Executive Compensation Processes
We have implemented an annual performance review program for our employees, including our executives, with annual corporate goals that are
proposed by management, reviewed by the compensation committee and approved by the board of directors. These corporate goals target the achievement of specified operational and financial goals;
specific research, clinical, regulatory, commercial and/or compliance milestones; and business development and financing initiatives.
Individual performance is evaluated in part by reviewing the extent to which an employee's performance facilitates the achievement of our annual corporate and business goals. Annual salary
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adjustments,
annual incentive cash bonus awards and equity awards for each of our chief executive officer, chief financial officer, and each of our three other most highly compensated executive
officers are tied to a combination of achievement of corporate goals and individual performance.
The
compensation committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation of executive officer compensation. To assist the
compensation committee in discharging its responsibilities, since mid-2010, the compensation committee has retained Radford Survey and Consulting, an Aon Hewitt company, an independent compensation
consultant that we refer to as Radford, to evaluate certain aspects of our compensation practices and assist the compensation committee with setting executive compensation.
For
further information about our executive compensation, please see the "Executive CompensationCompensation Discussion and Analysis" section below.
Director Nomination Process
The process followed by our nominating and corporate governance committee to identify and evaluate director candidates includes requests to
board members for recommendations as well as use of a third-party professional search firm. The committee meets from time to time to evaluate biographical information and background material relating
to potential candidates as well as to discuss the results of interviews of selected candidates by members of the nominating and corporate governance committee and other members of the board of
directors.
In
considering whether to recommend any particular candidate for inclusion in the board's slate of director nominees, the nominating and corporate governance committee applies the
criteria attached to its charter. These criteria include the candidate's integrity, business acumen, commitment to understanding our Company and our industry, experience, diligence and the ability to
act in the interests of all stockholders. The nominating and corporate governance committee also considers whether a candidate has any conflicts of interest that would impair his or her ability to
represent the interests of our stockholders and to fulfill the responsibilities of a director. The criteria further specify
that the value of diversity on the board should be considered by the nominating and corporate governance committee in the director identification and nomination process. While we do not have a formal
policy on diversity, the nominating and corporate governance committee proactively seeks nominees with a broad diversity of experience, professions, skills, gender, race, national origin and
backgrounds and considers such factors in evaluating prospective nominees. The nominating and corporate governance committee does not assign specific weights to particular criteria and no particular
trait is a prerequisite for each prospective nominee. We believe that the backgrounds and qualifications of our directors, considered as a group, should provide a composite mix of experience,
knowledge and abilities that will allow the board of directors to fulfill its responsibilities. Nominees are not discriminated against on the basis of race, religion, national origin, gender, sexual
orientation, disability or any other basis proscribed by law.
Stockholders
may recommend individuals to the nominating and corporate governance committee for consideration as potential director candidates by submitting their names, together with
appropriate biographical information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of
our common stock for at least a year as of the date such recommendation is made, to the nominating and corporate governance committee, c/o Alejandra Carvajal, Secretary, Momenta
Pharmaceuticals, Inc., 301 Binney Street, Cambridge, Massachusetts 02142. Assuming that appropriate biographical and background material has been provided on a timely basis, the nominating and
corporate governance committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates
submitted by others.
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Stockholders
also have the right under our by-laws to directly nominate director candidates, without any action or recommendation on the part of the nominating and corporate governance
committee or the board of directors, by following the procedures set forth in our by-laws that are described below under the heading "Additional InformationStockholder Proposals."
Stockholder Communications
Our board of directors will give appropriate attention to written communications that are submitted by stockholders and will respond if and as
appropriate. The chairman of the board of directors (an independent director) or otherwise the chair of the nominating and corporate governance committee, subject to advice and assistance from the
general counsel and secretary and, if requested, outside legal counsel, is primarily responsible for monitoring communications from
stockholders and for providing copies of summaries of such communications to the other directors as he or she considers appropriate.
Under
procedures approved by a majority of the independent directors, communications are forwarded to all directors if they relate to important substantive matters and include
suggestions or comments that the chairperson of the board considers to be important for the directors to know. In general, communications relating to corporate governance and corporate strategy are
more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we tend to receive repetitive or duplicative communications.
Stockholders
who wish to send communications on any topic to the board of directors should address such communications to the board of directors c/o Alejandra Carvajal, Secretary,
Momenta Pharmaceuticals, Inc., 301 Binney Street, Cambridge, Massachusetts 02142, fax: (617) 621-0431.
Code of Business Conduct and Ethics
Our written code of business conduct and ethics applies to our directors, officers and employees, including our principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing similar functions. The code is intended to deter wrongdoing and to promote the conduct of all Company
business in accordance with high standards of integrity and in compliance with all applicable laws and regulations. The code covers a wide range of professional conduct, including compliance with laws
and regulations applicable to the conduct of our business, conflicts of interest, insider trading, the protection of confidential information, honest and ethical fair dealing, acceptance and giving of
gifts and gratuities, accuracy of our books and records, concerns regarding accounting matters, dealings with our independent auditor, and reporting and compliance procedures.
Prohibition of Hedging or Pledging the Company's Securities
Our Insider Trading Policy generally prohibits pledging and hedging activities by employees and directors with respect to Company securities. No
employees or directors engage in pledging or hedging activities with respect to Company securities.
Succession Planning
Our management conducts formal succession planning for our chief executive officer and other executive officers, which is reviewed at least
annually by the board of directors under the oversight of the nominating and corporate governance committee.
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Our Executive Officers
The following table sets forth the names, ages and positions of our current executive officers:
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Name
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Age
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Position
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Craig A. Wheeler*
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58
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President and Chief Executive Officer
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Michelle Robertson
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52
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Chief Financial Officer and Treasurer
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Anthony Manning, Ph.D.
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57
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Chief Scientific Officer
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Santiago Arroyo, M.D., Ph.D.
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59
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Chief Medical Officer
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Young Kwon
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47
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Chief Business Officer
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Alejandra Carvajal
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45
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Chief Legal Officer, General Counsel and Secretary
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Ian Fier
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52
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Chief Manufacturing and Program Officer
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Jo-Ann Beltramello
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51
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Chief Human Resources and Infrastructure Officer
|
-
*
-
Mr. Wheeler
is a member of our board of directors. See "Proposal OneElection of Directors" for more information about Mr. Wheeler.
Michelle Robertson
has been our Chief Financial Officer since October 2018. Ms. Robertson is responsible for the oversight of all
finance, accounting and treasury functions. From May 2017 to October 2018, Ms. Robertson was our Vice President, Financial Planning and Analysis. Prior to joining Momenta, Ms. Robertson
was Vice President, Oncology Finance for Baxalta, Inc., a biopharmaceutical company, following its spin-off from Baxter International in July 2015. From 2012 to 2015, Ms. Robertson
served as Head of Financial Planning and Analysis and Operations Excellence at Ironwood Pharmaceuticals, Inc., and prior to that, held various leadership positions in the Oncology and
Biosurgery divisions of Finance and Commercial Operations at Genzyme Corporation (now Sanofi Genzyme), a biotechnology company. Ms. Robertson received her B.S. in Finance and A.S. in Accounting
and Management from Bentley University.
Anthony Manning, Ph.D.
has been our Chief Scientific Officer since October 2018. He is responsible for research and driving the discovery
of novel products. From January 2013 to October 2018, Dr. Manning served as our Senior Vice President, Research. Prior to joining Momenta, Dr. Manning was Vice President and Head of
Immunology Research for Biogen, Inc., a multinational biotechnology company. Before that, he was Vice President and Global Head of Inflammation, Autoimmunity and Transplantation Research at
Roche Pharmaceuticals. Dr. Manning is currently a member of the board of directors of Palatin Technologies, and is the Chairman of the non-profit Institute for Biomedical Entrepreneurship.
Dr. Manning holds a Ph.D. from the University of Otago, New Zealand.
Santiago Arroyo, M.D., Ph.D.
has been our Chief Medical Officer since October 2018. Dr. Arroyo is responsible for preclinical and
clinical development and regulatory affairs. Prior to his appointment as Chief Medical Officer, he served as our Senior Vice President, Development and Chief Medical Officer from June 2017 to October
2018. Prior to joining Momenta, Dr. Arroyo was Chief Medical Officer of Boston Pharmaceuticals Inc. from October 2015 to May 2017. Prior to that, from 2010 to 2015, he was Senior Vice
President, Head of Clinical Research and Chief Medical Officer of Biotherapeutics and Pharmatherapeutics at Pfizer Inc., a pharmaceutical company, in the areas of cardiovascular and metabolism,
pain, neuroscience, regenerative medicine and rare diseases. From 2007 to 2010, Dr. Arroyo was Therapeutic Area Head for Neurosciences, Discovery Medicine and Clinical Pharmacology at
Bristol-Myers Squibb, a pharmaceutical company, and, from 2004 to 2007, Neurology Global Therapeutic Area Head for Eisai Global Clinical Development, a division of Eisai Co. Ltd., a
pharmaceutical company. Dr. Arroyo was an Instructor in Neurology at the Johns Hopkins Hospital in 1994 and Associate Professor of Neurology and Director of the Epilepsy Program at the Medical
College of Wisconsin and Senior Specialist at the Hospital Clinic of Barcelona, Spain from 1994 to
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2003.
Dr. Arroyo received his M.D. from the Autonomous University of Madrid and his Ph.D. from the University of Barcelona, Spain.
Young Kwon
has been our Chief Business Officer since October 2018. From August 2015 to October 2018, Dr. Kwon served as our Senior
Vice President, Corporate Development and Strategy. From January 2011 to July 2015, Mr. Kwon served as our Vice President, Corporate Development and Strategy. Prior to joining us,
Mr. Kwon was Senior Director of Business Development at Biogen Idec, where he led corporate development activities, including evaluation of mergers and acquisitions, joint ventures and other
strategic transactions. Prior to that, he identified and invested in early-stage life science companies at Advanced Technology Ventures. Mr. Kwon received his B.S. from the Massachusetts
Institute of Technology in 1994 and his Ph.D. in Biological Chemistry and Molecular Pharmacology from Harvard University in 1999.
Alejandra V. Carvajal
has served as our Chief Legal Officer and General Counsel since October 2018. Ms. Carvajal is responsible for
all legal matters and operations at the Company. From June 2017 to October 2018, Ms. Carvajal served as our Vice President, Deputy General Counsel. Prior to joining Momenta, Ms. Carvajal
was Vice President and General Counsel of Cerulean Pharma Inc., a public biotechnology company, from September 2014 to June 2017. Prior to Cerulean, Ms. Carvajal worked at Millennium:
The Takeda Oncology Company from 2004 to 2014, where she held a variety of legal positions of increasing seniority. Ms. Carvajal began her legal career in private practice with the law firms of
Day, Berry & Howard and Hill & Barlow. Ms. Carvajal received a B.A. cum laude from Harvard University and a J.D. cum laude from The Georgetown University Law Center.
Ian D. Fier
has been our Chief Manufacturing and Program Officer since October 2018. Mr. Fier is responsible for overseeing our
process development and quality functions, manufacturing, and program management. From October 2002 to October 2018, Mr. Fier served as our Senior Vice President, Program Alliance and
Leadership. Prior to joining Momenta, he was Vice President of Clinical Affairs at BioTransplant Inc., a company that develops pharmaceuticals and organ-transplantation systems. Prior to that,
he held positions in product development and project management at Hoechst-Roussel (now Sanofi Aventis), Astra USA and The Medicines Company. Mr. Fier received his B.S. from Tufts University
and a M.B.A. in Heath Care Management from Boston University.
Jo-Ann Beltramello
has served as our Chief Human Resources and Infrastructure Officer since October 2018. Ms. Beltramello is
responsible for all human resources, IT, and site services for the Company. From October 2007 to 2018, Ms. Beltramello served as our Senior Vice President, Human Resources. Prior to joining
Momenta, she was the Chief Human Resources Officer at Multiplan, a provider of health care cost management solutions. Prior to Multiplan, she held senior human resources roles at Private Healthcare
Systems, Inc., Oxford Global Resources, Inc., and Randstad North America. Ms. Beltramello received her B.S. from Bentley University.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following discussion provides information regarding compensation earned by the following executive officers during
2018:
-
-
Craig A. Wheeler, our President and Chief Executive Officer,
-
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Michelle Robertson, our Chief Financial Officer,
-
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Scott M. Storer, our former Senior Vice President, Chief Financial Officer and Treasurer,
-
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Santiago Arroyo, M.D., Ph.D., our Senior Vice President, Development and Chief Medical Officer,
-
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Young Kwon, Ph.D., our Chief Business Officer, and
-
-
Anthony Manning, Ph.D., our Chief Scientific Officer.
We
refer to these executive officers as our "Named Executives." In January 2018, the Company initiated a strategic review of its business, aimed at reducing costs of biosimilar
development and focusing its resources on its pipeline of novel drug candidates for immune-mediated diseases (the "Strategic Review"). As a result of the Strategic Review, in September 2018, our Board
approved a plan to reduce the Company's headcount by approximately 50% (the "Restructuring") in order to align our workforce with the Company's new strategy to focus on the discovery and development
of novel therapeutics for the treatment of rare immune-mediated diseases and to advance two late-stage biosimilar products. As part of the Restructuring, on September 26, 2018, Scott M. Storer,
our former Senior Vice President, Chief Financial Officer and Treasurer, was terminated without cause, effective October 5, 2018.
In
addition, in September 2018, the Board appointed Ms. Robertson, then our Vice President, Financial Planning and Analysis, as the Company's Chief Financial Officer, replacing
Mr. Wheeler, who had been performing the functions of principal financial officer since May 2018 in connection with Mr. Storer's temporary medical leave of absence.
Executive Summary
The objectives of our executive compensation program are to align the interests of management with the interests of stockholders. We correlate
compensation to Company and individual performance and design our programs to attract, retain and motivate talented employees. We reward both short- and long-term company and individual performance,
with the goal of increasing stockholder value over the long term. In determining executive compensation for 2018, we considered the results of the most recent advisory, non-binding vote of
stockholders on the compensation of the Named Executives, which was approved by 97% of the votes cast at the 2018 annual meeting of stockholders. We also reach out to stockholders from time to time to
discuss important issues, including our compensation program, to inform our practices and confirm that they are aligned with our stockholders' interests.
In
2018, the compensation committee updated:
-
-
our long-term performance-based equity grant practices by replacing our performance based restricted stock awards with awards of
performance-based restricted stock units ("PSUs") for 2018;
-
-
in connection with the Restructuring, our peer group for executive compensation and performance reference purposes to ensure the group is
comprised of appropriately representative companies given our strategic changes in business; and
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-
-
given the uncertainty to our business resulting from the Strategic Review and Restructuring, our equity grant incentive policies to enhance the
probability we could retain our executive team during the Restructuring and to more align our CEO's compensation with our investors' interests by making his equity grants more heavily performance
based.
Our
compensation committee reviews competitive market data provided by Radford, the committee's independent compensation consultant, in making compensation decisions. The compensation
committee generally targets base salary, annual incentive cash bonus opportunities and equity based awards for our Named Executives at the 50
th
percentile of our peer group on an
aggregate basis; however, the compensation committee retains discretion to allow for individual adjustments based on factors and considerations specific to the individual, including but not limited
to, the Named Executive's performance during the year, leadership qualities, business responsibilities, role within the Company, industry experience, career and tenure with the Company, knowledge,
qualifications, overall impact on the organization, current compensation arrangements, and long-term potential to enhance stockholder value. We more heavily weigh equity based awards than other forms
of compensation because we believe equity based awards are a powerful tool for encouraging performance and aligning the interests of our executives with those of our stockholders.
Our
key compensation decisions for 2018 included the following:
-
-
In February 2018 the compensation committee decided not to consider increases in the base salaries of our executives, including our Named
Executives, until the impact of our strategic review could be determined.
-
-
In connection with the Restructuring, which included the departure of certain executives and the resulting need to consolidate responsibilities
across a smaller executive team, we determined to promote Ms. Robertson and Drs. Kwon and Manning into roles of increased responsibility. In connection with such promotions as well as the
expanded responsibilities of Dr. Arroyo, and following the compensation committee's review of industry trends in base salary increases, the compensation committee increased the base salaries of
Ms. Robertson and Drs. Arroyo, Kwon and Manning, effective October 5, 2018, ranging from a 3.5% to 25.0% increase.
-
-
In December 2018, the compensation committee determined bonuses under our annual bonus program for our executives, including eligible Named
Executives, to be at a 95% corporate goal achievement level. Based on this corporate performance and the individual performances for eligible Named Executives, including their impact and value to the
Strategic Review, the Restructuring and the conclusion of an equity financing in December 2018, the compensation committee approved an annual incentive cash bonus of 84% of base salary for our CEO,
representing 105% of his target bonus for 2018, and annual incentive cash bonuses ranging from 40% to 46% of base salary for our other eligible Named Executives, representing between 100% to 115% of
such Named Executives' target bonuses for 2018.
-
-
In February 2018, Ms. Robertson, Mr. Storer and Drs. Arroyo, Kwon and Manning received grants of only time-based restricted stock
units for 2017 performance in order to encourage stock ownership and retention during our Strategic Review, and Mr. Wheeler received a grant of time-based restricted stock units and stock
options. The amounts of such grants were based in part on each such individual's position in the Company and in part on his or her individual achievements in 2017.
-
-
In October 2018, our compensation committee adopted a new company-wide PSU program, in which our then-serving Named Executives participated.
PSUs granted under the program vest in amounts up to 150% of the target number of units granted subject to the Company achieving up to three specified performance milestones on or before
October 17, 2022. Upon achieving each of the milestones, 25% of the target number of units will vest on the milestone achievement
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date,
and an additional 25% of the units will vest on the one year anniversary of such achievement date, subject to a requirement that recipients remain employees through each applicable vesting date.
The PSUs are further subject to accelerated vesting in certain circumstances, as described below under "Equity AwardsOctober 2018 Retention and Incentive Awards." Each PSU represents the
right to receive a number of shares of our common stock based on our achievement of specified milestones or, at the administrator's discretion, the equivalent cash value shortly following vesting.
-
-
Also in October 2018, in connection with the conclusion of the Strategic Review and the Restructuring, the compensation committee granted
time-based restricted stock units to certain of our executives, including our then-serving Named Executives other than Mr. Wheeler, in order to encourage stock ownership and retention of such
Named Executives.
Highlights
of our compensation practices and policies include:
-
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Stock ownership guidelines designed to foster alignment between the board, management, and stockholders, by requiring all directors and
executive officers to maintain a meaningful investment in our stock.
-
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Use of periodic long-term performance-based stock grants that are tied to the achievement of important corporate value generating events and
are generally earned over a multi-year period, to supplement annual time-based equity grants and incent key business and strategic objectives.
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Double-trigger executive severance protection, whereby cash severance and equity acceleration occurs only in the context of a qualifying
termination of employment, not merely upon a change of control of the Company.
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Explicit prohibition of hedging the economic risk of ownership of our equity securities by our executive officers and directors.
Overview of Compensation Program and Philosophy
Our "pay-for-performance" philosophy forms the foundation for the compensation committee's decisions regarding executive compensation. We use a
combination of fixed and variable compensation programs to reward and incentivize strong performance, and to align the interests of our executives with our stockholders. This compensation philosophy,
and the program structure approved by the compensation committee, is central to our ability to attract, retain and motivate individuals who can achieve the results that our stockholders expect.
Our
compensation committee has determined that our compensation program should be designed to:
-
-
link pay to performance, measured on the corporate and individual level;
-
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reinforce and reflect our business strategy and values;
-
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reward teamwork and integrity;
-
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motivate our employees to achieve meaningful results in support of our Company goals;
-
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keep things simple to promote understanding and enable employees to make informed decisions; and
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retain our management team and our other employees.
Our
executive compensation philosophy is based on the following principles:
-
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Competitive and Fair Compensation.
We believe that the performance of our
Named Executives should be viewed, and their overall compensation should be determined, in the context of our
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industry,
our competitive landscape and our corporate performance. While we do not have an exact formula for allocating between cash and non-cash compensation, we try to balance short-term cash
compensation and long-term equity compensation by offering competitive base salaries, market-competitive benefits and perquisites, annual incentive cash bonus awards and opportunities for financial
growth through our equity incentive programs.
-
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Sustained Performance.
In determining total compensation, we stress a
philosophy that is performance driven. Our Named Executives are primarily rewarded based upon an assessment of corporate performance and secondarily on individual performance. Corporate performance is
evaluated by reviewing the extent to which established corporate goals are met and individual performance is evaluated by reviewing each Named Executive's contributions in the context of the overall
corporate goals. Considerations taken into account in evaluating individual performance include, but are not limited to, an individual's demonstration of leadership, teamwork and operational success
in his or her functional area, as well as across the Company. Our compensation philosophy emphasizing performance permeates total compensation for both executives and non-executives. We believe that
the design of our executive compensation program affects all of our employees and, because the performance of every employee is important to our success, we are cognizant of the effect that executive
compensation may have on other employees.
Compensation
for employees at all levels, including for our Named Executives, includes base salary, annual incentive cash bonuses, annual equity awards and other benefits. Certain
employees, including our Named Executives, are also entitled to specified benefits in connection with a termination of employment or change of control.
Realizable Pay Aligned with Stockholder Value
The Company's stock price has been and may continue to be extremely volatile. This volatility is due in part to regulatory, legal and other
events and factors whose impact on our business is often unrelated or disproportionately related to our operating performance. The current value of outstanding equity awards can fluctuate considerably
over time, falling well above or below the target or reported value of the awards at the time of grant. To help ensure our total compensation program is aligned with performance, our compensation
committee regularly reviews the "realizable value" of equity awards in the context of the overall compensation program and continuing performance of the Company.
We
believe that the compensation of our Named Executives is appropriate and aligned with the interests of our stockholders. In recent years, we have granted stock options and performance
and time based restricted stock and restricted stock units. A substantial portion of total compensation for our Named Executives has been attributable to stock options, the realizable value of which
depends upon an increase in our stock price (and thereby an increase in stockholder value) following the date of grant. We have also granted restricted stock and restricted stock units to our Named
Executives subject to performance-based vesting conditions tied to attaining goals that our compensation committee believes are key to creating value for our stockholders and restricted stock and
restricted stock units subject to time-based vesting conditions which encourages stock ownership by and retention of our Named Executives. In February 2018, our equity awards for Named Executives,
other than our CEO, consisted solely of restricted stock units subject to time-based vesting conditions to encourage stock ownership and retention of such Named Executives during the period in which
the company conducted the strategic review of its business. In February 2019, our equity awards for Named Executives consisted solely of stock options, in recognition of the grants of time-based
restricted stock units in October 2018 in connection with our restructuring.
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CEO Pay for Performance
A significant portion of Mr. Wheeler's compensation is variable, performance-based compensation that we consider to be "at risk" because
it is dependent on the success of our Company. At-risk compensation includes long-term equity based awards, the value of which depends on sustained, long-term increases in the price of our common
stock, and annual
incentive cash bonuses, which require attaining meaningful performance goals established by our board of directors with the intent of driving short-term value creation for our stockholders. The
following charts and tables highlight the alignment between Mr. Wheeler's compensation and our Company's performance.
2018 Pay Mix*
-
*
-
Percentages
calculated from values reported in the 2018 Summary Compensation Table.
We
believe that the design of our compensation program, heavily weighted towards performance-based vehicles, provides a strong linkage between the level of actual pay delivered and our
performance. As the table above demonstrates, 69% of Mr. Wheeler's 2018 compensation was granted in the form of equity-based awards which are tied to the future appreciation in value of our
stock and 14% of Mr. Wheeler's 2018 compensation was based on actual performance tied to the achievement of annual targets under our 2018 bonus program. This strong focus on aligning pay and
performance is a foundation of our executive compensation philosophy.
The
following chart illustrates the alignment over the past five years of Mr. Wheeler's total compensation (as reported in the Summary Compensation Table) and our total
stockholder return (presented on an indexed basis, reflecting the value of $100 invested in our stock on December 31,
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2013
as measured based on the closing price of our common stock on the final day of each indicated year).
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2013
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2014
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2015
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2016
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2017
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2018
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CEO Pay ($000s)
|
|
$
|
2,858
|
|
$
|
3,921
|
|
$
|
5,345
|
|
$
|
4,161
|
|
$
|
4,785
|
|
$
|
4,610
|
|
Indexed TSR 12/31
|
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$
|
100.00
|
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$
|
68.10
|
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$
|
83.94
|
|
$
|
85.12
|
|
$
|
78.90
|
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$
|
62.44
|
|
We
have also examined Mr. Wheeler's realizable pay and our Company's performance relative to our selected peer group, which is described below under the heading "Use
of Competitive Market Compensation Data". We have ranked Mr. Wheeler's three-year total realizable pay for 2016-18 relative to his counterparts in our peer group and compared the result to our
rank in total stockholder return versus the stockholder return of our peers over the same period. Realizable pay includes cumulative salary and bonus paid for the past three years, plus the value of
stock options, performance-based restricted stock and stock units, time-based restricted stock and restricted stock units granted during the same period, valued based on the Company's stock price on
December 31, 2018. The following chart illustrates that we fall squarely within the "zone of alignment" that has been identified by certain corporate governance advocates as a key measure of
pay for performance.
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2016-2018 CEO Realizable Pay Rank versus 2018 Total Stockholder Return Rank
3-Year CEO Realizable Pay Rank versus Total Stockholder Return Rank
Stock Ownership Guidelines
We maintain a stock ownership and retention program for our executive officers and directors to ensure that each of our executive officers and
directors has a long-term equity stake in Momenta, to more closely align the interests of the executive officers and directors with those of our stockholders and to further promote our commitment to
sound corporate governance.
Under
the program's guidelines:
-
-
our President and CEO is expected to hold shares of our common stock having an aggregate value equal to or greater than three times his or her
annual base salary;
-
-
other executive officers are expected to hold shares of our common stock having an aggregate value equal to or greater than their annual base
salary; and
-
-
non-employee directors are expected to hold shares of our common stock having an aggregate value equal to or greater than three times their
then current annual base retainer for general board membership, excluding committee retainers, per-meeting or other similar fees.
Our
executive officers and directors are expected to comply with these guidelines within five years of becoming subject to the guidelines. Until the applicable minimum share requirement
is achieved, each executive officer and director is required to retain all shares of restricted stock, and shares of stock received pursuant to restricted stock units upon the lapse of vesting
restrictions, net of shares surrendered or sold to pay applicable withholding taxes. In addition, in the event that the applicable minimum share requirement is not achieved as of each determination
date, such executive officer or director may not exercise and sell any stock options (other than to sell or surrender shares for payment of any taxes related to stock option exercises), including
without limitation any sales pursuant to a
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10b5-1
plan. Once an executive officer or director has met these guidelines, he or she must continue to satisfy the guidelines so long as he or she remains subject to the guidelines. Each executive
officer and director's satisfaction of the minimum share requirement is measured on at least an annual basis. Shares that count toward satisfaction of the guidelines
include:
-
-
shares of common stock owned outright by the executive officer or director or his or her spouse or minor children;
-
-
shares of common stock held in trust for the benefit of the executive officer or director or his or her spouse or minor children; and
-
-
restricted stock or restricted stock units for which applicable restrictions have lapsed.
The
minimum share requirement may be waived, at the discretion of the compensation committee, if compliance would create severe hardship or would prevent an executive officer or director
from complying with a court order. As of April 1, 2019, all but two executive officers and all but three directors met the ownership requirements under the program. The officers and directors
who are not in compliance are within the 5 year compliance period.
Determining Executive CompensationRoles and Process
Utilizing the philosophy and background outlined above, our compensation committee determines the parameters of the executive compensation
program, including appropriate target levels and performance measures, and administers our executive compensation program. This section discusses in greater detail the roles and process underlying the
application of our executive compensation philosophy.
Role of the Compensation Committee
The compensation committee oversees all aspects of our director, officer and other executive compensation policies. Based on the recommendations
of the CEO and our Chief Human Resources and Infrastucture Officer regarding each Named Executive's compensation, except his and her own, the compensation committee determines the compensation of each
of these Named
Executives. The chairman of the board and the chair of the compensation committee evaluate the CEO's performance, utilizing input from the board of directors and from selected executive officers, and
make recommendations to the compensation committee, which then determines the CEO's compensation. The compensation committee also directly engages the services of an independent compensation
consultant to assist the committee in evaluating its compensation practices and levels, as described in more detail under the caption "Role of External Advisors" below.
Role of CEO in Compensation Decisions
Our CEO, together with our executive team, contributes to the establishment of annual corporate and business goals against which our annual
incentive awards are measured. These goals are presented to our compensation committee, which reviews and finalizes the goals and recommends them for approval by our board of directors. The CEO's role
in the compensation process continues with eliciting "360-performance reviews" of our Named Executives, which are evaluations submitted by employees who interact with the Named Executives. Each Named
Executive also completes a written self-assessment which is submitted to the CEO. The CEO incorporates the feedback from the 360-performance reviews, the self-assessment and the CEO's own evaluation
into formal written evaluations of the Named Executives. Based on the results of this performance review, the CEO then works directly with our Chief Human Resources and Infrastucture Officer to
provide comprehensive recommendations for salary changes, individual components of annual incentive cash bonus awards and
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equity
awards for each of our Named Executives. These recommendations are presented to our compensation committee for review, modification and approval.
At
the request of the compensation committee, our CEO attends all or portions of periodic meetings of the compensation committee, but does not attend portions of any meeting in which the
compensation committee discusses the CEO's compensation or performance.
The
compensation committee has delegated to our CEO the authority to make stock option grants under our 2013 Incentive Award Plan to newly-hired employees below the senior director level
based on a number of options within a range as set forth in a matrix previously approved by the board of directors. All other stock options and all grants of restricted stock and restricted stock
units are granted by the compensation committee.
Role of External Advisors
To assist the compensation committee in discharging its responsibilities, the compensation committee directly engages its independent
compensation consultant, Radford, to evaluate aspects of our compensation practices, provide advice and make recommendations in determining compensation practices and levels, including making
recommendations for our board of directors and executive compensation programs. As part of this process, members of the compensation committee reviewed materials provided by Radford and had the
opportunity to meet independently with Radford periodically throughout the year to discuss our executive and director compensation and to receive input and advice. The compensation committee has
access to all written reports and studies provided by Radford to management. In 2018 and early 2019, Radford analyzed the share reserve under our 2013 Incentive Award Plan and projected share usage
and updated its reports on director compensation and on executive compensation philosophy, base salary, merit increases and allocation of equity stock grants. In addition, Radford also assisted us in
identifying our median employee and determining the ratio of our median employee's annual total compensation to the annual total compensation of our CEO as described in more detail below under "CEO
Pay Ratio." After review and consultation with Radford, the compensation committee has determined that Radford is independent and there is no conflict of interest resulting from retaining Radford
currently or during the year ended December 31, 2018. In reaching these conclusions, the compensation committee considered the factors set forth in Exchange Act Rule 10C-1 and Nasdaq
listing standards.
We
do not use "internal pay equity" as a constraint on compensation paid to our CEO or other Named Executives. Such systems typically put a ceiling on part or all of an executive's
compensation based on a specified multiple of compensation awarded to another executive or a class of employees of the Company. Our management and our compensation committee do not believe that such
limitations are an appropriate way to make compensation decisions for our executives. Instead, we rely on the judgment of the compensation committee, after considering recommendations from management
and external advisors, available market data and evaluations of executive performance, in the context of a program that is weighted heavily in favor of performance-based compensation for our Named
Executives.
Use of Competitive Market Compensation Data
We maintain a peer group for executive compensation and performance reference purposes. The compensation committee, in consultation with
Radford, determines the peer group using benchmarks based on revenue, market capitalization, and number of employees, among other factors, and uses a multi-year period perspective in determining the
peer group.
Prior
to 2018, we had the dual focus of developing novel drug candidates and nurturing a portfolio of biosimilar and complex generic products and product candidates. In 2018, we
initiated our Strategic Review and ultimately determined that shareholder value could be enhanced by shifting our future investments to fully support development of our promising novel drug portfolio
and our two late stage biosimilar product candidates. Accordingly, following the Strategic Review, we made the decision in September of 2018 to implement the Restructuring.
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In connection with the Restructuring, we terminated all future development of any new or early stage biosimilar and complex generic products, retained our
commercial partnership for our two approved complex generic products and retained two of our late stage biosimilar candidates. Additionally, as part of the Restructuring, we announced in October 2018
that we would reduce our workforce by approximately 50%, which reduction was substantially completed as of the end of 2018.
We
believe that our current business, which now consists of two product areas, novel therapeutic candidates and legacy products, which include complex generics and our remaining late
stage biosimilar product candidates, is more complex than many companies of our size and impacts the quality and breadth of talent that we need to attract and retain. We often compete for talent with
much larger companies that have greater resources.
While
the compensation committee reviews the peer group annually and makes changes when appropriate, we do not believe it is appropriate or informative to necessarily change our peer
group or our benchmark practices to reflect changes in the development stages of our programs or periods of significantly high or low free cash flows. We believe that doing so would not accurately
reflect our current or long-term talent and performance requirements. In addition, there is potential that frequent
changes to our peer group or benchmarking practices could result in dramatic swings in compensation that do not reflect long-term performance leading to long-term stockholder value. Instead, we
generally take a longer term, multi-year perspective in reviewing and selecting our peer group companies.
In
selecting our peer group companies for 2018, the compensation committee considered a recommendation provided by Radford, as well as our 2017 peer group, the peer group companies
selected for us by certain proxy advisory firms and the guidelines used by those proxy advisory firms in selecting peer companies. In making its recommendation, Radford first identified all publicly
traded, U.S.-headquartered companies in the biotechnology/pharmaceutical industry at the commercial stage. Based on projected company metrics for 2018, Radford next refined the pool to reflect
companies with 100 to 1,000 employees, annual revenue between $50 million and $500 million and a market capitalization between $400 million to $3.6 billion. Radford next
qualitatively evaluated and refined the pool to identify each company's business focus and corporate strategy, where publicly disclosed. Radford then selected companies that were similar to us, taking
into consideration the business focus, financial profile and stage of development for each company. Based on its analysis and Radford's recommendation, in September 2017 the compensation committee
approved the following 2018 peer group companies:
2018 Peer Group Companies
|
|
|
Acorda Therapeutics, Inc.
|
|
INSYS Therapeutics Inc.
|
AMAG Pharmaceuticals, Inc.
|
|
Ironwood Pharmaceuticals, Inc.
|
Arena Pharmaceuticals, Inc.
|
|
Keryx Biopharmaceuticals, Inc.
|
Depomed, Inc.
|
|
Lexicon Pharmaceuticals, Inc.
|
Emergent BioSolutions, Inc.
|
|
Retrophin, Inc.
|
Exelixis, Inc.
|
|
Nektar Therapeutics
|
Halozyme Therapeutics, Inc.
|
|
Spectrum Pharmaceuticals, Inc.
|
Horizon Pharma plc
|
|
Supernus Pharmaceuticals, Inc.
|
ImmunoGen, Inc.
|
|
The Medicines Company
|
Impax Laboratories, Inc.
|
|
Vanda Pharmaceuticals Inc.
|
The
2018 peer group included certain changes from the 2017 peer group as follows: the removal of Merrimack Pharmaceuticals, Inc. and the addition of Lexicon
Pharmaceuticals, Inc. and Retrophin, Inc. Merrimack Pharmaceuticals, Inc. was removed from the peer group because its market capitalization fell below Radford's suggested range
and it sold its commercial product. The two companies were added to the peer group as they fell within the financial parameters described above.
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In
anticipation of our Restructuring, which changed our business significantly, in selecting our peer group companies for 2019, the compensation committee considered recommendations
provided by Radford. In making its recommendations, Radford first identified all publicly traded, U.S.-headquartered companies in the biotechnology/pharmaceutical industry at the Phase 2
development stage with multiple product candidates or a revenue stream. Based on projected company metrics for 2019, Radford next refined the pool to reflect companies with 40 to 330 employees, annual
revenue between $15 million and $135 million and a market capitalization between $500 million to $2 billion. Radford next qualitatively evaluated and refined the pool to
identify each company's business focus and corporate strategy, where publicly disclosed. Radford then selected companies that were similar to us, taking into consideration the business focus,
financial profile and stage of development for each company. In addition, the compensation committee also considered our 2018 peer group and Radford's recommendations regarding inclusion of those
companies, along with the guidelines used by certain proxy advisory firms in selecting peer companies for us. Based on its analysis and Radford's recommendations, in March 2018 the compensation
committee approved the following 2019 peer group companies:
2019 Peer Group Companies
|
|
|
Adaptimmune Therapeutics plc
|
|
Iovance Biotherapeutics, Inc.
|
Akebia Therapeutics, Inc.
|
|
Jounce Therapeutics, Inc.
|
Arena Pharmaceuticals, Inc.
|
|
Mirati Therapeutics, Inc.
|
Audentes Therapeutics, Inc.
|
|
MyoKardia, Inc.
|
CytomX Therapeutics, Inc.
|
|
Prothena Corporation plc
|
Enanta Pharmaceuticals, Inc.
|
|
Reata Pharmaceuticals, Inc.
|
Epizyme, Inc.
|
|
Sangamo Therapeutics, Inc.
|
Five PrimeTherapeutics, Inc.
|
|
Wave Life Sciences, Inc
|
GlycoMimetics, Inc.
|
|
Xencor Inc.
|
ImmunoGen, Inc.
|
|
ZIOPHARM Oncology Inc.
|
As
a result of our Restructuring, the 2019 peer group only retained Arena Pharmaceuticals, Inc. and ImmunoGen, Inc from our 2018 peer group. The additional 18 companies were added
to the peer group as they fell within the financial parameters described above.
In
addition to using a peer group for executive compensation and performance reference purposes, we also utilize survey data, which has the advantage of including data on executive
positions beyond what is available in public filings. In the fall of 2017 we obtained survey data from the Radford survey of the life sciences industry in Massachusetts and nationally. These surveys
were utilized in determining the appropriate target level for Company-wide salary increases for 2018 to assure that our proposed merit salary increases were competitive in the market. The projected
merit salary increases for 2018 contained in the surveys was 3.5% of current base salaries. Using this data, we set a Company-wide target level of merit salary increase for 2018 at 3.5%, with the
goals of retaining a competitive compensation package and aligning internal compensation with external candidates coming into the Company. In addition, in February of 2018, Radford utilized survey
data from the same survey source used in 2017 in recommending 2018 compensation levels for the Named Executives. At such time, the compensation committee decided to maintain the then current base
salaries for our Named Executives until the impact of our Strategic Review could be factored into the decision, but considered Radford's recommendations in approving base salary increases in September
2018. With respect to the survey data
presented to the compensation committee, the identities of the individual companies included in the survey were not provided to the compensation committee, and the compensation committee did not refer
to individual compensation information for such companies.
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We
believe that the use of both publicly available peer group data and survey data provides us a comprehensive set of compensation data from which we are able to make informed
compensation decisions and remain competitive with the market in which we compete for executive talent. While the compensation committee generally targets the 50
th
percentile of
our peer group when determining compensation for our Named Executives, the compensation committee does not establish compensation levels based directly on benchmarking. The compensation committee
instead relies on the judgment of its members in making compensation decisions regarding base salaries, target bonus levels and long-term equity incentive awards after reviewing our performance and
carefully evaluating each Named Executive's performance during the year, leadership qualities, business responsibilities, role within the Company, industry experience, career and tenure with the
Company, knowledge, qualifications, overall impact on the organization, current compensation arrangements, and long-term potential to enhance stockholder value. The compensation committee does not
guarantee that any executive will receive a specific market-derived compensation level.
In
addition, the compensation committee determines the mix of compensation elements, such as base salary, annual incentive cash bonuses and equity awards, on an individual basis. The
compensation committee allocates total compensation between cash and equity compensation based on a number of objective and subjective factors, including the role and responsibilities of the
individual executive, and the nature of the behaviors the incentives are intended to motivate. The compensation committee's philosophy is to balance compensation between long-term and short-term
compensation, cash and non-cash compensation, and to take into the account the roles and responsibilities of the individual officer.
Elements of Compensation
Our compensation program is designed to reward each Named Executive based upon achievement of a combination of corporate and individual
performance objectives. Corporate performance is evaluated by reviewing the extent to which pre-set goals are met, which generally include the achievement of specified operational and financial goals;
specific research, clinical, regulatory, commercial or compliance milestones; and business development and financing initiatives. We evaluate individual performance in part by reviewing the extent to
which individual performance facilitated the achievement of our corporate and business goals.
The
compensation package offered to each Named Executive is comprised of a combination of:
-
-
base salary;
-
-
annual incentive cash bonus awards;
-
-
annual equity awards;
-
-
other benefits, such as health, dental, disability and life insurance; and
-
-
severance and change of control agreements.
Base Salary
Base salaries for our Named Executives are set at levels intended to reflect the scope of each Named Executive's leadership qualities, business
responsibilities, role within the Company, industry experience, career and tenure with the Company, knowledge, qualifications, overall impact on the organization, current compensation arrangements,
and long-term potential to enhance stockholder value. In setting base salary, our compensation committee reviews salary levels in effect for comparable positions within our peer group companies and
also survey data of comparable positions within our industry. We believe that base salaries are a fundamental element of our executive
compensation program because they provide a stable source of income for our Named Executives at a competitive
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level.
Base salaries are reviewed at least annually by our compensation committee and are adjusted from time to time to ensure that our executive compensation structure remains aligned with our
compensation objectives and to reward individual performance when warranted. The compensation committee generally targets base salaries for our Named Executives at the
50
th
percentile of our peer group.
2018 Base Salary.
In February 2018, the compensation committee reviewed the salaries of the Named Executives and did not approve
an increase at that
time as it was decided to maintain the same compensation levels until the impact of our ongoing strategic business review could be factored into the decision. Effective January 1, 2018,
Ms. Robertson, who was not a Named Executive at such time, received a merit increase of 2.3% to her base salary. In connection with the Restructuring, the compensation committee increased base
salaries for each of our Named Executives, except for Messrs. Wheeler and Storer, in September 2018. The increases were determined following consideration of the expanded responsibilities of
the Named Executives following the Restructuring, the promotions of Ms. Robertson and Drs. Kwon and Manning, the compensation committee's review of industry trends in base salary increases as
discussed in "Use of Competitive Market Compensation Data", and individual performance reviews of the Named Executives. The following table sets forth the base salary increases approved by the
compensation committee effective October 5, 2018:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2017
Base Salary ($)
|
|
2018
Base Salary ($)
|
|
Increase (%)
|
|
Craig A. Wheeler
|
|
|
750,000
|
|
|
750,000
|
|
|
|
|
Michelle Robertson
|
|
|
280,000
|
(1)
|
|
350,000
|
|
|
25
|
|
Santiago Arroyo
|
|
|
440,000
|
(2)
|
|
450,000
|
|
|
2.3
|
%
|
Young Kwon
|
|
|
403,150
|
|
|
440,000
|
|
|
9.1
|
|
Anthony Manning
|
|
|
351,050
|
|
|
380,000
|
|
|
8.2
|
%
|
Scott M. Storer
|
|
|
420,000
|
|
|
420,000
|
(3)
|
|
|
|
-
(1)
-
Ms. Robertson
commenced her employment with us in May 2017. $280,000 represents the base salary payable to Ms. Robertson pursuant to the terms of her
employment agreement.
-
(2)
-
Dr. Arroyo
commenced his employment with us in June 2017. $440,000 represents the base salary payable to Dr. Arroyo pursuant to the terms of his
employment agreement.
-
(3)
-
Mr. Storer
ceased his employment with us in October 2018. $420,000 represents his annual base salary up to such date.
2019 Base Salary.
The compensation committee reviewed the salaries of the Named Executives at its February 2019 meeting and
determined to maintain
the base salaries that had been increased in October 2018 for all of the Named Executives other than Mr. Wheeler and to maintain Mr. Wheeler's based salary at his 2017 level.
Annual Incentive Cash Bonus
We use annual incentive cash bonuses to motivate and reward our Named Executives to achieve and exceed specified goals on an annual basis.
Annual incentive cash bonuses are determined based on our achievement of corporate performance targets and individual contribution toward those corporate goals. Our corporate goals are typically
focused upon the achievement of specific research, clinical, regulatory, commercial, financial, compliance or operational milestones. We consider these goals to be difficult to attain, conducive to
the creation of stockholder value and designed to contribute to our current and future financial success. The goals we believe will have the greatest impact on stockholder value during the performance
period receive the heaviest weighting.
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Table of Contents
Under
our annual incentive cash bonus program, corporate goals are proposed by management, then reviewed and adopted by the compensation committee. Corporate goals are based on metrics
or events that we believe will lead to increases in stockholder value over the one-year performance period. Each corporate goal is assigned a percentage weighting and consists of three achievement
milestones that correspond to achievement levels of 75%, 100% and 125%, respectively, of the goal. Achievement milestones for any corporate goal may represent different levels of achievement of the
same condition or event, cumulative achievement of similar conditions or events, or may be independent conditions or events that are separately achievable. Our compensation committee retains
discretion to set achievement levels for each corporate goal along a continuous range from 50% to 150% of the target level to more accurately reflect, where appropriate, extenuating or mitigating
factors, extraordinary circumstances or other considerations relating to the achievement of one or more milestones for each goal or the resulting value of such achievement to stockholders and the
Company.
The
compensation committee approves an aggregate amount to fund all bonus payments to all employees, which we refer to as the annual bonus pool, based on our achievement of corporate
goals. For example, if we were to achieve 70% for each of our corporate goals, the annual bonus pool would be equal to 70% of the aggregate target bonuses for all employees.
The
CEO's annual incentive cash bonus award is determined based entirely upon the achievement of corporate goals. In the case of our other Named Executives, 75% of their annual incentive
cash bonus awards is determined based upon the achievement of corporate goals and 25% upon the subjective analysis of their individual performance in relation to the corporate goals as determined by
their performance review. The individual performance component of these bonuses is also adjusted by the percentage achievement of corporate goals. The individual performance reviews are presented to
our compensation committee along with compensation recommendations. However, the compensation committee makes the final determination of each Named Executive's individual achievement level
subjectively, based on its own analysis of performance and not formulaically by reference to pre-determined performance objectives.
Target
bonuses for 2018 were 80% of base salary for our CEO, and 40% of base salary for our other Named Executives. In October 2018, in connection with the promotion of
Ms. Robertson to the position of Chief Financial Officer, the compensation committee approved an increase to Ms. Robertson's target bonus from 30% to 40% of her base salary, effective as
of October 5, 2018. Each other Named Executive's target bonus remained at the same level as in 2017. The CEO has a maximum bonus opportunity equal to 150% of his base salary, as required by his
employment agreement. Our other Named Executives do not have specified maximum bonus opportunities. Bonuses, if any, are determined and paid on an annual basis after completion of the fiscal year in
which bonuses are earned. The 2018 corporate goals and their respective weightings were:
-
-
maximizing our GLATOPA 20 mg/mL and GLATOPA 40 mg/mL programs based on achievements in revenue and regulatory milestones (10%);
-
-
enhancing the value of biosimilar products based on clinical trial advancement, regulatory and partnership milestones (30%);
-
-
developing our novel therapeutics programs based on clinical trial milestones (30%);
-
-
expanding our novel therapeutics programs based on clinical trial and collaboration milestones (20%); and
-
-
achieving financial discipline goals (10%).
In
assessing the achievement of these goals, the compensation committee considered the recommendations of our CEO, who, with input from other executive officers, reviewed the Company's
performance against the goals and made recommendations to the board of directors and the
34
Table of Contents
compensation
committee. The compensation committee also considered assessments and guidance by the science committee relating to the achievement of technical and scientific goals. In December 2018,
the compensation committee met and determined achievement of the corporate goals was 95%, as set forth in the chart below. In reviewing this determination, the compensation committee noted the
particular events that significantly impacted performance in 2018, including our Strategic Review, Restructuring and equity financing completed in December 2018. Utilizing its discretion, the
compensation committee determined the overall corporate goal achievement level for Mr. Wheeler to be 105% in recognition of Mr. Wheeler overseeing such significant non-recurring factors
in 2018 against the achievement of corporate goal percentage. The achievement of corporate goals was determined as follows:
|
|
|
|
|
|
|
|
|
|
|
Corporate Goal
|
|
Percentage
Value (%)
|
|
Actual Level of
Achievement (%)
|
|
Percentage
Earned (%)
|
|
Maximizing Glatopa programs
|
|
|
10
|
%
|
|
125
|
%
|
|
12.5
|
%
|
Enhancing value of our biosimilars
|
|
|
30
|
%
|
|
75
|
%
|
|
22.5
|
%
|
Advancing novel therapeutic programs
|
|
|
30
|
%
|
|
100
|
%
|
|
30
|
%
|
Expanding novel therapeutics programs
|
|
|
20
|
%
|
|
100
|
%
|
|
20
|
%
|
Financial discipline goals
|
|
|
10
|
%
|
|
100
|
%
|
|
10
|
%
|
Total
|
|
|
100
|
%
|
|
|
|
|
95
|
%
|
In
February 2019, the compensation committee reviewed the performance recommendation for each of Ms. Robertson, Dr. Arroyo, Dr. Manning and Dr. Kwon as
submitted by the CEO and our Chief Human Resources and Infrastructure Officer. Individual performance was assessed, in part, on the Named Executive's contribution towards achievement of corporate
goals, managerial and departmental success and leadership within the organization, including their contributions to the particular events that significantly impacted performance in 2018, including our
Strategic Review, Restructuring and equity financing completed in December 2018.
Based
on the assessment of overall achievement level and the subjective analysis of individual performance, we paid bonuses to our Named Executives for their performance in 2018
representing the following percentages of base salary and target bonus payment as of December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Target Bonus
as a
Percentage of
Base Salary
(%)
|
|
Target Bonus
Payment
(at 100%)
($)
|
|
Corporate
Goal
Component
as a
Percentage of
Target Bonus
(%)
|
|
Individual
Performance
Component
as a
Percentage of
Target Bonus
(%)
|
|
Corporate
Goal
Achievement
Level
(%)
|
|
2018 Bonus
Payment
($)
|
|
2018 Bonus
Payment as a
Percentage of
Target Bonus
Payment
(at 100%)
(%)
|
|
Craig A. Wheeler
|
|
|
80
|
|
|
600,000
|
|
|
100
|
|
|
|
|
|
105
|
|
|
630,000
|
|
|
105
|
|
Michelle Robertson
|
|
|
40
|
|
|
140,000
|
|
|
75
|
|
|
25
|
|
|
95
|
|
|
147,000
|
|
|
105
|
|
Santiago Arroyo
|
|
|
40
|
|
|
180,000
|
|
|
75
|
|
|
25
|
|
|
95
|
|
|
189,000
|
|
|
105
|
|
Anthony Manning
|
|
|
40
|
|
|
152,000
|
|
|
75
|
|
|
25
|
|
|
95
|
|
|
152,000
|
|
|
100
|
|
Young Kwon
|
|
|
40
|
|
|
176,000
|
|
|
75
|
|
|
25
|
|
|
95
|
|
|
202,400
|
|
|
115
|
|
Mr. Storer
was not eligible to receive an annual bonus for 2018 because he terminated employment during 2018. However, pursuant to the terms of his separation and release
agreement entered into with him in connection with his termination, as part of his cash severance, Mr. Storer received an amount equal to the greater of (i) his target bonus for 2018 or
(ii) the annual bonus paid to him in 2017.
Equity Awards
Compensation for employees, including our Named Executives, also includes equity awards designed to align the long-term interests of our
employees and our stockholders, to reward the
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Table of Contents
achievement
of individual performance goals and to assist in the retention of employees and executives. Prior to 2017, we historically provided annual grants of time-based stock options and restricted
stock to our Named Executives. Beginning in 2017, our compensation committee elected to replace our annual restricted stock awards with awards of restricted stock units. Each restricted stock unit
represents the right to receive one share of our common stock or, at the administrator's discretion, its cash value equivalent shortly following vesting. In February 2018, our equity awards for our
CEO were in the standard format from prior years, with half of the grant value in restricted stock units subject to time based vesting and the balance in stock options. Given the uncertainty resulting
from the Strategic Review, the equity awards in February 2018 to our Named Executives consisted solely of restricted stock units subject to time based vesting conditions to encourage stock ownership
and retention of such Named Executives. In October 2018, given the expanded responsibilities and business uncertainties resulting from the Restructuring, coupled with declining stock values, the
compensation committee determined to grant additional time based restricted stock units to our executives, including Named Executives, except for Mr. Wheeler, to enhance our ability to retain
our critical executives. In February 2019, our compensation committee determined to award to our Named Executives only stock options given the award of time based restricted stock units in October
2018.
We
have historically maintained at least one outstanding long-term performance based grant of restricted stock for our executives and employees, vesting of which is subject to the
achievement of conditions we expect will require several years to attain and will create significant value for our stockholders, such as receipt of approval for a specific product from governmental
entities. Consequently, we make performance based equity grants less frequently than time-based equity grants. The Restructuring eliminated the potential of any future value for executives and
employees under performance based equity awards made under our 2016 plan. Accordingly, a new plan was put in place for our employees and executives in October 2018 and all Named Executives, except for
Mr. Wheeler, received grants of PSUs under the plan. At such time, the compensation committee determined to defer granting any performance based or time based equity awards to our CEO, in part
to determine how the retention of executives and a financing of the company after our Restructuring proceeded. In December 2018, after the successful completion of our equity financing and evidence of
the stabilization of the executive team, the compensation committee determined to make an equity grant to our CEO limited to performance based restricted stock units to further align CEO equity awards
with stockholder value.
The
compensation committee does not use a quantitative formula to determine the size of annual equity awards for our Named Executives. The compensation committee intends that the annual
aggregate value of awards (using the Black Scholes model in the case of options) to the Named Executives will be targeted at the 50
th
percentile of our peer group, with an
opportunity to achieve above or below that amount based on performance. Our equity grants awarded in 2019 for 2018 performance positioned our Named Executives approximately in the
50
th
percentile of our peer group.
Annual Equity Awards for 2018 Performance.
At its meeting in February 2019, our compensation committee reviewed proposed equity awards
for 2018
performance of our currently serving Named Executives and approved the following awards of stock options, which vest as to 25% of the shares on
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the
first anniversary of the date of grant and an additional 6.25% of the shares at the end of each successive three-month period thereafter:
|
|
|
|
|
Name
|
|
Shares of Common Stock
Underlying Stock Options
(#)
|
|
Craig A. Wheeler
|
|
|
491,000
|
|
Michelle Robertson
|
|
|
97,000
|
|
Santiago Arroyo
|
|
|
130,000
|
|
Young Kwon
|
|
|
135,000
|
|
Anthony Manning
|
|
|
106,000
|
|
Annual Equity Awards for 2017 Performance.
At its meeting in February 2018, our compensation committee reviewed proposed equity awards
for 2017
performance of the Named Executives and approved the following awards of stock options and restricted stock units:
|
|
|
|
|
|
|
|
Name
|
|
Shares of Common Stock
Underlying Stock Options
(#)
|
|
Restricted
Stock Units
(#)
|
|
Craig A. Wheeler
|
|
|
197,500
|
(1)
|
|
98,750
|
(1)
|
Michelle Robertson
|
|
|
|
|
|
9,740
|
(2)
|
Scott M. Storer
|
|
|
|
|
|
55,000
|
(2)
|
Santiago Arroyo
|
|
|
|
|
|
50,000
|
(2)
|
Young Kwon
|
|
|
|
|
|
55,000
|
(2)
|
Anthony Manning
|
|
|
|
|
|
50,000
|
(2)
|
-
(1)
-
The
awards vest as to 25% of the shares on the first anniversary of the date of grant and an additional 6.25% of the shares vest at the end of each successive
three-month period thereafter.
-
(2)
-
The
restricted stock units vest as to 50% of the shares on the first anniversary of the grant date and as to the remaining 50% of the shares on the second
anniversary of the grant date, subject to accelerated vesting in the event the Named Executive's employment with us is terminated without "cause" or the Named Executive resigns for "good reason" (as
such terms are defined in the Named Executive's employment agreement). The Retirement Policy (as defined and described below in "Other Elements of Compensation and Perquisites-Equity Award Retirement
Policy") does not apply to these restricted stock unit awards.
October 2018 Retention and Incentive Awards.
On October 17, 2018, the Compensation Committee determined that as a result of the
Restructuring,
it was desirable to grant equity awards to all of our employees, including our then-serving Named Executives, in order to retain and incentivize them to
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implement
our new strategy. The equity awards granted to our Named Executives consisted of PSUs and time-based restricted stock units as follows:
|
|
|
|
|
|
|
|
Name
|
|
Target
Performance-based
Restricted
Stock Units
(#)(1)
|
|
Time-Based
Restricted
Stock Units
(#)(2)
|
|
Craig A. Wheeler*
|
|
|
334,000
|
|
|
|
|
Michelle Robertson
|
|
|
60,000
|
|
|
39,000
|
|
Santiago Arroyo
|
|
|
60,000
|
|
|
56,000
|
|
Young Kwan
|
|
|
60,000
|
|
|
56,000
|
|
Anthony Manning
|
|
|
60,000
|
|
|
56,000
|
|
-
*
-
Mr. Wheeler's
PSU award was granted on December 21, 2018.
-
(1)
-
The
PSUs are eligible to vest in amounts up to 150% of the target number of PSUs based on the Company's achievement of up to three clinical or regulatory milestones
prior to October 17, 2022. The PSUs vest as to: (i) 25% of the target number of PSUs on the date the first milestone is achieved; (ii) 25% of the target number of PSUs on the
first anniversary of the date the first milestone is achieved; (iii) 25% of the target number of PSUs on the date the second milestone is achieved; (iv) 25% of the target number of PSUs
on the first anniversary of the date the second milestone is achieved; (v) 25% of the target number of PSUs on the date the third milestone is achieved; and (vi) 25% of the target number
of PSUs on the first anniversary of the date the third milestone is achieved, provided that if any milestone is achieved prior to October 17, 2019, the PSUs eligible to vest upon such
achievement shall vest on October 17, 2019. In addition, the PSUs will accelerate with respect to 25% of the target number of PSUs as of the date of a transfer to a third party of the Company's
program, business line or business division principally responsible for the product that is subject to an applicable milestone (a "Program Transfer") (or as of October 17, 2019 if the Program
Transfer occurs prior to October 17, 2019) and with respect to 25% of the target number of PSUs as of the first anniversary of the Program Transfer. The PSUs will also vest as to 150% of the
target number of PSUs in the event of a termination without "cause" on or after the first anniversary of the grant date and within 12 months following a change in control.
-
(2)
-
The
time-based restricted stock units vest as to 25% of the shares on the first anniversary of the date of grant and an additional 6.25% of the shares vest at the
end of each successive three-month period thereafter.
Timing and Pricing of Equity Grants.
The annual equity grant date for all eligible employees, including the Named Executives, is the
date of the
regularly scheduled meeting of the compensation committee following completion of company-wide performance reviews, which meeting date is generally set a year in advance. The grant date coincides with
our calendar-year-based performance management cycle, allowing us to deliver the equity awards close in time to performance assessments, which increases the impact of the awards by strengthening the
link between pay and performance.
Aside
from the annual equity grant to employees, it has been our policy that equity awards be granted:
-
-
to non-employee members of the board of directors, on the date of the scheduled board meeting coinciding with our annual stockholders' meeting
each calendar year; and
-
-
to newly-hired employees on the date of the next scheduled meeting of the compensation committee occurring after their date of hire.
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Initial
stock option grants typically vest as to 25% of the shares subject to such option one year from the date of grant and 6.25% of the shares subject to such option on a quarterly
basis thereafter. Annual restricted stock and restricted stock unit awards have historically vested as to 25% of the shares on the first anniversary of the date of grant and an additional 6.25% of the
shares at the end of each successive three-month period thereafter. Annual option awards have historically vested quarterly over a four-year period commencing three months from the date of grant. Due
to the uncertainties surrounding our strategic business review, in February 2018 we made a one-time change to our annual stock grants to improve retention. Accordingly, our annual restricted stock
unit awards granted to our Named Executives, other than our CEO, in February 2018 for 2017 performance vest as to 50% of the shares on each of the first and second anniversaries of the date of grant,
subject to accelerated vesting in the event the Named Executive is terminated without cause or resigns for good reason. In February 2019, our annual grants of stock options vested as to 25% of the
shares on the first anniversary of the date of grant and an additional 6.25% of the shares at the end of each successive three-month period thereafter. Awards granted to our employees, directors or
consultants after June 9, 2015 are generally subject to a minimum one year vesting requirement, subject to certain exceptions set forth in our 2013 Incentive Award Plan.
The
compensation committee sets the exercise price of all employee stock options to equal the closing price of our common stock on The Nasdaq Global Select Market on the date of grant.
Other Elements of Compensation and Perquisites
We maintain broad-based benefits that are provided to eligible employees, including health, dental, life and disability insurance and a 401(k)
plan. Our Named Executives are eligible to participate in our employee benefit plans, on the same basis as other employees. In order to attract and retain our employees and provide benefits packages
aligned with market levels, we provide our Named Executives and other employees the following benefits and perquisites:
Medical Insurance.
We provide to our Named Executives, their spouses, domestic partners and children, health, dental and vision
insurance coverage
that we generally make available to other employees. We pay a portion of the premiums for this insurance for all employees.
Life and Disability Insurance.
We provide each Named Executive disability and/or life insurance that we may from time to time make
available to other
executive employees. Our CEO also receives reimbursement for an additional $3.0 million life and disability policy, capped at a maximum of $5,000 of reimbursement premium per year, as well as a
tax gross up for such reimbursements.
Defined Contribution Plan.
We offer a Section 401(k) Savings/Retirement Plan, or the 401(k) Plan, a tax-qualified retirement plan,
to eligible
employees. The 401(k) Plan permits eligible employees to defer up to 60% of their annual eligible compensation, subject to certain limitations imposed by the Internal Revenue Code, or the Code. In any
plan year, we contribute a matching contribution equal to 50% of the first 6% of a participant's contributions. Our contribution is subject to vesting at the rate of 25% at the end of each year over
the first four years of employment. All of our Named Executives participated in the 401(k) Plan in 2018.
Employee Stock Purchase Plan.
We also offer an Employee Stock Purchase Plan, or the ESPP. The ESPP is available to all of our employees,
including
the Named Executives, who work more than 20 hours per week and five months per year. Under the ESPP, eligible participants purchase shares of our common stock at a discount of 15% from the fair
market value of the lower of the beginning date or end date of the applicable purchase period. The purchase dates occur on the last business day of January and July of each year. To pay for the
shares, each participant may authorize periodic payroll deductions ranging from 1% to 15% of his or her cash compensation, subject to certain limitations imposed by applicable law. All payroll
deductions collected from the participant during a plan period are
automatically applied to the purchase of common stock on that period's purchase date provided the participant remains an eligible employee and has not withdrawn from the ESPP prior to that date.
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Table of Contents
Equity Award Retirement Policy.
In December 2016 our board of directors adopted the Momenta Pharmaceuticals, Inc. Equity Award
Retirement
Policy, or the Retirement Policy, to provide for the treatment of time-based stock options and restricted stock units upon a participant's qualifying retirement from the Company. Under the Retirement
Policy, following the qualifying retirement of any employee of the Company, including the Named Executives, or non-employee member of the board of directors, the participant's then-outstanding
time-based options and restricted stock units will continue to vest during the one year period following the retirement date. In addition, the participant will have until the first anniversary of the
retirement date (or 90 days following the date an option becomes first exercisable if such date is within the 90 days preceding the first anniversary of the retirement date) to exercise
any vested options, except that no option may be exercised following the date upon which it would have expired under the applicable option award agreement if the participant had remained in service
with us. Benefits under the Retirement Policy are conditioned upon a participant's continued compliance with any non-competition, non-solicitation, confidentiality or other restrictive covenants with
the Company.
Other.
We make available certain other perquisites or fringe benefits to all eligible employees, including the Named Executives, such
as tuition
reimbursement, parking subsidies, mass transit commuting passes, professional society dues, gym subsidies, cell phones and food and recreational fees incidental to official company functions,
including board meetings. The CEO is also entitled to financial and tax advice, up to a maximum of $5,000 annually, and reimbursement of expenses in connection with using his personal airplane for
business purposes (up to the equivalent amount of a first class commercial fare per usage).
Severance and Change of Control Benefits
Pursuant to employment agreements, our Named Executives are entitled to specified benefits in the event of the termination of their employment
under specified circumstances, including termination without cause or for good reason.
We
believe that severance protections, particularly in the context of a change of control transaction, can play a valuable role in attracting and retaining executive officers, are an
important part of an executive's total compensation package and are consistent with competitive practices. We believe that the occurrence, or potential occurrence, of a change of control will create
uncertainty regarding the continued employment of our Named Executives. This uncertainty results from the fact that many change of control transactions result in significant organizational changes,
particularly at the senior executive level. Our practice, in the case of our employment agreements, has been to structure these change of control benefits as "double trigger" benefits. In other words,
the change of control does not itself trigger benefits; rather, benefits are paid only if the employment of the Named Executive is terminated during the twelve-month (or 24-month in the case of the
CEO) period after the change of control. We believe a "double trigger" benefit maximizes stockholder value because it prevents an unintended windfall to executives in the event of a friendly change of
control, while still providing them appropriate incentives to cooperate in negotiating any change of control in which they believe they may lose their jobs. Because we believe that a termination by
the executive for good reason is conceptually the same as a termination by us without cause, and that in the context of a change of control potential acquirers would otherwise have an incentive to
constructively terminate the executive's employment to avoid paying severance, we provide severance benefits in these circumstances. We have provided more detailed information about these benefits,
along with estimates of their value under various circumstances, under the captions "Employment, Severance and Change of Control Arrangements" and "Potential Termination and
Change of Control Payments" below.
Tax Considerations
Section 162(m) of the Code places a limit of $1,000,000 per person on the amount of compensation that a public company may deduct in any
year with respect to certain current or former
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executive
officers. Our compensation committee has not adopted a policy requiring all executive compensation to be fully deductible, but reviews the potential impact of section 162(m)
periodically and reserves the right to use its judgment to authorize compensation payments that may be subject to the section 162(m) limitation when it believes these payments are appropriate.
Risk Assessment of Compensation Policies and Programs
We periodically assess our compensation policies and programs for purposes of determining the relationship of such policies and programs to our
enterprise risks. This assessment typically occurs in connection with the establishment of corporate goals and annual incentive programs for our employees. We do not believe that our compensation
policies or programs create risks that are reasonably likely to have a material adverse effect on us.
WE WILL FURNISH, WITHOUT CHARGE, A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2018, INCLUDING CONSOLIDATED FINANCIAL STATEMENTS
BUT NOT INCLUDING EXHIBITS, TO EACH OF OUR STOCKHOLDERS OF RECORD ON APRIL 23, 2019, AND TO EACH BENEFICIAL STOCKHOLDER ON THAT DATE UPON WRITTEN REQUEST MADE TO ALEJANDRA CARVAJAL, SECRETARY, MOMENTA
PHARMACEUTICALS, INC., 301 BINNEY STREET, CAMBRIDGE, MASSACHUSETTS 02142. A REASONABLE FEE WILL BE CHARGED FOR COPIES OF REQUESTED EXHIBITS.
PLEASE VOTE YOUR SHARES OVER THE INTERNET OR BY TELEPHONE AS PROVIDED IN THE INSTRUCTIONS SET FORTH ON THE ENCLOSED PROXY CARD, OR COMPLETE, DATE, SIGN AND RETURN
THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER
MAILINGS.
By
Order of the Board of Directors,
Craig
A. Wheeler
President and Chief Executive Officer
Cambridge,
Massachusetts
April 26,
2019
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EXHIBIT A
MOMENTA PHARMACEUTICALS, INC.
2013 INCENTIVE AWARD PLAN
(as amended and restated)
ARTICLE 1.
PURPOSE
The purpose of the Momenta Pharmaceuticals, Inc. 2013 Incentive Award Plan (as it may be amended or restated from time to time, the
"
Plan
") is to promote the success and enhance the value of Momenta Pharmaceuticals, Inc. (the
"
Company
") by linking the individual interests of the members of the Board, Employees, and Consultants to those of Company stockholders and by providing
such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability
to motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon whose judgment, interest, and special effort the successful conduct of the Company's operation is
largely dependent.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise.
The singular pronoun shall include the plural where the context so indicates.
2.1 "
Administrator
" shall mean the entity that conducts the general administration of the Plan as provided in
Article 12. With reference to the duties of the Committee under the Plan which have been delegated to one or more persons pursuant to Section 12.6, or as to which the Board has assumed,
the term "Administrator" shall refer to such person(s) unless the Committee or the Board has revoked such delegation or the Board has terminated the assumption of such duties.
2.2 "
Applicable Accounting Standards
" shall mean Generally Accepted Accounting Principles in the United States, International
Financial Reporting Standards or such other accounting principles or standards as may apply to the Company's financial statements under United States federal securities laws from time to time.
2.3 "
Applicable Law
" shall mean any applicable law, including without limitation: (i) provisions of the Code, the
Securities Act, the Exchange Act and any rules or regulations thereunder; (ii) corporate, securities, tax or other laws, statutes, rules, requirements or regulations, whether federal, state,
local or foreign; and (iii) rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded.
2.4 "
Award
" shall mean an Option, a Restricted Stock award, a Restricted Stock Unit award, a Performance Award, a Dividend
Equivalents award, a Stock Payment award or a Stock Appreciation Right, which may be awarded or granted under the Plan (collectively, "
Awards
").
2.5 "
Award Agreement
" shall mean any written notice, agreement, terms and conditions, contract or other instrument or
document evidencing an Award, including through electronic medium, which shall contain such terms and conditions with respect to an Award as the Administrator shall determine consistent with the Plan.
2.6 "
Award Limit
" shall mean with respect to Awards that shall be payable in Shares or in cash, as the case may be, the
respective limit set forth in Section 3.3.
2.7 "
Board
" shall mean the Board of Directors of the Company.
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2.8 "
Change in Control
" shall mean and includes each of the following:
(a) A
transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and
Exchange Commission) whereby any "person" or related "group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its
subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a "person" that, prior to such transaction, directly or indirectly controls, is controlled by, or is
under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing
more than 50% of the total combined voting power of the Company's securities outstanding immediately after such acquisition; or
(b) During
any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a
Director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in Section 2.8(a) or 2.8(c)) whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the two-year
period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(c) The
consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger,
consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company's assets in any single transaction or series of related
transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(i) which
results in the Company's voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being
converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially
all of the Company's assets or otherwise succeeds to the business of the Company (the Company or such person, the "
Successor Entity
")) directly or
indirectly, at least a majority of the combined voting power of the Successor Entity's outstanding voting securities immediately after the transaction, and
(ii) after
which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity;
provided, however
, that no person or group shall be treated
for purposes of this Section 2.8(c)(ii) as beneficially owning 50% or more of the
combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or
(d) The
liquidation or dissolution of the Company.
Notwithstanding
the foregoing, if a Change in Control constitutes a payment event with respect to any portion of an Award that provides for the deferral of compensation and is subject to
Section 409A of the Code, the transaction or event described in subsection (a), (b), (c) or (d) with respect to such Award (or portion thereof) must also constitute a
"change in control event," as defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent required by Section 409A.
The
Committee shall have full and final authority, which shall be exercised in its sole discretion, to determine conclusively whether a Change in Control of the Company has occurred
pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a
determination of whether
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a
Change in Control is a "change in control event" as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.
2.9 "
Code
" shall mean the Internal Revenue Code of 1986, as amended from time to time, together with the regulations and
official guidance promulgated thereunder.
2.10 "
Committee
" shall mean the Compensation Committee of the Board, or another committee or subcommittee of the Board or the
Compensation Committee, appointed as provided in Section 12.1.
2.11 "
Common Stock
" shall mean the common stock of the Company, par value $0.0001 per share.
2.12 "
Company
" shall have the meaning set forth in Article 1.
2.13 "
Consultant
" shall mean any consultant or adviser engaged to provide services to the Company or any Subsidiary that
qualifies as a consultant under the applicable rules of the Securities and Exchange Commission for registration of shares on a Form S-8 Registration Statement.
2.14 "
Director
" shall mean a member of the Board, as constituted from time to time.
2.15 "
Disability
" shall mean that the Holder is either (a) unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, or
(b) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve
months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company. For purposes of the Plan, a Holder shall
be deemed to have incurred a Disability if the Holder is determined to be totally disabled by the Social Security Administration or in accordance with the applicable disability insurance program of
the Company's, provided that the definition of "disability" applied under such disability insurance program complies with the requirements of this definition.
2.16 "
Dividend Equivalent
" shall mean a right to receive the equivalent value (in cash or Shares) of dividends paid on
Shares, awarded under Section 9.2.
2.17 "
DRO
" shall mean a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security
Act of 1974, as amended from time to time, or the rules thereunder.
2.18 "
Effective Date
" shall mean March 5, 2013.
2.19 "
Eligible Individual
" shall mean any person who is an Employee, a Consultant or a Non-Employee Director, as determined
by the Committee.
2.20 "
Employee
" shall mean any officer or other employee (as determined in accordance with Section 3401(c) of the Code
and the Treasury Regulations thereunder) of the Company or of any Subsidiary.
2.21 "
Equity Restructuring
" shall mean a nonreciprocal transaction between the Company and its stockholders, such as a stock
dividend, stock split, spin-off or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other securities of the Company) or the share price of
Common Stock (or other securities) and causes a change in the per-share value of the Common Stock underlying outstanding Awards.
2.22 "
Exchange Act
" shall mean the Securities Exchange Act of 1934, as amended from time to time.
2.23 "
Expiration Date
" shall have the meaning given to such term in Section 13.1.
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2.24 "
Fair Market Value
" shall mean, as of any given date, the value of a Share determined as follows:
(a) If
the Common Stock is listed on any (i) established securities exchange (such as the New York Stock Exchange, the NASDAQ Global Market and the NASDAQ Global
Select Market), (ii) national market
system or (iii) automated quotation system on which the Shares are listed, quoted or traded, its Fair Market Value shall be the closing sales price for a Share as quoted on such exchange or
system for such date or, if there is no closing sales price for a Share on the date in question, the closing sales price for a Share on the last preceding date for which such quotation exists, as
reported in
The Wall Street Journal
or such other source as the Administrator deems reliable; or
(b) If
the Common Stock is neither listed on an established securities exchange, national market system or automated quotation system, its Fair Market Value shall be
established by the Administrator in good faith.
2.25 "
Full Value Award
" shall mean any Award other than an Option or a Stock Appreciation Right and that is settled by the
issuance of Shares.
2.26 "
Greater Than 10% Stockholder"
shall mean an individual then owning (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary corporation (as defined in Section 424(f) of the Code) or parent corporation
thereof (as defined in Section 424(e) of the Code).
2.27 "
Holder
" shall mean a person who has been granted an Award.
2.28 "
Incentive Stock Option
" shall mean an Option that is intended to qualify as an incentive stock option and conforms to
the applicable provisions of Section 422 of the Code.
2.29 "
Non-Employee Director
" shall mean a Director of the Company who is not an Employee.
2.30 "
Non-Employee Director Equity Compensation Policy
" shall have the meaning set forth in Section 4.6.
2.31 "
Non-Qualified Stock Option
" shall mean an Option that is not an Incentive Stock Option.
2.32 "
Option
" shall mean a right to purchase Shares at a specified exercise price, granted under Article 5. An Option
shall be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided
,
however
, that
Options granted to Non-Employee Directors and Consultants shall only be Non-Qualified Stock Options.
2.33 "
Option Term
" shall have the meaning set forth in Section 5.4.
2.34 "
Parent
" shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities
ending with the Company if each of the entities other than the Company beneficially owns, at the time of the determination, securities or interests representing at least fifty percent (50%) of the
total combined voting power of all classes of securities or interests in one of the other entities in such chain.
2.35 "
Performance Award
" shall mean a cash bonus award, stock bonus award, performance award or incentive award that is paid
in cash, Shares or a combination of both, awarded under Section 9.1.
2.36 "
Performance Criteria
" shall mean the criteria (and adjustments) that the Committee selects for an Award for purposes of
establishing the Performance Goal or Performance Goals for a Performance Period, determined as follows:
(a) The
Performance Criteria that may be used to establish Performance Goals may include, but is not limited to, the following: (i) net earnings (either before or
after one or more of the following: (A) interest, (B) taxes, (C) depreciation and (D) amortization); (ii) gross or net sales or
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revenue;
(iii) net income (either before or after taxes); (iv) adjusted net income; (v) operating earnings or profit; (vi) cash flow (including, but not limited to,
operating cash flow and free cash flow); (vii) return on assets; (viii) return on capital; (ix) return on stockholders' equity; (x) total stockholder return;
(xi) return on sales; (xii) gross or net profit or operating margin; (xiii) costs; (xiv) expenses; (xv) working capital; (xvi) earnings per share;
(xvii) adjusted earnings per share; (xviii) price per share; (xix) regulatory body approval for commercialization of a product; (xx) implementation, completion or
attainment of objectively determinable objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; (xxi) market share; and
(xxii) economic value, any of which may be measured either in absolute terms or as compared to any incremental increase or decrease or as compared to results of a peer group or to market
performance indicators or indices.
(b) The
Administrator, in its sole discretion, may provide that one or more adjustments shall be made to one or more of the Performance Goals. Such adjustments may include
one or more of the following:
(i) items related to a change in accounting principle; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other
non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period;
(vii) items related to the disposal of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under
Applicable Accounting Standards; (ix) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; (x) any other items
of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments,
(xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company's core, on-going business activities; (xiv) items related
to acquired in-process research and development; (xv) items relating to changes in tax laws; (xvi) items relating to major licensing or partnership arrangements; (xvii) items
relating to asset impairment charges; (xviii) items relating to gains or losses for litigation, arbitration and contractual settlements; or (xix) items relating to any other unusual or
nonrecurring events or changes in Applicable Law, accounting principles or business conditions.
2.37 "
Performance Goals
" shall mean, for a Performance Period, one or more goals established in writing by the Administrator
for the Performance Period based upon one or more Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms
of overall Company performance or the performance of a Subsidiary, division, business unit, or an individual.
2.38 "
Performance Period
" shall mean one or more periods of time, which may be of varying and overlapping durations, as the
Administrator may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Holder's right to, and the payment of, an Award.
2.39 "
Performance Stock Unit
" shall mean a Performance Award awarded under Section 9.1 which is denominated in units
of value including dollar value of Shares.
2.40 "
Permitted Transferee
" shall mean, with respect to a Holder, any "family member" of the Holder, as defined in the
instructions to Form S-8 under the Securities Act.
2.41 "
Plan
" shall have the meaning set forth in Article 1.
2.42 "
Prior Plans
" shall mean, collectively, the following plans of the Company: the Amended and Restated 2002 Stock
Incentive Plan and the 2004 Stock Incentive Plan, in each case as such plan may be or may have been amended from time to time.
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2.43 "
Program
" shall mean any program adopted by the Administrator pursuant to the Plan containing the terms and conditions
intended to govern a specified type of Award granted under the Plan and pursuant to which such type of Award may be granted under the Plan.
2.44 "
Restricted Stock
" shall mean Common Stock awarded under Article 7 that is subject to certain restrictions and
may be subject to risk of forfeiture or repurchase.
2.45 "
Restricted Stock Units
" shall mean the right to receive Shares awarded under Article 8.
2.46 "
Securities Act
" shall mean the Securities Act of 1933, as amended.
2.47 "
Shares
" shall mean shares of Common Stock.
2.48 "
Stock Appreciation Right
" shall mean a stock appreciation right granted under Article 10.
2.49 "
Stock Appreciation Right Term
" shall have the meaning set forth in Section 10.4.
2.50 "
Stock Payment
" shall mean (a) a payment in the form of Shares, or (b) an option or other right to
purchase Shares, as part of a bonus, deferred compensation or other arrangement, awarded under Section 9.3.
2.51 "
Subsidiary
" shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of
entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing
at least fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
2.52 "
Substitute Award
" shall mean an Award granted under the Plan upon the assumption of, or in substitution for,
outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock;
provided
,
however
, that in no event shall the term "Substitute Award" be construed to refer to an award
made in connection with the cancellation and repricing of an Option or Stock Appreciation Right.
2.53 "
Termination of Service
" shall mean:
(a) As
to a Consultant, the time when the engagement of a Holder as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without cause,
including, without limitation, by resignation, discharge, death or retirement, but excluding terminations where the Consultant simultaneously commences or remains in employment or service with the
Company or any Subsidiary.
(b) As
to a Non-Employee Director, the time when a Holder who is a Non-Employee Director ceases to be a Director for any reason, including, without limitation, a termination
by resignation, failure to be elected, death or retirement, but excluding terminations where the Holder simultaneously commences or remains in employment or service with the Company or any Subsidiary.
(c) As
to an Employee, the time when the employee-employer relationship between a Holder and the Company or any Subsidiary is terminated for any reason, including, without
limitation, a termination by resignation, discharge, death, disability or retirement; but excluding terminations where the Holder simultaneously commences or remains in employment or service with the
Company or any Subsidiary.
The
Administrator, in its sole discretion, shall determine the effect of all matters and questions relating to any Termination of Service, including, without limitation, the question of
whether a Termination of Service resulted from a discharge for cause and all questions of whether particular leaves of absence constitute a Termination of Service;
provided
,
however
, that, with respect to Incentive Stock Options, unless the Administrator otherwise
provides in the terms of the Program, the Award
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Agreement
or otherwise, or as otherwise required by Applicable Law, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Service only if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then-applicable regulations and revenue rulings under said Section. For purposes of the Plan, a Holder's employee-employer relationship or consultancy
relations shall be deemed to be
terminated in the event that the Subsidiary employing or contracting with such Holder ceases to remain an Subsidiary following any merger, sale of stock or other corporate transaction or event
(including, without limitation, a spin-off).
ARTICLE 3.
SHARES SUBJECT TO THE PLAN
3.1
Number of Shares
.
(a) Subject
to adjustment as provided in Section 3.1(b) and Section 13.2, the aggregate number of Shares which may be issued or transferred pursuant to Awards
under the Plan is the sum of (i) 21,200,000 Shares, plus (ii) the number of Shares subject to any option or stock appreciation right granted under a Prior Plan on or prior to
December 31, 2012 to the extent such Shares become available for issuance under this Plan pursuant to Section 3.1(b) below thereafter, plus (iii) (A) 1.35 Shares multiplied
by the number of Shares subject to any award granted under a Prior Plan on or prior to December 31, 2012 other than an option or stock appreciation right to the extent such Shares became
available for issuance under this Plan pursuant to Section 3.1(b) below prior to June 9, 2015 and (B) 1.67 Shares multiplied by the number of Shares subject to any award granted
under a Prior Plan on or prior to December 31, 2012 to the extent such Shares become available for issuance under this Plan pursuant to Section 3.1(b) below on or after June 9,
2015;
provided
,
however
, that in no event shall the number of Shares which shall become available for
issuance or transfer pursuant to Awards under the Plan pursuant to clauses (ii) and (iii) above exceed an aggregate of 5,288,836 Shares. Any Shares that are subject to Awards of Options
or Stock Appreciation Rights granted under the Plan shall be counted against this limit as one (1) Share for every one (1) Share granted. Any Shares that are subject to Awards granted
under the Plan that are other than Options or Stock Appreciation Rights shall be counted against this limit as 1.35 Shares if the Award is granted prior to June 9, 2015 and as 1.67 Shares if
the Award is granted on or after June 9, 2015 for every one (1) Share granted. After the date that the Plan is approved by the Company's shareholders, no awards may be granted under any
Prior Plan, however, any awards under any Prior Plan that are outstanding as of the date that the Plan is approved by the Company's shareholders shall continue to be subject to the terms and
conditions of such Prior Plan. Notwithstanding anything in this Section 3.1 to the contrary, the number of Shares that may be issued or transferred pursuant to Awards under the Plan (including
Incentive Stock Options) shall not exceed an aggregate of 26,488,836 Shares, subject to adjustment pursuant to Section 13.2.
(b) If
(i) any Shares subject to an Award are forfeited or expire or an Award is settled for cash (in whole or in part), or (ii) after the Effective Date any
Shares subject to an award granted under any Prior Plan on or prior to December 31, 2012 are forfeited or expire or an award granted under any Prior Plan on or prior to December 31, 2012
is settled for cash (in whole or in part), the Shares subject to such Award or award under the Prior Plan shall, to the extent of such forfeiture, expiration or cash settlement, again be available for
Awards under the Plan, in accordance with Section 3.1(d) below.
Notwithstanding anything to the contrary contained herein, the following Shares shall not be added to the Shares authorized for grant under Section 3.1(a) and shall not be available for future
grants of Awards: (i) Shares tendered by a Holder or withheld by the Company in payment of the exercise price of an Option; (ii) Shares tendered by the Holder
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or
withheld by the Company to satisfy any tax withholding obligation with respect to an Award; (iii) Shares subject to a Stock Appreciation Right that are not issued in connection with the
stock settlement of the Stock Appreciation Right on exercise thereof; and (iv) Shares purchased on the open market with the cash proceeds from the exercise of Options. Any Shares repurchased by
the Company under Section 7.4 at the same or lower price paid by the Holder so that such Shares are returned to the Company shall again be available for Awards. The payment of Dividend
Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the Shares available for issuance under the Plan. Notwithstanding the provisions of this
Section 3.1(b), no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422
of the Code.
(c) Substitute
Awards shall not reduce the Shares authorized for grant under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or
with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the
shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in
such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan
and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available Shares shall not be made after the date awards or grants could have been made under the
terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employed by or providing services to the Company or its Subsidiaries
immediately prior to such acquisition or combination.
(d) Any
Shares that again become available for grant pursuant to this Section 3.1 shall be added back as: (i) one (1) Share if such Shares were subject
to an Option or a Stock Appreciation Right granted under the Plan or an option or stock appreciation right granted under any Prior Plan, (ii) as 1.35 Shares if such Shares were subject to
Awards other than Options or Stock Appreciation Rights granted under the Plan prior to June 9, 2015 or if such Shares became available for grant under the Plan pursuant to
Section 3.1(b)(ii) prior to June 9, 2015, and (iii) as 1.67 Shares if such Shares were subject to Awards other than Options or Stock Appreciation Rights granted under the Plan on
or after June 9, 2015 or if
such Shares became available for grant under the Plan pursuant to Section 3.1(b)(ii) on or after June 9, 2015.
3.2
Stock Distributed.
Any Shares distributed pursuant to an Award may consist, in whole or in part, of
authorized and unissued Common Stock, treasury Common Stock or Common Stock purchased on the open market.
3.3
Limitation on Number of Shares Subject to Awards.
Notwithstanding any provision in the Plan to the contrary,
and subject to Section 13.2, the maximum aggregate number of Shares with respect to one or more Awards that may be granted to any one person other than a Non-Employee Director during any
calendar year shall be 2,500,000, the maximum aggregate number of Shares with respect to one or more Awards that may be granted to a Non-Employee Director during any calendar year shall be 100,000 and
the maximum aggregate amount of cash that may be paid in cash to any one person during any calendar year with respect to one or more Awards initially payable in cash shall be five million dollars.
ARTICLE 4.
GRANTING OF AWARDS
4.1
Participation.
The Administrator may, from time to time, select from among all Eligible Individuals, those
to whom an Award shall be granted and shall determine the nature and amount of
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each
Award, which shall not be inconsistent with the requirements of the Plan. Except as provided in Section 4.6 regarding the grant of Awards pursuant to the Non-Employee Director Equity
Compensation Policy, no Eligible Individual shall have any right to be granted an Award pursuant to the Plan.
4.2
Award Agreement.
Each Award shall be evidenced by an Award Agreement that sets forth the terms, conditions
and limitations for such Award, which may include the term of the Award, the provisions applicable in the event of the Holder's Termination of Service, and the Company's authority to
unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet
the applicable provisions of Section 422 of the Code.
4.3
Limitations Applicable to Section 16 Persons.
Notwithstanding any other provision of the Plan, the
Plan, and any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive
rule. To the extent permitted by Applicable Law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
4.4
At-Will Employment; Voluntary Participation.
Nothing in the Plan or in any Program or Award Agreement
hereunder shall confer upon any Holder any right to continue in the employ of, or as a Director or Consultant for, the Company or any Subsidiary, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which rights are hereby expressly reserved, to discharge any Holder at any time for any reason whatsoever, with or without cause, and with or without notice,
or to terminate or change all other terms and conditions of employment or engagement, except to the extent expressly provided otherwise in a written agreement between the Holder and the Company or any
Subsidiary. Participation by each Holder in the Plan shall be voluntary and nothing in the Plan shall be construed as mandating that any Eligible Individual shall participate in the Plan.
4.5
Foreign Holders.
Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws
in countries other than the United States in which the Company and its Subsidiaries operate or have Employees, Non-Employee Directors or Consultants, or in order to comply with the requirements of any
foreign securities exchange, the Administrator, in its sole discretion, shall have the power and authority to: (a) determine which Subsidiaries shall be covered by the Plan;
(b) determine which Eligible Individuals outside the United States are eligible to participate in the Plan; (c) modify the terms and conditions of any Award granted to Eligible
Individuals outside the United States to comply with applicable foreign laws or listing requirements of any such foreign securities exchange; (d) establish subplans and modify exercise
procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such subplans and/or modifications shall be attached to the Plan as appendices);
provided
,
however
, that no such subplans and/or modifications shall increase the share limitations
contained in 3.1 and 3.3; and (e) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory
exemptions or approvals or listing requirements of any such foreign securities exchange. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be
granted, that would violate Applicable Law. For purposes of the Plan, all references to foreign laws, rules, regulations or taxes shall be references to the laws, rules, regulations and taxes of any
applicable jurisdiction other than the United States or a political subdivision thereof.
4.6
Non-Employee Director Awards.
The Administrator, in its sole discretion, may provide that Awards granted to
Non-Employee Directors shall be granted pursuant to a written nondiscretionary formula established by the Administrator (the "
Non-Employee Director Equity Compensation
Policy
"), subject to the limitations of the Plan. The Non-Employee Director Equity Compensation Policy shall
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set
forth the type of Award(s) to be granted to Non-Employee Directors, the number of Shares to be subject to Non-Employee Director Awards (subject to the limits of the Plan), the conditions on which
such Awards shall be granted, become exercisable and/or payable and expire, and such other terms and conditions as the Administrator shall determine in its sole discretion. The Non-Employee Director
Equity Compensation Policy may be modified by the Administrator from time to time in its sole discretion.
4.7
Stand-Alone and Tandem Awards.
Awards granted pursuant to the Plan may, in the sole discretion of the
Administrator, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted
either at the same time as or at a different time from the grant of such other Awards.
ARTICLE 5.
GRANTING OF OPTIONS
5.1
Granting of Options to Eligible Individuals.
The Administrator is authorized to grant Options to Eligible
Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine, which shall not be inconsistent with the Plan.
5.2
Qualification of Incentive Stock Options.
No Incentive Stock Option shall be granted to any person who is
not an Employee of the Company or any subsidiary corporation (as defined in Section 424(f) of the Code) of the Company. No person who qualifies as a Greater Than 10% Stockholder may be granted
an Incentive Stock Option unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. Any Incentive Stock Option granted under the Plan may be modified
by the Administrator, with the consent of the Holder, to disqualify such Option from treatment as an "incentive stock option" under Section 422 of the Code. To the extent that the aggregate
Fair Market Value of stock with respect to which "incentive stock options" (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by a Holder during any calendar year under the Plan, and all other plans of the Company and any parent or subsidiary corporation thereof (each as defined in
Section 424(e) and 424(f) of the Code, respectively), exceeds $100,000, the Options shall be treated as Non-Qualified Stock Options to the extent required by Section 422 of the Code. The
rule set forth in the immediately preceding sentence shall be applied by taking Options and other "incentive stock options" into account
in the order in which they were granted and the Fair Market Value of stock shall be determined as of the time the respective options were granted.
5.3
Option Exercise Price.
The exercise price per Share subject to each Option shall be set by the
Administrator, but shall not be less than 100% of the Fair Market Value of a Share on the date the Option is granted (or, as to Incentive Stock Options, on the date the Option is modified, extended or
renewed for purposes of Section 424(h) of the Code). In addition, in the case of Incentive Stock Options granted to a Greater Than 10% Stockholder, such price shall not be less than 110% of the
Fair Market Value of a Share on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code).
5.4
Option Term.
The term of each Option (the "
Option Term
")
shall be set by the Administrator in its sole discretion;
provided
,
however
, that the Option Term shall
not be more than ten (10) years from the date the Option is granted, or five (5) years from the date an Incentive Stock Option is granted to a Greater Than 10% Stockholder. The
Administrator shall determine the time period, including the time period following a Termination of Service, during which the Holder has the right to exercise the vested Options, which time period may
not extend beyond the last day of the Option Term. Except as limited by the requirements of Section 409A, the Administrator may extend the Option Term of any outstanding Option, and may extend
the time period during which vested Options may be exercised, in connection with any Termination of Service of the Holder, and may amend,
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subject
to Section 13.1, any other term or condition of such Option relating to such a Termination of Service.
5.5
Option Vesting.
(a) The
period during which the right to exercise, in whole or in part, an Option vests in the Holder shall be set by the Administrator and the Administrator may determine
that an Option may not be exercised in whole or in part for a specified period after it is granted. Such vesting may be based on service with the Company or any Subsidiary, any of the Performance
Criteria, or any other criteria selected by the Administrator, and, except as limited by the Plan, at any time after the grant of an Option, the Administrator, in its sole discretion and subject to
whatever terms and conditions it selects, may accelerate the period during which an Option vests.
(b) No
portion of an Option which is unexercisable at a Holder's Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the
Administrator either in the applicable
Program, the Award Agreement evidencing the grant of an Option, or by action of the Administrator following the grant of the Option. Unless otherwise determined by the Administrator in the Award
Agreement or by action of the Administrator following the grant of the Option, the portion of an Option that is unexercisable at a Holder's Termination of Service shall automatically expire thirty
(30) days following such Termination of Service.
5.6
Substitute Awards.
Notwithstanding the foregoing provisions of this Article 5 to the contrary, in the
case of an Option that is a Substitute Award, the price per share of the Shares subject to such Option may be less than the Fair Market Value per share on the date of grant;
provided
that the excess of:
(a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the Shares subject to the
Substitute Award, over (b) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction
giving rise to the Substitute Award, such fair market value to be determined by the Administrator) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by
the Company, over (y) the aggregate exercise price of such shares.
ARTICLE 6.
EXERCISE OF OPTIONS
6.1
Partial Exercise.
An exercisable Option may be exercised in whole or in part. However, an Option shall not
be exercisable with respect to fractional Shares and the Administrator may require that, by the terms of the Option, a partial exercise must be with respect to a minimum number of Shares.
6.2
Manner of Exercise.
Unless otherwise indicated in an Award Agreement, all or a portion of an exercisable
Option shall be deemed exercised upon delivery of all of the following to the Secretary of the Company, the stock administrator of the Company or such other person or entity designated by the
Administrator, or his, her or its office, as applicable:
(a) A
written or electronic notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Holder or other person then entitled to exercise the Option or such portion of the Option;
(b) Such
representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with Applicable Law. The
Administrator, in its sole discretion, may also take whatever additional actions it deems appropriate to effect such compliance including, without
limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars;
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(c) In
the event that the Option shall be exercised pursuant to Section 11.3 by any person or persons other than the Holder, appropriate proof of the right of such
person or persons to exercise the Option, as determined in the sole discretion of the Administrator; and
(d) Full
payment of the exercise price and applicable withholding taxes to the stock administrator of the Company for the Shares with respect to which the Option, or portion
thereof, is exercised, in a manner permitted by 11.1 and 11.2.
6.3
Notification Regarding Disposition.
The Holder shall give the Company prompt written or electronic notice of
any disposition of Shares acquired by exercise of an Incentive Stock Option which occurs within (a) two years from the date of granting (including the date the Option is modified, extended or
renewed for purposes of Section 424(h) of the Code) such Option to such Holder, or (b) one year after the transfer of such Shares to such Holder.
ARTICLE 7.
AWARD OF RESTRICTED STOCK
7.1
Award of Restricted Stock.
(a) The
Administrator is authorized to grant Restricted Stock to Eligible Individuals, and shall determine the terms and conditions, including the restrictions applicable to
each award of Restricted Stock, which terms and conditions shall not be inconsistent with the Plan, and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate.
(b) The
Administrator shall establish the purchase price, if any, and form of payment for Restricted Stock;
provided
,
however
, that if a purchase price is charged,
such purchase price shall be no less than the par value, if any, of the Shares to be purchased, unless
otherwise permitted by Applicable Law. In all cases, legal consideration shall be required for each issuance of Restricted Stock.
7.2
Rights as Stockholders.
Subject to Section 7.4, upon issuance of Restricted Stock, the Holder shall
have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to said Shares, subject to the restrictions in the applicable Program or in each individual Award
Agreement, including the right to receive all dividends and other distributions paid or made with respect to the Shares;
provided
,
however
, that, in the
sole discretion of the Administrator, any extraordinary distributions with respect to the Shares shall be subject to the
restrictions set forth in Section 7.3. In addition, with respect to a share of Restricted Stock, dividends which are paid prior to vesting shall only be paid out to the Holder to the extent
that the vesting conditions are subsequently satisfied and the share of Restricted Stock vests.
7.3
Restrictions.
All shares of Restricted Stock (including any shares received by Holders thereof with respect
to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of the applicable Program or in each individual Award Agreement,
be subject to such restrictions and vesting requirements as the Administrator shall provide. Such restrictions may include, without limitation, restrictions concerning voting rights and
transferability and such restrictions may lapse separately or in combination at such times and pursuant to such circumstances or based on such criteria as selected by the Administrator, including,
without limitation, criteria based on the Holder's duration of employment, directorship or consultancy with the Company, the Performance Criteria, Company performance, individual performance or other
criteria selected by the Administrator. By action taken after the Restricted Stock is issued, the Administrator may, on such terms and conditions as it may determine to be appropriate, accelerate the
vesting of such Restricted Stock by removing any or all of the restrictions imposed by the terms of the applicable Program or Award Agreement. Restricted Stock may not be sold or encumbered until all
restrictions are terminated or expire.
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7.4
Repurchase or Forfeiture of Restricted Stock.
Except as otherwise determined by the
Administrator at the time of the grant of the Award or thereafter, if no price was paid by the Holder for the Restricted Stock, upon a Termination of Service during the applicable restriction period,
the Holder's rights in unvested Restricted Stock then subject to restrictions shall lapse, and such Restricted Stock shall be surrendered to the Company and cancelled without consideration. If a price
was paid by the Holder for the Restricted Stock, upon a Termination of Service during the applicable restriction period, the Company shall have the right to repurchase from the Holder the unvested
Restricted Stock then subject to restrictions at a cash price per share equal to the price paid by the Holder for such Restricted Stock or such other amount as may be specified in the applicable
Program or Award Agreement. Notwithstanding the foregoing, the Administrator, in its sole discretion, may provide that upon certain events, including a Change in Control, the Holder's death,
retirement or disability or any other specified Termination of Service or any other event, the Holder's rights in unvested Restricted Stock shall not lapse, such Restricted Stock shall vest and, if
applicable, the Company shall not have a right of repurchase.
7.5
Certificates for Restricted Stock.
Restricted Stock granted pursuant to the Plan may be evidenced in such
manner as the Administrator shall determine. Certificates or book entries evidencing shares of Restricted Stock shall include an appropriate legend referring to the terms, conditions, and restrictions
applicable to such Restricted Stock. The Company, in its sole discretion, may (a) retain physical
possession of any stock certificate evidencing shares of Restricted Stock until the restrictions thereon shall have lapsed and/or (b) require that the stock certificates evidencing shares of
Restricted Stock be held in custody by a designated escrow agent (which may but need not be the Company) until the restrictions thereon shall have lapsed, and that the Holder deliver a stock power,
endorsed in blank, relating to such Restricted Stock.
7.6
Section 83(b) Election.
If a Holder makes an election under Section 83(b) of the Code to be
taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Holder would otherwise be taxable under
Section 83(a) of the Code, the Holder shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service along with proof
of the timely filing thereof with the Internal Revenue Service.
ARTICLE 8.
AWARD OF RESTRICTED STOCK UNITS
8.1
Grant of Restricted Stock Units.
The Administrator is authorized to grant Awards of Restricted Stock Units
to any Eligible Individual selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator.
8.2
Term.
Except as otherwise provided herein, the term of a Restricted Stock Unit award shall be set by the
Administrator in its sole discretion.
8.3
Purchase Price.
The Administrator shall specify the purchase price, if any, to be paid by the Holder to the
Company with respect to any Restricted Stock Unit award;
provided
,
however
, that value of the
consideration shall not be less than the par value of a Share, unless otherwise permitted by Applicable Law.
8.4
Vesting of Restricted Stock Units.
At the time of grant, the Administrator shall specify the date or dates
on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate, including, without limitation, vesting based upon
the Holder's duration of service to the Company or any Subsidiary, one or more Performance Criteria, Company performance, individual performance or other specific criteria, in each case on a specified
date or dates or over any period or periods, as determined by the Administrator.
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8.5
Maturity and Payment.
At the time of grant, the Administrator shall specify the maturity date applicable to
each grant of Restricted Stock Units, which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the Holder (if permitted by the applicable Award
Agreement);
provided
that, except as otherwise determined by the Administrator, set forth in any applicable Award Agreement, and subject to compliance
with Section 409A of the Code, in no event shall the maturity date relating to each Restricted Stock Unit occur following the later of (a) the 15th day of the third month
following the end of calendar year in which the applicable portion of the Restricted Stock Unit vests; or (b) the 15th day of the third month following the end of the Company's fiscal
year in which the applicable portion of the Restricted Stock Unit vests. On the maturity date, the Company shall, subject to Section 11.4(e), transfer to the Holder one unrestricted, fully
transferable Share for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited, or in the sole discretion of the Administrator, an amount in cash equal to the
Fair Market Value of such Shares on the maturity date or a combination of cash and Common Stock as determined by the Administrator.
8.6
Payment upon Termination of Service.
An Award of Restricted Stock Units shall only be payable while the
Holder is an Employee, a Consultant or a member of the Board, as applicable;
provided
,
however
, that the
Administrator, in its sole discretion, may provide (in an Award Agreement or otherwise) that a Restricted Stock Unit award may be paid subsequent to a Termination of Service in certain events,
including a Change in Control, the Holder's death, retirement or disability or any other specified Termination of Service.
8.7
No Rights as a Stockholder.
Unless otherwise determined by the Administrator, a Holder of Restricted Stock
Units shall possess no incidents of ownership with respect to the Shares represented by such Restricted Stock Units, unless and until such Shares are transferred to the Holder pursuant to the terms of
this Plan and the Award Agreement.
ARTICLE 9.
AWARD OF PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS AND STOCK PAYMENTS
9.1
Performance Awards
.
(a) The
Administrator is authorized to grant Performance Awards, including Awards of Performance Stock Units, to any Eligible Individual. The value of Performance Awards,
including Performance Stock Units, may be linked to any one or more of the Performance Criteria or other specific criteria determined by the Administrator, in each case on a specified date or dates or
over any period or periods and in such amounts as may be determined by the Administrator. Performance Awards, including Performance Stock Unit awards may be paid in cash, Shares, or a combination of
cash and Shares, as determined by the Administrator.
(b) Without
limiting Section 9.1(a), the Administrator may grant Performance Awards to any Eligible Individual in the form of a cash bonus payable upon the attainment
of objective Performance Goals, or such other criteria, whether or not objective, which are established by the Administrator, in each case on a specified date or dates or over any period or periods
determined by the Administrator.
9.2
Dividend Equivalents.
Dividend Equivalents may be granted by the Administrator based on dividends declared
on the Common Stock, to be credited as of dividend payment dates with respect to dividends with record dates that occur during the period between the date an Award is granted to a Holder and the date
such Award vests, is exercised, is distributed or expires, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional Shares by such formula and at such
time and subject to such restrictions and limitations as may be determined by the Administrator. In addition, Dividend Equivalents with respect to an Award (including, without
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limitation,
an Option or Stock Appreciation Right) that are based on dividends paid prior to the vesting of such Award shall only be paid out to the Holder to the extent that the vesting conditions
are subsequently satisfied and the Award vests.
9.3
Stock Payments.
The Administrator is authorized to make Stock Payments to any Eligible Individual. The
number or value of Shares of any Stock Payment shall be determined by the Administrator and may be based upon one or more Performance Criteria or any other specific criteria, including service to the
Company or any Subsidiary, determined by the Administrator. Shares underlying a Stock Payment which is subject to a vesting schedule or other conditions or criteria set by the Administrator shall not
be issued until those conditions have been satisfied. Unless otherwise provided by the Administrator, a Holder of a Stock Payment shall have no rights as a Company stockholder with respect to such
Stock Payment until such time as the Stock Payment has vested and the Shares underlying the Award have been issued to the Holder. Stock Payments may, but are not required to, be made in lieu of base
salary, bonus, fees or other cash compensation otherwise payable to such Eligible Individual.
9.4
Term.
The term of a Performance Award, Dividend Equivalent award and/or Stock Payment award shall be
established by the Administrator in its sole discretion.
9.5
Purchase Price.
The Administrator may establish the purchase price of a Performance Award or Shares
distributed as a Stock Payment award;
provided
,
however
, that value of the consideration shall not be
less than the par value of a Share, unless otherwise permitted by Applicable Law.
9.6
Termination of Service.
A Performance Award, Stock Payment award, and/or Dividend Equivalent award is
distributable only while the Holder is an Employee, Director or Consultant, as applicable. The Administrator, however, in its sole discretion, may provide that the Performance Award, Dividend
Equivalent award, and/or Stock Payment award may be distributed subsequent to a Termination of Service in certain events, including a Change in Control, the Holder's death, retirement or disability or
any other specified Termination of Service.
ARTICLE 10.
AWARD OF STOCK APPRECIATION RIGHTS
10.1
Grant of Stock Appreciation Rights
.
(a) The
Administrator is authorized to grant Stock Appreciation Rights to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it
may determine, which shall not be inconsistent with the Plan.
(b) A
Stock Appreciation Right shall entitle the Holder (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a
specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by
subtracting the exercise price per share of the Stock Appreciation Right from the Fair Market Value on the date of exercise of the Stock Appreciation Right by the number of Shares with respect to
which the Stock Appreciation Right shall have been exercised, subject to any limitations the Administrator may impose. Except as described in (c) below, the exercise price per Share subject to
each Stock Appreciation Right shall be set by the Administrator, but shall not be less than 100% of the Fair Market Value on the date the Stock Appreciation Right is granted.
(c) Notwithstanding
the foregoing provisions of Section 10.1(b) to the contrary, in the case of a Stock Appreciation Right that is a Substitute Award, the price per
share of the Shares subject to such Stock Appreciation Right may be less than 100% of the Fair Market Value per share on the date of grant;
provided
that the excess of: (i) the aggregate Fair Market Value (as of the date such
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Substitute
Award is granted) of the Shares subject to the Substitute Award, over (ii) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate fair market
value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Administrator) of the shares of the predecessor entity
that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such shares.
10.2
Stock Appreciation Right Vesting.
(a) The
period during which the right to exercise, in whole or in part, a Stock Appreciation Right vests in the Holder shall be set by the Administrator and the
Administrator may determine that a Stock Appreciation Right may not be exercised in whole or in part for a specified period after it is granted. Such vesting may be based on service with the Company
or any Subsidiary, any of the Performance Criteria, or any other criteria selected by the Administrator. Except as limited by the Plan, at any time after grant of a Stock Appreciation Right, the
Administrator, in its sole discretion and subject to whatever terms and conditions it selects, may accelerate the period during which a Stock Appreciation Right vests.
(b) No
portion of a Stock Appreciation Right which is unexercisable at a Holder's Termination of Service shall thereafter become exercisable, except as may be otherwise
provided by the Administrator in the applicable Program, the Award Agreement evidencing the grant of a Stock Appreciation Right, or by action of the Administrator following the grant of the Stock
Appreciation Right.
10.3
Manner of Exercise.
All or a portion of an exercisable Stock Appreciation Right shall be deemed exercised
upon delivery of all of the following to the Secretary of the Company, the stock administrator of the Company, or such other person or entity designated by the Administrator, or his, her or its
office, as applicable:
(a) A
written or electronic notice complying with the applicable rules established by the Administrator stating that the Stock Appreciation Right, or a portion thereof, is
exercised. The notice shall be signed by the Holder or other person then entitled to exercise the Stock Appreciation Right or such portion of the Stock Appreciation Right;
(b) Such
representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with Applicable Law. The
Administrator, in its sole discretion, may also take whatever additional actions it deems appropriate to effect such compliance, including, without limitation, placing legends on share certificates
and issuing stop-transfer notices to agents and registrars;
(c) In
the event that the Stock Appreciation Right shall be exercised pursuant to this Section 10.3 by any person or persons other than the Holder, appropriate proof
of the right of such person or persons to exercise the Stock Appreciation Right, as determined in the sole discretion of the Administrator; and
(d) Full
payment of the exercise price and applicable withholding taxes to the stock administrator of the Company for the Shares with respect to which the Stock Appreciation
Right, or portion thereof, is exercised, in a manner permitted by 11.1 and 11.2.
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10.4
Stock Appreciation Right Term.
The term of each Stock Appreciation Right (the
"
Stock Appreciation Right Term
") shall be set by the Administrator in its sole discretion;
provided
,
however
,
that the Stock Appreciation Right Term shall not be more than ten (10) years from the date the Stock Appreciation Right is granted. The
Administrator shall determine the time period, including the time period following a Termination of Service, during which the Holder has the right to exercise the vested Stock Appreciation Rights,
which time period may not extend beyond the last day of the Stock Appreciation Right Term applicable to such Stock Appreciation Right. Except as limited by the requirements of Section 409A of
the Code and regulations and rulings thereunder or the first sentence of this Section 10.4, the Administrator may extend the Stock Appreciation Right Term of any outstanding Stock Appreciation
Right, and may extend the time period during which vested Stock Appreciation Rights may be exercised, in connection with any Termination of Service of the Holder, and may amend, subject to
Section 13.1, any other term or condition of such Stock Appreciation Right relating to such a Termination of Service.
10.5
Payment.
Payment of the amounts payable with respect to Stock Appreciation Rights pursuant to this
Article 10 shall be in cash, Shares (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised), or a combination of both, as determined by the Administrator.
ARTICLE 11.
ADDITIONAL TERMS OF AWARDS
11.1
Payment.
The Administrator shall determine the methods by which payments by any Holder with respect to any
Awards granted under the Plan shall be made, including, without limitation: (a) cash or check, (b) Shares (including, in the case of payment of the exercise price of an Award, Shares
issuable pursuant to the exercise of the Award) or Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences, in each case, having a
Fair Market Value on the date of delivery equal to the aggregate payments required, (c) delivery of a written or electronic notice that the Holder has placed a market sell order with a broker
acceptable to the Company with respect to Shares then issuable upon exercise or vesting of an Award, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale
to the Company in satisfaction of the aggregate payments required;
provided
that payment of such proceeds is then made to the Company upon settlement of
such sale, or (d) any other form of legal consideration acceptable to the Administrator in its sole discretion. The Administrator shall also determine the methods by which Shares shall be
delivered or deemed to be delivered to Holders. Notwithstanding any other provision of the Plan to the contrary, no Holder who is a Director or an "executive officer" of the Company within the meaning
of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment, with
a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
11.2
Tax Withholding.
The Company or any Subsidiary shall have the authority and the right to deduct or
withhold, or require a Holder to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Holder's FICA, employment tax or other social security
contribution obligation) required by law to be withheld with respect to any taxable event concerning a Holder arising as a result of the Plan. The Administrator, in its sole discretion and in
satisfaction of the foregoing requirement, may withhold, or allow a Holder to elect to have the Company withhold, Shares otherwise issuable under an Award (or allow the surrender of Shares). The
number of Shares which may be so withheld or surrendered shall be limited to the number of Shares which have a fair market value on the date of withholding or repurchase equal to the aggregate amount
of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.
The Administrator shall determine the fair market value of the Shares, consistent with applicable provisions
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of
the Code, for tax withholding obligations due in connection with a broker-assisted cashless Option or Stock Appreciation Right exercise involving the sale of Shares to pay the Option or Stock
Appreciation Right exercise price or any tax withholding obligation.
11.3
Transferability of Awards.
(a) Except
as otherwise provided in Section 11.3(b) and 11.3(c):
(i) No
Award under the Plan may be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the
consent of the Administrator, pursuant to a DRO, unless and until such Award has been exercised, or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares
have lapsed;
(ii) No
Award or interest or right therein shall be liable for the debts, contracts or engagements of the Holder or the Holder's successors in interest or shall be subject
to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the
extent that such disposition is permitted by Section 11.3(a)(i); and
(iii) During
the lifetime of the Holder, only the Holder may exercise an Award (or any portion thereof) granted to such Holder under the Plan, unless it has been disposed of
pursuant to a DRO; after the death of the Holder, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Program or Award
Agreement, be exercised by the Holder's personal representative or by any person empowered to do so under the deceased Holder's will or under the then-applicable laws of descent and distribution.
(b) Notwithstanding
Section 11.3(a), the Administrator, in its sole discretion, may determine to permit a Holder to transfer an Award other than an Incentive Stock
Option to any one or more Permitted Transferees, subject to the following terms and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the
Permitted Transferee other than by will or the laws of descent and distribution or pursuant to a DRO; (ii) an Award transferred to a Permitted Transferee shall continue to be subject to all the
terms and conditions of the Award as applicable to the original Holder (other than the ability to further transfer the Award); and (iii) the Holder and the Permitted Transferee shall execute
any and all documents requested by the Administrator, including, without limitation documents to (A) confirm the status of the transferee as a Permitted Transferee,
(B) satisfy any requirements for an exemption for the transfer under Applicable Law and (C) evidence the transfer.
(c) Notwithstanding
Section 11.3(a), a Holder may, in the manner determined by the Administrator, designate a beneficiary to exercise the rights of the Holder and to
receive any distribution with respect to any Award upon the Holder's death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to
all terms and conditions of the Plan and any Program or Award Agreement applicable to the Holder, except to the extent the Plan, the Program and the Award Agreement otherwise provide, and to any
additional restrictions deemed necessary or appropriate by the Administrator. If the Holder is married or a domestic partner in a domestic partnership qualified under Applicable Law and resides in a
community property state, a designation of a person other than the Holder's spouse or domestic partner, as applicable, as the Holder's beneficiary with respect to more than 50% of the Holder's
interest in the Award shall not be effective without the prior written or electronic consent
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of
the Holder's spouse or domestic partner. If no beneficiary has been designated or survives the Holder, payment shall be made to the person entitled thereto pursuant to the Holder's will or the laws
of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Holder at any time;
provided
that the
change or revocation is filed with the Administrator prior to the Holder's death.
11.4
Conditions to Issuance of Shares.
(a) Notwithstanding
anything herein to the contrary, the Company shall not be required to issue or deliver any certificates or make any book entries evidencing Shares
pursuant to the exercise of any Award, unless and until the Board or the Committee has determined, with advice of counsel, that the issuance of such Shares is in compliance with Applicable Law and the
Shares are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Board or the Committee may require
that a Holder make such reasonable covenants, agreements and representations as the Board or the Committee, in its sole discretion, deems advisable in order to comply with Applicable Law.
(b) All
share certificates delivered pursuant to the Plan and all Shares issued pursuant to book entry procedures are subject to any stop-transfer orders and other
restrictions as the Administrator deems
necessary or advisable to comply with Applicable Law. The Administrator may place legends on any share certificate or book entry to reference restrictions applicable to the Shares.
(c) The
Administrator shall have the right to require any Holder to comply with any timing or other restrictions with respect to the settlement, distribution or exercise of
any Award, including a window-period limitation, as may be imposed in the sole discretion of the Administrator.
(d) No
fractional Shares shall be issued and the Administrator, in its sole discretion, shall determine whether cash shall be given in lieu of fractional Shares or whether
such fractional Shares shall be eliminated by rounding down.
(e) Notwithstanding
any other provision of the Plan, unless otherwise determined by the Administrator or required by Applicable Law, the Company shall not deliver to any
Holder certificates evidencing Shares issued in connection with any Award and instead such Shares shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan
administrator).
11.5
Forfeiture and Claw-Back Provisions.
Pursuant to its general authority to determine the terms and
conditions applicable to Awards under the Plan, the Administrator shall have the right to provide, in an Award Agreement or otherwise, or to require a Holder to agree by separate written or electronic
instrument, that: (i) any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of the Award, or upon the receipt or resale of
any Shares underlying the Award, shall be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be forfeited, if
(x) a Termination of Service occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, or (y) the Holder at any time, or during a
specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Administrator or
(z) the Holder incurs a Termination of Service for "cause" (as such term is defined in the sole discretion of the Administrator, or as set forth in a written agreement relating to such Award
between the Company and the Holder). All Awards (including any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of any Award or
upon the receipt or resale of any Shares underlying the Award) shall be subject to the provisions of any claw-back policy implemented by the Company, including, without limitation, any claw-back
policy adopted to comply with the requirements of Applicable Law,
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including
without limitation the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth in such claw-back policy and/or
in the applicable Award Agreement.
11.6
Prohibition on Repricing.
Subject to Section 13.2, the Administrator shall not, without the approval
of the stockholders of the Company, (i) authorize the amendment of any outstanding Option or Stock Appreciation Right to reduce its price per share, or (ii) cancel any Option or Stock
Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying Shares. Subject to
Section 13.2, the Administrator shall have the authority, without the approval of the stockholders of the Company, to amend any outstanding Award to increase the price per share or to cancel
and replace an Award with the grant of an Award having a price per share that is greater than or equal to the price per share of the original Award. Furthermore, for purposes of this
Section 11.6, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the terms of outstanding Awards may not be amended to reduce the exercise price per
share of outstanding Options or Stock Appreciation Rights or cancel outstanding Options or Stock Appreciation Rights in exchange for cash, other Awards or Options or Stock Appreciation Rights with an
exercise price per share that is less than the exercise price per share of the original Options or Stock Appreciation Rights without the approval of the stockholders of the Company.
11.7
Minimum Vesting Provision.
Notwithstanding any other provision of the Plan to the contrary, Awards (other
than cash-settled Awards) made to Employees, Directors or Consultants shall not vest earlier than the date that is one year following the date the Award is approved by the Administrator; provided,
however, that, notwithstanding the foregoing, Awards that result in the issuance of an aggregate of up to 5% of the Shares available pursuant to Section 3.1 may be granted to any one or more
Employees, Directors or Consultants without respect to such minimum vesting provision.
ARTICLE 12.
ADMINISTRATION
12.1
Administrator.
The Committee (or another committee or a subcommittee of the Board assuming the functions of
the Committee under the Plan) shall administer the Plan (except as otherwise permitted herein). To the extent necessary to comply with Rule 16b-3 of the Exchange Act, the Committee (or another
committee or subcommittee of the Board assuming the functions of the Committee under the Plan) shall take all action with respect to such Awards, and the individuals taking such action shall consist
solely of two or more Non-Employee Directors appointed by and holding office at the pleasure of the Board, each of whom is intended to qualify as a "non-employee director" as defined by
Rule 16b-3 of the Exchange Act or any successor rule and, to the extent necessary with respect to Awards made under the Plan prior to November 2, 2017 that are intended to qualify as
"performance-based compensation" as described in Section 162(m)(4)(C) of the Code prior to its repeal or are otherwise not subject to the deduction limitation of Section 162(m) of the
Code because they were granted to an individual who was not considered a "covered employee" under Section 162(m) (such Awards, "
Section 162(m)
Awards
"), an "outside director" for purposes of Section 162(m) of the Code. Additionally, to the extent required by Applicable Law, each of the individuals constituting
the
Committee (or another committee or subcommittee of the Board assuming the functions of the Committee under the Plan) shall be an "independent director" under the rules of any securities exchange or
automated quotation system on which the Shares are listed, quoted or traded. Notwithstanding the foregoing, any action taken by the Committee shall be valid and effective, whether or not members of
the Committee at the time of such action are later determined not to have
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satisfied
the requirements for membership set forth in this Section 12.l or otherwise provided in any charter of the Committee. Except as may otherwise be provided in any charter of the
Committee, appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written or electronic notice to the Board.
Vacancies in the Committee may only be filled by the Board. Notwithstanding the foregoing, (a) the full Board, acting by a majority of its members in office, shall conduct the general
administration of the Plan with respect to Awards granted to Non-Employee Directors and, with respect to such Awards, the terms "Administrator" and "Committee" as used in the Plan shall be deemed to
refer to the Board and (b) the Board or Committee may delegate its authority hereunder to the extent permitted by Section 12.6.
12.2
Duties and Powers of Committee.
It shall be the duty of the Committee to conduct the general administration
of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan, the Program and the Award Agreement, and to adopt such rules for the administration,
interpretation and application of the Plan as are not inconsistent therewith, to interpret, amend or revoke any such rules and to amend any Program or Award Agreement;
provided
that the rights or
obligations of the Holder of the Award that is the subject of any such Program or Award Agreement are not affected adversely
by such amendment, unless the consent of the Holder is obtained or such amendment is otherwise permitted under Section 11.5 or Section 13.10. Any such grant or award under the Plan need
not be the same with respect to each Holder. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In
its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3
under the Exchange Act or any successor rule, or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded are required to be determined in
the sole discretion of the Committee.
12.3
Action by the Committee.
Unless otherwise established by the Board or in any charter of the Committee, a
majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by all members of the
Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to
that member by any officer or other employee of the Company or any Subsidiary, the Company's independent certified public accountants, or any executive compensation consultant or other professional
retained by the Company to assist in the administration of the Plan.
12.4
Authority of Administrator.
Subject to the Company's Bylaws, the Committee's Charter and any specific
designation in the Plan, the Administrator has the exclusive power, authority and sole discretion to:
(a) Designate
Eligible Individuals to receive Awards;
(b) Determine
the type or types of Awards to be granted to each Eligible Individual;
(c) Determine
the number of Awards to be granted and the number of Shares to which an Award will relate;
(d) Determine
the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, purchase price, any
Performance Criteria, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or
waivers thereof, and any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines;
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(e) Determine
whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Shares, other
Awards, or other property,or an Award may be canceled, forfeited, or surrendered;
(f) Prescribe
the form of each Award Agreement, which need not be identical for each Holder;
(g) Decide
all other matters that must be determined in connection with an Award;
(h) Establish,
adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
(i) Interpret
the terms of, and any matter arising pursuant to, the Plan, any Program or any Award Agreement;
(j) Make
all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan; and
(k) Accelerate
wholly or partially the vesting or lapse of restrictions of any Award or portion thereof at any time after the grant of an Award, subject to whatever terms
and conditions it selects and Section 13.2.
12.5
Decisions Binding.
The Administrator's interpretation of the Plan, any Awards granted pursuant to the Plan,
any Program, any Award Agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding and conclusive on all parties.
12.6
Delegation of Authority.
To the extent permitted by Applicable Law, the Board or Committee may from time to
time delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards or to take other administrative actions pursuant to this
Article 12;
provided
,
however
, that in no event shall an officer of the Company be delegated the
authority to grant awards to, or amend awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act, (b) Covered Employees or
(c) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder;
provided
,
further
, that any
delegation of administrative authority shall only be permitted to the extent it is permissible under Applicable Law. Any delegation
hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board may at any time rescind the authority so delegated or
appoint a new delegatee. At all times, the delegatee appointed under this Section 12.6 shall serve in such capacity at the pleasure of the Board and the Committee.
12.7
Provisions Applicable to Section 162(m) Awards.
Notwithstanding any other provision of the Plan or
any Award, each Section 162(m) Award shall be subject to any additional limitations as the Committee determines necessary for such Section 162(m) Award to qualify as "performance-based
compensation" as described in Section 162(m)(4)(C) of the Code prior to its repeal or to otherwise be exempt from Section 162(m) pursuant to the transition relief rules in the Tax Cuts
and Jobs Act of 2017, and to the extent any of the provisions of the Plan or any Award would cause any Section 162(m) Awards to fail to so qualify or to otherwise be so exempt, any such
provisions shall not apply to such Awards to the extent necessary to ensure the continued qualification or exemption of such Awards. To the extent permitted by Applicable Law, the Plan and any such
Awards shall be deemed amended to the extent necessary to conform to such requirements.
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ARTICLE 13.
MISCELLANEOUS PROVISIONS
13.1
Amendment, Suspension or Termination of the Plan.
Except as otherwise provided in this Section 13.1,
the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Committee. However, without approval of the Company's
stockholders given within twelve (12) months before or after the action by the Administrator, no action of the Administrator may, except as provided in Section 13.2, (a) increase
the limits imposed in Section 3.1 on the maximum number of Shares which may be issued under the Plan, (b) reduce the price per share of any outstanding Option or Stock Appreciation Right
granted under the Plan or take any action prohibited under Section 11.6, or (c) cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the Option or
Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying Shares. Except as provided in Section 11.5 and Section 13.10, no amendment, suspension or
termination of the Plan shall, without the consent of the Holder, impair any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so
provides. No Awards may be granted or awarded during any period of suspension or after termination of the Plan, and notwithstanding anything herein to the contrary, in no event may any Award be
granted under the Plan after March 13, 2029 (the "
Expiration Date
"). Any Awards that are outstanding on the Expiration Date shall remain in force
according to the terms of the Plan and the applicable Award Agreement.
13.2
Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate
Events
.
(a) In
the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of
Company assets to stockholders, or any other change affecting the Shares of the Company's stock or the share price of the Company's stock other than an Equity Restructuring, the Administrator may make
equitable adjustments, if any, to reflect such change with respect to: (i) the aggregate number and kind of Shares that may be issued under the Plan (including, but not limited to, adjustments
of the limitations in 3.1 and 3.3 on the maximum number and kind of Shares which may be issued under the Plan, and adjustments of the Award Limit, and adjustments of the manner in which shares subject
to Full Value Awards will be counted); (ii) the number and kind of Shares (or other securities or property) subject to outstanding Awards; (iii) (iii) the terms and conditions of any
outstanding Awards (including, without
limitation, any applicable performance targets or criteria with respect thereto); and (iv) the grant or exercise price per share for any outstanding Awards under the Plan.
(b) In
the event of any transaction or event described in Section 13.2(a) or any unusual or nonrecurring transactions or events affecting the Company, any Subsidiary
of the Company, or the financial statements of the Company or any Subsidiary, or of changes in Applicable Law or accounting principles, the Administrator, in its sole discretion, and on such terms and
conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Holder's request, is
hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws,
regulations or principles:
(i) To
provide for either (A) termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the
exercise of such Award or realization of the Holder's rights (and, for the avoidance of doubt, if as of the date
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of
the occurrence of the transaction or event described in this Section 13.2 the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award
or realization of the Holder's rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the
Administrator, in its sole discretion, having an aggregate value not exceeding the amount that could have been attained upon the exercise of such Award or realization of the Holder's rights had such
Award been currently exercisable or payable or fully vested;
(ii) To
provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options,
rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
(iii) To
make adjustments in the number and type of Shares of the Company's stock (or other securities or property) subject to outstanding Awards, and in the number and kind
of outstanding Restricted
Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards and Awards which may be granted in the future;
(iv) To
provide that such Award shall be exercisable or payable or fully vested with respect to all Shares covered thereby, notwithstanding anything to the contrary in the
Plan or the applicable Program or Award Agreement; and
(v) To
provide that the Award cannot vest, be exercised or become payable after such event.
(c) In
connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Section 13.2(a) and 13.2(b):
(i) The
number and type of securities subject to each outstanding Award and/or the exercise price or grant price thereof, if applicable, shall be equitably adjusted; and/or
(ii) The
Administrator shall make such equitable adjustments, if any, as the Administrator, in its sole discretion, may deem appropriate to reflect such Equity Restructuring
with respect to the aggregate number and kind of Shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in 3.1 and 3.3 on the maximum number and kind
of Shares which may be issued under the Plan, adjustments of the Award Limit, and adjustments of the manner in which Shares subject to Full Value Awards will be counted). The adjustments provided
under this Section 13.2(c) shall be nondiscretionary and shall be final and binding on the affected Holder and the Company.
(d) Notwithstanding
any other provision of the Plan, in the event of a Change in Control, each outstanding Award shall continue in effect or be assumed or an equivalent
Award substituted by the successor corporation or a parent or subsidiary of the successor corporation.
(e) In
the event that the successor corporation in a Change in Control refuses to assume or substitute for the Award, the Administrator may cause any or all of such Awards
to become fully exercisable immediately prior to the consummation of such transaction and all forfeiture restrictions on any or all of such Awards to lapse. If an Award is exercisable in lieu of
assumption or substitution in the event of a Change in Control, the Administrator shall notify the Holder that the Award shall be fully exercisable for a period of fifteen (15) days from the
date of such notice, contingent upon the occurrence of the Change in Control, and the Award shall terminate upon the expiration of such period.
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(f) For
the purposes of this Section 13.2, an Award shall be considered assumed if, following the Change in Control, the Award confers the right to purchase or
receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in the Change in Control by
holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares);
provided
,
however
, that if such consideration received in the
Change in Control was not solely common stock of the successor corporation or its parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Award, for each Share subject to an Award, to be solely common stock of the successor corporation or its parent equal in fair market value to the per-share
consideration received by holders of Common Stock in the Change in Control.
(g) The
Administrator, in its sole discretion, may include such further provisions and limitations in any Award, agreement or certificate, as it may deem equitable and in
the best interests of the Company that are not inconsistent with the provisions of the Plan.
(h) No
adjustment or action described in this Section 13.2 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action
would cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing
profits liability under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the Administrator determines that the Award is not to comply with such exemptive conditions.
(i) The
existence of the Plan, the Program, the Award Agreement and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or
the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of
the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common
Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets
or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
(j) No
action shall be taken under this Section 13.2 which shall cause an Award to fail to be exempt from or comply with Section 409A of the Code or the
Treasury Regulations thereunder.
(k) In
the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash
dividends) of Company assets to stockholders, or any other change affecting the Shares or the share price of the Common Stock including any Equity Restructuring, for reasons of administrative
convenience, the Administrator, in its sole discretion, may refuse to permit the exercise of any Award during a period of up to thirty (30) days prior to the consummation of any such
transaction.
13.3
Approval of Plan by Stockholders.
The Plan shall be submitted for the approval of the Company's
stockholders within twelve (12) months after the date of the Board's initial adoption of the Plan. Awards may be granted or awarded prior to such stockholder approval;
provided
that such Awards
shall not be exercisable, shall not vest and the restrictions thereon shall not lapse and no Shares shall be issued pursuant
thereto prior to the time when the Plan is approved by the stockholders; and
provided
,
further
, that if
such approval has not been obtained at the end of said twelve (12) month period, all Awards previously granted or awarded under the Plan shall thereupon be canceled and become null and void.
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13.4
No Stockholders Rights.
Except as otherwise provided herein, a Holder shall have none of the rights of a
stockholder with respect to Shares covered by any Award until the Holder becomes the record owner of such Shares.
13.5
Paperless Administration.
In the event that the Company establishes, for itself or using the services of a
third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation,
granting or exercise of Awards by a Holder may be permitted through the use of such an automated system.
13.6
Effect of Plan upon Other Compensation Plans.
The adoption of the Plan shall not affect any other
compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in the Plan shall be construed to limit the right of the Company or any Subsidiary: (a) to establish any
other forms of incentives or compensation for Employees, Directors or Consultants of the Company or any Subsidiary, or (b) to grant or assume options or other rights or awards otherwise than
under the Plan in connection with any proper corporate purpose including without limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association.
13.7
Compliance with Laws.
The Plan, the granting and vesting of Awards under the Plan and the issuance and
delivery of Shares and the payment of money under the Plan or under Awards granted or
awarded hereunder are subject to compliance with all Applicable Law (including but not limited to state, federal and foreign securities law and margin requirements), and to such approvals by any
listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be
subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all Applicable Law. To the extent permitted by Applicable Law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary
to conform to Applicable Law.
13.8
Titles and Headings, References to Sections of the Code or Exchange Act.
The titles and headings of the
Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. References to sections of the
Code or the Exchange Act shall include any amendment or successor thereto.
13.9
Governing Law.
The Plan and any agreements hereunder shall be administered, interpreted and enforced under
the internal laws of the State of Delaware without regard to conflicts of laws thereof or of any other jurisdiction.
13.10
Section 409A.
To the extent that the Administrator determines that any Award granted under the Plan
is subject to Section 409A of the Code, the Program pursuant to which such Award is granted and the Award Agreement evidencing such Award shall incorporate the terms and conditions required by
Section 409A of the Code. To the extent applicable, the Plan, the Program and any Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of
Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding
any provision of the Plan to the contrary, in the event that following the Effective Date the Administrator determines that any Award may be subject to Section 409A of the Code and related
Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Administrator may adopt such amendments to the Plan and the applicable
Program and Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator
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determines
are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the
Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of any penalty taxes under such
Section.
13.11
No Rights to Awards.
No Eligible Individual or other person shall have any claim to be granted any Award
pursuant to the Plan, and neither the Company nor the Administrator is obligated to treat Eligible Individuals, Holders or any other persons uniformly.
13.12
Unfunded Status of Awards.
The Plan is intended to be an "unfunded" plan for incentive compensation. With
respect to any payments not yet made to a Holder pursuant to an Award, nothing contained in the Plan or any Program or Award Agreement shall give the Holder any rights that are greater than those of a
general creditor of the Company or any Subsidiary.
13.13
Indemnification.
To the extent allowable pursuant to Applicable Law, each member of the Committee or of
the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against
and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her;
provided
he or she
gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company's Certificate of Incorporation or Bylaws, as a matter of law, or otherwise,
or any power that the Company may have to indemnify them or hold them harmless.
13.14
Relationship to other Benefits.
No payment pursuant to the Plan shall be taken into account in determining
any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided
in writing in such other plan or an agreement thereunder.
13.15
Expenses.
The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.
*
* * * *
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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 June 18, 2019. 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. MOMENTA PHARMACEUTICALS, INC. 301 BINNEY STREET CAMBRIDGE, MA 02142 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by Momenta Pharmaceuticals, Inc. 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 June 18, 2019. 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: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. The Board of Directors recommends you vote FOR the following: 1. Election of Class III Directors Nominees 1a. Steven C. Gilman For 0 0 0 For 0 Against 0 0 0 Against 0 Abstain 0 0 0 Abstain 0 For 0 Against 0 Abstain 0 1b. Thomas P. Koestler 4. To approve the amendment and restatement of the Momenta Pharmaceuticals, Inc. 2013 Incentive Award Plan, which, among other things, increases the number of shares authorized for issuance by 4,000,000 shares. 1c. Elizabeth Stoner The Board of Directors recommends you vote FOR proposals 2, 3 and 4. 2. To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019. NOTE: The shares represented by this proxy when properly executed will be voted in the manner directed herein by the undersigned Stockholder(s). If no direction is made, the reverse side of this proxy will be voted FOR all nominees in Proposal 1 and FOR proposals 2, 3 and 4. If any other matters properly come before the meeting, the persons named on the proxy card will vote in their discretion. 0 0 0 3. To approve, on an advisory (non-binding) basis, the compensation of our named executive officers. Yes 0 No 0 Please indicate if you plan to attend this meeting 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 0000421552_1 R1.0.1.18
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report and Notice and Proxy Statement are available at www.proxyvote.com . PROXY MOMENTA PHARMACEUTICALS, INC. 301 BINNEY STREET CAMBRIDGE, MASSACHUSETTS 02142 The undersigned, revoking all prior proxies, hereby appoints Michelle Robertson and Alejandra Carvajal, as proxies, each with the power to appoint her substitute, and hereby authorizes each of them to represent and vote, as designated on the reverse side of this proxy card, all shares of common stock of Momenta Pharmaceuticals, Inc., held of record by the undersigned on April 23, 2019 at the Annual Meeting of Stockholders to be held on June 19, 2019 at 10:30 a.m., local time, at the Marriott Hotel, 50 Broadway, Cambridge, Massachusetts 02142 and any postponements, continuations or adjournments thereof. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR ALL NOMINEES IN PROPOSAL 1, FOR PROPOSALS 2, 3 AND 4, AND IN THE DISCRETION OF MS. ROBERTSON AND MS. CARVAJAL, (X) FOR THE ELECTION OF ANY PERSON TO THE BOARD OF DIRECTORS IF ANY NOMINEE NAMED HEREIN BECOMES UNABLE TO SERVE, OR FOR GOOD CAUSE WILL NOT SERVE, (Y) ON ANY MATTER THAT THE BOARD OF DIRECTORS DID NOT KNOW WOULD BE PRESENTED AT THE MEETING BY A REASONABLE TIME BEFORE THE PROXY SOLICITATION WAS MADE, AND (Z) ON ANY OTHER ITEMS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY POSTPONEMENTYS, CONTINUATIONS OR ADJOURNMENTS THEREOF. ATTENDANCE OF THE UNDERSIGNED AT THE ANNUAL MEETING OR AT ANY ADJOURNMENT THEREOF WILL NOT BE DEEMED TO REVOKE THIS PROXY UNLESS THE UNDERSIGNED REVOKES THIS PROXY IN WRITING. UNLESS VOTING THE SHARES OF OUR COMMON STOCK OVER THE INTERNET OR BY TELEPHONE, PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 19, 2019 Continued and to be signed on reverse side 0000421552_2 R1.0.1.18