Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On April 19, 2022 (the “Effective Date”), Sarepta Therapeutics, Inc. (the “Company”) entered into a letter agreement (the “2022 Letter Agreement”) with Douglas S. Ingram, the Company’s President and Chief Executive Officer, amending each of the following agreements between the Company and Mr. Ingram: (i) Performance Stock Option Award Agreement (the “Stock Option Agreement”), dated June 26, 2017; (ii) Change in Control and Severance Agreement, effective June 26, 2017, as amended by letter agreement dated June 26, 2018 (the “CIC Agreement”); and (iii) Employment Agreement, dated as of June 26, 2017, as amended by letter agreement dated June 26, 2018 (the “Employment Agreement”). Although the vesting period under the Stock Option Agreement was set to end on June 26, 2022 (the fifth anniversary of the date of the option grant), the Company determined that it was necessary, appropriate and in the best interests of the Company and its stockholders to enter into the 2022 Letter Agreement to provide certainty to investors and employees in advance of the expiration of Mr. Ingram’s contract, and to retain and incentivize him.
Amendment to Stock Option Agreement
In consideration of the compounded annual growth (“CAGR”) of the Company’s common stock and significant over-performance relative to the Nasdaq Biotech Index from the grant date of the option under the Stock Option Agreement to the Effective Date, the 2022 Letter Agreement amends the vesting schedule of the Stock Option Agreement to provide that 33.33% of the option will be vested on the Effective Date. In determining changes to the option, including the appropriate amount that should be vested on the Effective Date, 16.67% of the option would have vested in accordance with the original vesting schedule contained in the Stock Option Agreement as in effect prior to the Effective Date, based on the 20-day trading average of the Company’s common stock immediately preceding the Effective Date (rather then immediately preceding June 26, 2022, the fifth anniversary of the date of grant of the option). The remainder of the 33.33% of the option (i.e., an incremental 16.66%) was near the CAGR-adjusted vesting price for April 19, 2022 to meet the terms of the original agreement and is being accelerated in recognition of Mr. Ingram’s strong performance, extensive experience in the Company’s industry, overall compensation as compared to the compensation paid in the Company’s peer group and the competitive landscape for talent.
The remaining unvested portion of the option shall vest in varying increments at any time between the Effective Date and June 26, 2025 (the “Measurement Period”) if the Company’s common stock (based on the average of the closing price during any consecutive 20 trading day period during the Measurement Period) reaches any of the following levels: $105.74, $128.65, $155.37 and $186.36 (each a “Company Target Stock Price”), subject to Mr. Ingram’s continued service through each applicable vesting date and the Company’s CAGR exceeds the CAGR of the Nasdaq Biotech Index in varying percentages (as set forth in the 2022 Letter Agreement) measured during the same period. The Company Target Stock Prices were calculated using the CAGR of the per share exercise price of the option from the date of grant until the fifth anniversary of the date of grant, using five percent increments starting with 25% CAGR and ending with 40% CAGR. The percentages of the option that will vest based on attainment of each Company Target Stock Price remain unchanged from the vesting percentages contained in the Stock Option Agreement as in effect immediately prior to the effective date of the 2022 Letter Agreement.
The 2022 Letter Agreement also adds a holding period with respect to any shares acquired pursuant to the exercise of any portion of the option. As of the Effective Date, Mr. Ingram will not be permitted during the Holding Period (as defined below) to sell or otherwise transfer or dispose of any of the shares acquired pursuant to the exercise of any portion of the option after deduction of any shares withheld or sold to pay the applicable aggregate exercise price and/or withholding taxes applicable to the exercise of the relevant portion of the option (other than certain transfers permitted for estate planning purposes where the transferee would be subject to the Holding Period).
“Holding Period” is defined in the 2022 Letter Agreement as the one year period commencing on the exercise of any portion of the stock option, except that the Holding Period shall automatically end on the earliest to occur of the following: a Change in Control, Mr. Ingram’s death or disability, termination of Mr. Ingram by the Company without “Cause,” termination by Mr. Ingram with “Good Reason”, or Mr. Ingram’s termination following non-renewal by the Company and Mr. Ingram of the “Employment Term” as provided in Section 2 of the Employment Agreement (and as each such term is defined in the Employment Agreement).