DEF 14A of Nurix Therapeutics, Inc.
Filed Mar 27, 2024 · FY20230001140361-24-015447
Compensation Committee
| • | evaluating and recommending non-employee director compensation arrangements for determination by our Board of Directors; |
Compensation Committee
| • | overseeing our compliance with regulatory requirements associated with the compensation of directors, officers and employees. |
Considerations in Evaluating Director Nominees
Considerations in Evaluating Director Nominees The Nominating and Corporate Governance Committee is responsible for identifying, considering and recommending candidates to the Board of Directors for Board membership. A variety of methods are used to identify and evaluate director nominees, with the goal of maintaining and further developing a diverse, experienced and highly qualified Board of Directors. Candidates may come to our attention through current members of our Board of Directors, professional search firms, stockholders or other persons. The Nominating and Corporate Governance Committee will recommend to the Board of Directors for selection all nominees to be proposed by the Board of Directors for election by the stockholders, including approval or recommendation of a slate of director nominees to be proposed by the Board of Directors for election at each annual meeting of stockholders, and will recommend all director nominees to be appointed by the Board of Directors to fill interim director vacancies. Our Board of Directors encourages selection of directors who will contribute to the company’s overall corporate goals and diversity. The Nominating and Corporate Governance Committee may from time to time review and recommend to the Board of Directors the desired qualifications, expertise and characteristics of directors, including such factors as diversity, breadth of experience, knowledge about our business and industry, willingness and ability to devote adequate time and effort to the Board of Directors, ability to contribute to the Board of Directors’ overall effectiveness, and the needs of the Board of Directors and its committees. Exceptional candidates who do not meet all of these criteria may still be considered. In evaluating potential candidates for the Board of Directors, the Nominating and Corporate Governance Committee considers these factors in the light of the specific needs of the Board of Directors at that time. In addition, under our Corporate Governance Guidelines, a director is expected to spend the time and effort necessary to properly discharge such director’s responsibilities. Accordingly, a director is expected to regularly attend meetings of the Board of Directors and committees on which such director sits, and to review, prior to meetings, the materials distributed in advance for such meetings. Thus, the number of other public company boards and other boards (or comparable governing bodies) on which a prospective nominee is a member, as well as his or her other professional responsibilities, will be considered. Also, under our Corporate Governance Guidelines, there are no limits on the number of three-year terms that may be served by a director. However, in connection with evaluating recommendations for nomination for reelection, the Nominating and Corporate Governance Committee considers director tenure. We value diversity on a company-wide basis but have not adopted a specific policy regarding Board diversity.
Stockholder Recommendations for Nominations to the Board of Directors
Stockholder Recommendations for Nominations to the Board of Directors The Nominating and Corporate Governance Committee will consider properly submitted stockholder recommendations for candidates for membership on our Board of Directors who meet the minimum qualifications as described above. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder. A stockholder of record can nominate a candidate for election to the Board of Directors by complying with the procedures in Article I, Section 1.12 of our amended and restated bylaws. Any eligible stockholder who wishes to submit a nomination should review the requirements in the amended and restated bylaws on nominations by stockholders. Any nomination should be sent in writing to our Secretary, Nurix Therapeutics, Inc., 1700 Owens Street, Suite 205, San Francisco, California, 94158. Submissions must include the full name of the proposed nominee, complete biographical information, a description of the proposed nominee’s qualifications as a director, other information specified in our amended and restated bylaws, and a representation that the nominating stockholder is a beneficial or record holder of our stock. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected. These candidates are evaluated at meetings of the Nominating and Corporate Governance Committee and may be considered at any point during the year. If any materials are provided by a stockholder in connection with the recommendation of a director candidate, such materials are forwarded to the Nominating and Corporate Governance Committee. Additional information regarding the process for properly submitting stockholder nominations for candidates for membership on our Board of Directors is set forth below under “Stockholder Proposals to Be Presented at Next Annual Meeting.”
ELECTION OF CLASS I DIRECTORS
ELECTION OF CLASS I DIRECTORS Our Board of Directors is divided into three classes. Each class serves for three years, with the terms of office of the respective classes expiring in successive years. Directors and director nominees in Class I will stand for election at the Annual Meeting. The terms of office of directors in Class II and Class III do not expire until the annual meetings of stockholders to be held in 2025 and 2026, respectively. Our Nominating and Corporate Governance Committee recommended to our Board of Directors, and our Board of Directors nominated, Dr. Lacey and Ms. Gregory, each an incumbent Class I director, for election as Class I directors at the Annual Meeting. At the recommendation of our Nominating and Corporate Governance Committee, our Board of Directors proposes that each of the Class I nominees be elected as a Class I director for a three-year term expiring at the annual meeting of stockholders to be held in 2027 and until such director’s successor is duly elected and qualified or until such director’s earlier resignation or removal. Each director will be elected by a plurality of the votes present at the virtual Annual Meeting or represented by proxy at the Annual Meeting and entitled to vote on the election of directors. This means that the two individuals nominated for election to the Board of Directors at the Annual Meeting receiving the highest number of “FOR” votes will be elected. As a result, any shares not voted “FOR” a particular nominee, whether as a result of a withhold vote or a broker non-vote, will not be counted in such nominee’s favor and will have no effect on the outcome of the election. You may vote “FOR ALL,” “WITHHOLD ALL,” or vote “FOR ALL EXCEPT” one or more of the nominees you specify. Shares represented by proxies will be voted “FOR ALL” unless the proxy is marked to withhold authority to so vote. You may not cumulate votes in the election of directors. If either nominee for any reason is unable to serve, the proxies may be voted for such substitute nominee as the proxy holders, who are officers of our company, might determine. Each nominee has consented to being named in this proxy statement and to serve if elected. Proxies may not be voted for more than two directors.
Nominees to the Board of Directors
Nominees to the Board of Directors The nominees and their ages as of March 21, 2024, are provided in the table below. Additional biographical information for each nominee is set forth in the text below the table.
Nominees to the Board of Directors
| Name | Age | Class | | Julia P. Gregory(1)(2) | 71 | Class I Director | | David L. Lacey, M.D.(3)(4) | 71 | Class I Director |
Nominees to the Board of Directors
| (1) Member of our Audit Committee. |
Nominees to the Board of Directors
| (2) Member of our Nominating and Corporate Governance Committee. |
Nominees to the Board of Directors
| (3) Member of our Compensation Committee. |
Nominees to the Board of Directors
| (4) Member of our Development Advisory Committee. |
Nominees to the Board of Directors
Julia P. Gregory has served as a member of our Board of Directors since August 2019. Ms. Gregory is currently Chair and Chief Executive Officer of Isometry Advisors, Inc., a biotechnology financial, strategy, and management advisory firm. Ms. Gregory formerly served as Chief Executive Officer at ContraFect Corporation (ContraFect), a biotechnology company focused on therapeutics for drug resistant infectious diseases, from November 2013 through March 2016, and as a member of its board of directors from April 2014 through March 2016. Prior to her appointment as Chief Executive Officer, Ms. Gregory served as ContraFect’s Executive Vice President and Chief Financial Officer from July 2012 to November 2013. From 2009 to August 2011, Ms. Gregory served as President and Chief Executive Officer of Five Prime Therapeutics, Inc., and from 2000 to 2008 she served as Executive Vice President, Corporate Development and Chief Financial Officer of Lexicon Pharmaceuticals, Inc. (Lexicon Pharmaceuticals). In addition, Ms. Gregory has twenty years of investment banking experience, including at Dillon, Read & Co. and at Punk, Ziegel & Company, where she served as the head of investment banking and head of its life sciences practice. Ms. Gregory currently serves on the board of directors of Biohaven Ltd. Ms. Gregory holds a B.A. from George Washington University and an M.B.A. from the Wharton School at the University of Pennsylvania. We believe that Ms. Gregory is qualified to serve as a member of our Board of Directors because of her industry leadership and expertise in strategy development and implementation, investment banking and business development. David L. Lacey, M.D., has served as Chairman of our Board of Directors since August 2019, and as a member of our Board of Directors since April 2016. Dr. Lacey is a biopharmaceutical consultant at David L. Lacey LLC, where he advises academic institutions, biotechnology companies, and venture capital firms, a position he has held since July 2011. Dr. Lacey currently serves on the board of directors of Arcus Biosciences, Inc., Atreca, Inc., and Inbiomotion SL. From 1994 until his retirement in 2011, Dr. Lacey held various positions, including Senior Vice President of Discovery Research, at Amgen Inc. Dr. Lacey holds a B.A. in Biology from the University of Colorado, Denver and an M.D. from the University of Colorado School of Medicine. We believe that Dr. Lacey is qualified to serve on our Board of Directors because of his extensive experience both in leading drug discovery and as an advisor to companies in the life sciences industry.
Continuing Directors
Continuing Directors The directors who are serving for terms that end following the Annual Meeting and their ages as of March 21, 2024, are provided in the table below. Additional biographical information for each continuing director is set forth in the text below the table.
Continuing Directors
| Name | Age | Class | | Lori A. Kunkel, M.D.(1)(2) | 66 | Class III Director | | Judith A. Reinsdorf, J.D.(3)(4) | 60 | Class II Director | | Edward C. Saltzman(1)(2) | 69 | Class II Director | | Arthur T. Sands, M.D., Ph.D. | 62 | Class III Director | | Paul M. Silva(3)(4) | 58 | Class III Director |
Continuing Directors
| (1) Member of our Compensation Committee. |
Continuing Directors
| (2) Member of our Development Advisory Committee. |
Continuing Directors
| (3) Member of our Audit Committee. |
Continuing Directors
| (4) Member of our Nominating and Corporate Governance Committee. |
Continuing Directors
Lori A. Kunkel, M.D., has served as a member of our Board of Directors since July 2019. Dr. Kunkel is a biotechnology consultant at LAK505, LLC (previously D2D, LLC), where she advises on drug development, strategy and commercialization, a position she has held since 2004. Dr. Kunkel currently serves on the board of directors of Oric Pharmaceuticals, Inc. and K36 Therapeutics, Inc. She previously served as a director of Loxo Oncology, Inc. from October 2014 until February 2019, Tocagen Inc. from September 2015 to June 2020, Maverick Therapeutics Inc. from May 2015 to August 2021, and Curis, Inc. from November 2016 to September 2022. Dr. Kunkel served as Chief Medical Officer of Pharmacyclics LLC from 2011 to 2013 and of Proteolix, Inc. from 2007 to 2009. Dr. Kunkel also serves as a scientific advisor to a number of public and private biotechnology companies. Dr. Kunkel earned a B.A. in Biology from University of California, San Diego and an M.D. from the University of Southern California. We believe that Dr. Kunkel is qualified to serve on our Board of Directors due to her clinical development expertise and experience in the biopharmaceutical industry. Judith A. Reinsdorf, J.D., has served as a member of our Board of Directors since October 2021. Ms. Reinsdorf has extensive experience in executive roles across multiple industries. She most recently served as executive vice president and general counsel of Johnson Controls International plc, a global leader in building products and technology and integrated solutions, from September 2016 to November 2017, following its merger with Tyco International plc, where she served as executive vice president and general counsel from March 2007 until September 2016. She currently serves on the board of directors of EnPro Inc. and Toll Brothers, Inc., on the board of trustees of the University of Rochester, and on the advisory board of the NACD New Jersey Chapter. Previously, Ms. Reinsdorf served on the boards of Alexion Pharmaceuticals, Inc. until its acquisition by AstraZeneca PLC in 2021, The Dun & Bradstreet Corporation from 2013 until 2019 and Cornerstone Building Brands, Inc. from 2021 until it was taken private in 2022. She began her career in 1989 as an associate at Crowell & Moring LLP and held various legal counsel positions at Monsanto, Pharmacia and C.R. Bard. Ms. Reinsdorf holds a B.A. from the University of Rochester and a J.D. from Cornell Law School. We believe that Ms. Reinsdorf is qualified to serve on our Board of Directors due to her extensive experience in executive roles across multiple industries. Edward C. Saltzman has served as a member of our Board of Directors since September 2022. Mr. Saltzman has nearly four decades of consulting and strategic development experience in the pharmaceutical, specialty pharmaceutical and biotechnology industries. He currently serves as a Senior Strategic Advisor for Lumanity Inc. (Lumanity), an Arsenal Capital Partners company focused on improving patient health by accelerating and optimizing access to medical advances, and he served as Lumanity’s Head of Biotech Strategy from March 2022 until March 2023. In 1993, Mr. Saltzman founded Defined Health Inc., an asset development strategy consulting firm, and led it to becoming a preeminent advisor to senior management and boards of directors of biotechnology and biopharmaceutical companies, including those developing novel drug discovery platforms. Following the sale of Defined Health to Cello Health plc (Cello Health) in January 2017, Mr. Saltzman served as President of Cello Health’s bio-consulting business unit until mid-2017, when he became the unit’s Executive Chairman, a position he held until March of 2022 when Cello Health was merged with several other businesses and renamed Lumanity. Mr. Saltzman is a frequent speaker on industry issues and is a past recipient of the LES Frank Barnes Mentoring Award for his contributions to education in the life sciences sector. Mr. Saltzman currently is a Venture Advisor to the Israel Biotech Fund and Hibiscus Capital Management. Mr. Saltzman previously served on the board of directors of Vidac Pharmaceuticals Inc. and Saniona AB. Mr. Saltzman holds a B.A. in Journalism from New York University. We believe Mr. Saltzman is qualified to serve on our Board of Directors due to his extensive experience in strategic development in the pharmaceutical, specialty pharmaceutical and biotechnology industries. Arthur T. Sands, M.D., Ph.D., has served as our President since June 2020, and as our Chief Executive Officer and a member of our Board of Directors since September 2014. Prior to joining us, Dr. Sands was the co-founder and served as President, Chief Executive Officer, and as a member of the board of directors of Lexicon Pharmaceuticals, a biopharmaceutical company focused on target validation and pharmaceutical development, from 1995 to July 2014. Before founding Lexicon Pharmaceuticals, Dr. Sands served as an American Cancer Society postdoctoral fellow in the Department of Human and Molecular Genetics at Baylor College of Medicine. Dr. Sands holds a B.A. in Economics and Political Science from Yale University and an M.D. and a Ph.D. in Cell Biology from Baylor College of Medicine. We believe Dr. Sands is qualified to serve on our Board of Directors due to his scientific and historical experience gained from serving as our Chief Executive Officer, combined with his previous scientific training and qualifications and the skills and experience he has developed during his extensive career in the life sciences industry. Paul M. Silva has served as a member of our Board of Directors since October 2021. Mr. Silva is a biotechnology leader with more than 30 years of finance and operational experience. He served as senior vice president, chief accounting officer, at Vertex Pharmaceuticals Incorporated (Vertex), a global biotechnology company, from April 2011 until his retirement in April 2021, and also served as the company’s interim chief financial officer from January 2019 to April 2019. Mr. Silva joined Vertex in August 2007 and was the company’s vice president and corporate controller from September 2008 through April 2011. Prior to Vertex, he held positions at Iron Mountain Incorporated, Thermo Electron Corporation, and Anderson LLP. Mr. Silva holds a B.S. in accounting from Assumption College. We believe Mr. Silva is qualified to serve on our Board of Directors because of his extensive finance and operational experience as a biotechnology leader.
Non-Employee Director Compensation
Non-Employee Director Compensation For the fiscal year ended November 30, 2023, our non-employee directors received compensation pursuant to the following non-employee director compensation program adopted by our Board of Directors, which was unchanged from our prior fiscal year:
Non-Employee Director Compensation
| ○ | Cash Compensation. The program provides for an annual cash retainer of $50,000 to each non-employee director. Additionally, the Chair of our Board of Directors receives an additional annual payment of $35,000; the Chairs of our Audit, Compensation, Nominating and Corporate Governance and Development Advisory Committees receive an additional annual payment of $15,000, $10,000, $10,000 and $10,000 respectively; and the members of our Audit, Compensation, Nominating and Corporate Governance and Development Advisory Committees receive an additional annual payment of $7,500, $5,000, $5,000 and $5,000, respectively. The cash compensation is paid quarterly in arrears and is pro-rated for partial quarters served. |
Non-Employee Director Compensation
| ○ | Equity Compensation. Each non-employee director who is elected or appointed to our Board of Directors is granted an option to purchase 50,000 shares of our common stock upon the director’s initial appointment to our Board of Directors, referred to as the Initial Grant. The Initial Grant will vest in 36 equal installments on each monthly anniversary of the date of grant, such that the Initial Grant will become fully vested and exercisable on the three-year anniversary of the date of grant, subject to the director’s continued service through each applicable vesting date. Additionally, effective as of the date of our annual meeting of stockholders, each non-employee director who is serving on our Board of Directors immediately prior to, and will continue to serve on the Board of Directors following, our annual meeting of stockholders, will be granted an option to purchase 25,000 shares of our common stock on the date of such annual meeting of stockholders, referred to as the Annual Grant. Each Annual Grant will vest on the anniversary of the date of grant, such that the Annual Grant will become fully vested and exercisable on the one-year anniversary of the date of grant, or if earlier, the next annual meeting of our stockholders, subject to the director’s continued service through the vesting date. |
Non-Employee Director Compensation
Non-employee directors are also reimbursed for reasonable expenses incurred in serving as a director, including travel expenses for attending meetings of our Board of Directors. The following table sets forth the compensation earned by or paid to our non-employee directors for services provided during the fiscal year ended November 30, 2023. Dr. Sands, our President and Chief Executive Officer, received no compensation for his service as a director during fiscal year 2023.
Non-Employee Director Compensation
| Name | Fees Earned or Paid in Cash($) | Option Awards($)(1) | Total($) | | Julia P. Gregory | 75,000 | 163,285 | 238,185 | | Lori A. Kunkel, M.D. | 65,000 | 163,285 | 228,185 | | David L. Lacey, M.D. | 100,000 | 163,285 | 263,285 | | Judith A. Reinsdorf, J.D. | 62,500 | 163,285 | 225,785 | | Edward C. Saltzman | 60,000 | 163,285 | 223,285 | | Paul M. Silva | 62,500 | 163,285 | 225,785 |
Non-Employee Director Compensation
| (1) The amounts reported in this column represent the aggregate grant date fair value of the stock options granted to our directors during the fiscal year ended November 30, 2023, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) Topic 718. The assumptions used in calculating the aggregate grant date fair value of the stock options reported in this column are set forth in Note 8 to our financial statements included in our Annual Report. The amounts reported in this column reflect the accounting cost for these stock options, and do not correspond to the actual economic value that may be received by our directors from the stock options. For information regarding the number of stock options held by each non-employee director as of November 30, 2023, see the table below: |
Non-Employee Director Compensation
| Name | Option Awards(#) | | Julia P. Gregory | 111,666 | | Lori A. Kunkel, M.D. | 64,305 | | David L. Lacey, M.D. | 126,666 | | Judith A. Reinsdorf, J.D. | 77,500 | | Edward C. Saltzman | 75,000 | | Paul M. Silva | 77,500 |
Non-Employee Director Compensation
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR ALL” NOMINEES IN THE ELECTION OF CLASS I DIRECTORS.
Compensation Program and Practices
| WHAT WE DO | | WHAT WE DON’T DO | | | ✔ | Directly link pay to performance | ✘ | No “golden parachute” excise tax gross-ups | | ✔ | Balance risks and rewards in our compensation program | ✘ | No single trigger change in control provisions | | ✔ | Maintain a robust Insider Trading Policy | ✘ | No material perquisites for our executive officers | | ✔ | Engage an independent executive compensation consultant to provide advisory services directly to the Compensation Committee | ✘ | No excessive severance payments for departing executive officers | | ✔ | Maintain a compensation recovery policy to ensure accountability | | |
Say-on-Pay Results
Say-on-Pay Results At our 2023 Annual Meeting, we conducted a non-binding stockholder advisory vote on the compensation of our named executive officers (commonly known as a “say-on-pay” proposal). Our stockholders approved the fiscal 2022 compensation of our named executive officers with approximately 61% of the votes cast in favor of our say-on-pay proposal. In contrast, at our annual meeting of stockholders in May 2022, which was the first year our say-on-pay proposal was presented to our stockholders, our say-on-pay proposal received the support of 96% of the votes cast. Our Compensation Committee believes the decreased support for fiscal year 2022 compensation as compared to fiscal year 2021 compensation occurred primarily as a result of a one-time company-wide equity award retention program during fiscal year 2022, which included our named executive officers. Our Compensation Committee determined that this fiscal year 2022 company-wide equity award retention program provided a necessary incentive to keep our team focused on driving towards our success at a time when many stock options held by our employees, including our named executive officers, were significantly underwater and were no longer providing incentive or retentive value. During fiscal year 2023, we did not grant similar one-time retention equity awards to our employees, including our named executive officers. Following our 2023 Annual Meeting, our Compensation Committee reviewed the results of our say-on-pay proposal and concluded that, although the results with respect to our fiscal 2022 compensation were disappointing, it continues to believe that our executive compensation program is correctly aligned with the current stage of our company’s maturity and is effective at attracting and retaining top-tier executives to drive our strategic initiatives in a highly competitive market. Consequently, our Compensation Committee did not make any significant changes to our executive compensation program based on its review of the voting results, other than making a decision not to grant any additional one-time retention equity awards in fiscal 2023. Our Board of Directors values the opinions of our stockholders, and our Compensation Committee will continue to consider the results of future stockholder votes, as well as feedback received throughout the year, when making compensation decisions for our executives, including our named executive officers.
Role of Independent Compensation Consultant
Role of Independent Compensation Consultant The Compensation Committee retained Aon as its independent outside compensation consultant to provide objective analysis in support of our compensation program. The Compensation Committee has sole authority to retain or replace its independent compensation consultants, and annually evaluates Aon’s independence and performance under applicable SEC rules and Nasdaq listing rules. The Compensation Committee believes that working with an independent compensation consultant helps inform and support our objectives to recruit and retain qualified executives and align executive and stockholder interests, and ensures that executive compensation packages appropriately motivate and reward ongoing achievement of our long term business goals. The Compensation Committee conducted a specific review of its relationship with Aon in fiscal year 2023 and determined that Aon’s work for the Compensation Committee did not raise any conflicts of interest. For our fiscal year 2023, Aon assisted the Compensation Committee with, among other things:
Role of Independent Compensation Consultant
| • | Providing compensation-related data for a peer group of companies to serve as a basis for assessing competitive compensation practices; |
Role of Independent Compensation Consultant
| • | Reviewing and assessing our current non-employee director, Chief Executive Officer and other executive officer compensation policies and practices and equity profile, relative to market practices; |
Role of Independent Compensation Consultant
| • | Reviewing and assessing our current executive compensation program relative to market practices to identify any potential changes or enhancements to be brought to the attention of the Compensation Committee; and |
Role of Independent Compensation Consultant
| • | Reviewing market practices regarding base salary, bonus and equity programs. |
Use of a Peer Group & Competitive Data
Use of a Peer Group & Competitive Data With Aon’s analysis and recommendations, in August 2022 the Compensation Committee developed and approved a peer group of companies to inform a broad perspective on competitive pay levels and practices for making fiscal year 2023 compensation decisions. When selecting peers, the Compensation Committee used the following criteria:
Use of a Peer Group & Competitive Data
| • | Industry – U.S.-based biotechnology and pharmaceutical companies, with an emphasis on companies that have recently gone public |
Use of a Peer Group & Competitive Data
| • | Stage – Target pre-clinical and early clinical-stage (phase 1 or 2) companies, with an emphasis on those that focus on immuno-oncology |
Use of a Peer Group & Competitive Data
| • | Market Capitalization – between $250 million and $2.5 billion (approximately 0.3x to 3.0x Nurix’s 30-day average market cap when the analysis was completed) |
Use of a Peer Group & Competitive Data
| • | Location – preference weighted toward Bay Area companies, or other biotech “hubs” |
Use of a Peer Group & Competitive Data
| • | Headcount – generally between 50 and 500 employees |
Use of a Peer Group & Competitive Data
Using the above criteria, the Compensation Committee determined the fiscal year 2023 peer group would consist of the following 21 companies:
Use of a Peer Group & Competitive Data
| Allogene Therapeutics | iTeos Therapeutics | RAPT Therapeutics | | Arcus Biosciences | Kezar Life Sciences | Relay Therapeutics | | Arvinas | Kronos Bio | Replimmune Group | | C4 Therapeutics | Kymera Therapeutics | Revolution Medicines | | Gossamer Bio | Mersana Therapeutics | Sutro Biopharma | | IDEAYA Biosciences | Nkarta | Turning Point Therapeutics | | IGM Biosciences | ORIC Pharmaceuticals | Zentalis Pharmaceuticals |
Use of a Peer Group & Competitive Data
In setting compensation for our executive officers, including our named executive officers, the Compensation Committee uses competitive compensation data from an Aon annual total compensation study of the selected peer group companies and other relevant survey sources to inform its decisions about overall compensation opportunities and specific compensation elements. The Compensation Committee uses our peer group as one data point among many when setting executive pay packages.
ELEMENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
ELEMENTS OF OUR EXECUTIVE COMPENSATION PROGRAM The Company’s executive compensation program consists of three primary elements: base salaries, annual cash incentives, and long-term equity awards, which for fiscal year 2023 was provided in the form of stock options and RSUs. As noted above, our Compensation Committee consults with our independent compensation consultant and, among other considerations, reviews the pay practices of our peer group in determining the mix and size of each element of our compensation program.
Annual Cash Incentives
Annual Cash Incentives We believe that a portion of the target total cash compensation for each named executive officer should be in the form of an annual cash incentive opportunity, which is intended to motivate our executive officers to achieve annual corporate and individual performance objectives. The CEO does not have individual performance objectives as he is more directly responsible for the achievement of our corporate objectives. Each named executive officer’s target bonus is calculated as a percentage of his or her base salary. In February 2023, the Board of Directors, upon a recommendation from the Compensation Committee, determined the target bonus percentage for Drs. Sands and Hansen and Mr. van Houte for fiscal year 2023. Based on their consideration of the compensation practices of the fiscal year 2023 peer group, the Board of Directors determined that the CEO’s target bonus percentage and the other named executive officers’ target bonus percentages would remain unchanged at 60% and 40%, respectively. For fiscal year 2023, the annual bonuses for our named executive officers were based on the achievement of corporate objectives and, for the named executive officers other than the CEO, individual performance objectives, with bonuses weighted at 70% for corporate performance objectives (100% for the CEO) and 30% for individual objectives for the named executive officers other than the CEO. We believe this weighting is appropriate as it incentivizes significant focus on strategic corporate goals, as well as individual growth and leadership. The corporate performance goals for the fiscal year 2023 bonuses were determined by our Board of Directors, upon recommendation from the Compensation Committee, and included certain developmental, research, financial, and operational milestones. In addition, our fiscal year 2023 bonus program included two stretch goals under which any actual annual cash bonus otherwise payable could be increased if our stretch goals were achieved, such that the maximum bonus that could have been achieved for fiscal year 2023 was 125% of the executive’s target bonus opportunity. We did not provide for any guaranteed minimum bonus payment. The Compensation Committee did not weight our 2023 corporate goals and retained full discretion to determine the corporate goal achievement based on all factors and circumstances effecting achievement. The corporate objectives were designed to directly impact our ability to advance and expand our product portfolio platform, advance our strategic business and financial partnerships, advance our hiring needs with sufficient fiscal discipline to retain cash runway, and increase the overall value of the Company in the future. In particular, our product development goals emphasized the importance of meeting key clinical milestones and creating shareholder value. Likewise, our product development goals were aligned with our strategic investment in research and development. The goals pertain to confidential company development and business plans, the disclosure of which in any additional granularity would result in competitive harm to the Company. The Board of Directors believed that each of these goals would be significantly challenging and would require a high level of performance in order to be achieved. In February 2024, the independent members of our Board of Directors reviewed performance against the fiscal year 2023 corporate goals. The independent members of our Board of Directors recognized the effective execution and significant progress made on certain critical business goals, including the advancement of our clinical programs and the achievement of our internal research goals and those related to our partnered programs. The independent members of our Board of Directors considered these achievements to be significant. Accordingly, our Board of Directors determined that our corporate goals were achieved at 100% of target. The Compensation Committee and the independent members of our Board of Directors, following recommendations from our Compensation Committee, determined that Dr. Hansen achieved her individual performance objectives at 110% of target for a total bonus achievement of 103% of target and Mr. van Houte achieved his individual performance objectives at 100% of target for a total bonus achievement of 100% of target. Since the CEO’s performance objectives are equivalent to the corporate performance objectives, Dr. Sands’ bonus was earned at 100% of target. The independent members of our Board of Directors and our Compensation Committee approved cash bonuses for fiscal year 2023 for the named executive officers as follows:
Annual Cash Incentives
| Executive | Target Annual Incentive (as a % of Base Salary) | Target Annual Incentive ($) | 2023 Earned Award ($) | | Arthur T. Sands | 60 | 355,350 | 355,350 | | Hans van Houte | 40 | 193,640 | 193,640 | | Gwenn M. Hansen | 40 | 197,760 | 203,693 |
Annual Equity Grants
Annual Equity Grants Because of the direct relationship between the value of our equity awards and the fair market value of our common stock, we believe that granting long-term equity awards is the best method of motivating our named executive officers in a manner that aligns their interest with our long-term strategic direction and the interests of our stockholders, as well as providing our executive officers with an incentive to remain with us as their equity awards vest. We have historically granted equity awards to new executive officers upon the commencement of their employment and consider additional grants to existing executive officers, including our named executive officers, annually, based on our overall corporate performance, individual performance, the equity award practices of our peer group, the executive’s potential for future responsibility, the criticality of his or her work to our long-term success, and the retentive value of the executive officers’ outstanding awards. For fiscal year 2023, our long-term incentive program consisted of stock options granted to the CEO and a mix of stock options and RSUs granted to the other named executive officers. As discussed above, these stock options are intended to incentivize delivery of sustainable long-term value and to provide strong retentive value for our executive officers. We believe stock options continued to be an appropriate equity instrument for our named executive officers for fiscal year 2023, as stock options will only have value if our stock price rises and therefore reward performance and strong growth and provide strong retentive value for our named executive officers. Additionally, we grant time-based RSUs to our named executive officers (other than the CEO) as we believe RSUs also serve as an important retention vehicle and align the interests of management and stockholders to promote stability and retention of our executive team while being less dilutive than stock options. Our Compensation Committee worked with its independent compensation consultant to determine the appropriate pay mix between equity compensation and cash compensation and considered the practices of our peer group as one data point in their determination of the appropriate proportion and size of the equity grants. The Compensation Committee also took into consideration each named executive officer’s recent performance history, his or her potential for future responsibility and the criticality of his or her work to the long-term success of our company as well as the retentive hold of his or her then-outstanding equity awards and our retention needs. The Compensation Committee has the discretion to give relative weight to each of these factors as it sets the size of the equity grant to appropriately create an opportunity for reward based on increasing stockholder value. Consistent with prior years, and based on the analysis and considerations described above, our Compensation Committee granted annual refresh equity awards to our named executive officers in February 2023. As noted above, our CEO received only stock options and our other named executive officers received a split of 70% stock options and 30% RSUs. Our annual stock options and annual RSUs have three-year vesting provisions in order to align with long-term value creation and provide a strong retention incentive for our named executive officers.
Fiscal Year 2023 Equity Awards
Fiscal Year 2023 Equity Awards
Fiscal Year 2023 Equity Awards
| Executive | (#) | Total Grant Date Fair Value ($)(3) | | Arthur T. Sands | 448,000(1) | 3,376,799 | | Hans van Houte | 112,900(2) | 930,004 | | Gwenn M. Hansen | 112,900(2) | 930,004 |
Fiscal Year 2023 Equity Awards
| (1) Consists of 448,000 options granted on February 14, 2023 |
Fiscal Year 2023 Equity Awards
| (2) Consists of 88,900 options and 24,000 RSUs granted on February 14, 2023 |
Fiscal Year 2023 Equity Awards
| (3) The amounts reported are computed in accordance with ASC Topic 718 based on the closing price of our common stock on the date of grant. These amounts do not reflect the actual economic value that may ultimately be realized by the named executive officers. |
Employment Agreements
Employment Agreements Each of our named executive officers is employed at-will and their compensation is reviewed periodically and subject to the discretion of our Board of Directors and Compensation Committee. We have entered into offer letters with each of our named executive officers. Each of these offer letters include each officer’s base salary, an annual incentive cash bonus opportunity and standard employee benefit plan participation. The offer letters also acknowledge that each named executive officer will participate in our Severance and Change in Control Plan. Any potential payments and benefits due upon a termination of employment or in connection with a change in control of the company are described below in “ —Potential Payments upon Termination or Change in Control.”
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($) | Total ($) | | Arthur T. Sands, M.D., Ph.D. President, Chief Executive Officer and Director | 2023 | 590,813 | — | | 3,376,799(3) | 355,350 | 40,158(4) | 4,363,120 | | | 2022 | 572,083 | — | | 8,505,239 | 293,250 | 45,649(5) | 9,416,222 | | Hans van Houte Chief Financial Officer | 2023 | 482,925 | — | 259,920(3) | 670,084(3) | 193,640 | 5,418(6) | 1,611,987 | | | 2022 | 465,417 | — | 899,990 | 2,756,950 | 171,080 | 14,244(7) | 4,307,781 | | Gwenn M. Hansen, Ph.D. Chief Scientific Officer | 2023 | 493,200 | — | 259,920(3) | 670,084(3) | 203,693 | 5,860(8) | 1,632,757 | | | 2022 | 476,250 | — | 999,993 | 2,163,400 | 180,480 | 4,460(9) | 3,824,583 |
Summary Compensation Table
| (1) The amounts reported in the “Stock Awards” and “Option Awards” columns represent the aggregate grant date fair value of such awards granted to our named executive officers during the fiscal years ended November 30, 2023, and 2022 as computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the aggregate grant date fair value of the stock options reported in this column are set forth in Note 9 to the audited consolidated financial statements included in our Annual Report. Note that the amounts reported in these columns reflect the accounting cost for these equity awards, and do not correspond to the actual economic value that may be received by our named executive officers from the equity awards. |
Summary Compensation Table
| (2) For additional information regarding the non-equity incentive plan compensation, see “—Overview and Narrative—Elements of our Executive Compensation Program—Annual Cash Incentives.” |
Summary Compensation Table
| (3) For more information regarding these awards, including vesting information, see “Outstanding Equity Awards at 2022 Fiscal Year-End Table” below. |
Summary Compensation Table
| (4) The amount includes (i) $3,500 in 401(k) plan matching contributions, (ii) $680 for reimbursement of cellular phone costs and (iv) $35,978 for housing expenses. |
Summary Compensation Table
| (5) The amount includes (i) $3,500 in 401(k) plan matching contributions, (ii) $960 for reimbursement of cellular phone costs and (iv) $41,189 for housing expenses. |
Summary Compensation Table
| (6) The amount includes (i) $3,500 in 401(k) plan matching contributions, (ii) $960 for reimbursement of cellular phone costs and (iii) $958 for reimbursement for wellness activities. |
Summary Compensation Table
| (7) The amount represents: (i) $3,500 in 401(k) plan matching contributions; (ii) $960 for reimbursement of cellular phone; (iii) $900 for reimbursement for wellness activities; and (iv) $8,884 for housing expenses. |
Summary Compensation Table
| (8) The amount includes (i) $3,500 in 401(k) plan matching contributions, (ii) $960 for reimbursement of cellular phone costs and (iii) $1400 for reimbursement for wellness activities. |
Summary Compensation Table
| (9) The amount includes (i) $3,500 in 401(k) plan matching contributions and (ii) $960 for reimbursement of cellular phone costs. |
Outstanding Equity Awards at 2023 Fiscal Year-End
Outstanding Equity Awards at 2023 Fiscal Year-End
Outstanding Equity Awards at 2023 Fiscal Year-End
| | Option Awards(1) | | | | | | | Stock Awards | | | Name | Grant Date | Vesting Commencement Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | EIP Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Units of Stock that have not Vested (#) | Market Value of Units of Stock that have not Vested ($) | | Arthur Sands | 8/29/2019(2) | 6/10/2019 | 249,999 | — | | 1.86 | 8/28/2029 | | | | | 2/27/2020(2) | 2/18/2020 | 153,333 | — | | 7.26 | 2/26/2030 | | | | | 6/14/2020(2) | 6/1/2020 | 100,402 | 17,137 | | 9.57 | 6/13/2030 | | | | | 10/21/2020(2) | 7/23/2020 | 670,141 | 134,029 | | 26.91 | 10/20/2030 | | | | | 2/11/2021(2) | 2/11/2021 | 103,125 | 46,875 | | 38.97 | 2/10/2031 | | | | | 1/20/2022(2) | 1/20/2022 | 137,500 | 162,500 | | 18.89 | 1/19/2032 | | | | | 8/9/2022(2) | 8/9/2022 | 125,000 | 275,000 | | 18.50 | 8/8/2032 | | | | | 2/14/2023(4) | 2/14/2023 | 112,000 | 336,000 | | 10.83 | 2/13/2033 | | | | Hans van Houte | 3/2/2018(2) | 2/2/2018 | 9,027 | — | | 1.20 | 3/1/2028 | | | | | 8/29/2019(2) | 6/10/2019 | 20,136 | — | | 1.86 | 8/28/2029 | | | | | 2/27/2020(2) | 2/18/2020 | 36,504 | — | | 7.26 | 2/26/2030 | | | | | 5/28/2020(2) | 5/28/2020 | 83,333 | — | | 9.57 | 5/27/2030 | | | | | 2/11/2021(2) | 2/11/2021 | 27,500 | 12,500 | | 38.97 | 2/10/2031 | | | | | 1/19/2022(2) | 1/19/2022 | 47,618 | 56,276 | | 19.49 | 1/18/2032 | | | | | 1/19/2022(5) | 1/19/2022 | — | — | | — | — | 25,975 | 506,253 | | | 8/9/2022(2) | 8/9/2022 | 37,500 | 82,500 | | 18.50 | 8/8/2032 | | | | | 2/14/2023(4) | 2/14/2023 | 22,225 | 66,675 | | 10.83 | 2/13/2033 | | | | | 2/14/2023(6) | 2/14/2023 | — | — | | — | — | 20,000 | 216,600 | | Gwenn Hansen | 2/11/2016(3) | 12/14/2015 | 31,333 | — | | 0.84 | 2/10/2026 | | | | | 3/2/2018(2) | 2/2/2018 | 8,333 | — | | 1.20 | 3/1/2028 | | | | | 11/15/2018(2) | 9/3/2018 | 20,000 | — | | 1.68 | 11/14/2028 | | | | | 8/29/2019(2) | 6/10/2019 | 66,666 | — | | 1.86 | 8/28/2029 | | | | | 2/27/2020(2) | 2/18/2020 | 67,466 | — | | 7.26 | 2/26/2030 | | | | | 5/28/2020(2) | 5/28/2020 | 81,905 | — | | 9.57 | 5/27/2030 | | | | | 2/11/2021(2) | 2/11/2021 | 41,250 | 18,750 | | 38.97 | 2/10/2031 | | | | | 1/19/2022(2) | 1/19/2022 | 52,909 | 62,529 | | 19.49 | 1/18/2032 | | | | | 1/19/2022(5) | 1/19/2022 | — | — | | — | — | 28,861 | 562,501 | | | 8/9/2022(2) | 8/9/2022 | 18,843 | 41,455 | | 18.50 | 8/8/2032 | | | | | 2/14/2023 (4) | 2/14/2023 | 22,225 | 66,675 | | 10.83 | 1/18/2033 | | | | | 2/14/2023(6) | 2/14/2023 | — | — | | — | — | 20,000 | 216,600 |
Outstanding Equity Awards at 2023 Fiscal Year-End
| (1) The outstanding stock option awards granted on and after October 21, 2020, were granted under the 2020 Equity Incentive Plan. All other outstanding stock option awards were granted under the 2012 Equity Incentive Plan. |
Outstanding Equity Awards at 2023 Fiscal Year-End
| (2) This stock option vests monthly at the rate of 1/48th of the shares of our common stock underlying the stock option following the vesting commencement date, subject to continued service to the company. |
Outstanding Equity Awards at 2023 Fiscal Year-End
| (3) This stock option vests at a rate of 1/4th of the shares of our common stock underlying the stock option on the one-year anniversary of the vesting commencement date and an additional 1/48th vests monthly thereafter, subject to the executive’s continued service to the company. |
Outstanding Equity Awards at 2023 Fiscal Year-End
| (4) This stock option vests monthly at the rate of 1/36th of the shares of our common stock underlying the stock option following the vesting commencement date, subject to continued service to the company. |
Outstanding Equity Awards at 2023 Fiscal Year-End
| (5) These RSUs vest in substantially equal increments quarterly over four years, with the first quarterly incremental vesting occurring on April 30, 2022, subject to the executive’s continued service to the company. |
Outstanding Equity Awards at 2023 Fiscal Year-End
| (6) These RSUs vest in substantially equal increments quarterly over three years, with the first quarterly incremental vesting occurring on July 30, 2023, subject to the executive’s continued service to the company. |
Pay versus Performance
Pay versus Performance In accordance with rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive compensation for our principal executive officer (“PEO”) and Non-PEO NEOs and Company performance for the fiscal years listed below. The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown.
Pay versus Performance
| Year | Summary Compensation Table Total for PEO(1) ($) | Compensation Actually Paid to PEO(1)(2)(3) ($) | Average Summary Compensation Table Total for Non-PEO NEOs(1) ($) | Average Compensation Actually Paid to Non-PEO NEOs(1)(2)(3) ($) | Value of Initial Fixed $100 Investment based on:(4) TSR ($) | Net Income ($ Millions) | | 2023 | 4,363,120 | (913,889) | 1,622,372 | 125,731 | 21.58 | (143.9) | | 2022 | 9,416,222 | (5,024,024) | 4,066,182 | 916,179 | 42.99 | (180.4) |
Pay versus Performance
| (1) Arthur T. Sands was our PEO for each year presented. The individuals comprising the Non-PEO NEOs for each year presented are listed below. |
Pay versus Performance
| 2022-2023 | | Hans van Houte | | Gwenn M. Hansen |
Pay versus Performance
| (2) The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the Company’s NEOs. These amounts reflect the Summary Compensation Table Total with certain adjustments as described in footnote 3 below. |
Pay versus Performance
| (3) Compensation Actually Paid reflects the exclusions and inclusions for the PEO and the Non-PEO NEOs as set forth below. Equity values are calculated in accordance with FASB ASC Topic 718. Amounts in the Exclusion of Stock Awards and Option Awards column are the amounts from the Stock Awards and Option Awards columns set forth in the Summary Compensation Table. |
Pay versus Performance
| Year | Summary Compensation Table Total for PEO ($) | Exclusion of Stock Awards and Option Awards for PEO ($) | Inclusion of Equity Values for PEO ($) | Compensation Actually Paid to PEO ($) | | 2023 | 4,363,120 | (3,376,799) | (1,900,210) | (913,889) | | 2022 | 9,416,222 | (8,505,239) | (5,935,007) | (5,024,024) |
Pay versus Performance
| Year | Average Summary Compensation Table Total for Non-PEO NEOs ($) | Average Exclusion of Stock Awards and Option Awards for Non- PEO NEOs ($) | Average Inclusion of Equity Values for Non- PEO NEOs ($) | Average Compensation Actually Paid to Non- PEO NEOs ($) | | 2023 | 1,622,372 | (930,004) | (566,638) | 125,731 | | 2022 | 4,066,182 | (3,410,167) | 260,164 | 916,179 |
Pay versus Performance
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables:
Pay versus Performance
| Year | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for PEO ($) | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for PEO ($) | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for PEO ($) | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for PEO ($) | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for PEO ($) | Value of Dividends or Other Earnings Paid on Equity Awards Not Otherwise Included for PEO ($) | Total - Inclusion of Equity Values for PEO ($) | | 2023 | 1,272,157 | (2,666,999) | 633,090 | (1,138,458) | — | — | (1,900,210) | | 2022 | 4,613,780 | (6,190,508) | 672,511 | (5,030,790) | — | — | (5,935,007) |
Pay versus Performance
| Year | Average Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Non-PEO NEOs ($) | Average Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Non-PEO NEOs ($) | Average Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Non-PEO NEOs ($) | Average Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Non-PEO NEOs ($) | Average Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Non-PEO NEOs ($) | Average Value of Dividends or Other Earnings Paid on Equity Awards Not Otherwise Included for Non-PEO NEOs ($) | Total - Average Inclusion of Equity Values for Non-PEO NEOs ($) | | 2023 | 376,844 | (807,861) | 155,628 | (291,249) | — | — | (566,638) | | 2022 | 1,771,807 | (1,125,605) | 341,153 | (727,192) | — | — | 260,164 |
Pay versus Performance
| (4) Assumes $100 was invested in the Company for the period starting November 30, 2021, through the end of the listed year. Historical stock performance is not necessarily indicative of future stock performance. |
Pay versus Performance
Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Company Total Shareholder Return (“TSR”) The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our Non-PEO NEOs, and the Company’s cumulative TSR over the two most recently completed fiscal years. Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Net Income The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our Non-PEO NEOs, and our Net Income during the two most recently completed fiscal years.
Potential Payments upon Termination or Change in Control
Potential Payments upon Termination or Change in Control Certain of our officers, including our named executive officers, participate in our Executive Severance and Change in Control Plan (Executive Severance Plan). Outside of a Change in Control. Pursuant to the Severance Plan and his Executive Severance Plan participation agreement, if Dr. Sands is terminated without “cause” or resigns for “good reason” (as such terms are defined in the Executive Severance Plan) prior to a “change in control” (as defined in the Executive Severance Plan”) of the company or following the 12-month anniversary of a change in control of the company, he will be entitled to receive a cash amount, payable in a lump sum, equal to his (i) annual base salary and (ii) any annual bonus earned for our prior completed fiscal year to the extent not yet paid. In addition, Dr. Sands will be entitled to continued coverage under our group-healthcare plans for a period ending on the earlier of (x) 12 months following the termination date and (y) the date that he and his covered dependents become eligible for coverage under another employer’s plans. Pursuant to the Executive Severance Plan and their applicable Executive Severance Plan participation agreements, if our other named executive officers (other than Dr. Sands) are terminated without cause or resign for good reason prior to a change in control of the company, or following the 12-month anniversary of a change in control of the company, they will be entitled to receive a cash amount, payable in a lump sum, equal to (i) 0.75 times their annual base salary and (ii) any annual bonus earned for our prior completed fiscal year to the extent not yet paid. In addition, they will be entitled to continued coverage under our group-healthcare plans for a period ending on the earlier of (x) nine months following the termination date and (y) the date that they and their covered dependents become eligible for coverage under another employer’s plans. In Connection with a Change in Control. In the event that Dr. Sands is terminated without cause or resigns for good reason within 12 months following a change in control of the company, then in lieu of the foregoing, he will be entitled to receive a cash amount, payable in a lump sum, equal to (i) two times his annual base salary, (ii) any annual bonus earned for our prior completed fiscal year to the extent not yet paid and (iii) his target bonus for the fiscal year in which the termination occurs. Dr. Sands will also be entitled to continued coverage under our group-healthcare plans for a period ending on the earlier of (x) 24 months following the termination date and (y) the date that Dr. Sands and his covered dependents become eligible for coverage under another employer’s plans. In addition, each then-outstanding equity award that vests subject to Dr. Sand’s continued service will automatically become vested and exercisable in full and any equity awards subject to performance-based vesting criteria will be treated in accordance with the applicable award agreement or other applicable equity incentive plan governing the terms of such equity award. In the event that our named executive officers other than Dr. Sands are terminated without cause or resign for good reason within 12 months following a change in control of the company, then in lieu of the payments and benefits set forth above, they will be entitled to receive a cash amount, payable in a lump sum, equal to (i) their annual base salary, (ii) any annual bonus earned for our prior completed fiscal year to the extent not yet paid and (iii) their target bonus for the fiscal year in which the termination occurs. Such named executive officers will also be entitled to continued coverage under our group-healthcare plans for a period ending on the earlier of (x) 12 months following the termination date and (y) the date that they and their covered dependents become eligible for coverage under another employer’s plans. In addition, each then-outstanding equity award that vests subject to their continued service will automatically become vested and exercisable in full and any equity awards subject to performance-based vesting criteria will be treated in accordance with the applicable award agreement or other applicable equity incentive plan governing the terms of such equity award. The vesting of any outstanding equity award that is not assumed by a successor company following a change in control of the company will automatically accelerate in full without regard to the named executive officer’s termination of service. For purposes of the Executive Severance Plan, “cause” means: an Executive Severance Plan participant (i) has been convicted of, or has pleaded guilty or nolo contendere to, any felony or crime involving moral turpitude, (ii) has engaged in a willful act of misconduct, or committed any act of fraud, theft, embezzlement, misappropriation of funds, breach of fiduciary duty or other willful act of material dishonesty against us, (iii) other than in the case of a termination of employment during the period commencing on the change in control and ending 12 months following the change in control (the “change in control period”), has materially failed or refused to satisfactorily perform the material duties lawfully and reasonably assigned to the him or her or has performed such material duties with gross negligence; (iv) has breached any material term or condition of his or her employment agreement, or Employment, Confidential Information and Intellectual Property Assignment Agreement with us or any other material agreement with us; or (v) acted in willful violation or disregard of any written policy or practice of ours, including a code of conduct, which results in material loss, damage or injury to us; in each case provided that any of the foregoing may be cured, if curable, within 30 days’ notice from us. For purposes of the Executive Severance Plan, “good reason” means: a cessation of an Executive Severance Plan participant’s employment as a result of the participant’s resignation within 120 days after the occurrence of one or more of the following without the participant’s consent: (i) a reduction of more than 10% in participant’s base salary as an employee of the company, except to the extent we implement an equal percentage reduction applicable to all executive officers and management personnel; (ii) a material reduction in the participants duties, responsibilities or authority at the company; provided that this clause (ii) will only apply in the case of a termination during a change in control period; (iii) a change in the geographic location at which the participant must perform services which results in an increase in the one-way commute of the participant by more than 50 miles, provided that our requirement that participant work remotely or return to work at participant’s designated company office following a current or future remote work period required by the company in its sole discretion will not constitute the foregoing change in geographic location; or (iv) a successor of the ours does not assume the Executive Severance Plan. A resignation for good reason will not be deemed to have occurred unless the participant gives us written notice of the condition within 90 days after the condition comes into existence and we fail to remedy the condition within 30 days after receiving the participant’s written notice.
Potential Payments upon Termination or Change in Control
For purposes of the Executive Severance Plan, “change in control” means: the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the company representing more than fifty percent (50%) of the total voting power represented by our then outstanding voting securities; (ii) the consummation of the sale or disposition by the company of all or substantially all of our assets; or (iii) the consummation of a merger or consolidation of the company with any other corporation, other than a merger or consolidation which would result in the our voting securities outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) more than fifty percent (50%) of the total voting power represented by our voting securities or such surviving entity or its parent outstanding immediately after such merger or consolidation; provided that the event also qualifies as a change in control under U.S. Treasury Regulation 1.409A-3(i)(5)(v) or 1.409A-3(i)(5)(vii). All such severance payments and benefits are subject to each named executive officer’s execution of a general release of claims against us. The terms of the Executive Severance Plan supersede all prior agreements with our named executive officers, including their respective individual offer letters and employment agreements, with respect to any severance payments and equity acceleration to which any such named executive officers may be entitled upon a termination of service or change in control of the company. The Executive Severance Plan includes a 280G “best-net” cutback, which would cause an automatic reduction in any payments or benefits that the named executive officer would receive that constitute parachute payments within the meaning of Code Section 280G, in the event such reduction would result in the named executive officer receiving greater payments and benefits on an after-tax basis.