ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
The following table and text set forth
the name, age and positions of each of our directors elected by our common stockholders at our Annual Meeting held on December
27, 2013. Except for Dr. Chapman, who has served as a member of our Board of Directors since 2005, none of our other directors
elected at our Annual Meeting had previously served as a member of our Board of Directors:
Name
|
Age
|
Position
|
Christopher C. Chapman, Jr., MD
|
61
|
President
|
Benjamin M. Dent (1)(2)(3)
|
63
|
Director
|
Michael J. Mullan, MBBS (MD) PhD
|
57
|
Chairman and CEO
|
Scott P. Sensenbrenner (1)(2)(3)
|
44
|
Director
|
Naomi Whittel (4)
|
39
|
Director
|
Tom Wilson (1)(2)
|
67
|
Director
|
(1)
|
Member of the Audit Committee.
|
(2)
|
Member of the Compensation Committee.
|
(3)
|
Member of the Nominating Committee.
|
(4)
|
Ms. Whittel resigned from our Board of Directors on February 10, 2014.
|
Set forth below is biographical information
for each director of our company.
Christopher C. Chapman, Jr. MD, 61.
Dr. Chapman has served as a member of our Board of Directors since September 2005 and was elected as President of our Company following
the Annual Meeting held on December 27, 2013. Since its inception in 1999, Dr. Chapman has served as Chairman and Chief Executive
Officer of Chapman Pharmaceutical Consulting, Inc., which provides expert medical consultation on the development and management
of domestic and global product development programs for biotech, pharmaceutical and medical device products. He served as Senior
Director of Medical Affairs with Quintiles/BRI, the largest contract research organization in the U.S., from 1995 until 2000. In
that capacity, Dr. Chapman had oversight responsibility for the support of new drug applications, clinical studies and device submissions
to the FDA for approval. From 1992 until 1994, Dr. Chapman was Medical Director at Regeneron Pharmaceuticals. He currently serves
as Chairman of the Chapman Pharmaceutical Health Foundation. Dr. Chapman is a graduate of the Georgetown University School of Medicine
in Washington, D.C.
Dr. Chapman understands the history
of our Company and the strategic goals envisioned by management. He has valuable experience with research and development
strategies and bringing new drug applications before the FDA (including the IND process). This experience will be key in
light of the Company’s expected shift to focus more on the development, approval and sales of pharmaceutical
products in connection with the corporate transition matters. Dr. Chapman is expected to act as a key bridge between our
prior Board and new Board.
Benjamin M. Dent, 63.
Mr. Dent has
served as a member of our Board of Directors since December 2013. Mr. Dent has held leadership positions with a number of public
and privately-held companies across business sectors. Mr. Dent served as Chief Financial Officer of SADAR 3D from 2012 to 2013,
Senior Vice President and Chief Financial Officer for Carbolytic Materials Company from 2011 to 2012, Chief Executive Officer for
PBM Consulting (Mr. Dent’s own consulting firm, now known as The Dent Consulting Group LLC) from 2010 to the present, and
Vice President and Chief Financial Officer of Moark, LLC from 2005 to 2009. From 1997 to 2001, Mr. Dent held senior leadership
and accounting positions with Solutia, Inc. and Capsugel, a business unit of Pfizer, Inc., and acted as a management consultant
for Lehman Brothers Investment Management Portfolio Company. Mr. Dent was named to the 2012 list of “
Worldwide Who’s
Who in Excellence in Finance
.” Mr. Dent is an adjunct professor at St. Louis University in the graduate entrepreneurial
management program. Mr. Dent received his undergraduate degree and MBA from the University of South Carolina and is a Certified
Management Accountant.
Mr. Dent has extensive experience in finance, accounting and
capital funding for both private and public companies, including acting as a Chief Financial Officer. This experience will be particularly
important as the Company implements strategies to finance its expected pharmaceutical development efforts.
Michael John Mullan MBBS(MD),PhD, 57.
Dr. Mullan has served as a member of our Board of Directors since December 2013. Dr. Mullan was elected as our Chief Executive
Officer and Chairman of our Board following the Annual Meeting held on December 27, 2013. Dr. Mullan is a global leader in the
medical, pharmaceuticals and research fields. Until October 2013, Dr. Mullan served as Chief Executive Officer and President of
the Roskamp Institute, and currently serves as Chief Executive Officer of the Roskamp Institute and of Archer Pharmaceuticals,
Inc., and President of Sci-Brain. Dr. Mullan has served in numerous directorship positions for medical research organizations,
including the Roskamp Institute from 2003 to 2011, Roskamp Institute for Research of Alzheimers Disease and related Neuropsychiatric
Disorders from 1998 to 2003 and the Memory Disorder Clinic from 1998 to 2003. Dr. Mullan taught as a professor of medicine in neuroscience,
psychiatry and pathology at the University of South Florida from 1995 to 2003. Dr. Mullan has authored or co-authored more than
200 articles on an array of medical topics, including the treatment of Alzheimer’s disease. Dr. Mullan received his medical
degree, MBBS (MD) and PhD in Molecular Genetics from London University.
Dr. Mullan brings a highly unique set of
skills to our new Board as a seasoned executive, physician and clinical researcher. In light of our Company’s shift
to focus more on the development, approval and sales of pharmaceutical products, Dr. Mullan’s scientific background and experience
with, and contacts in, the pharmaceutical industry will be a necessary component of the corporate transition matters. Further,
Dr. Mullan has important experience acting in a leadership position of large medical research organizations and is well-known and
respected in his field.
Scott P. Sensenbrenner, 45.
Mr.
Sensenbrenner has served as a member of our Board of Directors since December 2013. Mr. Sensenbrenner has extensive experience
in the areas of nutraceutical marketing, supply chain, operations and financial management in the natural products industry. He
currently serves as the Chief Executive Officer and a director for Enzymedica Inc., a market leader in the area of enzymes supplementation,
and has been in this position since 2009. From 2004 to 2009 Mr. Sensenbrenner acted as Vice President of Marketing and Sales for
Thorne Research and from 2001 to 2004 he served as the Group Director of the Nutrition Division for Perrigo, Inc. Mr. Sensenbrenner
led the marketing efforts at Enzymatic Therapy in the 1990’s, when the firm introduced many of the leading products sold
in the natural products industry today including; Glucosamine, CoQ10, St. John’s Wort, 7Keto, Policosanol, Red Yeast Rice,
Standardized Herbs, IP-6, KAVA, and Black Cohosh. In each of these roles Mr. Sensenbrenner designed and orchestrated business strategies
and executed category-changing product introductions. Mr. Sensenbrenner also served as an advisory director of Z Trim Holdings,
a public company, from 2006 to 2007. Mr. Sensenbrenner received his Bachelor of Science degree in Journalism from the University
of Wisconsin.
Mr. Sensenbrenner’s nutraceutical
and pharmaceutical marketing experience will be valuable given that a key component of the corporate transition matters is a focus
on market acceptance of pharmaceutical products (as well as continuing to market the Company’s existing nutraceutical supplements
and our cosmetic line of products). Thus, if our Company obtains any requisite regulatory approvals to market pharmaceutical products,
we expect Mr. Sensenbrenner will be able to provide the New Board and our management with valuable insight and guidance with respect
to the marketing of such products.
Thomas L. Wilson, 67.
Mr. Wilson
has served as a member of our Board of Directors since December 2013. Mr. Wilson has more than 30 years of experience in the banking
industry. Mr. Wilson served as President of Southern Commerce Bank, a privately-held banking institution, from 1988 to 2010 and
served as chairman of the board of directors from 1988 to 2006. Mr. Wilson held similar executive and board positions with St.
Francis State Bank and Mequon State Bank from 1974 to 1990. Mr. Wilson has extensive experience with banking regulations, implementation
and oversight of compliance policies and risk assessment strategies. Mr. Wilson presently operates his own consulting firm focusing
on business planning, bank financing and private equity fundraising. Mr. Wilson received his bachelor in science degree in business
administration from Marquette University.
Mr. Wilson’s more than 30 years of
banking experience will be particularly important as the Company implements strategies to finance its expected pharmaceutical development
efforts in connection with the corporate transition matters. Mr. Wilson also brings important experience in the areas of financial
risk assessment.
Executive Officers
The following table sets forth certain
information with respect to our executive officers, other than Drs. Michael J. Mullan and Christopher C. Chapman, Jr., whose information
is set forth above under the caption “-Directors.”
Name
|
|
Age
|
|
Position
|
David M. Dean
|
|
54
|
|
Vice President of Sales and Marketing
|
Park A. Dodd, III
|
|
61
|
|
Chief Financial Officer
|
Paul L. Perito
|
|
77
|
|
Vice President and Senior Counsel for Legal and Regulatory Affairs
|
Robert E. Pokusa
|
|
63
|
|
General Counsel
|
Set forth below is biographical information
for each executive officer of our company who is not also a director.
David M. Dean
, 54, has served as
Vice President of Sales and Marketing of our company since November 1999 and as President of Star Tobacco since February 2010.
From 1998 to October 1999, he served as a Principal of Group Insurance Concepts of Virginia, L.L.C., an employee benefits
consulting firm and an affiliate of Northwestern Mutual. From 1984 to 1998, Mr. Dean was employed with Trigon Blue Cross/Blue
Shield in Richmond, Virginia, where he held a variety of executive positions over a 14 year period, including Vice President
of the Eastern Region from 1994 to 1996, Vice President of Sales from 1996 to 1997, and Vice President of Sales and Account Management
for the Eastern and Western Regions from 1997 to 1998. Trigon Blue Cross/Blue Shield was the largest health insurer in Virginia
and was purchased during 2002 by Anthem. Mr. Dean is a graduate of Elon College.
Park A. Dodd, III
, 61, has served
as our company’s Chief Financial Officer, Treasurer, and Assistant Secretary since October 2007. Mr. Dodd was a
special advisor to our company from May 2007 until assuming the role as Chief Financial Officer in October 2007. Mr. Dodd’s
experience includes a thirty-two year career in strategic financial planning and accounting. From 1980 to 2000 he held a number
of management positions with Philip Morris, Inc. with increasing responsibilities in accounting and reporting, business decision
support, financial planning and analysis during that time, including his service as Senior Manager and Director of Financial Planning
and Analysis from 1992 to 1998 and Director of Finance Reengineering and Technology Upgrade from 1998 to 2000. Mr. Dodd was special
advisor to the Chief Financial Officer of the United States Olympic Committee during 2000, and from 2001 to 2005 he served as Director
in Accounting and Reporting of Capital One Financial Corporation in Richmond, Virginia. Between 2005 and the end of 2009, Mr. Dodd
was a partner with Tatum, LLC, a national executive services firm that specializes in providing interim financial leadership to
client organizations. Mr. Dodd received an undergraduate degree in Accounting from Virginia Tech in 1975 and an MBA from Virginia
Commonwealth University in 1986. He is a licensed Certified Public Accountant in the State of Virginia.
Paul L. Perito
, 77, is our company’s
Vice President and Senior Counsel for Legal and Regulatory Affairs and has served in that capacity since December 2013. Previously,
he served as a member of our Board of Directors and as President and COO from 1999 until December 2013 and as the Chairman of our
Board of Directors from August 2000 to December 2013. Mr. Perito served as our company’s Executive Vice President, General
Counsel, and Chief Ethics Officer from June 1999 through November 1999. Prior to joining our Company, Mr. Perito was a senior partner
in the law firm of Paul, Hastings, Janofsky & Walker LLP, or PHJ&W, from July 1991 until June 1999 when he became a senior
counsel to the firm at the time he joined our company. Mr. Perito resigned his position as senior counsel to PHJ&W as of March
31, 2001, after serving as National Co-Chair of the White Collar Corporate Defense Practice Group at PHJ&W since 1991, and
Chair of the Litigation Department in that firm’s Washington, D.C. office since 1995. Prior to his re-entry into private
practice, he served as Chief Counsel and Deputy Director of the White House Special Action Office on Drug Abuse Prevention from
1971 to 1973. Mr. Perito was confirmed by the Senate for that position in March 1972. From 1970 to 1971, Mr. Perito served as Chief
Counsel and Staff Director to the U.S. House of Representatives Select Committee on Crime. Immediately prior to serving the Congress,
Mr. Perito was an Assistant United States Attorney in the Southern District of New York, U.S. Department of Justice from 1966 to
1970. Mr. Perito graduated from Tufts University, Magna Cum Laude and Phi Beta Kappa, and from the Harvard Law School. Mr. Perito
was a Rotary International Scholar at the Victoria University of Manchester in Manchester, England, and in Lund University, Lund,
Sweden, in P.P.E. in 1960-1961 before entering Harvard Law School. Mr. Perito graduated from Harvard Law School (LLB/JD), as an
Edward John Noble Scholar, in 1964 and was thereafter admitted to the Bar of the Commonwealth of Massachusetts. He is also a member
of the District of Columbia Bar and is admitted to practice in numerous federal District Courts, Courts of Appeal, and the United
States Supreme Court. Mr. Perito was the President of the Harvard Law School Association of the District of Columbia from 1990
to 2010 and is now Chair Emeritus. He is also a member of the Executive Committee of the Harvard Law School Association and was
Secretary to the Harvard Law School Association for approximately 15 years. In June 2010, Mr. Perito was elected First Vice President
of the Harvard Law School Association for a two-year term and assumed the role of President of that association in June 2012 for
a two-year term. He served as Chairman of the Harvard Law School Class of 1964 Reunion and Fund Committees from 1995 to 2010 and
served as Co-Chair of the World Alumni Congress in 2006-2007, and Class Agent for the Harvard Law School Fund in 2006-2007. Mr.
Perito was Chair of the Harvard Law School 45th Reunion Committee and Co-Chair of the Gift Committee Class of 1964. Mr. Perito
is a member of the International Board of Overseers of Tufts University and a former member of the Board of Georgetown Preparatory
School in Washington, D.C.
Robert E. Pokusa
, 63, has served
as our company’s General Counsel and Secretary since March 2001. From 1991 until joining our company, he was associated with
Paul, Hastings, Janofsky & Walker LLP during which time he worked on a number of matters for our company and concentrated his
practice in the areas of complex civil litigation and administrative law. From 1980 to 1991, Mr. Pokusa was associated with the
law firms of Perito, Duerk & Carlson; Finley, Kumble, Wagner, Hiney, Underburg, Manley, Meyerson & Casey; and Washington,
Perito and Dubuc. Mr. Pokusa received his Bachelor of Arts Degree from Montclair State University and his law degree from
The American University, Washington College of Law. He is a member of the Virginia and District of Columbia bars.
Section 16 (a) Beneficial Ownership Reporting Compliance
Section 16 of the Securities Exchange
Act of 1934, as amended, requires directors and executive officers and persons, if any, owning more than ten percent of a class
of our company’s equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of our company’s equity and equity derivative securities. Based solely upon a review of the copies
of such reports and written representations from reporting persons, we believe that all Section 16(a) filing requirements
applicable to our officers, directors and greater than ten percent stockholders were complied with on a timely basis for the year
ended December 31, 2013.
Code of Ethics
We have adopted a Code of Ethics that applies
to all of our company’s directors, officers (including our Chief Executive Officer, Chief Financial Officer, Controller and
any person performing similar functions) and employees. We have filed a copy of this Code of Ethics as Exhibit 14.1 to this Report.
We also have made the Code of Ethics available on our company’s website at:
www.starscientific.com
. Information contained
on our website is not part of this Report and is not incorporated in this Report by reference.
Audit Committee
We currently maintain an Audit Committee
which has responsibility for the appointment of our independent registered public accountants, reviews our internal accounting
procedures and financial statements, and consults with and reviews the services provided by our independent registered public accountants,
including the results and scope of their audits. The Audit Committee is currently comprised of Messrs. Dent, Sensenbrenner and
Wilson, each of whom are independent under the applicable rules of the Securities and Exchange Commission and The Nasdaq Global
Market. The Board of Directors has determined that Benjamin M. Dent, who is the Chairman of the Audit Committee, also qualifies
as an “Audit Committee Financial Expert” as defined by the rules of the Securities and Exchange Commission.
ITEM 11. EXECUTIVE
COMPENSATION
Compensation Discussion and Analysis
Our company’s Named Executive Officers
are Michael John Mullan, MBBS (MD) PhD, our Chairman and Chief Executive Officer, or CEO, Park A. Dodd, III, our Chief Financial
Officer, or CFO, Christopher J. Chapman, Jr., MD, our President, Paul L. Perito, our Vice President and Senior Counsel for Legal
and Regulatory Affairs, David M. Dean, our Vice President for Sales and Marketing and Jonnie R. Williams, Sr., our founder and
former CEO. We collectively refer to these executive officers as the “Named Executives.” The following discussion summarizes
the compensation awarded to the Named Executives or other executive officers during 2013.
Overview
In our proxy statement filed on November
18, 2013 in connection with the holding of our Annual Meeting, we announced a transition of our Company’s activities to take
advantage of the potential opportunities in the area of pharmaceutical products, including the development of products approved
by the Food and Drug Administration. As part of that transition, at the Annual Meeting held on December 27, 2013, our stockholders
elected a new Board of Directors that, except for Christopher C. Chapman, consisted of individuals who had not previously served
on our Board of Directors. Immediately following the Annual Meeting, Michael J. Mullan, MBBS (MD) PhD was elected as our Chairman
and CEO and Christopher C. Chapman, MD was elected as our President. We also entered into compensation arrangements with Drs. Mullan
and Chapman at that time that had been previously summarized in our proxy statement. Also, immediately following our Annual Meeting
our CEO, Jonnie R. Williams, Sr. and our Chairman, President and COO, Paul L. Perito, resigned from their prior positions but continued
to serve as employees of our company, Mr. Perito as Vice President and Senior Counsel for Legal and Regulatory Affairs and Mr.
Williams as a non-executive employee. The discussion and analysis that follows will address compensation matters for 2013 generally,
as well as the changes that took place following our Annual Meeting on December 27, 2013 with respect to our Company’s ongoing
transition to focus more directly on the drug development area.
Our mission over the past
several years has been to move away from the production of tobacco products in favor of promoting the use of certain
alkaloids found in tobacco that appear to be beneficial in assisting in maintaining a healthy metabolism and potentially in
treating a range of neurological and other conditions. In this regard, we focused on the development of non-nicotine,
non-tobacco dietary supplements that provide viable alternatives to tobacco products and anti-inflammatory support, related
pharmaceutical products and the licensing of our company’s low tobacco specific nitrosamine, or low-TSNA, curing
technology and our other technology. In particular, over the last several years we have been engaged in the production of
several nutraceutical, dietary supplements that are marketed under the brand names Anatabloc
®
and CigRx
®
and the development of related
pharmaceutical products that are designed to treat a range of conditions including Alzheimer’s disease,
Parkinson’s disease, multiple sclerosis, osteoarthritis, dermatological conditions and tobacco dependence. With the
change in structure put into place at our Annual meeting in December 2013, we are focusing on the new drug development
aspects of our business and are transitioning our activities to meet that objective.
Currently, our revenues are being derived
from the sale of our anatabine-based nutraceutical products and a cosmetic line of products that also utilizes our anatabine compound.
As we have worked to achieve our corporate objectives over the years, we initially utilized our company’s technology in producing
low-TSNA tobacco as a platform to provide a base of financial support for our intellectual property, licensing and development
initiatives. However, since 2007, we shifted the focus of our efforts to nutraceuticals and the development of related pharmaceutical
products. We ceased manufacturing and selling our low-TSNA, dissolvable tobacco products as of December 31, 2012.
Over the years we also have sought to develop
a sophisticated structure for our innovative, technology-based company that could interact at all levels of the government, regulatory,
medical and industrial sectors on a broad range of issues relating to the promotion of a healthy metabolism and lifestyle. To achieve
this objective, our company sought to engage individuals as our Chief Executive Officer and President who could oversee our company’s
existing business and promote a far-ranging approach to the issues facing our company, and be in a position to enlist other individuals
as employees and consultants to assist in those initiatives. With the incorporation of our Rock Creek subsidiary in 2007, we also
sought to spearhead our development of nutraceuticals and pharmaceuticals which had evolved from our prior investigation of certain
alkaloids in tobacco. Further, we worked to staff key executive positions in sales and marketing, finance, legal, investor relations
and medical research with individuals who would complement our company’s senior management and provide a level of expertise
that would minimize the need to procure those services through external third parties.
Compensation Objectives
In establishing compensation for our company’s
executive officers, including our current CEO and President, we have sought to:
|
·
|
attract and retain individuals of superior ability and managerial talent;
|
|
·
|
ensure that the compensation for senior executive officers is aligned with our company’s corporate strategies, business
objectives and long term interests; and
|
|
·
|
enhance the incentive of our company’s executive officers to maximize shareholder value by providing opportunities for
direct ownership in our company through awards of stock options and stock grants.
|
Over the last eleven years our company
has experienced operating losses on an annual basis. Accordingly since 2002, we had chosen to maintain our executive officers base
salary at levels that existed at that time or at levels that were established when certain of our executive officers first joined
our company (though see “Base Salary” below for a discussion of recent voluntary reductions in base salary levels for
certain of our Named Executives, as well as the new salary information for our new executive officers appointed in December 2013
in connection with our corporate transition) and to limit the use of an incentive-based salary structure as a means of determining
salary levels for our executive officers or other employees.
In connection with the recent
change in our board and management, we negotiated employment agreements with Drs. Mullan and Chapman in 2013 that contain
a combination of base salary, a potential performance cash award during their first year of employment ($150,000 and $75,000
in the case of Drs. Mullan and Chapman, respectively) based on the completion of pre-market testing of a time-released
version of Anatabloc
®
and performance based stock options and stock awards. Consistent with our prior
practice, those agreements were structured to minimize cash payments and to focus incentive awards on issuance of stock
options and stock grants. In 2013 we did not make cash incentive payments to any of our employees, beyond the commission to
David Dean on Anatabloc
®
sales discussed below. In April 2012 our Board of Directors, did, upon recommendation
of the Compensation Committee, approve the payment of cash bonuses in an aggregate amount of $270,000 to ten of our
employees, including three of our executive officers and one of our named executives, in recognition of their efforts in
connection with the successful introduction of our Anatabloc
®
dietary supplement. In 2012 the Board of
Directors approved a discretionary incentive bonus plan for David Dean under which, beginning in March 2012, he is receiving
a commission of one-half of one percent of gross sales of our Anatabloc
®
product and will be entitled to target bonuses of $10,000, $20,000, $50,000 and $100,000 when Anatabloc
®
sales reach gross revenues of $10.0 million, $20.0 million, $50.0 million and $100.0 million, respectively.
As part of the compensation arrangements
entered into with Drs. Mullan and Chapman in December 2013, our Board of Directors, upon recommendation of the Compensation Committee,
approved awards to Drs. Mullan and Chapman in the amounts of 6,000,000 and 3,000,000 stock options, respectively, and stock grants
with a value of $2.5 million and $1.25 million, respectively. The stock options granted to Dr. Mullan were issued in two grants
of 3,000,000 each on December 27, 2013 and January 2, 2014. 1,000,000 of the stock grant on December 27, 2013 vested immediately.
The stock options granted to Dr. Chapman were issued on December 27, 2013 with 500,000 vesting immediately. The remainder of the
stock option awards (5,000,000 for Mr. Mullan and 2,500,000 for Mr. Chapman) and stock grants are subject to performance based
vesting criteria contained in Drs. Mullan’s and Chapman’s employment agreements. Between 2008 and 2012, we made stock
option awards to certain of our executive officers and other employees in recognition of their continued contribution towards our
company’s goals and objectives, particularly our product development initiates. Those grants were intended, in part, to recognize
past performance and to provide incentives for future performance in a manner that would not result in immediate cash payments
by our company.
In conducting our risk assessment analysis
of employee compensation policies and practices, including those for our Named Executives, we have taken into account the fact
that our compensation levels have traditionally been limited to base salary and benefits and have not been tied to additional compensation
in the form of salary or cash bonus payments for meeting specific performance objectives. Since 2008 we have issued stock options
to our Named Executives and other employees; however, most of those stock option grants have vested at the time of issuance and
have not been tied to performance criteria. The stock options issued to Drs. Mullan and Chapman in December 2013 and Messrs. Perito
and Williams in 2011 contained performance based vesting requirements, but those requirements have been tied to corporate objectives
that are aligned to our company’s overall mission, as opposed to specific individual performance criteria. Further, the decision
to issue performance based stock options and stock awards was based, in part, on our company’s determination that it would
continue its previous policy of maintaining salary levels at prior year levels and, in the case of Drs. Mullan and Chapman, to
incentivize their performance while limiting the level of cash payments required as part of their compensation packages. In the
case of the incentive bonus plan established in April 2012 for David Dean, our Vice President of Sales and Marketing, that bonus
plan is discretionary and may be terminated at any time by our Board of Directors. Also, these bonus payments are tied to sales
of our Anatabloc
®
dietary supplement, which has been a principal focus of our company’s sales efforts since
the introduction of Anatabloc
®
in 2011. Based on those considerations, we have concluded that our employee compensation
policies and practices, including those applicable to our Named Executives, do not create risks that are reasonably likely to have
a material adverse effect on us and do not result in an incentive for our Named Executives to take undue risk in order to increase
their levels of compensation.
Our compensation determinations have been
driven primarily by considerations relating to the ability to attract and retain individuals who could help our company carry out
its long-term objectives to promote the maintenance of a healthy metabolism and lifestyle and, in the case of Drs. Mullan and Chapman,
to expanded and expedite our efforts in the drug development area. The determinations also have involved an assessment of our company’s
progress in obtaining and protecting the intellectual property to which we are the exclusive owner or licensee, and the licensing
of that technology, our success in introducing to the market nutraceuticals and pharmaceuticals through Rock Creek, and our success
in generating revenue from the licensing of our proprietary technology.
Our Board of Directors has provided its
Compensation Committee the primary authority to determine the compensation awards available to our company’s executive officers
and the Compensation Committee, in turn, makes recommendations on compensation levels to the Board for its approval after undertaking
an analysis of appropriate levels of compensation for our executive officers. To aid the Compensation Committee in making its determinations,
on a yearly basis the Compensation Committee is provided an analysis of the compensation levels of our executive officers based
on the review of job functions and job responsibilities that have been assumed by particular executive officers and compensation
ranges available in comparable positions for individuals with like training and experience. The analysis has been prepared by our
company’s General Counsel working with our COO and with input from outside counsel. Our CEO and COO also have provided recommendations,
as appropriate, regarding compensation for all executive officers, including themselves. Our company has not engaged a compensation
consultant to undertake this analysis. Given our company’s unique position in the area of developing nutraceuticals and pharmaceuticals
based on our experience in dealing with non-nicotine alkaloids, the Compensation Committee has considered general market information
for similar senior level executives in setting base compensation as opposed to specific industry data, including an analysis of
salary levels and benefits for executives in the manufacturing sector in the relevant geographic markets (Richmond, Virginia, Washington,
DC and Boston, Massachusetts) where we have had our principal offices. In connection with the consideration of employment contracts
for Drs. Mullan and Chapman, the Board, at the request of our Compensation Committee, retained CompensationGPS to provide the Compensation
Committee with compensation data and other information as related to the proposed terms of Drs. Mullan’s and Chapman’s
employment arrangements, including comparing such terms to both public and private companies in industries similar to the Company,
and to advise the Compensation Committee as to the reasonableness of such terms.
In August 2010 through our Rock Creek
subsidiary, we introduced our non-nicotine, non-tobacco nutraceutical (CigRx
®
)
and in August 2011 introduced another non-nicotine nutraceutical for anti-inflammatory support (Anatabloc
®
). We also introduced an Anatabloc
®
cosmetic line in 2012 and 2013. Given the current
focus of our company on the drug development area, going forward we expect we will consider the appropriate industry comparison
based on the mix of products being sold and developed by our company. In the case of our company’s Vice President and Senior
Counsel for Legal and Regulatory Affairs and General Counsel, the Compensation Committee also has undertaken an analysis of compensation
for senior partners at major law firms in the Washington, DC area, given the background of our COO and General Counsel in the litigation,
regulatory and legislative areas and their active involvement in implementing and coordinating our company’s activities in
these areas. The general market information that we have used previously is publicly available aggregated pooled data and, while
the Compensation Committee reviews the general market information, it does not see the identity of any of the surveyed companies.
Further, the analysis has focused on the extent to which executive officers have assumed multiple functions relating to various
aspects of our company’s mission and long-term objectives that in different circumstances likely would have been assumed
by other employees. Also, the Compensation Committee considers other factors such as the seniority of our senior executives, and
for newer hires, the executive’s base salary at his/her prior place of employment, the duties and responsibilities that the
individual will be assuming, the availability of other well-qualified candidates that would be available to carry out our company’s
goals and objectives, and the compensation level a potential executive would be able to demand in a similar position with another
company or institution. The Compensation Committee reviews the information provided by management and makes its recommendation
to the Board of Directors with respect to appropriate compensation levels.
Base Salary
In 2013, the base salary for each of our
executive officers, except for Drs. Mullan and Chapman, were set in accordance with the terms of contracts that were entered into
prior to 2012 and have been continued without any change in base salary on a month-to-month basis. In November, 2012, Mr. Williams
voluntarily agreed to reduce his salary to $1.00 per month beginning in January 2013 until our company becomes profitable and in
February 2013, Mr. Perito voluntarily reduced his salary by $500,000 until our company becomes profitable. Also, in February 2013,
our General Counsel, Mr. Pokusa, and our CFO, Mr. Dodd, voluntarily agreed to reduce their salaries by $100,000 and $50,000, respectively,
until our company becomes profitable. Those decisions were ratified by the Compensation Committee and our Board in December 2012,
as to Mr. Williams, and in February 2013, as to Mr. Perito, our General Counsel and our CFO
.
Further, Messrs. Williams and
Perito agreed to maintain the same reduced salary levels in the positions they assumed following our Annual Meeting.
Ancillary Bonuses
As part of the employment agreements entered
into with Drs. Mullan and Chapman in December 2013, they are entitled to an ancillary cash bonus of $150,000 and $75,000, respectively,
in 2014 if our company introduces a time-release version of Anatabloc
®
. In addition, as part of their employment
agreements, they are entitled to stock options and stock grants if certain performance targets identified in their employment agreements
are met. In April 2012, two of our Named Executives, David Dean and Park A. Dodd, III, received cash bonuses of $75,000 and $5,000,
respectively, as part of a one-time award of an aggregate of $270,000 in cash bonuses paid to a total of ten of our employees in
recognition of their efforts in connection with the successful introduction of our Anatabloc
®
dietary supplement.
On an annual-basis, we have paid an ancillary
holiday bonus in the amount of $1,500 to executive officers, except for our company’s CEO, COO and at times our CFO. An identical
bonus has been paid to our other employees. Such bonuses have been paid as part of a long-standing holiday bonus policy and are
not based on executive officers meeting achievement or performance goals.
Equity Incentive Awards
While our Board of Directors believes compensating
our executive officers with equity awards helps align the interests of our executive officers with that of our shareholders and
enhances the incentive of our company’s executive officers to maximize shareholder value, our Board of Directors recognizes
that the number of our shares owned by any director or executive is a personal decision and has not adopted a policy requiring
ownership by directors or executives of a minimum number of our shares.
Our executive officers, along with our
other employees, are eligible to participate in the award of stock options or restricted stock grants or stock appreciation rights
under our 2000 Equity Incentive Plan, or 2000 Plan, and our 2008 Incentive Award Plan. However, to date we have only granted stock
options and not shares of restricted stock or stock appreciation rights to our executive officers.
As part of the employment agreements entered
into with Drs. Mullan and Chapman on December 27, 2013, our Board of Directors, upon recommendation of the Compensation Committee,
granted awards of stock options to Drs. Mullan and Chapman in the amounts of 6,000,000 and 3,000,000, respectively, and stock awards
with a value of $2.5 million and $1.25 million, respectively, and which in the case of the stock grants will be based on our company’s
closing stock price on the day prior to the vesting of such awards. Of the stock options granted to Drs. Mullan and Chapman, 1,000,000
and 500,000, respectively, vested on the date of the grant and are not subject to any performance conditions. The employment agreements
for Drs. Mullan and Chapman provide the following criteria for vesting upon the attainment of the performance goals for the remaining
stock option and stock grant awards.
Star Scientific, Inc.
Performance Criteria and
Allocations for Option Vesting and Stock Payments
|
|
|
|
Dr. Mullan
|
|
Dr. Chapman
|
|
|
|
|
Option Vesting
|
|
Value of Stock
Payments
|
|
|
Option Vesting
|
|
Value of Stock
Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
Date of the Company’s first Investigational New Drug (IND) and/or Clinical Trial Application (CTA) filing occurring after December 27, 2013
|
|
1 million shares
|
|
$
|
500,000
|
|
|
500,000 shares
|
|
$
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
|
Last day of first calendar quarter occurring after December 27, 2013 within which the Company’s cash receipts attributable to operations of the Company’s consumer products line of business exceeds expenses (without regard to overhead) attributable to such operation
|
|
1 million shares
|
|
$
|
500,000
|
|
|
500,000 shares
|
|
$
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
|
Last day of the first calendar quarter occurring after December 27, 2013 within which earnings of the Company (without regard to interest, depreciation, amortization or taxes) is reported as positive
|
|
1 million shares
|
|
$
|
500,000
|
|
|
500,000 shares
|
|
$
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
|
Date of commencement of human clinical trials with respect to the Company’s first IND and/or CTA filing occurring after December 27, 2013
|
|
2 million shares
|
|
$
|
1,000,000
|
|
|
1 million shares
|
|
$
|
500,000
|
|
On March 14, 2011 our Board of Directors,
upon recommendation of the Compensation Committee, approved an award of stock options to Messrs. Perito and Williams, our
former Chairman of the Board and CEO, respectively, as part of new employment agreements entered into with these executive officers
in the amount of 4,000,000 and 4,900,000 stock options, respectively. Each of the stock options granted to Messrs. Perito and Williams
in 2011 was subject to performance based vesting criteria and stockholder approval. In 2011 sixty-five percent of the stock options
granted to Messrs. Perito and Williams (3,185,000 and 2,600,000, respectively) vested based on their meeting two of the performance
criteria in their employment agreements and upon stockholder approval of the stock option grants. On December 24, 2013, Mr. Williams
forfeited his unvested stock options in the amount of 1,715,000 option shares. On the same date, 1,400,000 option shares, the remaining
shares granted to Mr. Perito, vested, upon the determination by our company’s Compensation Committee that a performance criteria
covering eighty percent of the stock options had been satisfied.
At December 31, 2013, there were 22,145,000
options issued and outstanding with a weighted average exercise price of $2.27 per share.
Benefits Plans
In order to attract and retain individuals
who are capable of carrying out and enhancing our mission, we have provided certain benefits and perquisites to our senior executives
that we believe are comparable to those generally available to senior management and were available to those executives in previous
positions. In the case of our CEO, President and our former CEO and COO these benefits and perquisites have included the items
listed below. Where noted, such benefits also have been provided to other executive officers:
|
·
|
reimbursement for life insurance coverage in the amount of $10 million for our company’s CEO, $5 million for our
President and $1 million for our General Counsel;
|
|
·
|
additional disability insurance for our CEO, President and General Counsel;
|
|
·
|
a Company automobile allowance for our company’s CEO and President and reimbursement of automobile expenses for our company’s
Vice President of Sales and Marketing;
|
|
·
|
monthly or annual club membership dues for our company’s CEO and President;
|
|
·
|
Reimbursement for the cost of outside counsel retained by our company’s CEO and President in connection with advice and
counsel related to the negotiation, drafting, and execution of their employment agreements.
|
Employment and Severance Arrangements
The executive employment agreements with
Drs. Mullan and Chapman contain severance provisions that provide for continued payments of salary and benefits through the term
if the agreements are terminated without “Cause” or if either Dr. Mullan or Dr. Chapman resigns for “Good Reason”.
In addition, in those circumstances equity awards granted to either Dr. Mullan or Dr. Chapman would be retained with the possibility
of vesting if the performance targets discussed above are met. Upon a termination of employment for death or disability, Dr. Mullan
or Dr. Chapman, as applicable, would be entitled to continued salary and benefits for the one-year period following death or disability
and all then-outstanding equity awards would become fully vested. Upon a change in control of our Company, Dr. Mullan and Dr. Chapman
would be entitled to receive a lump sum payment of $2.5 million, respectively, and all then-outstanding equity awards would become
fully vested and accelerate.
The executive employment agreements entered
into with Messrs. Williams and Perito on March 14, 2011 continued through December 31, 2012 and contained identical
severance provisions that provided for the payments of all salary, benefits, bonuses and other compensation that would be due through
the term of the contract, if the contract were terminated without “Cause” or if either Mr. Perito or Mr. Williams resigned
for “Good Reason”, as set forth in the employment agreements. Beginning in December 2012, the executive employment
agreements were amended to continue on a month-to-month basis. Under the amendments the executive employment agreements may be
terminated upon notice provided at least 15-days prior to the end of each monthly period. In the event of termination, Mr. Perito
or Mr. Williams, as applicable, will be entitled to all salary, benefits, bonuses and other compensation that would be due
thereunder through the end of the termination of his contract.
Under the terms of Mr. Dodd’s
employment agreement he is entitled to severance payments equal to six months base salary, based on his average salary over the
past twelve months or lesser period as applicable, in the event the agreement is terminated without “Cause” or for
“Good Reason”, as defined in the agreement. Any severance payments would be made at the same time and in the same manner
as salary payments would have been paid to Mr. Dodd during the term of his agreement. The executive employment agreement with
Mr. Dean was modified to eliminate any severance payments when his contract was continued on a month-to-month basis after
expiration and in connection with the decision to limit Mr. Dean’s compensation at that time to his base salary payments
and benefits.
The employment agreements with Drs. Mullan
and Chapman and with Messrs. Dean, Dodd, Perito, and Williams each contain noncompetition covenants following the termination
of employment as well as covenants relating to the treatment of confidential information disclosed to them during their employment
with our company. The noncompetition covenants prohibit these individuals from owning a company or accepting employment with an
entity that competes in the same field as our company or soliciting business of the same or similar type being carried on by our
company for a period of one year following termination of employment.
We believe that written agreements are
in the best interest of our company to retain our current executive officers, to attract prospective executive officers to our
company and to provide such individuals with assurances of continued salary and benefits in the event of the termination of their
employment relationship. Absent such provisions, we believe that we would have difficulty attracting and retaining the type of
executive officers that we believe are critical to our mission and long-term objectives. In the future, it is expected that such
contracts will be for multiple-year terms and will contain provisions for base salary, and provisions covering a combination of
some or all of bonuses, equity incentive awards and severance provisions.
Taxation of Executive Compensation
We seek to compensate our executive officers
in a manner that is tax effective for our company. As appropriate, we seek to structure these compensation arrangements, to the
extent applicable, to comply with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended.
Consideration of “Say-on-Pay” Vote
Our Board of Directors recognizes the fundamental
interest that our stockholders have in the compensation of our executive officers. At our 2013 annual meeting of stockholders,
our stockholders approved, on an advisory basis, the compensation of our Named Executive Officers (a “say-on-pay proposal”)
as disclosed in the proxy statement for such meeting. Our stockholders approved the say-on-pay proposal by the affirmative vote
of 89.5% of the shares cast on that proposal. The Compensation Committee believes that this illustrates our stockholders’
support of our approach to executive compensation. The Compensation Committee will continue to consider the outcome of our company’s
say-on-pay proposals when making future compensation decisions for our executive officers. In addition, as previously disclosed,
our company’s Board of Directors has determined that it will hold an advisory vote on the compensation of our company’s
named executive officers annually until the next required vote on the frequency of stockholder votes on executive compensation,
which will occur no later than our annual meeting of stockholders in 2017.
Compensation Committee Report
Our company’s prior Compensation
Committee, or Committee, held seven meetings during the fiscal year ended December 31, 2013. Prior to our company’s
Annual Meeting, the Committee determined that our company’s current compensation levels were appropriate, as were the compensation
arrangements for Drs. Mullan and Chapman. The Committee also ratified the voluntary action by the Company’s CEO, Chairman,
President and COO, General Counsel and CFO to voluntarily reduce their salaries until our company is profitable. Based upon discussions
with management, the review of the action of the Committee and the review of the Compensation Discussion and Analysis for the year
ended December 31, 2013, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion
and Analysis section be included in this Report. Additionally, based on such review, the Compensation Committee has determined
that the current levels of compensation of our executive officers are appropriate given their experience, job responsibilities
and the diverse management roles that have been assumed by the executive officers.
Benjamin M. Dent
Scott P. Sensenbrenner
Thomas L. Wilson (Chairman)
The foregoing report shall not be deemed
incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities
Act of 1933 or under the Securities Exchange Act of 1934, as amended (together, the “Acts”), except to the extent that
our company specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Acts.
The following table summarizes the compensation
paid to the Named Executives employed by our company during 2011, 2012 and 2013, for services rendered in all capacities to our
company and its subsidiaries.
SUMMARY COMPENSATION TABLE FOR 2013
Name and
Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)(2)
|
|
|
Options
($)(3)
|
|
|
All
Other
Compensation
($)
|
|
|
Total($)
|
|
Michael J.
|
|
|
2011
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mullan(1)
|
|
|
2012
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Chief Executive officer
|
|
|
2013
|
|
|
|
-
|
|
|
|
-
|
|
|
|
943,874
|
|
|
|
-
|
|
|
|
934,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher C.
|
|
|
2011
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Chapman
|
|
|
2012
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
President
|
|
|
2013
|
|
|
|
-
|
|
|
|
-
|
|
|
|
471,937
|
|
|
|
-
|
|
|
|
471,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonnie R. Williams, Sr. (4)
|
|
|
2011
|
|
|
|
1,000,000
|
|
|
|
-
|
|
|
|
7,971,363
|
|
|
|
117,641
|
|
|
|
9,089,004
|
|
|
|
|
2012
|
|
|
|
1,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
148,443
|
|
|
|
1,148,443
|
|
|
|
|
2013
|
|
|
|
12
|
|
|
|
-
|
|
|
|
-
|
|
|
|
157,918
|
(5)
|
|
|
157,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Park A. Dodd, III
|
|
|
2011
|
|
|
|
246,019
|
|
|
|
1,500
|
|
|
|
-
|
|
|
|
11,025
|
|
|
|
247,519
|
|
Chief Financial Officer
|
|
|
2012
|
|
|
|
279,791
|
|
|
|
6,500
|
|
|
|
83,755
|
|
|
|
12,750
|
|
|
|
382,796
|
|
|
|
|
2013
|
|
|
|
225,000
|
|
|
|
1,500
|
|
|
|
-
|
|
|
|
10,125
|
(6)
|
|
|
236,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul L. Perito
|
|
|
2011
|
|
|
|
1,000,000
|
|
|
|
-
|
|
|
|
6,507,235
|
|
|
|
220,750
|
|
|
|
7,727,985
|
|
Vice President and Senior
Counsel,
|
|
|
2012
|
|
|
|
1,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
338,180
|
|
|
|
1,338,180
|
|
Legal and Regulatory
Affairs (7)
|
|
|
2013
|
|
|
|
625,000
|
|
|
|
-
|
|
|
|
3,503,896
|
(8)
|
|
|
397,808
|
(9)
|
|
|
4,526,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Dean
|
|
|
2011
|
|
|
|
295,000
|
|
|
|
1,500
|
|
|
|
451,500
|
|
|
|
28,977
|
|
|
|
776,977
|
|
Vice President Sales and Marketing
|
|
|
2012
|
|
|
|
295,000
|
|
|
|
100,761
|
|
|
|
358,950
|
|
|
|
63,007
|
|
|
|
817,718
|
|
|
|
|
2013
|
|
|
|
295,000
|
|
|
|
53,550
|
|
|
|
-
|
|
|
|
56,767
|
(10)
|
|
|
405,117
|
|
(1)
|
On December 27, 2013, Michael J. Mullan, MBBS (MD) PhD was elected to the position of Chairman and CEO and Christopher C. Chapman, MD was elected President of our Company. Neither Dr. Mullan nor Dr. Chapman received any salary during 2013, but were granted stock options on December 27, 2013 that had a value as reflected above.
|
|
|
(2)
|
Represents our company’s yearly Holiday bonus of $1,500 paid to all employees, except our CEO and COO. Our Vice President Sales and Marketing also received $52,050 in sales commission for Anatabloc
®
sales.
|
|
|
(3)
|
Amounts represent the grant date fair value of the stock options vested in the respective year. For the assumptions used in calculating the value of this award, see Note 8 to our consolidated financial statements included in Item 15 of our 10-K Report for the year ended December 31, 2013.
|
|
|
(4)
|
Mr. Williams served as our company’s Chief Executive Officer until December 27, 2013, at which time he resigned from that position and became a non-executive employee.
|
|
|
(5)
|
Represents $63,260 in automobile expenses, $63,701 in life insurance premiums and $30,957 in club memberships.
|
(6)
|
Represents matching contributions by our company under our 401(k) Plan.
|
|
|
(7)
|
Mr. Perito served as our Chairman, President and COO until December 27, 2013, at which time he resigned from those positions and became Vice President and Senior Counsel for Legal and Regulatory Affairs.
|
|
|
(8)
|
Amounts reflect the vesting of a performance-based stock options award, as described above in “Compensation Discussion and Analysis.”
|
|
|
(9)
|
Represents $53,874 in automobile expenses, $320,858 in life and disability insurance premiums and $23,076 in club memberships.
|
|
|
(10)
|
Represents $56,767 in automobile expenses.
|
Grants of Plan Based Awards During 2013
The following table
sets forth certain information with respect to grants of executive compensation plan-based awards to the Named Executive Officers
during the fiscal year ended December 31, 2013.
Name
|
|
Grant
Date
|
|
Estimated Future Payouts Under Equity
Incentive Plan Awards
|
|
|
All Other
Option
Awards:
Number of
Shares of
Stock or
Units (#)
|
|
|
Exercise
or Base
Price of
Option
Awards
($/sh)
|
|
|
Grant Date
Fair Value of
Stock and
Option Awards
|
|
|
|
|
|
Threshold
($)
|
|
|
Target ($)(#)
|
|
|
Maximum
($)
|
|
|
|
|
|
|
|
|
|
|
Michael J. Mullan
|
|
12/27/13
|
|
|
|
|
|
$
|
2,500,000
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/27/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
(2)
|
|
$
|
1.25
|
|
|
$
|
0.94
|
|
|
|
12/27/13
|
|
|
|
|
|
|
2,000,000
|
(2)
|
|
|
|
|
|
|
|
|
|
$
|
1.25
|
|
|
$
|
0.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher C. Chapman
|
|
12/27/13
|
|
|
|
|
|
$
|
1,250,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/27/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
(4)
|
|
$
|
1.25
|
|
|
$
|
0.94
|
|
|
|
12/27/13
|
|
|
|
|
|
|
2,500,000
|
(4)
|
|
|
|
|
|
|
|
|
|
$
|
1.25
|
|
|
$
|
0.94
|
|
(1)
|
Upon his appointment as our Chief Executive Officer and Chairman of the Board on December 27, 2013, Dr. Mullan was granted an incentive opportunity to receive an award of an aggregate of $2.5 million, depending on whether certain performance goals are obtained. This $2.5 million payment, if achieved, will be paid in the form of fully vested shares of our common stock, and may be paid in separate tranches over time if the relevant performance criteria is met. For a description of the performance criteria, and the schedule for potential payment of this award, please see “Compensation Discussion and Analysis — Equity Incentive Awards
|
|
|
(2)
|
During 2013, Dr. Mullan was granted a total of 3,000,000 stock options to purchase shares of our common stock. 2,000,000 of these stock options will vest over various periods of time depending on whether certain performance goals are obtained. The vesting schedule and performance criteria are the same as referred to in Footnote (1) above, and we refer you to a description of this award in “Compensation Discussion and Analysis — Equity Incentive Awards.” The remaining 1,000,000 stock options vested immediately upon Dr. Mullan’s appointment as our Chief Executive Officer and Chairman of the Board on December 27, 2013.
|
|
|
(3)
|
Upon his appointment as our President on December 27, 2013, Dr. Chapman was granted an incentive opportunity to receive an award of an aggregate of $1.25 million, depending on whether certain performance goals are obtained. This $1.25 million payment, if achieved, will be paid in the form of fully vested shares of our common stock, and may be paid in separate tranches over time if the relevant performance criteria is met. For a description of the performance criteria and the schedule for potential payment of this award, please see “Compensation Discussion and Analysis — Equity Incentive Awards”.
|
(4)
|
During 2013, Dr. Chapman was granted a total of 3,000,000 stock options to purchase shares of our common stock. 2,500,000 of these stock options will vest over various periods of time depending on whether certain performance goals are obtained. The vesting schedule and performance criteria are the same as referred to in Footnote (3) above, and we refer you to a description of this award in “Compensation Discussion and Analysis — Equity Incentive Awards.” The remaining 500,000 stock options vested immediately upon Dr. Chapman’s appointment as our President on December 27, 2013.
|
For the assumptions used in calculating
the value of these awards, see Note 8 to our consolidated financial statements included in “Item 15. Exhibits, Financial
Statement Schedules” of our 10-K for the year ended December 31, 2013.
Outstanding Equity Awards as of December 31, 2013
The following table provides information
regarding the stock options held by the Named Executives as of December 31, 2013. All stock options were fully vested and
exercisable as of December 31, 2013.
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (1)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
Christopher C. Chapman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
3.58
|
|
|
9/22/15
|
|
|
|
50,000
|
|
|
|
|
|
|
|
2.89
|
|
|
9/22/16
|
|
|
|
50,000
|
|
|
|
|
|
|
|
1.01
|
|
|
9/22/17
|
|
|
|
50,000
|
|
|
|
|
|
|
|
4.03
|
|
|
9/22/18
|
|
|
|
50,000
|
|
|
|
|
|
|
|
0.98
|
|
|
9/22/19
|
|
|
|
75,000
|
|
|
|
|
|
|
|
2.72
|
|
|
4/5/20
|
|
|
|
50,000
|
|
|
|
|
|
|
|
2.30
|
|
|
9/22/20
|
|
|
|
50,000
|
|
|
|
|
|
|
|
2.88
|
|
|
9/22/21
|
|
|
|
50,000
|
|
|
|
|
|
|
|
3.02
|
|
|
4/5/22
|
|
|
|
50,000
|
|
|
|
|
|
|
|
3.93
|
|
|
9/22/22
|
|
|
|
50,000
|
|
|
|
|
|
|
|
1.90
|
|
|
9/22/23
|
|
|
|
500,000
|
|
|
|
2,500,000
|
|
|
|
1.25
|
|
|
12/27/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Mullan
|
|
|
1,000,000
|
|
|
|
2,000,000
|
|
|
|
1.25
|
|
|
12/27/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonnie R. Williams, Sr.
|
|
|
500,000
|
|
|
|
|
|
|
|
1.72
|
|
|
5/6/18
|
|
|
|
1,250,000
|
|
|
|
|
|
|
|
2.72
|
|
|
4/5/20
|
|
|
|
3,185,000
|
|
|
|
|
|
|
|
2.95
|
|
|
3/14/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Park A. Dodd, III
|
|
|
250,000
|
|
|
|
|
|
|
|
1.19
|
|
|
10/10/17
|
|
|
|
50,000
|
|
|
|
|
|
|
|
1.72
|
|
|
5/6/18
|
|
|
|
50,000
|
|
|
|
|
|
|
|
2.72
|
|
|
4/5/20
|
|
|
|
35,000
|
|
|
|
|
|
|
|
3.02
|
|
|
4/5/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul L. Perito
|
|
|
625,000
|
|
|
|
|
|
|
|
1.72
|
|
|
5/6/18
|
|
|
|
1,250,000
|
|
|
|
|
|
|
|
2.72
|
|
|
4/5/20
|
|
|
|
4,000,000
|
|
|
|
|
|
|
|
2.95
|
|
|
3/14/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Dean
|
|
|
350,000
|
|
|
|
|
|
|
|
2.00
|
|
|
1/31/21
|
|
|
|
150,000
|
|
|
|
|
|
|
|
3.02
|
|
|
4/5/22
|
These stock options are subject
to performance based vesting criteria. For a description of the vesting schedule upon the attainment of the applicable performance
goals, see “Compensation Discussion and Analysis - Discretionary Equity Incentive Awards.”
Option Exercises and Stock Vested During 2013
No stock options were exercised by our
Named Executives during the year ended December 31, 2013. In 2011, the stockholders approved a grant of 4,900,000 and 4,000,000
stock options to Mr. Jonnie Williams, Sr, our Company’s former CEO and Paul L. Perito, our company’s Vice President
and Senior Counsel for Legal and Regulatory Affairs, and former President and COO, which would vest based on stated performance
criteria. In 2011 sixty-five percent of the stock options granted to Messrs. Perito and Williams (3,185,000 and 1,600,000 respectively)
vested based on their meeting two of the performance criteria in their employment agreements and upon stockholder approval of the
stock option grants. On December 24, 2013 Mr. William’s forfeited his unvested stock options in the amount of 1,715,000 option
shares. On the same date, 1,400,000 option shares, the remaining shares granted to Mr. Perito, vested upon the determination by
our company’s Compensation Committee that a performance criteria covering eighty percent of the stock options had been satisfied.
Potential Payments Upon Termination or Change of Control
As noted below, certain of our executive
officers are entitled to severance upon a termination of employment but are not entitled to any payments solely as a result of
agreements that were in effect as of December 31, 2013. The employment agreements are described above under “-Employment
and Severance Arrangements”. The following chart sets forth the severance the executive officers would be entitled to receive
upon certain terminations of employment, assuming the relevant event occurred on December 31, 2013.
Name
|
|
Benefit
|
|
Upon
Termination by
the Company
without Cause
|
|
|
Upon
Termination
for Good
Reason
|
|
|
Upon
Change in
Control/Management
|
|
|
Upon
Death
|
|
|
Upon
Disability
|
|
Michael J. Mullan (1)
|
|
Base Salary/Benefits
|
|
$
|
1,281,500
|
|
|
$
|
1,281,500
|
|
|
$
|
2,500,000
|
|
|
$
|
645,500
|
|
|
$
|
645,500
|
|
|
|
Bonus
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Equity Compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
3,821,735
|
|
|
|
3,821,735
|
|
|
|
3,821,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher C. Chapman (2)
|
|
Base Salary/Benefits
|
|
|
681,500
|
|
|
|
681,500
|
|
|
|
2,500,000
|
|
|
|
336,750
|
|
|
|
336,750
|
|
|
|
Bonus
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Equity Compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
1,985,327
|
|
|
|
1,985,327
|
|
|
|
1,985,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Park A. Dodd, III(3)
|
|
Base Salary
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul L. Perito(4)
|
|
Base Salary/Benefits
|
|
|
75,818
|
|
|
|
75,818
|
|
|
|
2,500,000
|
|
|
|
576,950
|
|
|
|
897,808
|
|
|
|
Bonus
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Equity Compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonnie Williams, Sr. (5)
|
|
Base Salary/Benefits
|
|
|
13,161
|
|
|
|
13,161
|
|
|
|
2,500,000
|
|
|
|
12
|
|
|
|
157,930
|
|
|
|
Bonus
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Equity Compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(1)
|
Dr. Mullan
. Upon various termination events, Dr.
Mullan is entitled to the benefits as described below:
|
Without Cause
. Upon a termination without
cause, Dr. Mullan shall be entitled to all salary, benefits, bonuses and other compensation that would be due to him had he served
out the remainder of the term of his employment agreement. With respect to Dr. Mullan’s equity awards, such awards shall
not vest and accelerate, but rather will continue to vest pursuant to the terms of his employment agreement. Therefore, amounts
related to equity awards are not reflected in the table above for this termination event.
Good Reason
. Upon a termination for
good reason, Dr. Mullan shall be entitled to the same benefits as described above related to a termination without cause.
Change of Control
. Upon a termination
following a change of control of the company, Dr. Mullan shall be entitled to (i) a cash payment of $2.5 million, (ii) a payment
related to any tax liability incurred by him under Section 280G of the Code (which such amounts are not reflected in the table
above), and (iii) all outstanding equity awards would become fully vested and accelerate. “
Change in Control
”
means: (a) a change in ownership or control of the company effected through a transaction or series of transactions whereby any
person or persons acting in concert directly or indirectly acquires beneficial ownership of securities of the company possessing
more than fifty present (50%) of the total combined voting power of the company’s securities outstanding immediately after
such transaction, or (b) a sale or disposition, in one or a series of related transactions, of all or substantially all of the
assets of the company to any person or persons acting in concert.
Death
. Upon death, Dr. Mullan’s
estate would be entitled to all salary and accrued benefits that would have been payable by us to him during the one year period
immediately following death. In addition, all outstanding equity awards would become fully vested and accelerate.
Disability
. Upon a termination for
disability, Dr. Mullan shall be entitled to the same benefits as described above related to a termination upon death.
If Dr. Mullan terminated his employment without cause,
or we terminated his employment for good reason, he would only be entitled to accrued and unpaid salary, and all unvested equity
awards would be forfeited by him.
|
(2)
|
Dr. Chapman
. Upon various termination events,
Dr. Chapman is entitled to the benefits as described below:
|
Without Cause
. Upon a termination without
cause, Dr. Chapman shall be entitled to all salary, benefits, bonuses and other compensation that would be due to him had he served
out the remainder of the term of his employment agreement. With respect to Dr. Chapman’s equity awards, such awards shall
not vest and accelerate, but rather will continue to vest pursuant to the terms of his employment agreement. Therefore, amounts
related to equity awards are not reflected in the table above for this termination event.
Good Reason
. Upon a termination for
good reason, Dr. Chapman shall be entitled to the same benefits as described above related to a termination without cause.
Change of Control
. Upon a termination
following a change of control of the company, Dr. Chapman shall be entitled to (i) a cash payment of $2.5 million, (ii) a payment
related to any tax liability incurred by him under Section 280G of the Code (which such amounts are not reflected in the table
above), and (iii) all outstanding equity awards would become fully vested and accelerate. “
Change in Control
”
means: (a) a change in ownership or control of the company effected through a transaction or series of transactions whereby any
person or persons acting in concert directly or indirectly acquires beneficial ownership of securities of the company possessing
more than fifty present (50%) of the total combined voting power of the company’s securities outstanding immediately after
such transaction, or (b) a sale or disposition, in one or a series of related transactions, of all or substantially all of the
assets of the company to any person or persons acting in concert.
Death
. Upon death, Dr. Chapman’s
estate would be entitled to all salary and accrued benefits that would have been payable by us to him during the one year period
immediately following death. In addition, all outstanding equity awards would become fully vested and accelerate.
Disability
. Upon a termination for
disability, Dr. Chapman shall be entitled to the same benefits as described above related to a termination upon death.
If Dr. Chapman terminated his employment without
cause, or we terminated his employment for good reason, he would only be entitled to accrued and unpaid salary, and all unvested
equity awards would be forfeited by him.
|
(3)
|
Mr. Dodd
. Upon various termination events, Mr.
Dodd is entitled to the benefits as described below:
|
Without Cause
. Upon a termination without cause,
Mr. Dodd shall be entitled to continued salary of $100,000.
Good Reason
. Upon a termination for
good reason, Mr. Dodd shall be entitled to continued salary of $100,000.
|
(4)
|
Mr. Perito
. Upon various termination events, Mr.
Perito is entitled to the benefits as described below:
|
Without Cause
. Upon a termination without
cause, Mr. Perito shall be entitled to all salary, benefits, bonuses and other compensation that would be due to him had he served
out the remainder of the term of his employment agreement — However, Mr. Perito’s employment agreement is currently
on a month to month basis, and thus, amounts in this column reflect only one month of such salary, benefits, bonuses and other
compensation. With respect to Mr. Perito’s equity awards, such awards shall not vest and accelerate, but rather will continue
to vest pursuant to the terms of his employment agreement. However, as of the date hereof, all such equity awards are fully vested,
and thus are not reflected in the table above for this termination event.
Good Reason
. Upon a termination for
good reason, Mr. Perito shall be entitled to the same benefits as described above related to a termination without cause.
Change of Management
. Termination
by Mr. Perito upon Certain Change of Management. Thirty (30) days after delivery by Mr. Perito to the company of a written
notice terminating his agreement upon (a) a change in the senior management of the company resulting from the death or disability
of Mr. Williams Sr., or (b) a removal and replacement of a majority of the Board of Directors, including such other persons elected
to serve as directors with the approval of the Board of Directors subsequent to the date of the employment agreement, by the stockholders
of the company at a special meeting of the stockholders, held in accordance with the terms of the company’s Certificate of
Incorporation and By-Laws and in accordance with all applicable laws, called by a stockholder or a group of stockholders of the
company for such purpose, in which event the company shall, within thirty (30) days following the effective date of termination,
pay Mr. Perito the sum of $2,500,000. The company shall also pay any tax due by Mr. Perito under Section 280G of the Code as a
result of any payment to Mr. Perito under this termination event (and such amounts are not reflected in the table above).
Death
. Upon death, Mr. Perito’s
estate would be entitled to all salary and accrued benefits that would have been payable by us to him during the one year period
immediately following death. In addition, all outstanding equity awards would become fully vested and accelerate. However, as of
the date hereof, all such equity awards are fully vested, and thus are not reflected in the table above for this termination event.
Disability
. Upon a termination for
disability, Mr. Perito shall be entitled to the same benefits as described above related to a termination upon death.
|
(5)
|
Mr. Williams
. Upon various termination events,
Mr. Williams is entitled to the benefits as described below:
|
Without Cause
. Upon a termination without
cause, Mr. Williams shall be entitled to all salary, benefits, bonuses and other compensation that would be due to him had he served
out the remainder of the term of his employment agreement. However, Mr. Williams’s employment agreement is currently on a
month to month basis, and thus, amounts in this column reflect only one month of such salary, benefits, bonuses and other compensation.With respect to Mr. William’s equity awards, such awards shall not vest and accelerate, but rather will continue to vest
pursuant to the terms of his employment agreement. However, as of the date hereof, all such equity awards are fully vested, and
thus are not reflected in the table above for this termination event.
Good Reason
. Upon a termination for
good reason, Mr. Williams shall be entitled to the same benefits as described above related to a termination without cause.
Change of Management
. Termination
by Mr. Williams upon Certain Change of Management. Thirty (30) days after delivery by Mr. Williams to the company of a written
notice terminating his agreement upon (a) a change in the senior management of the company resulting from the death or disability
of Mr. Perito, or (b) a removal and replacement of a majority of the Board of Directors, including such other persons elected
to serve as directors with the approval of the Board of Directors subsequent to the date of the employment agreement, by the stockholders
of the company at a special meeting of the stockholders, held in accordance with the terms of the company’s Certificate
of Incorporation and By-Laws and in accordance with all applicable laws, called by a stockholder or a group of stockholders of
the company for such purpose, in which event the company shall, within thirty (30) days following the effective date of termination,
pay Mr. Williams the sum of $2,500,000. The company shall also pay any tax due by Mr. Williams under Section 280G of the Code
as a result of any payment to Mr. Williams under this termination event (and such amounts are not reflected in the table above).
Death
. Upon death, Mr. William’s
estate would be entitled to all salary and accrued benefits that would have been payable by us to him during the one year period
immediately following death. In addition, all outstanding equity awards would become fully vested and accelerate. However, as of
the date hereof, all such equity awards are fully vested, and thus are not reflected in the table above for this termination event.
Disability
. Upon a termination for
disability, Mr. Williams shall be entitled to the same benefits as described above related to a termination upon death.
For purposes of Dr. Mullan’s and Chapman’s,
and Messrs. Dodd’s, Perito’s and William’s agreements, the following terms are defined as set forth below:
“
Disability
” means: A physical
or mental condition, verified by a physician designated by the company, which prevents executive from carrying out one or more
of the material aspects or essential functions of his assigned duties for at least ninety (90) consecutive days, or for a total
of ninety (90) days in any six (6) month period.
“
Cause
” means:
(a) Executive shall have committed an act of dishonesty,
fraud, embezzlement or theft with respect to the property, business or affairs of the company, in any such event in such a manner
as to cause material loss, damage or injury to the company;
(b) Executive shall have materially breached his employment
agreement and such breach shall have continued for a period of twenty (20) days after receipt of written notice from the company
specifying such breach;
(c) Executive shall have been grossly negligent in
the performance of his duties under the employment agreement, intentionally not performed or misperformed any of such duties, or
refused to abide by or comply with the directives of the company’s Board of Directors, which action shall have continued
for a period of twenty (20) days after receipt of written notice from the company demanding such action cease or be cured;
(d) Executive shall have been found guilty of, or
has plead nolo contendere to, the commission of a felony offense or other crime involving moral turpitude; or
(e) Executive shall have abused alcohol or drugs (legal
or illegal) that, in the reasonable judgment of the company’s Board of Directors, materially impairs executive’s ability
to perform his duties hereunder.
“
Good Reason
” means:
(a) The assignment of executive to any duties inconsistent
with, or any adverse change in, executive's positions, duties, responsibilities, functions or status with the company, or the removal
of executive from, or failure to reelect executive to, any of such positions; provided, however, that a change in executive's positions,
duties, responsibilities, functions or status that executive shall agree to in writing shall not be an event of “Good Reason”;
(b) A reduction by the company of executive’s
base salary without his written consent;
(c) The failure by the company to continue in effect
for executive any material benefit provided under his employment agreement or otherwise available to any of the management executives
of the company, including without limitation, any retirement, pension or incentive plans, life, accident, disability or health
insurance plans, equity or cash bonus plans or savings and profit sharing plans, or any action by the company which would adversely
affect executive's participation in or reduce executive's benefits under any of such plans or deprive executive of any fringe benefit
enjoyed by Executive; or
(d) Any other material breach by the company of the
employment agreement which is not cured within twenty (20) days of delivery of written notice thereof by executive to the company.
Dual Position of CEO and Chairman
We previously separated the positions of
Chairman of the Board and Chief Executive Officer. However, in connection with the corporate transition effected by us in
December 2013, these positions were combined to be held by Dr. Mullan. We believe that this Board leadership structure is
appropriate for our company at this time, in that the combined role of the Chairman of the Board and the Chief Executive Officer
promotes unified leadership and direction for the company, allowing for a single, clear focus for management to execute the company’s
strategy and business plan, while also providing for effective oversight by an independent Board. We believe the Chief Executive
Officer is in the best position to focus the independent directors’ attention on the issues of greatest importance to the
company and its stockholders. We believe these factors are particularly important in light of the corporate transition,
and the importance of Dr. Mullan being able to set the agenda for the company. We believe that our overall corporate governance
policies and practices combined with the strength of our independent directors minimize any potential conflicts that may result
from combining the roles of our Chairman of the Board and our Chief Executive Officer. As part of its annual self-assessment, the
Board will consider whether the current leadership structure continues to be optimal for the company and its stockholders.
Board of Director Compensation
In compensating directors, our company
has sought to use a combination of payments for participation in director and committee meetings, initial anniversary stock option
grants and periodic stock option grants. The combination of payments for meeting attendance and stock option grants is intended
to motivate and align the interest of the directors with that of our company. Also, we have sought to use the combination of payments
to directors for attendance at meetings and stock option grants to attract directors who have particular skills and expertise that
would complement our company’s mission, particularly in the area of finance, new product development, medical research, and
other health-related areas.
Each of our company’s independent
directors, as so classified by our Board of Directors, or the Independent Directors, is granted a stock option to purchase up to
50,000 shares of our common stock on the date such Independent Director is first elected to the Board of Directors, vesting in
equal installments on each of the first two anniversaries of the date of grant. As an annual retainer, each Independent Director
additionally receives a stock option to purchase up to 50,000 shares of our common stock granted on each anniversary of such Independent
Director’s initial election to the Board of Directors, exercisable immediately. Each Independent Director also receives a
payment of $4,500 for participation in each meeting of the Board of Directors and any committee meeting attended personally and
$3,500 for participation in each meeting of the Board of Directors and any committee meeting attended telephonically, subject to
a cap of $6,000 for multiple in-person or telephonic meetings on the same day. Additionally, the chairman of the Audit Committee
is to receive a separate fee of $20,000 per year for services in that capacity, although the fee has been waived at times in the
past, and the chairman of the Compensation Committee is to receive a separate fee of $15,000 per year for services in that capacity.
Messrs. Dent, Sensenbrenner and Wilson
have been designated as our current Independent Directors. This designation of independence is intended solely for the purpose
of clarifying which directors are entitled to compensation for their services as directors. Directors not designated as Independent
Directors generally are those who in the past have been employees of our company, or who have waived their right to receive director
compensation. Directors who are employees of our company receive compensation in their capacity as employees but do not receive
any compensation for board or committee meetings, nor do they receive the “options package” made available to individuals
serving as Independent Directors.
The following table sets forth, for our
company’s Independent Directors, certain information regarding fees earned and equity awards granted during the year ended
December 31, 2013.
Name
|
|
Fees Earned or
Paid in Cash
($)(1)
|
|
|
Option Grant
Date Fair Value
($)(2)
|
|
|
All Other
Compensation
|
|
|
Total
($)
|
|
Burton J. Haynes (3)
|
|
$
|
160,500
|
|
|
$
|
72,550
|
|
|
|
-
|
|
|
$
|
233,050
|
|
Christopher C. Chapman, MD(3)
|
|
|
154,500
|
|
|
|
73,000
|
|
|
|
-
|
|
|
|
227,500
|
|
Neil L. Chayet(3)
|
|
|
135,000
|
|
|
|
73,000
|
|
|
|
-
|
|
|
|
208,000
|
|
Ralph B. Everett(3)
|
|
|
92,500
|
|
|
|
47,150
|
|
|
|
-
|
|
|
|
139,650
|
|
Benjamin Dent (4)
|
|
|
-
|
|
|
|
48,600
|
|
|
|
-
|
|
|
|
48,600
|
|
Scott Sensenbrenner (4)
|
|
|
-
|
|
|
|
48,600
|
|
|
|
-
|
|
|
|
48,600
|
|
Naomi Whittel (4)
|
|
|
-
|
|
|
|
48,600
|
|
|
|
-
|
|
|
|
48,600
|
|
Tom Wilson (4)(5)
|
|
|
-
|
|
|
|
48,600
|
|
|
|
-
|
|
|
|
48,600
|
|
|
(1)
|
This column represents the amount of compensation earned by each Independent Director during 2013 in the form of director fees.
|
|
(2)
|
Amounts represent the grant date fair value of the stock options issued in the respective year. For the assumptions used in
calculating the value of this award, see Note 8 to our consolidated financial statements included in Item 15 of the 10-K for
the year ended December 31, 2013.
|
|
(3)
|
Messrs. Haynes, Chapman, Chayet and Everett did not stand for re-election as independent directors to the Board at our Annual
Meeting held on December 27, 2013. Mr. Chapman was elected as a management member of the board at our Annual Meeting.
|
|
(4)
|
Messrs. Dent, Sensenbrenner and Wilson and Ms. Whittel
were elected to our Board of Directors at our annual meeting held on December 27, 2013 and did not receive any fees for attending
Board meetings in 2013. They did receive initial Director stock option grants on December 27, 2013 for 50,000 option shares, which
are reflected in the option grant fair value column above.
|
|
(5)
|
Ms. Whittel resigned from our Board of Directors on February 10, 2014, and her stock options which had not yet vested were
terminated on that date.
|
The following represents the number of
options granted to each Independent Director in 2013 and the total number of options held by each Independent Director as of December 31,
2013.
Name
|
|
Options
Granted 2013
|
|
|
2013 Vested
Options
|
|
|
Option
Exercise Price
($)
|
|
|
Option
Expiration
Date
|
|
Total Options
outstanding as of
December 31, 2013
|
|
Burton J. Haynes (1)
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
1.90
|
|
|
10/22/23
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher C. Chapman, M.D(1)
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
1.90
|
|
|
9/22/23
|
|
|
575,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil L. Chayet(1)
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
1.90
|
|
|
9/7/23
|
|
|
475,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ralph B. Everett(1)
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
1.25
|
|
|
12/14/23
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benjamin M. Dent
|
|
|
50,000
|
|
|
|
-
|
|
|
|
1.25
|
|
|
12/27/23
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott P. Sensenbrenner
|
|
|
50,000
|
|
|
|
-
|
|
|
|
1.25
|
|
|
12/27/23
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Naomi Whittel (2)
|
|
|
50,000
|
|
|
|
-
|
|
|
|
1.25
|
|
|
12/27/23
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas L. Wilson
|
|
|
50,000
|
|
|
|
-
|
|
|
|
1.25
|
|
|
12/27/23
|
|
|
50,000
|
|
|
(1)
|
Messrs. Haynes, Chayet and Everett did not stand for re-election to the Board at the Annual Meeting held on December 27,
2013. Mr. Chapman was elected as a management member of the board at our Annual Meeting.
|
|
(2)
|
Ms. Whittel resigned from our Board of Directors on February 10, 2014.
|
Compensation Committee Interlocks and Insider Participation
No member of our Board of Director’s
Compensation Committee, each of whom is listed under “-Compensation Committee Report,” has served as one of our officers
or employees at any time. None of our executive officers served during 2013 as a member of the board of directors or as a member
of a compensation committee of any other company that has an executive officer serving as a member of our Board of Directors or
Compensation Committee.