PROPOSAL NO. 1
ELECTION OF CLASS III DIRECTORS
Our organizational documents currently provide that our Board will consist of not less than six or more than ten directors. Our Board has
adopted resolutions providing for up to nine directors. The directors are divided into three classesClass I, Class II, and Class III. Each class of directors serves
for three years on a staggered term basis and the term of our Class III directors will expire at the Annual Meeting. Accordingly, the Board has nominated David R. Brennan and Melvin Sharoky,
M.D. for election as Class III directors. Each of the nominees was recommended for election by the Nominations and Governance Committee, and such recommendation was approved by the Board. If
re-elected, the term of office for these nominees will expire at our 2021 Annual Meeting of Shareholders. The information below describes the primary experience, qualifications and skills of
Mr. Brennan and Dr. Sharoky.
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David R. Brennan
, age 64
Director since May 2014
Member of the Compensation Committee
Career Highlights:
Alexion Pharmaceuticals (Nasdaq: ALXN) (2016 - 2017)
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Interim CEO
AstraZeneca PLC (NYSE: AZN) (1999 - 2012)
o
CEO
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Executive Vice President of North America
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Senior Vice President of Commercialization and Portfolio Management
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Director
Astra
Merck, Inc. (1995 - 1999)
Merck & Co., Inc. (1975 - 1994)
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Current Public Board Service:
Chairman, Alexion Pharmaceuticals
Education:
Gettysburg College - B.A., business
administration
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Qualifications
: Mr. Brennan has nearly 40 years of experience in the pharmaceutical industry. The Board believes that Mr. Brennan's public company and public company board experience at pharmaceutical
companies, including roles in executive management, commercialization and product management, makes him a valuable asset to the Board.
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Melvin Sharoky, M.D.
, age 67
Director since May 2001
Chairman from June 2009 - December 2010
Member of Nominations and Governance Committee
Member of Compensation Committee
Career Highlights:
Par Pharmaceutical Companies, Inc. (2007 - 2012)
o
Director until acquisition by Endo International plc (Nasdaq:
ENDP)
Somerset
Pharmaceuticals, Inc. (1995 - 2001; 2002 - 2007)
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President
o
CEO
o
Consultant
Watson
Pharmaceuticals, Inc. (now Actavis plc) (1995 - 1998)
o
President
Circa Pharmaceuticals, Inc., a wholly-owned subsidiary of Watson Pharmaceuticals, Inc. (1988 - 1998)
o
President
o
CEO
Pharmakinetics Laboratories, Inc. (1986 - 1988)
o
Vice President
o
Chief Medical Officer
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Education:
University of Maryland in Baltimore County - B.A., biology
University of Maryland School of Medicine - M.D.
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Qualifications
: Dr. Sharoky has more than 30 years of experience in the pharmaceutical industry. The Board believes that, in addition to his medical experience as a physician, Dr. Sharoky's background
as an executive of pharmaceutical companies, as well as his public company board service, brings valuable senior management, leadership, financial and strategic planning experience to our Board.
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THE BOARD RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE CLASS III DIRECTOR NOMINEES.
Vote Required for Election of Director Nominees
Our Class III directors will be elected by a plurality of the votes properly cast, in person or by proxy, at the Annual Meeting. Votes
withheld and broker non-votes will not have any effect on the outcome of this vote.
Our Remaining Board Members
The information below describes the primary experience, qualifications and skills of each of our Class I directors, Alfred F. Altomari,
Steinar J. Engelsen, M.D., and William H. Lewis, and Class II directors, Donald Hayden, Jr., David W.J. McGirr, and Myrtle Potter. The term of the Class I directors will expire at the
2019 Annual Meeting of Shareholders, and the term of the Class II directors will expire at the 2020 Annual Meeting of Shareholders.
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Incumbent Directors Whose Term Expires at the 2019 Annual Meeting of Shareholders (Class I
Directors)
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Alfred F. Altomari
, age 59
Director since August 2012
Chairman of the Compensation Committee
Member of the Audit Committee
Career Highlights:
Agile Therapeutics, Inc. (Nasdaq: AGRX)
(2004 - present)
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Chairman of the Board
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President
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CEO
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Director
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Executive Chairman
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Consultant
Barrier Therapeutics, Inc. (2003 - 2008)
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Director
o
CEO
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Chief Operating Officer
o
Chief Commercial Officer
Johnson & Johnson (NYSE: JNJ) (1982 - 2003)
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Numerous executive roles in general management, commercial
operations, business development, product launch preparation, and finance
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Current Public Board Service:
Chairman, Agile Therapeutics, Inc.
Director, Recro Pharma, Inc. (Nasdaq: REPH)
Education:
Drexel University - B.S., finance
Drexel University - B.S.,
accounting
Rider
University - M.B.A.
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Qualifications
: Mr. Altomari is a pharmaceutical industry veteran with more than 30 years of experience. The Board believes that Mr. Altomari's executive experience in pharmaceutical companies with
commercialized products, product launches, and more than 20 years of focus on the development and marketing of specialty pharmaceutical products, along with his public company board service, makes him uniquely suited to guide the Board in
strategic planning, as well as operational and commercial matters.
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Steinar J. Engelsen, M.D.
, age 67
Director since November 1999
Director of Insmed Pharmaceuticals Inc. from 1998 - 2000
Chairman of the Nominations and Governance Committee
Member of the Audit Committee
Career Highlights:
Teknoinvest AS (1996 - present)
o
Partner
Centaur Pharmaceuticals, Inc. (2000)
o
Acting CEO
Hafslund Nycomed AS (1989 - 1996)
o
Senior Vice President, Research and Development among other management positions
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Current Private Board Service:
Director, Holberg EEG AS
Education and Certifications:
University of Oslo - M.S., nuclear chemistry
University of Oslo - M.D.
Norwegian School of
Economics - Certified European Financial Analyst
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Qualifications
: Dr. Engelsen has more than 25 years of experience in the pharmaceutical industry, including his experience as a financial analyst and as an investor in biopharmaceutical companies. The Board
believes that Dr. Engelsen's finance and management experience as well as his public company board experience in biopharmaceutical companies enables him to provide operating insights.
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William H. Lewis
, age 49
Director since September 2012
President and CEO since September 2012
Consultant to Board from June - September 2012
Career
Highlights:
Aegerion
Pharmaceuticals, Inc. (Nasdaq: AEGR) (Aegerion) (2005 - 2011)
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Co-founder
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President
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Chief Financial Officer
Wells Fargo & Co. (2002 - 2004)
Robertson Stephens Capital (2000 - 2002)
JP Morgan Chase & Co. (1995 - 2000)
Foreign Service for the U.S. Government (1989 - 1992)
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Education:
Oberlin
College - B.A.
Case Western Reserve University - M.B.A.
Case Western Reserve University - J.D.
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Qualifications
: Mr. Lewis has more than 10 years of executive experience in the life sciences industry and a track record of success for over 20 years in the pharmaceutical and finance industries both
in the United States and internationally. During his tenure at Aegerion, Mr. Lewis played a pivotal role in re-orienting the company's strategy to focus on rare disease indications, enabling Aegerion to conduct a successful initial public
offering in 2010. The Board believes that Mr. Lewis brings significant qualifications including his experience as a seasoned entrepreneur and senior executive with a fast-growing biotechnology company. In addition, Mr. Lewis offers the
Board significant insights and experience with financing, orphan drug development and commercialization, and international business development.
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Incumbent Directors Whose Term Expires at the 2020 Annual Meeting of Shareholders (Class II
Directors)
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Donald Hayden, Jr.
, age 62
Non-Executive Chairman of Board since December 2010
Executive Chairman from May - September 2012 during senior management transition
Member of the Nominations and Governance Committee
Career Highlights:
Vitae Pharmaceuticals Inc. (Nasdaq: VTAE) (2006 - 2016)
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Chairman until acquisition by Allergan plc (NYSE: AGN)
Dimension Therapeutics, Inc. (2013 - 2015)
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Director
Transave, Inc. (2006 - 2010)
o
Executive Chairman until acquisition by Insmed
Bristol-Myers Squibb Company (1981 - 2006)
o
President of Global Pharmaceuticals
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Executive Vice President and President, Americas
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Executive Vice President of the Health Care Group
o
President of Oncology and Immunology
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Senior Vice President of Worldwide Franchise Management and Business Development.
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Current Public Board Service:
Chairman, REGENXBIO Inc. (Nasdaq: RGNX)
Lead Independent Director, Amicus Therapeutics, Inc. (Nasdaq: FOLD)
Current Private Board
Service:
Director,
WindMIL Therapeutics, Inc.
Director, Otsuka America Pharmaceutical, Inc.
Education:
Harvard University - B.A., general studies
Indiana
University - M.B.A.
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Qualifications
: Mr. Hayden has more than 30 years of pharmaceutical industry experience, including roles in executive management, commercialization, business development, and financial and strategic
planning. This extensive experience makes him a valuable asset to our Board. The Board believes that Mr. Hayden brings a unique combination of skills to the Board, including public company board experience, and that his leadership abilities make
him particularly well qualified to be our Chairman.
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David W.J. McGirr
, age 63
Director since October 2013
Chairman of the Audit Committee
Career Highlights:
Relypsa, Inc. (2013 - 2016)
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Director until acquisition by Galencia AG
Cubist Pharmaceuticals, Inc. (2002 - 2014), acquired by Merck & Co., Inc. (NYSE: MRK) in 2015
o
Senior Advisor to the CEO
o
Senior Vice President
o
Chief Financial Officer
o
Treasurer
hippo inc. (1999 - 2002)
o
Chief Operating Officer
o
President
o
Director
GAB Robins North America, Inc. (1996 - 1999)
o
CEO
o
President
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Private Equity Investor
S.G. Warburg Group (1978 - 1995)
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Chief Financial Officer (U.S.)
o
Chief Administrative Officer
o
Managing Director of S.G. Warburg & Co., Inc.
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Current Public Board Service:
Director, Rhythm Pharmaceuticals, Inc. (Nasdaq: RYTM)
Director, Arsanis, Inc. (Nasdaq: ASNS)
Director, Menlo Therapeutics Inc. (Nasdaq: MNLO)
Education:
University of Glasgow - B.S., civil engineering
University of Pennsylvania - M.B.A.
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Qualifications
: Mr. McGirr has more than 30 years of experience as a senior financial executive, including 11 years at Cubist, during which the company secured a number of product approvals and
launched these products across multiple markets. The Board believes that Mr. McGirr brings a unique combination of skills to the Board, including public company executive and board experience, capital markets insight, operational and corporate
development experience, and significant expertise in the healthcare sector, specifically with infectious diseases. Mr. McGirr's background is well-suited to help guide the Company in building a commercial biopharmaceutical company with a
franchise of novel therapies at the intersection of orphan, pulmonary, and infectious diseases.
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Myrtle Potter
, age 59
Director since December 2014
Member of the Compensation Committee
Career Highlights:
Myrtle Potter & Company, LLC
(2005 - present)
o
CEO
Express Scripts (2012)
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Director
Everyday Health (2010 - 2016)
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Director until acquisition by Ziff Davis, LLC, a subsidiary of j2 Global, Inc. (Nasdaq: JCOM)
Medco Health Solutions (2007 - 2012)
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Director until acquisition by Express Scripts (Nasdaq: ESRX)
Genentech (2000 - 2005)
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President of Commercial Operations
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Chief Operating Officer
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Member of the Executive Committee
Bristol-Myers Squibb (1996 - 2000)
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President of U.S. Cardiovascular and Metabolic business
Merck & Co., Inc.
(1982 - 1996)
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Vice President of $800 million U.S. pharmaceutical business unit, among other positions
Procter & Gamble Company (1980 - 1982)
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Current Public Board Service:
Director, Rite Aid (NYSE: RAD)
Director, Axsome Therapeutics, Inc. (NYSE: AXSM)
Current Private Board and Other
Service:
Director,
Liberty Mutual Holding Company
Director, Proteus Digital Health
Trustee, The University of Chicago
Education:
University of Chicago - B.A., political
science
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Qualifications
: Ms. Potter has over 35 years of experience in the pharmaceutical industry. The Board believes that Ms. Potter's experience, including extensive commercial and operational experience
leading pharmaceutical companies in bringing new therapies to market, makes her well-suited to guide the Board in operational and commercial matters.
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Executive Officers
The following table sets forth our current executive officers, their ages, the positions currently held by each such person as of the date of
this Proxy Statement and the period holding such positions.
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Name
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Age
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Position(s)
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Period During Which
Officer Served in Such
Position(s)
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William H. Lewis
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49
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President and CEO
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September 2012Present
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Paolo Tombesi
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54
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Chief Financial Officer
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June 2017Present
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Roger Adsett
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49
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Chief Commercial Officer
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September 2016Present
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Paul Streck, M.D.
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55
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Chief Medical Officer
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June 2017Present
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Christine Pellizzari
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50
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Chief Legal Officer
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July 2013Present
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William H. Lewis.
Mr. Lewis's biographical information is summarized above under "Incumbent
Directors Whose Term Expires at the 2019 Annual
Meeting of Shareholders (Class I Directors)."
Paolo Tombesi.
Mr. Tombesi joined Insmed as Chief Financial Officer in June 2017.
Mr. Tombesi brings over 20 years of
experience in the biotechnology and pharmaceutical sector. Prior to joining the Company, Mr. Tombesi was Vice President and Chief Financial and Administrative Officer of Novartis
Pharmaceuticals Corporation, a position he held since November 2014. Mr. Tombesi was Managing Director and Chief Financial Officer of Novartis Japan from April 2009 to October 2014 and held
various finance roles at Novartis from September 2006 to March 2009. Mr. Tombesi held several finance director positions at Bristol-Myers Squibb from August 1996 to September 2006. From January
1988 to July 1996, Mr. Tombesi held various positions in consumer goods at Unilever NV and Johnson &
Johnson. Mr. Tombesi holds a B.Ed. in Business and Managerial Economics from Sapienza Università di Roma and a B.A. in Accounting from Duca degli Abruzzi Roma.
Roger Adsett.
Mr. Adsett joined Insmed as Chief Commercial Officer in September 2016.
Mr. Adsett has over 20 years of
experience in the global biotechnology and pharmaceutical industry. From January 2015 to September 2016, Mr. Adsett was Senior Vice President, Head of Gastrointestinal and Internal Medicine
Business Unit at Shire Plc (Nasdaq: SHPG) (Shire), a global specialty biopharmaceutical company. From August 2008 to January 2015, Mr. Adsett was Senior Vice President, Gastrointestinal
Business Unit Leader at Shire. From October 2005 to August 2008, Mr. Adsett was General Manager, Oral IBD Products of the Gastroenterology Business Unit of Shire. From November 1994 to October
2005, Mr. Adsett held various marketing and commercial roles at AstraZeneca plc (NYSE: AZN), a multinational pharmaceutical and biopharmaceutical company. Mr. Adsett was a senior
analyst at Accenture PLC (NYSE: ACN), a global professional services company, from September 1991 to November 1994. Mr. Adsett holds a Masters of Business Administration from The Wharton
School at the University of Pennsylvania and a Bachelor of Arts in English and Economics from Bucknell University.
Paul Streck.
Dr. Streck joined Insmed as Chief Medical Officer in June 2017. Dr. Streck
has over 25 years of clinical
development, management and leadership expertise. He most recently served as Vice President, Global Medical Specialty Franchise, Immuno-inflammation at GlaxoSmithKline, a position he held since
November 2015, where he was responsible for portfolio strategy, including drug launch, life cycle management, post-registration clinical strategy and health economics. From November 2007 to November
2015, Dr. Streck held various positions at Shire Pharmaceuticals. Dr. Streck served as Group Vice President, Clinical Development/TA Lead (Hematology, Gastrointestinal, Internal
Medicine) at Shire Pharmaceuticals from November 2013 to November 2015. Prior to that, Dr. Streck
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served
as Global Head of Medical Affairs, Internal Medicine (November 2012 to December 2013), Product General Manager, Emerging Business Unit (November 2011 to November 2012), and Senior Director,
Global Clinical Development (November 2007 to December 2012). From February 2006 to October 2007, Dr. Streck was Director of Marketing at AMGEN USA Inc. Dr. Streck holds a M.B.A.
from the Duke University Fuqua School of Business, a M.D. from Jefferson Medical College, a D.M.D. from the Temple University School of Dentistry and a B.A. in chemistry from Rutgers University.
Christine Pellizzari.
Ms. Pellizzari joined Insmed as General Counsel and Corporate Secretary
in July 2013
and was promoted to Chief Legal Officer in January 2018. Ms. Pellizzari has over 20 years of experience in the global biotechnology and pharmaceutical industry, including senior-level
leadership roles. From August 2007 to December 2011, Ms. Pellizzari served as Executive Vice President, General Counsel and Secretary for Aegerion and served as a legal consultant for Aegerion
from January 2012 to June 2012. From 1998 to 2007, Ms. Pellizzari served as Senior Vice President, General Counsel and Secretary of Dendrite International, Inc., a publicly traded
company that provided the global pharmaceutical industry with sales effectiveness, promotional and compliance solutions until it was acquired by Cegedim S.A. (Euronext: CGM) in 2007. Prior to
her tenure at Dendrite, Ms. Pellizzari practiced law at the firm of Wilentz, Goldman & Spitzer where she specialized in health care transactions and related regulatory matters. Before
joining Wilentz, Ms. Pellizzari served as a law clerk to the Honorable Reginald Stanton, Assignment Judge for the Superior Court of New Jersey. Ms. Pellizzari received her Bachelor of
Arts degree, cum laude, from the University of Massachusetts, Amherst and her Juris Doctor degree from the University of Colorado, Boulder.
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CORPORATE GOVERNANCE
Corporate Governance Matters
Corporate Governance Materials and Practices.
Our written corporate governance materials,
including our Bylaws, Corporate Governance Guidelines,
Code of Business Conduct and Ethics, Audit Committee Charter, Compensation Committee Charter, Nominations and Governance Committee Charter, and Director Resignation Policy are posted on our website at
www.insmed.com under the heading "Investor RelationsCorporate Governance." Our corporate governance practices include the following:
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The Board currently has an independent Chairman, and all of our non-employee directors and board committee members are independent.
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The Board has adopted a director resignation policy in uncontested director elections.
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The Board oversees succession planning for executive officers, including the CEO.
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Directors have access to all levels of management and are provided with opportunities to meet with members of management on a regular basis.
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Directors may retain their own independent advisors, at our expense.
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The Board and each committee thereof conduct self-evaluations at least once per year to assess their performance and ways in which performance
could be improved.
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Our Board addresses the importance of incorporating new viewpoints on the Board through the director evaluation and nomination process. Our
director composition reflects a mix of tenure on the Board (ranging from three years to 18 years), which we believe provides an effective balance of historical perspective and an understanding
of the evolution of the Company with fresh perspectives and insights.
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Share ownership guidelines are in place for our directors and executive officers.
Code of Business Conduct and Ethics.
We have adopted a Code of Business Conduct and Ethics
that applies to all of our directors, officers (including
our CEO, chief financial officer, controller and any person performing similar functions) and employees. Our Code of Business Conduct and Ethics contains written standards designed to communicate our
expectations of our directors, officers, and employees when making decisions and conducting themselves in corporate activities, including the ethical handling and use of confidential information;
actual or apparent conflicts of interest; compliance with applicable governmental laws, rules and regulations; protection of our assets and proprietary information; the ethical handling of payments
and gifts received in the normal course of business and of payments made to government personnel; prompt internal reporting of violations of our Code of Business Conduct and Ethics; and accountability
for adherence to our Code of Business Conduct and Ethics. We have established a means for individuals to report a violation or suspected violation of the Code of Business Conduct and Ethics
anonymously, including those violations relating to accounting, internal controls or auditing matters, and federal securities laws. We intend to satisfy the disclosure requirements regarding any
amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics by making disclosures concerning such matters available on our website at www.insmed.com under the heading
"Investor RelationsCorporate Governance."
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Corporate Governance Guidelines.
We have adopted Corporate Governance Guidelines to assist
and guide the Board in the exercise of its
responsibilities and establish a framework for our corporate governance practices. The Corporate Governance Guidelines contain written standards pertaining to director qualifications, director
responsibilities, structure of our Board, director access to management and independent advisors, director compensation, and performance evaluation of our Board and committees, among other things. The
Corporate Governance Guidelines help to ensure that the Board is independent from management, the Board adequately performs its oversight functions, and the interests of the Board and management align
with the interests of our shareholders. Our Corporate Governance Guidelines are interpreted in accordance with all applicable laws and regulations, the Nasdaq listing standards, and our Articles of
Incorporation and our Bylaws.
Meetings of the Board.
The Board held eleven meetings during 2017. Each director attended at
least 75% of the Board meetings that occurred in 2017.
Each director attended at least 75% of the committee meetings that occurred in 2017 during his or her tenure on such committees.
Director Resignation Policy.
Any nominee for director in an uncontested election who has a
greater number of votes "withheld" from his or her
election than votes cast "for" his or her election must submit his or her resignation to the Board promptly following certification of the election results. Within 90 days after the date of the
certification of the election results, the Nominations and Governance Committee will make a recommendation to the Board as to whether to accept or reject the submitted resignation. Within
45 days after receiving this recommendation, the Board must accept or reject the resignation or pursue another action unless doing so would cause us to fail to comply with federal or state law
or Nasdaq listing standards. If more than a majority of the members of the Nominations and Governance Committee do not receive a greater number of votes cast "for" their election than votes
"withheld," the independent directors whose classes were not nominated for election will appoint a special committee to consider the resignations and make a recommendation to the Board. Any director
whose resignation is under consideration will not participate in any deliberation or vote regarding his or her resignation. If the Board accepts a director's resignation pursuant to this policy, the
Board may decrease the size of the Board or fill the resulting vacancy in accordance with the Virginia Stock Corporation Act and our Articles of Incorporation and Bylaws.
Independence of the Directors and Director Nominees.
The Board has determined that the
following members of the Board are independent, as that term
is defined under the general independence standards of the Nasdaq listing standards: Mr. Altomari, Mr. Brennan, Dr. Engelsen, Mr. Hayden, Mr. McGirr,
Ms. Potter, and Dr. Sharoky. Mr. Lewis is not considered independent because he is currently employed by the Company. The Board makes an affirmative determination regarding the
independence of each director annually, based on the recommendation of the Nominations and Governance Committee.
Board's Role in Strategy.
The Board actively participates in Company strategy decisions and
oversight throughout the year. The Board annually
reviews the company's strategic plan, including key risks and decisions facing the company.
Director Nominating Process
Our Nominations and Governance Committee, which is described more fully below under "Corporate GovernanceCommittees of the
BoardNominations and Governance Committee," serves as an independent and objective party to identify, assess, recruit and recommend to the Board qualified candidates for directorship,
consistent with criteria approved by the Board, and establishes and annually reviews such criteria based on factors it considers appropriate. Among the factors that the Board and the Nominations and
Governance Committee consider are strength of character, sound business
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judgment,
career specialization, relevant technical skills, diversity, independence, the ability to commit sufficient time to the Board, and the extent to which the candidate would fill a present need
of the Board.
Nominations and Governance Committee Process for Identifying and Evaluating Director Candidates.
The Nominations and Governance Committee evaluates
all director candidates in accordance with the director qualification standards described in the Corporate Governance Guidelines and seeks candidates with experience in the pharmaceutical and
biotechnology industries, as well as business, management, accounting and financial experience. The Nominations and Governance Committee evaluates a candidate's qualifications to serve as a member of
the Board based on the skills and characteristics of such individual Board members, as well as the composition of the Board as a whole. In addition, the Nominations and Governance Committee will
evaluate a candidate's independence, diversity, skills and experience in the context of the Board's needs.
Director Candidate Recommendations and Nominations by Shareholders.
The Nominations and Governance
Committee's charter provides that the committee
will consider director candidate recommendations by shareholders. Shareholders should submit any such recommendations for the Nominations and Governance Committee through the method described below
under "Corporate GovernanceCommunications with the Board." In accordance with our Bylaws, any person who is a shareholder of record on the record date for the shareholder meeting, on the
date of the shareholder meeting, and on the date such person provides required notice to the Company may
nominate persons for election to the Board if such shareholder complies with the notice procedures set forth in the Bylaws and summarized in this Proxy Statement under the heading "Proposals for 2019
Annual Meeting."
Communications with the Board
The Board has approved a process for shareholders to send communications to the Board. Shareholders can send communications to the Board and,
if applicable, to the Nominations and Governance Committee or to specified individual directors in writing c/o Ms. Christine Pellizzari, Corporate Secretary, Insmed Incorporated, 10 Finderne
Avenue, Building 10, Bridgewater, New Jersey, 08807. All communications sent to Ms. Pellizzari will be forwarded, as appropriate, to the Board, the Nominations and Governance Committee
or any specified individual directors.
Director Attendance at Annual Meeting
Our policy is that directors are expected to make reasonable efforts to attend the annual meeting of shareholders absent unusual circumstances.
All directors attended the 2017 Annual Meeting of Shareholders.
Board Leadership Structure
The Board believes that it is in the best interests of the Company to maintain the flexibility to make determinations about the separation of
the positions of Board Chair and CEO. The Board believes that its current leadership structure, with Mr. Lewis serving as CEO and Mr. Hayden serving as our independent non-executive
Chairman, is appropriate for the Company at this time. Both Mr. Lewis and Mr. Hayden are actively engaged on significant matters affecting us, such as long-term strategy. The CEO has
overall responsibility for all aspects of our operation, while the Chairman has a greater focus on governance of the Company, including oversight of the Board. We believe this balance of shared
leadership between the two positions is a strength for the Company. As our independent non-executive Chairman, Mr. Hayden calls and chairs regular and special meetings of the Board and all
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executive
sessions of the independent directors, chairs and presides at annual or special meetings of shareholders, provides meaningful input into the agenda of Board meetings, oversees the retention
of outside advisors, consultants and legal counsel who report directly to the Board, consults frequently with committee chairs and management and has the right to and often does attend Board committee
meetings.
Committees of the Board
Our Bylaws provide that the Board may create one or more committees of the Board. Currently, the Board has three standing committees: the Audit
Committee, the Compensation Committee and the Nominations and Governance Committee.
Composition and Attendance.
Our Audit Committee consists of Mr. McGirr (Chairman),
Dr. Engelsen, and Mr. Altomari, each of whom
is an independent Board member. During 2017, the Audit Committee held six meetings. Each of Mr. McGirr, Dr. Engelsen and Mr. Altomari attended all meetings of the Audit Committee
held in 2017.
Responsibilities and Duties.
The Audit Committee assists our Board in fulfilling its oversight
responsibilities relating to the accounting,
reporting and financial practices of the Company and seeking
to ensure our compliance with applicable legal and regulatory requirements. The Committee reviews and oversees:
-
-
the financial statements, financial reports and other financial information that we provide to governmental bodies, our shareholders and
others;
-
-
our systems of internal controls regarding finance and accounting;
-
-
our auditing, accounting, and financial reporting processes;
-
-
the qualifications and independence of our independent registered public accounting firm; and
-
-
the engagement and compensation of our independent registered public accounting firm to perform audit services and any permissible non-audit
services.
The
Audit Committee reviews and reassesses the adequacy of its charter at least annually.
Committee Independence.
Our Board has determined that all three of the current Audit Committee
members, Mr. McGirr, Dr. Engelsen, and
Mr. Altomari, satisfy the heightened independence requirements of the Nasdaq listing standards and Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act).
Financial Literacy and Expertise.
Our Board determined that each of the members of the Audit
Committee is able to read and understand fundamental
financial statements, including our consolidated balance sheet, statement of comprehensive income/loss, statement of cash flows, and statement of shareholders' equity. Our Board also has determined
that Mr. McGirr is an "audit committee financial expert," as that term is defined in the rules promulgated by the SEC and has accounting or related financial management expertise as required
under the Nasdaq listing standards.
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Composition and Attendance.
Our Compensation Committee consists of Mr. Altomari (Chairman),
Mr. Brennan, Ms. Potter, and
Dr. Sharoky, each of whom is an independent Board member. During 2017, the Compensation Committee held seven meetings. Each of Mr. Altomari, Mr. Brennan, and Dr. Sharoky
attended all Compensation Committee meetings held in 2017 and Ms. Potter attended six of the Compensation Committee meetings held in 2017.
Responsibilities and Duties.
The Compensation Committee develops and oversees the implementation of
our compensation philosophy for our executive
officers and is responsible for our executive and other compensation plans. The Committee's primary objectives are to develop and maintain an executive compensation program
that:
-
-
creates a direct relationship between pay levels and corporate performance and returns to shareholders;
-
-
provides overall competitive pay levels to effectively attract and retain executive talent;
-
-
creates proper incentives to enhance shareholder value; and
-
-
rewards performance.
The
Compensation Committee reviews and reassesses the adequacy of its charter at least annually.
Committee Independence and Related Requirements.
Our Board has determined that all four of the
current Compensation Committee members,
Mr. Altomari, Mr. Brennan, Ms. Potter and Dr. Sharoky, satisfy the heightened independence requirements of the Nasdaq listing standards. In addition, all of the members of
our Compensation Committee are "non-employee directors" within the meaning of the rules under Section 16 of the Exchange Act and "outside directors" for purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the Code and Section 162(m)).
Composition and Attendance.
Our Nominations and Governance Committee consists of Dr. Engelsen
(Chairman), Mr. Hayden, and
Dr. Sharoky, each of whom is an independent Board member. During 2017, the Nominations and Governance Committee held six meetings. Each of Dr. Engelsen, Mr. Hayden, and
Dr. Sharoky attended all meetings of the Nominations and Governance Committee held in 2017 during their tenure on the Nominations and Governance Committee.
Responsibilities and Duties.
The Nominations and Governance Committee identifies and nominates
qualified candidates for directorship and serves in a
leadership role in shaping our corporate governance and overseeing the evaluation of the Board and its committees. The Nominations and Governance Committee:
-
-
assists the Board by identifying individuals qualified to become Board members and recommending to the Board the director nominees for election
at shareholder meetings and to fill vacancies on the Board;
-
-
makes recommendations to the Board regarding Board and committee organization, structure and composition;
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-
-
evaluates the overall effectiveness of the Board and its committees; and
-
-
develops, implements and assesses the Company's corporate governance policies and practices, including risks related to such policies and
practices.
The
Nominations and Governance Committee reviews and reassesses the adequacy of its charter at least annually.
The Role of the Board in Risk Oversight
The Board has primary responsibility for overseeing the Company's risk management. The Board administers its oversight responsibility for risk
management directly and through its committees. Each committee chairman reports to the Board regarding the committee's considerations of management's processes for identifying, evaluating, and
controlling significant risks. In addition, the officers responsible for oversight of particular risks within the Company provide updates and information to our Board. The Board considers specific
risk topics, including risks associated with our strategic plan, our capital structure, our research and development activities, our manufacturing and supply chain, and our operations. Our Board
believes that full and open communication between management and the Board is essential for effective risk management and oversight. The Board and each of its committees have full access to our senior
management, as well as the ability to engage outside advisors and other experts. Management routinely informs the Board of developments that could affect our risk profile or other aspects of our
business and development.
The
Audit Committee periodically discusses with management and the independent auditor our policies and guidelines regarding risk assessment and risk management as well as our major
financial and operational risk exposures and the steps that management has taken to monitor and control such exposures. The Audit Committee also reviews and evaluates our processes and policies for
identifying and assessing key risk areas and for formulating and implementing steps to address such risk areas. The Audit Committee oversees disclosure controls and procedures, including applicable
internal control over financial reporting and meets with the Chief Financial Officer, the Chief Legal Officer, the Chief Compliance Officer, the Vice President of Quality Assurance, the Vice
President, Corporate Controller, external audit personnel, and other senior managers as appropriate to review issues regarding compliance with the applicable legal and regulatory requirements.
The
Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk taking. Our Compensation Committee
engages an independent consultant to advise it on topics related to Board and executive compensation. During the last year, the Compensation Committee, with the assistance of Frederic W.
Cook & Co., Inc. (FW Cook), its independent compensation consultant, reviewed the executive compensation program and determined that the design of the compensation policies,
including the components, weightings and focus of the elements of executive compensation, do not encourage management to assume excessive or inappropriate risks.
The
Nominations and Governance Committee oversees the risks associated with our corporate governance and operating practices, including those relating to the composition of the Board,
the structure and function of Board committees and meeting logistics and policies. The Nominations and Governance Committee regularly reviews the Board's performance, oversees the self-evaluation of
each of the Board's committees, oversees our corporate governance and formulates and recommends corporate governance standards to our Board.
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|
|
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2017 CEO Compensation
|
|
Variable Performance-Based vs.
Guaranteed
CEO Compensation for 2017
|
|
|
|
|
|
|
2017 Other Named Executive Officer Compensation
(1)
|
|
Variable Performance-Based vs.
Guaranteed Other Named
Executive Officer Compensation for 2017
(1)
|
|
|
|
(1)
Mr. Dreschler's 2017 compensation is not included in these charts.
Pay for Performance.
The compensation program is designed to reward the named executive
officers for attaining established business and individual
goals. The attainment of these goals requires the named executive officer to dedicate his or her time, effort, skills and business experience to the success of the Company and the maximization of
shareholder value. A significant portion of the named executive officers' compensation is based on Company and individual performance, and the compensation program is designed to reward both
short-term and long-term performance. Short-term performance of our named executive officers is principally rewarded through annual cash incentives that reflect the achievement of corporate and
individual goals. Long-term performance of our named executive officers is largely rewarded through option awards that are eligible to vest based on continued service and have a value tied to our
share price appreciation.
Pay competitively to attract and retain skilled executive officers.
The compensation program
is designed to allow the Company to attract and retain
individuals whose skills are critical to the current and long-term success of the Company. Because the implementation of our strategic goals requires long-term commitments by our named executive
officers, and because competition for top talent is intense in our industry, retention is a key objective of the compensation program. The compensation program is designed to appropriately compensate
our executive officers for the success of the Company
29
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from
a competitive standpoint, so that they remain with the Company and continue to contribute to the Company's long-term success.
At
our 2017 Annual Meeting of Shareholders, we held an advisory vote on the compensation of our named executive officers. Over 99% of the shares voted were voted in favor of our
say-on-pay proposal. The Compensation Committee considered these voting results and believes they affirm the Company's compensation philosophy and the principles discussed above.
Corporate Governance Perspectives on our Executive Compensation Program
We believe that our executive compensation program reflects our commitment to strong corporate governance practices as evidenced by the
following aspects of our executive compensation program:
-
-
Our Compensation Committee has governance responsibility over executive pay and incentives while our independent Board members ratify
recommendations made by our Compensation Committee on our President and CEO's goals and compensation;
-
-
Performance metrics that govern incentive compensation are defined by our Compensation Committee at the start of each fiscal year and are
reviewed by our Compensation Committee at the end of the year;
-
-
The executive compensation program, in the aggregate, rewards performance in a variety of ways, aimed at a balanced assessment based on the
Company's strategic objectives;
-
-
Individual and corporate multiplier ranges under our incentive compensation program are developed and implemented such that payouts are capped
at a predetermined maximum amount, irrespective of performance that exceeds objectives;
-
-
Our Compensation Committee has the ability to exercise its discretion to reduce or eliminate incentive compensation payouts;
-
-
We have share ownership guidelines in place for our President and CEO, pursuant to which he must hold shares of Common Stock equal to at least
three times his base salary as in effect from time to time within 5 years of the adoption of the guidelines or date of hire, whichever is later. As of the Record Date, Mr. Lewis
satisfied these guidelines;
-
-
We also have share ownership guidelines in place for certain of our senior executives (other than our President and CEO), including each of our
current named executive officers other than our President and CEO, pursuant to which each of them must hold shares of Common Stock equal to his or her base salary as in effect from time to time within
5 years of the adoption of the guidelines or date of hire, whichever is later. As of the Record Date, Mr. Adsett and Ms. Pellizari satisfied these guidelines, and
Mr. Tombesi and Dr. Streck, who joined the company during 2017, are making progress towards satisfying these guidelines;
-
-
Our independent executive compensation consultant reports directly to the Compensation Committee;
-
-
The employment agreements for our Named Executive Officers do not provide for tax "gross-ups";
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-
-
Our executive compensation program balances short-term pay opportunities through base salary and annual cash incentives with long-term
incentive opportunities through equity awards and balances fixed compensation (base salary) with variable compensation (annual cash incentives and equity awards); and
-
-
Our insider trading policy prohibits our officers and directors from engaging in hedging transactions involving the Company's securities and
prohibits insiders from pledging the Company's securities as collateral for loans of any type without the prior approval of the Compensation Committee. No such pledges were approved during 2017.
In
addition, the Compensation Committee conducts a compensation risk assessment annually. Due to adherence to our compensation philosophy and principles and the governance principles
described above, the Compensation Committee does not believe that our compensation program is reasonably likely to have a material adverse effect on the Company.
Executive Compensation Determination Process
Role of the Compensation Committee and the Board in Making Compensation Decisions.
Our
Compensation Committee has been delegated the authority to
make determinations regarding all elements of compensation for our executive officers, except for Mr. Lewis, our President and CEO. Our Compensation Committee recommends to our independent
Board members the goals and individual elements of total compensation for Mr. Lewis for final approval. The independent Board members review this recommendation and determine the compensation
for Mr. Lewis. As discussed in further
detail below, in assessing executive compensation, our Compensation Committee engages an outside independent executive compensation consultant to assess the competitiveness of our programs and
periodically conducts a peer group review.
Role of Management.
The Compensation Committee, in making executive compensation decisions,
may solicit input from management as appropriate with
respect to individual and Company performance and results. The Compensation Committee receives recommendations and evaluations with respect to the compensation and performance of our named executive
officers from the CEO (aside from his own compensation and performance) and Company performance. The Compensation Committee considered management's assessment along with the input of its independent
executive compensation consultant when making 2017 compensation decisions.
Role of the Compensation Consultant.
The Compensation Committee is authorized to select and
retain its own independent compensation consultant and
has routinely sought the advice of an independent compensation consultant regarding our executive compensation practices. The Compensation Committee evaluates the independence of its compensation
consultant on an annual basis and concluded during its 2017 evaluation that FW Cook was independent. During 2017, FW Cook advised the Compensation Committee on evolving best pay practices, provided
benchmarking data and recommendations on executive officer compensation and provided recommendations about certain changes to our 2017 peer group.
Compensation Evaluation Processes and Criteria.
Given the high demand for experienced and
well-qualified executives of the type we seek to employ,
the Compensation Committee reviews data and information from a variety of sources such as outside surveys of compensation and benefits for executive officers in the biotechnology industry, as well as
public information regarding executive compensation at peer biotechnology companies. The Compensation Committee also draws upon the personal knowledge of its members with respect to executive
compensation at comparable companies.
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In
determining the amount and composition of compensation elements (cash and non-cash elements and short- and long-term elements) for our non-CEO named executive officers, our
Compensation Committee relies upon its judgment about the performance of each individual executive officer and not on rigid formulas or short-term changes in business performance. In setting
compensation levels for our
executive officers for 2017, our Compensation Committee considered many factors, including, but not limited to, the following factors:
-
-
our achievement of certain product development, corporate partnering, financial, strategic planning and other goals;
-
-
each officer's individual performance against certain pre-established goals, as discussed in more detail below;
-
-
the scope and strategic impact of each executive officer's responsibilities;
-
-
our past business performance and future expectations;
-
-
our long-term goals and strategies;
-
-
the experience of each individual;
-
-
past compensation levels of each individual and of the executives as a group;
-
-
relative levels of pay among officers;
-
-
the amount of each element of compensation in the context of the executive officer's total compensation and other benefits;
-
-
for each executive officer, other than the President and CEO, the evaluations and recommendations of our President and CEO; and
-
-
the competitiveness of our compensation relative to the selected peer group companies and other survey data, which are described in detail
below.
Consideration
of these factors is subjective; no relative weights or rankings are assigned to them (except as otherwise discussed in this CD&A).
For
the President and CEO's compensation, the Compensation Committee reviews and evaluates the performance of the President and CEO and recommends to the Board the individual elements
of his total compensation, considering, among other things, individual performance, experience, prior compensation levels, and our general performance objectives, as well as the compensation practices
of peer companies and the markets where we compete for executive talent. The Board then must approve the President and CEO's compensation; the President and CEO may not be present during voting or
deliberations on his compensation.
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Table of Contents
In August 2016, the Compensation Committee, upon advice received from FW Cook, selected the companies that comprised our 2017 peer group
through a screening process that considered publicly traded biopharmaceutical companies similar to us in number of employees, market capitalization and stage of product development. This review
resulted in modifications from our 2016 peer group as described below.
The
number of employees at the companies in our 2017 peer group ranged from 28 to 465, with a median of 184 employees, and these companies had average market capitalizations that ranged
from approximately $450 million to $2.12 billion, with a median of $953 million. We had 125 employees and an average market capitalization of approximately $866 million.
Employee numbers were as of the most recently reported fiscal year-end prior to August 2016 and market capitalizations were the average of the market capitalizations as of December 31, 2015 and
June 30, 2016. At those respective times, our
percentile rank among our peers for number of employees and average market capitalization were 35% and 32%, respectively. The table below depicts our 2017 peer group:
|
|
|
|
|
Achillion Pharmaceuticals, Inc.
|
|
Dynavax Technologies Corp.
|
|
Sage Therapeutics
|
Amicus Therapeutics, Inc.
|
|
Halozyme Therapeutics, Inc.
|
|
Sangamo BioSciences, Inc.
|
Celldex Therapeutics, Inc.
|
|
Keryx Biopharmaceuticals, Inc.
|
|
ZIOPHARM Oncology, Inc.
|
Cempra, Inc.
|
|
Novavax, Inc.
|
|
|
Clovis Oncology, Inc.
|
|
Raptor Pharmaceutical Corp.
|
|
|
The
2017 peer group reflects the following changes from our 2016 peer group: (i) the removal of Anacor Pharmaceuticals, Inc., Dyax Corp., Ligand Pharameucitcal
Incorporated, Nektar Therapeutics, and PTC Therapeutics, Inc., and (ii) the addition of Achillion Pharmaceuticals, Inc., Dynavax Technologies Corp. and ZIOPHARM
Oncology, Inc. The Compensation Committee concluded that these adjustments to the peer group were appropriate given changes in the number of employees, market capitalization, stage of
development and merger-and-acquisition activity of the Company and historical and potential peer companies.
Using
compensation data from these peer companies, the Compensation Committee establishes benchmarks for the purpose of evaluating appropriate compensation ranges for base salary,
annual cash incentive targets and long-term equity incentives for each of our named executive officers.
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Table of Contents
Components of Compensation
In summary, the compensation paid to our executive officers includes the following components:
|
|
|
Component
|
|
Purpose of Component
|
Base Salary
|
|
Provide our executive officers with a level of stability and certainty each year.
|
|
|
|
Sign-On Bonus
|
|
Motivate top executive candidates to join the Company.
|
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|
Annual Cash Incentives
|
|
Motivate and reward executive officers for short-term individual and corporate performance.
|
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|
Long-term Equity Incentives (Stock Options)
|
|
Motivate and reward executive officers for long-term corporate performance.
|
|
|
Align the interests of management and shareholders, thereby enhancing shareholder value.
|
|
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Equity-based incentive to help attract, motivate, and retain talented employees.
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|
Health, Welfare and Retirement Programs
|
|
Provide market competitive benefits to protect employees' and their covered dependents' health and welfare. Provide a program to foster retirement savings.
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Severance and Change in Control Benefits
|
|
Discourage turnover and permit executives to be better able to respond to the possibility of a change in control without being influenced by the potential effect of a change in control on their job security.
|
The
components of our compensation program and compensation decisions for 2017 for each named executive officer are described in more detail below:
The Compensation Committee reviews and sets base salaries for executives, other than the President and CEO, on an annual basis during the first
quarter of each year. The Board annually determines the base salary for our President and CEO based on the recommendation of our Compensation Committee.
Our
Board and Compensation Committee seek to establish and maintain base salaries for each position and level of responsibility that are competitive with those of executive officers in
our peer group. Our Compensation Committee reviews variances between the salary levels for each of our executive officers and those of the companies included in our peer group and determines, in its
discretion, individual salary adjustments after considering the factors described above, although no relative weights or rankings are assigned to these factors. In setting the base salary for our
executive officers other than our President and CEO, the Compensation Committee also considers the recommendations of our President and CEO.
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Table of Contents
The
base salaries for our named executive officers were adjusted as follows in 2017:
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|
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|
Base Salaries
|
Name
|
|
Annual Rate Approved
in 2016
|
|
Annual Rate Approved
in 2017
|
|
% Increase
|
William H. Lewis
|
|
$550,000
|
|
$566,500
|
|
3%
|
Paolo Tombesi
|
|
N/A
|
|
$435,000
|
|
N/A
|
Roger Adsett
|
|
$430,000
|
|
$436,450
|
|
1.5%
|
Christine Pellizzari
|
|
$394,613
|
|
$415,340
|
|
5.25%
|
Paul Streck
|
|
N/A
|
|
$425,000
|
|
N/A
|
Andrew T. Drechsler
|
|
$379,106
|
|
$390,480
|
|
3%
|
Mr. Lewis,
Mr. Adsett, Ms. Pellizzari, and Mr. Drechsler were given merit increases based on their performance in 2016. Mr. Adsett's merit increase
has been prorated for six months, given that he joined the Company during the second half of 2016.
Mr. Tombesi received a $40,000 sign-on bonus in 2017 to incent him to join the Company and serve as its Chief Financial Officer.
Dr. Streck received a $40,000 sign-on bonus in 2017 to incent him to join the Company and serve as its Chief Medical Officer.
We maintain an annual cash incentive program for all of our employees to motivate and reward the attainment of annual corporate goals and
individual goals. In establishing targets for the cash incentive awards for our executive officers, the Compensation Committee (and the Board in the case of our President and CEO) considers target
annual cash incentive opportunities extended to executive officers in similar positions at companies included in our peer group.
For
2017, target cash incentive award percentages were set at 60% of our President and CEO's base salary and 40% of base salary for each of Mr. Tombesi, Mr. Adsett,
Ms. Pellizzari, and Dr. Streck. The target percentages set for 2017 are the same as the percentages set for the prior year for Mr. Lewis, Mr. Adsett, and
Ms. Pellizzari, as reflected in the table below. The 2017 target percentages for Mr. Tombesi and Dr. Streck were set in accordance with their respective employment agreements.
Mr. Drechsler left the Company in March 2017 and was not eligible for an annual cash incentive in 2017.
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|
|
|
|
Target Cash
Incentive Award
Opportunity as a
Percentage of Base
Salary
|
Name
|
|
2016
|
|
2017
|
William H. Lewis
|
|
60%
|
|
60%
|
Paolo Tombesi
|
|
|
|
40%
|
Roger Adsett
|
|
40%
|
|
40%
|
Christine Pellizzari
|
|
40%
|
|
40%
|
Paul Streck
|
|
|
|
40%
|
For
2017, the Compensation Committee determined that the cash incentive award for our named executive officers other than Mr. Lewis would be determined by reference to both
corporate
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and
individual goals, with 75% tied to corporate goals and 25% tied to individual goals. The Compensation Committee believes that including the achievement of individual goals as a component of our
2017 cash incentive award payouts is important to incent our non CEO named executive officers as we continue to transform the Company from a development stage company into a commercial
biopharmaceutical company. Given Mr. Lewis's substantial influence on the overall performance of the Company, the Compensation Committee believes it is appropriate and in the best interests of
our shareholders to continue to have Mr. Lewis's cash incentive award be based solely upon the achievement of corporate objectives, and the Board has concurred in this view.
Payouts
for corporate goals were based upon the product of each named executive officer's respective target award times an overall corporate multiplier (ranging between 0% and 200%),
which was determined based on Company performance during 2017. For our non-CEO named executive officers, payouts for individual objectives were based upon the product of each named executive officer's
respective target award times an individual multiplier (ranging between 25% and 150%), which was determined based on achievement of individual goals for 2017.
At the beginning of each year, management recommends annual corporate objectives to the Compensation Committee for approval. These objectives
serve as the basis for determining our performance against key strategic and operating parameters for the year.
The
Compensation Committee (and the Board, with respect to our President and CEO) approved the following corporate objectives and weightings for 2017:
|
|
|
Corporate Objectives
|
|
Weighting (% of
Corporate
Objectives)
|
Advance ALIS for NTM for commercial sale
|
|
70%
|
Ensure resourcing of human and financial capital
|
|
20%
|
Advance successor product candidates
|
|
10%
|
|
|
|
Total
|
|
100%
|
|
|
|
|
|
|
|
|
|
At
that time, the Compensation Committee believed that these corporate objectives were challenging but attainable, and attainment was uncertain.
In consultation with our named executive officers, Mr. Lewis established individual goals for each of our named executive officers at
the beginning of 2017 that (i) were specific to each named executive officer's area of responsibility and (ii) supported our corporate objectives for 2017. These individual goals were
then recommended to and approved by our Compensation Committee. At the time these goals were established, the Compensation Committee believed they were challenging but
36
Table of Contents
attainable,
and attainment was uncertain. Specifically, the individual goals for each named executive officer, other than Mr. Lewis, for 2017 were as follows:
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|
Paolo Tombesi
|
|
|
|
Roger Adsett
|
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|
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Christine Pellizzari
|
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|
Paul Streck
|
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Leading the finance
organization's evolution from an accounting function into a broad based finance function;
Maintaining a financial forecast for corporate defense and planning purposes;
Working effectively with the Audit Committee; and
Working on a growth plan in advance of
commercial launch.
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|
|
Laying the groundwork for
international launch of ALIS;
Creating a comprehensive launch plan; and
Ensuring the effective growth of the commercial organization with a particular focus on culture.
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|
Managing all Board
interactions as corporate secretary and being responsive to Board needs;
Ensuring timely filing of all SEC required disclosures;
Managing compliance to integrate effectively with the commercial team and the board;
Working effectively with our corporate development team;
Preparing materials for corporate
defense and strategies for proactive growth post-data release; and
Effectively managing outstanding litigation towards a timely resolution.
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|
|
Advancing the 212 study
and 312 study through completion of the 212 study top-line results;
Advancing INS1007 into phase 2 clinical trials;
Coordinating database preparation, release and integration into filings for the United States, Japan and Europe; and
Leading and directing the Medical Affairs
function to ensure compliant outreach to and learning by the physician community.
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|
With
input from Mr. Lewis, the Compensation Committee made a qualitative determination following the end of the year as to the level of achievement by each of our named executive
officers other than our President and CEO with regard to his or her respective individual performance objectives.
The Compensation Committee received benchmarking data and recommendations from FW Cook in evaluating the 2017 cash incentive awards for our
named executive officers. When determining payouts for the annual cash incentives, the Board, with respect to our President and CEO, and the Compensation Committee, with respect to the other named
executive officers, took into account our
37
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performance
against our annual corporate objectives. Specifically, we had the following achievements in 2017 relative to our corporate objectives:
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Advance ALIS for
NTM for commercial sale
|
|
|
|
Ensure resourcing of human
and financial capital
|
|
|
|
Advance successor product
candidates
|
|
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Released positive top-line
results from the phase 3 CONVERT study of ALIS in patients with treatment-refractory NTM lung disease in a timely manner.
Timely advanced the new drug application (NDA) for accelerated approval of ALIS with the U.S. Food and Drug Administration (FDA).
Accelerated progress towards
commercial readiness via our go-to-market strategy, including efforts to ensure that our product supply chain is sufficient to satisfy current clinical demand and to meet projected commercial need post-launch.
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Completed an underwritten
offering in September 2017 of 14.1 million shares of our common stock for net proceeds of $377.7 million, net of fees and expenses related to the offering.
Made the following additions to our sales team in preparation of
commercial launch: Jason Hoitt, Vice President, Head of U.S. Sales, two area directors, ten regional sales directors and four key account directors.
Made the following appointments to our leadership team: Paolo Tombesi,
Chief Financial Officer; Paul Streck, M.D., Chief Medical Officer; Blaine Davis, Vice President, Head of Investor Relations; Patrick Coyle, Vice President, Financial Planning & Analysis; Peter Sallstig, Vice President, Clinicial
Development Pipeline Programs; and Andy Stautberg, General Manager, Pipeline Programs.
|
|
|
|
Advanced our phase 2
WILLOW study of INS1007 in non-CF bronchiectasis and commenced enrollment in December 2017.
Evaluated options to advance INS1009 development including exploring its use as an inhaled dry powder formulation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
bonuses related to our 2017 performance, the Compensation Committee determined that we achieved a cash bonus payout percentage of 170% on our overall performance against our
corporate objectives. The following table provides a breakdown of how the Board, with respect to our President
38
Table of Contents
and
CEO, and the Compensation Committee, with respect to our remaining named executive officers, determined that we performed against each of these corporate objectives during 2017:
|
|
|
|
|
|
|
Corporate Objectives
|
|
Weighting
(% of
Corporate
Objectives)
|
|
Actual
Performance
|
|
Actual % of
Corporate
Objectives
Earned
|
Advance ALIS for NTM for commercial sale
|
|
70%
|
|
Exceeded
|
|
122.5%
|
Ensure resourcing of human and financial capital
|
|
20%
|
|
Exceeded
|
|
37.5%
|
Advance successor product candidates
|
|
10%
|
|
Achieved
|
|
10%
|
|
|
|
|
|
|
|
Total
|
|
100%
|
|
|
|
170%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based
upon our performance in 2017, including our achievement of the corporate goals summarized above, as well as the achievement of individual goals set by the Compensation Committee,
our named executive officers earned the following cash incentive awards for 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of
Bonus
|
|
Actual Bonus
Achievement
|
|
|
Name
|
|
Base
Salary
|
|
Target
Bonus %
|
|
Corporate
Goals
|
|
Individual
Goals
|
|
Corporate
Goals
|
|
Individual
Goals
|
|
2017 Cash
Bonus
|
William H. Lewis
|
|
$566,500
|
|
60%
|
|
100%
|
|
N/A
|
|
170%
|
|
N/A
|
|
$577,830
|
Paolo Tombesi
|
|
$435,000
|
|
40%
|
|
75%
|
|
25%
|
|
170%
|
|
127.5%
|
|
$277,400
|
Roger Adsett
|
|
$436,450
|
|
40%
|
|
75%
|
|
25%
|
|
170%
|
|
135%
|
|
$281,600
|
Christine Pellizzari
|
|
$415,340
|
|
40%
|
|
75%
|
|
25%
|
|
170%
|
|
140%
|
|
$270,000
|
Paul Streck
|
|
$425,000
|
|
40%
|
|
75%
|
|
25%
|
|
170%
|
|
145%
|
|
$208,800
|
Dr. Streck's
2017 cash bonus reflects a prorated amount for nine months in accordance with his employment agreement.
One of the guiding principles of our compensation program is pay for performance, and we believe that a significant portion of our executives'
compensation should be performance-based to create appropriate incentives and rewards for achieving strategic goals that are critical drivers of shareholder value. We also believe that stock ownership
by management aligns our executives' interests with those of our shareholders, and equity incentive compensation rewards our executives for their contributions to the long-term success of the Company.
The Compensation Committee believes that equity-based compensation is a vital part of our compensation program as it creates an ownership culture that rewards our executives for maximizing shareholder
value over time and aligns the interests of our named executive officers and other key employees with those of our shareholders.
In
determining the equity compensation awards to grant to our named executive officers in 2017, the Board, with respect to our President and CEO, and the Compensation Committee, with
respect to our remaining named executive officers, considered each named executive officer's role, as described above, along with the advice of FW Cook, including information regarding comparative
equity compensation awards received by the executives in our peer group. With regard to Messrs. Lewis, Tombesi, and Adsett and Ms. Pellizzari, performance prior to the grant date was
also
39
Table of Contents
considered.
Based on these considerations, Messrs. Lewis, Tombesi and Adsett, Ms. Pellizzari and Dr. Streck received the following option awards in 2017:
|
|
|
|
|
Name
|
|
Date of Option
Grant(1)
|
|
Number of Options
Granted
|
William H. Lewis
|
|
1/5/2017
|
|
175,530
|
|
|
5/17/2017
|
|
142,080
|
Paolo Tombesi(2)
|
|
6/1/2017
|
|
127,160
|
Roger Adsett
|
|
1/5/2017
|
|
82,280
|
|
|
5/17/2017
|
|
76,600
|
Christine Pellizzari
|
|
1/5/2017
|
|
65,820
|
|
|
5/17/2017
|
|
60,780
|
Paul Streck(2)
|
|
6/5/2017
|
|
109,210
|
Andrew T. Drechsler(3)
|
|
|
|
|
-
(1)
-
Options
granted on (1) January 5, 2017 had an exercise price of $13.67, (2) May 17, 2017 had an exercise price of $17.16,
(3) June 1, 2017 had an exercise price of $15.60, and (4) June 5, 2017 had an exercise price of $15.38, the per-share closing price of our Common Stock on the relevant
grant date. Shares of our Common Stock underlying these options will vest over a four-year period, with 25% of the shares vesting on the first anniversary of the date of grant and 12.5% of the shares
vesting every six months thereafter until the fourth anniversary of the date of grant.
-
(2)
-
Mr. Tombesi
and Dr. Streck received their option grants as inducement awards in connection with their commencement of employment.
-
(3)
-
Mr. Drechsler
announced his resignation in November 2016 and left the Company in March 2017; accordingly he was not eligible to receive equity compensation
awards in 2017.
The
Board, with respect to our President and CEO, and the Compensation Committee, with respect to our remaining named executive officers, may also grant stock options from time to time
in recognition of a named executive officer's expanded duties and responsibilities or continuing contributions to the Company's performance. No such option grants were made during 2017.
We maintain several other benefit programs that are offered to all employees including executives on an equivalent basis, which include
coverage for health insurance, dental insurance, life and disability insurance, and a 401(k) Plan. In 2017, we increased the Company match with respect to our 401(k) Plan. In general, for each
employee who contributes up to 4% of his or her eligible compensation, the Company will deposit a matching contribution of 100% of deferrals up to 4% of eligible compensation (subject to any maximum
applicable limits under the IRS regulations). We do not have any defined benefit plans or non-qualified deferred compensation plans.
As discussed in further detail below, we have entered into employment agreements with each of our named executive officers that, in addition to
other items, provide for certain severance and change in control payments. We believe that the existence of these potential benefits will discourage turnover and cause such executives to be better
able to respond to the possibility of a change in control
40
Table of Contents
without
being influenced by the potential effect of a change in control on their job security. The employment agreements with our named executive officers do not provide for tax gross-up payments.
Section 162(m).
The limitation on deductibility imposed by Section 162(m) is one
of the considerations we take into account in
designing our executive compensation programs. Under Section 162(m), we cannot deduct, for federal income tax purposes, compensation in excess of $1,000,000 paid to certain executive officers
for any one calendar year. Prior to the Tax Cuts and Jobs Act of 2017 (the Tax Act), this limitation on deductibility did not apply to certain "performance-based compensation" within the meaning of
Section 162(m) and the regulations promulgated thereunder. However, the Tax Act eliminated the "performance-based compensation" exemption for tax years beginning after December 31, 2017,
other than with respect to grandfathered amounts. In light of this change to Section 162(m), compensation that was previously intended to satisfy the "performance-based compensation" exemption
may not be fully deductible when paid after December 31, 2017. Additionally, the Tax Act significantly expanded the definition of "covered employees" under Section 162(m), such that
after December 31, 2017, all of our named executives officers (including our chief financial officer) will be subject to the limitation on deductibility under Section 162(m), and any
executive who is a covered employee will remain a covered employee for subsequent years, even after such executive's termination of employment.
41
Table of Contents
COMPENSATION COMMITTEE REPORT*
The Compensation Committee has reviewed and discussed the CD&A required by Item 402(b) of Regulation S-K with management and
based on the review and discussions with management of the CD&A, the Compensation Committee recommended to the Board that the CD&A be included in this Proxy Statement and incorporated by reference in
the Company's Annual Report.
THE COMPENSATION COMMITTEE
Alfred
F. Altomari, Chairman
David R. Brennan
Myrtle Potter
Melvin Sharoky, M.D.
-
*
-
The
foregoing report of the Compensation Committee is not to be deemed "soliciting material" or deemed to be "filed" with the SEC (irrespective of any general
incorporation language in any document filed with the SEC) or subject to Regulation 14A of the Exchange Act or to the liabilities of Section 18 of the Exchange Act, except to the extent
we specifically incorporate it by reference into a document filed with the SEC.
42
Table of Contents
Summary Compensation Table
The following table sets forth information regarding compensation earned by the named executive officers in 2017, 2016, and 2015.
To
improve readability, the following columns have been removed from the table as there is no reportable information with respect to these items: "Stock Awards," "Change in Pension
Value," and "Nonqualified Deferred Compensation Earnings."
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal Position
|
|
Year
|
|
Salary
|
|
Bonus(1)
|
|
Option
Awards(2)
|
|
Non-Equity
Incentive Plan
Compensation(3)
|
|
All Other
Compensation(4)
|
|
Total
|
William H. Lewis
|
|
2017
|
|
$566,500
|
|
|
|
$3,200,003
|
|
$577,830
|
|
$8,100
|
|
$4,352,433
|
President and
|
|
2016
|
|
$550,000
|
|
|
|
$3,595,226
|
|
$330,000
|
|
$7,950
|
|
$4,483,176
|
CEO
|
|
2015
|
|
$505,000
|
|
|
|
$2,379,360
|
|
$248,460
|
|
$7,950
|
|
$3,140,770
|
Paolo Tombesi(5)
|
|
2017
|
|
$253,750
|
|
$40,000
|
|
$1,300,046
|
|
$277,400
|
|
$12,087
|
|
$1,883,283
|
Chief Financial
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger Adsett(6)
|
|
2017
|
|
$436,450
|
|
|
|
$1,612,615
|
|
$281,600
|
|
$8,100
|
|
$2,338,765
|
Chief Commercial
|
|
2016
|
|
$114,115
|
|
$25,000
|
|
$1,282,154
|
|
$86,000
|
|
$3,583
|
|
$1,510,852
|
Officer
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Christine Pellizzari
|
|
2017
|
|
$415,340
|
|
|
|
$1,284,425
|
|
$270,000
|
|
$8,100
|
|
$1,977,865
|
Chief Legal Officer
|
|
2016
|
|
$394,613
|
|
|
|
$1,100,674
|
|
$169,700
|
|
$7,950
|
|
$1,672,937
|
|
|
2015
|
|
$365,382
|
|
|
|
$880,026
|
|
$132,000
|
|
$7,950
|
|
$1,385,358
|
Paul Streck(7)
|
|
2017
|
|
$244,920
|
|
$40,000
|
|
$1,099,996
|
|
$208,800
|
|
$684
|
|
$1,594,400
|
Chief Medical
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew T. Drechsler(8)
|
|
2017
|
|
$97,620
|
|
|
|
|
|
|
|
$3,905
|
|
$101,525
|
Former Chief
|
|
2016
|
|
$379,106
|
|
|
|
$1,100,674
|
|
$151,700
|
|
$7,950
|
|
$1,639,430
|
Financial Officer
|
|
2015
|
|
$351,024
|
|
|
|
$880,026
|
|
$119,700
|
|
$7,950
|
|
$1,358,700
|
-
(1)
-
Amounts
in this column represent cash bonus compensation paid to each executive officer as a sign-on bonus upon commencement of employment.
-
(2)
-
Amounts
in this column reflect grant date fair values of stock option awards granted during 2017, calculated in accordance with FASB ASC Topic 718, except the
assumptions of forfeitures is not made. See Note 8, "Stock-Based Compensation" of the consolidated financial statements in the Company's Form 10-K for the year ended December 31,
2017, regarding assumptions underlying valuation of all equity awards. The stock options granted expire ten years from the date of grant, and the exercise price equals the closing price of our Common
Stock on the date of grant.
-
(3)
-
Amounts
in this column represent annual cash incentive awards paid to each executive officer under our annual cash incentive program. For further information, see
"Components of CompensationAnnual Cash Incentives."
-
(4)
-
In
2015, we implemented a Company match with respect to our 401(k) plan. Amounts in this column partially represent contributions to each named executive officer's
account pursuant to such plan. In 2015, 2016 and 2017, Mr. Lewis and Ms. Pellizzari each received $7,950, $7,950, and $8,100, respectively, pursuant to our 401(k) plan. In 2016 and 2017,
Mr. Adsett received $3,583 and $8,100, respectively, pursuant to our 401(k) plan. In 2017, Mr. Tombesi received $7,200 pursuant to our 401(k) plan and an additional $4,887 as
reimbursement for legal fees in connection with his entry into an employment agreement with the Company. In 2017, Dr. Streck received $684 as reimbursement for legal fees in connection with his
entry into an employment agreement with the Company.
43
Table of Contents
-
(5)
-
Mr. Tombesi's
2017 salary covers the period from his date of hire on June 1, 2017 through December 31, 2017. Mr. Tombesi's annual salary
as of his hire date was $435,000.
-
(6)
-
Mr. Adsett's
2016 salary covers the period from his date of hire on September 27, 2016 through December 31, 2016. Mr. Adsett's annual
salary as of his hire date was $430,000.
-
(7)
-
Dr. Streck's
2017 salary covers the period from his date of hire on June 5, 2017 through December 31, 2017. Dr. Streck's annual salary as
of his hire date was $425,000. Dr. Streck's 2017 non-equity incentive plan compensation reflects a prorated amount for nine months pursuant to his employment agreement.
-
(8)
-
Mr. Drechsler's
2017 salary covers the period from January 1, 2017 through his departure date of March 31, 2017. Mr. Drechsler's approved
annual salary for 2017 was $390,480.
2017 Grants of Plan-Based Awards
The following table sets forth certain information regarding the annual cash incentive awards and stock option grants made to our named
executive officers during the year ended December 31, 2017. No other plan-based awards were granted to any of our named executive officers during 2017. Mr. Drechsler was not eligible to
receive annual cash incentive awards or stock option grants in 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Future
Payouts
Under Equity
Incentive
Plan
|
|
All Other
Stock
Awards:
Number of
Shares of
Restricted
Stock
Units
(RSUs)
(#)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(2)
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under
Non-Equity
Incentive Plan Awards(1)
|
|
Exercise or
Base
Price of
Option
Awards
($/Sh)
|
|
Grant Date
Fair Value
of Stock
and Option
Awards
($)(3)
|
Name
|
|
Grant Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Target (#)
|
William H. Lewis
|
|
|
|
|
|
$339,900
|
|
$679,800
|
|
|
|
|
|
|
|
|
|
|
|
|
1/5/2017
|
|
|
|
|
|
|
|
|
|
|
|
175,530
|
|
$13.67
|
|
$1,600,026
|
|
|
5/17/2017
|
|
|
|
|
|
|
|
|
|
|
|
142,080
|
|
$17.16
|
|
$1,599,977
|
Paolo Tombesi
|
|
|
|
$10,875
|
|
$174,000
|
|
$326,250
|
|
|
|
|
|
|
|
|
|
|
|
|
6/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
127,160
|
|
$15.60
|
|
$1,300,046
|
Roger Adsett
|
|
|
|
$10,911
|
|
$174,580
|
|
$327,338
|
|
|
|
|
|
|
|
|
|
|
|
|
1/5/2017
|
|
|
|
|
|
|
|
|
|
|
|
82,280
|
|
$13.67
|
|
$750,015
|
|
|
5/17/2017
|
|
|
|
|
|
|
|
|
|
|
|
76,600
|
|
$17.16
|
|
$862,600
|
Christine Pellizzari
|
|
|
|
$10,384
|
|
$166,136
|
|
$311,505
|
|
|
|
|
|
|
|
|
|
|
|
|
1/5/2017
|
|
|
|
|
|
|
|
|
|
|
|
65,820
|
|
$13.67
|
|
$599,975
|
|
|
5/17/2017
|
|
|
|
|
|
|
|
|
|
|
|
60,780
|
|
$17.16
|
|
$684,450
|
Paul Streck.
|
|
|
|
$10,625
|
|
$170,000
|
|
$318,750
|
|
|
|
|
|
|
|
|
|
|
|
|
6/5/2017
|
|
|
|
|
|
|
|
|
|
|
|
109,210
|
|
$15.38
|
|
$1,099,996
|
Andrew T. Drechsler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Constitutes
threshold, target and maximum award opportunities for our named executive officers under our annual cash incentive program. See "Compensation Discussion
and AnalysisComponents of CompensationAnnual Cash Incentives" for information regarding the criteria applied in determining the amounts payable under the awards. The actual
amounts paid with respect to these awards are included in the "Non-Equity Incentive Plan Compensation" column in the Summary Compensation Table.
-
(2)
-
The
amounts shown in this column reflect stock options granted to our named executive officers pursuant to our 2015 and 2017 Incentive Plans. The vesting schedule
for these grants is as follows: 25% on the first anniversary of the date of grant and 12.5% of the shares vesting on each six-month anniversary thereafter until the fourth anniversary of the date of
grant.
-
(3)
-
Reflects
grant date fair values of stock option awards granted during the applicable year, calculated in accordance with FASB ASC Topic 718, except the assumption of
forfeitures is not made. See Note 8 of the consolidated financial statements in the Company's Form 10-K for year ended 2017 regarding assumptions underlying valuation of all equity
awards.
44
Table of Contents
Narrative Disclosure to Summary Compensation Table and 2017 Grants of Plan-Based Awards Table
Our employment agreements for our named executive officers and other officers generally provide for no fixed termination or other expiration
dates. See "Potential Payments Upon Termination or Change in Control" for information regarding the terms of these agreements that would be relevant in the event of the executive's termination or upon
a change in control.
William H. Lewis.
On September 10, 2012, we entered into an employment agreement with
Mr. Lewis under which he is entitled to an
annual base salary, a target annual bonus opportunity equal to 50% of his base salary and participation in Company benefit plans generally provided to the Company's executive personnel, including
participation in any equity incentive plans maintained by the Company. For 2017, Mr. Lewis's base salary was increased to $566,500 and his target bonus percentage remained consistent with the
prior year at 60%.
Paolo Tombesi.
On June 1, 2017, we entered into an employment agreement with Mr. Tombesi
under which he is entitled to an annual base
salary, a target annual bonus opportunity equal to 40% of his base salary and participation in Company benefit plans generally provided to the Company's executive personnel, including participation in
any equity incentive plans maintained by the Company. For 2017, Mr. Tombesi's initial base salary was at an annual rate of $435,000. He also received a sign-on bonus of $40,000 upon the
completion of 30 days of employment
Roger Adsett.
On September 27, 2016, we entered into an employment agreement with
Mr. Adsett under which he is entitled to an annual
base salary, a target annual bonus opportunity equal to 40% of his base salary and participation in Company benefit plans generally provided to the Company's executive personnel, including
participation in any equity incentive plans maintained by the Company. For 2017, Mr. Adsett's base salary was increased to $436,450 and his target bonus percentage remained consistent with the
prior year at 40%.
Christine Pellizzari.
On July 29, 2013, we entered into an employment agreement with
Ms. Pellizzari under which she is entitled to an
annual base salary, a target annual bonus opportunity equal to 40% of her base salary and participation in Company benefit plans generally provided to the Company's executive personnel, including
participation in any equity incentive plans maintained by the Company. On September 26, 2016, we entered into an amended employment agreement with Ms. Pellizzari to revise
certain terms of her employment agreement related to severance, as described in more detail below. For 2017, Ms. Pellizzari's base salary was increased to $415,340 and her target bonus remained
consistent with the prior year at 40%.
Paul Streck.
On June 5, 2017, we entered into an employment agreement with Dr. Streck
under which he is entitled to an annual base
salary, a target annual bonus opportunity equal to 40% of his base salary and participation in Company benefit plans generally provided to the Company's executive personnel, including participation in
any equity incentive plans maintained by the Company. For 2017, Dr. Streck's initial base salary was at an annual rate of $425,000. Dr. Streck also received a sign-on bonus of $40,000
upon the completion of 30 days of employment. We further agreed to reimburse Dr. Streck for certain other fees and expenses incurred by him in connection with entering into the
employment agreement and joining the Company, up to a maximum of $50,000.
Andrew T. Drechsler.
On November 7, 2012, we entered into an employment agreement with
Mr. Drechsler under which he was entitled to an
annual base salary, a target annual bonus opportunity equal to 30% of his base salary and participation in Company benefit plans generally provided to the Company's executive personnel, including
participation in any equity incentive plans maintained by the Company. For 2017, Mr. Drechsler's base salary was increased to $390,480. Mr. Drechsler announced his resignation in
November 2016 and left the Company in March 2017, and was not eligible for an annual bonus.
45
Table of Contents
Outstanding Equity Awards at 2017 Year End
The following table sets forth certain information regarding the stock options held by each of our named executive officers as of
December 31, 2017. None of our named executive officers held unvested RSUs as of December 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock
That Have
Not Vested
(#)
|
|
Market
Value of
Shares or
Units of
Stock
That Have
Not Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
|
William H. Lewis
|
|
708,314
|
|
|
|
|
|
$3.40
|
|
09/10/2022(1)
|
|
|
|
|
|
|
|
|
|
|
186,170
|
|
|
|
|
|
$4.55
|
|
09/28/2022(1)
|
|
|
|
|
|
|
|
|
|
|
83,334
|
|
|
|
|
|
$12.44
|
|
05/23/2023(1)
|
|
|
|
|
|
|
|
|
|
|
83,333
|
|
83,333
|
|
|
|
$12.44
|
|
05/23/2023(2)
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
|
|
$14.24
|
|
10/31/2023(1)
|
|
|
|
|
|
|
|
|
|
|
43,750
|
|
6,250
|
|
|
|
$20.49
|
|
01/10/2024(1)
|
|
|
|
|
|
|
|
|
|
|
43,750
|
|
6,250
|
|
|
|
$12.58
|
|
06/02/2024(1)
|
|
|
|
|
|
|
|
|
|
|
93,750
|
|
56,250
|
|
|
|
$22.76
|
|
05/21/2025(1)
|
|
|
|
|
|
|
|
|
|
|
61,125
|
|
101,875
|
|
|
|
$16.16
|
|
01/07/2026(1)
|
|
|
|
|
|
|
|
|
|
|
92,231
|
|
153,719
|
|
|
|
$10.85
|
|
05/19/2026(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
175,530
|
|
|
|
$13.67
|
|
01/05/2027(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
142,080
|
|
|
|
$17.16
|
|
05/17/2027(1)
|
|
|
|
|
|
|
|
|
Paolo Tombesi
|
|
|
|
127,160
|
|
|
|
$15.60
|
|
06/01/2027(1)
|
|
|
|
|
|
|
|
|
Roger Adsett
|
|
22,015
|
|
66,045
|
|
|
|
$14.56
|
|
10/03/2026(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
82,280
|
|
|
|
$13.67
|
|
01/05/2027(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
76,600
|
|
|
|
$17.16
|
|
05/17/2027(1)
|
|
|
|
|
|
|
|
|
Christine Pellizzari
|
|
150,000
|
|
|
|
|
|
$11.14
|
|
07/30/2023(1)
|
|
|
|
|
|
|
|
|
|
|
26,250
|
|
3,750
|
|
|
|
$20.49
|
|
01/10/2024(1)
|
|
|
|
|
|
|
|
|
|
|
26,250
|
|
3,750
|
|
|
|
$12.58
|
|
06/02/2024(1)
|
|
|
|
|
|
|
|
|
|
|
9,375
|
|
5,625
|
|
|
|
$16.07
|
|
01/07/2025(1)
|
|
|
|
|
|
|
|
|
|
|
28,125
|
|
16,875
|
|
|
|
$22.76
|
|
05/21/2025(1)
|
|
|
|
|
|
|
|
|
|
|
18,750
|
|
31,250
|
|
|
|
$16.16
|
|
01/07/2026(1)
|
|
|
|
|
|
|
|
|
|
|
28,181
|
|
46,969
|
|
|
|
$10.85
|
|
05/19/2026(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
65,820
|
|
|
|
$13.67
|
|
01/05/2027(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
60,780
|
|
|
|
$17.16
|
|
05/17/2027(1)
|
|
|
|
|
|
|
|
|
Paul Streck
|
|
|
|
109,210
|
|
|
|
$15.38
|
|
06/05/2027(1)
|
|
|
|
|
|
|
|
|
Andrew T. Drechsler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
These
stock options have a vesting schedule of 25% on the first anniversary of the date of grant and 12.5% on each six-month anniversary thereafter until the fourth
anniversary of the date of grant.
-
(2)
-
Vesting
for this performance based option grant is as follows: exercisable with respect to one half of the shares subject to the option upon receipt of the first
written acceptance of an NDA or marketing authorization application (MAA) filing from the FDA or EMA, as applicable; and with respect to the remaining one half of the shares subject to the option upon
receipt of the first written approval of an NDA or MAA from the FDA or EMA. One-half of these options vested on February 26, 2015.
46
Table of Contents
Option Exercises and Stock Vested During 2017
During the fiscal year ended December 31, 2017, none of the named executive officers acquired shares upon exercise of stock options or
vesting of stock awards.
Potential Payments Upon Termination or Change in Control
Our named executive officers are entitled to payments and other benefits under their employment agreements in connection with their termination
under certain circumstances. We believe that the existence of these potential benefits will discourage turnover and cause such executives to be better able to respond to the possibility of a change in
control without being influenced by the potential effect of a change in control on their job security.
If
Mr. Lewis's employment is terminated by us without cause or by Mr. Lewis for good reason within twelve months after a change in control of the Company, Mr. Lewis
will receive payment of accrued obligations, a lump sum severance payment equal to two times the sum of his then annual base salary and target bonus, a pro-rata portion of his annual target bonus
based on actual performance for the year of termination, full vesting of all time-based vesting equity awards, and continuation for up to eighteen months of health benefits provided he elects
continued coverage under COBRA. Should Mr. Lewis's employment be terminated by us without cause or by Mr. Lewis for good reason prior to the date of a change in control or more than one
year after a change in control, he would be entitled to receive all of the foregoing benefits provided that his severance payment would instead be limited to one times his then annual base salary
(payable over a twelve month period) and target bonus for the year of termination and his accelerated vesting would be limited to full vesting of all time-based equity awards granted at least one year
prior to his termination date. Should Mr. Lewis's employment be terminated due to his death or disability, Mr. Lewis or his estate would receive payment of accrued obligations, a
pro-rata portion of his annual target bonus based on actual performance for the year of termination, and any insurance benefits to which he and his beneficiaries were entitled as a result of his death
or disability.
If
Mr. Tombesi's, Mr. Adsett's, Ms. Pellizzari's or Dr. Streck's employment is terminated by us without cause or by the departing executive for good reason
within one year after a change in control of the Company, the departing executive will receive payment of accrued obligations, a lump sum severance payment equal to the sum of his or her then annual
base salary, a pro-rata portion of his or her annual target bonus based on actual performance for the year of termination, full vesting of all time-based equity awards, and a continuation of up to one
year of health benefits provided he or she elects continued coverage under COBRA. Should Mr. Tombesi's, Mr. Adsett's, Ms. Pellizzari's or Dr. Streck's employment be
terminated by us without cause or by the departing executive for good reason prior to the date of a change in control or more than one year after a change in control, the departing executive would be
entitled to receive all of the foregoing benefits provided that his or her severance payment would instead be payable over a twelve month period and his or her equity award vesting would be limited to
accelerated vesting of stock options that would otherwise have vested within 12 months following his or her termination date. Should the departing executive's employment be terminated due to
his or her death or disability, the executive or his or her estate would receive payment of accrued obligations, a pro-rata portion of his or her annual target bonus based on actual performance for
the year of termination, and any insurance benefits to which he or she and his or her beneficiaries were entitled as a result of his or her death or disability.
47
Table of Contents
For
purposes of the employment agreements, the term "cause" generally includes:
-
(a)
-
a
conviction of the executive, or a plea of nolo contendere, to a felony involving moral turpitude;
-
(b)
-
willful
misconduct or gross negligence by the executive resulting, in either case, in material economic harm to the Company or any related entities;
-
(c)
-
a
willful failure by the executive to carry out the reasonable and lawful directions of the Board and failure by the executive to remedy such willful failure within
30 days after receipt of written notice of same, by the Board;
-
(d)
-
fraud,
embezzlement, theft or dishonesty of a material nature by the executive against the Company or any related entity, or a willful material violation by the
executive of a policy or procedure of the Company or any related entity, resulting, in any case, in material economic harm to the Company or any related entity; or
-
(e)
-
a
willful material breach by the executive of his or her employment agreement and failure by the executive to remedy the material breach within 30 days after
receipt of written notice thereof from the Board.
For
purposes of the employment agreements, the term "good reason" generally includes:
-
(a)
-
a
material diminution in the executive's base compensation;
-
(b)
-
a
material diminution in the executive's authority, duties, or responsibilities;
-
(c)
-
a
material diminution in the authority, duties, or responsibilities of the supervisor to whom the executive is required to report;
-
(d)
-
the
Company's or related entity's requiring the executive to be based at any office or location outside of 50 miles from the location of employment or service as of
the effective date of his or her employment agreement, except for travel reasonably required in the performance of the executive's responsibilities; or
-
(e)
-
any
other action or inaction that constitutes a material breach by the Company of the executive's employment agreement.
For
purposes of the employment agreements, the term "change in control" generally includes:
-
(a)
-
the
acquisition by another person of beneficial ownership of 40% or more of our Common Stock;
-
(b)
-
a
proxy contest that results in the replacement of a majority of the members of our Board;
-
(c)
-
a
merger after which our shareholders own less than 60% of the surviving corporation's stock; or
-
(d)
-
approval
by our shareholders of a complete liquidation or dissolution of our Company.
48
Table of Contents
To
protect our business and goodwill, for a period of twelve months after the termination of an executive's employment with us, each executive has agreed that he or she will
not:
-
1.
-
engage
in any activity in material competition with the business in which we engaged while the executive was employed by us;
-
2.
-
directly
or indirectly recruit or solicit any person who is then our employee or was our employee at any time within six months prior to such solicitation; or
-
3.
-
solicit,
divert or take away, or attempt to divert or to take away, the business or patronage of any of our clients or customers, or prospective clients or
customers.
The
severance benefits that executives may be entitled to receive under these agreements and other benefits that the executives are entitled to receive under other plans may constitute
parachute payments that are subject to the "golden parachute" rules of Section 280G of the Code and the excise tax of Code Section 4999. If these payments are determined to be parachute
payments, as calculated by our independent registered public accounting firm, the parachute payments will be reduced if, and only to the extent that, a reduction will allow the executives to receive a
greater net after tax amount than the executives would receive absent a reduction. All severance benefits are also subject to the execution and non-revocation of a general release of claims against
the Company.
Mr. Drechsler
resigned as our chief financial officer in November 2016, and his employment with the Company ended on March 31, 2017. Mr. Drechsler did not receive
any compensation from the Company as a result of his resignation.
The
table below summarizes the hypothetical payments that could have been incurred by us with respect to each of our remaining named executive officers assuming that a qualified
termination under the applicable agreement had occurred on December 31, 2017 as a result of termination without cause or for good reason during the one-year period immediately following a
change in control.
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Severance(1)
|
|
Pro-Rata
Bonus(2)
|
|
Benefits
|
|
Value of
Accelerated
Equity(3)
|
|
Total
|
William H. Lewis
|
|
$1,812,800
|
|
$339,900
|
|
$38,075
|
|
$10,377,449
|
|
$12,568,224
|
Paolo Tombesi
|
|
$435,000
|
|
$174,000
|
|
$30,808
|
|
$1,981,153
|
|
$2,620,961
|
Roger Adsett(4)
|
|
$436,450
|
|
$174,580
|
|
$84
|
|
$3,612,323
|
|
$4,223,437
|
Christine Pellizzari
|
|
$415,340
|
|
$166,136
|
|
$25,383
|
|
$3,765,817
|
|
$4,372,676
|
Paul Streck
|
|
$425,000
|
|
$170,000
|
|
$25,383
|
|
$1,725,518
|
|
$2,345,901
|
-
(1)
-
These
payments and other benefits would be payable to the executive upon a qualified termination under the applicable agreement. The cash severance figure for
Mr. Lewis includes salary for two years plus the target bonus for two years. The cash severance figures for Mr. Tombesi, Mr. Adsett, Ms. Pellizzari and Dr. Streck
includes salary for one year.
-
(2)
-
The
value used in the table assumes the full target bonus for the year.
-
(3)
-
The
value represents the acceleration of all time-based equity awards outstanding as of December 31, 2017. Values shown are equal to the number of stock
options multiplied by the difference between the $31.18 closing price of our Common Stock on December 29, 2017, as reported by Nasdaq Global Select Market, and the exercise price of the
options.
49
Table of Contents
-
(4)
-
For
Mr. Adsett, the value of benefits does not include medical or dental benefits as Mr. Adsett is not a participant in the Company-paid medical and
dental insurance programs and would not be eligible to elect COBRA coverage upon a qualified termination.
The
following table summarizes the hypothetical payments that could have been incurred by us with respect to each of the named executive officers below assuming that a qualified
termination under the applicable agreement had occurred on December 31, 2017 as a result of termination without cause or for good reason prior to the date of a change in control or following
the one-year period after a change in control.
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Severance(1)
|
|
Pro-Rata
Bonus(2)
|
|
Benefits
|
|
Value of
Accelerated
Equity(3)
|
|
Total
|
William H. Lewis
|
|
$906,400
|
|
$339,900
|
|
$38,075
|
|
$5,311,957
|
|
$6,596,332
|
Paolo Tombesi
|
|
$435,000
|
|
$174,000
|
|
$30,808
|
|
$742,932
|
|
$1,382,740
|
Roger Adsett(4)
|
|
$436,450
|
|
$174,580
|
|
$84
|
|
$1,308,885
|
|
$1,919,999
|
Christine Pellizzari
|
|
$415,340
|
|
$166,136
|
|
$25,383
|
|
$1,582,666
|
|
$2,189,525
|
Paul Streck
|
|
$425,000
|
|
$170,000
|
|
$25,383
|
|
$647,069
|
|
$1,267,452
|
-
(1)
-
These
payments and other benefits would be payable to the executive upon a qualified termination under the applicable agreement. The cash severance figure for
Mr. Lewis consists of salary for one year plus target bonus for one year, while the figures for Mr. Tombesi, Mr. Adsett, Ms. Pellizzari and Dr. Streck consist of
their respective base salaries for one year.
-
(2)
-
The
value used in the table assumes the full target bonus for the year.
-
(3)
-
For
Mr. Lewis, the value represents the acceleration of all time-based vesting equity outstanding as of December 31, 2017 granted at least one year
prior to the termination date. For Mr. Tombesi, Mr. Adsett, Ms. Pellizzari and Dr. Streck, the value represents accelerated vesting of stock options that would have
otherwise vested within 12 months following the termination date. Values shown are equal to the number of stock options multiplied by the difference between the $31.18 closing price of our
Common Stock on December 29, 2017, as reported by Nasdaq Global Select Market, and the exercise price of the options.
-
(4)
-
For
Mr. Adsett, the value of benefits does not include medical or dental benefits as Mr. Adsett is not a participant in the Company-paid medical and
dental insurance programs and would not be eligible to elect COBRA coverage upon a qualified termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised entirely of independent directors, and none of our executive officers served on the Compensation
Committee or on the board of any company that employed any member of our Compensation Committee or our Board during the year ended December 31, 2017.
DODD-FRANK MANDATED CEO PAY RATIO
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of
Regulation S-K, we are providing the following information about the relationship of the median annual total compensation of our employees and the annual total
50
Table of Contents
compensation
of Mr. Lewis, our President and CEO. The pay ratio included in this section is calculated in a manner consistent with Item 402(u) of Regulation S-K.
For
2017, our last completed fiscal year:
-
-
the median of the annual total compensation of all employees of our company (other than Mr. Lewis) was $235,733; and
-
-
the annual total compensation of Mr. Lewis, as reported in the Summary Compensation Table, is $4,352,433.
Based
on this information, for 2017, the ratio of the median of the annual total compensation of all employees (other than Mr. Lewis) to the annual total compensation of
Mr. Lewis was 1 to 18.46.
To
identify the median of the annual total compensation of all of our employees (other than Mr. Lewis), as well as to determine the annual total compensation of our median
employee, we took the following steps:
-
1.
-
We
determined that, as of December 31, 2017, our employee population, excluding Mr. Lewis, consisted of approximately 215 individuals working either at
Insmed Incorporated or one of our global consolidated subsidiaries. This population consisted of our full-time, part-time and temporary employees and, as permitted by SEC rules, excluded independent
contractors or similar non-employee workers during 2017. We did not exclude any non-U.S. employees from these calculations.
-
2.
-
To
identify the "median employee" from our employee population, we compared the sum of each employee's wages, aggregate fair value of option awards and target cash
bonus for 2017. In doing so, we annualized the compensation of all permanent employees who were hired in 2017 but did not work for us the entire fiscal year. The fair value of option awards granted
during 2017 was calculated using the Black-Scholes valuation model pursuant to the assumptions described in Note 8 of the consolidated financial statements included in our Annual Report. We did
not make any cost-of-living adjustments in identifying the median employee. Our determination of the median employee yielded two median employees because our employee population consisted of an even
number of employees.
-
3.
-
After
identifying the two median employees as described above, we calculated annual total compensation for each such employee using the same methodology we use for
our named executive officers, as set forth in the Summary Compensation Table, and selected the employee with the lower annual total compensation to compute the ratio. This process resulted in a median
employee with annual total compensation of $235,733 for 2017.
The
SEC's rules for identifying the median compensated employee and calculating the pay ratio based on that employee's annual total compensation allow companies to adopt a variety of
methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by
other companies may not be comparable to our pay ratio, reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies,
exclusions, estimates and assumptions in calculating their own pay ratios.
51
Table of Contents
DIRECTOR COMPENSATION
Our Board determines the compensation of our non-employee directors based in part on recommendations made by the Compensation Committee. The
Compensation Committee evaluates the appropriate level and form of compensation for non-employee directors at least annually and recommends changes to our Board when appropriate. Our Board is
currently compensated through a combination of fees, in the form of cash retainers, and equity awards, in the form of RSUs. Our approach to Board compensation is intended to align our non-employee
director compensation practices with the interests of our shareholders. For example, we have share ownership guidelines in place for our non-employee directors, with a target share ownership of three
times the amount of each director's annual retainer that should be achieved within five years after the adoption of the guidelines or first appointment to the Board, whichever is later. As of the
Record Date, all of our non-employee directors who had been on the Board for at least five years held shares exceeding the share ownership guidelines. Mr. Lewis is a director and an executive
officer of the Company. He receives no additional compensation for serving on the Board. Our share ownership guidelines for Mr. Lewis are described under "Compensation Discussion and
AnalysisCorporate Governance Perspectives on our Executive Compensation Program" above. No other director is an employee of the Company.
Fees Earned or Paid in Cash
Our non-employee directors are paid quarterly retainer fees for their service on the Board. Our non-employee directors are not compensated for
attending individual meetings of the Board on a per-meeting basis. During 2017, each non-employee director was paid retainer fees totaling $40,000 annually, except for Mr. Hayden who, as the
Chairman of the Board, was paid retainer fees totaling $80,000 annually. The Chairman of the Nominations and Governance Committee was paid an additional annual fee of $10,000. The Chairman of the
Compensation Committee was paid an additional annual fee of $15,000. The Chairman of the Audit Committee was paid an additional annual fee of $20,000. Annual retainer fees for non-chair committee
members were paid as follows: members of the Nominations and Governance Committee, $5,000; members of the Compensation Committee, $7,000; and members of the Audit Committee, $10,000. Retainers are
paid on a quarterly basis.
Grant of Restricted Stock Units
During 2017, each non-employee director received an annual equity-based grant with a grant date value of approximately $115,000 in the form of
RSUs. The RSUs vest on the first anniversary of the date of the award, provided that the director attends at least 75% of the meetings of the Board during the year in which the award is made.
Other
We reimburse all of our directors for expenses incurred in connection with their attendance at Board or committee meetings. We also provide
director and officer insurance for all directors.
The
following table sets forth a summary of the compensation we paid to our non-employee directors in 2017.
52
Table of Contents
To
improve readability, only the columns "Fees Earned or Paid in Cash," "Stock Awards," and "Total" have been included in the table, all other columns have been removed as there is no
reportable information with respect to those compensation items.
|
|
|
|
|
|
|
Name
|
|
Fees Earned
or Paid
in Cash
|
|
Stock Awards(1)(2)(3)
|
|
Total
|
Alfred F. Altomari
|
|
$65,000
|
|
$115,000
|
|
$180,000
|
David R. Brennan
|
|
$47,000
|
|
$115,000
|
|
$162,000
|
Steinar J. Engelsen, M.D.
|
|
$60,000
|
|
$115,000
|
|
$175,000
|
Donald J. Hayden Jr.
|
|
$85,000
|
|
$115,000
|
|
$200,000
|
David W.J. McGirr
|
|
$60,000
|
|
$115,000
|
|
$175,000
|
Myrtle Potter
|
|
$47,000
|
|
$115,000
|
|
$162,000
|
Melvin Sharoky, M.D.
|
|
$52,000
|
|
$115,000
|
|
$167,000
|
-
(1)
-
Amounts
in this column reflect grant date fair values of stock awards granted during 2017, calculated in accordance with FASB ASC Topic 718, except the assumption of
forfeitures is not made.
-
(2)
-
Each
director received a grant of 6,702 RSUs in May 2017. As of December 31, 2017, each of our directors held 6,702 unvested RSUs.
-
(3)
-
No
option awards were granted to our directors in 2017. As of December 31, 2017, Mr. Hayden held 25,000 outstanding stock options. None of our other
non-employee directors held options as of that date.
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Table of Contents
PROPOSAL NO. 3
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Information Relative to Ratification of the Appointment of Independent Registered Public Accounting Firm
The Audit Committee has appointed Ernst & Young as our independent registered public accounting firm for the year ending
December 31, 2018. Shareholder ratification of the appointment of our independent registered public accounting firm is not required under Virginia law, our Articles of Incorporation or our
Bylaws. However, the Board is submitting the appointment of Ernst & Young to our shareholders for ratification as a matter of good corporate governance. A representative of Ernst & Young
is expected to be present at the Annual Meeting and will have an opportunity to make a statement and respond to appropriate questions.
The
principal function of Ernst & Young is to audit our consolidated financial statements and attest on the effectiveness of our internal control over financial reporting and, in
connection with these audits, to review certain related filings submitted to the SEC and to conduct limited reviews of the consolidated financial statements included in each of our quarterly reports.
The aggregate fees billed for each of the last two years for professional services rendered by Ernst & Young, as well as information relating to the Audit Committee's pre-approval policies and
procedures, are detailed in the "Audit Committee Report and Independent Auditor Fees."
Vote Required for Approval of Proposal
Ratification of the appointment of Ernst & Young as the Company's independent registered public accounting firm for the year ending
December 31, 2018 requires the affirmative vote of a majority of the votes properly cast, in person or by proxy, at the Annual Meeting. Abstentions are not considered votes cast and, therefore,
will have no effect on the voting outcome. If your shares are held in street name, your broker or agent has discretionary authority to vote shares held through it in the absence of your instruction
regarding how your shares should be voted.
In
the event that this proposal is not approved, the Audit Committee plans to consider the vote and the reasons therefore in future decisions on the selection of our independent
registered public accounting firm. Even if the appointment is ratified, the Audit Committee may engage different independent auditors at any time during the year if it determines that such a change
would be in our best interests and those of our shareholders.
Recommendation
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2018.
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Table of Contents
PROPOSAL NO. 4
APPROVAL OF THE 2018 EMPLOYEE STOCK PURCHASE PLAN
We
are requesting that shareholders vote to approve the ESPP, which our Board of Directors approved on April 4, 2018. Subject to shareholder approval, (i) one million (1,000,000) shares
of Common Stock
plus
(ii) commencing on January 1, 2019 and ending on December 31, 2023, an additional number of shares to be added
on the first day of each calendar year equal to the lesser of (A) 1,200,000 shares of Common Stock, (B) 2% of the number of outstanding shares of Common Stock on such date and
(C) an amount determined by the administrator, have been reserved for issuance under the ESPP. The ESPP is intended to qualify as an "employee stock purchase plan" under Section 423 of
the Code. The purpose of the ESPP is to provide eligible employees with opportunities to purchase shares of Common Stock
through payroll deductions at a discounted price. If the ESPP is not approved by shareholders within 12 months following the Board approval date, the ESPP will automatically terminate.
Summary of Material Features of the ESPP
The
following is a brief summary of the material features of the ESPP. This summary is qualified in its entirety by reference to the full text of the ESPP, a copy of which is attached as
Appendix A
. You are urged to read the text of the ESPP in its entirety.
Purpose.
The purpose of the ESPP is to advance the interests of the Company and its shareholders by providing eligible employees of the Company and its
designated subsidiaries with opportunities to purchase Common Stock at a discounted price through payroll deductions. The ESPP is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Code.
Administration.
The ESPP is administered by the Company's compensation committee, or in the absence of such committee, the Board itself. The
administrator has the authority to take all necessary or appropriate actions in connection with the administration of the ESPP, including the adoption of rules or procedures for the ESPP to
accommodate the specific requirements of local laws.
Share Pool.
The maximum number of shares of Common Stock reserved for issuance under the ESPP is equal to the sum of (i) one million (1,000,000)
shares of Common Stock
plus
(ii) commencing on January 1, 2019 and ending on December 31, 2023, an additional number of shares to
be added on the first day of each calendar year equal to the lesser of (A) 1,200,000 shares of Common Stock, (B) 2% of the number of outstanding shares of Common Stock on such date and
(C) an amount determined by the administrator. Shares of Common Stock issued under the ESPP may be shares that are authorized and unissued or shares that were reacquired by the Company,
including shares purchased in the open market. The administrator has the authority to equitably adjust the number and kind of shares of Common Stock reserved for issuance under the ESPP, as well as
the number of shares and the exercise price applicable to outstanding options granted under the ESPP, in the event of certain changes to the Company's capitalization.
Eligibility and Participation.
Employees of the Company and its designated subsidiaries may generally elect to participate in the ESPP by submitting a
participation form authorizing payroll deductions to the Company in accordance with the instructions in such participation form. In order for the participation form to be effective for a particular
offering period, the participation form must be
submitted to the Company on or before the 15th day of the month immediately preceding the month in which the offering period begins.If the ESPP is approved by the Company's shareholders,
approximately 313 employees as of March 23, 2018 would have been eligible to participate in the ESPP.
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Table of Contents
Payroll Deductions.
A participant may elect to have payroll deductions withheld from his or her eligible compensation on each payroll date during his or
her participation in the ESPP in amounts equal to or greater than one percent (1%) but not in excess of fifteen percent (15%) of eligible compensation received on each such payroll date during the
offering period, subject to the provisions of the plan. Participants may increase or decrease the amount of payroll deductions for a subsequent offering period by filing an amended participation form
with the Company. In order for the amended participation form to be effective for a subsequent offering period, such amended participation form must be submitted to the Company on or before the
15th day of the month immediately preceding the month in which such subsequent offering period begins. Payroll deductions may be made only in whole percentages. Payroll deductions will be
credited to an account established under the ESPP for the participant. No separate cash contributions may be made to such account. No interest will accrue on any payroll deductions held under the
ESPP.
Restriction on Participation.
No participant may be granted an option to purchase shares of Common Stock under the ESPP if: (i) immediately after
such grant, the participant (or any other person whose stock ownership would be attributed to such participant pursuant to Section 424(d) of the Code) would own shares of stock (including any
shares of stock that the participant may purchase under outstanding options) possessing 5% or more of the total combined voting power or value of all classes of shares of the Company or any of its
subsidiaries; or (ii) the participant's rights to purchase shares of Common Stock under all "employee stock purchase plans" (within the meaning of Section 423 of the Code) of the Company
and its subsidiaries would accrue at a rate which exceeds $25,000 of the fair market value of such shares (determined at the time the option is granted) for each calendar year in which the option is
outstanding at any time.
Withdrawal and Termination of Employment.
Participants may withdraw from participating in the ESPP at any time by submitting a withdrawal notice on or
before the 15th day of the month in which the offering period ends. All payroll deductions for a participant will immediately cease upon the participant's withdrawal from the ESPP. Payroll
deductions that have accrued for the participant prior to withdrawal shall not be refunded and shall instead continue to be applied towards the purchase of shares at the end of the offering period in
which such withdrawal occurs. A withdrawing employee may participate in a subsequent offering period if the employee continues to meet the eligibility requirements and submits a valid participation
form to the Company in accordance with the instructions in such participation form. Generally, in the event of a participant's termination of employment, all payroll deductions and rights to purchase
shares of Common Stock granted to the participant will immediately cease, and the amount of any accumulated payroll deductions will be refunded to the participant. A transfer of employment between the
Company and a designated
subsidiary or between one designated subsidiary and another designated subsidiary, or certain leaves of absence, are not considered a termination of employment for purposes of the ESPP.
Offering Period.
Each offering period under the ESPP will be of a duration not to exceed 12 months, as determined by the administrator before the
start of the applicable offering period. Until the administrator determines otherwise, there will be two six-month offering periods under the ESPP each calendar year, one commencing on
January 1 and ending on June 30, and the other commencing on July 1 and ending on December 31. During the offering period, the Company will withhold via payroll deduction
the amount elected by the participant for purposes of purchasing Common Stock at the end of the offering period. The initial offering period under the ESPP will run from July 1, 2018 to
December 31, 2018. However, no offering period under the ESPP will begin until shareholder approval for the ESPP is obtained.
Grant and Exercise of Option.
Participants will be granted an option to purchase Common Stock on the first business day of each offering period, with
such option to be automatically exercised on the last
56
Table of Contents
business
day of such offering period to purchase a whole number of shares of Common Stock determined by dividing the accumulated payroll deductions in the participant's account on such exercise date
by the applicable exercise price. The exercise price is equal to 85% of the fair market value of a share of Common Stock on the first business day of the offering period or the last business day of
the offering period, whichever is lower.
Corporate Transactions.
In the event of a proposed liquidation or dissolution of the Company, the administrator has the authority to decide whether to
(i) shorten the offering period then in effect, with any outstanding options to be exercised at the end of such shortened period, or (ii) terminate the offering period then in effect,
with any payroll deductions accumulated for such period to be refunded to participants. In the event of a proposed sale of all or substantially all of the Company's assets, or a merger or
consolidation of the Company (except for (x) a transaction the primary purpose of which is to change the Company's jurisdiction of incorporation or (y) a transaction where the acquiring
or surviving company is directly or indirectly owned, immediately after such transaction, by the shareholders of the Company in substantially the same proportion as their ownership of stock in the
Company immediately before such transaction), the administrator may, in its discretion, provide for outstanding options to be assumed or substituted by the successor entity (or its parent or
subsidiary) or to take one of the courses of action described in sub-clauses (i) and (ii) in the preceding sentence.
Amendment or Termination.
The ESPP may be amended or terminated at any time by the Board or the compensation committee, except that no amendment may
materially and adversely affect a participant's rights under the ESPP without his or her consent. No amendment to the ESPP will be effective without
the approval of the Company's shareholders, where such approval is required by Section 423 of the Code.
Federal Income Tax Consequences
The
following generally summarizes certain key U.S. federal income tax consequences that will arise with respect to participation in the ESPP and with respect to the sale of Common Stock acquired
under the ESPP. This summary is based on the tax laws in effect as of the date of this proxy statement. Changes to these laws could alter the tax consequences described below. The following summary is
not intended to be a complete summary or legal interpretation, and it does not address consequences other than U.S. federal income tax consequences. Participants may also be subject to U.S. state,
U.S. local or non-U.S. tax as a result of participating in the ESPP.
Tax Consequences to Participants
.
Participants
do not incur any U.S. federal income tax consequences upon enrolling in the ESPP. Amounts withheld via payroll deduction for purposes of purchasing shares under the ESPP are included in
the participant's income in accordance with the Company's regular income and payroll tax withholding and reporting procedures. Because participants use after-tax dollars to purchase shares at the end
of the offering period, there is no income tax at the time the participant purchases shares. As a general matter, additional income tax is not realized until the participant sells the shares acquired
under the ESPP.
A
participant may have both ordinary income and capital gain income or both ordinary income and a capital loss upon the sale of Common Stock that was acquired under the ESPP. The amount of each type
of income and loss will depend on when the participant sells the shares of Common Stock and the price at which the participant sells the shares of Common Stock.
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Table of Contents
If
the participant sells the shares of Common Stock (i) more than two years after the first business day of the offering period during which the Common Stock was purchased and (ii) more
than one year after the date that the participant purchased the Common Stock under the ESPP, then the participant will have ordinary income equal to the lesser of: (1) the excess of the fair
market value of the shares at the time of such sale
over
the exercise price or (2) the excess of the fair market value of the shares on the first
business day of such offering period
over
the exercise price. Any profits in excess of amounts classified as ordinary income will be taxed as long-term
capital gain income. If the participant sells the shares of Common Stock at a loss (
i.e.
, if sales proceeds are less than the exercise price) after
satisfying these waiting periods, there is no ordinary income and the participant will have a long-term capital loss for the difference between the sale price and the purchase price.
If
the participant sells the shares of Common Stock prior to satisfying the waiting periods described above, the participant will have engaged in a disqualifying disposition. Upon a disqualifying
disposition, the participant will have ordinary income equal to the value of the Common Stock on the day the participant exercised his or her option to purchase the Common Stock under the ESPP
less
the
exercise price. If the participant's sale proceeds exceed the ordinary income, then the excess proceeds will be a capital gain. If the
participant's sale proceeds are less than the ordinary income, then the participant will have a capital loss equal to the value of the Common Stock on the date of exercise less the sales proceeds.
This capital gain or loss will be long-term if the participant has held the shares for more than one year and otherwise will be short-term.
Tax Consequences to the Company.
There
will be no tax consequences to the Company except that the Company will be entitled to a deduction when a participant has ordinary income upon a disqualifying disposition. Any such deduction
will be subject to the limitations of Section 162(m) of the Code.
New Plan Benefits
The
actual amount or value of shares purchased by any given employee or group of employees is not determinable because it depends on the elections of each employee who chooses to participate in the
ESPP. Therefore, it is not possible to determine the benefits that will be received in the future by participants in the ESPP.
The Board of Directors deems the 2018 Employee Stock Purchase Plan to be in the best interests of the Company and its shareholders and recommends a vote "FOR" the approval of
the 2018 Employee Stock Purchase Plan.
Equity Compensation Plan Information
In 2017, we made stock-based awards from our 2017 Incentive Plan and the 2015 Incentive Plan, and have outstanding grants under our 2013
Incentive Plan and 2000 Stock Incentive Plan (together with the 2017 Incentive Plan, 2015 Incentive Plan and the 2013 Incentive Plan, the Plans).
The
2017 Incentive Plan was adopted by the Board and approved by our shareholders on May 18, 2017. Under the terms of the 2017 Incentive Plan, we are authorized to grant a
variety of incentive awards based on our Common Stock, including stock options (both ISOs and non-qualified stock options), performance options/shares and other stock awards, such as RSUs, as well as
the payment of incentive bonuses to all employees and non-employee directors.
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Table of Contents
The
following table presents information as of December 31, 2017, with respect to the Plans.
|
|
|
|
|
|
|
Plan Category
|
|
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options and Rights
|
|
Weighted
Average
Exercise Price
of
Outstanding
Options and
Rights
|
|
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
|
Equity Compensation Plans Approved by Shareholders:
|
|
|
|
|
|
|
2017 Incentive Plan(1)
|
|
204,770
|
|
$18.31
|
|
4,910,002
|
2015 Incentive Plan(2)
|
|
4,689,657
|
|
$15.53
|
|
|
2013 Stock Incentive Plan(3)
|
|
2,044,345
|
|
$15.01
|
|
|
2000 Stock Incentive Plan(4)
|
|
1,135,773
|
|
$4.07
|
|
|
Equity Compensation Plans Not Approved by Shareholders:
|
|
|
|
|
|
|
Individual Compensation Arrangement(5)
|
|
227,000
|
|
$18.14
|
|
|
Individual Compensation Arrangement(6)
|
|
88,060
|
|
$14.56
|
|
|
Individual Compensation Arrangement(7)
|
|
127,160
|
|
$15.60
|
|
|
Individual Compensation Arrangement(8)
|
|
109,210
|
|
$15.38
|
|
|
Individual Compensation Arrangement(9)
|
|
29,860
|
|
$31.78
|
|
|
|
|
|
|
|
|
|
Total
|
|
8,655,835
|
|
|
|
4,910,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Represents
shares of Common Stock issuable upon the exercise of outstanding stock options and vesting of outstanding RSUs granted under our 2017 Incentive Plan.
-
(2)
-
Represents
shares of Common Stock issuable upon the exercise of outstanding stock options and vesting of outstanding RSUs granted under our 2015 Incentive Plan. To
the extent that awards granted under the 2015 Incentive Plan terminate unearned, expire, or are canceled, forfeited, lapse for any reason, or are settled in cash without the delivery of shares, the
shares of Common Stock underlying such grants will again become available for purposes of the 2017 Incentive Plan.
-
(3)
-
Represents
shares of Common Stock issuable upon the exercise of outstanding stock options granted under our 2013 Stock Incentive Plan. To the extent that awards
granted under the 2013 Incentive Plan terminate unearned, expire, or are canceled or, forfeited, lapse for any reason, or are settled in cash without the delivery of shares, the shares of Common Stock
underlying such grants will again become available for purposes of the 2017 Incentive Plan.
-
(4)
-
Represents
shares of Common Stock issuable upon the exercise of outstanding stock options granted under the 2000 Stock Incentive Plan.
-
(5)
-
Represents
inducement grants of stock options totaling 227,000 shares of Common Stock we made in connection with the hiring of Dr. Eugene Sullivan, as well as
several of our European managers during the first quarter of 2015. The vesting schedule for the shares of Common Stock subject to these options is as follows: 25% on the first anniversary of the date
of grant and 12.5% of the shares vesting on each six-month anniversary thereafter until the fourth anniversary of the date of grant.
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Table of Contents
-
(6)
-
Represents
inducement grants of stock options totaling 88,060 shares of Common Stock we made during the fourth quarter of 2016 in connection with the appointment of
Chief Commercial Officer Roger Adsett. The vesting schedule for the shares of Common Stock subject to this option grant is as follows: 25% on the first anniversary of the date of grant and 12.5% of
the shares vesting on each six month anniversary thereafter until the fourth anniversary of the date of grant.
-
(7)
-
Represents
inducement grants of stock options totaling 127,160 shares of Common Stock we made in connection with the appointment of Chief Financial Officer Paolo
Tombesi in June 2017. The vesting schedule for the shares of Common Stock subject to this option is as follows: 25% on the first anniversary of the date of grant and 12.5% of the shares vesting on
each six-month anniversary thereafter until the fourth anniversary of the date of grant.
-
(8)
-
Represents
inducement grants of stock options totaling 109,210 shares of Common Stock we made in connection with the appointment of Chief Medical Officer
Dr. Paul Streck in June 2017. The vesting schedule for the shares of Common Stock subject to this option is as follows: 25% on the first anniversary of the date of grant and 12.5% of the shares
vesting on each six-month anniversary thereafter until the fourth anniversary of the date of grant.
-
(9)
-
Represents
inducement grants of stock options totaling 29,860 shares of Common Stock we made in connection with the hiring of ten employees in November 2017. The
vesting schedule for the shares of Common Stock subject to these options is as follows: 25% on the first anniversary of the date of grant and 12.5% of the shares vesting on each six-month anniversary
thereafter until the fourth anniversary of the date of grant.
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Table of Contents
PROPOSALS FOR 2019 ANNUAL MEETING
Shareholder proposals intended for inclusion in our proxy statement for the 2019 Annual Meeting of Shareholders must be received at our offices
no later than the close of business on December 6, 2018. All such proposals must comply with Rule 14a-8 under the Exchange Act and must be submitted to the Corporate Secretary, Insmed
Incorporated, 10 Finderne Avenue, Building 10, Bridgewater, New Jersey, 08807.
Under
our Bylaws, any shareholder (as defined in our Bylaws) who wishes to present other business or nominate a director candidate at the 2019 Annual Meeting of Shareholders must give
timely written notice of any such business or nomination to our Corporate Secretary in advance of the meeting. Such written notice must comply with the requirements in our Bylaws and must be given,
either by personal delivery or by United States registered or certified mail, postage prepaid, to our Corporate Secretary at the address given above no later than 120 days nor more than
150 days before the anniversary of the immediately preceding year's annual meeting. Accordingly, for the 2019 Annual Meeting of Shareholders, our Corporate Secretary must receive such written
notice no earlier than December 16, 2018 and no later than January 15, 2019. If the date of the 2019 Annual Meeting of Shareholders is more than 30 days before or more than
60 days after May 15, 2019 (the anniversary of this year's Annual Meeting), then the written notice must be received no later than the 120th day prior to such Annual Meeting or,
if later, the 10th day following the day on which public disclosure of the date of such Annual Meeting was first made. If a shareholder fails to meet these requirements or fails to satisfy the
requirements of Rule 14a-4 under the Exchange Act, the named proxies may exercise discretionary voting authority under proxies that we solicit to vote on any such business or nomination in
accordance with their best judgment. Our Bylaws are available on our website at www.insmed.com under the heading "Investor RelationsCorporate Governance" or by submitting a written
request to the Corporate Secretary, Insmed Incorporated, 10 Finderne Avenue, Building 10, Bridgewater, New Jersey, 08807.
ANNUAL REPORT ON FORM 10-K
We will provide without charge to each person to whom this Proxy Statement has been made available on the written
request of such person, a printed copy of our Annual Report, including the financial statements and financial statement schedules. Requests should be directed to
Ms. Christine Pellizzari, Corporate Secretary, Insmed Incorporated, 10 Finderne Avenue, Building 10, Bridgewater, New Jersey, 08807, (908) 977-9900. In connection with any such
request, we will provide a list of exhibits to the Annual Report, and will provide copies of any such exhibit upon the payment of a reasonable fee.
SEPARATE COPIES FOR BENEFICIAL HOLDERS
Institutions that hold shares in street name for two or more beneficial owners with the same address are permitted to deliver a single set of
proxy materials to that address. Only one set of proxy materials will be delivered to such address unless we receive contrary directions from one or more of such beneficial owners. Any such beneficial
owner can request a separate copy of these proxy materials by contacting our Corporate Secretary as described above, and we will promptly provide a separate copy. If you are the beneficial owner, but
not the record holder, of the Company's shares and wish to receive only one copy of our proxy materials in the future, you will need to contact your broker, bank or other agent to request that only a
single copy of each document be mailed to all shareholders at the shared address in the future.
April 5,
2018
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Table of Contents
APPENDIX A
INSMED INCORPORATED
2018 EMPLOYEE STOCK PURCHASE PLAN
1.
Purpose
and History
. The purpose of the Insmed Incorporated 2018 Employee Stock Purchase Plan (the "
Plan
") is
to advance the interests of Insmed Incorporated, a Virginia corporation (the "
Company
"), and its shareholders by providing Eligible Employees (as defined below) of the
Company and its Designated Subsidiaries (as defined below) with an opportunity to acquire an ownership interest in the Company by purchasing Common Stock (as defined below) through payroll deductions.
It is the intention of the Company that the Plan qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"
Code
"), except with respect to the participation of Non-Corporate Foreign Subsidiaries (as defined below) in the Plan. Accordingly, provisions of the Plan shall be
construed so as to extend and limit participation in a manner consistent with the requirements of Section 423 of the Code, other than with respect to the participation of Non-Corporate Foreign
Subsidiaries in the Plan.
2.
Definitions
.
(a)
"
Administrator
"
has the meaning set forth in Section 3(a).
(b)
"
Board
"
means the Board of Directors of the Company.
(c)
"
Code
"
has the meaning set forth in Section 1.
(d)
"
Common
Stock
" means the common stock of the Company, par value $0.01 per share, or the kind of shares of stock or other
securities into which such common stock may be changed in accordance with Section 13(b).
(e)
"
Committee
"
means the Compensation Committee of the Board (or any successor committee).
(f)
"
Company
"
has the meaning set forth in Section 1.
(g)
"
Compensation
"
means the total cash compensation from salary, wages, annual bonuses, and other cash incentive compensation
paid to an Eligible Employee by reason of his or her employment with the Company or a Designated Subsidiary (determined prior to any reduction thereof by operation of a salary reduction election under
a plan described in Section 401(k) of the Code or Section 125 of the Code), as reported on IRS Form W-2, but excludes (i) any amounts not paid in cash which are required to
be accounted for as imputed income on IRS Form W-2, (ii) any reimbursements of expenses, (iii) any housing, relocation, automobile, travel or other similar cash allowances,
(iv) any overtime payments or shift premiums, (v) any sign-on bonus, (vi) any sales commission payments, (vi) any equity-based awards and (vii) any amounts similar
to those described in clauses (i) through (vi).
(h)
"
Designated
Subsidiary
" means a Subsidiary, other than any Subsidiary that has been excluded from participation in the Plan
by the Administrator.
(i)
"
Eligible
Employee
" means, with respect to any Offering Period, an individual who is an employee of the Company or a
Designated Subsidiary. In accordance with Treas. Reg. §1.421-1(h)(2), an employee will be considered to be employed during military or sick leave or any
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other
bona fide leave of absence that does not exceed three months and during any period longer than three months if his or her right to reemployment is guaranteed by statute or contract.
(j)
"
Exchange
Act
" means the Securities Exchange Act of 1934, as amended.
(k) "
Fair
Market Value
" means as of any date, the value of the Common Stock determined as follows: (i) if the Common
Stock is listed on any established stock exchange, system or market, the closing price for the Common Stock on such date (or if the Common Stock was not traded on such exchange, system, or market on
such date, then on the next preceding date on which shares of Common Stock were traded) on such exchange, system or market as reported in the Wall Street Journal or such other source as the
Administrator deems reliable; and (ii) in the absence of an established market for the Common Stock, as determined in good faith by the Administrator by the reasonable application of a
reasonable valuation method.
(l)
"Non-Corporate
Foreign Subsidiary" means any non-U.S. subsidiary of the Company that would have satisfied the definition of "Subsidiary" under the Plan
but for the fact that it is not a corporation.
(m) "
Offering
Date
" means the first business day of an Offering Period.
(n)
"
Offering
Period
" means an offering to Participants to purchase Common Stock under the Plan established pursuant to
Section 5.
(o)
"
Option
Price
" means an amount equal to 85% of the Fair Market Value of one share of Common Stock on the Offering Date or
the Termination Date of the applicable Offering Period, whichever is lower.
(p)
"
Participant
"
means an Eligible Employee who elects to participate in one or more Offering Periods under the Plan pursuant
to Section 6.
(q)
"
Participation
Form
" has the meaning set forth in Section 6(a).
(r)
"
Plan
"
has the meaning set forth in Section 1.
(s)
"
Securities
Act
" means the Securities Act of 1933, as amended.
(t)
"
Subsidiary
"
means any corporation, other than the Company, in an unbroken chain of corporations, beginning with the
Company, if, at the time an option is granted under the Plan, each of the corporations, other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the
total combined voting power of all classes of stock in one of the other corporations in such chain;
provided
that a Non-Corporate Foreign Subsidiary
shall also be deemed to be a Subsidiary for purposes of the Plan.
(u)
"
Termination
Date
" means the last business day of the Offering Period.
(v)
"
Withdrawal
Notice
" has the meaning set forth in Section 11(a).
3.
Plan
Administration
.
(a)
Administration
.
The Plan shall be administered by the Committee, or, in the absence of the Committee, the Board itself (such
administrator, the "
Administrator
"). Any power of the
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Committee
may also be exercised by the Board. To the extent that any permitted action taken by the Board conflicts with action taken by the Committee, the Board action shall control.
(b)
Powers
and Duties of the Administrator
. Subject to the express provisions of the Plan, the Administrator shall be authorized
and empowered to do all things that it determines to be necessary or appropriate in connection with the administration of the Plan, including:
(i)
to
prescribe, amend and rescind rules and regulations relating to the Plan and to define terms not otherwise defined in the Plan;
(ii) to
determine which persons are eligible to participate in the Plan;
(iii) to
interpret and construe the Plan and any rules and regulations under the Plan, and to make exceptions to any such provisions if the Administrator, in good faith,
determines that it is appropriate to do so;
(iv) to
decide all questions concerning the Plan and to determine all ambiguities, inconsistencies and omissions in the terms of the Plan;
(v)
to
appoint such agents, counsel, accountants, consultants and other persons as may be required to assist in administering the Plan;
(vi) to
allocate and delegate its responsibilities under the Plan and to designate other persons to carry out any of its responsibilities under the Plan;
(vii) to
prescribe and amend such forms as may be necessary or appropriate for Eligible Employees to make elections under the Plan or to otherwise administer the Plan; and
(viii) to
do such other acts as it deems necessary or appropriate to administer the Plan in accordance with its terms, or as may be provided for or required by law.
(c)
Determinations
by the Administrator
. All decisions, determinations and interpretations by the Administrator regarding the
Plan and any rules and regulations under the Plan shall be final and binding on all Participants, beneficiaries, heirs, assigns or other persons holding or claiming rights under the Plan. The
Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, in making such decisions, determinations and interpretations, including the recommendations or
advice of any officer or other employee of the Company and such attorneys, consultants and accountants as it may select. Members of the Board and members of the Committee acting in their capacity as
Administrator under the Plan shall be fully protected in relying in good faith upon the advice of counsel.
(d)
No
Liability of Committee or Board Members
. No member of the Committee or the Board shall be personally liable by reason of
any contract or other instrument executed by such member or on his or her behalf in his or her capacity as a member of the Committee or the Board nor for any mistake of judgment made in good faith,
and the Company shall indemnify and hold harmless each member of the Committee and the Board and each other employee, officer or director of the Company to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any amount paid in settlement of a claim)
arising out of any act or failure to act in connection with the Plan unless arising out of such person's own fraud or willful bad faith;
provided,
however
, that approval
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of
the Board shall be required for the payment of any amount in settlement of a claim against any such person. The foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, any contract with the Company, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.
(e)
Rules
for Foreign Jurisdictions
. The Administrator may adopt rules or procedures relating to the operation and
administration of the Plan to accommodate the specific requirements of local laws and procedures. Without limiting the generality of the foregoing, the Administrator is specifically authorized to
adopt rules and procedures regarding handling of payroll deductions, payment of interest, conversion of local currency, payroll tax, withholding procedures and handling of stock certificates. The
Administrator may also adopt sub-plans applicable to particular Designated Subsidiaries or locations.
4.
Eligibility
to Participate
. An Eligible Employee may elect to participate in an Offering Period in accordance with Section 6, with
such participation to begin no earlier than the first Offering Date as of which the Eligible Employee's Participation Form (as defined below) becomes effective, subject to the limitations imposed by
Section 423 of the Code.
5.
Offering
Periods
.
(a) Shares
of Common Stock shall be offered for purchase under the Plan through a series of successive Offering Periods until the earlier of (i) the
maximum number of shares of Common Stock available for issuance under the Plan have been purchased and (ii) the termination of the Plan.
(b) Each
Offering Period shall be of such duration not to exceed twelve (12) months, as determined by the Administrator prior to the start of the
applicable Offering Period. Until such time as the Administrator determines otherwise, each Offering Period shall be of a duration of six (6) months and shall run from January 1 to
June 30 and July 1 to December 31 of each year;
provided
that the initial Offering Period under the Plan will begin on
July 1, 2018 and end on December 31, 2018;
provided, further
, that in the event the Administrator establishes an Offering Period of a
different duration or specifies that an Offering Period begins and/or ends on a different date, an individual who is employed by a Non-Corporate Foreign Subsidiary and who is subject to U.S. income
taxation shall not be eligible to participate in the Plan to the extent necessary to comply with Section 409A of the Code. Notwithstanding the foregoing, no Offering Period may begin under the
Plan until the Company's shareholders have approved the Plan pursuant to the conditions set forth in Section 19(a).
6.
Participation
in Offering Periods
.
(a) An
Eligible Employee may elect to participate in an Offering Period under the Plan by completing a participation form authorizing payroll deductions on
the form provided by the Company (the "
Participation Form
"), and filing such Participation Form with the Company in accordance with the instructions in such Participation
Form. The Participation Form will become effective on the first Offering Date to occur after such form is properly filed with the Company, so long as such filing occurs on or before the
15th day of the month immediately preceding the month in which such Offering Date occurs. A Participation Form that is filed after such 15th day but before such Offering Date shall be
effective as of the next Offering Date to occur after such Offering Date.
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(b) Subject
to the provisions of Section 7, payroll deductions for a Participant shall begin with the first payroll date after the Offering Date as of
which the Participant's Participation Form has become effective and shall continue until the Plan is terminated, subject to the Participant's withdrawal or termination of employment as provided in
Section 11.
7.
Payroll
Deductions
.
(a) By
completing and filing a Participation Form in accordance with the instructions in such Participation Form, an Eligible Employee shall elect to have
payroll deductions withheld from his or her Compensation on each payroll date (including payroll dates covering regular payroll, commissions and bonuses) during the time he or she is a Participant in
the Plan in amounts equal to or greater than one percent (1%), but not exceeding fifteen percent (15%), of the Compensation which the Participant receives on each such payroll date during the Offering
Period, subject to the provisions set forth in Section 8. Such payroll deductions shall be in whole percentages only.
(b) All
payroll deductions authorized by a Participant shall be credited to an account established under the Plan for the Participant. The funds represented
by such account shall be held as part of the Company's general assets, usable for any corporate purpose, and the Company shall not be obligated to segregate such funds. A Participant may not make any
separate cash payment or contribution to such account.
(c)
Subject
to Section 11 and Section 14, no increases or decreases in the amount of payroll deductions for a Participant may be made during
an Offering Period. A Participant may increase or decrease the amount of his or her payroll deductions under the Plan for subsequent Offering Periods by completing an amended Participation Form and
filing it with the Company in accordance with the instructions in such Participation Form. The amended Participation Form will become effective on the first Offering Date to occur after such form is
properly filed with the Company, so long as such filing occurs on or before the 15th day of the month immediately preceding the month in which such Offering Date occurs. An amended
Participation Form that is filed after such 15th day but before such Offering Date shall be effective as of the next Offering Date to occur after such Offering Date.
(d) A
Participant may discontinue his or her participation in the Plan at any time as provided in Section 11.
8.
Grant
and Exercise of Option
.
(a) On
each Offering Date, a Participant shall be granted, by operation of the Plan, an option to purchase a number of shares of Common Stock at the Option
Price, determined in accordance with Section 8(b), subject to the limitations set forth in Section 8(c). Notwithstanding any other provision of the Plan, no Participant shall be granted
an option under the Plan for any Offering Period if:
(i)
immediately
after the grant, the Participant (or any other person whose stock ownership would be attributed to such Participant pursuant to Section 424(d) of
the Code) would own shares of stock (including any shares of stock that the Participant may purchase under outstanding options) possessing
5% or more of the total combined voting power or value of all classes of shares of the Company or of any Subsidiary; or
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(ii)
the
Participant's rights to purchase shares of Common Stock under all "employee stock purchase plans" (within the meaning of Section 423 of the Code) of the
Company and its Subsidiaries would accrue at a rate which exceeds $25,000 of the Fair Market Value of such shares of Common Stock (determined at the time the option is granted) for each calendar year
in which the option is outstanding at any time.
(b) Unless
a Participant withdraws from the Plan pursuant to Section 11 or incurs a termination of employment, the Participant's option for an
Offering Period shall be automatically exercised on the Termination Date of such Offering Period to purchase such whole number of shares of Common Stock determined by dividing the accumulated payroll
deductions in the Participant's account on such Termination Date by the Option Price, subject to the limitations set forth in Section 8(c). No fractional shares will be purchased and any
accumulated payroll deductions not used to purchase shares shall be refunded to the Participant;
provided, however
, that an amount representing a
fractional share that was not used to purchase shares during an Offering Period may be carried over to a subsequent Offering Period.
(c)
Notwithstanding
anything in the Plan to the contrary, the number of shares of Common Stock that a Participant may purchase during an Offering Period may
not exceed the maximum number of shares that may be purchased without exceeding the limitation described in Section 8(a)(ii).
9.
Delivery
of Shares
. As soon as practicable after the Termination Date of each Offering Period, the Company will deposit, or cause to be
deposited, the shares of Common Stock purchased by each Participant upon exercise of the Participant's option for such Offering Period in an account established for the Participant at a brokerage firm
or other financial services firm selected by the Administrator, to be held in book entry form.
10.
No
Shareholder Rights
. No Participant (or other person claiming through such Participant) shall, by reason of the Plan or any rights
granted pursuant thereto, or by the fact that there are payroll deductions credited to a Participant's account sufficient to purchase shares of Common Stock, have any rights of a shareholder of the
Company until shares of Common Stock have been delivered to such Participant in the manner provided in Section 9.
11.
Withdrawal;
Termination of Employment
.
(a) A
Participant may terminate his or her participation in the Plan at any time by giving written notice to the Company ("
Withdrawal
Notice
") on or before the 15th day of the month in which the applicable Termination Date occurs. The Withdrawal Notice shall state that the Participant wishes to terminate his or
her participation in the Plan, specify the applicable Termination Date and request the cessation of further payroll deductions under the Plan. No further payroll deductions for the purchase of shares
of Common Stock will be made on behalf of the Participant for such Offering Period or for any subsequent Offering Period;
provided
,
however
, that
previously accumulated payroll deductions for such Offering Period shall not be refunded to the Participant, but shall be applied to the
purchase of shares of Common Stock on the Termination Date in accordance with the provisions of Section 8. A Participant's withdrawal from the Plan pursuant to this Section shall not have any
effect upon his or her eligibility to participate in a subsequent Offering Period by completing and filing a new Participation Form pursuant to Section 6, or in any similar plan that may
hereafter be adopted by the Company.
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(b) If a
Participant ceases to be employed by the Company or by a Designated Subsidiary for any reason, all payroll deductions and
all rights to purchase shares of Common Stock granted to the Participant with respect to the Offering Period then in effect shall immediately cease, unless otherwise determined by the Administrator in
its sole discretion in compliance with Treas. Reg. §1.423-2(f). The amount of payroll deductions accumulated in such Participant's account shall be refunded to the Participant as soon as
practicable (or in the case of the Participant's death, to the executor or administrator of the Participant's estate, or if no such executor or administrator has been appointed, to such other person
as the Company may designate) in the currency in which collected. For purposes of the Plan, the date of the Participant's termination of employment shall be the Participant's last date of actual
employment and shall not include any period during which such Participant receives any severance payments. A transfer of employment between the Company and a Designated Subsidiary or between one
Designated Subsidiary and another Designated Subsidiary, or an absence or leave described in Section 2(i), shall not be deemed a termination of employment under this Section.
12.
Interest
.
No interest shall accrue on a Participant's payroll deductions under the Plan.
13.
Common
Stock Subject to the Plan
.
(a) Subject
to Section 13(b), the maximum number of shares of Common Stock reserved for issuance under the Plan is equal to the sum of (i) one
million (1,000,000) shares, plus (ii) commencing on January 1, 2019 and ending on December 31, 2023, an additional number of shares to be added on the first day of each calendar
year equal to the lesser of (A) 1,200,000 shares of Common Stock, (B) 2% of the number of outstanding shares of Common Stock on such date and (C) an amount determined by the
Administrator. The shares of Common Stock issued under the Plan may be shares that are authorized and unissued or shares that were reacquired by the Company, including shares purchased in the open
market. If, on any Termination Date, the total number of shares of Common Stock that are subject to options granted for the applicable Offering Period exceeds the number of shares then available for
issuance under the Plan, the Company shall make a pro rata allocation of the shares of Common Stock remaining available for issuance under the Plan in a uniform and equitable manner, as determined by
the Administrator. In such event, the Company shall give written notice of such reduction of the number of shares subject to the option to each affected Participant and shall refund any excess funds
accumulated in each Participant's account as soon as practicable after the Termination Date of such Offering Period.
(b) The
number of shares available for issuance under the Plan, the maximum number of shares each Participant may purchase per Offering Period, as well as
the Option Price and the number of shares of Common Stock covered by each option granted under the Plan which has not yet been exercised shall be equitably adjusted by the Administrator to reflect any
reorganization, reclassification, combination of shares, stock split, reverse stock split, spin-off, dividend or distribution of securities, property or cash (other than regular, quarterly cash
dividends), or any other similar event or transaction that affects the number or kind of shares of Common Stock outstanding. Such adjustment shall be made by the Administrator, whose determination
shall be final, binding and conclusive. The Administrator shall have the authority to adjust not only the number of securities, but also the class and kind of securities subject to the Plan and to
make appropriate adjustments in the price of such securities if other than shares of Common Stock of the Company, so long as any such action complies with applicable law.
14.
Corporate
Transactions
.
(a) In
the event of the proposed liquidation or dissolution of the Company, the Administrator shall, in its discretion, provide for one of the following
courses of action: (i) the Offering
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Period
then in effect shall end as of a date selected by the Administrator before the consummation of such liquidation or dissolution of the Company, and each outstanding option granted under the Plan
shall be automatically exercised as of such date, or (ii) the Offering Period then in effect shall be
terminated as of a date selected by the Administrator before the consummation of such liquidation or dissolution of the Company, and each outstanding option granted under the Plan shall be
automatically cancelled and any payroll deductions accumulated for such Offering Period shall be refunded to the applicable Participant as soon as practicable.
(b) In
the event of a proposed sale of all or substantially all of the assets of the Company, or the merger or consolidation of the Company (except for
(x) a transaction the principal purpose of which is to change the jurisdiction in which the Company is incorporated or (y) a transaction where the acquiring or surviving company is
directly or indirectly owned, immediately after such transaction, by the shareholders of the Company in substantially the same proportion as their ownership of stock in the Company immediately before
such transaction), the Administrator shall, in its discretion, provide for one of the following courses of action: (i) each outstanding option granted under the Plan shall be assumed or an
equivalent option shall be substituted by the successor entity (or a parent or subsidiary thereof), (ii) the Offering Period then in effect shall end as of a date selected by the Administrator
before the consummation of such sale, merger or consolidation of the Company, and each outstanding option granted under the Plan shall be automatically exercised as of such date, or (iii) the
Offering Period then in effect shall be terminated as of a date selected by the Administrator before the consummation of such sale, merger or consolidation of the Company, and each outstanding option
granted under the Plan shall be automatically cancelled and any payroll deductions accumulated for such Offering Period shall be refunded to the applicable Participant as soon as practicable.
15.
Transferability
.
Neither payroll deductions credited to a Participant's account nor any rights relating to the exercise of an option or to
receive shares of Common Stock under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will or the laws of descent and distribution) by the Participant.
Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw in accordance with
Section 11(a). During the Participant's lifetime, a Participant's option to purchase shares of Common Stock under the Plan is exercisable only by the Participant.
16.
Restrictions
on Issuance and Transfer of Shares
.
(a) The
issuance of shares of Common Stock under the Plan shall be subject to compliance with all applicable requirements of federal, state or foreign
securities laws. An option granted for an Offering Period may not be exercised if the issuance of shares of Common Stock upon such exercise would constitute a violation of any applicable federal,
state or foreign securities laws or other laws or regulations. In addition, no option granted for an Offering Period may be exercised unless (i) a registration statement under the Securities
Act shall, at the time of exercise, be in effect with respect to the Common Stock issuable upon exercise of the option, or (ii) in the opinion of the legal counsel of the Company, the Common
Stock issuable upon exercise of the option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. As a condition to the
exercise of an option granted for an Offering Period, the Administrator may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any
applicable law or regulation, and to make any representation or warranty with respect thereto as may be requested by the Administrator. In the event that the issuance of shares of Common Stock under
the Plan upon the exercise of an option granted for an Offering Period would
not comply with applicable federal, state or foreign securities laws, all payroll deductions accumulated for such Offering Period shall be refunded to the Participant as soon as practicable.
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(b)
Notwithstanding
any other provision of the Plan to the contrary, to the extent that any Participant is subject to the provisions of Section 16 of
the Exchange Act, and the rules and regulations promulgated thereunder, such Participant's participation in the Plan shall be subject to, and such Participant shall be required to comply with, any and
all additional restrictions and/or requirements imposed by the Administrator, in its sole discretion, in order to ensure that the exemption made available pursuant to Rule 16b-3 promulgated
pursuant to the Exchange Act is available with respect to all transactions pursuant to the Plan effected by or on behalf of any such Participant.
17.
Amendment
or Termination
. The Plan may be amended or terminated at any time and for any reason by the Committee or the Board;
provided
that, no amendment of the Plan may, without the consent of each
Participant holding an outstanding option under the Plan, materially and
adversely affect such Participant's rights under the Plan. Notwithstanding the foregoing, no amendment adopted by the Committee or the Board shall be effective without the approval of the shareholders
of the Company if shareholder approval of the amendment is then required under Section 423 of the Code.
18.
Notices
.
Except as otherwise provided herein, any notice or other communication given pursuant to the Plan shall be in writing and shall be
personally delivered or mailed by United States registered, certified or overnight mail, postage prepaid, return receipt requested, to the Company at its principal place of business or to the
Participant at the address on the payroll records of the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing. Additionally, if such
notice or communication is by the Company to the Participant, the Company may provide such notice electronically (including via email). Any such notice shall be deemed to have been given on the date
of postmark, in the case of notice by mail, or on the date of delivery, if delivered in person or electronically.
19.
Miscellaneous
.
(a)
Effective
Date; Shareholder Approval
. The Plan is effective as of the date it is adopted by the Board. In accordance with
Section 423 of the Code, the Company shall obtain shareholder approval of the Plan within twelve (12) months after the Plan is adopted by the Board. If shareholder approval is not
obtained in accordance with the preceding sentence, the Plan shall be terminated.
(b)
Governing
Law
. The Plan shall be interpreted and construed in accordance with the laws of the Commonwealth of Virginia
(without regard to any rule or principle of conflicts of laws that otherwise would result in the application of the substantive laws of another jurisdiction) and applicable federal law.
(c)
Withholding
.
To the extent required by applicable federal, state, local or foreign law, the Administrator may and/or a
Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise with respect to any option granted under the Plan, or the issuance or
sale of any shares of Common Stock. The Company shall not be required to recognize any Participant rights under an option granted under the Plan, to issue shares of Common Stock or to recognize the
disposition of such shares of Common Stock until such obligations are satisfied. To the extent permitted or required by the Administrator, these obligations may or shall be satisfied by the Company
withholding cash from any compensation otherwise payable to or for the benefit of a Participant, the Company withholding a portion of the shares of Common Stock that otherwise would be issued to a
Participant upon exercise of an option granted under the Plan or by the Participant tendering to the Company cash or, if allowed by the Administrator, shares of Common Stock.
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(d)
Rules
of Construction
. Whenever used in the Plan, unless the context clearly indicates to the contrary, (i) any
references to paragraphs, subparagraphs, sections or subsections are to those parts of the Plan, (ii) the plural includes the singular and the singular includes the plural;
(iii) "includes" and "including" are each "without limitation"; (iv) "herein," "hereof," "hereunder" and other similar compounds of the word "here" refer to the entire Plan and not to
any particular paragraph, subparagraph, section or subsection; (v) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the entities or persons referred to may require; (vi) references to a statute or regulation or statutory or regulatory provision shall refer to that provision (or to a successor
provision of similar import) as currently in effect, as amended, or as reenacted, and to any regulations and other formal guidance of general applicability issued thereunder; and
(vii) references to a law shall include any statute, regulation, rule, court case, or other requirement established by an exchange or a governmental authority or agency, and applicable law
shall include any tax law that imposes requirements in order to avoid adverse tax consequences.
(e)
Headings
and Captions
. The headings to sections, subsections, and paragraphs of the Plan are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.
(f)
No
Right to Employment
. The Plan does not constitute a contract of employment, and participation in the Plan does not give
any Eligible Employee or Participant the right to be retained in the employ of the Company, a Designated Subsidiary or any other subsidiary of the Company, nor give any person a
right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan.
(g)
Severability
.
If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of the Plan and the Plan shall be construed and enforced as if such provision had not been included.
(h)
Unfunded
Status of Plan
. The Plan is unfunded and shall not create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Company, any Designated Subsidiary, or the Administrator and a Participant or any other person.
(i)
Annex
of Terms and Conditions for Non-US Participants
. Notwithstanding any provisions in this Agreement, participation by a
Participant located outside the United States may be subject to special terms and conditions set forth in the Annex to this Agreement. The Annex constitutes part of the Plan.
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ANNEX
SPECIAL TERMS AND CONDITIONS FOR NON-U.S. PARTICIPANTS
This Annex contains special terms and conditions applicable to Participants located outside of the United States. These terms and conditions
are in addition to those set forth in the Plan. Any capitalized term used in this Annex shall have the meaning ascribed to it in the Plan.
1.
Data
Privacy
. Each Participant understands that the Company may collect, use and transfer, in electronic or other form, such Participant's
personal data as described in the Plan for the exclusive purpose of implementing, administering and managing such Participant's participation in the Plan. Each Participant understands that the Company
holds certain personal information about such Participant, including such Participant's name, home address and telephone number, date of birth, social insurance number or other identification number,
salary, nationality, job title, any shares or directorships held in the Company, details of all options granted under the Plan, canceled, exercised, or outstanding in such Participant's favor, for the
purpose of implementing, administering and managing such Participant's participation in the Plan ("
Data
"). Each Participant understands that Data may be
transferred to any third parties assisting in the implementation, administration and management of such Participant's participation in the Plan, that these recipients may be located in such
Participant's country or elsewhere, and that the recipient's country may have different data privacy laws and protections than such Participant's country. Each Participant understands that he or she
may request a list with the names and addresses of any potential recipients of the Data by contacting such Participant's local human resources representative. Each Participant understands that
recipients may receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing such Participant's participation in the
Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom such Participant may elect to deposit any shares acquired pursuant to an option
granted under the Plan. Each Participant understands that Data will be held only as long as is necessary to implement, administer and manage such Participant's participation in the Plan. Each
Participant understands that he or she may, at any time, view Data, request additional information about the storage and processing of Data or require any necessary amendments to Data, by contacting
in writing such Participant's local human resources representative. For more information on the processing of Data for the purposes set out above, each Participant understands that he or she may
contact such Participant's local human resources representative. For Participants located within the European Union, each such Participant understands that Data will always be processed in accordance
with the Insmed EU Employee Personal Data Processing Notice, a copy of which is available from such Participant's local human resources representative.
2.
Language
.
If the Plan or any other document related to the Plan is translated into a language other than English and if the meaning of the
translated version is different than the English version, the English version will control.
3.
No
Acquired Rights
. The grant of an option to a Participant under the Plan is voluntary and occasional and does not create any contractual
or other right to receive future grants of options under the Plan, or benefits in lieu of such options, even if options under the Plan have been granted to a Participant repeatedly in the past. All
decisions with respect to future grants of options under the Plan, if any, will be at the sole discretion of the Administrator. The grant of an option to a Participant under the Plan is an
extraordinary item that does not constitute compensation of any kind for service of any kind rendered to the Company or its Designated Subsidiaries, and which is outside the scope of a Participant's
employment contract, if any. Such grant is not part of normal or expected compensation or salary for any purpose, including calculating any severance, resignation, termination, redundancy,
end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
A-11
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information through 11:59 P.M. Eastern Time on Monday, May 14, 2018. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions through 11:59 P.M. Eastern Time on Monday, May 14, 2018. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Votes must be received by 9:00 A.M. Eastern Time on Tuesday, May 15, 2018. VOTE IN PERSON If you would like to vote in person, please attend the annual meeting. Please find the meeting location on the reverse side. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. C/O BROADRIDGE P.O. BOX 1342 BRENTWOOD, NY 11717 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E42898-P06246 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. INSMED INCORPORATED For Withhold For All AllAllExcept To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. The Board of Directors recommends you vote FOR Item 1: !! ! 1. Election of Class III Directors Nominees: 01) David R. Brennan 02) Melvin Sharoky, M.D. The Board of Directors recommends you vote FOR Items 2, 3 and 4: For Against Abstain ! ! ! ! ! ! ! ! ! 2. Advisory vote on the 2017 compensation of our named executive officers. 3. Ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for Insmed Incorporated for the year ending December 31, 2018. Approval of the Insmed Incorporated 2018 Employee Stock Purchase Plan. 4. Other business may be considered as may properly come before the meeting or any adjournment or postponement thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Form 10-K and Notice and Proxy Statement are available at www.proxyvote.com. E42899-P06246 INSMED INCORPORATED Annual Meeting of Shareholders May 15, 2018 at 9:00 AM This proxy is solicited by the Board of Directors The undersigned hereby appoints Donald Hayden, Jr., William H. Lewis, and Christine Pellizzari, or any of them, with full power of substitution in each, as proxies (and if the undersigned is a proxy, substitute proxies) to vote all shares of Common Stock of Insmed Incorporated that the undersigned is entitled to vote at the Annual Meeting of Shareholders to be held on May 15, 2018 at 9:00 AM at the Bridgewater Marriott, 700 Commons Way, Bridgewater, NJ 08807. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations or, in the absence of such recommendations, in the judgment of the proxy holders. Continued and to be signed on reverse side
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