def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant þ
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Definitive Proxy Statement |
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Soliciting Material Pursuant to § 240.14a-12 |
CORNERSTONE THERAPEUTICS INC.
(Name of Registrant as Specified In Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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CORNERSTONE
THERAPEUTICS INC.
1255 CRESCENT GREEN DRIVE,
SUITE 250
CARY, NORTH CAROLINA 27518
April 18,
2011
Dear Fellow Stockholders:
I am pleased to invite you to join us for the Cornerstone
Therapeutics Inc. 2011 Annual Meeting of Stockholders to be held
on May 18, 2011 at 8:30 a.m., local time, at our
offices at 1255 Crescent Green Drive, Suite 250, Cary, NC
27518. Details about the meeting, the nominees for the Board of
Directors and other matters to be acted on are presented in the
Notice of 2011 Annual Meeting of Stockholders and Proxy
Statement that follow.
In addition to annual meeting formalities, we will report to
stockholders generally on Cornerstone Therapeutics Inc.s
business, and will be pleased to answer stockholders
questions relating to Cornerstone Therapeutics.
We hope you plan to attend the Annual Meeting. Please exercise
your right to vote by signing, dating and returning the enclosed
proxy card as described in the Proxy Statement, even if you plan
to attend the meeting. You may also vote by proxy over the
Internet.
On behalf of Cornerstone Therapeutics Board of Directors
and management, it is my pleasure to express our appreciation
for your continued support.
Yours sincerely,
Craig A. Collard
President and Chief Executive Officer
YOUR VOTE
IS IMPORTANT
PLEASE TAKE TIME TO VOTE AS SOON AS POSSIBLE. BY DOING SO, YOU
MAY SAVE
CORNERSTONE THERAPEUTICS THE EXPENSE OF ADDITIONAL
SOLICITATION.
CORNERSTONE
THERAPEUTICS INC.
1255 CRESCENT GREEN DRIVE,
SUITE 250
CARY, NORTH CAROLINA 27518
NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 18,
2011
To our stockholders:
NOTICE IS HEREBY GIVEN that the 2011 Annual Meeting of
Stockholders of Cornerstone Therapeutics Inc. will be held on
May 18, 2011 at 8:30 a.m., local time, at our offices
at 1255 Crescent Green Drive, Suite 250, Cary, NC 27518.
The purposes of the annual meeting are:
1. To elect eight (8) members to our Board of
Directors to serve as directors until the sooner of the election
and qualification of their successors or the next Annual Meeting
of our Stockholders.
2. To ratify the selection by the Audit Committee of Grant
Thornton LLP as our independent registered public accounting
firm for the fiscal year ending December 31, 2011.
3. To hold an advisory vote on executive compensation.
4. To hold an advisory vote on the frequency of future
advisory votes on executive compensation.
Stockholders also will consider and vote on any other matters as
may properly come before the annual meeting or any adjournment
thereof. Our Board of Directors has no knowledge of any other
matters which may come before the meeting.
Stockholders of record on March 28, 2011 are entitled to
notice of, and to vote at, the annual meeting or any adjournment
thereof. Your vote is important regardless of the number of
shares you own. Our stock transfer books will remain open for
the purchase and sale of our common stock.
We hope that all stockholders will be able to attend the annual
meeting in person. However, in order to ensure that a quorum is
present at the meeting, please complete, date, sign and promptly
return the enclosed proxy card whether or not you expect to
attend the annual meeting. A postage-paid envelope, addressed to
First Shareholder Services, our transfer agent and registrar,
has been enclosed for your convenience. You may also vote by
proxy over the Internet. If you attend the meeting, your proxy
will, upon your written request, be returned to you and you may
vote your shares in person.
All stockholders are cordially invited to attend the meeting.
By order of the Board of Directors,
Andrew K. W. Powell, Esq.
Secretary
Cary, North Carolina
April 18, 2011
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, YOUR VOTE IS
IMPORTANT. IN ORDER TO ASSURE THE REPRESENTATION OF YOUR
SHARES AT THE ANNUAL MEETING, PLEASE VOTE AS SOON AS
POSSIBLE OVER THE INTERNET OR BY MAIL.
CORNERSTONE
THERAPEUTICS INC.
PROXY STATEMENT
For
the 2011 Annual Meeting of Stockholders
To Be Held on May 18, 2011
Table of
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CORNERSTONE
THERAPEUTICS INC.
1255 CRESCENT GREEN DRIVE,
SUITE 250
CARY, NORTH CAROLINA 27518
PROXY
STATEMENT
For the
2011 Annual Meeting of Stockholders
To Be Held on May 18, 2011
INFORMATION
CONCERNING SOLICITATION AND VOTING
This proxy statement and the enclosed proxy card are being
furnished in connection with the solicitation of proxies by the
Board of Directors of Cornerstone Therapeutics Inc. for use at
the 2011 Annual Meeting of Stockholders to be held on
May 18, 2011 at 8:30 a.m., local time, at our offices
at 1255 Crescent Green Drive, Suite 250, Cary, NC 27518,
and any adjournment thereof.
All proxies will be voted in accordance with your instructions.
If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any
proxy may be revoked by a stockholder at any time before it is
exercised by attending the meeting and voting in person,
delivering written notice of revocation of your proxy to our
Secretary at any time before voting is closed or timely
submitting another signed proxy card bearing a later date or new
voting instructions over the Internet as described below.
Our Annual Report to Stockholders for the fiscal year ended
December 31, 2010 is being mailed to stockholders with the
mailing of these proxy materials on or about April 18, 2011.
Important
Notice Regarding the Availability of Proxy Materials
For the Stockholder Meeting to Be Held on May 18,
2011
The
annual report and proxy statement will also be available on the
Internet at
www.proxydocs.com/crtx
A copy of our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 as filed with
the Securities and Exchange Commission, or SEC, except for
exhibits, will be furnished without charge to any stockholder
upon written or oral request to Cornerstone Therapeutics Inc.,
Attention of Andrew K. W. Powell, Executive Vice President,
General Counsel, and Secretary, 1255 Crescent Green Drive,
Suite 250, Cary, North Carolina 27518; telephone:
(888) 466-6505.
Voting
Securities and Votes Required
Stockholders of record on March 28, 2011 will be entitled
to notice of and to vote at the annual meeting. On that date,
25,703,434 shares of our common stock were issued,
outstanding and entitled to vote. Each share of common stock
entitles the holder to one vote with respect to all matters
submitted to stockholders at the meeting. We have no other
securities entitled to vote at the meeting.
The representation in person or by proxy of at least a majority
of the shares of common stock issued, outstanding and entitled
to vote at the annual meeting is necessary to establish a quorum
for the transaction of business. If a quorum is not present, the
meeting will be adjourned until a quorum is obtained.
Directors are elected by a plurality of votes cast by
stockholders entitled to vote at the meeting. The ratification
of Grant Thornton LLP as our independent registered public
accounting firm, the proposal relating to the advisory vote on
executive compensation and the proposal relating to the advisory
vote on the frequency of future advisory votes on executive
compensation each require the affirmative vote of the majority
of shares present in person or represented by proxy and voting
on such matter at the annual meeting. The votes will be counted,
tabulated and certified by a representative of First Shareholder
Services, who will serve as the inspector of elections at the
annual meeting.
1
Shares which abstain from voting as to a particular matter, and
shares held in street name by banks, brokers or
other nominees who indicate on their proxy cards that they do
not have discretionary authority to vote such shares as to a
particular matter, which we refer to as broker
non-votes, will be counted for the purpose of determining
whether a quorum exists but will not have any effect upon the
outcome of voting with respect to any matters voted on at the
annual meeting.
Stockholders may vote in person or by proxy. Voting by proxy
will not in any way affect a stockholders right to attend
the meeting and vote in person. Any stockholder voting by proxy
has the right to revoke the proxy at any time before the polls
close at the annual meeting by attending the meeting and voting
in person, delivering written notice of revocation of your proxy
to our Secretary at any time before voting is closed, timely
submitting another signed proxy card bearing a later date or
timely submitting new voting instructions over the Internet as
described below. The shares represented by all properly executed
proxies received in time for the meeting or voted by proxy over
the Internet will be voted as specified. If the shares you own
are held in your name and you do not specify in the proxy card
how your shares are to be voted, they will be voted in favor of
the election as directors of those persons named as nominees in
this proxy statement, in favor of the proposal relating to the
advisory vote on executive compensation, in favor of holding an
advisory vote on executive compensation every three years, and
in favor of the ratification of Grant Thornton LLP as our
independent registered public accounting firm. If any other
matters properly come before the meeting, the persons named in
the accompanying proxy will vote the shares represented by such
proxy on such matters as determined by a majority in voting
power of our directors. If the shares you own are held in
street name, the bank, broker or other nominee, as
the record holder of your shares, is required to vote your
shares in accordance with your instructions. In order to vote
your shares held in street name, you will need to
follow the directions your bank, broker or other nominee
provides you.
If your shares are registered directly in your name, you may
vote:
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Over the Internet. Go to the web site of our
tabulator, First Shareholder Services, at
https://www.shareholderlink.com/fss/crtx/pxsignon.asp
and follow the instructions you will find there. You must
specify how you want your shares voted or your Internet vote
cannot be completed and you will receive an error message. Your
shares will be voted according to your instructions.
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By Mail. Complete, date and sign the enclosed
proxy card and mail it in the enclosed postage-paid envelope to
First Shareholder Services. Your proxy will be voted according
to your instructions. If you do not specify how you want your
shares voted, they will be voted as recommended by our Board of
Directors.
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In Person at the Meeting. If you attend the
meeting, you may deliver your completed proxy card in person or
you may vote by completing a ballot, which will be available at
the meeting.
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If your shares are held in street name for your
account by a bank, broker or other nominee, you may vote:
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Over the Internet. You will receive
instructions from your broker or other nominee if you are
permitted to vote over the Internet.
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By Mail. You will receive instructions from
your broker or other nominee explaining how to vote your shares.
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In Person at the Meeting. Contact the broker
or other nominee that holds your shares to obtain a
brokers proxy card and bring it with you to the meeting.
A brokers proxy is not the form of proxy
enclosed with this proxy statement. You will not be able to vote
shares you hold in street name at the meeting unless
you have a proxy from your broker issued in your name giving you
the right to vote the shares.
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Householding
of Annual Meeting Materials
Some banks, brokers and other nominee record holders may be
participating in the practice of householding proxy
statements and annual reports. This means that only one copy of
our proxy statement and Annual Report to Stockholders may have
been sent to multiple stockholders in your household. We will
promptly deliver a separate copy of either document to you upon
written or oral request to Cornerstone Therapeutics Inc.,
Attention of Andrew K. W. Powell, Executive Vice President,
General Counsel, and Secretary, 1255 Crescent Green Drive,
Suite 250, Cary, North Carolina 27518; telephone:
(888) 466-6505.
If you want to receive separate copies of the proxy statement or
Annual Report to Stockholders in the future, or if you are
receiving multiple copies and would like to receive only one
copy per household, you should contact your bank, broker or
other nominee record holder, or you may contact us at the above
address and phone number.
3
CHIESI
TRANSACTION
On May 6, 2009, we and certain of our stockholders entered
into a series of transactions and agreements with Chiesi
Farmaceutici S.p.A, or Chiesi, which we refer to as the
Chiesi Transaction. These agreements include
(i) a stock purchase agreement between us and Chiesi;
(ii) a separate stock purchase agreement among Chiesi,
Cornerstone Biopharma Holdings, Ltd., an entity controlled by
Craig A. Collard, our President and Chief Executive Officer, and
the Lutz Family Limited Partnership, an entity controlled by
Steven M. Lutz, our Executive Vice President, Manufacturing and
Trade, which we refer to as the Selling Stockholder Stock
Purchase Agreement; (iii) a governance agreement,
which expires on July 28, 2011, among us, Chiesi and, with
respect to certain sections, certain of our stockholders, which
we refer to as the Governance Agreement; (iv) a
license and distribution agreement between us and Chiesi, which
we refer to as the
U.S. CUROSURF®
Agreement; and (v) a stockholders agreement, as
subsequently amended, among Chiesi, Mr. Collard,
Mr. Lutz, Cornerstone Biopharma Holdings, Ltd., the Lutz
Family Limited Partnership and Carolina Pharmaceuticals Ltd., or
Carolina Pharmaceuticals, an entity controlled by
Mr. Collard, which we refer to as the Stockholders
Agreement.
In connection with the closing of the Chiesi Transaction, the
Governance Agreement became effective, and our Board of
Directors approved the amendment and restatement of our bylaws
pursuant to its provisions. Among other things, the Governance
Agreement (i) contains certain governance provisions
related to the structure and composition of our Board of
Directors; (ii) provides Chiesi with certain majority
stockholder rights that are incorporated in our certificate of
incorporation and bylaws; (iii) requires us to take or
cause to be taken all lawful action necessary to ensure that our
certificate of incorporation and bylaws are not at any time
inconsistent with the Governance Agreements provisions;
(iv) imposes certain restrictions on Chiesi, including
restrictions on its purchases and transfers of our common stock;
and (v) requires Chiesi, Mr. Collard, Mr. Lutz
and the entities controlled by them to vote their shares in
favor of the directors nominated for election in accordance with
the Governance Agreement and otherwise in a manner consistent
with the Governance Agreement. The provisions of the Governance
Agreement are effective through July 28, 2011 (two years
following the closing of the Chiesi Transaction).
As a result of the provisions we agreed to in connection with
the Chiesi Transaction, among other things:
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our Board of Directors was reconstituted to consist of eight
members divided into two classes, with our Class A
directors consisting of our Chief Executive Officer and three
independent directors and our Class B directors consisting
of four directors designated by Chiesi; thereafter, the number
of directors Chiesi may nominate for election to our Board of
Directors will be based upon Chiesis percentage level of
beneficial ownership of our common stock;
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a quorum at any meeting of our Board of Directors will require a
majority of the total authorized number of directors (including
at least one Class B director when there is one);
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our Compensation Committee must approve, and the Board of
Directors must ratify, all executive compensation;
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for so long as Chiesi and its affiliates beneficially own more
than 50% of the outstanding shares of our common stock on a
fully diluted basis, as defined in our bylaws, certain actions
are subject to the approval of our Board of Directors;
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for so long as Chiesi and its affiliates beneficially own at
least 50% of the outstanding shares of our common stock on a
fully diluted basis, as defined in our certificate of
incorporation, the Class B directors present at a meeting
will have equal voting power with the Class A directors
present at a meeting; and
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for so long as Chiesi and its affiliates beneficially own at
least 40% of the outstanding shares of our common stock on a
fully diluted basis, as defined in our certificate of
incorporation, certain significant actions specified in our
certificate of incorporation are subject to Chiesis
approval.
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Also in connection with the closing of the Chiesi Transaction,
the Stockholders Agreement became effective. Among other things,
the Stockholders Agreement generally requires Mr. Collard,
Mr. Lutz and the entities controlled by them to
(i) refrain, through July 28, 2011, from purchasing
and transferring our common stock beneficially owned by them
except in accordance with the agreement and (ii) vote in
favor of a transaction whereby Chiesi or its affiliates will
acquire all of our outstanding common stock.
4
PROPOSAL ONE
ELECTION OF DIRECTORS
As discussed above, as a result of the Chiesi Transaction, our
Board of Directors currently consists of eight members, four of
whom are a Class A directors and four of whom are
Class B directors. Class B directors are nominated by
Chiesi.
At the 2011 annual meeting, stockholders will have an
opportunity to vote for all the director nominees. The persons
named in the enclosed proxy card will vote to elect these
nominees as directors, unless you withhold authority to vote for
the election of a nominee by marking the proxy card to that
effect. The nominees have indicated their willingness to serve,
if elected. However, if a nominee should be unable or unwilling
to serve, the proxies may be voted for a substitute nominee
designated by our Board of Directors, or our Board of Directors
may reduce the number of directors to be elected at the 2011
annual meeting.
Board
Recommendation
The Board of Directors recommends a vote FOR the
election of the director nominees.
The following paragraphs provide information as of the date of
this proxy statement about our Class A and Class B
director nominees. The information presented includes
information about each such director, including, among other
things, his age; all positions and offices he holds with us;
length of service as a director; principal occupation and
employment for the past five years; the names of other public
companies of which he has served as a director at any time
during the past five years; and the specific experience,
qualifications, attributes and skills that led to the conclusion
that the director nominee should serve as one of our directors.
For information about the number of shares of common stock
beneficially owned by our directors as of April 4, 2011,
see Stock Ownership Information.
No director, director nominee or executive officer is related by
blood, marriage or adoption to any director, director nominee or
executive officer. Other than as set forth in the Governance
Agreement and the Stockholders Agreement, no arrangements or
understandings exist between any director or person nominated
for election as a director and any other person pursuant to
which such person is to be selected as a director or nominee for
election as a director. For more information regarding the
director nomination process, see Corporate
Governance Director Nomination Process.
Class A
Director Nominees
Craig
A. Collard, age 45, became a director in
2008.
Craig A. Collard has served as our President and Chief
Executive Officer and the chairman of our Board of Directors
since the consummation of our merger with Cornerstone BioPharma
Holdings, Inc., or Cornerstone BioPharma, on October 31,
2008. We refer to this transaction as the Merger.
Mr. Collard also served as our Interim Chief Financial
Officer from July 2010 through January 2011. In March 2004,
Mr. Collard founded Cornerstone Biopharma Holdings, Ltd.
(the assets and operations of which were restructured as
Cornerstone BioPharma in May 2005), and served as its President
and Chief Executive Officer and a director from March 2004 to
October 2008. Before founding Cornerstone BioPharma,
Mr. Collards principal occupation was serving as the
President and Chief Executive Officer of Carolina
Pharmaceuticals, Inc., a specialty pharmaceutical company he
founded in May 2003. From August 2002 to February 2003,
Mr. Collard served as Vice President of Sales for Verum
Pharmaceuticals, Inc., a specialty pharmaceutical company in
Research Triangle Park, North Carolina. From 1998 to 2002,
Mr. Collard worked as Director of National Accounts at DJ
Pharma, Inc., a specialty pharmaceutical company which was
eventually purchased by Biovail Pharmaceuticals, Inc. His
pharmaceutical career began in 1992 as a field sales
representative at Dura Pharmaceuticals, Inc., or Dura. He was
later promoted to several other sales and marketing positions
within Dura. Mr. Collard is a member of the Board of
Directors of Hilltop Home Foundation, a Raleigh, North Carolina,
non-profit corporation, in addition to our Board of Directors.
Mr. Collard holds a B.S. in Engineering from the Southern
College of Technology (now Southern Polytechnic State
University) in Marietta, Georgia. As our founder and Chief
Executive Officer, and as a former sales representative
and/or
executive at several
5
other specialty pharmaceutical companies, Mr. Collard
brings to our Board of Directors a depth of sales and executive
experience both in the specialty pharmaceutical industry in
general and at our company in particular.
Christopher
Codeanne, age 43, became a director in 2008.
Christopher Codeanne has served on our Board of Directors
since the consummation of the Merger. Since December 2010,
Mr. Codeanne has served as the Executive Vice President,
Finance, Chief Financial Officer and Director of Premier
Research Group Limited, an international pharmaceutical and
medical device services company. From April 2008 through
November 2010, Mr. Codeanne served as Chief Operating
Officer and Chief Financial Officer of Oncology Development
Partners, LLC (d/b/a Oncopartners), a specialized international
oncology contract research organization. From December 2006
through April 2008, Mr. Codeanne served as the Chief
Financial Officer of Averion International Corp., or Averion, a
publicly traded international contract research organization.
Prior to Averion, from 2002 through July 2006, Mr. Codeanne
was the Chief Financial Officer of SCIREX Corporation (which was
acquired by Premier Research Group plc in 2006), or SCIREX, an
international, full-service clinical research organization. From
1999 to 2002, Mr. Codeanne served as Director of Finance of
SCIREX. Mr. Codeanne is a member of the American Institute
of Certified Public Accountants, the Connecticut Society of
Certified Public Accountants and Financial Executives
International. Mr. Codeanne holds a B.A. in Accounting from
Fairfield University and an MBA from the University of
Connecticut. He brings to our Board of Directors a depth of
experience in financial, operational and public company matters
and knowledge regarding pharmaceutical development and working
with contract research organizations.
Michael
Enright, age 49, became a director in 2008.
Michael Enright has served on our Board of Directors
since the consummation of the Merger. Since February 2011,
Mr. Enright has served as the President of OckhamCRO, a
division of Ockham Development Group Inc., or Ockham, a global
contract research organization. Prior to becoming President of
OckhamCRO, Mr. Enright had served as the Chief Financial
Officer for Ockham since its merger with Atlantic Search Group,
Inc., a staff augmentation and functional outsourcing services
organization serving pharmaceutical companies and contract
research organizations in the United States and India, where he
held the same position since 1995. Prior to 1995,
Mr. Enright held positions in employee benefits
administration with Hauser Insurance Group and The Prudential
Insurance Company, and in financial management with General
Electric Companys aerospace business group.
Mr. Enright holds a B.A. in Finance from Villanova
University and an MBA from the Kenan-Flagler School of Business
of the University of North Carolina at Chapel Hill. He brings to
our Board of Directors a depth of experience in strategic
planning and organizational development and human resources.
Michael
Heffernan, age 46, became a director in 2008.
Michael Heffernan has served on our Board of Directors
since the consummation of the Merger. Since 2002,
Mr. Heffernan has served as President and Chief Executive
Officer of Collegium Pharmaceutical, Inc., a specialty
pharmaceutical company that develops and commercializes products
to treat central nervous system, respiratory and skin-related
disorders. From 1999 to 2001, Mr. Heffernan served as
President and Chief Executive Officer of PhyMatrix Corp., an
integrated health care services company. From 1995 to 1999,
Mr. Heffernan served as President and Chief Executive
Officer of Clinical Studies Ltd., a pharmaceutical clinical
development company. From 1987 to 1994, Mr. Heffernan
served in a variety of sales and marketing positions with Eli
Lilly and Company, a pharmaceutical company. Mr. Heffernan
has also served on the Board of Directors of TyRx Pharma, Inc.
since 2002. Mr. Heffernan holds a B.S. in Pharmacy from the
University of Connecticut and is a Registered Pharmacist. He
brings to our Board of Directors a depth of experience in sales
and marketing and knowledge regarding pharmaceutical development
and working with contract research organizations.
6
Class B
Director Nominees
Alessandro
Chiesi, age 44, became a director in 2009.
Alessandro Chiesi has served on our Board of Directors
since the closing of the Chiesi Transaction. Mr. Chiesi has
been employed by Chiesi holding various positions. Since
September 2010, he has served as head of the International
Division. From May 2005 to September 2010, he served as the
Affiliates Coordinator of the International Division. From May
2002 through November 2004, he was the Managing Director of
Asche-Chiesi GmbH. Between 1995 and 2002, he held positions
including assistant to the CEO and project leader for various
mergers and acquisitions. Mr. Chiesi has served on the
boards of directors of the following companies: Master Pharma
S.r.l. since July 1990, Chiesi Hellas Pharmaceuticals S.A. since
April 1998, Chiesi S.A. since September 1999, Promedica S.r.l.
since May 2001, Chiesi Farmaceutici, S.p.A. since January 2004,
Valline S.r.l. since May 2004, Chiesi Pharmaceuticals B.V. since
February 2007 and DOC Generici S.r.l. since November 2008. He
brings to our Board of Directors a depth of experience in global
business development, strategic business planning and risk
assessment and the integration and management of transnational
joint ventures.
Anton
Giorgio Failla, age 46, became a director in
2009.
Anton Giorgio Failla has served on our Board of Directors
since the closing of the Chiesi Transaction. Since July 2008,
Dr. Failla has served as Head of Business Development of
Chiesi. Prior to his employment at Chiesi, from 2004 to 2008,
Dr. Failla served as the CFO of Sorin Group, a medical
device company, based in Milan, Italy and as its Senior Vice
President of Operations based in Denver, Colorado. From 2000 to
2004, Dr. Failla served as Vice President, Business
Development and Strategic Planning at Novartis Consumer Health,
or Novartis, at its Headquarters in Switzerland. Prior to
Novartis, Dr. Failla held various positions in business
development at Medtronic Inc., both in the U.S. and in
Europe. Dr. Failla has served on the boards of directors of
several private companies in Europe and the United States:
Bellco S.r.l. (April 2004-January 2007), Sorin Biomedica Cardio
S.r.l. (April
2004-April
2005), Biofin Holding International N.V. (July 2004 -June 2006),
Ela Medical S.a.s. (April 2004-June 2006), Sorin Biomedica CRM
S.r.l. (April 2007-July 2008), Sorin Group International S.A.
(December 2005-June 2006), CasinoMunicipale Campione
dItalia (August 2007-June 2009), and Phenomix Corporation
Inc. (February September 2010). Dr. Failla
holds a Master in Business Administration from SDA Bocconi and a
doctorate in Electronic Engineering from Polytechnic of Turin.
He brings to our Board of Directors a depth of experience in the
areas of strategic planning, finance, business development and
operations management.
Robert
M. Stephan, age 68, became a director in
2009.
Robert M. Stephan has served on our Board of Directors
since the closing of the Chiesi Transaction. Mr. Stephan is
an experienced business attorney currently in private practice
in New Canaan, Connecticut. With over 40 years experience,
Mr. Stephan concentrates his law practice on domestic and
international business transactions and serves as chief counsel
to small and mid-sized companies and local counsel to foreign
companies with operations in the United States. Mr. Stephan
has served as Vice President and Secretary since 1997 and as a
director since April 2009, of Chiesi Pharmaceuticals, Inc., a
subsidiary of Chiesi. Prior to opening his private practice in
1997 and after initial training with the Office of the General
Counsel of the U.S. Securities and Exchange Commission in
Washington D.C. and the law firm of Day, Berry &
Howard in Hartford, Connecticut, Mr. Stephan embarked on a
career as in-house counsel with publicly traded corporations. He
served as Vice President and Group General Counsel for General
Mills Inc; Vice President and Associate General Counsel for US
Surgical Corporation ; Vice President, General Counsel and
Secretary for Erbamont N.V. (Montedison Group); and Vice
President, General Counsel and Secretary for American Maize
Products Corporation. Mr. Stephan has advised boards of
directors on corporate governance matters and is a former member
of the National Association of Corporate Directors.
Mr. Stephan is a former Captain/Judge Advocate in the
United States Marine Corps and an Assistant Attorney General for
the State of Wisconsin. Mr. Stephan holds a Bachelor of
Arts in economics and political science from Lawerence
University and a Juris Doctor from the University of Wisconsin
Law School. He brings to our Board of
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Directors a depth of experience in all areas of corporate
governance, with particular emphasis on the governance of
transnational joint ventures.
Marco
Vecchia, age 51, became a director in 2010.
Marco Vecchia has served on our Board of Directors since
May 2010. Since 1987, Mr. Vecchia has served as Head of
Legal and Corporate Affairs at Chiesi. Mr. Vecchia holds a
degree in law from the University of Parma. Mr. Vecchia has
also served on the boards of directors of the following
companies: Chiesi S.A., Belgium, since June 2010; Chiesi
Pharmaceuticals Shanghai Co. Ltd. (Wfoe), China, since June
2008; Cheshire Healthcare Limited, England, since January 2003;
Chiesi Limited, England, since May 1999; Chiesi Healthcare
Limited, England, since May 1999; Chiesi S.A., France, since
April 2002; Chiesi Hellas Pharmaceuticals S.A., Greece, since
April 1998; Chiesi Int. H. B.V., Holland, since April 2008;
Chiesi Pharmaceuticals B.V., Holland, since February 2007;
Opocrin S.P.A., Italy, since November 2008; Opocrin S.r.l.,
Italy, since November 2008; Novadynamics Healthcare S.r.l.,
Italy, since May 2007; Chiesi Pharmaceuticals Pvt Limited,
Pakistan, since November 2001; Chiesi España S.A., Spain,
since April 2000; Chiesi Pharmaceuticals Inc., USA, since April
1992. He brings to our Board of Directors a depth of experience
in the areas of mergers and acquisitions and transnational joint
ventures, pharmaceutical IP licensing, risk management and
corporate governance.
8
CORPORATE
GOVERNANCE
General
Our management and Board of Directors believe that good
corporate governance is important to ensure that we are managed
for the long-term benefit of our stockholders. This section
describes key corporate governance practices that we have
adopted.
Controlled
Company Exemption under NASDAQ Marketplace Rules
We are a controlled company within the meaning of
applicable rules of The NASDAQ Stock Market LLC, or NASDAQ,
because more than 50% of our voting power is held by Chiesi.
Therefore, we are not subject to the NASDAQ listing requirements
that would otherwise require us to have (i) a Board of
Directors comprised of a majority of independent directors;
(ii) compensation of our executive officers determined, or
recommended to our board for determination, by a majority of our
independent directors or a compensation committee comprised
solely of independent directors; and (iii) director
nominees selected, or recommended for our boards
selection, either by a majority of our independent directors or
a nominating committee comprised solely of independent
directors. Nevertheless, as discussed below, we have established
the Compensation Committee to approve executive officer
compensation (subject to ratification by our Board of Directors)
and the Nominating and Corporate Governance Committee to select
director nominees, each of which is comprised solely of
independent directors.
Board
Determination of Independence
Under applicable NASDAQ rules, a director will only qualify as
an independent director if, in the opinion of our
Board of Directors, that person does not have a relationship
which would interfere with the exercise of independent judgment
in carrying out the responsibilities of a director. These rules
also specify certain persons whose relationships with us would
preclude them from being considered independent. Our Board of
Directors has determined that each of the following current
members of our Board of Directors is an independent
director as defined under applicable NASDAQ rules,
including that each such director is free of any relationship
that would interfere with the exercise of his independent
judgment in carrying out his responsibilities as a director:
Mr. Codeanne, Mr. Enright, Mr. Heffernan and
Mr. Stephan. In reaching the determination with respect to
Mr. Stephan, the Board of Directors considered
Mr. Stephans representation of Chiesi in various
matters unrelated to the Chiesi Transaction and also the fees he
receives from Chiesi under consulting
and/or
retainer arrangements.
Board
Leadership Structure
Our President and Chief Executive Officer, Craig A. Collard, is
also the chairman of our Board of Directors. Our Board of
Directors has determined this leadership structure is the most
effective way to ensure that it remains focused on the key
issues affecting our company. Mr. Collard founded
Cornerstone BioPharma, has been our chairman and Chief Executive
Officer since the Merger and oversaw our entry into the Chiesi
Transaction. Although we do not have a lead independent
director, our Board of Directors which consists
primarily of either independent directors or directors
designated by Chiesi exercises a strong, independent
oversight function. This oversight function is enhanced by the
fact that each of our board committees our Audit
Committee, our Compensation Committee and our Nominating and
Corporate Governance Committee is comprised entirely
of independent directors and by the fact that, under the
Governance Agreement and our bylaws, our full Board of Directors
must approve certain significant corporate actions.
Board
Oversight and Risk Management
Our Board of Directors has responsibility for establishing broad
corporate policies and reviewing our overall performance rather
than
day-to-day
operations. The primary responsibility of our Board of Directors
is to oversee our management and, in doing so, assess and manage
the risks inherent in our business in order to serve our best
interests and the best interests of our stockholders. The Board
of Directors selects, evaluates and
9
provides for the succession of executive officers and, subject
to stockholder election, directors. It reviews and approves
corporate objectives and strategies, and assesses the risks
presented by those strategies and the manner in which management
intends to mitigate those risks. In the exercise of its risk
oversight function, our Board of Directors solicits and reviews
regular updates from key members of management about significant
policies and proposed major commitments of corporate resources.
Our Board of Directors also participates in decisions that have
a potential major economic impact on us. In addition to making
reports and presentations at Board of Directors and committee
meetings, our management keeps the directors informed of our
activity through regular communication. While each of our
standing board committees is responsible for assessing risks
within its respective area of responsibility and for making
appropriate risk management recommendations to our Board of
Directors, our full board is principally responsible for
evaluating business risks and determining whether any risk
mitigation measures should be implemented.
Board
Meetings and Attendance
Our Board of Directors met eight times during the fiscal year
ended December 31, 2010, either in person or by
teleconference. During 2010, each of our current directors
attended at least 75% of the aggregate of the total number of
board meetings held during the period each has been a director
and the total number of meetings held by all committees on which
each director then served.
We have no formal policy requiring director attendance at the
annual meeting of stockholders, although all directors are
expected to attend the annual meeting if they are able to do so.
One of our directors attended the 2010 annual meeting.
Board
Committees
Our Board of Directors has established three standing
committees: the Audit Committee, the Compensation Committee and
the Nominating and Corporate Governance Committee. The members
of each committee are appointed by our Board of Directors, upon
the recommendation of the Nominating and Corporate Governance
Committee, and serve one-year terms. Each of these committees
operates under a charter that has been approved by the Board of
Directors. We have posted current copies of each
committees charter on the Corporate Governance
section of our website, which can be found at www.crtx.com.
The Board of Directors has determined that all of the members of
each of the boards three standing committees are
independent as defined under NASDAQ rules and, in the case of
all members of the Audit Committee, that they meet the
additional independence requirements of
Rule 10A-3
under the Securities Exchange Act of 1934.
Audit
Committee
The Audit Committees responsibilities include:
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appointing, approving the compensation of and assessing the
independence of our registered public accounting firm;
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overseeing the work of our independent registered public
accounting firm, including through the receipt and consideration
of reports from the independent registered public accounting
firm;
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reviewing and discussing with management and the independent
registered public accounting firm our annual and quarterly
financial statements and related disclosures;
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monitoring our internal control over financial reporting,
disclosure controls and procedures and code of business conduct
and ethics;
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establishing policies regarding hiring employees from the
independent registered public accounting firm and procedures for
the receipt and retention of accounting-related complaints and
concerns;
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meeting independently with our independent registered public
accounting firm and management to discuss our financial
statements, and other financial reporting and audit matters;
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preparing the audit committee report required by SEC
rules; and
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reviewing and approving or ratifying related person transactions.
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The members of the Audit Committee are Mr. Codeanne,
Mr. Enright and Mr. Heffernan. Mr. Codeanne
serves as chair of the Audit Committee. The Board of Directors
has determined that Mr. Codeanne is an audit
committee financial expert as defined by applicable SEC
rules. The Audit Committee met 13 times in 2010.
Compensation
Committee
The Compensation Committees responsibilities include:
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reviewing and approving the compensation of our executive
officers, with such approval subject to ratification by the full
Board of Directors;
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overseeing the evaluation of our senior executives;
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reviewing and making recommendations to the Board of Directors
regarding incentive compensation and equity-based plans;
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administering our stock incentive plans;
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reviewing and discussing with management the Compensation
Discussion and Analysis, or CD&A, and recommending that the
CD&A be included in our annual proxy statement on Schedule
14A;
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preparing the compensation committee report required by SEC
rules; and
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reviewing and making recommendations to the Board of Directors
regarding director compensation.
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For information about the processes and procedures followed by
the Compensation Committee in considering executive and director
compensation, see Executive and Director Compensation
Process.
The members of the Compensation Committee are
Mr. Heffernan, Mr. Codeanne and Mr. Enright.
Mr. Heffernan serves as chair of the Compensation
Committee. The Compensation Committee met six times in 2010.
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committees
responsibilities include:
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identifying individuals qualified to become board members;
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recommending to the Board of Directors the persons to be
nominated for election as directors and to each of the
committees of the Board of Directors, and verifying that the
designated Class B directors meet the qualifications to
become board members under the standards set forth in the
Governance Agreement;
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reviewing and making recommendations to the Board of Directors
with respect to management succession planning;
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developing and recommending to the Board of Directors corporate
governance principles; and
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overseeing periodic evaluation of the Board of Directors.
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The members of the Nominating and Corporate Governance Committee
are Mr. Enright, Mr. Codeanne and Mr. Stephan.
Mr. Enright serves as chair of the Nominating and Corporate
Governance Committee. The Nominating and Corporate
Governance Committee met five times in 2010. Although the
Governance Agreement generally provides that Class B
Directors, as designees of Chiesi, are disqualified from being
considered independent for purposes of the Governance Agreement,
the Committee received the consent of Chiesi, by way of a waiver
of the relevant provision of the Governance Agreement, to
Mr. Stephans appointment by the Board of Directors as
a member of the Nominating and Corporate Governance Committee.
11
Executive
and Director Compensation Process
Our Compensation Committee is responsible for approving the
compensation of our executive officers, subject to ratification
by our Board of Directors. As part of this process, our
Compensation Committee has implemented an annual performance
review program for our executive officers. As part of that
program, the committee considers actual corporate performance
compared to our corporate goals and individual performance
compared to individual goals, as well as various subjective
performance criteria. Each executive officers individual
performance goals relate to our corporate goals.
Additionally, on a rolling basis, our Compensation Committee
tracks progress towards our corporate and individual goals,
assesses the continuing relevance of those goals, and may add to
or revise those goals as necessary or appropriate based on
emergent challenges and opportunities. Any change in our
corporate goals is subject to adoption by the full Board of
Directors.
Our Compensation Committee evaluates each executive officer
against his individual goals. Evaluation begins with a written
self-assessment, which is submitted to our President and Chief
Executive Officer. Our President and Chief Executive Officer
then prepares a written evaluation based on the executive
officers self-assessment, the President and Chief
Executive Officers own evaluation and input from other
employees. This process leads to a recommendation by our
President and Chief Executive Officer to the Compensation
Committee for annual executive salary increases, annual stock
option and restricted stock awards and bonuses, if any, for
executive officers other than himself. The Compensation
Committee then reviews our corporate performance, and in light
of that review considers the recommendations of the President
and Chief Executive Officer. Upon completion of this review and
consideration, the committee may approve or amend, in its
discretion, the recommended annual executive salary increases,
annual stock option and restricted stock awards and bonuses, if
any, for our executive officers. In the case of our President
and Chief Executive Officer, his individual performance
evaluation is conducted by the Compensation Committee, which
then approves any annual salary increase, annual stock option
and restricted stock award and bonus. For more information
regarding this process, see Information About Executive
and Director Compensation Process for Determining
Executive Compensation.
Our Compensation Committee periodically reviews and makes
recommendations to the Board of Directors regarding director
compensation. Currently, each of our non-employee directors is
compensated pursuant to our compensation and reimbursement
policy, which was amended and restated effective
October 31, 2008. For more information regarding this
policy, see Information About Executive and Director
Compensation Director Compensation for Fiscal
2010.
Our Compensation Committee may delegate its authority to the
chair of the committee to the extent it deems necessary to
finalize matters as to which the committee has given its general
approval.
Our Compensation Committee has the authority to retain
compensation consultants and other outside advisors to assist in
the evaluation of executive officer compensation. During 2010,
our Compensation Committee did not retain a compensation
consultant to assist in setting executive compensation. However,
for 2010, in order to improve its understanding of compensation
practices at companies in the specialty pharmaceutical sector,
the committee considered market data from a variety of sources,
including the Radford Survey covering pharmaceutical and
bio-technology companies having between 150 and
499 employees and between $50 million and
$150 million in revenues. For more information regarding
the role of compensation consultants and surveys, see
Information About Executive and Director
Compensation Process for Determining Executive
Compensation Role of Compensation Consultants and
Surveys.
Director
Nomination Process
The Nominating and Corporate Governance Committee is responsible
for identifying individuals qualified to become board members,
consistent with criteria approved by the board, and recommending
the persons to be nominated for election as directors, except
where we are legally required by contract, bylaw or otherwise to
provide third parties with the right to nominate directors. The
process followed by the Nominating and Corporate Governance
Committee to identify and evaluate director candidates includes
requests to board
12
members and others for recommendations, meetings from time to
time to evaluate biographical information and background
material relating to potential candidates and interviews of
selected candidates by members of the committee and the board,
with direct input from our Chief Executive Officer. From time to
time, the Nominating and Corporate Governance Committee may
retain the services of an executive search firm to help identify
and evaluate potential director candidates but did not retain
such services during the year ended December 31, 2010.
In considering whether to recommend any particular candidate for
inclusion in the boards slate of recommended Class A
director nominees, the Nominating and Corporate Governance
Committee applies certain criteria, including the
candidates reputation for integrity, honesty and adherence
to high ethical standards, business acumen, experience and
judgment, understanding of our business and industry, diligence,
conflicts of interest or the appearance thereof, other
directorships and their impact on the ability of the candidate
to devote adequate time to service on our board and the ability
to act in the interests of all stockholders. The committee does
not assign specific weights to particular criteria, and no
particular criterion is a prerequisite for any prospective
nominee. Our Board of Directors has adopted guidelines that
provide that nominees shall not be discriminated against on the
basis of race, religion, national origin, sex, sexual
orientation, disability or any other basis proscribed by law and
require the Nominating and Corporate Governance Committee to
consider the value of diversity on our board. The Nominating and
Corporate Governance Committee implements and assesses the
effectiveness of these guidelines and the boards
commitment to diversity by considering these guidelines in our
assessment of potential director nominees and the overall
make-up of
our Board of Directors. We believe that the backgrounds and
qualifications of our directors, considered as a group, should
provide a significant breadth of experience, knowledge and
abilities that will assist our board in fulfilling its
responsibilities.
Pursuant to the Governance Agreement, our certificate of
incorporation and our bylaws, the Nominating and Corporate
Governance Committee selects and recommends the Class A
directors, which consist of our Chief Executive Officer and
three independent directors, for nomination by our Board of
Directors. Chiesi designates the Class B directors to the
Nominating and Corporate Governance Committee for recommendation
to and nomination by our Board of Directors. Under the
Governance Agreement, the Nominating and Corporate Governance
Committee reviews each Chiesi nominees background and must
recommend each Chiesi nominee for election unless it reasonably
determines that the nominee lacks the business or technical
experience, stature and character appropriate for service on our
board. While the Governance Agreement is in effect, Chiesi is
entitled to designate for consideration for election to the
Companys Board of Directors a number of persons based on
the level of beneficial ownership by Chiesi and its affiliates
of Cornerstone common stock as follows:
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if Chiesi and its affiliates own 50% or more of the outstanding
shares of our common stock on a fully diluted basis (as defined
in the Governance Agreement), four individuals;
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if Chiesi and its affiliates own 35% or more but less than 50%
of the outstanding shares of our common stock on a fully diluted
basis, three individuals;
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if Chiesi and its affiliates own 25% or more but less than 35%
of the outstanding shares of our common stock on a fully diluted
basis, two individuals;
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if Chiesi and its affiliates own 10% or more but less than 25%
of the outstanding shares of our common stock on a fully diluted
basis, one individual; and
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if Chiesi and its affiliates own less than 10% of the
outstanding shares of our common stock on a fully diluted basis,
Chiesi will not have the right to designate any directors.
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Stockholders may recommend individuals to the Nominating and
Corporate Governance Committee for consideration as potential
Class A director candidates by submitting their names,
together with appropriate biographical information and
background materials and a statement as to whether the
stockholder or group of stockholders making the recommendation
has beneficially owned more than 5% of our common stock for at
least a year as of the date such recommendation is made, to the
Nominating and Corporate Governance Committee,
c/o Corporate
Secretary, Cornerstone Therapeutics Inc., 1255 Crescent Green
Drive, Suite 250,
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Cary, North Carolina 27518. Assuming that appropriate
biographical and background material has been provided on a
timely basis, the Nominating and Corporate Governance Committee
will evaluate stockholder recommended candidates by following
substantially the same process, and applying substantially the
same criteria, as it follows for Class A candidates
submitted by others. As described in Stockholder
Proposals below, stockholders also have the right under
Section 1.10 of our bylaws to directly nominate director
candidates, without any action or recommendation on the part of
the Nominating and Corporate Governance Committee or the board,
by following the procedures set forth therein.
Communicating
with the Independent Directors
The board will give appropriate attention to written
communications that are submitted by stockholders, and will
respond if and as appropriate. The chairman of the Nominating
and Corporate Governance Committee, with the assistance of our
General Counsel, is primarily responsible for monitoring
communications from stockholders and for providing copies or
summaries to the other directors as he considers appropriate.
Communications are forwarded to all directors if they relate to
important substantive matters and include suggestions or
comments that the chairman of the Nominating and Corporate
Governance Committee considers to be important for the directors
to know. In general, communications relating to corporate
governance and corporate strategy are more likely to be
forwarded than communications relating to ordinary business
affairs, personal grievances and matters as to which we tend to
receive repetitive or duplicative communications.
Stockholders who wish to send communications on any topic to the
board should address such communications to the Board of
Directors,
c/o Corporate
Secretary, Cornerstone Therapeutics Inc., 1255 Crescent Green
Drive, Suite 250, Cary, North Carolina, 27518. You should
indicate on your correspondence that you are a Cornerstone
Therapeutics Inc. stockholder.
Anyone may express concerns regarding questionable accounting or
auditing matters or complaints regarding accounting, internal
accounting controls or auditing matters to the Audit Committee
by calling the voicemail box at
(800) 799-6158.
Messages to the Audit Committee will be received by the members
of the Audit Committee and our Corporate Secretary. You may
report your concern anonymously or confidentially.
Pre-Approval
Policy and Procedures
The Audit Committee has adopted policies and procedures relating
to the approval of all audit and non-audit services that are to
be performed by our independent registered public accounting
firm. This policy generally provides that we will not engage our
independent registered public accounting firm to render audit or
non-audit services unless the service is specifically approved
in advance by the Audit Committee or the engagement is entered
into pursuant to one of the pre-approval procedures described
below.
From time to time, the Audit Committee may pre-approve specified
types of services that are expected to be provided to us by our
independent registered public accounting firm during the next
12 months. Any such pre-approval is detailed as to the
particular service or type of services to be provided and is
also generally subject to a maximum dollar amount.
The Audit Committee has also delegated to the chair of the Audit
Committee the authority to approve any audit or non-audit
services to be provided to us by our independent registered
public accounting firm. Any approval of services by the chair of
the Audit Committee pursuant to this delegated authority is
reported at the next meeting of the Audit Committee.
Related
Person Transactions
U.S.
CUROSURF Agreement
As a result of the Chiesi Transaction, Chiesi manufactures all
of our requirements of CUROSURF, which we began promoting and
selling in September 2009. Pursuant to the U.S. CUROSURF
Agreement, we pay to Chiesi the greater of a percentage of net
sales price for CUROSURF or the applicable floor price set forth
in
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the agreement. Inventory purchases from Chiesi under the
U.S. CUROSURF Agreement from inception through
March 31, 2011 aggregated approximately $39.4 million.
As of March 31, 2011, the Company had accounts payable of
approximately $1.5 million due to Chiesi.
Top-Up
Transaction among Chiesi, Mr. Collard and
Mr. Lutz
Pursuant to a Stock Purchase Agreement, effective
December 16, 2010, Cornerstone Biopharma Holdings, Ltd. and
the Lutz Family Limited Partnership agreed to sell 385,000 and
65,000 shares, respectively, of our common stock to Chiesi
for consideration of $6.02 per common share. At the time they
agreed to sell their shares, Cornerstone Biopharma Holdings,
Ltd. and the Lutz Family Limited Partnership beneficially owned
approximately 6.1% and less than 1% of our common stock,
respectively. Mr. Collard owns 100% of the outstanding
common stock of Cornerstone Biopharma Holdings, Ltd. and is a
director of that entity, and Mr. Lutz is the general
partner of the Lutz Family Limited Partnership.
Chiesi
Option
The Stockholders Agreement grants Chiesi an option to purchase,
at $12.00 per share in cash, a certain number of shares of
common stock beneficially owned (as defined in the agreement) by
Mr. Collard, Mr. Lutz and the entities controlled by
them during the
30-day
period following July 28, 2011, referred to as the
covered shares. Mr. Collard, Cornerstone
Biopharma Holdings, Ltd., Carolina Pharmaceuticals,
Mr. Lutz and the Lutz Family Limited Partnership have
228,559, 1,561,780, 947,207, 195,227 and 261,878 covered shares,
respectively, under the Stockholders Agreement. Because
Mr. Collard and Mr. Lutz do not own any shares of
common stock directly, their covered shares were based on the
number of vested options (with exercise prices ranging from
$0.43 per share to $3.90 per share) held by them.
If Chiesi exercises its option, Mr. Collard, Cornerstone
Biopharma Holdings, Ltd., Carolina Pharmaceuticals,
Mr. Lutz and the Lutz Family Limited Partnership would
receive proceeds of approximately $2.4 million,
$18.7 million, $11.4 million, $2.0 million and
$3.1 million, respectively. Proceeds received by the
entities controlled by Mr. Collard or Mr. Lutz are not
included in the amounts attributable to these individuals. In
addition, for Mr. Collard and Mr. Lutz, these amounts
are net of the amounts they would be required to pay to exercise
a sufficient number of stock options held by them prior to
selling the covered shares to Chiesi (assuming for this purpose
that Mr. Collard and Mr. Lutz would exercise stock
options with the lowest exercise prices to satisfy their
respective obligations).
Policies
and Procedures Regarding Review, Approval or Ratification of
Related Person Transactions
In March 2007, our Board of Directors adopted written policies
and procedures for the review of any transaction, arrangement or
relationship in which we are a participant, the amount involved
exceeds $120,000 and one of our executive officers, directors,
director nominees or 5% stockholders (or their immediate family
members), each of whom we refer to as a related
person, has a direct or indirect material interest.
If a related person proposes to enter into such a transaction,
arrangement or relationship, which we refer to as a
related person transaction, the related person must
report the proposed related person transaction to our General
Counsel, who we refer to as our chief legal officer. The policy
calls for the proposed related person transaction to be reviewed
and, if deemed appropriate, approved by the Audit Committee.
Whenever practicable, the reporting, review and approval will
occur prior to entry into the transaction. If advance review and
approval is not practicable, the Audit Committee will review,
and, in its discretion, may ratify the related person
transaction. The policy also permits the chair of the Audit
Committee to review and, if deemed appropriate, approve proposed
related person transactions that arise between committee
meetings, subject to ratification by the Audit Committee at its
next meeting. Any related person transactions that are ongoing
in nature will be reviewed annually.
15
A related person transaction reviewed under the policy will be
considered approved or ratified if it is authorized by the Audit
Committee after full disclosure of the related persons
interest in the transaction. As appropriate for the
circumstances, the Audit Committee will review and consider:
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the related persons interest in the related person
transaction;
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|
the approximate dollar value of the amount involved in the
related person transaction;
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the approximate dollar value of the amount of the related
persons interest in the transaction without regard to the
amount of any profit or loss;
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whether the transaction was undertaken in the ordinary course of
our business;
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|
whether the terms of the transaction are no less favorable to us
than terms that could have been reached with an unrelated third
party;
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|
the purpose of, and the potential benefits to us of, the
transaction; and
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any other information regarding the related person transaction
or the related person in the context of the proposed transaction
that would be material to investors in light of the
circumstances of the particular transaction.
|
The Audit Committee may approve or ratify the transaction only
if the committee determines that, under all of the
circumstances, the transaction is in, or is not in conflict
with, our best interests. The Audit Committee may impose any
conditions on the related person transaction that it deems
appropriate.
In addition to the transactions that are excluded by the
instructions to the SECs related person transaction
disclosure rule, our Board of Directors has determined that the
following transactions do not create a material direct or
indirect interest on behalf of related persons and, therefore,
are not related person transactions for purposes of this policy:
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interests arising solely from the related persons position
as an executive officer of another entity (whether or not the
person is also a director of such entity), that is a participant
in the transaction, where (a) the related person and all
other related persons own in the aggregate less than a 10%
equity interest in such entity, (b) the related person and
his or her immediate family members are not involved in the
negotiation of the terms of the transaction and do not receive
any special benefits as a result of the transaction, and
(c) the amount involved in the transaction equals less than
the greater of $200,000 or 5% of the annual gross revenues of
the company receiving payment under the transaction; and
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a transaction that is specifically contemplated by provisions of
our charter or bylaws.
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The policy provides that transactions involving compensation of
executive officers shall be reviewed and approved by the
Compensation Committee in the manner specified in its charter.
16
PROPOSAL TWO
RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected the firm of Grant Thornton LLP
as our independent registered public accounting firm for the
fiscal year ending December 31, 2011.
Although stockholder approval of the selection of Grant Thornton
LLP is not required by law, our Board of Directors believes that
it is advisable to give stockholders an opportunity to ratify
this selection. If this proposal is not approved at the annual
meeting, our Audit Committee will reconsider its selection of
Grant Thornton LLP.
Grant Thornton LLP also served as our independent registered
public accounting firm for the fiscal year ended
December 31, 2010. Representatives of Grant Thornton LLP
are expected to be present at the annual meeting and will have
the opportunity to make a statement, if they desire to do so,
and will be available to respond to appropriate questions from
our stockholders.
Board
Recommendation
The Board of Directors recommends a vote FOR the
ratification of the selection of Grant Thornton LLP as
Cornerstone Therapeutics Inc.s independent registered
public accounting firm for the fiscal year ending
December 31, 2011.
Audit
Committee Report
The Audit Committee consists of the following members of the
Board of Directors of Cornerstone Therapeutics Inc. (the
Company): Mr. Codeanne, Mr. Enright and
Mr. Heffernan. The Audit Committee is responsible for
assisting the Board of Directors in fulfilling its oversight
responsibilities pertaining to the accounting, auditing and
financial reporting processes of the Company. Management is
responsible for establishing and maintaining the Companys
internal control over financial reporting and for preparing
financial statements in accordance with accounting principles
generally accepted in the United States of America. The Audit
Committee is directly responsible for the appointment,
oversight, compensation and retention of Grant Thornton LLP, the
independent registered public accounting firm for the Company.
Grant Thornton LLP is responsible for performing an independent
audit of the Companys annual financial statements and
expressing an opinion on the conformity of the Companys
financial statements with accounting principles generally
accepted in the United States of America.
The Board of Directors has determined that each of
Mr. Codeanne, Mr. Enright and Mr. Heffernan
(i) meets the independence criteria prescribed by
applicable law and the rules of the Securities and Exchange
Commission (the SEC) for audit committee membership,
(ii) is an independent director as defined in
NASDAQ rules and (iii) meets NASDAQs financial
knowledge and sophistication requirements. The Board of
Directors has determined that Mr. Codeanne is an
audit committee financial expert under SEC rules.
The Audit Committee operates pursuant to a written charter
approved by the Board of Directors. The charter is available on
the Companys website at www.crtx.com.
The Audit Committees responsibility is one of oversight.
The Audit Committees oversight responsibility relating to
the accounting, auditing and financial reporting processes of
the Company includes overseeing the Companys processes and
internal control over financial reporting in accordance with
Section 404 of the Sarbanes-Oxley Act of 2002.
Members of the Audit Committee rely on the information provided
and the representations made to them by:
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management, which has primary responsibility for the
Companys financial statements and reports and for
establishing and maintaining appropriate internal control over
financial reporting; and
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the independent registered public accounting firm for the
Company, which is responsible for performing an audit in
accordance with Standards of the Public Company Accounting
Oversight Board United States (PCAOB)
and expressing an opinion on the conformity of the
Companys financial statements with accounting principles
generally accepted in the United States.
|
17
In this context, we have reviewed and discussed with management
the Companys audited financial statements as of and for
the year ended December 31, 2010.
We have discussed with Grant Thornton LLP, the independent
registered public accounting firm for the Company, the matters
required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees, as
amended (AICPA, Professional Standards, Vol. 1., AU
section 380), as adopted by the PCAOB.
We have received and reviewed the written disclosures and the
letter from Grant Thornton LLP required by applicable
requirements of the PCAOB regarding Grant Thornton LLPs
communications with us concerning independence, and have
discussed with them their independence. We have concluded that
Grant Thornton LLPs provision of audit and non-audit
services to us is compatible with their independence.
Based on the reviews and discussions referred to above, and
exercising our business judgment, we recommended to the Board of
Directors that the financial statements referred to above be
included in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 for filing with
the SEC. We have selected Grant Thornton LLP as the independent
registered public accounting firm for the Company for the year
ended December 31, 2011, and have approved submitting the
selection of the independent registered public accounting firm
for ratification by the stockholders.
By the Audit Committee of the Board of
Directors of Cornerstone Therapeutics Inc.
Christopher Codeanne, Chair
Michael Enright
Michael Heffernan
Independent
Registered Public Accounting Firms Fees
The following table summarizes the fees that Grant Thornton LLP,
our independent registered public accounting firm, billed to us
for each of the last two fiscal years for audit and other
services. For 2010, audit fees include an estimate of amounts
not yet billed.
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Fee Category
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|
2010
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2009
|
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Audit Fees(1)
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$
|
298,231
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|
|
$
|
364,282
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|
Audit-Related Fees(2)
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|
Tax Fees(3)
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All Other Fees(4)
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|
Total Fees
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|
$
|
298,231
|
|
|
$
|
364,282
|
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(1) |
|
Audit fees consist of fees related to professional services
rendered in connection with reviews of our quarterly filings on
Form 10-Q,
the audit of our consolidated financial statements and other
professional services provided in connection with statutory and
regulatory filings or engagements. Audit fees reported during
2009 also include fees related to an audit of our internal
control over financial reporting as we were required to obtain
such an audit. |
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(2) |
|
Audit-related fees consist of fees for assurance and related
services that are reasonably related to the performance of the
audit and the review of our financial statements and which are
not reported under Audit Fees. No fees for
audit-related services were incurred in 2009 or 2010. |
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(3) |
|
Tax fees consist of fees for tax compliance, tax advice and tax
planning services. Tax compliance services relate to the
preparation of federal and state tax returns and quarterly
estimated tax payments. Tax advice and tax planning services
relate to miscellaneous items. No tax fees were incurred in 2009
or 2010. |
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(4) |
|
No fees for other services were incurred in 2009 or 2010. |
18
STOCK
OWNERSHIP INFORMATION
The following table sets forth information regarding beneficial
ownership of our common stock as of April 4, 2011 by:
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each person, entity or group of affiliated persons or entities
known to us to be the beneficial owner of more than 5% of the
outstanding shares of our common stock;
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each of our directors;
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our President and Chief Executive Officer, our former Chief
Financial Officer and our three other most highly compensated
executive officers during 2010; and
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all of our directors and executive officers as a group.
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Beneficial ownership is determined in accordance with the
applicable rules of the SEC and includes voting or investment
power with respect to shares of our common stock. Shares of
common stock issuable under stock options and warrants that are
currently exercisable or exercisable within 60 days of
April 4, 2011 are deemed to be beneficially owned by the
person holding the option or warrant for purposes of calculating
the percentage ownership of that person but are not deemed
outstanding for purposes of calculating the percentage ownership
of any other person. The information set forth below is not
necessarily indicative of beneficial ownership for any other
purpose, and the inclusion of any shares deemed beneficially
owned in this table does not constitute an admission of
beneficial ownership of those shares. Unless otherwise
indicated, to our knowledge, all persons named in the table have
sole voting and investment power with respect to the shares of
common stock beneficially owned by them, except, where
applicable, to the extent authority is shared by spouses under
community property laws.
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Number of
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Shares
|
|
|
|
|
|
|
Outstanding
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|
Underlying
|
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Total Number
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|
Percentage of
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Shares
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|
Options
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|
of Shares
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|
Common Stock
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Name and Address of
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Beneficially
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Exercisable
|
|
Beneficially
|
|
Beneficially
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Beneficial Owner(1)
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Owned
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within 60 Days
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Owned
|
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Owned
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5% Stockholders
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Chiesi Farmaceutici S.p.A.
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14,222,425
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14,222,425
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55.3
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%
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Via Palermo 26/A
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43122 Parma, Italy
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Craig A. Collard(2)
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3,011,138
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373,198
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3,384,336
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13.0
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%
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President, Chief Executive
Officer and Director
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Cornerstone Biopharma Holdings, Ltd.
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1,567,225
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1,567,225
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6.1
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%
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Carolina Pharmaceuticals Ltd.
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1,443,913
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1,443,913
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5.6
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%
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Carolina Pharmaceuticals Holdings, Ltd.(3)
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1,443,913
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1,443,913
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5.6
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%
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Directors and Named Executive Officers
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Christopher Codeanne
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20,139
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20,139
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*
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Director
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|
|
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Michael Enright
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20,139
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20,139
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*
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Director
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|
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Michael Heffernan
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|
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23,710
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|
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|
23,710
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*
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|
Director
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|
|
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Alessandro Chiesi
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7,500
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7,500
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*
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Director
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Anton Giorgio Failla
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7,500
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|
|
|
7,500
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*
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|
Director
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|
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|
|
|
|
|
|
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Robert Stephan
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|
|
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7,500
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|
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|
7,500
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|
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*
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|
Director
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|
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|
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|
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19
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|
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Number of
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Shares
|
|
|
|
|
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Outstanding
|
|
Underlying
|
|
Total Number
|
|
Percentage of
|
|
|
Shares
|
|
Options
|
|
of Shares
|
|
Common Stock
|
Name and Address of
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|
Beneficially
|
|
Exercisable
|
|
Beneficially
|
|
Beneficially
|
Beneficial Owner(1)
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|
Owned
|
|
within 60 Days
|
|
Owned
|
|
Owned
|
|
Marco Vecchia
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|
|
|
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
*
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Steven M. Lutz
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|
|
262,348
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|
|
|
269,814
|
|
|
|
532,162
|
|
|
|
2.0
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%
|
Executive Vice President, Sales and Trade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Andrew K. W. Powell
|
|
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100,100
|
|
|
|
|
|
|
|
100,100
|
|
|
|
*
|
|
Executive Vice President, General Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Alan Roberts
|
|
|
74,100
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|
|
|
38,541
|
|
|
|
112,641
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|
|
|
*
|
|
Vice President, Scientific Affairs
|
|
|
|
|
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|
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|
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David Price
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13,584
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|
|
|
|
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|
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|
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|
*
|
|
Former Executive Vice President, Finance, Chief Financial
Officer and Treasurer
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|
|
|
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|
|
|
|
|
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All executive officers and directors as a group
(12 persons, consisting of 5 executive officers and 7
non-employee directors)
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3,502,686
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|
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|
773,041
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|
|
|
4,275,727
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|
|
16.1
|
%
|
|
|
|
* |
|
Represents beneficial ownership of less than one percent of
common stock. |
|
(1) |
|
Unless otherwise indicated, the address of each beneficial owner
is care of Cornerstone Therapeutics Inc., 1255 Crescent Green
Drive, Suite 250, Cary, North Carolina 27518. |
|
(2) |
|
Consists of 1,567,225 shares of common stock held by
Cornerstone Biopharma Holdings, Ltd., and 1,443,913 shares
of common stock held by Carolina Pharmaceuticals, Carolina
Pharmaceuticals Holdings, Ltd., or Carolina Pharmaceuticals
Holdings, owns 100% of Carolina Pharmaceuticals
outstanding shares. Mr. Collard owns 100% of the
outstanding common stock and is a director of Cornerstone
Biopharma Holdings, Ltd. and by virtue of such positions
exercises voting and investment power with respect to the
Cornerstone Therapeutics Inc. shares owned by Cornerstone
Biopharma Holdings, Ltd. Mr. Collard is the chief executive
officer and chairman of the boards of Carolina Pharmaceuticals
and Carolina Pharmaceuticals Holdings and by virtue of such
positions exercises voting and investment power with respect to
the Cornerstone Therapeutics Inc. shares beneficially owned by
these entities. Mr. Collard disclaims beneficial ownership
of the shares held by Cornerstone Biopharma Holdings, Ltd. and
Carolina Pharmaceuticals, except to the extent of his pecuniary
interest therein. |
|
(3) |
|
Carolina Pharmaceuticals Holdings disclaims beneficial ownership
of the shares held by Carolina Pharmaceuticals, except to the
extent of its pecuniary interest therein. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires our directors, executive officers and the holders of
more than 10% of our common stock to file with the SEC initial
reports of ownership of our common stock and other equity
securities on a Form 3 and reports of changes in such
ownership on a Form 4 or Form 5. Officers, directors
and 10% stockholders are required by SEC regulations to furnish
us with copies of all Section 16(a) forms they file. To our
knowledge, based solely upon a review of the copies of such
forms furnished to us for the year ended December 31, 2010,
and the information provided to us by those persons required to
file such reports, no such person failed to file the forms
required by Section 16(a) of the Exchange Act on a timely
basis during the year ended December 31, 2010, except that
Mr. Roberts failed to timely file a Form 3.
20
INFORMATION
ABOUT EXECUTIVE AND DIRECTOR COMPENSATION
Executive
Compensation
Compensation
Discussion and Analysis
The Compensation Discussion and Analysis, which we refer to
herein as the CD&A, describes our executive
compensation philosophy, components and policies, including
analysis of the compensation earned by our named executive
officers for 2010 as detailed in the accompanying tables.
The following executives were our named executive officers for
2010:
|
|
|
Name
|
|
Position
|
|
Craig A. Collard
|
|
President, Chief Executive Officer and (from July 2010
through January 2011) Interim Chief Financial Officer
|
Steven M. Lutz
|
|
Executive Vice President, Manufacturing and Trade
|
Andrew K. W. Powell
|
|
Executive Vice President, General Counsel and Secretary
|
Alan Roberts
|
|
Vice President, Scientific Affairs
|
David Price
|
|
Former Executive Vice President, Finance, Chief Financial
Officer and Treasurer
|
Executive
Summary
Key
Executive Compensation Actions and Highlights
Since the beginning of 2010, we have taken the following key
actions implementing our pay for performance philosophy, while
also taking into account various considerations that affect our
ability to achieve our strategic growth objectives. All, and the
rationale for each, are described below.
For 2010, each named executive officer who had been with us for
more than six months was awarded a small merit increase in base
salary reflecting our corporate performance in 2009. For 2011,
our Compensation Committee decided not to award any merit
increase in base salary to our named executive officers as part
of an overall objective of maintaining base salaries for all
employees at 2010 levels.
Our Compensation Committee nonetheless determined that we
performed well in 2010, including over-achieving our financial
goals, and that we met, or over-achieved, most of our other
corporate goals. Accordingly, our named executive officers
received cash bonuses which, when taken together as a group,
represented approximately 95% of their target bonuses for 2010.
Our Compensation Committee determined that it would keep annual
cash bonus targets for 2011 at 2010 levels.
In March 2010 and March 2011, we granted stock options to each
of our named executive officers who had been with us for more
than six months. These awards reflected our corporate
performance, the executives individual performance and the
target equity award levels reflected in certain executives
employment agreements.
Compensation
Governance
Consistent with our philosophy of pay for performance, the
following features are built into our executive compensation
process to ensure appropriate process and governance:
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Our Compensation Committee is comprised solely of independent
directors.
|
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|
Under our Governance Agreement, the determinations of our
Compensation Committee are subject to ratification by the full
Board of Directors.
|
21
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|
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|
|
Our Compensation Committee uses independently generated third
party data to obtain an understanding of compensation practices
at companies in our industry. Our Compensation Committee
approves and reviews our executive officers individual
goals to ensure that they are aligned with our corporate goals
and that they do not create incentives to engage in behaviors
that might expose us to undue risk or have a material adverse
effect on us.
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|
Our Compensation Committee regularly reviews our executive
compensation program as a whole, including base salaries, annual
cash incentives and equity-based incentives, to ensure that it
properly rewards the value of executives contributions to
the achievement of our corporate goals.
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|
Our Board of Directors recently adopted a clawback policy that
will allow us to seek recovery of certain compensation from our
executive officers in the event of an accounting restatement
caused by our material noncompliance with applicable financial
reporting requirements.
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Our policies include stringent insider trading policy
prohibitions as well as prohibitions on speculating or trading
in derivative instruments related to company securities.
|
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|
This year we will provide our stockholders with the opportunity
to cast an advisory vote on executive compensation as described
in Proposal No. 3 below.
|
Executive
Compensation Philosophy
The principal objectives of our executive compensation program
are to attract and retain talented executives. Our philosophy is
then to use compensation as a tool for rewarding performance and
thereby creating and maintaining stockholder value.
Elements
of Compensation
We have entered into executive employment agreements with each
of our named executive officers. Each of our named executive
officers is entitled to the following elements of compensation,
which are discussed more fully below:
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base salary;
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target bonus (in the discretion of our Compensation
Committee); and
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target equity awards (in the discretion of our Compensation
Committee).
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Compensation
Principles, Philosophy and Objectives
The following principles have guided our Compensation Committee
in developing our compensation programs and in determining total
compensation levels for our executive officers:
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we must be prepared to compete with larger organizations with
greater resources for executive talent;
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our compensation practices should take into account the ongoing
transformation of our business and our continuing growth
strategies; and
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our compensation programs should encourage our executive
officers to increase long-term stockholder value in a manner
that appropriately rewards the achievement of specified
short-term objectives without creating undue risk for us or our
stockholders.
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The goal of our executive compensation program is to attract and
retain key employees and then motivate them to
achieve and reward them for achieving
our business goals. We do this by:
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providing competitive compensation that consists of cash and
equity-based components that appropriately encourage and reward
performance and create enduring long-term stockholder value;
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rewarding our executive officers for their individual
contributions to our success;
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22
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aligning the interests of our executives as a group by linking
individual executive compensation to the company-wide
achievement of both our short-term operating imperatives and our
long-term strategic objectives; and
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aligning the interests of our executives with those of our
stockholders by building a culture of equity ownership and
shared risk.
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Elements
of Executive Compensation
Consistent with our executive officers employment
agreements, our Compensation Committee determined that the
compensation of our executive officers for 2010 should consist
of base salary, a discretionary bonus and stock-based
compensation. The committee does not target a specific mix of
executive compensation by allocating total compensation across
cash and noncash pay, between current and long-term pay or among
different types of long-term incentive awards.
Our overall executive compensation program includes the
following major elements:
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Compensation Element
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Objective
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Key Features
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Base salary
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Provide a fixed level of cash compensation based on
responsibilities, background, training and experience to
encourage retention and recognize performance.
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Annually reviewed by our Compensation Committee.
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Cash Bonus
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Reward executive officers for their individual performance and
contributions to corporate performance. Reinforce pay for
performance.
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Determined in the discretion of our Compensation Committee based
on broad parameters, not fixed formulas.
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Stock-based compensation
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Align our executive officers long-term interests with
those of our stockholders by rewarding officers for sustaining
long-term corporate performance; encourage retention through the
use of vesting provisions.
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Consists of stock options and, for certain executive officers
under certain circumstances, restricted stock awards.
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Broad-based benefits
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Provide a safety net of protection against the financial
catastrophes that can result from illness, disability or death.
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Executive officers participate in the same plans as other
employees, except that our medical insurance, dental insurance
and vision insurance plans are provided to them at no cost.
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Perquisites and severance benefits
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Promote client development and fulfillment of business duties on
an efficient and cost-effective basis; provide reasonable level
of severance compensation in certain circumstances.
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Designed to represent a small part of our overall compensation
package.
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Process
for Determining Executive Compensation
Overview
Our Compensation Committee annually approves salary increases,
targets for annual bonuses, the amounts of stock option and
restricted stock awards and payouts of bonuses, in its
discretion. In exercising its discretion, the committee
considers our actual corporate performance compared to our
corporate goals and
23
actual individual performance compared to individual goals, as
well as various subjective performance criteria. In general, our
Compensation Committee does not take into account amounts
realizable from prior compensation when making future pay
decisions.
As required by our bylaws and our Compensation Committees
charter, the compensation of our executive officers is approved
by our Compensation Committee and subject to ratification by our
Board of Directors.
Role
of Executive Officers
Our Chief Executive Officer assists our Compensation Committee
by annually developing the individual objectives and reviewing
the performance of each of our executive officers (other than
his own, which is reviewed by our Compensation Committee). Our
Chief Executive Officer generally makes specific recommendations
regarding salary adjustments and amounts of discretionary
bonuses, if any, for each executive. Our Chief Executive
Officers recommendations are then reviewed by our
Compensation Committee. That review includes a rigorous
assessment of our overall corporate performance and the
performance of individual executives, and includes consideration
of any factors that are relevant to corporate or executive
performance. The committee then either approves our Chief
Executive Officers recommendations or exercises its
discretion by modifying any recommended salary adjustments
and/or bonus
payments to our executive officers. In exercising its discretion
the committee may take into account the market data information
discussed below.
Role
of Compensation Consultants and Surveys
In setting executive compensation, our Compensation Committee
generally considers, along with various other factors, the
compensation paid to officers with similar responsibilities in
similar companies. Our Compensation Committee does not retain a
compensation consultant to assist in setting executive
compensation. However, in 2010, in order to improve its
understanding of compensation practices at companies in our
industry, our Compensation Committee considered market data from
a variety of sources, including the Radford Survey covering
pharmaceutical and bio-technology companies having between 150
and 499 employees and between $50 million and
$150 million in revenues. The committee does not use this
data, or any customized subset thereof, to benchmark its
compensation decisions. In 2010 it did, however, after
establishing compensation levels, use this data to assess and
confirm generally whether the nature and overall level of
compensation paid to our executives is reasonably sufficient to
support our objectives of attracting and retaining talented
executives. Our Compensation Committee did not attempt to align
our overall compensation structure to any specific percentile of
the companies whose data it reviewed.
Role
of Corporate and Individual Performance
Our Compensation Committee believes that our success is
dependent upon, and reflective of, the performance of our senior
management team, including our executive officers. In an effort
to appropriately incentivize our executives to achieve certain
objectives, the committee approves various commercialization,
research, clinical, regulatory, financial and operational goals.
The process of setting performance goals begins with our Chief
Executive Officer proposing our annual corporate goals. These
are reviewed by our Compensation Committee and then modified as
the committee believes is appropriate. Our Compensation
Committee then recommends that our full Board provisionally
adopt these corporate goals, subject to further review and
adjustment throughout the year as necessary based on changing
market and competitive conditions.
Once we have set our corporate goals, we establish individual
goals for each of our executive officers. Our Chief Executive
Officers individual goals are the same as our corporate
goals. The individual goals for our other executive officers are
set early in the first quarter of the calendar year and focus on
contributions that will facilitate the achievement of our
corporate goals. Each executive officer reviews our corporate
goals and proposes individual goals that appropriately support
our corporate goals, taking into account the executives
functional responsibilities. These individual goals are approved
by our Chief Executive Officer and then submitted to our
Compensation Committee for discussion, revision and adoption.
Our Compensation Committee regularly tracks our progress towards
our corporate and individual goals, and in 2011 this will be a
standing agenda item for all regularly scheduled Compensation
Committee meetings.
24
As part of this process the Compensation Committee also assesses
the continuing relevance of these goals, and may add to or
revise these goals as necessary or appropriate based on emergent
challenges and opportunities. Our Compensation Committee
believes that if our focus changes due to market shifts or
potential opportunities, our goals, on an individual and
corporate basis, should be correspondingly adjusted to encourage
our executive officers to position us to capitalize on such
shifts and opportunities, rather than focusing on past goals
that may or may not continue to enhance stockholder value. Any
change in our corporate goals is subject to adoption by the full
Board of Directors.
Goals may relate to objective financial metrics (such as the
achievement of a certain level of sales), to objective
non-financial achievements (such as the approval of a product
for sale) or to qualitative performance (such as building and
integrating a new team into our operational structure). We
intend for goals to be achievable as the result of sustained
focused effort on the part of the executive team, and it is our
expectation that in normal circumstances executives will achieve
substantially all of their individual goals, and as a result we
will achieve substantially all of our corporate goals.
Corporate
Performance
When making compensation decisions for our executive officers
with respect to annual bonuses and equity awards, our
Compensation Committee first assesses the level to which we have
achieved our corporate goals. The assessment of the achievement
of any corporate goal is in the discretion of our Compensation
Committee, and may exceed 100%. In reaching an overall
assessment of corporate performance, our Compensation Committee
may choose to weight our corporate goals. The overall assessment
may be expressed as a percentage of full goal achievement. The
assessment takes into account any revisions to goals made
throughout the year. The weighting of particular goals is a
matter of committee discretion, though as a general rule the
committee ascribes particular weight to goals related to
financial performance. While total achievement of all corporate
goals, as revised during the year, may not be expected, our
Compensation Committee demands that management significantly
advance our business objectives and the interests of
stockholders throughout the year for the committee to consider
it appropriate to base decisions regarding cash and equity
incentive compensation on an overall assessment that we achieved
our corporate goals at 100% or more.
Individual
Performance
Having made an overall assessment of corporate performance, our
Compensation Committee then assesses the level to which each of
our executive officers achieved their individual goals. In
assessing individual achievement, our Compensation Committee may
choose to weight an individuals goals, and the resulting
assessment may be expressed as a percentage of full goal
achievement.
In making compensation decisions for each individual executive
officer, our Compensation Committee considers both the
executives achievement of his individual goals and our
achievement of our corporate goals. Because the goals of our
Chief Executive Officer are the same as our corporate goals, the
committees assessment of his individual achievement will
be the same as the committees overall assessment of our
corporate performance. In the case of other executive officers,
the committee will exercise its discretion in balancing
individual achievement and corporate performance when
determining annual cash bonus and equity awards, as it deems
appropriate.
Our Compensation Committee believes that it is not appropriate,
at our stage of development, to have a rigid funding metric for
executive bonus and equity awards. However, as a general matter,
the committee believes that, in the absence of special
circumstances, our
pay-for-performance
philosophy demands that actual annual bonus and equity awards
made to our executive officers, as a group, should not reflect a
level of achievement in excess of that reflected in the
committees overall assessment of corporate performance.
Our Compensation Committee believes that, at this time, this
flexible but principled process is appropriate because it allows
the committee to consider (i) goals established by the
committee at the beginning of the year and goals communicated to
our executive officers at any point throughout the year,
(ii) the effects of unanticipated events and circumstances
on our business or on a particular executives performance,
and (iii) the performance
25
of our executives in managing change, addressing emergent
challenges and exploiting unexpected opportunities.
Our 2010 corporate and individual goals and their impact on our
named executive officers compensation are discussed more
fully below.
Executive
Compensation in 2010
Base
Salary
Our Compensation Committee has established base salaries for our
named executive officers at levels that are intended to reflect
the scope of their responsibilities and relevant backgrounds,
training and experience. When establishing a named executive
officers base salary, our Compensation Committee takes
into account his seniority, his level of responsibility, the
functional role of the position and compensation practices in
the pharmaceutical industry and among public companies. The
Compensation Committee reviews our named executive
officers base salaries annually.
The following table shows annual base salaries in effect for
2009, 2010 and 2011 for each named executive officer, as well as
the percentage increase from 2009 to 2010:
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2009 Base
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2010 Base
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Percent
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2011 Base
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Executive
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Salary
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Salary
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Increase
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Salary
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Craig A. Collard
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$
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394,784
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$
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400,000
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1.3
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%
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$
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400,000
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Steven M. Lutz
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$
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260,000
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$
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267,800
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3.0
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%
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$
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267,800
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Andrew K. W. Powell
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$
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275,000
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$
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275,000
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N/A
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$
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275,000
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Alan Roberts
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$
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225,000
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$
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231,750
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3.0
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%
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$
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231,750
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David Price
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$
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288,791
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$
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297,455
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3.0
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%
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N/A
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For 2010, each named executive officer who had been with us for
more than six months was awarded a merit increase, effective as
of January 1, 2010. Our Compensation Committee based these
increases on compensation trends in the pharmaceutical industry
generally, information regarding local compensation trends, 2009
corporate and individual performance and our Compensation
Committees experience and discretion.
For 2011, our Compensation Committee decided not to award any
merit increase in base salary to the named executive officers.
Our Compensation Committee based this decision on a review of
our strategic priorities for 2011 and the intention of our
executive management team to maintain base salaries for
substantially all of our other employees at 2010 levels.
Annual
Performance-Based Cash Incentive Compensation
Our current named executive officers are eligible for annual
cash bonuses pursuant to the terms of their respective
employment agreements. Annual bonuses are intended to link our
strategic and corporate operating plans with individual
performance, and to provide executive officers with incentives
to achieve greater corporate performance by focusing on the
attainment of specific goals.
Our Compensation Committee annually determines the target cash
bonus for each named executive officer based on a percentage of
such officers annual base salary. Although the employment
agreements we have entered into with each of our named executive
officers provide for target cash bonuses up to 50% for
Mr. Collard, 40% for Mr. Lutz and 35% for our other
named executive officers, our Compensation Committee retains
discretion to set the target cash bonuses for each named
executive officer either above or below these levels. For 2010,
our Compensation Committee set the target cash bonus for each of
our named executive officers, other than Mr. Collard, at
the maximum target level set forth in the executives
respective employment agreement. In the case of
Mr. Collard, however, the committee set the target cash
bonus percentage at 75% of base salary to reward
Mr. Collard for his leadership during 2009 and to
incentivize similar performance during 2010.
26
2010 Cash
Bonus
When exercising its discretion in awarding cash bonuses for
2010, our Compensation Committee considered our achievement of
our overall corporate goals and our named executive
officers achievement of their individual goals. In
reviewing our 2010 corporate goals, our Compensation Committee
focused on the degree to which we were able to achieve our
corporate goals, which included:
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To achieve net revenue in excess of $112 million and
non-GAAP income from operations in excess of
$16.4 million,1
consistent with guidance provided to our investors;
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To develop a quality/regulatory department and advance our
product development candidates;
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To acquire at least one new product;
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To focus our product portfolio and transition revenue away from
marketed unapproved products;
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To grow our market capitalization; and
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To develop a comprehensive three-year strategic plan.
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Based on its review of our corporate performance, our
Compensation Committee determined that we performed well in 2010
and over-achieved our financial goals while substantially
achieving most of our other goals. Our Compensation Committee
ultimately determined that 95% represented a reasonable estimate
of the extent to which we had met our corporate goals for 2010
and was therefore an appropriate basis from which to make bonus
determinations.
In making this estimate, our Compensation Committee considered
all aspects of our corporate performance in 2010, focusing on
the following key financial and non-financial results for the
year:
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Net revenues increased $14.5 million, or 14%, from
$109.6 million in 2009 to $125.3 million in
20102;
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Income from operations was $7.9 million in 2010 when
calculated in accordance with accounting principles generally
accepted in the United States (GAAP), and
$24.0 million in 2010 on a non-GAAP basis;
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Overall, cash and cash equivalents increased $32.1 million
or 170% to $50.9 million as of December 31, 2010
compared to $18.9 million as of December 31, 2009;
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We did not acquire any new products;
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We completed our transition away from marketed unapproved
products; and
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The percentage of net revenues generated from our approved
products increased from 36% in 2009 to 60% in 2010.
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In reaching its final assessment that we achieved substantially
all of our goals, our Compensation Committee applied a
subjective approach, ascribing particular weight to the
achievement of all financial metrics and the significant
over-achievement in revenues, operating income and cash flow, as
well as the effective transition away from marketed unapproved
products. At the same time our Compensation Committee took note
of the fact that market capitalization was generally flat over
the year, certain product specific sales targets were not
achieved, and due in part to certain factors outside the control
of our named executive officers, no new products were acquired,
some development milestones were set back, and our strategic
plan was not complete at year end.
1 Targeted
non-GAAP income from operations for 2010 excludes expected
stock-based compensation ($1.0 million) and amortization of
product rights ($14.4 million).
2 Non-GAAP
income from operations for 2010 excludes stock-based
compensation ($1.3 million) and amortization of product
rights ($14.7 million).
27
In addition to considering our overall corporate performance,
our Compensation Committee also took into account the
achievement by our named executive officers of the following
individual goals:
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Craig Collard. Mr. Collards goals
were the same as our corporate goals, so the committee assessed
his performance in the same way that it assessed our overall
performance.
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Steven Lutz. Mr. Lutzs goals
related to the achievement of specified levels of sales for
certain products, the introduction of new generic products, the
management of inventories, the management of our relationships
with wholesalers and the development of a strategic plan for our
Aristos subsidiary. In determining Mr. Lutzs annual
cash bonus award, the committee ascribed particular weight to
the over-achievement of sales targets for certain products and
the important role played by our relationships with wholesalers
in effecting the timely transition of our business away from
marketed unapproved products, which more than offset the delay
in some product introductions and the re-prioritization of the
Aristos strategic plan.
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Andrew Powell. Mr. Powells goals
related to the management of our disclosure function, the
reduction of our legal expenses, the completion of certain
licensing and divestiture transactions, the clarification of the
strategic value of our intellectual property portfolio and the
adoption of governance processes appropriate for a controlled
company. In determining Mr. Powells annual cash bonus
award, our Compensation Committee considered that our corporate
goals and the interests of our stockholders were significantly
advanced in each of these areas.
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Alan Roberts. Mr. Robertss goals
related to advancement of various of our pipeline products and
product candidates, the upgrade and continuous improvement of
our quality and compliance functions and the resolution of
various matters arising out of U.S. Food Drug and
Administration, or FDA, audits. In determining
Mr. Robertss annual cash bonus award, the committee
considered the progress of our various development projects,
including the delay and re-prioritization of certain projects,
as well as the successful resolution of all matters relating to
quality audits.
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In making annual cash bonus awards to our named executive
officers, our Compensation Committee also considered generally
the collective efforts of our executive officers in directing
our operations during the absence, for a substantial part of the
year, of a permanent Chief Financial Officer.
Our Compensation Committees assessment of each named
executive officers achievement was then weighed together
with the committees overall assessment of our performance
against our corporate goals. The committee, in its discretion,
then made awards to each executive officer such that total cash
bonus payouts to all executive officers, as a group (which
includes all of our named executive officers), did not exceed
the committees overall assessment of the extent to which
we achieved our corporate goals.
The following table illustrates our actual and target cash
bonuses for 2010:
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2010 Target Bonus
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2010 Actual Cash Bonus
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% of Base
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% of Base
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Executive
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Dollars
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Salary
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Dollars
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Salary
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% of Target
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Craig A. Collard
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$
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300,000
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75
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%
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$
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285,000
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71
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%
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95
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%
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Steven M. Lutz
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$
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107,120
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40
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%
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$
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107,120
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40
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%
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100
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%
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Andrew K. W. Powell
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$
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96,250
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35
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%
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$
|
112,292
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(1)
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35
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%(1)
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100
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%
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Alan Roberts
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$
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81,113
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35
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%
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|
$
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68,946
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30
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%
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85
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%
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David Price
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$
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104,109
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35
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%
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N/A
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N/A
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N/A
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(1) |
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Mr. Powells actual cash bonus payment for 2010
represented 14/12 of his 2010 bonus target because, pursuant to
his executive employment agreement, his service from
October 31, 2009 (his date of hire) to December 31,
2009 was aggregated with his 2010 service for purposes of
computing his 2010 annual cash bonus award. Thus, his actual
cash bonus payment for 2010 represents 35% of his base salary
during the 14 month period from October 31, 2009 to
December 31, 2010. |
28
2011
Target Cash Bonus
Our Compensation Committee determined that it would keep annual
cash bonus targets at 2010 levels, and for purposes of measuring
performance and determining appropriate incentive awards it
would follow a similar process to that followed in 2010.
Stock-Based
Compensation
Background
Our named executive officers are generally awarded initial stock
options and/or, in certain cases, restricted stock grants at the
time of hire. Additionally, our Compensation Committee approves
annual grants of options to our named executive officers based
on level of responsibility and perceived overall contribution to
the generation of stockholder value. The degree to which an
individual achieved his goals for a particular year is factored
into making the assessment of overall contribution, but the
individuals performance of non-goal specific activities
may be taken into account. Although we do not measure ourselves
against a specific benchmark, we believe that the annual
aggregate value of awards (using the Black Scholes-Merton or
equivalent valuation methodology) of options to named executive
officers reflects competitive levels for similar companies, as
reflected in the third-party data that is available to our
Compensation Committee.
We have granted certain named executive officers shares of
restricted stock at the time of hire because we believe that in
such circumstances restricted stock enables us to attract
executive talent and is a powerful retention tool. On an ongoing
basis, however, we believe that the grant of options to purchase
common stock is the best way to give executives an incentive to
build and sustain stockholder value over an extended period of
time. Options also align the interests of executives and
stockholders by enabling our executives to participate in any
increase in stockholder value resulting from their efforts. Our
stock option and restricted stock grants typically provide for
vesting over four years, which encourages retention.
Our Compensation Committee generally approves annual equity
awards at the committee meeting held in conjunction with the
first meeting of the Board of Directors each year, and, if its
decision is ratified by our Board, such awards are normally
effective on the date of ratification. We believe that this
timing is appropriate as it provides sufficient time for a
thorough review of corporate and individual performance during
the preceding year, while also providing timely reinforcement
for award recipients. Our Compensation Committee awards equity
grants without regard to any scheduled or anticipated release of
material information. We do not accelerate or delay equity
grants in response to material information, nor do we delay the
disclosure of information due to plans to make equity grants.
Impact of
the Chiesi Transaction
In connection with our 2009 strategic transaction with Chiesi,
entities controlled by Mr. Collard and Mr. Lutz sold
shares to Chiesi, and Mr. Collard, Mr. Lutz and the
entities controlled by them agreed to refrain, through
July 28, 2011, from purchasing or transferring our common
stock except in accordance with the Stockholders Agreement (as
discussed below). Mr. Collard and Mr. Lutz also
entered into executive employment agreements with us (as
discussed more fully below) in which they each agreed that they
would not be eligible to receive any annual equity awards,
unless approved by our Board of Directors or a committee thereof.
Our other named executive officers employed by us at the time of
the Chiesi transaction (Mr. Roberts and Mr. Price)
entered into executive employment agreements that provide that
they each would be eligible to receive an annual target equity
award in the form of an option to purchase, in whole or in part,
up to 50,000 shares of our common stock in each of the
years 2010, 2011 and 2012, vesting over a four-year period,
subject to their continued employment with us. These named
executive officers also agreed not to transfer a certain number
of their shares through July 28, 2011.
29
2010
Equity Awards
In March 2010, we granted stock options to each of our named
executive officers who had been with us for more than six
months. In making the equity awards, our Compensation Committee
considered the following factors:
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Craig Collard. The committee considered 2009
performance, and specifically the fact that in 2009
Mr. Collards leadership was particularly important in
the completion the Chiesi transaction, the acquisition of
FACTIVE, the integration of Critical Therapeutics and the growth
of our company.
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Steven Lutz. The committee considered that,
although the Aristos division did not achieve some of its goals
for the year, Mr. Lutz had made a significant contribution
to the increase in sales of certain products, the completion of
the Chiesi transaction and the growth of our company.
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Alan Roberts. The committee considered that
Mr. Roberts had made a significant contribution to the
advancement of our product pipeline, the establishment of our
cough and cold platform, and the improvement in our quality
systems, and had taken on increased responsibility following the
retirement of Dr. Brian Dickson. Accordingly, the committee
awarded Mr. Roberts the full amount of the annual equity
award target set forth in his employment agreement.
|
|
|
|
David Price. The committee considered that
Mr. Price had made a significant contribution to the
completion of the Chiesi transaction, the acquisition of FACTIVE
and the integration of Critical Therapeutics. Accordingly, the
committee awarded Mr. Price the full amount of the annual
equity award target set forth in his employment agreement.
|
In light of the above considerations, our Compensation Committee
approved, and our Board of Directors ratified, the following
stock option grants to our named executive officers in 2010:
|
|
|
|
|
Executive
|
|
No. of Options
|
|
Craig A. Collard
|
|
|
200,000
|
|
Steven M. Lutz
|
|
|
42,500
|
|
Andrew K. W. Powell
|
|
|
|
|
Alan Roberts
|
|
|
50,000
|
|
David Price
|
|
|
50,000
|
|
Each option award vests over four years, with 25% vesting on the
one-year anniversary of the grant date and the remaining 75%
vesting in 36 equal monthly installments, subject to the named
executive officers continued employment with us.
Mr. Prices option awards were forfeited when he
resigned effective July 2, 2010.
2011
Equity Awards
In March 2011, our Compensation Committee, in the exercise of
its discretion to make executive equity awards, conducted the
same analysis of corporate and individual performance as it
conducted in determining the level of 2010 cash bonuses (see
Annual Performance-Based Cash Incentive Compensation
above). As a result of this analysis, and taking into account
the annual equity award targets set forth in certain of the
named executive officers employment agreements, we made
the following stock option grants to our named executive
officers in 2011:
|
|
|
|
|
Executive
|
|
No. of Options
|
|
Craig A. Collard
|
|
|
95,000
|
|
Steven M. Lutz
|
|
|
50,000
|
|
Andrew K. W. Powell
|
|
|
50,000
|
|
Alan Roberts
|
|
|
42,500
|
|
30
Each option award vests over four years, with 25% vesting on the
one-year anniversary of the grant date and the remaining 75%
vesting in 36 equal monthly installments, subject to the
executives continued employment with us.
Stock
Ownership and Retention Guidelines
We believe that our named executive officers should hold stock
in our company to better align their interests with those of our
stockholders. Although we do not currently have any stock
ownership or retention guidelines for our executive officers or
employees, all of our named executive officers (other than
Mr. Powell) are subject to the lockup provisions discussed
below (see Potential Payments Upon Termination and Change
in Control Employment Agreements). In
addition, our insider trading policy prohibits our executive
officers and directors, as well as certain of their family
members and all entities controlled by them, from engaging in
short sales of our securities or puts and purchases or sales of
puts or calls for speculative purposes.
Other
Elements of Compensation
We primarily compensate our named executive officers through
base salaries, annual bonuses and annual stock option grants. In
addition, our Compensation Committee has determined that it is
appropriate to provide our named executive officers the same
broad-based benefits as our other employees, a limited amount of
perquisites and certain protections in the event of the
termination of the named executive officers employment
with us
and/or in
connection with a change in control.
Broad-based
benefits
Our named executive officers, like other employees, are entitled
to participate in our employee benefit plans, including medical
insurance, dental insurance, vision insurance, life insurance,
long-term disability insurance and a 401(k) savings plan. We do
not currently make any matching contributions under our 401(k)
plan, although our Board of Directors has approved a plan to
begin doing so in 2011. In addition, our named executive
officers, unlike other employees, are not required to make any
payments or other contributions to participate in our medical
insurance, dental insurance or vision insurance plans. Our
Compensation Committee has determined that it is appropriate to
provide medical, dental and vision insurance at no cost to our
named executive officers as part of our compensation package to
help us attract and retain superior talent and to encourage our
named executive officers to utilize these programs.
Perquisites
We have provided limited perquisites to our named executive
officers as a means of providing additional compensation to
them, through the availability of benefits that are convenient
for the executives to use when faced with the demands of their
positions. During 2010, these perquisites included the use of
company cars or automobile allowances, and in the case of
Mr. Collard, Mr. Lutz and Mr. Price, country club
memberships. Because our Compensation Committee has determined
that the payment of perquisites generally does not fit our
pay-for-performance
model, it should only represent a small part of our overall
compensation package. Accordingly, our Compensation Committee
only approves the payment of perquisites in limited
circumstances after consideration of business needs. Our
Compensation Committee periodically reviews these arrangements
to ensure they continue to fulfill our business needs.
Executive
Employment Agreements
We have entered into employment agreements with each of our
named executive officers. The form of these agreements was
negotiated in connection with our transaction with Chiesi. In
light of the competitive industry in which we operate, combined
with our majority ownership by Chiesi, our Compensation
Committee believes that these employment agreements are
necessary for us to attract and retain the talent necessary to
lead our company. We also believe that our executive employment
agreements help focus our executive officers on performance and
enhancing stockholder value.
31
Our executive employment agreements provide benefits in
connection with certain terminations of employment and certain
changes of control. These provisions are discussed more fully in
Potential Payments Upon Termination and Change in
Control Employment Agreements below. In
general, if we terminate a named executive officer without
cause, or if the named executive officer resigns with
good reason, the officer is entitled to cash
severance, continuation of healthcare benefits and acceleration
of vesting of his outstanding equity awards by one year. If such
without cause or good reason termination occurs three months
before or three months after a change of control,
the executive officers equity will become 100% vested.
In addition, if we experience a change of control, we provide
our named executive officers with immediate acceleration of
their equity. We believe that accelerating the vesting of
outstanding equity awards is appropriate because, depending on
the structure of the transaction, the continuation of such
awards may unnecessarily complicate a potentially beneficial
transaction. It may not be possible to replace these awards with
comparable awards of the acquiring companys stock, and we
believe that it would not be fair to our executives to lose the
benefit of these outstanding awards. The acceleration of such
awards may allow the executive to exercise the awards and
possibly participate in the change in control transaction for
the shares received. We believe that our change of control
benefits promote the stability and retention of our named
executive officers in the event of a potential change of control
and assist them in being able to react neutrally and not be
influenced by personal financial concerns. In addition, the
acceleration of vesting aligns the interests of executives in a
potential change of control transaction with those of our
stockholders, by motivating them to work towards the completion
of the transaction.
Tax and
Accounting Considerations
Tax
Deductibility of Compensation Expense
Under Section 162(m) of the Internal Revenue Code of 1986,
as amended, a publicly held corporation such as ours will
generally not be allowed a federal income tax deduction for
otherwise deductible compensation paid to our named executive
officers to the extent that compensation paid to a particular
officer is not performance-based and exceeds
$1 million in any fiscal year. However, qualifying
performance-based compensation, including compensation
attributable to the issuance or exercise of equity incentives,
such as nonstatutory stock options, will not be subject to the
deductibility limitation if certain conditions are met.
The base salaries, cash bonuses and certain equity incentive
components of our executive compensation program (e.g., any
service-based restricted stock awards that we make) generally do
not constitute qualifying performance-based compensation for
purposes of Section 162(m). However, given that the annual
non-performance-based compensation of our named executive
officers is below $1 million per year, Section 162(m)
does not have a significant impact on our Compensation
Committees executive compensation decisions.
Accounting
Considerations
Our Compensation Committee also considers the accounting and
cash flow implications of various forms of executive
compensation. In our financial statements, we record salaries
and bonuses as expenses in the amount paid or to be paid to our
named executive officers. Accounting rules also require us to
record an expense in our financial statements for equity awards,
even though equity awards are not paid as cash to employees. The
accounting expense of equity awards to employees is calculated
in accordance with GAAP. Under GAAP, stock-based compensation
expense is measured at the grant date based on the fair value of
the award and is generally recognized on a straight-line basis
over the vesting period. Our Compensation Committee believes
that the many advantages of equity compensation, as discussed
above, more than compensate for the non-cash accounting expense
associated with it.
Executive
Incentive Compensation Recovery (Clawback)
Policy
Our Board of Directors recently adopted an Executive Incentive
Compensation Recovery (Clawback) Policy, effective
as of March 2, 2011, pursuant to which, in the event that
noncompliance with applicable financial reporting requirements
results in a material restatement of our financial statements,
we will have the right to recover from an executive officer any
portion of cash or equity incentive compensation awards granted
32
after January 1, 2011 in excess of what should have been
paid or awarded. We will implement this policy in accordance
with the rules of the Securities and Exchange Commission, as
they are promulgated.
Risk
Management
Our Compensation Committee endeavors to design our compensation
programs to help ensure that these programs do not encourage our
executive officers to take unnecessary and excessive risks that
could harm our long-term value. We believe that the following
components of our executive compensation program, which are
discussed more fully below, discourage our executive officers
from taking unnecessary or excessive risks:
|
|
|
|
|
Base salaries and benefits are sufficiently competitive and not
subject to performance risk.
|
|
|
|
Individual and corporate goals for our executive officers are
generally designed to be achievable with sustained and focused
effort.
|
|
|
|
Stock option awards begin vesting no earlier than one year from
the date of grant and only have value if our share price
increases, thus aligning our executives interests with the
interests of our stockholders.
|
|
|
|
Our clawback policy allows us to seek recovery of certain
compensation from our executive officers in the event of
accounting restatement caused by our material noncompliance with
applicable financial reporting requirements.
|
Our Compensation Committee annually reviews our executive
compensation programs to ensure that they do not encourage
excess risk-taking.
Compensation
Committee Report
The Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis
section of this Proxy Statement. Based on the review and
discussions, the Compensation Committee recommended to the
Companys Board of Directors, and the Board of Directors
has approved, the inclusion of the Compensation Discussion and
Analysis in this Proxy Statement.
COMPENSATION COMMITTEE
Michael Heffernan (Chair)
Christopher Codeanne
Michael Enright
Compensation
Program Risk Assessment
During 2010, we conducted a risk assessment of our compensation
policies and practices for all of our employees (not just our
executive officers). Based on this review, we concluded that
risks arising from our compensation policies and practices for
our employees are not reasonably likely to have a material
adverse effect on us. Our risk assessment included a review of
program policies and practices; program analysis to identify
risk and risk control related to the programs; and
determinations as to the sufficiency of risk identification, the
balance of potential risk to potential reward, risk control and
the support of the programs and their risks to company strategy.
Although we reviewed all compensation programs, we focused on
the programs with variability of payout (e.g., bonus plans and
sales commissions), with the ability of a participant to
directly affect payout and the controls on participant action
and payout. As part of our review, we specifically noted the
following factors that reduce the likelihood that excessive risk
taking would have a material adverse effect on us: (i) a
strong internal control structure, (ii) payment to our
employees of competitive base salaries and benefits that are not
subject to performance risk, (iii) performance bonuses that
are not based on preset formulas but are in the discretion of
our Compensation Committee and (iv) short-term incentive
compensation that is counterbalanced with long-term incentive
compensation.
33
Summary
Compensation Table
The following table sets forth information for the fiscal years
ended December 31, 2010, 2009 and 2008 regarding the
compensation of our named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)(1)
|
|
($)(2)
|
|
($)(2)
|
|
($)
|
|
($)
|
|
Craig A. Collard
|
|
|
2010
|
|
|
|
400,000
|
|
|
|
285,000
|
|
|
|
|
|
|
|
683,280
|
|
|
|
100,793
|
(3)
|
|
|
1,469,073
|
|
President, Chief Executive Officer
|
|
|
2009
|
|
|
|
394,784
|
|
|
|
197,392
|
|
|
|
|
|
|
|
217,828
|
|
|
|
114,042
|
|
|
|
924,046
|
|
and (from July 2010 through January 2011) Interim Chief
Financial Officer
|
|
|
2008
|
|
|
|
379,600
|
|
|
|
378,800
|
|
|
|
|
|
|
|
93,388
|
|
|
|
72,667
|
|
|
|
925,455
|
|
Steven M. Lutz
|
|
|
2010
|
|
|
|
267,800
|
|
|
|
107,120
|
|
|
|
|
|
|
|
145,197
|
|
|
|
37,008
|
(4)
|
|
|
557,125
|
|
Executive Vice President, Manufacturing and Trade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew K. W. Powell
|
|
|
2010
|
|
|
|
275,000
|
|
|
|
112,292
|
|
|
|
|
|
|
|
|
|
|
|
26,806
|
(5)
|
|
|
414,098
|
|
Executive Vice President, General Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan Roberts
|
|
|
2010
|
|
|
|
231,750
|
|
|
|
68,946
|
|
|
|
|
|
|
|
170,820
|
|
|
|
32,359
|
(6)
|
|
|
503,875
|
|
Vice President, Scientific Affairs
|
|
|
2009
|
|
|
|
139,327
|
|
|
|
78,750
|
|
|
|
496,300
|
|
|
|
286,475
|
|
|
|
12,640
|
|
|
|
1,013,492
|
|
David Price
|
|
|
2010
|
|
|
|
154,448
|
|
|
|
|
|
|
|
|
|
|
|
170,820
|
(7)
|
|
|
25,915
|
(8)
|
|
|
351,183
|
|
Former Executive Vice President and Chief Financial
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Annual bonuses for 2010 reflected in this column are described
in the section Compensation Discussion and
Analysis Annual Performance-Based Cash Incentive
Compensation. |
|
(2) |
|
The amounts in these columns reflect the aggregate grant date
fair value of awards granted during the year computed in
accordance with Financial Accounting Standards Board ASC Topic
718, Compensation Stock Compensation. The
assumptions made in determining the fair values of our stock and
option awards are set forth in Note 7 to our 2010
Consolidated Financial Statements and in the Critical Accounting
Policies and Estimates section of our Managements
Discussion and Analysis, each of which is included in our Annual
Report on
Form 10-K
for the year ended December 31, 2010 filed with the
Securities and Exchange Commission on March 3, 2011. |
|
(3) |
|
Represents $31,120 in automobile related payments for company
car for personal use, $34,508 in country club membership
payments, $3,638 in additional payments for employee benefits
and $31,527 for tax
gross-ups. |
|
(4) |
|
Represents $20,042 in automobile related payments for company
car for personal use, $2,590 in country club membership
payments, $3,504 in additional payments for employee benefits
and $10,872 for tax
gross-ups. |
|
(5) |
|
Represents $10,200 in automobile related payments, $9,695 for
relocation expenses, $3,638 in additional payments for employee
benefits and $3,273 for tax
gross-ups. |
|
(6) |
|
Represents $19,401 in automobile related payments, $3,638 in
additional payments for employee benefits and $9,320 for tax
gross-ups. |
|
(7) |
|
Mr. Prices option awards were forfeited when he
resigned effective July 2, 2010. |
|
(8) |
|
Represents $6,573 in automobile related payments, $5,855 in
country club membership payments, $9,967 in additional payments
for employee benefits and $3,520 for tax
gross-ups. |
34
Grants of
Plan-Based Awards in 2010
The table below summarizes the material terms of each equity
award made to our named executive officers during the fiscal
year ended December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Securities
|
|
Option
|
|
Grant
|
|
|
|
|
Underlying
|
|
Exercise
|
|
Date
|
Name
|
|
Grant Date
|
|
Options(1)
|
|
Price
|
|
Fair Value
|
|
Craig A. Collard
|
|
|
3/3/2010
|
|
|
|
200,000
|
|
|
$
|
5.26
|
|
|
$
|
683,280
|
|
Steven M. Lutz
|
|
|
3/3/2010
|
|
|
|
42,500
|
|
|
$
|
5.26
|
|
|
$
|
145,197
|
|
Andrew K. W. Powell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan Roberts
|
|
|
3/3/2010
|
|
|
|
50,000
|
|
|
$
|
5.26
|
|
|
$
|
170,820
|
|
David Price(2)
|
|
|
3/3/2010
|
|
|
|
50,000
|
|
|
$
|
5.26
|
|
|
$
|
170,820
|
|
|
|
|
(1) |
|
The option awards reflected in these columns will vest 25% on
the first anniversary of the date of the grant and approximately
2.08% monthly thereafter. The options expire 10 years from
the grant date. |
|
(2) |
|
Mr. Prices option awards were forfeited when he
resigned effective July 2, 2010. |
Outstanding
Equity Awards at Fiscal Year-End 2010
The following table sets forth information regarding unexercised
stock options and restricted stock that has not vested for each
of our named executive officers outstanding as of
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(1)
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Value of
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
of Shares
|
|
Shares or
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
or Units
|
|
Units of
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
of Stock
|
|
Stock
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
That
|
|
That
|
|
|
|
|
Options (#)
|
|
Options (#)
|
|
Price
|
|
Expiration
|
|
Have Not
|
|
Have Not
|
Name
|
|
Grant Date
|
|
Exercisable
|
|
Unexercisable
|
|
($/Sh)(2)
|
|
Date
|
|
Vested (#)
|
|
Vested ($)
|
|
Craig A. Collard
|
|
|
1/17/06
|
|
|
|
11,904
|
|
|
|
|
|
|
$
|
0.43
|
|
|
|
8/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
3/16/07
|
|
|
|
238,083
|
|
|
|
|
|
|
$
|
1.77
|
|
|
|
3/16/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
10/31/08
|
|
|
|
35,712
|
|
|
|
|
|
|
$
|
3.90
|
|
|
|
10/31/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
5/28/09
|
|
|
|
19,791
|
|
|
|
30,209
|
|
|
$
|
7.09
|
|
|
|
5/27/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
3/3/10
|
|
|
|
|
|
|
|
200,000
|
|
|
$
|
5.26
|
|
|
|
3/2/2020
|
|
|
|
|
|
|
|
|
|
Steven M. Lutz
|
|
|
7/1/05
|
|
|
|
5,952
|
|
|
|
|
|
|
$
|
1.06
|
|
|
|
7/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
2/23/06
|
|
|
|
35,712
|
|
|
|
|
|
|
$
|
0.43
|
|
|
|
2/23/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
3/16/07
|
|
|
|
178,562
|
|
|
|
|
|
|
$
|
1.77
|
|
|
|
3/16/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
10/31/08
|
|
|
|
23,808
|
|
|
|
|
|
|
$
|
3.90
|
|
|
|
10/31/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
5/28/09
|
|
|
|
9,895
|
|
|
|
15,105
|
|
|
$
|
7.09
|
|
|
|
5/27/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
3/3/10
|
|
|
|
|
|
|
|
42,500
|
|
|
$
|
5.26
|
|
|
|
3/2/2020
|
|
|
|
|
|
|
|
|
|
Andrew K. W. Powell
|
|
|
10/30/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,500
|
(3)
|
|
|
478,000
|
|
Alan Roberts
|
|
|
7/28/09
|
|
|
|
17,708
|
|
|
|
32,292
|
|
|
$
|
9.30
|
|
|
|
7/27/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
3/3/10
|
|
|
|
|
|
|
|
50,000
|
|
|
$
|
5.26
|
|
|
|
3/2/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
5/28/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,500
|
(4)(5)
|
|
|
304,000
|
|
David Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Option awards granted on or before October 31, 2008 were
fully vested as of December 31, 2010. Option awards granted
on or after May 28, 2009 vest 25% on the first anniversary
of the date of the grant and approximately 2.08% monthly
thereafter. |
35
|
|
|
(2) |
|
All option awards are granted with exercise prices equal to the
fair market value of our common stock on the grant date. The
option awards granted by Cornerstone BioPharma prior to the date
of the Merger were based on Cornerstone BioPharmas per
share fair market value as determined by Cornerstone
BioPharmas Board of Directors. The option awards
Cornerstone BioPharma granted on the date of the Merger were
based on the closing price per share of our common stock
reported by NASDAQ. Following the Merger, the exercise prices of
all option awards we have granted equal the closing price per
share of our common stock reported by NASDAQ on the grant date. |
|
(3) |
|
The vesting schedule for this restricted stock award is 25% on
each on the first anniversary of the grant date and
approximately 6.3% on a day to be randomly determined in each of
the next 11 calendar quarters (provided that in no event shall
the days so chosen in two consecutive quarters be less than
60 days apart from each other). The grant date for the
award was October 30, 2009. |
|
(4) |
|
The vesting schedule for this restricted stock award is 25% on
each of the first four anniversaries of the grant date. The
grant date for the award was May 28, 2009. |
|
(5) |
|
Immediately following our transaction with Chiesi in July 2009,
25% of this restricted stock award immediately vested. The
remaining 75% will vest according to the original vesting
schedule. |
Option
Exercises and Stock Vested in Fiscal 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
|
|
Number of Shares
|
|
|
|
|
Acquired on
|
|
Value Realized on
|
|
Acquired on Vesting
|
|
Value Realized on
|
Name
|
|
Exercise (#)
|
|
Exercise ($)
|
|
(#)
|
|
Vesting ($)
|
|
Craig A. Collard
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven M. Lutz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew K. W. Powell
|
|
|
|
|
|
|
|
|
|
|
27,500
|
|
|
|
172,150
|
|
Alan Roberts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential
Payments Upon Termination and Change in Control
Employment Agreements
We have entered into employment agreements with each of our
named executive officers that provide that each of our named
executive officers is (or was) entitled to minimum annual base
salary; consideration for a discretionary target annual bonus
specified as a percentage of the executive officers base
salary; car allowance or reimbursement; certain health,
retirement and other benefits; and severance. The discretionary
target annual bonus amounts are 50% for Mr. Collard, 40%
for Mr. Lutz and 35% for our other named executive
officers. In addition, the employment agreements for
Messrs. Roberts and Price (if he were still serving as an
executive officer) each provides for annual awards of options to
purchase 50,000 shares of our common stock, in the
discretion of the Compensation Committee, in each of 2010, 2011
and 2012.
Each of the employment agreements with our named executive
officers provides that the named executive officer may not
compete with us during the term of his employment and, if his
employment is terminated, for certain periods following
termination. For Mr. Collard, the noncompetition period
continues for (i) one and a half years following a
termination without Cause or for Good Reason and not during a
Change of Control Period, (ii) two years following a
termination without Cause or for Good Reason during a Change of
Control Period and (iii) one year following a termination
under any other circumstances. The noncompetition period for
each of our other named executive officers extends for one year
following termination in all circumstances.
The employment agreements also prohibit each of our named
executive officers from soliciting, among others, our employees
and customers during the term of his employment and for one year
following the termination of his employment. Each employment
agreement also contains customary provisions relating to
confidentiality, proprietary information and non-disparagement
and provides that upon a Change of Control
36
100% of the named executive officers unvested stock
options and restricted stock vest, regardless of whether his
employment is terminated.
The employment agreements with Messrs. Roberts and Price
also contain restrictions on the transfer of certain shares held
by the named executive officer (the named executive
officers covered shares). These restrictions
remain in effect for two years following the closing of the
Chiesi Transaction regardless of whether the named executive
officer remains employed with us. Messrs. Collard and Lutz
are subject to similar
lock-up
provisions under the Stockholders Agreement.
If we terminate a named executive officers employment
without Cause or if the named executive officer terminates his
employment for Good Reason and such termination is not during a
Change of Control Period, and if the executive officer executes
a release and settlement agreement in a form acceptable to us,
he will be entitled to:
|
|
|
|
|
a lump sum payment equal to one times (1.5 times in the case of
Mr. Collard) his annualized base salary;
|
|
|
|
continuation of benefits for the shorter of 12 months or
until he is eligible for other employer-sponsored health
coverage;
|
|
|
|
a lump sum payment in an amount equal to a pro rata payment of
his target cash bonus; and
|
|
|
|
accelerated vesting of all of his outstanding unvested stock
options and restricted stock by one year.
|
If we terminate a named executive officers employment
without Cause or if the named executive officer terminates his
employment for Good Reason and such termination is during a
Change in Control Period, and if the named executive officer
executes a release and settlement agreement in a form acceptable
to us, he will be entitled to:
|
|
|
|
|
a lump sum payment equal to one times his annualized base salary
(two times his highest annualized base salary during the
three-year period prior to the Change in Control in the case of
Mr. Collard);
|
|
|
|
continuation of benefits for the shorter of 12 months
(24 months in the case of Mr. Collard) or until he is
eligible for other employer-sponsored health coverage;
|
|
|
|
a lump sum payment in an amount equal to a pro rata payment of
his target cash bonus (the annual bonus paid or payable for the
most recently completed fiscal year in the case of
Mr. Collard); and
|
|
|
|
accelerated vesting of 100% of his outstanding unvested stock
options and restricted stock.
|
If Mr. Collards employment is terminated due to his
death, then his estate will receive a lump sum payment in an
amount equal to a pro rata payment of the annual cash bonus, if
any, paid to him in the year prior to his death. For all other
named executive officers, if terminated due to their death, the
named executive officers estate will receive a lump sum
payment in an amount equal to a pro rata payment of the annual
cash bonus for which such named executive officer would have
been eligible.
Upon termination of Mr. Collards employment, we will
pay or reimburse Mr. Collard for the balance of the
remaining lease payments on the vehicle provided by us for his
use, and will assign and transfer title and other appropriate
evidence of ownership of the vehicle to him in exchange for $100.
For purposes of each of the employment agreements with our named
executive officers, the terms below have the following meanings:
Cause means:
|
|
|
|
|
use of alcohol or narcotics which proximately results in the
willful material breach or habitual willful neglect of duties;
|
|
|
|
criminal conviction of fraud, embezzlement, misappropriation of
assets, or conviction of any felony or other crime that brings
embarrassment to us, but in no event traffic or similar
violations;
|
37
|
|
|
|
|
any act constituting willful misconduct which is materially
detrimental to our best interests, including but not limited to
misappropriation of, or intentional damage to, our funds,
property or business;
|
|
|
|
a material violation of our policies, including but not limited
to violations of our policies prohibiting harassment or
discrimination; or
|
|
|
|
willful breach of the employment agreement, if such willful
breach is not cured within thirty (30) days after our
written notice thereof specifying the nature of such willful
material breach.
|
Good Reason means:
|
|
|
|
|
a material reduction in the annual base compensation (but
exclusive of any target cash bonus, annual equity award or other
similar cash bonus or equity plans for this purpose);
|
|
|
|
relocation of the place of business at which the named executive
officer is principally located to a location that is greater
than thirty (30) miles from its current location;
|
|
|
|
our failure to comply with a material term of the named
executive officers employment agreement; or
|
|
|
|
a material reduction in the named executive officers level
of responsibility to that which is not consistent with the
position held by the named executive officer.
|
Change of Control means:
|
|
|
|
|
an acquisition of beneficial ownership of our capital stock by
any one person or group if, following such acquisition, such
person or group has 50% or more of the combined voting power of
our then-outstanding securities entitled to vote generally in
the election of directors;
|
|
|
|
such time as the Continuing Directors (as defined below) do not
constitute a majority of our Board of Directors, where the term
Continuing Director means at any date a member of
the Board of Directors (i) who was a member of the Board of
Directors on the date of the initial adoption of the Employment
Agreement by the Board of Directors or (ii) who was
nominated or elected subsequent to such date by at least a
majority of the directors who were Continuing Directors at the
time of such nomination or election or whose election to the
Board of Directors was recommended or endorsed by at least a
majority of the directors who were Continuing Directors at the
time of such nomination or election; provided, however, that
there shall be excluded from this clause (i) any individual
whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person
other than the Board of Directors;
|
|
|
|
the consummation of a merger, consolidation, reorganization,
recapitalization or share exchange involving us or a sale or
other disposition of all or substantially all of our assets
unless, immediately following such transaction (i) all or
substantially all of the individuals and entities who were the
beneficial owners of the outstanding voting securities
immediately prior to such transaction beneficially own, directly
or indirectly, more than 50% of the combined voting power of the
then-outstanding securities entitled to vote generally in the
election of directors, respectively, of the resulting or
acquiring corporation in such transaction in substantially the
same proportions as their ownership of the outstanding voting
securities immediately prior to such transaction and
(ii) no person beneficially owns, directly or indirectly,
50% or more of the combined voting power of the then-outstanding
securities of such corporation entitled to vote generally in the
election of directors (except to the extent that such ownership
existed prior to such transaction); or
|
|
|
|
our liquidation or dissolution.
|
Change of Control Period means the period from three
(3) months before until three (3) months after the
date on which a Change of Control occurs.
38
Payments
Upon Termination or Change of Control
The following table summarizes the estimated amounts payable to
each named executive officer, other than Mr. Price, in the
event of a termination of employment or change of control, or
both. These estimates are based on the assumption that the
various triggering events occurred on December 31, 2010.
Because Mr. Price voluntarily resigned from employment with
us in June 2010, he was not entitled to the payment of any
severance in connection with the termination of his employment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Triggering Event
|
|
Severance
|
|
|
Bonus
|
|
|
Equity
|
|
|
Health(1)
|
|
|
Other(2)
|
|
|
Total
|
|
|
Craig A. Collard
|
|
Voluntary/For Cause/Disability
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
Death
|
|
$
|
|
|
|
$
|
197,392
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
197,392
|
|
|
|
Without Cause/For Good Reason (not in Change of Control Period)
|
|
$
|
600,000
|
|
|
$
|
300,000
|
|
|
$
|
46,375
|
|
|
$
|
14,496
|
|
|
$
|
87,066
|
|
|
$
|
1,047,937
|
|
|
|
Without Cause/For Good Reason (in Change of Control Period)
|
|
$
|
800,000
|
|
|
$
|
197,392
|
|
|
$
|
106,000
|
|
|
$
|
28,991
|
|
|
$
|
89,723
|
|
|
$
|
1,222,106
|
|
|
|
Change of Control (no termination)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
106,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
106,000
|
|
Steven M. Lutz
|
|
Voluntary/For Cause/Disability
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
Death
|
|
$
|
|
|
|
$
|
107,120
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
107,120
|
|
|
|
Without Cause/For Good Reason (not in Change of Control Period)
|
|
$
|
267,800
|
|
|
$
|
107,120
|
|
|
$
|
9,854
|
|
|
$
|
14,014
|
|
|
$
|
1,779
|
|
|
$
|
400,567
|
|
|
|
Without Cause/For Good Reason (in Change of Control Period)
|
|
$
|
267,800
|
|
|
$
|
107,120
|
|
|
$
|
22,525
|
|
|
$
|
14,014
|
|
|
$
|
1,779
|
|
|
$
|
413,237
|
|
|
|
Change of Control (no termination)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
22,525
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
22,525
|
|
Andrew K. W. Powell
|
|
Voluntary/For Cause/Disability
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
Death
|
|
$
|
|
|
|
$
|
96,250
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
96,250
|
|
|
|
Without Cause/For Good Reason (not in Change of Control Period)
|
|
$
|
275,000
|
|
|
$
|
96,250
|
|
|
$
|
160,499
|
|
|
$
|
14,496
|
|
|
$
|
1,826
|
|
|
$
|
548,071
|
|
|
|
Without Cause/For Good Reason (in Change of Control Period)
|
|
$
|
275,000
|
|
|
$
|
96,250
|
|
|
$
|
477,675
|
|
|
$
|
14,496
|
|
|
$
|
1,826
|
|
|
$
|
865,247
|
|
|
|
Change of Control (no termination)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
477,675
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
477,675
|
|
Alan Roberts
|
|
Voluntary/For Cause/Disability
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
Death
|
|
$
|
|
|
|
$
|
81,113
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
81,113
|
|
|
|
Without Cause/For Good Reason (not in Change of Control Period)
|
|
$
|
231,750
|
|
|
$
|
81,113
|
|
|
$
|
112,919
|
|
|
$
|
14,496
|
|
|
$
|
1,539
|
|
|
$
|
441,816
|
|
|
|
Without Cause/For Good Reason (in Change of Control Period)
|
|
$
|
231,750
|
|
|
$
|
81,113
|
|
|
$
|
330,475
|
|
|
$
|
14,496
|
|
|
$
|
1,539
|
|
|
$
|
659,373
|
|
|
|
Change of Control (no termination)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
330,475
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
330,475
|
|
|
|
|
(1) |
|
Represents the cost of healthcare continuation that we would pay
during the severance period. Amounts are based on the cost of
continuing coverage under the Consolidated Omnibus Budget
Reconciliation Act, as amended (COBRA). The expenses
are based on the coverage and premium rates in force on
December 31, 2010. |
|
(2) |
|
Represents life and disability insurance premiums for
12 months for each named executive officer, except that in
the case of Mr. Collard, it represents life and disability
insurance premiums for 24 months if terminated without
cause or for good reason during a change of control period. In
addition, Mr. Collards amount includes $84,409
representing the balance of the remaining lease payments on the
vehicle provided by us for his use. |
39
Director
Compensation
We use fees and option awards to attract and retain qualified
candidates to serve on our Board of Directors. In setting
director compensation, we consider both the significant amount
of time directors expend in fulfilling their duties to us and
the skill level required to be a director.
Director
Compensation for Fiscal 2010
The table below summarizes the compensation paid by Cornerstone
to its directors for the fiscal year ended December 31,
2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
or Paid
|
|
Option
|
|
|
|
|
in Cash
|
|
Awards
|
|
Total
|
Name(1)
|
|
($)
|
|
($)(2)
|
|
($)
|
|
Alessandro Chiesi(5)
|
|
|
41,000
|
|
|
|
86,969
|
|
|
|
127,969
|
|
Maria Paola Chiesi(3)
|
|
|
7,500
|
|
|
|
|
|
|
|
7,500
|
|
Christopher Codeanne(4)
|
|
|
55,000
|
|
|
|
38,653
|
|
|
|
93,653
|
|
Michael Enright(4)
|
|
|
50,000
|
|
|
|
38,653
|
|
|
|
88,653
|
|
Anton Giorgio Failla(5)
|
|
|
39,000
|
|
|
|
86,939
|
|
|
|
125,939
|
|
Michael Heffernan(7)
|
|
|
52,500
|
|
|
|
38,653
|
|
|
|
91,153
|
|
Robert Stephan(5)
|
|
|
42,000
|
|
|
|
86,969
|
|
|
|
128,969
|
|
Marco Vecchia(6)
|
|
|
21,000
|
|
|
|
57,980
|
|
|
|
78,980
|
|
|
|
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(1) |
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Craig A. Collard, our President and Chief Executive Officer, is
a director but receives no additional compensation for his
services as a director. The compensation received by
Mr. Collard as our President and Chief Executive Officer in
2010 is shown in the Summary Compensation Table. |
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(2) |
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The amounts in this column reflect the aggregate grant date fair
value of stock option awards granted during the year computed in
accordance with Financial Accounting Standards Board ASC Topic
718, Compensation Stock Compensation. The
assumptions made in determining the fair values of our option
awards are set forth in Note 7 to our 2010 Consolidated
Financial Statements and in the Critical Accounting Policies and
Estimates section of our Managements Discussion and
Analysis, each of which included in our Annual Report on
Form 10-K
for the year ended December 31, 2010 filed with the
Securities and Exchange Commission on March 3, 2011. |
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(3) |
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No option awards were granted or forfeited during 2010 and none
were outstanding as of December 31, 2010. |
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(4) |
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Option awards consist of one grant for 10,000 shares made
on May 20, 2010 with a grant date fair value of $38,653. No
option awards have been forfeited and there were 30,833
aggregate shares underlying outstanding option awards as of
December 31, 2010. |
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(5) |
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Option awards consist of one grant for 22,500 shares made
on May 20, 2010 with a grant date fair value of $86,969. No
option awards have been forfeited and there were 22,500
aggregate shares underlying outstanding option awards as of
December 31, 2010. |
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(6) |
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Option awards consist of one grant for 15,000 shares made
on May 20, 2010 with a grant date fair value of $57,980. No
option awards have been forfeited and there were 15,000
aggregate shares underlying outstanding option awards as of
December 31, 2010. |
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(7) |
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Option awards consist of one grant for 10,000 shares made
on May 20, 2010 with a grant date fair value of $38,653. No
option awards have been forfeited and there were 34,404
aggregate shares underlying outstanding option awards as of
December 31, 2010. |
On December 18, 2008, our Board of Directors approved an
Amended and Restated Non-Employee Director Compensation and
Reimbursement Policy effective October 31, 2008, or the
Director Compensation Policy, which applies to both Class A
and Class B non-employee directors, with effect from their
date of
40
election or appointment. The Director Compensation Policy
provides that each non-employee member of our Board of Directors
is eligible to receive the following:
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A $30,000 annual retainer, payable in installments of $7,500
quarterly in arrears; and
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Up to an annual aggregate maximum of $15,000 for attendance fees
for the following:
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u
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$2,000 for each meeting of the Board of Directors that the
director attends in person;
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u
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$1,000 for each meeting of any board committee on which the
director serves that the director attends in person;
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u
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$1,000 for each meeting of the Board of Directors that the
director attends by teleconference; and
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u
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$500 for each meeting of any board committee on which the
director serves that the director attends by teleconference.
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The annual fee for the lead independent director, if any, is
$10,000, the annual fee for the chair of the Audit Committee is
$10,000, the annual fee for the chair of the Compensation
Committee is $7,500, and the annual fee for the chair of the
Nominating and Corporate Governance Committee is $5,000.
Under the Director Compensation Policy currently in effect, each
non-employee director also receives an option to purchase up to
15,000 shares of our common stock upon his or her initial
election to our Board of Directors and an option to purchase up
to 10,000 shares of our common stock at each years
annual meeting after which he or she continues to serve as a
director. Non-employee directors serving on the Board of
Directors for less than a full year receive a pro rata portion
of the stock option grant that we make to non-employee directors
following our annual meeting each year. The shares subject to
these options become exercisable in 36 equal monthly
installments beginning one month from the date of grant.
On March 31, 2011, our Board of Directors approved an
amendment and restatement of the Director Compensation Policy to
provide that, beginning with the 2011 annual meeting, each
non-employee director will receive an option to purchase up to
20,000 shares of our common stock upon his or her initial
election to our Board of Directors and an option to purchase up
to 15,000 shares of our common stock at each years
annual meeting after which he or she continues to serve as a
director. The shares subject to options granted upon initial
election will become exercisable in 36 equal monthly
installments beginning one month from the date of grant, and the
shares subject to options granted upon re-election will become
exercisable in 12 equal monthly installments beginning one month
from the date of grant.
We reimburse each non-employee director for reasonable travel
and other expenses incurred in connection with attending
meetings of the Board of Directors and its committees. We pay
all reasonable expenses related to continuing director
education. However, we pay only a pro rata portion of education
expenses for our non-employee directors who serve on any
additional public company boards.
Securities
Authorized for Issuance Under Equity Compensation
Plans
The following table sets forth information as of
December 31, 2010 regarding securities authorized for
issuance under our equity compensation plans, consisting of our
2004 Stock Incentive Plan, our 2003 Stock Incentive Plan, the
2005 Cornerstone BioPharma Holdings, Inc. Stock Incentive Plan,
or the 2005 Stock Incentive Plan, and the Cornerstone BioPharma
Holdings, Inc. 2005 Stock Option Plan, or the 2005 Stock Option
Plan. All of our equity compensation plans were approved by our
stockholders, except that the 2005 Stock Incentive Plan and the
2005 Stock Option Plan were approved by Cornerstone
BioPharmas stockholders prior to the Merger. In connection
with the Merger, we assumed each outstanding option, whether
vested or unvested, to purchase Cornerstone BioPharmas
common stock, and these options became options to purchase
41
our common stock. We assumed the 2005 Stock Incentive Plan and
the 2005 Stock Option Plan on the same terms and conditions as
were applicable under those plans immediately prior to the
effective time of Merger.
Equity
Compensation Plan Information
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Number of Securities
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Remaining Available for
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Future Issuance Under
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Number of Securities to
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Weighted-Average
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Equity Compensation
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be Issued Upon Exercise
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Exercise Price of
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Plans (Excluding
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of Outstanding Options,
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Outstanding Options,
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Securities Reflected in
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Warrants and Rights
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Warrants and Rights
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Column (a))(1)
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Plan Category
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(a)
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(b)
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(c)
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Equity compensation plans approved by stockholders
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2,198,541
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$
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4.15
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1,810,855
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Equity compensation plans not approved by stockholders
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Total
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2,198,541
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$
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4.15
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1,810,855
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(1) |
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In addition to being available for future issuance upon exercise
of stock options that may be granted after December 31,
2010, our 2004 Stock Incentive Plan provides for the issuance of
restricted stock awards and other stock-based awards. |
Compensation
Committee Interlocks and Insider Participation
The Compensation Committee of our Board of Directors consists of
Mr. Heffernan, Mr. Codeanne and Mr. Enright.
Mr. Heffernan is the chairman of the Compensation
Committee. No member of the Compensation Committee was at any
time during the fiscal year ended December 31, 2010, or
formerly, an officer or employee of Cornerstone Therapeutics or
any subsidiary of Cornerstone Therapeutics, nor has any member
of the Compensation Committee had any relationship with us
during the fiscal year ended December 31, 2010 requiring
disclosure under Item 404 of
Regulation S-K
under the Securities Exchange Act of 1934.
None of our executive officers has served as a director or
member of the compensation committee (or other committee serving
an equivalent function) of any other entity, one of whose
executive officers served as a director or member of the
Compensation Committee.
42
PROPOSAL THREE
ADVISORY VOTE ON EXECUTIVE COMPENSATION
As discussed in the CD&A in this proxy statement, our
philosophy is to use compensation as a tool for creating and
maintaining stockholder value. The objectives of our executive
compensation program are therefore first to attract and retain
talented executives and then to motivate and reward them to act
in ways that create stockholder value. We have structured our
annual and long-term incentive based cash and non-cash
compensation programs to motivate executives to achieve, and
reward them for achieving, our short- and long-term business
goals.
As required by Section 14A of the Securities Exchange Act
of 1934, we are providing our stockholders with an advisory
(nonbinding) vote on the compensation of our executive officers.
This proposal, commonly known as a
Say-on-Pay
proposal, is designed to give you as a stockholder the
opportunity to endorse or not endorse our executive compensation
program through the following resolution:
Resolved, that the stockholders approve, on an advisory
basis, the compensation of our named executive officers, as
disclosed in this proxy statement pursuant to the compensation
disclosure rules of the Securities and Exchange Commission,
including the Compensation Discussion and Analysis, the
compensation tables and the other narrative disclosure.
When you cast your vote, we urge you to consider the description
of our executive compensation program contained herein,
including in the CD&A and the accompanying tables and
narrative disclosure, as well as the following factors:
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Our Compensation Committee regularly reviews our executive
compensation program as a whole, including our base salaries and
annual cash and equity incentives, to ensure that our executive
compensation program appropriately incentivizes our executive
officers to contribute to the creation of long-term stockholder
value and rewards our executive officers for superior
performance.
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Our policies include stringent insider trading policy
prohibitions as well as prohibitions on speculating in or
trading in derivative instruments related to company securities.
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Our Board recently adopted a clawback policy that will allow us
to seek recovery of certain compensation from our executive
officers in the event of an accounting restatement caused by our
material noncompliance with applicable financial reporting
requirements.
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Because your vote is advisory, it will not be binding upon our
Board of Directors, it will not overrule any decision by our
Board of Directors, and it will not create or imply any
additional fiduciary duties on the Board of Directors or any
member thereof. However, our Compensation Committee will take
into account the outcome of the vote when considering future
executive compensation arrangements.
Board
Recommendation
The Board of Directors recommends that the stockholders vote
FOR the approval of the resolution regarding the
advisory (nonbinding) vote on executive compensation.
43
PROPOSAL FOUR
ADVISORY VOTE ON FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE
COMPENSATION
As discussed in Proposal Three above, we are providing our
stockholders an advisory (nonbinding) vote on the compensation
of our executive officers. In this Proposal Four, we are
providing our stockholders with a separate advisory (nonbinding)
vote regarding the frequency (every one, two or three years)
with which we will provide our stockholders with an advisory
vote on the compensation of our executive officers. We will
present this proposal to our stockholders at least once every
six years.
You may cast your advisory vote on whether the stockholder vote
on executive compensation will occur every one, two or three
years, or you may abstain from voting on the matter. Because
your vote is advisory, it will not be binding upon our Board of
Directors, it will not overrule any decision by our Board of
Directors and it will not create or imply any additional
fiduciary duties on our Board of Directors or any member
thereof. However, we will take into account the outcome of the
vote when considering matters to be submitted to stockholders in
the future. In Proposal Four, you are not voting
for or against any proposal or
recommendation by our Board of Directors but, rather, are voting
for the option (every one, two or three years) you believe is
the most appropriate.
Our Board of Directors recommends that you vote in favor of
holding our advisory vote on executive compensation every
three years. In making this recommendation, our Board of
Directors considered the relevant merits of the three
alternatives. Our Board of Directors believes that holding the
advisory vote every one or two years would not provide our
stockholders sufficient time to focus on the long-term
performance objectives of our executive compensation programs or
give our Compensation Committee and Board of Directors
sufficient time to evaluate and respond to stockholder feedback
on these programs. Accordingly, our Board of Directors therefore
believes that an advisory vote on executive compensation that
occurs every three years will provide sufficient accountability
for our Compensation Committee and Board of Directors and will
allow our compensation programs and practices to be evaluated
over a longer term against longer-term corporate and financial
performance, as well as against the performance of our peers.
Board
Recommendation
The Board of Directors recommends a vote for three
years (as opposed to one year or two years) for the
frequency of future stockholder votes on executive
compensation.
OTHER
MATTERS
Our Board of Directors has no knowledge of any other matters
which may come before the meeting. However, if any other matters
are properly presented to the meeting, the persons named in the
accompanying proxy will vote the shares represented by such
proxy on such matters as determined by a majority in voting
power of our directors.
SOLICITATION
OF PROXIES
We will bear the cost of solicitation of proxies. In addition to
the solicitation of proxies by mail, our officers and employees
may solicit proxies in person or by telephone. We may reimburse
brokers or persons holding stock in their names, or in the names
of their nominees, for their expenses in sending proxies and
proxy material to beneficial owners.
REVOCATION
OF PROXY
Subject to the terms and conditions set forth in this proxy
statement, all proxies received by us will be effective,
notwithstanding any transfer of the shares to which those
proxies relate, unless prior to the closing of the polls at the
annual meeting, we receive a written notice of revocation signed
by the person who, as of the record date, was the registered
holder of those shares. The notice of revocation must indicate
the certificate number and numbers of shares to which the
revocation relates and the aggregate number of shares
represented
44
by the certificate(s). A proxy may also be revoked by a
stockholder if the stockholder attends the meeting and votes in
person, timely submits another signed proxy card bearing a later
date or timely submits new voting instructions over the Internet.
STOCKHOLDER
PROPOSALS
In order to be included in the proxy materials for our 2012
annual meeting of stockholders, stockholders proposed
resolutions must be received by us at our principal executive
offices, Cornerstone Therapeutics Inc., Attn: Corporate
Secretary, 1255 Crescent Green Drive, Suite 250, Cary,
North Carolina 27518, no later than December 20, 2011.
However, if the date of the 2012 annual meeting is changed by
more than 30 days from the date of the first anniversary of
the 2011 annual meeting, then the deadline is a reasonable time
before we begin to print and mail our proxy statement for the
2012 annual meeting. We suggest that proponents submit their
proposals by certified mail, return receipt requested.
In addition, our bylaws require that we be given advance notice
of stockholder nominations for election to the Board of
Directors and of other matters that stockholders wish to present
for action at an annual meeting of stockholders, other than
matters included in our proxy statement. The required notice
must be in writing and received by our corporate secretary at
our principal offices in the case of an election of directors at
an annual meeting of stockholders, not less than 90 days
nor more than 120 days prior to the first anniversary of
the preceding years annual meeting; provided, however,
that in the event that the date of the annual meeting is
advanced by more than 20 days, or delayed by more than
60 days, from the first anniversary of the preceding
years annual meeting, a stockholders notice must be
so received not earlier than the 120th day prior to such
annual meeting and not later than the close of business on the
later of (A) the 90th day prior to such annual meeting
and (B) the tenth day following the day on which notice of
the date of such annual meeting was mailed or public disclosure
of the date of such annual meeting was made, whichever first
occurs. The date of our 2012 annual meeting of stockholders has
not yet been established, but assuming it is held on
May 18, 2012, in order to comply with the time periods set
forth in our bylaws, appropriate notice for the 2012 annual
meeting would need to be provided to our Corporate Secretary no
earlier than January 19, 2012 and no later than
February 17, 2012.
DIRECTIONS
TO OUR ANNUAL MEETING AT OUR OFFICES
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From Durham, NC or points West, including RDU Airport, please
take I-40 East toward Raleigh and then take exit # 293 US-1
S / US-64 W toward Sanford. Take the Tryon Road East
exit # 98A and merge onto Tryon Road. At
2nd light
take right on Crescent Green Drive. 1255 Crescent Green Drive
will be on the right. Our office is in the
2nd
building (behind the main building, which is at 1225 Crescent
Green Drive) in Suite 250.
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From Raleigh, NC or points East, please take I-40 West
toward Durham/Chapel Hill and then take exit # 293 US-1
S / US-64 W toward Sanford. Take the Tryon Road East
exit # 98A and merge onto Tryon Road. At
2nd light
take right on Crescent Green Drive. 1255 Crescent Green Drive
will be on the right. Our office is in the
2nd
building (behind the main building, which is at 1225 Crescent
Green Drive) in Suite 250.
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45
If you need additional directions, please call 1-888-466-6505,
and we will be glad to direct you to the annual meeting location.
By order of the Board of Directors,
Andrew K. W. Powell, Esq.
Secretary
Cary, North Carolina
April 18, 2011
OUR BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND
THE ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE
URGED TO VOTE BY PROXY OVER THE INTERNET OR BY MAIL. A PROMPT
RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING
AND YOUR COOPERATION WILL BE APPRECIATED. STOCKHOLDERS WHO
ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH
THEY HAVE SENT IN THEIR PROXY CARDS OR VOTED BY PROXY OVER THE
INTERNET.
46
Dear Stockholder:
Please take note of the important information enclosed with this proxy card. There are matters
related to the operation of Cornerstone Therapeutics Inc. that require your prompt attention. Your
vote counts and you are strongly encouraged to exercise your right to vote your shares.
Please mark the boxes on the proxy card to indicate how your shares will be voted. Then sign and
date the proxy card and return it in the enclosed postage-paid envelope. Thank you in advance for
your prompt consideration of these matters.
Sincerely,
Cornerstone Therapeutics Inc.
Your vote is important. Please vote immediately.
ANNUAL MEETING OF STOCKHOLDERS OF
CORNERSTONE THERAPEUTICS INC.
May 18, 2011
Please date, sign and mail your proxy card in the envelope provided as soon as possible.
PROXY
CORNERSTONE THERAPEUTICS INC.
1255 Crescent Green Drive, Suite 250
Cary, North Carolina 27518
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2011
The undersigned, revoking all prior proxies, hereby appoints Craig A. Collard, Vincent T.
Morgus and Andrew K. W. Powell as proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and vote, as designated on this proxy card, all shares
of common stock of Cornerstone Therapeutics Inc.
(the Company) held of record by the undersigned on March 28, 2011 at
the Annual Meeting of Stockholders to be held on
May 18, 2011 at 8:30 a.m. and any adjournments thereof. The undersigned hereby directs Craig A.
Collard, Vincent T. Morgus and Andrew K. W. Powell to vote in accordance with the determination of
a majority in voting power of the directors as to any other matters which may properly come before
the Annual Meeting, all as indicated in the Notice of Annual Meeting, receipt of which is hereby
acknowledged, and to act on the matters set forth in such Notice as specified by the undersigned.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS
DIRECTED. IF NO DIRECTION IS GIVEN WITH
RESPECT TO PROPOSAL 1 THIS PROXY WILL BE VOTED FOR ALL NOMINEES, WITH RESPECT TO PROPOSALS
2 AND 3 THIS PROXY WILL BE VOTE FOR SUCH PROPOSALS AND WITH RESPECT TO PROPOSAL 4, THIS PROXY WILL
BE VOTED FOR EVERY THREE YEARS. ATTENDANCE OF THE UNDERSIGNED AT THE ANNUAL MEETING OR AT ANY
ADJOURNMENT THEREOF WILL NOT BE DEEMED TO REVOKE THE PROXY UNLESS THE UNDERSIGNED REVOKES THIS
PROXY IN WRITING.
TO VOTE AND APPOINT YOUR PROXY VIA THE INTERNET
Your Internet vote and appointment of proxy is quick, confidential and your vote is immediately
submitted. Just follow these easy steps:
1. |
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Read the accompanying Proxy Statement. |
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2. |
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Visit https://www.shareholderlink.com/fss/crtx/pxsignon.asp |
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When prompted for your Control Number, enter the 12-digit number printed above your name on
the proxy card. |
Please note that all appointments and votes cast by Internet must be completed and submitted by
5:00 p.m. on May 17, 2011, which is one day prior to the meeting date. Your Internet vote
authorizes the named proxies to vote your shares to the same extent as if you marked, signed, dated
and returned the proxy card. You may revoke your Internet appointment by revisiting our website and
changing your vote prior to 5:00 p.m. on May 17, 2011, or by any method sufficient to revoke an
appointment of proxy as set forth above.
This is a secured web page site.
Your software and/or Internet provider must be enabled to access this site. Please call your software or Internet provider for
further information if needed.
The board of directors unanimously recommends a
vote FOR proposals 1, 2 and 3, and Every Three Years
for proposal 4.
1. |
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Election of the following eight (8) nominees as directors of the Company. |
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Nominees: |
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01
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Craig A. Collard
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05 |
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Allessandro Chiesi |
02
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Christopher Codeanne
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06 |
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Anton Giorgio Failla |
03
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Michael Enright
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07 |
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Robert M. Stephan |
04
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Michael Heffernan
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08 |
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Marco Vecchia |
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WITHHOLD |
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FOR ALL |
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AUTHORITY FOR |
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FOR ALL EXCEPT |
NOMINEES |
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ALL NOMINEES |
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(See Instructions below) |
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INSTRUCTION: To withhold authority to vote for any individual nominee, mark FOR ALL EXCEPT
and write the name of the nominee on the line below. |
2. |
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Ratification of the selection by the Audit Committee of Grant Thornton LLP as the Companys independent
registered public accounting firm
for the fiscal year ending December 31, 2011. |
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o
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FOR
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AGAINST
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ABSTAIN
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3. |
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Advisory vote on executive compensation. |
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o |
FOR
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AGAINST
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ABSTAIN
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4. |
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Advisory vote on the frequency of future advisory votes on executive compensation. |
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o |
EVERY YEAR
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o
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EVERY TWO YEARS
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o
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EVERY THREE YEARS
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o |
ABSTAIN |
The proxies are authorized to vote in accordance with the determination of a majority in
voting power of the directors as to any other matters which may properly come before the Annual
Meeting or any adjournment thereof.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE OR
FOLLOW THE INSTRUCTIONS ON THE REVERSE TO APPOINT YOUR PROXY VIA THE INTERNET.
Dated:________________________________________, 2011
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Signature (if held jointly)
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Instruction: Please sign above exactly as your name appears on this appointment of proxy.
Joint owners of shares should both sign. Fiduciaries or other persons signing in a representative
capacity should indicate the capacity in which they are signing.
Control Number:
Proxy: Shares:
IMPORTANT: To ensure that a quorum is present, please send in your appointment of proxy whether
or not you plan to attend the annual meeting. Even if you send in your appointment of proxy you
will be able to vote in person at the meeting if you so desire.