financial statements, reviewing and evaluating the scope and results of the annual audit, approving all professional services to be provided to Threshold by its
independent registered public accounting firm, meeting with management and the independent registered public accounting firm to discuss its financial statements and matters that may affect its financial statements, and reviewing, overseeing and
approving transactions between Threshold and any related persons.
Code of Ethics.
Threshold has adopted a Code of Ethics that
applies to all of Thresholds officers, directors and employees, including Thresholds principal executive officer and all members of Thresholds finance department, including Thresholds principal financial officer. The Code of
Ethics can be found at
www.thresholdpharm.com
, by clicking first on Investors then clicking on Corporate Governance and then clicking on Code of Ethics. Threshold intends to satisfy the disclosure
requirements under Item 5.05 of
Form 8-K regarding
an amendment to, or waiver from, a provision of its Code of Ethics by posting such information on its website at the website address and location
specified above.
Director Nominations
. No material changes have been made to the procedures by which stockholders may recommend
nominees to our board of directors.
4
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
Description of
Compensation Arrangements
Below is a description of compensation arrangements applicable to our named executive officers,
which are those current and former executive officers of Threshold that are named in the
Summary Compensation Table
beginning on page 7 of this Amendment No. 1 to Annual Report on Form
10-K/A.
Executive Employment Agreements
. Threshold does not have employment
agreements currently in effect with any of its named executive officers. Like other employees, its named executive officers are eligible for annual salary increases, cash bonus awards and discretionary stock option awards. From time to time,
Threshold has provided an offer letter in connection with a named executive officers commencement of employment which describes such officers initial terms of employment. However, each of named executive officers employment is
at-will
and not governed by the terms of their respective offer letters.
Change of Control
Severance Agreements; Severance for Terminated named executive officer
. Thresholds named executive officers have entered into change of control severance agreements with the company, which are described below in the section titled
Post-Termination Compensation
beginning on page 9 of this Amendment No. 1 to Annual Report on Form
10-K/A.
In connection with Stewart M. Krolls termination
effective September 30, 2016, we provided Mr. Kroll with certain severance benefits, which benefits are described below in the section titled
Post-Termination Compensation
beginning on page 9 of this
Amendment No. 1 to Annual Report on Form
10-K/A.
Annual Performance Cash Bonus
Awards
. Threshold has historically maintained an annual performance-based cash program under which each year Thresholds named executive officers are eligible to receive a performance-based cash bonus for achievement of
pre-determined
company and personal goals. However, no annual performance-based cash bonuses were awarded for 2015 or 2016, and no goals were established for purposes of any bonus eligibility for 2016.
Discretionary Stock Option Awards
.
In addition to salary and short-term incentive compensation in the form of
performance-based cash bonus awards, Threshold provides its named executive officers with long-term equity incentives, in the form of stock options. Stock options in 2016 were granted under Thresholds 2014 Plan, have a term of ten years and
vest 1/48th of the total shares monthly following the date of grant such that all shares are 100% vested as of four years after the date of grant, subject to vesting acceleration as described below under the section titled
Post-Termination Compensation
beginning on page 9 of this Amendment No. 1 to Annual Report on Form
10-K/A.
All stock options granted in 2016 were granted with an
exercise price equal to 100% of the fair market value of Thresholds common stock on the date of grant. 1,500,000 shares were subject to the named executive officers option grants in 2016, including 300,000 for Mr. Stewart Kroll.
2014 Equity Incentive Plan
.
The 2014 Plan provides for the grant of stock options, stock appreciation rights,
restricted stock awards, restricted stock unit awards, other stock awards, and performance awards that may be settled in cash, stock, or other property. All of Thresholds employees,
non-employee
directors and consultants are eligible participants under the 2014 Plan. As of December 31, 2016, a total of 1,544,744 shares of Thresholds common stock were available for future issuance under the 2014 Plan. For more detail on the share
reserve under the 2014 Plan see the section titled
Equity Compensation Plan Information
beginning on page 14 of this Amendment No. 1 to Annual Report on Form
10-K/A.
The 2014 Plan is administered by the Board of directors, which has delegated concurrent authority to administer the 2014 Plan to Thresholds compensation committee, including for purposes of
approving equity award grants to Thresholds named executive officers.
Options granted under the 2004 Plan may be either
incentive stock options or nonstatutory stock options, provided that incentive stock options may be granted only to Thresholds employees. The exercise price of stock options may not be less than 100% of the fair market value of
Thresholds common stock on the date of grant or, in the case of an incentive stock option, 110% of such fair market value if granted to a holder of 10% or more of Thresholds common stock, or a 10% stockholder.
The applicable plan administrator determines the vesting schedule applicable to options. For options granted to Thresholds named
executive officers in 2016, the options vest as to 1/48th of the total shares monthly following the date of grant such that all shares are 100% vested as of four years after the date of grant. The term of options may not be more than ten years from
the date of grant, except that the term of any incentive stock option granted to a 10% stockholder may not be more than five years from the date of grant. Generally, if an awardees continuous service with Threshold terminates, the
awardees vested options will remain exercisable for up to three months following such termination, except that (i) if such termination is due to death or disability, the awardees vested options will remain exercisable for up to 12
months following the awardees termination due to the awardees disability or for up to 18 months following the awardees death and (ii) if such termination is for cause, the awardees options may not be exercised from and
after such termination. Under the 2014 Plan, the term of a stock option may be extended if the exercise of the stock option following the awardees termination of continuous service (other than upon the awardees disability or death and
other than for cause) would be prohibited by applicable securities laws or the sale of any common stock received upon exercise of the stock option following the awardees termination of service (other than for cause) would violate
Thresholds insider trading policy. In no event, however, may a stock option be exercised after its original expiration date.
Acceptable forms of consideration for the purchase of Thresholds common stock pursuant to the exercise of a stock option under the 2014
Plan is determined by the applicable plan administrator and may include payment: (i) by cash, check, bank draft or money order payable to Threshold; (ii) pursuant to a program developed under Regulation T as promulgated by the Federal
Reserve Board; (iii) by delivery to Threshold of shares of common stock (either by actual delivery or attestation); (iv) by a net exercise arrangement (for nonstatutory stock options only); or (v) in other legal consideration approved
by the applicable plan administrator.
5
Generally, an awardee may not transfer a stock option granted under the 2014 Plan other than by
will or the laws of descent and distribution or, subject to approval by the applicable plan administrator, pursuant to a domestic relations order or an official marital settlement agreement. However, the applicable plan administrator may permit
transfer of a stock option in a manner consistent with applicable tax and securities laws. In addition, subject to approval by the applicable plan administrator, an awardee may designate a beneficiary who may exercise the stock option following the
awardees death.
Unless otherwise provided in an awardees award agreement or other written agreement with Threshold or one of
its affiliates or in any director compensation policy, in the event of a fundamental transaction, any outstanding awards may be assumed, converted or replaced by the successor corporation (if any). In the alternative, the successor
corporation may substitute equivalent awards or provide substantially similar consideration to awardees as was provided to stockholders (after taking into account the existing provisions of the awards). The successor corporation may also issue, in
place of outstanding shares of Thresholds common stock held by awardees, substantially similar shares or other property subject to repurchase restrictions no less favorable to the awardees. In the event such successor corporation (if any) does
not assume or substitute awards pursuant to a fundamental transaction, the vesting of such awards will fully and immediately accelerate or Thresholds repurchase rights, if any, will fully and immediately terminate, as applicable, so that the
awards may be exercised or the repurchase rights will terminate before, or otherwise in connection with the fundamental transaction, but then terminate. However, the applicable plan administrator may provide that the vesting of any shares of
Thresholds common stock subject to an award that are subject to vesting or Thresholds right of repurchase will accelerate or lapse, as applicable, upon a fundamental transaction. If the applicable plan administrator exercises such
discretion with respect to options, such options will become exercisable in full prior to the fundamental transaction at such time and on such conditions as the applicable plan administrator determines, and if such options are not exercised prior to
the fundamental transaction, they will terminate at such time as determined by the applicable plan administrator. Subject to any greater rights granted to awardees under the provisions of the 2014 Plan, in the event of a fundamental transaction, any
outstanding awards will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation, or sale of assets.
Under the 2014 Plan, a stock award may be subject to acceleration of vesting and exercisability upon or after a change in control
as may be provided in the awardees stock award agreement or other written agreement with Threshold or one of its affiliates, or as may be provided in any director compensation policy, but in the absence of such provision, no such acceleration
will occur. In this regard, each of Thresholds named executive officers is a party to a change of control severance agreement with Threshold that provides each named executive officer with full equity award vesting acceleration benefits if
such named executive officer is involuntarily terminated within 18 months following a change of control of Threshold. For more information on these change of control severance agreements, the benefits of which would be triggered by the Merger, see
section titled
Post-Termination Compensation
beginning on page 9 of this Amendment No. 1 to Annual Report on
Form 10-K/A.
For purposes of the 2014 Plan, a fundamental transaction generally will be deemed to occur in the event of the consummation of: (i) a
merger or consolidation in which Threshold is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, Thresholds reincorporation in a different jurisdiction, or other transaction in which there is no
substantial change in Thresholds stockholders or their relative stock holdings and the awards granted under the 2014 Plan are assumed, converted or replaced by the successor corporation); (ii) a merger in which Threshold is the surviving
corporation but after which its stockholders immediately prior to such merger (other than any stockholder that merges, or which owns or controls another corporation that merges, with Threshold in such merger) cease to own their shares or other
equity interest in the company; (iii) the sale of all or substantially all of Thresholds assets; or (iv) the acquisition, sale, or transfer of more than 50% of Thresholds outstanding shares by tender offer or similar
transaction. For purposes of the 2014 Plan, a change in control generally will be deemed to occur in the event: (i) a person, entity or group acquires, directly or indirectly, Thresholds securities representing more than 50% of the
combined voting power of Thresholds then outstanding securities, other than by virtue of a merger, consolidation, or similar transaction; (ii) there is consummated a merger, consolidation, or similar transaction and, immediately after the
consummation of such transaction, Thresholds stockholders immediately prior thereto do not own, directly or indirectly, more than 50% of the combined outstanding voting power of the surviving entity or the parent of the surviving entity in
substantially the same proportions as their ownership of Thresholds outstanding voting securities immediately prior to such transaction; (iii) Thresholds stockholders or its Board of directors approves a plan of complete dissolution
or liquidation of the company, or a complete dissolution or liquidation of the company will otherwise occur, except for a liquidation into a parent corporation; (iv) there is consummated a sale or other disposition of all or substantially all
of Thresholds consolidated assets, other than a sale or other disposition to an entity in which more than 50% of the entitys combined voting power is owned by Thresholds stockholders in substantially the same proportions as their
ownership of Thresholds outstanding voting securities immediately prior to such sale or other disposition; or (v) a majority of Thresholds board of directors becomes comprised of individuals whose nomination, appointment, or
election was not approved by a majority of the Board members or their approved successors. The Merger, if consummated, will constitute a change of control for purposes of the 2014 Plan.
Employee Stock Purchase Plan
. Additional long-term equity incentives are provided through Thresholds 2004 Employee Stock
Purchase Plan, or ESPP. The ESPP is intended to be an employee stock purchase plan within the meaning of Section 423 of the Internal Revenue Code. Under the ESPP, all of Thresholds employees (who are not 5% owners of
Thresholds common stock), including the named executive officers, are eligible participants. The ESPP permits participants to purchase Thresholds common stock through payroll deductions of between 1% and 15% of the participants
compensation, up to a maximum of 3,000 shares per purchase period. The ESPP contains consecutive, overlapping 24 month offering periods. Each offering period includes four
six-month
purchase periods. The price
of the common stock purchased will be the lower of 85% of the fair market value of the common stock at the beginning of an offering period or at the end of the purchase period.
6
401(k) Plan
. Threshold maintains a defined contribution employee retirement plan,
or 401(k) plan, for its employees. Its named executive officers are also eligible to participate in the 401(k) plan on the same basis as its other employees. The 401(k) plan is intended to qualify as a
tax-qualified
plan under Section 401(a) of the Code. The 401(k) plan provides that each participant may contribute up to the statutory limit, which is $18,000 for calendar year 2016 and 2016. Participants
that are 50 years or older can also make
catch-up
contributions, which in calendar year 2016 and 2017 may be up to an additional $6,000 above the statutory limit. Threshold currently does not make
matching contributions into the 401(k) plan on behalf of participants. Participant contributions are held and invested, pursuant to the participants instructions, by the plans trustee.
Additional Benefits
. The named executive officers are eligible to participate in Thresholds other benefit plans generally
available to all employees.
Pension Benefits
. Other than with respect to Thresholds 401(k) plan, its named executive
officers do not participate in any plan that provides for retirement payments and benefits, or payments and benefits that will be provided primarily following retirement.
Nonqualified Deferred Compensation
. During the year ended December 31, 2016, Thresholds named executive officers did
not contribute to, or earn any amounts with respect to, any defined contribution or other plan sponsored by Threshold that provides for the deferral of compensation on a basis that is not
tax-qualified.
Summary Compensation Table
The following
table sets forth certain summary information for the year indicated with respect to the compensation earned by Thresholds former Chief Executive Officer, who resigned effective March 31, 2017, Thresholds two most highly compensated
executive officers other than its Chief Executive Officer who were serving as executive officers as of December 31, 2016, and Thresholds former Chief Operating Officer, whose employment with Threshold terminated effective
September 30, 2016. These individuals are referred to in this proxy statement as the named executive officers.
SUMMARY
COMPENSATION TABLEFISCAL 2015 AND 2016
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Name and Principal Position
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Year
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Salary(1)($)
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Option
Awards(2)($)
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Non-Equity
Incentive Plan
Compensation ($)
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All Other
Compensation($)
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Total($)
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Harold E. Selick,
Ph.D.
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2016
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575,000
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349,280
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1,980
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(3)
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926,260
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Former Chief Executive Officer
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2015
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|
575,000
|
|
|
|
1,252,680
|
|
|
|
|
|
|
|
2,063
|
(3)
|
|
|
1,829,743
|
|
Joel A. Fernandes
|
|
|
2016
|
|
|
|
281,000
|
|
|
|
90,620
|
|
|
|
|
|
|
|
416
|
(3)
|
|
|
372,036
|
|
Senior Vice President, Finance and Controller
|
|
|
2015
|
|
|
|
281,000
|
|
|
|
219,219
|
|
|
|
|
|
|
|
430
|
(3)
|
|
|
500,649
|
|
Tillman Pearce,
M.D.
|
|
|
2016
|
|
|
|
405,000
|
|
|
|
90,620
|
|
|
|
|
|
|
|
1,290
|
(3)
|
|
|
496,910
|
|
Chief Medical Officer
|
|
|
2015
|
|
|
|
405,000
|
|
|
|
501,072
|
|
|
|
|
|
|
|
1,344
|
(3)
|
|
|
907,416
|
|
Stewart M. Kroll
|
|
|
2016
|
|
|
|
247,500
|
|
|
|
281,898
|
|
|
|
|
|
|
|
371,002
|
(3)
|
|
|
900,400
|
|
Former Chief Operating Officer
|
|
|
2015
|
|
|
|
330,000
|
|
|
|
313,170
|
|
|
|
|
|
|
|
1,344
|
(3)
|
|
|
644,514
|
|
(1)
|
Includes amounts deferred pursuant to Thresholds 401(k) plan.
|
(2)
|
The dollar amounts in this column reflect the aggregate grant date fair value of all stock option awards granted during the indicated fiscal year. These amounts have been calculated in accordance with ASC 718, using the
Black-Scholes option-pricing formula and excluding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are included in Note 9 of the notes to Thresholds audited consolidated financial statements included
in Thresholds 2016 Annual Report on Form
10-K,
filed the SEC on March 29, 2017. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the named
executive officers. In addition, with respect to the Mr. Kroll, the amount reported for 2016 includes, in addition the grant date fair value of his 2016 option grant, $145,968 of aggregate incremental fair value, as calculated in accordance
with ASC 718, with respect to the modification of 533,560 of vested stock option awards that were modified in connection with his termination as part of Thresholds September 2016 workforce reduction. The modification increased the
post-termination exercise period of Mr. Krolls outstanding vested stock options at September 30, 2016 from ninety days to up to two years.
|
(3)
|
Represents group term life insurance premiums paid by Threshold on behalf of the named individual named executive officer. For Mr. Kroll, in addition to group term life insurance premiums, this amount also includes
accrual of severance benefits of $330,000 as well as accrual of paid time off benefits of $39,886, in fiscal year 2016, both of which were paid in fourth quarter of 2016.
|
Outstanding Equity Awards at Fiscal
Year-End
The following table sets forth information regarding outstanding equity awards held by Thresholds named executive officers at the end of
fiscal year 2016.
7
OUTSTANDING EQUITY AWARDS AT 2016 FISCAL
YEAR-END
TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(1)
|
|
Name
|
|
Grant Date
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Option Exercise
Price(2)
($)
|
|
|
Option
Expiration
Date
|
|
Harold E. Selick,
Ph.D
.
|
|
|
3/14/2016
|
|
|
|
150,000
|
|
|
|
650,000
|
|
|
|
0.55
|
|
|
|
03/13/2026
|
|
|
|
|
2/26/2015
|
|
|
|
183,333
|
|
|
|
216,667
|
|
|
|
4.43
|
|
|
|
02/25/2025
|
|
|
|
|
5/16/2014
|
|
|
|
209,895
|
|
|
|
115,105
|
|
|
|
3.62
|
|
|
|
5/15/2024
|
|
|
|
|
3/13/2013
|
|
|
|
337,500
|
|
|
|
22,500
|
|
|
|
5.09
|
|
|
|
3/12/2023
|
|
|
|
|
4/06/2012
|
|
|
|
325,000
|
|
|
|
|
|
|
|
7.22
|
|
|
|
4/05/2022
|
|
|
|
|
6/07/2011
|
|
|
|
400,000
|
|
|
|
|
|
|
|
1.64
|
|
|
|
6/06/2021
|
|
|
|
|
5/25/2010
|
|
|
|
785,000
|
|
|
|
|
|
|
|
1.44
|
|
|
|
5/24/2020
|
|
|
|
|
1/09/2009
|
|
|
|
70,000
|
|
|
|
|
|
|
|
0.79
|
|
|
|
1/08/2019
|
|
|
|
|
2/27/2008
|
|
|
|
41,666
|
|
|
|
|
|
|
|
1.30
|
|
|
|
2/26/2018
|
|
|
|
|
3/20/2007
|
|
|
|
41,666
|
|
|
|
|
|
|
|
1.30
|
|
|
|
3/19/2017
|
|
Joel A. Fernandes
|
|
|
3/11/2016
|
|
|
|
37,500
|
|
|
|
162,500
|
|
|
|
0.55
|
|
|
|
03/10/2026
|
|
|
|
|
2/26/2015
|
|
|
|
32,083
|
|
|
|
37,917
|
|
|
|
4.43
|
|
|
|
02/25/2025
|
|
|
|
|
5/16/2014
|
|
|
|
32,291
|
|
|
|
17,709
|
|
|
|
3.62
|
|
|
|
5/15/2024
|
|
|
|
|
3/13/2013
|
|
|
|
84,375
|
|
|
|
5,625
|
|
|
|
5.09
|
|
|
|
3/12/2023
|
|
|
|
|
4/06/2012
|
|
|
|
60,000
|
|
|
|
|
|
|
|
7.22
|
|
|
|
4/05/2022
|
|
|
|
|
6/07/2011
|
|
|
|
80,000
|
|
|
|
|
|
|
|
1.64
|
|
|
|
6/06/2021
|
|
|
|
|
5/25/2010
|
|
|
|
40,000
|
|
|
|
|
|
|
|
1.44
|
|
|
|
5/24/2020
|
|
|
|
|
1/9/2009
|
|
|
|
10,000
|
|
|
|
|
|
|
|
0.79
|
|
|
|
1/08/2019
|
|
|
|
|
2/27/2008
|
|
|
|
16,666
|
|
|
|
|
|
|
|
1.30
|
|
|
|
2/26/2018
|
|
|
|
|
11/02/2007
|
|
|
|
3,333
|
|
|
|
|
|
|
|
1.30
|
|
|
|
11/01/2017
|
|
|
|
|
1/24/2007
|
|
|
|
3,333
|
|
|
|
|
|
|
|
1.30
|
|
|
|
1/23/2017
|
|
Tillman Pearce,
M.D
.
|
|
|
3/11/2016
|
|
|
|
37,500
|
|
|
|
162,500
|
|
|
|
0.55
|
|
|
|
03/10/2026
|
|
|
|
|
2/26/2015
|
|
|
|
73,333
|
|
|
|
86,667
|
|
|
|
4.43
|
|
|
|
02/25/2025
|
|
|
|
|
5/16/2014
|
|
|
|
93,645
|
|
|
|
51,355
|
|
|
|
3.62
|
|
|
|
5/15/2024
|
|
|
|
|
3/13/2013
|
|
|
|
131,250
|
|
|
|
8,750
|
|
|
|
5.09
|
|
|
|
3/12/2023
|
|
|
|
|
2/16/2012
|
|
|
|
212,000
|
(3)
|
|
|
|
|
|
|
3.46
|
|
|
|
2/15/2022
|
|
Stewart M. Kroll (4)
|
|
|
3/11/2016
|
|
|
|
37,499
|
|
|
|
|
|
|
|
0.55
|
|
|
|
09/30/2018
|
|
|
|
|
2/26/2015
|
|
|
|
39,583
|
|
|
|
|
|
|
|
4.43
|
|
|
|
09/30/2018
|
|
|
|
|
5/16/2014
|
|
|
|
52,499
|
|
|
|
|
|
|
|
3.62
|
|
|
|
09/30/2018
|
|
|
|
|
3/13/2013
|
|
|
|
87,500
|
|
|
|
|
|
|
|
5.09
|
|
|
|
09/30/2018
|
|
|
|
|
4/06/2012
|
|
|
|
100,000
|
|
|
|
|
|
|
|
7.22
|
|
|
|
09/30/2018
|
|
|
|
|
6/07/2011
|
|
|
|
113,000
|
|
|
|
|
|
|
|
1.64
|
|
|
|
09/30/2018
|
|
|
|
|
5/25/2010
|
|
|
|
77,899
|
|
|
|
|
|
|
|
1.44
|
|
|
|
09/30/2018
|
|
|
|
|
1/9/2009
|
|
|
|
9,082
|
|
|
|
|
|
|
|
0.79
|
|
|
|
09/30/2018
|
|
|
|
|
2/27/2008
|
|
|
|
14,415
|
|
|
|
|
|
|
|
1.30
|
|
|
|
2/26/2018
|
|
|
|
|
04/02/2007
|
|
|
|
2,083
|
|
|
|
|
|
|
|
1.30
|
|
|
|
04/01/2017
|
|
(1)
|
All options were granted under and subject to the terms of either Thresholds 2004 Equity Incentive Plan, for options granted prior to May 16, 2014, or under Thresholds 2014 Equity Incentive Plan for
options granted on May 16, 2014. Each option has a term of ten years and except as otherwise indicated, vests
one-forty-eighth
(1/48) of the total shares monthly following the date of grant such that all
shares are 100% vested as of four years after the date of grant.
|
(2)
|
The exercise price per share of each option grant is the closing price of Thresholds common stock on the NASDAQ Capital Market on the date of grant.
|
(3)
|
This grant is a new hire option and vests
one-fourth
(1/4) of the total shares on the
one-year
anniversary of the date of grant, and
one-thirty-sixth
(1/36) monthly following the
one-year
anniversary such that all shares are 100% vested as of four years after the date of grant. The number of vested shares
reflects the transfer in 2015 of beneficial ownership of 18,000 of the vested shares to Dr. Pearces
ex-spouse
pursuant to a marital settlement agreement.
|
(4)
|
Mr. Kroll was terminated as an executive officer in September 2016. In conjunction with the termination of his employment, his post termination exercise period of his vested options at September 30, 2016, was
increased from ninety days to up to two years. In addition, the number of shares reported reflects the transfer in 2016 of beneficial ownership of a portion of the indicated stock options to Mr. Krolls
ex-spouse
pursuant to a domestic relations order.
|
Option Exercises During 2016
Our named executive officers did not exercise any stock options during the year ended December 31, 2016. However, beneficial ownership of
vested stock options covering 40,577 shares was transferred to Mr. Krolls former spouse pursuant to a domestic relations order in 2015. Mr. Kroll did not realize a specific dollar amount upon this transfer, as the transfer was made
in connection with a mutually agreed allocation of and release of claims with respect to marital property.
8
Post-Termination Compensation
Change of Control Severance Agreements and Merger-Related Modifications
Threshold has entered into change of control severance agreements with its named executive officers that provide for certain benefits upon the
named executive officers involuntary termination, including in connection with a change of control transaction. For purposes of these agreements, the Merger, if consummated, will constitute a change of control transaction.
Agreement with Dr.
Selick.
In December 2004, Threshold entered into a change of control severance agreement with
Dr. Selick, which was amended and restated in November 2008, and further amended and restated in April 2012. This agreement provides that if Dr. Selicks employment is involuntarily terminated (which generally means his resignation
following a material reduction in his duties, position or responsibilities, a material reduction in base salary, a relocation of work location, any termination other than for cause or for which there lacks valid grounds or failure by any successor
to the company to assume the terms of his change of control severance agreement), then he will be entitled to a lump sum cash severance payment equivalent to 12 months base salary as in effect as of the date of termination. This agreement also
provides that if Dr. Selick is involuntarily terminated within 18 months following a change of control of Threshold, then he will be entitled to the following enhanced change of control severance benefits: a lump sum payment equivalent to 12
months base salary and any applicable allowances in effect as of the date of termination or, if greater, as in effect in the year in which the change of control occurs; payment of the full amount of Dr. Selicks target bonus for the
calendar year of termination plus a
pro rata
portion (based on the number of full weeks during such year) of the amount of such bonus or, if no target bonus has been established, an amount equal to Dr. Selicks
bonus in the prior year plus a pro rata portion (based on the number of full weeks during such year) of the amount of such bonus; immediate acceleration and vesting of all stock options or other awards granted prior to the change of control; the
termination of our right to repurchase shares of restricted stock purchased prior to the change of control; extension of the exercise period for stock options granted prior to the change of control to two years following the date of termination; and
up to 12 months of health benefits.
In connection with the Merger, upon the recommendation of the compensation committee, the board of
directors deemed Dr. Selicks resignation as Chief Executive Officer effective March 31, 2017 to be an involuntary termination for purposes of his change of control severance agreement, but only if the Merger occurs within
four months following March 31, 2017 and if he remains as Chairman of the Board through the Closing of the Merger. Accordingly, if the Merger occurs by July 31, 2017 and he remains Chairman of the Board, then Dr. Selick will be
entitled to the enhanced change of control severance benefits.
All of the benefits provided above are expressly contingent on
Dr. Selicks delivery to us of a satisfactory release of claims.
Agreement with Dr.
Pearce
. We
entered into a change of control severance agreement with Dr. Pearce in April 2012 that was modified in connection with the Merger. The agreement provides that if Dr. Pearces employment is involuntarily terminated (which generally
means his resignation following a material reduction in his duties, position or responsibilities, a material reduction in base salary, a relocation of work location, any termination other than for cause or for which there lacks valid grounds or
failure by any successor to Threshold to assume the terms of his change of control severance agreement), then Dr. Pearce will be entitled to a lump sum cash severance payment equivalent to 12 months base salary as in effect as of the date of
termination. In addition, if Dr. Pearce is involuntarily terminated within 18 months following a change of control, then Dr. Pearce will be entitled to the following enhanced change of control severance benefits: a lump sum payment
equivalent to 12 months base salary and any applicable allowances in effect as of the date of termination or, if greater, as in effect in the year in which the change of control occurs; payment of any bonus due in the year of termination plus
a
pro rata
amount of the bonus that would have been awarded for the year following termination, assuming full bonus payment for that year; immediate acceleration and vesting of all stock options or other awards granted prior
to the change of control; the termination of our right to repurchase shares of restricted stock purchased prior to the change of control; extension of the exercise period for stock options or other awards granted prior to the change of control to
two years following the date of termination; and up to 12 months of health benefits.
In connection with the Merger,
Dr. Pearces agreement was modified to provide that if an involuntary termination occurs during the four-month period prior to the Merger rather than following the Merger, and the Merger is consummated, the termination will be treated as
having occurred following the Merger and will entitle Dr. Pearce to the enhanced change of control severance benefits. In connection with such modification, the compensation committee may choose to reduce the salary portion of the enhanced
change of control severance benefits by salary earned after such date as the compensation committee may determine.
All of the benefits
provided above are expressly contingent on Dr. Pearces delivery to us of a satisfactory release of claims.
Agreement with
Mr.
Fernandes.
In connection with his promotion to Senior Vice President of Finance and Controller in March 2016, Threshold entered into a new change of control severance agreement with Mr. Fernandes, which was modified
in connection with the Merger. The agreement provides that if Mr. Fernandes employment is involuntarily terminated (which generally means Mr. Fernandes resignation following a material reduction in his duties, position or
responsibilities, a material reduction in base salary, a relocation of work location, any termination other than for cause or for which there lacks valid grounds or failure by any successor to Threshold to assume the terms of the new severance
agreement), then Mr. Fernandes will be entitled to a lump sum cash severance payment equivalent to 12 months base salary as in effect as of the date of termination. In addition, if Mr. Fernandes is involuntarily terminated within 18 months
following a change of control of Threshold, then Mr. Fernandes will be entitled to the following enhanced change of control severance benefits: a lump sum payment equivalent to 12 months base salary and any applicable allowances in effect
as of the date of termination or, if greater, as in effect in the year in which the change of control occurs; payment of the full amount Mr. Fernandes target bonus for the calendar year of termination plus a pro rata portion (based on the
number of full weeks during such year) of the amount of such bonus or, if no target bonus has been established, an amount equal to Mr. Fernandes bonus in the prior year plus a pro rata portion (based on the number of full weeks during such
year) of the amount of such bonus; immediate acceleration and vesting of all equity awards granted by Threshold to Mr. Fernandes prior to the change of control; extension of the exercise period for stock options granted prior to the change of
control to up to two years following the date of termination; and up to 12 months of health benefits.
9
In connection with the Merger, Mr. Fernandes agreement was modified to provide that if
an involuntary termination occurs during the four-month period prior to the Merger rather than following the Merger, and the Merger is consummated, the termination will be treated as having occurred following the Merger and will entitle
Mr. Fernandes to the enhanced change of control severance benefits. In connection with such modification, the compensation committee may choose to reduce the salary portion of the enhanced change of control severance benefits by salary earned
after such date as the compensation committee may determine.
All of the benefits provided above are expressly contingent on
Mr. Fernandes delivery to us of a satisfactory release of claims.
Severance Arrangements for Mr. Kroll
In connection with Mr. Krolls termination effective September 30, 2016, we provided Mr. Kroll with the following severance
benefits in exchange for this full general release of any claims that he may have on account of his employment with us: (1) a lump sum cash payment equal to one year of base salary pursuant to the
pre-existing
change of control severance agreement that we previously entered into with Mr. Kroll and (2) the post-termination exercise period applicable to all of Mr. Krolls vested stock
options was increased from ninety days to up to two years.
Other Termination and Change of Control Benefits
Other than as set forth in a named executive officers change of control severance agreement with us, and except as otherwise provided by
applicable law, our named executive officers are generally not entitled to any additional benefits upon a termination or change of control of our company. However, under both the 2004 Plan and the 2014 Plan, in the event of a fundamental transaction
(as defined in the respective plan, which would include the Merger, if consummated), if the successor corporation does not assume, convert or replace or substitute equivalent awards for outstanding equity awards granted pursuant to the 2004 Plan or
the 2014 Plan, then the vesting of such equity awards shall be accelerated in full and will terminate in connection with the closing or completion of the fundamental transaction. In addition, under the 2004 Plan, if awards granted under the 2004
Plan are assumed, converted, replaced or substituted for equivalent awards or outstanding equity awards following a fundamental transaction or change of control (which would include the Merger, if consummated), and the holder of an award is
terminated without cause (other than due to death or disability) or resigns for good reason within 18 months following the transaction, any outstanding awards will accelerate for 12 months of vesting and be exercisable for three months following
such termination.
DIRECTOR COMPENSATION
We generally provide our
non-employee
directors with cash and equity compensation for their service on
our board of directors. The board of directors is responsible for considering and approving the compensation paid to our
non-employee
directors, upon recommendation from the compensation committee. The
compensation committee reviews the compensation paid to our
non-employee
directors with input and market data provided by the compensation committees outside compensation consultant. In this regard, in
March 2015, the board of directors approved a
non-employee
director compensation policy, or the director compensation policy, that sets forth the terms of the cash and equity compensation that will be paid to
our
non-employee
directors beginning in 2015. Our director compensation policy was approved after the compensation committee received input and market data from Radford, its independent compensation consultant
in 2015. The director compensation policy adopted in March 2015 generally provides for the same compensation as our 2014
non-employee
director compensation program, except based on Radfords analysis and
to better reflect the average compensation received by new members of the boards of directors of our comparator companies, the compensation committee recommended and the board approved an increase in the size of the initial stock option granted to
individuals who are elected or appointed for the first time from 25,000 shares to 35,000 shares. As described below, the size of the annual stock option grants to continuing
non-employee
directors was
subsequently increased in March 2016.
Cash Compensation.
Under our director compensation policy, each
non-employee
director was entitled to receive the following cash compensation for board services, as applicable, for 2016:
|
|
|
a $30,000 annual retainer for service as a member of our board of directors;
|
|
|
|
a supplemental annual retainer for the chairs of the board committees in the following amounts: $20,000 for the chair of the audit committee, $14,000 for the chair of the compensation committee and $14,000 for the chair
of the nominating and governance committee; and
|
|
|
|
a supplemental annual retainer of $11,000 for each member of audit committee, compensation committee and the nominating and governance committee other than the chairs.
|
All of our directors are entitled to reimbursement for all reasonable
out-of-pocket
expenses incurred in connection with attendance at board and committee meetings.
Equity Compensation.
Under our director compensation policy, upon first joining our board of directors, a
non-employee
director is awarded an initial grant of an option to purchase 35,000 shares of our common stock that vests monthly over a three-year period. On the date of each annual meeting of stockholders, each
non-employee
director serving on our board of directors on such date provided that the applicable individual has served as a
non-employee
director for at least six months
prior to such date) was awarded an annual grant of an option to purchase 20,000 shares of our common stock that vests monthly over one year. However, the compensation committee recommended and the board approved in March 2016 an increase in the size
of the annual stock option grants from 20,000 shares to 35,000 shares of our common stock that vests monthly over a
one-year
period. Accordingly, on June 24, 2016, each
non-employee
director was granted an option to purchase 35,000
10
shares of our common stock at an exercise price of $0.38 per share, the closing price of our common stock on the NASDAQ Capital Market on the date of grant. These options expire on June 23,
2026. The options are granted under and subject to the terms of our 2014 Plan, the terms of which are described in more detail above under
Executive CompensationDescription of Compensation Arrangements2014 Equity Incentive
Plan
beginning on page 5 of this Amendment No. 1 to Annual Report on Form
10-K/A.
In addition, under our director compensation policy, in the event of a fundamental transaction (as defined in
the 2014 Plan) while a 2014 Plan participant remains a
non-employee
director, the shares subject to all initial and annual option grants held by such
non-employee
director will vest in full immediately prior to the effective date of the fundamental transaction, with all such options terminating immediately following the consummation of the fundamental transaction unless assumed by the successor corporation.
Likewise, in the event of a change of control (as defined in the 2014 Plan), while a participant remains a
non-employee
director, the shares subject to all outstanding initial and annual option grants held by
such
non-employee
director will automatically vest in full, and such options will remain exercisable until the expiration or sooner termination of the applicable option term. The Merger, if consummated, will
constitute a change of control for purposes of the 2014 Plan.
Director Compensation Table
The following table sets forth all of the compensation awarded to, earned by, or paid to each person who served as a director of Threshold
during 2016. Dr. Selick, Thresholds Chairman, is not listed in the following table because he was Thresholds employee during all of 2016 and his compensation is described in section titled
Executive Compensation
beginning on page 5 of this Amendment No. 1 to Annual Report on Form
10-K/A.
DIRECTOR
COMPENSATION FOR FISCAL 2016
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Name
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Fees Earned or
Paid in Cash($)
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Option
Awards($)(1)(2)
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Total($)
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Jeffrey W. Bird,
M.D., Ph.D.
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52,000
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10,574
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62,574
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Bruce C. Cozadd
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41,000
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10,574
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51,574
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David R. Hoffmann
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64,000
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10,574
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74,574
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Wilfred E. Jaeger,
M.D.
(3)
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55,000
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10,574
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65,574
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George G.C. Parker,
Ph.D.
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41,000
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10,574
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51,574
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David R. Parkinson,
M.D.
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41,000
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10,574
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51,574
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(1)
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The dollar amounts in this column represent the aggregate grant date fair value of each stock option award granted to the directors listed in the table above in 2016. These amounts have been calculated in accordance
with ASC 718, using the Black-Scholes option-pricing formula and excluding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are included in Note 9 of the notes to Thresholds audited consolidated
financial statements included in the 2016 Annual Report on Form
10-K.
These amounts do not necessarily correspond to the actual value recognized or that may be recognized by Thresholds directors.
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(2)
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The aggregate number of shares subject to outstanding stock options held by each director listed in the table above as of December 31, 2016 was as follows: 165,000 shares for Dr. Bird; 165,000 shares for
Mr. Cozadd; 167,500 shares for Mr. Hoffman; 115,000 shares for Dr. Jaeger; 142,500 shares for Dr. Parker; and 152,500 shares for Dr. Parkinson.
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(3)
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In connection with Dr. Jaegers appointment of interim Chief Executive Officer effective March 31, 2017, Dr. Jaeger is no entitled longer receive compensation as a
non-employee
member of the board and is instead being paid a monthly salary of $20,000 for his service as interim Chief Executive Officer. Other than the foregoing, there were no new compensatory arrangements
or modifications to existing compensatory arrangements nor were there any grants or awards made to Dr. Jaeger in connection with his appointment as Thresholds interim Chief Executive Officer.
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11
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Related Party Transactions and Business Relationships
Participation in Public Offering
On February 18, 2015, Threshold completed an underwritten public offering of 8,300,000 shares of its common stock and warrants to purchase
8,300,000 shares of its common stock. The combined purchase price to the public for each share of common stock and accompanying warrant was $3.62. However, one of Thresholds directors who participated in the offering, Wilfred E. Jaeger, who in
March 2017 also became Thresholds interim Chief Executive Officer, paid an additional $0.125 price per share of common stock and accompanying warrant in accordance with the rules of NASDAQ. Net cash proceeds from the public offering were
approximately $28.2 million, after deducting the underwriting discounts and commissions and offering expenses payable by Threshold. The warrants issued in the offering carried an initial exercise price of $10.86 per share and were exercisable
at any time and from time to time commencing with the date six months following the issuance date and continuing through the date that is five years from the issuance date. Pursuant to adjustment provided in the Warrant, effective January 21,
2016, the exercise price was adjusted to be the floor price of $3.62 per share. The investors in this offering included following related parties listed in the table below.
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Name of Related Party
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Shares
Purchased (#)
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Shares Underlying
Warrants Purchased (#)
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Purchase Price
($)
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Capital Ventures International(1)
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4,150,000
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4,150,000
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$
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15,023,000
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Wilfred E. Jaeger, M.D.
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25,000
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25,000
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$
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93,625
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(1)
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Became a greater than 5% stockholder of Threshold as a result of Thresholds February 2015 public offering and, accordingly, became a related party of Threshold under applicable SEC rules and
regulations.
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Since this offering was public, with the price to the public in the offering determined in part by a book
building process with the underwriters and in part by negotiation at arms-length with parties that were not, prior to the offering, related parties, the offering was not specifically reviewed in advance as a related-party transaction. However, the
offering was approved in advance by Thresholds board of directors and by a pricing committee of Thresholds board of directors. Thresholds nominating and governance committee, which served as the independent review and oversight
body due to the participation of Dr. Jaeger (who at the time had served on Thresholds audit committee) in the offering, subsequently reviewed the offering.
Indemnification Arrangements
Thresholds amended and restated certificate of incorporation and amended and restated bylaws provide that Threshold will indemnify each
of its directors and officers to the fullest extent permitted by Delaware law. Further, Threshold has entered into separate indemnification agreements with each of its directors and executive officers. Such agreements require Threshold, among other
things, to indemnify its directors and officers, other than for liabilities arising from willful misconduct of a culpable nature, and to advance their expenses incurred as a result of any proceedings against them as to which they could be
indemnified.
Related Party Transaction Policy and Procedures
Threshold has not yet adopted a written related-party transactions policy. However, applicable NASDAQ rules require that Thresholds audit
committee (or another independent body of the Board of directors) conduct an appropriate review and oversight of all related-party transactions for potential conflict of interest situations on an ongoing basis. In addition, Thresholds audit
committee has been delegated the express authority and responsibility to review, provide oversight of and to approve related-party transactions. For these purposes, related-party transactions are generally those transactions required to
be disclosed by Threshold in its proxy statements and annual reports that it files with the SEC in which certain categories of enumerated persons (including Thresholds executive officers and directors and their immediately family members, as
well as Thresholds significant stockholders) have a direct or indirect material interest. In approving or rejecting any proposed related-party transaction, the audit committee considers the relevant facts and circumstances available and deemed
relevant, including but not limited to, the risks, costs, and benefits to Threshold, the terms of the transactions, the availability of other sources for comparable services or products, and, if applicable, the impact on director independence.
Director Independence
As required under
the NASDAQ listing standards, a majority of the members of a listed companys board of directors must qualify as independent, as affirmatively determined by the board of directors. Consistent with the requirements under the NASDAQ
listing standards, after review of all relevant transactions or relationships between each director, or any of his or her family members, and Threshold, its senior management and its independent registered public accounting firm, our board of
directors affirmatively determined that all of our current directors are independent directors within the meaning of the applicable NASDAQ listing standards, except that Dr. Selick, the Chairman of Thresholds board of directors and
Thresholds Chief Executive Officer until March 31, 2017, is not an independent director by virtue of his past employment with Threshold, and Dr. Jaeger, Thresholds interim Chief Executive Officer, is not an independent director
by virtue of his current employment with Threshold. In addition, Thresholds board of directors has determined that each member of the audit committee, compensation committee and nominating and governance committee meets the applicable NASDAQ
and SEC rules and regulations regarding independence and that each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to
15
Threshold. In determining that Dr. Bird and Dr. Parkinson are independent within the meaning of the applicable NASDAQ listing standards and SEC rules, Thresholds board of
directors considered Dr. Birds affiliation with one of Thresholds significant stockholders and determined that such relationships would not interfere with either Dr. Birds exercise of independent judgment in carrying out
the responsibilities of a director.
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