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Item 11.
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Executive Compensation
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Compensation Discussion
and Analysis
Introduction
The
Compensation Committee is responsible for establishing, implementing and overseeing our overall compensation strategy and policies,
including our executive compensation program, in a manner that supports our business objectives.
The Compensation Committee’s
complete roles and responsibilities are set forth in a written charter of the Compensation Committee adopted by our Board of Directors,
which can be found at our website, www.peregrineinc.com
.
This Compensation
Discussion and Analysis explains our compensation philosophy, policies and practices for the fiscal year ended April 30, 2017 for
the following executive officers, who are referred to in this Compensation Discussion and Analysis and the subsequent tables as
our “Named Executive Officers” or “NEOs”:
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Steven W. King, President and Chief Executive Officer;
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Paul J. Lytle, Chief Financial Officer;
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Shelley P.M. Fussey, Ph.D., Vice President, Intellectual Property;
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Joseph S. Shan, Vice President, Clinical & Regulatory Affairs; and
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Mark R. Ziebell, Vice President, General Counsel and Corporate Secretary.
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Overview
Executive compensation
programs affect all employees by setting general levels of compensation and helping to create an environment of goals, rewards
and expectations. Because we believe the performance of every employee is important to our success, we are mindful of the effect
executive compensation and incentive programs have on all of our employees.
The employment market
for personnel and executives with experience in the biotechnology and pharmaceutical industry in Southern California is very competitive
because there are several pharmaceutical, biotechnology and medical device companies in that region. The majority of our competitors
in this geographic area have more resources than we do which makes it more difficult for us to hire and retain key personnel. As
a result, the Compensation Committee must establish compensation packages that will enable the Company to be competitive with the
local market.
Given the competitive
environment in which we operate, o
ur executive compensation programs are
designed to deliver compensation that is competitive with our peer group and that allows us to attract and retain superior talent
who can perform effectively and succeed in a demanding business environment. Our compensation programs are also designed to reward
performance against pre-established corporate and individual goals and align the interests of our executives with our stockholders.
We believe that the compensation of our executive officers should focus executive behavior on the achievement of near-term corporate
targets as well as long-term business objectives and strategies. We believe that pay-for-performance compensation programs, which
reward our executives when they achieve individual and/or corporate goals, create stockholder value and thus have emphasized company
and individual performance in setting compensation. We use a combination of base salary, annual cash incentive compensation programs,
a long-term equity incentive compensation program and a broad-based benefits program to create a competitive compensation package
for our executive management team.
Our President and Chief
Executive Officer, who attends most meetings of the Compensation Committee, assists the Compensation Committee in determining the
compensation of all other executive officers by, among other things:
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recommending to the Compensation Committee appropriate base salaries of the other executive officers;
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establishing corporate objective and evaluating individual contributions and performance against those objectives; and
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making recommendations, from time to time, for annual or special stock grants or stock option grants (e.g., for motivational
or retention purposes).
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The other executive
officers do not have a role in determining their own compensation, other than discussing their annual individual performance objectives
with the President and Chief Executive Officer.
Independent Compensation Consultants
The Compensation
Committee has the authority to directly retain the services of independent consultants and other experts to assist in fulfilling
its responsibilities. For the fiscal year ended April 30, 2017, the Compensation Committee engaged Barney & Barney LLC, or
Barney & Barney,
to review our executive compensation programs and
to assess our executive officers’ base salaries, short-term incentive opportunities, target and actual total cash, long-term
incentive value and total direct compensation from a competitive standpoint. As described herein, Barney & Barney assisted
the Compensation Committee in defining the appropriate market of our peer companies for executive compensation and practices and
in benchmarking our executive compensation program against the peer group. The Compensation Committee has adopted a compensation
philosophy of targeting our executive compensation to the 50
th
percentile of executive compensation of our peer group.
Executive compensation may be above or below the 50
th
percentile based on an executive’s experience, scope of
position, individual performance and Company constraints.
The Compensation
Committee uses the information it obtains from Barney & Barney primarily for evaluating our executive compensation practices,
including measuring the competitiveness of our practices. The Compensation Committee also uses the information obtained from Barney & Barney to review our cash bonus policy, equity awards, and base salary benchmarks across all levels of the Company. The Compensation
Committee has assessed the independence of Barney & Barney pursuant to SEC rules and the corporate governance rules of The
NASDAQ Stock Market and concluded that no conflict of interest exists that would prevent Barney & Barney from independently
advising the Compensation Committee. In compliance with the SEC and the corporate governance rules of The NASDAQ Stock Market,
Barney & Barney provided the Compensation Committee with a letter addressing each of the six independence factors described
in those rules. Their responses affirm the independence of Barney & Barney and its employees who service the Compensation Committee
on executive compensation matters.
Components of Our Executive Compensation
Program
The primary elements
of our executive compensation program are:
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annual cash bonus plan;
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employment agreements and severance and change-in-control benefits; and
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perquisites and other benefits.
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The Compensation Committee
has structured our executive compensation program to ensure that executive officers are compensated in a manner consistent with
stockholder interests, competitive pay practices and applicable regulatory requirements.
The Compensation Committee
does not have any formal or informal policy or target for allocating compensation between long-term and short-term compensation
or between cash and non-cash compensation. Instead, the Compensation Committee, after reviewing information provided by an independent
compensation consulting firm, determines subjectively what it believes to be the appropriate level and mix of the various compensation
components that it believes appropriate to achieve the compensation and corporate objectives described in this discussion.
Base Salary
Base salary is used
to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our executives, and
to provide a fixed amount of compensation for performing daily responsibilities, and also provide stability and security. When
reviewing base salaries for the fiscal year ended April 30, 2017, the Compensation Committee considered various data regarding
the base salaries of executive officers in comparable positions at other biotechnology companies. Additional factors included,
but were not limited to, company size, market capitalization, stage of development of a company’s products and geographic
location. The Compensation Committee also considered the individual experience level and actual performance of each executive officer
in light of our needs and objectives. The Compensation Committee also reviewed an analysis from Barney & Barney, our independent
compensation consulting firm, to ensure that base salaries are competitive and within the competitive range of other biotechnology
companies in our peer group.
Base salaries are
reviewed at least annually by the Compensation Committee, and may be adjusted to realign salaries with market levels after
taking into account individual responsibilities, performance and experience, subject to minimum salary requirements set forth
in applicable employment agreements. Base salaries may be increased for merit reasons, based on the executive’s success
in meeting or exceeding individual performance objectives as well as our combined success in meeting corporate goals,
including contact manufacturing revenue goals and research and development goals. An executive’s base salary is also
evaluated by reviewing the executive’s other compensation components to ensure that the executive’s total
compensation is in line with our overall compensation philosophy as discussed above.
The following annual
base salary amounts of our Named Executive Officers for the fiscal year ended April 30, 2017 were determined based on the “Factors
for Determining Compensation”, as noted below:
Named Executive Officer
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Annual Base Salary ($)
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Steven W. King
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540,800
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Paul J. Lytle
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405,600
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Shelley P.M. Fussey, Ph.D.
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321,000
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Joseph S. Shan
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309,000
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Mark R. Ziebell
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361,920
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The above annual base
salaries for fiscal year ended April 30, 2017 reflect a four percent (4%) increase for Messrs. King, Lytle and Ziebell, and a three
percent (3%) increase for Mr. Shan, which were approved by the Compensation Committee on June 9, 2016 and retroactively applied
to the beginning of fiscal year 2017.
Annual Cash Bonus
Plan
In July 2011, the Compensation
Committee adopted and approved a formal Annual Cash Bonus Plan (the “Bonus Plan”) for its Named Executive Officers
for the fiscal year ended April 30, 2012 performance and for each subsequent fiscal year, unless amended, which the Compensation
Committee used to determine the annual bonuses awarded to Named Executive Officers. The Compensation Committee may also make discretionary
bonuses outside of the framework of the Bonus Plan, but in general, each participant’s annual cash bonus under the Bonus
Plan will be determined by multiplying the participant’s annual base salary for the applicable fiscal year by (a) a corporate
goal achievement percentage ranging from 0% to 100%, (b) a target bonus percentage for such participant, generally targeted for
the 50
th
percentile of our peer groups, and (c) a corporate factor ranging from 0 to 1.5, based on the Company’s
achievement of corporate goals, the participant’s achievement of individual goals, the participant’s role and responsibilities
within the Company, and other factors as determined by the Compensation Committee.
The
Company’s corporate goals are set at or around the beginning of each fiscal year by the Compensation Committee, based
on recommendations by the Company’s management. At the end of each fiscal year, the Compensation Committee determines
the extent to which the corporate goals were achieved (expressed as a percentage) and each participant’s corporate
factor based on a quantitative and qualitative review of such participant’s performance, in addition to other factors
determined by the Compensation Committee. Each participant’s individual goals, which are aligned to support the
corporate goals, are also set at or around the beginning of each fiscal year and are also evaluated based on a quantitative
and qualitative review of performance. The Compensation Committee’s chair will recommend the President and Chief
Executive Officer’s individual goals and individual factor to the Compensation Committee and the President and Chief
Executive Officer will recommend other executive officers individual goals and individual factors to the Compensation
Committee. All individual goals and individual factors will be set by the Compensation Committee. Corporate goals and
individual goals may be modified by the Compensation Committee during the applicable fiscal year based on operational
and financial developments.
Following the end of
the fiscal year, the Compensation Committee reviews performance relative to each corporate goal and determines the achievement
level of each corporate goal, and then calculates an overall aggregate achievement percentage (not to exceed 100%) which takes
into consideration the individual weighting attributed to each corporate goal. The Compensation Committee does not use a strict
formula in assessing the Company’s level of achievement with respect to each goal, but rather considers factors such as:
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the level of success achieved for each corporate goal;
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the difficulty of the goal;
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whether significant unforeseen events or obstacles reasonably beyond our control impacted the Company’s
ability to achieve the goal, or altered the expected difficulty of the goal;
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changes in circumstances which may have made the goal more or less important to our near- and long-term
success; and
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other corporate accomplishments during the fiscal year that, while not established as a formal goal,
are nonetheless deemed important to our near- and long-term success and enhance stockholder value.
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The following table
sets forth the corporate goals established by the Compensation Committee for the fiscal year ended April 30, 2017 and the weighting
the Compensation Committee assigned to each corporate goal, and, based on the Compensation Committee’s review of our performance
during fiscal year 2017 relative to the corporate goals, the achievement percentage for each corporate goal and the adjusted weighting
based on our performance:
Goal
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Weighting
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Achievement
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Adjusted
Weighting
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Generate $60 million in third-party contract manufacturing revenue
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45%
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96%
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43.2%
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Implement and/or evaluate new contract manufacturing revenue opportunities
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5%
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67%
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3.3%
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Analyze and present underlying Phase III SUNRISE data
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20%
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100%
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20%
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Initiate an immuno-oncology company sponsored combination trial
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5%
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0%
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0%
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Support initiation of two to five new trials through NCCN program
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5%
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100%
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5%
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Enter into two new collaborations with immuno-oncology leaders
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5%
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50%
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2.5%
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Advance exosome diagnostic technology
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5%
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100%
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5%
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Evaluate new opportunities for antibody discovery program
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5%
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0%
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0%
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Conduct preclinical studies for early stage opportunities
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5%
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100%
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5%
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Total
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100%
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84%
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As depicted in the
above table, the Compensation Committee determined that the aggregate achievement percentage with respect to our corporate goals
for the fiscal year ended April 30, 2017 was 84%.
The following table
sets forth the target bonus percentage, based upon the “Factors for Determining Compensation”, as noted below, of our
Named Executive Officers approved by the Compensation Committee for the fiscal year ended April 30, 2017 and their respective earned
cash bonuses as approved by the Compensation Committee:
Named Executive Officer
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Fiscal Year 2017 Target
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Fiscal Year 2017 Bonus ($)
(1)
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Steven W. King
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60%
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261,661
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Paul J. Lytle
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40%
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130,830
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Shelley P.M. Fussey, Ph.D.
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35%
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–
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Joseph S. Shan
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35%
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87,212
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Mark R. Ziebell
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35%
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102,148
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______________
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(1)
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The corporate factors for the Named Executive Officers set by the Compensation Committee at 0.96
for each executive officer, other than for Dr. Fussey, which was set at 0.
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With respect to the
above executive officer bonuses earned for the fiscal year ended April 30, 2017, the Compensation Committee determined that such
bonuses would not be paid until the sooner of (i) completing one of several specified strategic milestones, (ii) the termination
of an executive officer’s employment, or (iii) April 30, 2018.
In addition, as
was discussed in our proxy statement for the fiscal year ended April 30, 2016, while the Compensation Committee had
determined that 100% of the corporate goals for the fiscal year ended April 30, 2016 had been achieved based, the
Compensation Committee decided to reduce each executive’s discretionary corporate factor by 25% due to the
Company’s discontinuance of the Phase III SUNRISE trial in February 2016 and to allocate the 25% opportunity to up to
four specific new corporate goals targeted to be achieved in fiscal year 2017 which the Compensation Committee believed will
help build stockholder value. During fiscal year 2017, one such new corporate goal was timely achieved, the in-licensing of
the PS exosome diagnostic technology. As a result of their contributions towards attaining this new corporate goal: Mr. King
received a bonus of $20,280, representing one-quarter of his total opportunity; Mr. Lytle received a bonus of $10,140,
representing one-quarter of his total opportunity; Mr. Ziebell received a bonus of $10,556, representing one-third of his
total opportunity; and, Dr. Fussey received a bonus of $14,044, representing one-half of her total opportunity. These bonuses
were paid on September 9, 2016, and are included in the Summary Compensation Table as “Non-Equity Incentive Plan
Compensation” for the fiscal year ended April 30, 2017.
Equity Awards
Stock Option Awards
and Grant Practices.
Based on market practice and our objective to align executives’ interest with those of our stockholders,
we currently use stock option awards as the primary form of long-term incentive compensation for executives and other employees.
In the fiscal year ended April 30, 2012, the Compensation Committee implemented a policy of a routine annual broad-based grant
of stock option awards to our executive officers and other employees, with the grant typically occurring during the initial weeks
of our fiscal year. The grant date of such annual award and of other grants (e.g., for new hires) is either on the date the Compensation
Committee approves the grants or on a pre-selected later date, such as a future hire date. In determining the size and types of
equity grants to executive officers, the Compensation Committee considers, among other things, comparative industry data provided
by the Compensation Committee’s independent compensation consultant, our outstanding shares at the time of grant, the number
and type of equity awards granted to such individuals in prior years, the equity available under our long-term incentive plan and
desirable run rate and aggregate estimated equity usage in the future, each executive officer’s ownership in our Company,
our corporate performance, and each executive officer’s individual performance, role and responsibilities.
The Compensation
Committee exercises discretion in determining the information it considers, as well as any weighting of particular
information, in determining the equity awards. The determination of equity awards is made by the Compensation Committee after
evaluating the information and areas of consideration described above in their totality. For the fiscal year ended April 30,
2017, our annual broad-based stock option grant was approved by the Compensation Committee on June 2, 2016.
Stock
option grant information for the fiscal year ended April 30, 2017, is set forth below under “Grants of Plan-Based
Awards For the Fiscal Year Ended April 30, 2017”.
Stock Awards and
Award Practices.
In addition to stock options, we have in the past used stock awards as a form of long-term incentive compensation
for executives and other employees. Stock awards are shares of common stock that vest in accordance with the terms established
by the Compensation Committee. Usually, the awards will be subject to vesting upon the Company’s timely attainment of certain
predetermined clinical, financial or operational milestones with specific targeted attainment dates or vest over a specific predetermined
period of performance. However, the Compensation Committee, at its discretion, may issue discretionary stock awards that are not
subject to any future vesting requirements. There were no discretionary stock award grants to our Named Executive Officers during
the fiscal year ended April 30, 2017.
Employment Agreements,
Severance and Change-in-Control Benefits
We have employment
agreements with all of our Named Executive Officers providing for severance payments and accelerated vesting benefits triggered
by various termination events. For a description of these agreements and our potential payment obligations, please see “Overview
of Employment Agreements and Potential Payments Upon Termination or Change-in-Control” and the related tabular disclosure
below.
When entering into
employment agreements which provide for post-termination compensation for our Named Executive Officers, the Compensation Committee
considers, among multiple factors, peer company practice, retention needs and consistency of post-termination compensation among
our executives. Gains from prior equity awards are not a material consideration in setting the level of such compensation. In particular,
we believe such employment agreements benefit us and our stockholders by attracting and retaining executives in a marketplace where
such protections are commonly offered by our peer companies. We also believe that severance protection triggered by a change-in-control
allows our executives to assess a potential change-in-control objectively, from the perspective of what is best for our stockholders,
without regard to the potential impact of the transaction on their own job security. We use a “double trigger” with
respect to benefits that are to be provided in connection with a change-in-control. A change-in-control does not itself trigger
benefits; rather, benefits are paid only if the employment of the executive is terminated by us other than for cause or due to
the executive’s death or disability during a specified period before or after a change of control. We believe a “double
trigger” benefit maximizes stockholder value because it prevents a windfall to executives in the event of a change of control
in which the executive retains significant responsibility as defined in his or her individual agreement, while still providing
our executives appropriate incentives to cooperate in negotiating any change of control that may put their jobs at risk. Further,
we believe the severance protection offered under the employment agreements is balanced with the interests of the Company and its
stockholders, as the executives are bound by non-disclosure, non-competition, and non-solicitation arrangements and must execute
a general release in favor of the Company as a condition to receiving benefits under these agreements. None of the agreements include
any tax gross-up payments for “golden parachute” excise taxes. All of the Named Executive Officers are “at will”
employees.
These employment agreements
are subject to automatic one-year extensions annually and, as part of the Compensation Committee’s review of all of our executive
compensation practices, will be reviewed to ensure that they continue to serve our interests in retaining these key executives,
remain consistent with packages offered by our peers, and provide reasonable levels of severance protection and compensation.
Perquisites and
Other Benefits
We maintain broad-based
benefits that are provided to all employees, including health, dental, and vision insurance, life and disability insurance, a 401(k)
plan, and an Employee Stock Purchase Plan.
Under the 401(k) plan,
Named Executive Officers are allowed to contribute on the same basis as other employees of the Company as determined by IRS regulations.
Effective January 1, 2010, the Company voluntarily agreed to match 50% of all employee contributions, including Named Executive
Officers, up to the first 6% of a participant’s annual salary for all 401(k) plan contributions, subject to certain IRS limitations.
In addition, the plan allows for additional discretionary matching contributions in excess of the 50% match. During calendar year
2015, the Company voluntarily agreed to match 50% of all employee contributions (for employees with up to five years of service),
75% of all employee contributions (for employees with six to nine years of service), and 100% of all employee contributions (for
employees with ten or more years of service), including Named Executive Officers, up to the first 6% of a participant’s annual
salary for all 401(k) plan contributions. Under the 401(k) plan, each participating employee, including Named Executive Officers,
is fully vested in his or her contributions to the 401(k) plan and Company contributions to the 401(k) plan will fully vest after
six years of service.
Under the Employee
Stock Purchase Plan, Named Executive Officers are allowed to participate on the same basis as other employees of the Company, which
allows employees on a voluntarily basis to purchase shares of our common stock directly from the Company through accumulated payroll
deductions, which the Company believes closely aligns the interests of participants with the interests of stockholders.
In addition, Named
Executive Officers are eligible to participate in the same employee benefit plans as all other employees. The cost of health and
dental insurance was 100% covered by the Company for Named Executive Officers during the fiscal year ended April 30, 2017. In addition,
all employees, including Named Executive Officers, receive one (1) times their annual salary in term-life insurance, long-term
disability benefits, and vision insurance at no cost to the employee. We also provide all employees, including Named Executive
Officers, the option to make pre-tax payroll deductions up to $2,600 per year under a flexible spending account plan that can be
utilized for out-of-pocket medical, dental and other allowable expenses. The Company also provides paid-time-off benefits to cover
vacation and sick time and annually determined Company holidays.
Factors for Determining Compensation
Performance
.
One of the primary objectives of our compensation program is to motivate our Named Executive Officers to achieve our short and
long-term strategic goals. These goals are tied to, among other things, increasing contract manufacturing revenue, the advancement
of our product pipeline, the attainment of clinical and regulatory milestones, the development, acquisition and out-licensing of
key technologies, and the securing of capital funding. In addition to linking compensation to the attainment of pre-approved goals,
individual performance is assessed on the basis of more subjective, non-formulaic, criteria, such as:
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involvement in, and responsibility for, the
development and implementation of our strategic plans and the attainment of our strategic and operating objectives;
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participation in the achievement of contract
manufacturing revenue growth and/or strategic or regulatory milestones;
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contribution to the management team and application
of managerial leadership skills; and
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involvement in accessing capital to fund
our research and development operations, facilities expansion and improvements and other business activities.
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“Say-on-Pay”
Consideration
.
At our 2016 Annual Meeting, approximately 53% of the
shares voted at the meeting approved, on an advisory basis, the compensation of our Named Executive Officers. Given that less than
70% of the shares voted to approve the ‘say-on-pay’ advisory proposal, the Compensation Committee spent additional
time with its independent compensation consultant, reviewing the Company’s compensation practices, analyzing the various
elements of executive compensation for each Named Executive Officer and how such elements compare to the median compensation for
the Company’s peer group
, assessing the Company’s progress towards the attainment of corporate goals, and other
factors affecting the Company’s strategic objectives
. Following
thoughtful deliberation, the Compensation Committee determined not to implement specific changes and continued with its compensation
philosophy and its balanced approach to various components of its compensation program, after giving consideration to the level
of attainment of corporate goals and benchmarking compensation with the Company’s peer group. Furthermore, the Compensation
Committee does monitor the results of the annual advisory ‘say-on-pay’ proposal and refers to such results as one of
many factors considered, along with peer group benchmarking, in connection with the discharge of its responsibilities, although
the Compensation Committee does not assign a quantitative weighting to any such factors.
Market Benchmarks
and Competitive Analysis.
We believe that our select peer group provides useful information to help us establish competitive
compensation practices and levels of compensation that allow us to attract, retain and motivate a talented executive team and,
at the same time, aligns the interests of our executives with those of our stockholders. Accordingly, in the fiscal year ended
April 30, 2017, Barney & Barney, the independent compensation consultant engaged by the Compensation Committee with experience
in evaluating public biopharmaceutical companies, has helped the Compensation Committee collect and analyze data and to compare
all components of our compensation program, including base salary, annual cash bonus and long-term equity awards, to the practices
of peer companies. In the fiscal year ended April 30, 2017, Barney & Barney developed a list of peer group of pharmaceutical
and biopharmaceutical companies based on several characteristics, including, being publicly traded, relative company size (e.g.,
market capitalization and number of employees), stage of development, performance and geographic location as compared to peer companies,
as well as the specific responsibilities of our executives. In addition, this peer group also includes companies with which we
believe we must compete for talent. The Compensation Committee intends to review and modify this peer group periodically to ensure
that this list remains aligned with our size and stage of development. For the fiscal year ended April 30, 2017, our peer group
consisted of the following 23 companies:
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Amicus Therapeutics, Inc.
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Dynavax Technologies Corp.
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Rigel Pharmaceuticals, Inc.
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Anika Therapeutics, Inc.
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Endocyte, Inc.
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Sarepta Therapeutics, Inc.
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ArQule, Inc.
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Geron Corporation
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Spectrum Pharmaceuticals, Inc.
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Array BioPharma Inc.
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Immunomedics, Inc.
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Sucampo Pharmaceuticals, Inc.
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ChemoCentryx, Inc.
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Infinity Pharmaceuticals, Inc.
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Threshold Pharmaceuticals, Inc.
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Chimerix, Inc.
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MacroGenics, Inc.
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XOMA Corporation
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CTI BioPharma Corp.
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Madrigal Pharmaceuticals, Inc.
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Zogenix, Inc.
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Cytokinetics, Inc.
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NewLink Genetics Corporation
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The
executive employment market in the biotechnology and pharmaceutical industry in Southern California is very competitive
because there are many pharmaceutical, biotechnology and medical device companies in that region, many of which are similar
to us in size and stage of development. We believe our executive compensation must be competitive within such a peer group,
yet fully aligned with our current stage of development and our responsibilities to stockholders. Our general philosophy and
practice is to target each of our executive’s overall compensation to be at approximately the market median for our
peer group. This benchmarking indicated that the total direct compensation for our President and Chief Executive Officer,
Chief Financial Officer and Vice President, General Counsel for the fiscal year ended April 30, 2017 was below the
25
th
percentile of our peer group, and the other two Named Executive Officers were below the 50
th
percentile. The Compensation Committee considered this benchmarking information as one consideration in making the
compensation decisions reflected above, primarily to determine whether compensation paid to Named Executive Officers, in
light of Company and individual performance, is at, above or below the median of executive compensation among the
Company’s peer group.
Compensation Risk
As part of its oversight
of our compensation policies, the Compensation Committee considers the incentives created by our executive compensation program
and the impact that our compensation policies could have on our overall risk profile. In addition, the Compensation Committee annually
reviews our compensation policies and procedures to determine whether they create risks that are reasonably likely to have a material
adverse effect on the Company. Based on its latest review, the Compensation Committee has concluded that our compensation policies
and procedures do not create such risks.
Summary
The Compensation
Committee believes the Company’s compensation programs are designed and administered in a manner consistent with its compensation
philosophy and objectives. The Compensation Committee monitors these programs in recognition of the dynamic marketplace in which
the Company competes for talent. The Compensation Committee intends to continue to emphasize pay-for-performance and equity-based
incentive programs that reward executives for actual results and that are consistent with stockholder interests.
Compensation Committee
Report
The Report of the
Compensation Committee of the Board of Directors shall not be deemed incorporated by reference by any general statement incorporating
by reference this Amendment into any filing under the Securities Act or under the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.
The Compensation Committee
of our Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with
management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this Amendment.
The Compensation Committee of the Board of
Directors
Eric S. Swartz (Chairman)
Carlton M. Johnson, Jr.
David H. Pohl
Executive Compensation
All share and per share
amounts of our common stock for all periods presented have been retroactively adjusted to reflect the one-for-seven reverse stock
split of our issued and outstanding common stock, which took effect on July 10, 2017.
Compensation Summary
The following table
contains information with respect to the compensation for the fiscal years ended April 30, 2017, 2016 and 2015 by each individual
who acted as our chief executive officer, our chief financial officer, and our three other most highly compensated executive officers
during the fiscal year ended April 30, 2017. We refer to the executive officers identified in this table as our “Named Executive
Officers.”
SUMMARY COMPENSATION TABLE
Name and Principal
Position
|
Fiscal Year
|
Salary
($)
(1)
|
Bonus
($)
|
Stock Awards
($)
(2)
|
Option Awards
($)
(2)
|
Non-Equity
Incentive Plan
Compensation
($)
(3)
|
All Other Compensation ($)
(4)
|
Total ($)
|
Steven W. King, President and Chief Executive Officer
|
2017
2016
2015
|
540,000
520,000
517,160
|
—
—
—
|
—
—
—
|
209,500
316,860
581,280
|
281,941
362,000
389,863
|
51,365
51,043
39,754
|
1,082,806
1,249,903
1,528,057
|
Paul J. Lytle, Chief Financial Officer
|
2017
2016
2015
|
405,000
390,000
388,032
|
—
—
—
|
—
—
—
|
104,750
158,430
290,640
|
140,970
156,000
219,931
|
51,948
50,580
40,253
|
702,668
755,010
938,856
|
Shelley P.M. Fussey, Vice President, Intellectual
Property
|
2017
2016
2015
|
321,000
321,000
319,874
|
—
—
—
|
—
—
—
|
62,850
79,215
145,320
|
14,044
56,175
114,994
|
30,109
30,004
20,746
|
428,003
486,394
600,934
|
Joseph S. Shan, Vice President, Clinical & Regulatory
Affairs
|
2017
2016
2015
|
308,654
300,000
298,862
|
—
—
—
|
—
—
—
|
62,850
105,620
145,320
|
87,212
122,917
59,917
|
51,913
50,463
38,468
|
510,629
579,000
542,567
|
Mark R. Ziebell, Vice President, General Counsel and
Corporate Secretary
|
2017
2016
2015
|
361,385
348,000
346,731
|
—
—
—
|
—
—
—
|
62,850
105,620
254,310
|
112,704
91,350
114,477
|
44,074
42,334
40,575
|
581,013
587,304
756,093
|
______________________
|
(1)
|
Salary information is reported as of the last payroll paid prior to or immediately after April 30th
of each fiscal year.
|
|
(2)
|
Represents the aggregate grant date fair value of the awards made in each fiscal year as computed
in accordance with the authoritative guidance for share-based compensation. These amounts do not correspond to the actual value
that may be recognized by each Named Executive Officer. Additional information regarding outstanding awards, including corresponding
exercise prices and expiration dates, can be found in the “Outstanding Equity Awards at Fiscal Year-End” table of this
Amendment. The assumptions used in determining the grant date fair values of the stock and option awards are set forth in Note 6
“Equity Compensation Plans” in our Annual Report on Form 10-K for the period ended April 30, 2017, filed with
the SEC on July 14, 2017.
|
|
(3)
|
Represents performance bonuses earned under the Company’s Annual Cash Bonus Plan. For fiscal
years 2016 and 2017, amounts include performance bonuses for the prior fiscal year that were carried over and made subject to additional
performance requirements achieved in fiscal years 2016 and 2017, respectively. Additional information regarding the Company’s
Annual Cash Bonus Plan for its Named Executive Officers can be found in the “Compensation Discussion and Analysis”
section of this Amendment under “Annual Cash Bonus Plan”.
|
|
(4)
|
Amounts shown in this column reflect the cost of benefits paid on behalf of the Named Executive Officer
for health, dental, and vision benefits in addition to premiums paid for disability and term life insurance (collectively referred
to as “Health Benefits”) as well as company contributions to the Peregrine Pharmaceuticals, Inc. 401(k) Plan. Health
Benefits paid and/or accrued during the fiscal year ended April 30, 2017 for each Named Executive Officer were as follows: Mr.
King - $35,465; Mr. Lytle - $36,048; Dr. Fussey - $14,209; Mr. Shan - $35,930; and Mr. Ziebell - $35,995. Company contributions
to the Peregrine Pharmaceuticals, Inc. 401(k) Plan during the fiscal year ended April 30, 2017 for each Named Executive Officer
were as follows: Mr. King - $15,900; Mr. Lytle - $15,900; Dr. Fussey - $15,900; Mr. Shan - $15,983; and Mr. Ziebell - $8,078.
|
Grants of Plan-Based Awards For the Fiscal
Year Ended April 30, 2017
The following table
set forth certain summary information with respect to non-equity incentive plans and each plan-based award granted during the fiscal
year ended April 30, 2017 to our Named Executive Officers:
GRANTS OF PLAN-BASED AWARDS FOR THE FISCAL
YEAR ENDED APRIL 30, 2017
|
|
|
Estimated Future Payouts
Under
Non-Equity Incentive Plan Awards (1)
|
|
|
All Other Stock Awards: Number of Shares of Stock or
|
|
All Other Option Awards: Number of Securities Underlying
|
|
Exercise or Base Price of Option
|
|
Grant Date Fair Value of Stock or Option
|
Name
|
Grant Date
|
|
Threshold ($)
|
Target ($)
|
Maximum ($)
|
|
|
Units
(#)
|
|
Options
(#) (2)
|
|
Awards ($/sh)
|
|
Awards
($) (3)
|
Steven W. King
|
—
|
|
—
|
324,480
|
486,720
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6/2/2016
|
|
—
|
—
|
—
|
|
|
—
|
|
71,429
|
|
3.50
|
|
209,500
|
Paul J. Lytle
|
—
|
|
—
|
162,240
|
243,360
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6/2/2016
|
|
—
|
—
|
—
|
|
|
—
|
|
35,714
|
|
3.50
|
|
104,750
|
Shelley P.M. Fussey
|
—
|
|
—
|
112,350
|
168,525
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6/2/2016
|
|
—
|
—
|
—
|
|
|
—
|
|
21,429
|
|
3.50
|
|
62,850
|
Joseph S. Shan
|
—
|
|
—
|
108,150
|
162,225
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6/2/2016
|
|
—
|
—
|
—
|
|
|
—
|
|
21,429
|
|
3.50
|
|
62,850
|
Mark R. Ziebell
|
—
|
|
—
|
126,672
|
190,008
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6/2/2016
|
|
—
|
—
|
—
|
|
|
—
|
|
21,429
|
|
3.50
|
|
62,850
|
______________
|
(1)
|
Represents each Named Executive Officer’s participation in the Company’s Annual Cash Bonus
Plan, as adopted by the Compensation Committee in July 2011. The amounts shown in the “Target” column reflect a percentage
of each Named Executive Officer’s base salary for the fiscal year ended April 30, 2017, as specified under the Annual Cash
Bonus Plan. The amounts shown in the “Maximum” column are 150% of the respective target amounts, representing the 1.5
times corporate multiplier under the Annual Cash Bonus Plan. There is no minimum amount payable for a certain level of performance.
Additional information regarding the Company’s Annual Cash Bonus Plan for its Named Executive Officers can be found in the
“Compensation Discussion and Analysis” section of this Amendment under “Annual Cash Bonus Plan”. The actual
amount of bonus earned by each Named Executive Officer under the Annual Cash Bonus Plan is reflected in the Summary Compensation
Table above under the heading, “Non-Equity Incentive Plan Compensation.”
|
|
(2)
|
Option awards referenced in the table above were granted under our 2011 Stock Incentive Plan and vest
in eight (8) equal quarterly installments over a two-year period beginning on the first quarter following the date of grant and
each quarter thereafter until fully-vested
|
|
(3)
|
The assumptions used in determining the grant date fair value of option awards are set forth in Note 6
“Equity Compensation Plans” in our Annual Report on Form 10-K for the fiscal year ended April 30, 2017, filed
with the SEC on July 14, 2017.
|
Outstanding Equity Awards at Fiscal Year-End
The following table
sets forth certain information regarding unexercised stock options held by our Named Executive Officers as of fiscal year ended
April 30, 2017:
|
|
Option Awards
|
Named Executive
Officer
|
|
Number of Securities
Underlying Unexercised Options (#) Exercisable
|
|
Number of Securities
Underlying Unexercised Options (#) Unexercisable
|
|
Option Exercise
Price ($)
|
|
Option
Expiration
Date
|
Steven W. King
|
|
7,143
|
|
—
|
|
13.65
|
|
01/11/2018
|
|
|
31,571
|
|
—
|
|
20.51
|
|
02/01/2020
|
|
|
20,357
|
|
—
|
|
17.08
|
|
05/02/2021
|
|
|
37,519
|
|
—
|
|
6.65
|
|
02/17/2022
|
|
|
35,714
|
|
—
|
|
3.22
|
|
05/04/2022
|
|
|
28,571
|
|
—
|
|
8.26
|
|
12/27/2022
|
|
|
57,143
|
|
—
|
|
9.87
|
|
05/06/2023
|
|
|
35,714
|
|
—
|
|
9.73
|
|
10/15/2023
|
|
|
57,143
|
|
—
|
|
12.25
|
|
05/06/2024
|
|
|
37,500
|
|
5,357
(1)
|
|
9.17
|
|
05/11/2025
|
|
|
26,787
|
|
44,642
(2)
|
|
3.50
|
|
06/02/2026
|
Paul J. Lytle
|
|
4,286
|
|
—
|
|
13.65
|
|
01/11/2018
|
|
|
17,143
|
|
—
|
|
20.51
|
|
02/01/2020
|
|
|
8,214
|
|
—
|
|
17.08
|
|
05/02/2021
|
|
|
20,000
|
|
—
|
|
6.65
|
|
02/17/2022
|
|
|
28,571
|
|
—
|
|
3.22
|
|
05/04/2022
|
|
|
28,571
|
|
—
|
|
8.26
|
|
12/27/2022
|
|
|
28,571
|
|
—
|
|
9.87
|
|
05/06/2023
|
|
|
28,571
|
|
—
|
|
12.25
|
|
05/06/2024
|
|
|
18,751
|
|
2,678
(1)
|
|
9.17
|
|
05/11/2025
|
|
|
13,394
|
|
22,320
(2)
|
|
3.50
|
|
06/02/2026
|
Shelley P.M. Fussey
|
|
4,286
|
|
—
|
|
13.65
|
|
01/11/2018
|
|
|
10,715
|
|
—
|
|
20.51
|
|
02/01/2020
|
|
|
4,286
|
|
—
|
|
17.08
|
|
05/02/2021
|
|
|
8,286
|
|
—
|
|
6.65
|
|
02/17/2022
|
|
|
17,857
|
|
—
|
|
3.22
|
|
05/04/2022
|
|
|
21,429
|
|
—
|
|
8.26
|
|
12/27/2022
|
|
|
14,286
|
|
—
|
|
9.87
|
|
05/06/2023
|
|
|
14,286
|
|
—
|
|
12.25
|
|
05/06/2024
|
|
|
9,375
|
|
1,339
(1)
|
|
9.17
|
|
05/11/2025
|
|
|
8,037
|
|
13,392
(2)
|
|
3.50
|
|
06/02/2026
|
Joseph S. Shan
|
|
2,857
|
|
—
|
|
29.40
|
|
07/06/2017
|
|
|
2,857
|
|
—
|
|
13.65
|
|
01/11/2018
|
|
|
10,715
|
|
—
|
|
20.51
|
|
02/01/2020
|
|
|
4,286
|
|
—
|
|
17.08
|
|
05/02/2021
|
|
|
20,000
|
|
—
|
|
6.65
|
|
02/17/2022
|
|
|
21,429
|
|
—
|
|
3.22
|
|
05/04/2022
|
|
|
21,429
|
|
—
|
|
8.26
|
|
12/27/2022
|
|
|
14,286
|
|
—
|
|
9.87
|
|
05/06/2023
|
|
|
14,286
|
|
—
|
|
12.25
|
|
05/06/2024
|
|
|
12,501
|
|
1,785
(1)
|
|
9.17
|
|
05/11/2025
|
|
|
8,037
|
|
13,392
(2)
|
|
3.50
|
|
06/02/2026
|
Mark R. Ziebell
|
|
32,143
|
|
—
|
|
3.29
|
|
06/20/2022
|
|
|
21,429
|
|
—
|
|
8.26
|
|
12/27/2022
|
|
|
25,000
|
|
—
|
|
9.87
|
|
05/06/2023
|
|
|
25,000
|
|
—
|
|
12.25
|
|
05/06/2024
|
|
|
12,501
|
|
1,785
(1)
|
|
9.17
|
|
05/11/2025
|
|
|
8,037
|
|
13,392
(2)
|
|
3.50
|
|
06/02/2026
|
______________
|
(1)
|
Option
vests in eight (8) equal quarterly installments over a two-year period beginning August
11, 2015 and each quarter thereafter until fully-vested.
|
|
(2)
|
Option
vests in eight (8) equal quarterly installments over a two-year period beginning September
2, 2016 and each quarter thereafter until fully-vested.
|
Option Exercises and Stock Vested
There were no stock
option exercises or vesting of restricted stock by the Company’s Named Executive Officers during the fiscal year ended April
30, 2017.
Overview of Employment Agreements and Potential
Payments Upon Termination or Change-in-Control
Employment Agreements
We have entered into
an employment agreement with each of our Named Executive Officers, each of which are subject to automatic one-year extensions annually
unless either party gives written notice of such party’s intent not to renew the employment agreement at least ninety (90) days
prior to the commencement of the next year’s period.
Each employment agreement
provides that the executive officer must devote his or her full business time to the performance of services to the Company. In
addition, each executive officer has agreed to maintain the confidentiality of the Company’s proprietary information, and
that all work product discovered or developed by him or her in the course of his or her employment belongs to the Company. Each
executive officer has further agreed that he or she will not (i) compete with the Company, directly or indirectly, during the course
of such executive’s employment within the United States or any foreign country in which the Company has done business or
has actually investigated doing business or where its products are sold or distributed, or (ii) solicit Company employees or customers
during the course of employment and for a period of one year following the termination of such executive’s employment.
The Company has the
right to terminate each executive’s employment for “cause” if such executive (a) breaches in any material respect
or fails to fulfill in any material respect his or her fiduciary duty owed to Company; (b) breaches in any material respect his
or her employment agreement or any other confidentiality or non-solicitation, non-competition agreement with the Company; (c) pleads
guilty to or is convicted of a felony; (d) is found to have engaged in any reckless, fraudulent, dishonest or grossly negligent
misconduct, (e) fails to perform his or her duties to the Company, provided that he or she fails to cure any such failure within
thirty (30) days after written notice from Company of such failure, provided further, however, that such right to cure shall not
apply to any repetition of the same failure previously cured under the agreement; or (f) violates any material rule, regulation
or policy of the Company that may be established and made known to Company’s employees from time to time, including without
limitation, the Company’s employee handbook. If an executive is terminated for “cause”, he or she shall have
no right to receive any compensation or benefit under his or her employment agreement after such termination other than base salary
and paid time-off earned or accrued but unpaid as of the date of termination.
The following discussion
describes the amounts that we would pay or provide to our Named Executive Officers or, as applicable, their beneficiaries under
these employment agreements as a result of (i) termination without cause or resignation for good reason, (ii) termination following
a change-in-control, (iii) death or disability, and (iv) voluntary resignation with extended notice.
Payments Upon Termination
Without Cause or Resignation for Good Reason
If we terminate Mr.
King’s, Mr. Lytle’s or Mr. Ziebell’s employment without cause or the executive terminates his employment for
“good reason”, such executive is entitled to (i) continued base salary and group insurance benefits for a period of
twelve (12) months, and (ii) the payment of any prorated target bonus. In addition, each of Mr. King, Mr. Lytle and Mr. Ziebell
shall have a period of time equal to the lesser of two years following the date of such termination or until the original expiration
date of the applicable option agreement to exercise any vested and outstanding stock options as of the date of such termination.
If we terminate Dr. Fussey’s or Mr. Shan’s employment without cause or such executive terminates his or her employment
for good reason, such executive shall be entitled to (i) continued base salary and group insurance benefits for a period of twelve
(12) months, and (ii) the payment of any prorated target bonus. In addition, each of Dr. Fussey and Mr. Shan shall have a period
of time equal to the lesser of twelve (12) months following the date of such termination or until the original expiration date
of the applicable option agreement to exercise any vested and outstanding stock options as of the date of such termination. An
executive’s receipt of the foregoing severance benefits shall be conditioned upon such executive’s execution of a general
release of known and unknown claims in favor of the Company and its affiliates.
Each employment agreement
defines “good reason” as (a) the Company relocates executive’s principal place of work to a location more than
fifty (50) miles from the original location, without the executive’s prior written approval; (b) the executive’s
position and/or duties are modified so that his or her duties are no longer consistent with the executive’s title; or (c)
the executive’s annual base salary and related benefits, as adjusted from time to time, are reduced without his or her written
authorization.
The following table
sets forth the potential payments to our Named Executive Officers assuming a termination without cause or resignation for good
reason with estimated benefits calculated as if the termination occurred on or about April 30, 2017:
Named Executive Officer
|
|
Base
Salary ($)
(1)
|
|
Target
Bonus ($)
(2)
|
|
Group
Benefits ($)
(3)
|
|
Total ($)
|
|
Steven W. King
|
|
540,800
|
|
324,480
|
|
36,756
|
|
902,036
|
Paul J. Lytle
|
|
405,600
|
|
162,240
|
|
37,348
|
|
605,188
|
Shelley P.M. Fussey
|
|
321,000
|
|
112,350
|
|
14,651
|
|
448,001
|
Joseph S. Shan
|
|
309,000
|
|
108,150
|
|
37,229
|
|
454,379
|
Mark R. Ziebell
|
|
361,920
|
|
126,672
|
|
37,298
|
|
525,890
|
______________
|
(1)
|
Represents payment of base salary for a period of twelve (12) months.
|
|
(2)
|
The payment of a Target Bonus to the Named Executive Officers is at the sole discretion of the Company’s
Board of Directors. Amount includes the maximum proposed Target Bonus as a percentage of base salary established for the fiscal
year ended April 30, 2017 for each Named Executive Officer as follows: Mr. King – 60%; Mr. Lytle – 40%; Mr. Ziebell
– 35%; Dr. Fussey – 35%; and Mr. Shan – 35%.
|
|
(3)
|
Represents estimated payment to reimburse executive’s monthly benefits premiums for continued
group health, dental, and vision benefits in addition to premiums for disability and term life insurance during the severance period
of twelve (12) months. Amounts were calculated based on current premiums paid for executive’s benefits.
|
Payments Upon a
Termination in Connection with a Change-in-Control
In the event of a change-in-control
of Peregrine, if a Named Executive Officer’s (i) employment is terminated other than for cause within three (3) months prior
or thirty-six (36) months following a change-in-control (in the case of Mr. King) or twenty-four (24) months following a change-in-control
(in the case of the other Named Executive Officers), or (ii) such executive terminates his employment for “good reason”
within twelve (12) months following a change-in-control, the executive shall be paid a lump sum amount equal to (a) thirty-six
(36) months’, in the case of Mr. King, and twenty-four (24) months’, in the case of the other Named Executive Officers,
base salary then in effect, (b) one hundred percent (100%) of such executive’s target bonus, and (c) payment of group insurance
benefits for thirty-six (36) months, in the case of Mr. King, and twenty-four (24) months, in the case of the other Named Executive
Officers. In addition, each of the Named Executive Officers’ outstanding unvested stock options immediately shall become
fully vested and each shall have a period of time equal to the lesser of two years following the date of such termination or until
the original expiration date of the applicable option agreement to exercise any vested and outstanding stock options as of the
date of such termination. An executive’s receipt of the foregoing severance benefits shall be conditioned upon such executive’s
execution of a general release of known and unknown claims in favor of the Company and its affiliates.
The following table
sets forth the potential payments to our Named Executive Officers assuming a termination without cause or resignation for good
reason in connection with a change-in-control, with estimated benefits calculated assuming the change-in-control and termination
of employment occurred on or about April 30, 2017:
Named
Executive Officer
|
|
Base
Salary($)
(1)
|
|
Target
Bonus ($)
(2)
|
|
Stock Option
Acceleration
($)
(3)
|
|
Group
Benefits ($)
(4)
|
|
Total ($)
|
Steven W. King
|
|
1,622,400
|
|
324,480
|
|
36,093
|
|
110,268
|
|
2,093,241
|
Paul J. Lytle
|
|
811,200
|
|
162,240
|
|
18,046
|
|
74,696
|
|
1,066,182
|
Shelley P.M. Fussey
|
|
642,000
|
|
112,350
|
|
10,827
|
|
29,302
|
|
794,479
|
Joseph S. Shan
|
|
618,000
|
|
108,150
|
|
10,827
|
|
74,458
|
|
811,435
|
Mark R. Ziebell
|
|
723,840
|
|
126,672
|
|
10,827
|
|
74,596
|
|
935,935
|
______________
|
(1)
|
Represents payment of base salary for a period of thirty-six (36) months for Mr. King and twenty-four
(24) months for Mr. Lytle, Dr. Fussey, Mr. Shan and Mr. Ziebell.
|
|
(2)
|
The payment of a Target Bonus to the Named Executive Officer is at the discretion of the Company’s
Board of Directors. A Target Bonus is equal to a percentage of the Named Executive Officer’s annual base salary as follows:
Mr. King – 60%; Mr. Lytle – 40%; Dr. Fussey – 35%; Mr. Shan – 35%; and Mr. Ziebell – 35%. The above
assumes that the Board of Directors authorized the payment of the full Target Bonus to each executive for the fiscal year.
|
|
(3)
|
Amount calculated by multiplying the number of unvested shares subject to accelerated vesting under
outstanding stock options by the difference between $4.31 (the closing price per share of our common stock on the last trading
day of fiscal year ended April 30, 2017) and the exercise price per share of the underlying stock option in connection with a change-in-control
event. These amounts, if any, do not correspond to the actual value that may be recognized by each Named Executive Officer as there
can be no assurance that the options will ever be exercised or that the value on exercise will be equal to the amounts shown in
this column.
|
|
(4)
|
Represents estimated payment to reimburse executive’s monthly benefits premiums for continued
group health, dental, and vision benefits in addition to premiums for disability and term life insurance during the severance period
of thirty-six (36) months for Mr. King and twenty-four (24) months for Mr. Lytle, Dr. Fussey, Mr. Shan and Mr. Ziebell. Amounts
were calculated based on current premiums paid for executive’s benefits.
|
Payments upon Death or Disability
In the event of the
death or disability, as defined in the employment agreements, of a Named Executive Officer, the Company will not pay any further
compensation or benefits after such event other than the payment by the Company of group insurance benefits previously provided
to our Named Executive Officers for a period of twelve (12) months, in the case of Mr. King, Mr. Lytle and Mr. Ziebell, and nine
(9) months, in the case of Dr. Fussey and Mr. Shan. Amounts were calculated based on current premiums paid for executive’s
benefits as follows:
Named Executive Officer
|
|
|
Group Benefits ($)
|
Paul J. Lytle
|
|
|
37,348
|
Shelley P.M. Fussey
|
|
|
10,988
|
Joseph S. Shan
|
|
|
27,922
|
Mark R. Ziebell
|
|
|
37,298
|
Payments upon Executive’s
Voluntary Resignation with Extended Notice Period
In the event that a
Named Executive Officer voluntarily resigns, and in connection therewith provides ninety (90) days’ advance written notice
(the “Extended Notice Period”) to the Company, and provided the executive shall have been employed by the Company for
a period of at least five (5) years (in the case of Dr. Fussey, Mr. Shan and Mr. Ziebell), the Company will pay the Named Executive
Officer’s base salary then in effect and shall continue to provide other contractual benefits including group insurance benefits
during the Extended Notice Period and for a period of nine (9) months in the case of Mr. King and six (6) months in the case of
the other Named Executive Officers after the Extended Notice Period provided the executive makes themselves telephonically available
to the Board of Directors and the Company’s executive team for up to two (2) hours per week.
Director Compensation
Director Compensation Policy
Pursuant to our compensation
program for non-employee directors, during the fiscal year ended April 30, 2017, each member of our Board of Directors who was
not an employee or officer of the Company received an annual cash retainer, paid in monthly installments, of $180,000 per year.
In addition, each non-employee director received a separate annual cash retainer related to their board membership and oversight
of our wholly-owned subsidiary, Avid Bioservices, Inc. (“Avid”), paid in monthly installments, of $60,000 per year.
Moreover, for their services as chairperson of their respective committees, the chairman of the Audit Committee, the chairman of
the Compensation Committee, and the chairman of the Nominating Committee received an additional annual cash retainer, paid in monthly
installments, of $90,000, $60,000, and $30,000 per year, respectively. Furthermore, each non-employee director received a cash
fee of $2,000 per day for each Board of Directors meeting attended, whether in-person or telephonically, and is entitled to receive
a cash fee of $2,000 for each additional Company meeting attended in excess of four hours in length. A member of the Board of Directors
who is also our employee receives no additional compensation for serving as a director.
Pursuant to our compensation
program for non-employee directors, each non-employee director participates in our routine annual broad-based stock option grant
program. The grant to each non-employee director: (i) consists of a non-qualified stock option to purchase a number of shares of
common stock as determined by the Compensation Committee; (ii) has an exercise price equal to the fair market value of our common
stock on the date of grant; and (iii) typically vests in quarterly increments over a two-year period.
In addition, the Company
reimburses its non-employee directors for their out-of-pocket expenses incurred in connection with attending Board of Directors
and committee meetings.
Director Compensation Table
The following table
outlines the compensation paid to our non-employee directors, including annual base retainer fees, meeting attendance fees, and
option awards for the fiscal year ended April 30, 2017:
Name
|
|
Fees Earned or
Paid in
Cash ($)
|
|
Option
Awards ($)
(1)
|
|
Total ($)
|
Carlton M. Johnson, Jr.
|
|
360,000
(2)
|
|
83,800
(5)
|
|
443,800
|
David H. Pohl
|
|
300,000
(3)
|
|
83,800
|
|
383,800
|
Eric S. Swartz
|
|
330,000
(4)
|
|
83,800
(5)
|
|
413,800
|
_________________________
|
(1)
|
As to each individual, represents the grant date
fair value of the option award granted in the fiscal year ended April 30, 2017 as computed in accordance with the
authoritative guidance for share-based compensation. The assumptions used in determining the grant date fair values of the option
awards are set forth in Note 6 “Equity Compensation Plans” in our Annual Report on Form 10-K for
the fiscal year ended April 30, 2017, as filed with the SEC on July 14, 2017. In addition, these amounts do
not correspond to the actual value that may be recognized by the non-employee director. As of April 30, 2017,
each non-employee director held unexercised option awards covering 274,213 shares of common stock.
|
|
(2)
|
Includes annual base retainers of $240,000 (including Avid annual base retainer), the annual Audit Committee chair fee of $90,000 and meeting fees of $30,000.
|
|
(3)
|
Includes annual base retainers of $240,000 (including Avid annual base retainer), the annual Nominating Committee chair fee of $30,000 and meeting fees of $30,000.
|
|
(4)
|
Includes annual base retainers of $240,000 (including Avid annual base retainer), the annual Compensation Committee chair fee of $60,000 and meeting fees of $30,000.
|
|
(5)
|
Pursuant to the settlement terms of a derivative lawsuit approved by Vice Chancellor Laster by Order dated
July 27, 2017, the Board of Directors have agreed to cap their individual annual compensation at the greater of (i) $400,000, or
(ii) the 75
th
percentile of compensation paid by the Company’s peer group to its non-employee directors for a
period of two years from the settlement date. On August 25, 2017, Messrs. Johnson and Swartz voluntarily forfeited 14,934 and 4,706
options, respectively, thereby reducing their fiscal year 2017 director compensation by $43,802 and $13,803, respectively, which
reduced their total compensation to below the agreed upon cap.
|
Compensation Committee Interlocks and Insider
Participation
The following non-employee
directors currently serve on the Compensation Committee of the Board of Directors: Mr. Carlton M. Johnson, Jr., Mr. David H. Pohl
and Mr. Eric S. Swartz. There are no interlocks of executive officers or directors of the Company serving on the compensation committee
or equivalent committee of another entity, which has any director or executive officer serving on the Compensation Committee, other
committees or the Board of Directors of the Company.