UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K/A
(Amendment
No. 1)
| x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
fiscal year ended December 31, 2008
or
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
transition period
from to
Commission
file number 000-26422
DISCOVERY
LABORATORIES, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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94-3171943
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
Number)
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2600
Kelly Road, Suite 100
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Warrington,
Pennsylvania 18976-3622
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(Address
of principal executive offices)
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(215)
488-9300
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, $.001 par value
Preferred
Stock Purchase Rights
__________________
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. YES o NO
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. YES o NO
x
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES o NO
x
i
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of the registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated
filer o Accelerated
filer x
Non-accelerated
filer o Smaller
reporting company o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YES o NO
x
The
aggregate market value of shares of voting and non-voting common equity held by
non-affiliates of the registrant computed using the closing price of common
equity as reported on The Nasdaq Global Market under the symbol DSCO on June 29,
2008, the last business day of the registrant’s most recently completed second
fiscal quarter, was approximately $159 million. For the purposes of
determining this amount only, the registrant has defined affiliates to include:
(a) the executive officers named in Part III of this Annual Report on Form 10-K;
(b) all directors of the registrant; and (c) each shareholder, if any, that has
informed the registrant by March 11, 2009 that it is the beneficial owner of 10%
or more of the outstanding shares of common stock of the
registrant.
As of
April 28, 2009, 104,453,750 shares of the registrant’s common stock were
outstanding.
Unless
the context otherwise requires, all references to “we,” “us,” “our,” and the
“Company” include Discovery Laboratories, Inc., and its wholly-owned, presently
inactive subsidiary, Acute Therapeutics, Inc.
Explanatory
Note to Amendment No. 1
We are
filing this Amendment No. 1 on Form 10-K/A (“Amendment No. 1”) to our Annual
Report on Form 10-K for the fiscal year ended December 31, 2008 which was
filed with the Securities and Exchange Commission (“SEC”) on March 13, 2009
(“Form 10-K”), solely (i) to include Items 10 through 14 of Part III of the
Form 10-K as contemplated by instruction G(3) to the Form 10-K, and (ii) to
include as exhibits in Part IV, Item 15 of the Form 10-K the new certifications
required by Rule 13a-14(a) under the Securities and Exchange Act of 1934
(“Exchange Act”). Other than the addition of Items 10-14 and the new
certifications, the Form 10-K is not being amended or updated in any
respect. This Amendment No. 1 continues to describe the
conditions as of the date of the Form 10-K, and except as contained herein,
we have not modified or updated the disclosures contained in the Form
10-K. This Amendment No. 1 should be read in conjunction with
our filings made with the SEC subsequent to the filing of the Form 10-K,
including any amendment to those filings.
Forward-Looking
Statements
This
Amendment No. 1 contains “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933 (“Securities Act”) and Section 21E of
the Exchange Act. The forward-looking statements include all matters
that are not historical facts. Forward-looking statements are only
predictions and provide our current expectations or forecasts of future events
and financial performance and may be identified by the use of forward-looking
terminology, including the terms “believes,” “estimates,” “anticipates,”
“expects,” “plans,” “intends,” “may,” “will” or “should” or, in each case, their
negative, or other variations or comparable terminology, though the absence of
these words does not necessarily mean that a statement is not
forward-looking. We intend that all forward-looking statements be
subject to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. The forward-looking statements in this report are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical results or anticipated results, including
those set forth under “Risk Factors” and “Management's Discussion and Analysis
of Financial Conditions and Results of Operations” in the Form 10-K and
elsewhere in, or incorporated by reference into, the Form 10-K and this
Amendment No. 1.
ii
Except to
the extent required by applicable laws, rules or regulations, we do not
undertake any obligation to update any forward-looking statements or to publicly
announce revisions to any of the forward-looking statements, whether as a result
of new information, future events or otherwise.
iii
DISCOVERY
LABORATORIES, INC.
Table
of Contents to Annual Report on Form 10-K/A
For
the Fiscal Year Ended December 31, 2008
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PART
III
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ITEM
10.
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DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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1
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ITEM
11.
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EXECUTIVE
COMPENSATION
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5
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ITEM
12.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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20
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ITEM
13.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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22
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ITEM
14.
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PRINCIPAL
ACCOUNTING FEES AND SERVICES
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22
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PART
IV
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ITEM
15.
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EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES.
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23
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SIGNATURES
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24
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PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Directors
of the Company
The
following table sets forth the names of the persons serving on our Board of
Directors. Our stockholders elect the directors to serve until
the next annual meeting of stockholders and, if applicable, until their
successors are duly elected and qualified.
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Name
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Age
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Position with the
Company
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W.
Thomas Amick
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66
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Director,
Chairman of the Board of Directors
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Robert J. Capetola,
Ph.D.
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59
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Director,
Chief Executive Officer
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Antonio Esteve,
Ph.D.
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51
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Director
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Max E. Link,
Ph.D.
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68
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Director
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Herbert H. McDade,
Jr.
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82
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Director
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Marvin E. Rosenthale,
Ph.D.
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75
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Director
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W. Thomas Amick has served as a member
of our Board of Directors since September 2004 and as its Chairman since March
2007. Mr. Amick currently serves as Chairman of the Board for
Argolyn Bioscience and Chairman and CEO of Aldagen, Inc. In 2004,
Mr. Amick retired from a distinguished 30-year career with Johnson
& Johnson, having most recently served as Vice President, Business
Development at Johnson & Johnson Development Corporation from 2003 to 2004,
and President of Ortho Biotech Europe from 2001 to 2003. He also
served as President of Janssen-Ortho, Inc., managing the entire Johnson &
Johnson pharmaceutical and biotechnology portfolio for Canada, as Vice President
of the Oncology Franchise of Ortho Biotech, and has held various other sales and
executive positions throughout his career. Mr. Amick is a member
of the Advisory Boards for Quaker BioVentures and Intersouth Partners and a
member of the boards of directors of several private biotechnology
companies. He holds a B.A. degree in business administration from
Elon College and has attended executive courses at the Kellogg School of
Management, Harvard Business School and Darden School of
Business.
Robert J. Capetola, Ph.D. has served as President,
Chief Executive Officer and a member of our Board of Directors and an affiliated
entity, Acute Therapeutics, Inc., since 1996. Prior to joining the
Company, Dr. Capetola served as President and a member of the board
of directors of Delta Biotechnology, a subsidiary of Ohmeda Pharmaceutical
Products Division, a division of The BOC Group (“Ohmeda”), from 1994 to 1996,
and as Vice President of Research and Development at Ohmeda, from 1992 to
1996. He served on Ohmeda’s operating board and was responsible for
all aspects of Ohmeda’s research and development, including preclinical research
and development, clinical development, biometrics and regulatory
affairs. From 1977 to 1992, Dr. Capetola held a variety of
positions at Johnson & Johnson Pharmaceutical Research Institute, including
Senior Worldwide Director of Experimental
Therapeutics. Dr. Capetola received his B.S. from the
Philadelphia College of Pharmacy & Science and his Ph.D. in
pharmacology from Hahnemann Medical College.
Antonio Esteve, Ph.D. has served as a member of our
Board of Directors since May 2002. Dr. Esteve has chaired the
company that bears his surname, Laboratorios del Dr. Esteve, S.A., since 2005,
having previously held various posts within. Since 2003, he has also
chaired the Regional Government of Catalonia Department of Health Blood and
Tissue Bank (BST). Dr. Esteve was recently appointed Chair of
the Catalan Foundation for Research and Innovation Advisory
Board. From October 2006 until October 21, 2008, Dr. Esteve
served as President of Farmaindustria (National Association of the
Pharmaceutical Industry in Spain). He is a member of the IFPMA
Council (International Federation of Pharmaceutical Manufacturers &
Associations) and various advisory boards in both Spain and the United
States. He specialized in pharmaceutical marketing at McNeil
Pharmaceutical (Pennsylvania, USA). Antonio Esteve is the
founder of the Pharmaceutical Marketing course and the Masters in Business
Management for the Pharmaceutical Industry at Barcelona University (Faculty
of Pharmacy). Dr. Esteve holds a Doctorate in Pharmacy and PDD
(Executive Development Program) from IESE.
1
Max E. Link, Ph.D. has served as a member
of our Board of Directors since October 1996. Dr. Link has held
a number of executive positions with pharmaceutical and health care
companies. He currently serves on the board of directors of three
other publicly-traded life science companies: Alexion Pharmaceuticals, Inc.,
Celsion Corporation and CytRx Corporation. Until May 2008 he served
as a director of Human Genome Sciences, Inc. From March 2001 until October 2003,
Dr. Link was Chairman and Chief Executive Officer of Centerpulse,
Ltd. From May 1993 until June 1994, Dr. Link was Chief Executive
Officer of Corange Limited, the parent company of Boehringer Mannheim, now F.
Hoffmann La Roche & CIE AG, and DePuy, Inc. Prior to that time,
he served in a number of positions within Sandoz Pharma, Ltd., now Novartis
Pharma, Ltd., including Chief Executive Officer from 1987 until April 1992, and
Chairman from April 1992 until May 1993.
Herbert H. McDade, Jr. has served as a member of
our Board of Directors since June 1996 and as its Chairman from June 2000 until
March 2007. Mr. McDade was employed by the Upjohn Company for 20
years and served for 14 years as President of Revlon Health Care Pharmaceuticals
and Revlon Health Care International, and, from 1986 to 1989, as Chairman, Chief
Executive Officer and President of Armour Pharmaceutical
Company. Until May 2007, Mr. McDade was a member of the board of
directors of Access Pharmaceuticals, Inc., and until January 2003, he was a
member of the board of directors of CytRx Corporation.
Marvin E. Rosenthale, Ph.D. has served as a member
of our Board of Directors since 1998. Prior to his retirement in
1999, Dr. Rosenthale served as President and Chief Executive Officer of
Allergan Ligand Retinoid Therapeutics, Inc., having joined as Vice President in
1993. Previously, over a period of 16 years, Dr. Rosenthale
served in a variety of executive positions at Johnson & Johnson, including
Vice President, Drug Discovery Worldwide, at R.W. Johnson Pharmaceutical
Research Institute, and director of the divisions of pharmacology and biological
research and executive director of drug discovery research at Ortho
Pharmaceutical. From 1960 to 1977, Dr. Rosenthale served in
various positions with Wyeth Laboratories. Dr. Rosenthale
currently serves on the boards of directors of several privately-held
companies. Dr. Rosenthale received a Ph.D. in pharmacology from
Hahnemann Medical College, an M.Sc. in pharmacology from
Philadelphia College of Pharmacy & Science and a B.Sc. in pharmacy from
the Philadelphia College of Pharmacy & Science.
Executive
Officers
The
following table sets forth the names and positions of our executive
officers. The Board of Directors approves the election of
officers annually and such officers serve until the meeting of the Board of
Directors following the next annual meeting of the stockholders and, if
applicable, until their successors are duly elected and qualified:
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Name
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Age
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Position with the
Company
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Robert J. Capetola,
Ph.D.
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59
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President,
Chief Executive Officer and Director
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Kathryn A. Cole
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43
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Senior
Vice President, Human Resources
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John G. Cooper
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50
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Executive
Vice President, Chief Financial Officer and Treasurer
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Charles F. Katzer
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59
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Senior
Vice President, Manufacturing Operations
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David
L. Lopez, Esq., CPA
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51
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Executive
Vice President, General Counsel, Chief Compliance Officer and
Secretary
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Thomas F. Miller,
Ph.D., MBA
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38
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Senior
Vice President, Commercialization and Corporate
Development
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Gerald J. Orehostky
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42
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Senior
Vice President, Quality Operations
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Robert Segal,
M.D., F.A.C.P.
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52
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Senior
Vice President, Medical/Scientific Affairs &
Chief
Medical Officer
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Mary B. Templeton,
Esq.
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62
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Senior
Vice President, Deputy General
Counsel
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2
Robert J. Capetola, Ph.D. Please refer
to the Directors section of Proposal I for a biographical discussion of
Dr. Capetola.
Kathryn A. Cole has been with the
Company since January 2006 and since then has served as Senior Vice President,
Human Resources. From 2002 through 2006, Ms. Cole served as Vice
President, Human Resources for Savient Pharmaceuticals Inc., a publicly-traded
specialty pharmaceutical company, where she was responsible for creating and
implementing the human resources strategy for the corporate office, commercial
operations, and its former subsidiary, Rosemont Pharmaceuticals, LTD. of Leeds,
United Kingdom. Ms. Cole has also held various human resource
management positions with companies, including Cytogen Corporation, EpiGenesis
Pharmaceuticals, and the Prudential Insurance Company of
America. Ms. Cole received her undergraduate degree in
Communication from Douglass College and her Master of Science degree in
Industrial Relations and Human Resources from the Rutgers University School of
Management and Labor Relations.
John G. Cooper has been with the
Company since December 2001 and since December 2002, has served as Executive
Vice President, Chief Financial Officer and
Treasurer. Mr. Cooper has over 25 years of experience as a
senior financial executive with emerging growth companies and extensive
experience in public and private equity financings, investor relations,
strategic alliances, mergers and acquisitions, strategic and financial planning,
and development of financial management and accounting
operations. Mr. Cooper’s previous experience has
been predominantly in the Life Sciences industry, including as Senior
Vice President and Chief Financial Officer of Chrysalis International
Corporation (a public contract drug development organization
where Mr. Cooper managed the acquisition and integration
of several private international businesses. The company
was ultimately acquired by MDS Pharmaceuticals, Inc.), Senior Vice President and
Chief Financial Officer of DNX Corporation (a public company specializing in
transgenic biotechnology, where Mr. Cooper managed its initial public offering
and downstream joint venture into a subsidiary of Baxter Healthcare), Chief
Financial Officer of Taratec Development Corporation (a venture capital backed
provider of information technology to biotechnology, medical device and
pharmaceutical companies) and Director, Finance and Controller of ENI
Diagnostics (a public medical device and diagnostics company where Mr. Cooper
was responsible for worldwide financial operations and assisted in its
acquisition by Pharmacia). Mr. Cooper is a Certified Public
Accountant and received his B.S. in Commerce from
Rider University.
Charles F. Katzer has been with the
Company since January 2006 and since then has served as Senior Vice President,
Manufacturing Operations. From 2000 through 2005, Mr. Katzer
served as Vice President, Vaccine Manufacturing at MedImmune Vaccines,
Inc. Previously, and during his over-30 years experience in the
pharmaceutical industry, he has held positions of increasing responsibility in
Manufacturing, Quality Assurance, Supply Chain, Engineering and Research with
MedImmune, U.S. Bioscience, Rhone Poulenc Rorer, Baxter Travenol, McGaw
Laboratories and Biological Specialties. Mr. Katzer holds a B.S.
degree in Zoology from the University of Wisconsin.
David L. Lopez, Esq., CPA has
been with the Company since April 2000 and since June 2006 has served as
Executive Vice President, General Counsel, Chief Compliance Officer and
Secretary. Previously, Mr. Lopez served as Senior Corporate
Attorney at the Manhattan law firm of Roberts, Sheridan & Kotel, P.C. and,
in 1996, as a Legal Research Specialist with the Securities and Exchange
Commission. Prior to that time, he held increasingly senior corporate
finance, tax and accounting related positions with Drexel Burnham Lambert, Price
Waterhouse and Deloitte, Haskins & Sells. Mr. Lopez holds a
B.S. in Economics and Accounting from Fairleigh Dickinson University
and a J.D. from St. John’s University School of Law.
Thomas F. Miller, Ph.D., MBA
initially joined the Company in August 2004 as Vice President, Worldwide
Marketing. He left the Company for a brief period as part of the 2006
corporate restructuring. Dr. Miller rejoined the Company in June
2006, and since then has served as Senior Vice President, Commercialization and
Corporate Development. Prior to joining the Company, from 2003 to
2004, Dr. Miller served as the Director of Global Biologics Strategic
Marketing at Centocor, a Johnson & Johnson biotechnology company, where he
was responsible for the development of global business strategy for emerging,
niche-market products. Previously, Dr. Miller held commercial
and scientifically-related positions of increasing responsibility at Pharmacia,
BASF Pharma, and Pfizer. Dr. Miller holds a B.S. Degree in
Biology from Fairfield University, an MBA degree from
Fairleigh Dickinson University and a Ph.D. in cardio-respiratory
physiology from Temple University School of Medicine.
3
Gerald J. Orehostky has been
with the Company since May 2005 and since August 2007 has served as Senior Vice
President, Quality Operations, having previously served as Vice President,
Quality Operations. Mr. Orehostky has over 20 years of diverse
technical and regulatory compliance experience with global pharmaceutical,
biopharmaceutical and medical device companies. Prior to joining the Company,
Mr. Orehostky served as Executive Director, Quality Assurance and
Regulatory Affairs at Palatin Technologies, Inc. and, prior to that, served as
Director, Worldwide Quality Services at Schering Plough,
Inc. Mr. Orehostky holds a B.A. degree in Natural Science and
Mathematics from Thomas Edison State College and has obtained his Quality
Engineer Certification.
Robert Segal, M.D.,
F.A.C.P. has
been with the Company since July 2000 and since December 2002 has served as
Senior Vice President, Medical and Scientific Affairs and Chief Medical Officer,
having previously served as Vice President, Clinical
Research. Dr. Segal has over 25 years of medical and
pharmaceutical experience. Prior to joining the Company, from 1992,
Dr. Segal held the positions of Associate Director and Director,
Cardiovascular Clinical Research at Merck Research Laboratories at Merck &
Co, Inc. Dr. Segal received his medical degree from the
University of Pretoria Medical School, South Africa. Dr. Segal is a
diplomat of the American Board of Internal Medicine with sub-specialty
certification in nephrology and is a Fellow of the American College of
Physicians. He completed his internship and residency in medicine at
Sinai Hospital, Baltimore, and clinical postdoctoral fellowships in general
medicine at The Johns Hopkins Hospital and nephrology at UCLA, as well as a
research fellowship in molecular biology at UCLA. Prior to joining
Merck, he was an Assistant Professor of Medicine in the Division of Nephrology
at UCLA School of Medicine and served as an intern advisor to the Biotechnology
Program at Northwestern University.
Mary B. Templeton, Esq. has been with the Company
since March 2006 and since then has served as Senior Vice President and Deputy
General Counsel. Prior to joining the Company, Ms. Templeton
spent eight years in private practice in New York City, including, from 2001, as
a partner of Taylor, Colicchio & Silverman, LLP. Previously,
Ms. Templeton held senior legal positions in the financial services
industry, serving as Senior Vice President and General Counsel to both The
Charles Schwab Corporation, from 1992 to 1998 and The Sequor Group Inc., from
1984 to 1992. Prior to that time, she served as Director of
Investment Company Products at Charles Schwab & Co., Inc., and Trust Officer
of Bradford Trust Company. Ms. Templeton holds a B.A. from
Chatham College, where she is a member of the Board of Trustees, and a J.D.
with High Honors from Rutgers University School of Law - Camden. She
is a member of the Bar Associations of Pennsylvania and New York.
Family
Relationships
There are
no family relationships among directors or executive officers of the
Company.
Section
16(A) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
requires our directors, officers (including a person performing a principal
policy-making function) and persons who beneficially own more than 10% of a
registered class of our equity securities (collectively, “Reporting Persons”) to
file with the SEC initial reports of ownership and reports of changes in
ownership of the common stock and other equity securities of the
Company. Reporting Persons are required by SEC regulations to furnish
us with copies of all of filings they file make under Section 16(a) and we are
required to identify those Reporting Persons who failed to make such filings
timely. Based solely on a review of the copies of any such filings
made available to us and written representations from our officers and
directors, we believe that all Reporting Persons complied with the filing
requirements under Section 16(a) of the Exchange Act during the year ended
December 31, 2008, except for the following: Marvin E. Rosenthale, Ph.D., a
director of the Company, inadvertently failed to file a timely Form 4 for an
acquisition of 51,289 shares that was completed on October 3, 2008 but not filed
until October 8, 2008, and an acquisition of 10,000 shares that was completed on
October 8, 2008 but not filed until October 14, 2008.
4
Audit
Committee
The Audit
Committee of the Board of Directors is a standing committee of the Board
(“Standing Committee”) and currently consists of Max E. Link, Ph.D.,
Herbert H. McDade, Jr., and Marvin E. Rosenthale,
Ph.D. The primary functions of the Audit Committee
include:
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·
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overseeing
our financial statements, system of internal controls, auditing,
accounting and financial reporting
processes;
|
|
·
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providing
an independent, direct communication between the Board of Directors and
internal auditors;
|
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·
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appointing,
compensating, evaluating and, when appropriate, replacing independent
auditors;
|
|
·
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overseeing
our tax compliance;
|
|
·
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reviewing
with management and our independent auditors the annual audit
plan;
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·
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reviewing
the Audit Committee Charter;
|
|
·
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reviewing
and pre-approving audit and permissible non-audit services;
and
|
|
·
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reviewing
and approving all related-party
transactions.
|
The Audit
Committee is also responsible for addressing matters of accounting policy with
our independent accountants. In discharging its role, the Audit
Committee is empowered to investigate any matter brought to its attention and
has full access to all books, records, facilities and personnel of the
Company. The Audit Committee also has the power to retain such legal,
accounting and other advisors as it deems necessary to carry out its
duties. The Audit Committee met five times during the fiscal year
ended December 31, 2008.
The Board
of Directors has adopted a written Audit Committee Charter. The
composition and responsibilities of the Audit Committee and the attributes of
its members, as reflected in its Charter, are intended to be in accordance with
applicable qualitative listing requirements of The Nasdaq Global Market and the
rules of the SEC for corporate audit committees. All members of our
Audit Committee are “independent” as defined in Rule 4200(a)(15) of the Nasdaq
Marketplace Rules and the financial sophistication requirements of Nasdaq
Marketplace Rule 4350. The Board of Directors has determined that
Max E. Link, Ph.D. is an “audit committee financial expert” as defined
under SEC rules.
Code of
Ethics
We have
adopted a Code of Ethics that applies to our officers, including our principal
executive, financial and accounting officers, and our directors and
employees. We have posted the Code of Ethics on our Internet website
at “http://www.DiscoveryLabs.com” under the “Investors” tab in the Corporate
Policies section. We intend to make all required disclosures on a
Current Report on Form 8-K concerning any amendments to, or waivers from, our
Code of Ethics with respect to our executive officers and
directors. Our website and the information contained therein or
connected thereto are not incorporated into this Annual Report on Form
10-K.
ITEM
11. EXECUTIVE
COMPENSATION
Compensation
Committee of the Board of Directors
The
Compensation Committee of the Board of Directors is a standing committee of the
Board and currently consists of W. Thomas Amick,
Max E. Link, Ph.D. and Marvin E. Rosenthale,
Ph.D. The primary functions of the Compensation Committee
include:
|
·
|
reviewing
and approving corporate goals and objectives related to compensation of
executive officers;
|
|
·
|
reviewing
and making recommendations to the Board of Directors concerning executive
and general compensation matters;
|
|
·
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determining
the compensation of the Chief Executive
Officer;
|
|
·
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reviewing
and approving compensation arrangements for executive officers, including
employment and severance
agreements;
|
|
·
|
overseeing
significant employee benefits programs, policies and equity plans for the
Company’s executives, and, where appropriate, other
employees;
|
|
·
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reviewing
and establishing guidelines for the compensation of members of the
Company’s Board of Directors; and
|
|
·
|
reviewing
and discussing with management disclosures in the Company's annual report
and proxy statement related to executive compensation
matters.
|
5
The
Compensation Committee may, in its discretion, confer with, and consider the
recommendations of, management in establishing compensation policies and in
determining compensation (and the form of compensation) to be paid to executives
of the Company. The Compensation Committee generally approves
aggregate amounts to be paid to non-officer employees and management assumes
responsibility for individual non-officer employee compensation
packages. The Compensation Committee may also form, and delegate its
authority to, subcommittees or other committees of the Board when deemed
appropriate by the Compensation Committee and, at its discretion, retain special
legal, compensation or other consultants to advise the Compensation Committee on
compensation matters or as it deems necessary to carry out its
duties. The Compensation Committee met two times during the fiscal
year ended December 31, 2008.
Compensation Committee
Interlocks
The
Compensation Committee is composed entirely of independent
directors. There are no “interlocks” as defined by the SEC with
respect to any member of the Compensation Committee.
Compensation Committee
Report
In
fulfilling its oversight responsibilities, the Compensation Committee reviewed
and discussed the Compensation Discussion and Analysis section of this Amendment
with management. Based on that review and those discussions, the
Compensation Committee recommended to the Board of Directors, and the Board
approved, that the Compensation Discussion and Analysis be included in this
Amendment No. 1 to the Form 10-K and filed with the SEC.
Submitted
by the Compensation Committee
Marvin E. Rosenthale,
Ph.D., Chairman, Compensation Committee
W.
Thomas Amick
Max E. Link,
Ph.D.
Compensation
Discussion and Analysis
Compensation
Philosophy
We are
committed to providing our employees with meaningful work and advancement
opportunities, and our stockholders with a superior rate of
return. Under the oversight of the Compensation Committee of the
Board of Directors, we have developed and implemented compensation policies,
plans and programs for all officers, including its Named Executive Officers
(identified in the Summary Compensation Table below). We provide a
total compensation package that is intended to be competitive within our
industry to enable us to attract and retain high-caliber, qualified
executives. Our compensation practices are designed to motivate
executives over the long term, to align the interests of management and
stockholders, and to ensure that executives are appropriately rewarded for their
accomplishments and the benefits achieved for our stockholders during the
relevant fiscal year.
Compensation Program
Objectives and Rewards
Our
compensation philosophy is based on the following objectives and intended
rewards:
|
·
|
attract,
engage and retain the workforce to ensure our long-term
success;
|
|
·
|
align
our employees’ interests with our short- and long-term strategic goals and
objectives;
|
|
·
|
promote
the interests of our stockholders with a goal of increasing stockholder
value;
|
6
|
·
|
acknowledge
and respond to changes in compensation for similar executive positions at
comparable companies in our highly competitive marketplace;
and
|
|
·
|
link
compensation to our performance and also acknowledge the performance of
individuals who contribute to the advancement of our corporate
objectives.
|
Executive Compensation
Structure
The
primary components of executive compensation are (i) competitive base salary,
(ii) annual incentive bonus, and (iii) awards under our 2007 Long-Term Incentive
Plan (“2007 Plan”), each of which is reviewed
annually. In deciding on total compensation packages for
executives, the Compensation Committee considers such factors as:
(i) market-based data, which is gathered annually through participation in
salary surveys such as the Radford Life Sciences Survey (the “Radford Survey”);
(ii) compensation practices of biotech and pharmaceutical companies that are
similarly situated, taking into account such factors as (x) financial condition,
(y) geographic region, and (z) size or management structure; (iii) the extent to
which our corporate goals for the calendar year have been advanced and the
degree to which an executive is positioned to influence the outcomes; and
(iv) management performance reviews and recommendations prepared by
management. The Radford Survey is a compilation of compensation
information for over 200 biotech and pharmaceutical companies, and is reported
based upon such criteria as company size, geographic location, title and job
responsibilities. The Compensation Committee does not have a policy
of adhering to a strict formulaic process to determine the weighting of
components of compensation. Rather, the Compensation Committee will
assess the totality of the circumstances, and may, in its discretion, consider
and give weight to such additional factors as an individual’s overall
contribution, teamwork skills and leadership qualities. In addition,
the Compensation Committee may weight more heavily non-cash components of
compensation during periods in which we are conserving our cash
resources.
Executive Employment
Agreements
We have
employment agreements with our executive officers, the terms of which for each
level (vice president, senior vice president, etc.) are generally
similar. These agreements provide for, among other things, employment
for a stated term, subject to automatic renewal, severance payments in the event
of termination of employment, whether for termination or by reason of
resignation for good reason, enhanced severance benefits in the event of a
change of control, and equity incentives in the form of stock and option
grants. These
agreements also include non-competition covenants and provide for severance
payments that are contingent upon the executive’s refraining from competition
with us. We believe that these agreements are necessary and
appropriate to remain competitive in the marketplace, to attract executive
talent, to retain key executives during periods of uncertainty and to assure
that executives will act in the best interest of the stockholders.
Management Compensation
Committee
The
President and Chief Executive Officer heads an internal management compensation
committee (“Management Compensation Committee”) consisting of himself, the
Executive Vice President and Chief Financial Officer, the Executive Vice
President and General Counsel, and the Senior Vice President, Human
Resources. The Management Compensation Committee reviews each
executive’s total compensation and performance annually, including against
achievement of corporate goals and personal objectives and against available
market data, and presents its recommendations to the Compensation Committee of
the Board of Directors. The Compensation Committee considers the
Management Compensation Committee recommendations and separately evaluates and
determines the total compensation of all executives annually.
The
Compensation Committee generally holds meetings in conjunction with the regular
meetings of the Board of Directors, though it may meet more or less
frequently. Executive compensation packages, including annual
incentive bonuses for the then-current calendar year, base salary adjustments
for the following calendar year and the grants of equity incentives, are
typically discussed during the last meeting of a calendar year.
Corporate
Goals
Corporate
goals are typically defined and approved by the Board of Directors following
internal discussions and planning exercises by our senior
management. Corporate goals are focused generally to timely advancing
the development of our novel proprietary technology KL4 Surfactant
Technology pipeline and managing our financial and fiscal health within our
financial plan and in accordance with any guidance that we may give the
financial markets. Corporate goals include those identified from time
to time in our public filings and also include goals concerning unannounced
activities associated with proof of concept studies and other efforts to
potentially advance our pipeline. The Board of Directors expects that
our corporate goals will be very challenging but realistically achievable with a
sustained effort. In assessing the progress towards achieving our
goals, the Board of Directors will typically take into account the total
circumstances, including events and circumstances that may be outside of our
control and that may adversely affect our ability to fully achieve our goals,
and the degree to which our goals are advanced notwithstanding such
circumstances.
7
Our
corporate goals in 2008 included (i) taking actions intended to gain regulatory
approval to market and sell Surfaxin® for the
prevention of RDS in premature infants in the United States, (ii) preparing for
the potential approval and launch of Surfaxin for RDS in the United States,
including preparing to build our own commercial sales and marketing
organization to execute the launch of Surfaxin in the United States, if
approved, (iii) research and development activities, including new formulation
development, a Phase 2 clinical trial for children up to two years of age
suffering with Acute Respiratory Failure and the ongoing program for
Aerosurf®, (iv)
seeking collaboration agreements and strategic partnerships in the international
and domestic markets for the development and potential commercialization of our
SRT product candidates, including Surfaxin and Aerosurf, (v) continued
investment in our quality systems and manufacturing capabilities, including our
recently-completed analytical laboratories in Warrington, Pennsylvania and our
manufacturing operations in Totowa, New Jersey, and (vi) securing additional
capital to support our activities, including potentially from business
alliances, commercial and development partnerships, equity financings and other
similar opportunities. In addition, certain confidential corporate
goals related to advancing our research and development programs were not
publicly announced but considered by the Compensation Committee in its
deliberations. See “Business – Business Strategy,” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.”
A
discussion of the key individual components of our compensation packages are set
forth below.
Base
Salary
Base
salary and base salary adjustments are determined for each executive based on a
review of such factors as (i) the executive’s (A) title and position, (B)
contribution to achieving our corporate goals, (C) individual performance and
achievements, and (D) level of experience; (ii) comparative compensation
information for the position; and (iii) internal equity with respect to
other members of the executive team. In reviewing comparative
compensation information such as in the Radford Survey, the Management
Compensation Committee considers compensation ranges for equivalent positions in
the marketplace, salary trends in our industry and cost of living
indexes. For this purpose, the Management Compensation Committee may
refer to national, industry and local salary survey
information. Following its deliberations, the Management Compensation
Committee recommends base salary adjustments for executives for approval by the
Compensation Committee. At the request of the Compensation Committee,
the Management Compensation Committee may also provide additional information
prepared by an independent compensation consultant. The Compensation
Committee typically will separately review, deliberate and approve annually base
salary adjustments for each executive. Base salary adjustments are
prorated for all executive new hires, based upon the executive’s start date in
the position, and for those executives who may not have been an active employee
for the full year. Executives hired in the fourth quarter are
generally not eligible for salary increases during the next calendar year, as it
is too early in their tenure to determine the executive’s performance and
contribution to achieving our goals. All compensation matters, once
approved by the Compensation Committee, are typically ratified by the Board of
Directors and become effective the first day of the following calendar
year.
Annual Incentive
Bonus
Incentive
compensation in each year may consist of cash incentive bonuses, equity awards,
or a combination of cash bonus and equity awards, in each case based upon the
achievement of corporate goals and the individual’s contribution to meeting
those goals as well as achieving individual performance
objectives. The primary purpose of the annual incentive bonus is to
reward executives for achieving corporate goals and personal
objectives in the relevant fiscal year. Each executive is eligible
for an annual incentive bonus, which, before adjustment, is expressed as a
percent of annual base salary, varying dependent upon title. The
annual incentive bonus target range for the President and Chief Executive
Officer is 0-100% of the annual base salary; for Executive Vice Presidents,
0-70% of the annual base salary; for Senior Vice Presidents, 0-30% of the annual
base salary; and, for Vice Presidents, 0-25% of the annual base
salary. These percentages were selected because the Compensation
Committee believes that they reflect the custom and practice in the industry and
are sufficient to attract and retain executive talent. The
Compensation Committee may, in its discretion, approve a deviation from these
percentages when it deems appropriate.
8
The
Management Compensation Committee recommends individual annual incentive bonus
awards to the Compensation Committee of the Board, which typically conducts its
own deliberations as to each executive’s contributions, overall level of
compensation relative to market, and title and position within the
organization. Prior to considering individual awards, the
Compensation Committee may adjust the aggregate amount available for payment of
annual incentive bonus awards to reflect its assessment
of management’s success in achieving corporate goals. For
example, the Compensation Committee may determine, based on an evaluation of
corporate goals, that only 50% of the potential bonus dollars should be awarded
and reduce the dollars available for distribution by 50%. The Compensation
Committee weighs the achievement of corporate goals more heavily for executives
in senior executive positions. As a result, the achievement of
corporate goals are primary factors in determining annual incentive bonuses for
the Chief Executive Officer and Executive Vice Presidents, who are largely
responsible for determining strategy initiatives and leadership
initiatives. The annual incentive bonuses of Senior Vice Presidents
and Vice Presidents are based on a subjective balancing of such factors as the
achievement of corporate goals, the executive’s personal contribution to the
achievement of corporate goals, the executive’s success in meeting individual
performance objectives and the executive’s total compensation in relation to
other executives and the marketplace.
In
addition to providing recommendations for our executives, the Management
Compensation Committee recommends to the Compensation Committee the funding of
an annual incentive bonus pool for all other employees based upon a maximum
annual incentive bonus payout ranging from zero (0%) to twenty (20%) percent of
the covered employees’ aggregate annual base salary. Again, the total
amount allocated to this pool may be adjusted to reflect the Compensation
Committee’s evaluation of how well we accomplished our corporate
goals. Once the Compensation Committee has approved funding, the
Management Compensation Committee distributes individual employee awards in line
with individual performance relative to position, and may, in its discretion,
grant a combination of cash, stock options, or both.
Annual
incentive bonus awards are typically paid in cash during the first quarter of
the following calendar year, after we have prepared our financial statements and
completed an evaluation of each employee’s success in meeting personal
performance objectives. If, however, the Compensation Committee
determines that it is in our best interests in any year not to pay annual
incentive bonus awards wholly in cash, bonuses may be paid out in the form
of equity incentive awards or a combination of cash and equity
incentive awards. Annual incentive bonus awards are prorated in the
first year for all new hires, based upon the new hire’s start date, and for
those employees who may not have been active for the full
year. Employees hired in the fourth quarter are generally not
eligible for an annual incentive bonus award during the first year, as it is too
early in their tenure to determine their performance and contribution to
achieving their personal and corporate goals.
All
executive compensation payments and awards, and the incentive bonus pool for all
other employees, once approved by the Compensation Committee, are typically
ratified by the Board of Directors.
Long-Term Incentive Equity
Awards
The
purpose of our 2007 Plan is to attract, recruit and reward executives and key
employees for their contributions, with a focus on our long-term success and
increased stockholder value. The Compensation Committee serves as the
2007 Plan Administrator and grants long-term incentive equity awards pursuant to
the 2007 Plan based on recommendations of a Plan Management Committee, which
currently consists of our President and Chief Executive Officer, the Executive
Vice President and Chief Financial Officer, the Executive Vice President and
General Counsel, and the Senior Vice President, Human
Resources. Long-term incentive equity awards granted to executives
under the 2007 Plan generally have a ten-year term and vest over varying periods
as determined by the Compensation Committee at the time of the
grant.
9
Although
the Compensation Committee has not adopted a formulaic policy to allocate
between annual incentive bonuses and long-term compensation, the Compensation
Committee often relies on long-term incentive equity compensation in the form of
stock options to motivate its officers and other employees. This
practice allows us to retain cash to operate our business. In making
long-term incentive equity awards, the Compensation Committee considers a number
of factors to determine the size of grants to individual executives, including
the scope of an executive's job responsibilities, past performance, salary
level, the achievement of designated milestones, the size of any prior grants,
and the size and frequency of grants by comparable biopharmaceutical and life
sciences companies. The Compensation Committee has delegated to the
Plan Management Committee the right, in its discretion, to grant options to
newly-hired employees, effective on the first day of employment, in share
amounts that are within ranges pre-approved by the Compensation Committee for
each title and position. Such long-term incentive equity awards
typically have an exercise price equal to the market value at the close of
market on the date of grant. Awards to new hires typically vest
annually in three equal installments, starting on the first anniversary of the
grant date.
The
Compensation Committee approves long-term incentive equity awards for individual
executives based on recommendations of the Plan Management Committee and its own
assessment of each executive’s contributions, overall level of compensation
relative to market, and title and position. At the request of the
Plan Management Committee, the Compensation Committee will also typically
approve a pool of long-term incentive equity awards, which will be distributed
to non-executive key employees by, and at the discretion of, the Plan Management
Committee. Awards for executives and key employees (other than
new-hire awards) typically vest twenty-five percent (25%) on the date of the
grant with the remaining options vesting ratably over a three-year period,
becoming fully exercisable on the third anniversary of the date of
grant.
All
long-term incentive equity matters, once approved by the Compensation Committee,
are typically ratified by the Board of Directors.
Incentive Equity Granting
Practices
The
Compensation Committee reviews and approves the grant of long-term incentive
equity awards to executives at various times throughout the year. The
Compensation Committee of the Board also delegates to the Plan Management
Committee the authority to make grants of a designated number of incentive
equity awards to non-officer key employees for the purpose of rewarding and
providing incentives to employees whose performance on a particular project or
during a particular period is exemplary. Such awards are valued at
the closing market price on the date of grant. We do not have a
program or policy in place to coordinate the grant of equity awards either prior
to the public announcement of potentially positive news or after the public
announcement of potentially negative news.
401(k)
Plan
All
employees are eligible to defer a portion of their annual base salary, up to the
IRS contribution limits, on a pre-tax basis, to our qualified 401(k)
Plan. At the end of each quarter, we currently fund a company match
in the amount of fifty (50%) percent of each employee’s regular contributions
made during the quarter, which is paid in shares of our common
stock.
Severance and Change in
Control Benefits
Our
executive employment agreements contain severance and change in control
provisions. These criteria may include termination of employment as a
result of a reduction in the work force, position elimination, office closing,
job relocation beyond a certain distance, performance, mutually agreed
resignation, or terminations within certain periods of time following a change
in control. We believe that these benefits are necessary and
appropriate to remain competitive in the marketplace, to attract executive
talent, to retain key executives during periods of uncertainty and to assure
that executives will act in the best interests of the
stockholders. See the “Potential Payments
upon Termination or Change in Control” table below for a summary of the
estimated potential payments and benefits that would become payable to Named
Executive Officers upon termination of employment or a change of
control.
10
Deductibility of
Compensation; Excise Tax Reimbursement
Section
162(m) of the Internal Revenue Code of 1986, as amended, provides that we may
not deduct compensation in excess of $1 million paid to an executive officer
unless it is performance based. Base salary does not qualify as
performance-based compensation under Section 162(m). It is our
general policy to structure compensation programs that allow us to fully deduct
compensation to executives. The Compensation Committee may make
payments that are not fully deductible to ensure competitive levels of total
compensation for executives or, in its judgment, may make payments that are
otherwise necessary or appropriate to achieve our compensation
objectives. In addition, under our executive employment agreements,
if any compensation payable to any executive is subject to an excise tax under
Section 4999 of the Internal Revenue Code, we have agreed to make an additional
payment to such executive equal to the amount of such excise tax, as well as the
income tax and excise tax applicable to such payment.
2008
Compensation Reviews for Named Executive Officers
Each
Named Executive Officers’ initial base salary, annual incentive bonus award and
certain long-term incentive equity awards are determined generally as described
above and in accordance with a written employment agreement with
us. Annual cash and annual incentive equity bonuses, if any, are
solely at the discretion of the Compensation Committee and awarded in the manner
described above.
Based
primarily on the fact that we did not gain approval in the United States to
market Surfaxin in 2008, the consequential erosion of our cash position and the
extraordinary conditions in the financial markets that affect our ability to
raise capital on acceptable terms, as well as a review of the 2008 Radford
Survey, the Compensation Committee did not approve any increase in base salary
over the base salaries in effect in 2007 for any Named Executive
Officers. In addition, the Compensation Committee declined to
authorize the payment of any cash incentive bonus awards to any Named Executive
Officer, but, as referenced in Note 8 of the Notes to consolidated financial
statements in the Form 10-K, the Compensation Committee indicated that it would
re-evaluate this decision should circumstances warrant mid-year.
During
2008, the Compensation Committee authorized one stock option award to each Named
Executive Officer. See “Grants of Plan-Based
Awards” Table, below. In making these awards, the Compensation
Committee assessed total long-term compensation opportunities already available
to each executive, including the current value and size of prior stock option
grants, the tenure of the executive, the executive’s performance relative to
other executive’s and relevant market data in the Radford
Survey. See
“Long-Term Incentive Awards”, above.
In
addition, in determining the award made to Dr. Capetola, the Compensation
Committee considered the progress made in the advancement of various pipeline
programs, the delay in securing the potential approval of Surfaxin and relevant
market data, his leadership initiatives and his efforts to raise capital to fund
our activities. The award to Mr. Cooper was based on his efforts to
tightly manage our financial condition while at the same time making judicious
investments in activities designed to advance our research and development
programs and demonstrate proof-of-concept for our pipeline products to
potentially attract strategic development partners and collaborators. The
Compensation Committee also considered his efforts in communicating with
stockholders and potential investors to maintain awareness of our products and
capital needs. The award to Mr. Lopez was in recognition of his efforts in
managing the legal and regulatory aspects of our business, including the high
quality and timely disclosures contained in the Company public filings with the
Securities and Exchange Commission, as well as his work in developing a full
corporate-wide compliance program. In making the award to Dr. Segal,
the Compensation Committee considered his ability to advance our research and
development programs by executing upon carefully planned preclinical
studies and experiments while at the same time conserving cash resources.
In making the award to Mr. Katzer, the Compensation Committee acknowledged
the significant progress made in manufacturing and noted the excellent progress
made by the internal engineering team in the development of the capillary
aerosolization device for Aerosurf.
11
SUMMARY
COMPENSATION TABLES
Named
Executive Officers
The
following table summarizes the compensation of our Named Executive Officers,
including our President and Chief Executive Officer, Executive Vice President
and Chief Financial Officer, Executive Vice President and General Counsel and
the two other most highly-compensated executive officers ranked by their total
compensation for the fiscal year ended December 31, 2008.
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
(1)
|
Stock
Awards
($)
(2)
|
Option
Award
($)
(3)
|
Non-Equity
Incentive Plan Compen-sation ($)
|
Nonqualified
Deferred Compensation Earnings ($)
|
All
Other
($)
|
Total
|
||||||||||||||||||||||||
|
Robert J. Capetola,
Ph.D.
|
2008
|
$ | 490,000 | $ | - | $ | 10,465 | $ | 1,091,132 | $ | - | $ | - | $ | 34,450 | (4) | $ | 1,626,047 | |||||||||||||||
|
President
and
|
2007
|
470,000 | 300,000 | 25,708 | 1,353,401 | - | - | 29,556 | 2,178,665 | ||||||||||||||||||||||||
|
Chief
Executive Officer
|
2006
|
470,000 | 150,000 | 52,358 | 1,040,563 | - | - | 34,364 | 1,747,285 | ||||||||||||||||||||||||
|
John G. Cooper
|
2008
|
307,000 | - | 6,279 | 429,949 | - | - | - | (5) | 743,228 | |||||||||||||||||||||||
|
Executive
Vice President,
|
2007
|
292,000 | 150,000 | 15,425 | 535,322 | - | - | - | (5) | 992,747 | |||||||||||||||||||||||
|
Chief
Financial Officer and Treasurer
|
2006
|
292,000 | 120,000 | 31,415 | 526,439 | - | - | - | (5) | 969,854 | |||||||||||||||||||||||
|
David
L. Lopez, Esq., CPA
|
2008
|
307,000 | - | 6,279 | 437,343 | - | - | - | (5) | 750,622 | |||||||||||||||||||||||
|
Executive
Vice President,
|
2007
|
290,000 | 152,000 | 15,425 | 526,279 | - | - | (5) | 983,704 | ||||||||||||||||||||||||
|
General
Counsel, Chief Compliance Officer and Secretary
|
2006
|
290,000 | 120,000 | 31,415 | 498,107 | - | - | (5) | 939,522 | ||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||
|
Robert Segal,
M.D., F.A.C.P.
|
2008
|
290,000 | - | 2,791 | 221,701 | - | - | - | (5) | 514,492 | |||||||||||||||||||||||
|
Senior
Vice President,
Medical
and Scientific Affairs
|
2007
|
273,000 | 70,000 | 6,855 | 281,041 | - | - | - | (5) | 630,896 | |||||||||||||||||||||||
|
and
Chief Medical Officer
|
2006
|
265,000 | 60,000 | 13,962 | 226,453 | - | - | - | (5) | 565,416 | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||
|
Charles F. Katzer
|
2008
|
250,000 | - | - | 216,299 | - | - | - | (5) | 466,299 | |||||||||||||||||||||||
|
Senior
Vice President,
|
2007
|
225,000 | 70,000 | - | 246,038 | - | - | - | (5) | 541,038 | |||||||||||||||||||||||
|
Manufacturing
Operations
|
2006
|
213,484 | 80,000 | - | 149,164 | - | - | - | (5) | 442,648 | |||||||||||||||||||||||
|
(1)
Bonuses for 2007 include
2007-related bonus paid in 2008. Bonuses for 2006 include
2006-related bonus paid in 2007. All bonuses were paid in
cash. No bonuses related to 2008 have been paid to date in 2009, although the
Compensation Committee may re-evaluate its decision not to pay cash
bonuses should our circumstances change. See “Compensation Discussion and
Analysis – 2008 Compensation Reviews for Named Executive
Officers.”
|
|||||||||||||||||||||||||||||||||
|
(2)
Represents the ratable
amount expensed for the year under Financial Accounting Statement
123R (“FAS 123R”)
for grants of restricted stock made in October 2007 (“2007 Restricted
Stock”) to Drs. Capetola and Segal and Messrs. Cooper and Lopez, and is not an amount paid to,
or realized by, the Named Executive Officer. There can be no assurance that
these FAS 123R amounts will ever be realized. The 2007 Restricted Stock
will vest on the date that our first drug product becomes widely
commercially available, as determined by the Board of
Directors. Prior to vesting, the 2007 Restricted Stock is
non-transferable and subject to cancellation upon termination of a
grantee’s employment. The FAS 123R value as of the grant date for the
2007 Restricted Stock is spread over the number of
months of service required for the grant to become
non-forfeitable.
|
|||||||||||||||||||||||||||||||||
|
(3)
Represents compensation
costs for the year under FAS 123R for stock options and is not an amount
paid to, or realized by, the Named Executive Officer. There can be no
assurance that these amounts will ever be realized. The FAS 123R value as of the
grant date for each option is spread over the number of months of service
required for the grant to become non-forfeitable. This amount
includes ratable amounts expensed for options granted in prior years
(2005, 2006, and
2007).
See
Note 11
– “Stock
Options and Stock-based Employee Compensation” to our consolidated financial
statements for the
year ended December
31, 2008,
in the Form
10-K.
|
|||||||||||||||||||||||||||||||||
|
(4) For 2008, represents a personal car
allowance – $10,000; premiums paid for life insurance policies with
coverage of $4 million – $16,700; and the Company match of the
employee contribution to the 401(k) Plan – $7,750.
|
|||||||||||||||||||||||||||||||||
|
(5) Less than
$10,000.
|
|||||||||||||||||||||||||||||||||
12
Grants
of Plan-Based Awards
The
following table contains information concerning the stock option grants made to
the Named Executive Officers for the fiscal year ended December 31,
2008. The amount of these awards that were expensed in 2008 is shown
in the Summary Compensation Table included on page 21. No stock
appreciation rights were granted to these individuals during such
year. There can be no assurance that the Grant Date Fair Value of
Stock and Option Awards reported below will ever be realized by a
grantee.
|
Estimated
Future Payouts Under Non-equity Incentive Plan Awards
|
Estimated
Future Payouts Under Equity Incentive Plan Awards
|
|||||||||||||||||||
|
Named
Executive Officer
|
Grant Date
|
Threshold
($)
|
Target
($)
|
Maxi-
mum
($)
|
Threshold
($)
|
Target
($)
|
Maxi-
mum
($)
|
All
Other Stock Awards; Number of Shares of Stock
(#)
|
All
Other Option Awards; Number of Securities Under-lying Options
(#)
|
Exercise
Price of Option Awards
($/Sh) (1)
|
Grant Date Fair Value of Stock
and Option Awards (2)
|
|||||||||
|
Robert J. Capetola
|
12/12/08
|
500,000 | $ | 1.93 | $ | 361,350 | ||||||||||||||
|
12/12/08
|
250,000 | $ | 1.21 | 205,000 | ||||||||||||||||
|
John G. Cooper
|
12/12/08
|
266,667 | $ | 1.93 | 192,720 | |||||||||||||||
|
12/12/08
|
133,333 | $ | 1.21 | 109,333 | ||||||||||||||||
|
David L. Lopez
|
12/12/08
|
166,667 | $ | 1.93 | 120,450 | |||||||||||||||
|
12/12/08
|
83,333 | $ | 1.21 | 68,333 | ||||||||||||||||
|
Robert Segal
|
12/12/08
|
66,667 | $ | 1.93 | 48,180 | |||||||||||||||
|
12/12/08
|
33,333 | $ | 1.21 | 27,333 | ||||||||||||||||
|
Charles F. Katzer
|
12/12/08
|
66,667 | $ | 1.93 | 48,180 | |||||||||||||||
|
12/12/08
|
33,333 | $ | 1.21 | 27,333 | ||||||||||||||||
|
(1)
One third of the options granted
to the Named Executive Officers on December 12, 2008 were awarded with an exercise
price of $1.21, which was the closing market price of our common stock on
the date of grant. The remaining two thirds of the options were
granted with an exercise price of $1.93, representing a premium to the
closing market price of our stock on the date of grant. On
September 26,
2008, the Plan
Management Committee had awarded options with an exercise price of $1.93
to certain non-officer key employees. To maintain equity between the
officer and non-officer options granted in the fourth quarter, the
Compensation Committee determined to grant two-thirds of the officer
options with the same exercise price as the prior
grants.
|
||||||||||||||||||||
|
(2)
Grant Date Fair Value
represents the aggregate FAS 123R values of awards and options granted
during the year. See
Note 11
– “Stock
Options and Stock-based Employee Compensation” to our consolidated financial
statements for the
year ended December
31, 2008, in the
Form 10-K. There can be no assurance that the stock options will ever
be exercised or that the FAS 123R amounts set forth above will ever be
realized
|
||||||||||||||||||||
Outstanding
Equity Awards at Fiscal Year-End 2008
The
following table shows the number of shares covered by exercisable and
unexercisable options and unvested restricted stock awards (including grants
that vest contingently upon the occurrence of a specified milestone) held by the
Company’s Named Executive Officers on December 31, 2008.
13
|
Option
Awards*
|
Stock
Awards**
|
||||||||||||||||||||
|
Named
Executive Officer
|
No.
of Securities Underlying Unexercised Options -Exercisable
|
No.
of Securities Underlying- Unexercised Options –
Unexercisable
|
Option
Exercise Price
|
Option
Expiration Date
|
No.
of Shares or Units of Stock That Have Not Vested
|
Market
Value of Shares or Units of Stock That Have Not Vested
|
|||||||||||||||
|
Robert J. Capetola
|
125,000 | (1) | $ | 5.06 |
9/16/10
|
||||||||||||||||
| 31,250 | (1) | 1.72 |
6/27/12
|
||||||||||||||||||
| 20,000 | (1) | 1.89 |
11/5/12
|
||||||||||||||||||
| 85,000 | (3) | 2.75 |
12/13/12
|
||||||||||||||||||
| 165,000 | (3) | 2.75 |
1/3/13
|
||||||||||||||||||
| 200,000 | (2) | 8.08 |
9/12/13
|
||||||||||||||||||
| 450,000 | (4) | 9.17 |
12/15/13
|
||||||||||||||||||
| 88,000 | (5) | 6.47 |
8/12/14
|
||||||||||||||||||
| 500,000 | (4) | 9.02 |
12/17/14
|
||||||||||||||||||
| 142,500 | (1) | 47,500 | (1) | 7.01 |
1/3/16
|
||||||||||||||||
| 225,000 | (1) | 75,000 | (1) | 2.25 |
5/17/16
|
||||||||||||||||
| 225,000 | (1) | 75,000 | (1) | 2.46 |
12/15/16
|
||||||||||||||||
| 300,000 | (1) | 300,000 | (1) | 3.27 |
6/21/17
|
||||||||||||||||
| 250,000 | (1) | 250,000 | (1) | 2.61 |
12/11/17
|
||||||||||||||||
| 500,000 | (6) | 1.93 |
12/12/18
|
||||||||||||||||||
| 250,000 | (6) | 1.21 |
12/12/18
|
||||||||||||||||||
| 15,000 | (7) | $ | 16,800 | ||||||||||||||||||
|
John G. Cooper
|
80,000 | (1) | 2.97 |
12/10/11
|
|||||||||||||||||
| 105,000 | (1) | 1.72 |
6/27/12
|
||||||||||||||||||
| 30,000 | (1) | 1.89 |
11/5/12
|
||||||||||||||||||
| 80,000 | (3) | 2.75 |
12/13/12
|
||||||||||||||||||
| 80,000 | (2) | 8.08 |
9/12/13
|
||||||||||||||||||
| 200,000 | (4) | 9.17 |
12/15/13
|
||||||||||||||||||
| 75,000 | (5) | 6.47 |
8/12/14
|
||||||||||||||||||
| 75,000 | (4) | 9.02 |
12/17/14
|
||||||||||||||||||
| 37,500 | (1) | 12,500 | (1) | 7.01 |
1/3/16
|
||||||||||||||||
| 187,500 | (1) | 62,500 | (1) | 2.25 |
5/17/16
|
||||||||||||||||
| 150,000 | (1) | 50,000 | (1) | 2.46 |
12/15/16
|
||||||||||||||||
| 80,000 | (1) | 80,000 | (1) | 3.27 |
6/21/17
|
||||||||||||||||
| 75,000 | (1) | 75,000 | (1) | 2.61 |
12/11/17
|
||||||||||||||||
| 266,667 | (6) | 1.93 |
12/12/18
|
||||||||||||||||||
| 133,333 | (6) | 1.21 |
12/12/18
|
||||||||||||||||||
| 9,000 | (7) | 10,080 | |||||||||||||||||||
|
David L. Lopez
|
40,000 | (5) | 4.13 |
5/15/10
|
|||||||||||||||||
| 26,000 | (1) | 5.06 |
9/16/10
|
||||||||||||||||||
| 15,000 | (1) | 4.09 |
5/10/11
|
||||||||||||||||||
| 45,000 | (1) | 2.10 |
9/21/11
|
||||||||||||||||||
| 25,000 | (1) | 1.72 |
6/27/12
|
||||||||||||||||||
| 30,000 | (1) | 1.89 |
11/5/12
|
||||||||||||||||||
| 70,000 | (3) | 2.75 |
12/13/12
|
||||||||||||||||||
| 100,000 | (2) | 8.08 |
9/12/13
|
||||||||||||||||||
| 150,000 | (4) | 9.17 |
12/15/13
|
||||||||||||||||||
| 50,000 | (5) | 6.47 |
8/12/14
|
||||||||||||||||||
| 70,000 | (4) | 9.02 |
12/17/14
|
||||||||||||||||||
| 37,500 | (1) | 12,500 | (1) | 7.01 |
1/3/16
|
||||||||||||||||
| 187,500 | (1) | 62,500 | (1) | 2.25 |
5/17/16
|
||||||||||||||||
| 165,000 | (1) | 55,000 | (1) | 2.46 |
12/15/16
|
||||||||||||||||
| 80,000 | (1) | 80,000 | (1) | 3.27 |
6/21/17
|
||||||||||||||||
| 75,000 | (1) | 75,000 | (1) | 2.61 |
12/11/17
|
||||||||||||||||
| 166,667 | (6) | 1.93 |
12/12/18
|
||||||||||||||||||
| 83,333 | (6) | 1.21 |
12/12/18
|
||||||||||||||||||
| 9,000 | (7) | 10,080 | |||||||||||||||||||
14
|
Option
Awards*
|
Stock
Awards**
|
||||||||||||||||||||
|
Named
Executive Officer
|
No.
of Securities Underlying Unexercised Options -Exercisable
|
No.
of Securities Underlying- Unexercised Options –
Unexercisable
|
Option
Exercise Price
|
Option
Expiration Date
|
No.
of Shares or Units of Stock That Have Not Vested
|
Market
Value of Shares or Units of Stock That Have Not Vested
|
|||||||||||||||
|
Robert
Segal
|
75,000 | (6) | 4.34 |
8/1/10
|
|||||||||||||||||
| 16,000 | (1) | 5.06 |
9/16/10
|
||||||||||||||||||
| 15,000 | (1) | 4.09 |
5/10/11
|
||||||||||||||||||
| 40,000 | (1) | 2.10 |
9/21/11
|
||||||||||||||||||
| 20,000 | (1) | 1.89 |
11/5/12
|
||||||||||||||||||
| 80,000 | (3) | 2.75 |
12/13/12
|
||||||||||||||||||
| 35,000 | (2) | 8.08 |
9/12/13
|
||||||||||||||||||
| 125,000 | (4) | 9.17 |
12/15/13
|
||||||||||||||||||
| 20,000 | (5) | 6.47 |
8/12/14
|
||||||||||||||||||
| 50,000 | (4) | 9.02 |
12/17/14
|
||||||||||||||||||
| 18,750 | (1) | 6,250 | (1) | 7.01 |
1/3/16
|
||||||||||||||||
| 56,250 | (1) | 18,750 | (1) | 2.25 |
5/17/16
|
||||||||||||||||
| 75,000 | (1) | 25,000 | (1) | 2.46 |
12/15/16
|
||||||||||||||||
| 25,000 | (1) | 25,000 | (1) | 2.66 |
1/22/17
|
||||||||||||||||
| 30,000 | (1) | 30,000 | (1) | 3.27 |
6/21/17
|
||||||||||||||||
| 57,500 | (1) | 57,500 | (1) | 2.61 |
12/11/17
|
||||||||||||||||
| 66,667 | (6) | 1.93 |
12/12/18
|
||||||||||||||||||
| 33,333 | (6) | 1.21 |
12/12/18
|
||||||||||||||||||
| 4,000 | (7) | 4,480 | |||||||||||||||||||
|
Charles F. Katzer
|
33,334 | (6) | 16,666 | (6) | 7.01 |
1/3/16
|
|||||||||||||||
| 56,250 | (1) | 18,750 | (1) | 2.25 |
5/17/16
|
||||||||||||||||
| 15,000 | (1) | 5,000 | (1) | 1.62 |
9/8/16
|
||||||||||||||||
| 15,000 | (1) | 5,000 | (1) | 2.46 |
12/15/16
|
||||||||||||||||
| 45,000 | (1) | 45,000 | (1) | 3.27 |
6/21/17
|
||||||||||||||||
| 37,500 | (1) | 37,500 | (1) | 2.61 |
12/11/17
|
||||||||||||||||
| 66,667 | (6) | 1.93 |
12/12/18
|
||||||||||||||||||
| 33,333 | (6) | 1.21 |
12/12/18
|
||||||||||||||||||
|
*
For the fiscal year ended December 31, 2008, there were no Securities
Underlying Unexercised, Unearned Options. For readability, the
column titled “Equity Incentive Plan Awards: No. of Securities Underlying
Unexercised, Unearned Options” has been removed.
**
For the fiscal year ended December 31, 2008, there were no Unearned
Shares, Units or Other Rights that have not vested. For
readability, that column and the column titled “Equity Incentive Plan
Awards: Market or Payout Value of Unearned Shares, Units or Other Rights
That Have Not Vested” have been removed.
|
|
(1)
These options vest and become exercisable in four equal installments on
the date of grant and on the first, second and third anniversary of the
grant, and expire as listed above, which is the tenth anniversary of the
grant.
|
|
(2)
These options vest and become exercisable as follows: one fourth on the
date of grant and thereafter in twenty-four equal installments at the
close of each of the following twenty-four months. The options
expire, as listed above, on the tenth anniversary of the
grant.
|
|
(3)
These options vested and became exercisable upon the earlier of December
13, 2006 (4 years from the date of grant) or approval of a New Drug
Application. The options expire, as listed above, on the tenth
anniversary of the
grant.
|
15
|
(4)
As granted, options vest and become exercisable as follows: one fourth on
the date of grant and thereafter in thirty-six equal installments at the
close of each of the following thirty-six months. In December
2005, the Compensation Committee accelerated the vesting of all stock
options that at the time had an exercise price of $9.02 or
greater. Accordingly, all unvested options became fully vested
and exercisable, subject to a written “lock-up” agreement under which any
shares acquired may not be sold (except as needed to cover the exercise
price and satisfy withholding taxes) until the date on which the exercise
would have been permitted under the option’s pre-acceleration vesting
terms.
|
|
(5)
These options vest and become exercisable as follows: one fourth on the
date of grant and thereafter in thirty-six equal installments at the close
of each of the following thirty-six months. The options expire,
as listed above, on the tenth anniversary of the grant.
|
|
(6)
These options vest and become exercisable in three equal installments on
the first, second and third anniversary of the grant, and expire as listed
above, which is the tenth anniversary of the grant.
|
|
(7)
2007 Restricted Stock granted October 30, 2007 under the 1998 Plan to
replace certain shares of phantom stock previously granted to each grantee
and to be released upon commercialization of the Company’s first product,
as determined by the Board of Directors.
|
Option
Exercises and Vested Stock Awards
During
2008, none of the Named Executive Officers exercised any stock
options and none of the 2007 Restricted Stock awarded to a Named Executive
Officer vested.
Potential
Payments upon Termination or Change in Control
Our
executive employment agreements provide for, among other things, certain
payments and other benefits in the event that an executive’s employment
terminates under circumstances specified in the agreement, including upon a
“change in control.” In addition, these agreements provide for
non-competition and non-solicitation agreements of varying duration as follows:
Dr. Capetola – 15 months, Messrs. Cooper, Lopez and Katzer and
Dr. Segal – 12 months from the date of termination.
The
following table describes and quantifies estimated potential payments and
benefits that would become payable under the executive’s employment agreements
if the executive’s employment were terminated on December 31, 2008, or if a
change of control occurred on that date. The amounts contained in the
table are based on each executive’s compensation and, where applicable, the
Company's closing stock price as of December 31, 2008.
|
Name
and Type of Termination or Change in Control
|
Severance
|
Bonus
|
Equity
Acceleration (1)
|
Health
Benefits
|
Out-Placement
Counseling (2)
|
Excise
Tax & Gross-up (3)
|
TOTAL
|
|||||||||||||||||||||
|
Robert J. Capetola,
Ph.D
|
||||||||||||||||||||||||||||
|
Change
in Control
|
$ | – | (4) | $ | 3,360 | (5) | $ | – | $ | – | $ | – | $ | 3,360 | ||||||||||||||
|
Termination by
Company
|
||||||||||||||||||||||||||||
|
– Change in Control
(4)
|
2,370,000 | (6) | 300,000 | (7) | 3,360 | (5) | 67,527 | (8) | 40,000 | 344,913 | 3,125,800 | |||||||||||||||||
|
– for Cause
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– without Cause
|
1,580,000 | (9) | 300,000 | (7) | 3,360 | (5) | 45,018 | (10) | 40,000 | 1,968,378 | ||||||||||||||||||
|
Termination
by Executive
|
||||||||||||||||||||||||||||
|
– without Good
Reason
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– for Good
Reason
|
1,580,000 | (9) | 300,000 | (7) | 3,360 | (5) | 45,018 | (10) | 40,000 | 1,968,378 | ||||||||||||||||||
|
Death
or Disability
|
- | - | 3,360 | (5) | - | - | 3,360 | |||||||||||||||||||||
16
|
Name
and Type of Termination or Change in Control
|
Severance
|
Bonus
|
Equity
Acceleration (1)
|
Health
Benefits
|
Out-Placement
Counseling (2)
|
Excise
Tax & Gross-up (3)
|
TOTAL
|
|||||||||||||||||||||
|
John G. Cooper
|
||||||||||||||||||||||||||||
|
Change
in Control
|
– | (11) | 2,016 | (5) | – | – | – | 2,016 | ||||||||||||||||||||
|
Termination by
Company
|
||||||||||||||||||||||||||||
|
– Change in Control
(11)
|
1,142,500 | (12) | 150,000 | (7) | 2,016 | (5) | 33,258 | (13) | 40,000 | 110,728 | 1,478,502 | |||||||||||||||||
|
– for Cause
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– without Cause
|
685,500 | (14) | 150,000 | (7) | 2,016 | (5) | 16,629 | (15) | 40,000 | 894,145 | ||||||||||||||||||
|
Termination
by Executive
|
||||||||||||||||||||||||||||
|
– without Good
Reason
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– for Good
Reason
|
685,500 | (14) | 150,000 | (7) | 2,016 | (5) | 16,629 | (15) | 40,000 | 894,145 | ||||||||||||||||||
|
Death
or Disability
|
- | - | 2,016 | (5) | - | - | 2,016 | |||||||||||||||||||||
|
David
L. Lopez, Esq., CPA
|
||||||||||||||||||||||||||||
|
Change
in Control
|
– | (11) | 2,016 | (5) | – | – | – | 2,016 | ||||||||||||||||||||
|
Termination by
Company
|
||||||||||||||||||||||||||||
|
– Change in Control
(11)
|
1,147,500 | (12) | 152,000 | (7) | 2,016 | (5) | 33,864 | (13) | 40,000 | 110,728 | 1,497, 905 | |||||||||||||||||
|
– for Cause
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– without Cause
|
688,500 | (14) | 152,000 | (7) | 2,016 | (5) | 16,932 | (15) | 40,000 | 899,448 | ||||||||||||||||||
|
Termination
by Executive
|
||||||||||||||||||||||||||||
|
– without Good
Reason
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– for Good
Reason
|
688,500 | (14) | 152,000 | (7) | 2,016 | (5) | 16,932 | (15) | 40,000 | 899,448 | ||||||||||||||||||
|
Death
or Disability
|
- | - | 2,016 | (5) | - | - | 2,016 | |||||||||||||||||||||
|
Robert Segal,
M.D., F.A.C.P.
|
||||||||||||||||||||||||||||
|
Change
in Control
|
– | (11) | 896 | (5) | – | – | – | 896 | ||||||||||||||||||||
|
Termination by
Company
|
||||||||||||||||||||||||||||
|
– Change in Control
(11)
|
720,000 | (16) | 70,000 | (7) | 896 | (5) | 44,665 | (13) | 40,000 | - | 875,561 | |||||||||||||||||
|
– for Cause
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– without Cause
|
360,000 | (17) | 70,000 | (7) | 896 | (5) | 22,333 | (15) | 40,000 | 493,229 | ||||||||||||||||||
|
Termination
by Executive
|
||||||||||||||||||||||||||||
|
– without Good
Reason
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– for Good
Reason
|
360,000 | (17) | 70,000 | (7) | 896 | (5) | 22,333 | (15) | 40,000 | 493,229 | ||||||||||||||||||
|
Death
or Disability
|
- | - | 896 | (5) | - | - | 896 | |||||||||||||||||||||
|
Charles F. Katzer
|
||||||||||||||||||||||||||||
|
Change
in Control
|
– | (11) | – | (5) | – | – | – | – | ||||||||||||||||||||
|
Termination by
Company
|
||||||||||||||||||||||||||||
|
– Change in Control
(11)
|
320,000 | (18) | 70,000 | (7) | – | (5) | 21,988 | (19) | 40,000 | - | 451,988 | |||||||||||||||||
|
– for Cause
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– without Cause
|
160,000 | (20) | 70,000 | (7) | – | (5) | 10,994 | (21) | 40,000 | 280,994 | ||||||||||||||||||
|
Termination
by Executive
|
||||||||||||||||||||||||||||
|
– without Good
Reason
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– for Good
Reason
|
160,000 | (20) | 70,000 | (7) | – | (5) | 10,994 | (21) | 40,000 | 280,994 | ||||||||||||||||||
|
Death
or Disability
|
- | - | 896 | (5) | - | - | 896 |
17
|
(1)
Under all the executive employment agreements, under certain conditions,
the vesting of unvested stock options and 2007 Restricted Stock would be
accelerated. Equity acceleration represents the incremental
value, as defined in FAS 123R, resulting from such acceleration on the
assumed termination date, December 31, 2008. In the event that
the fair market value on the assumed termination date is less than the
exercise price of the unvested options, the equity acceleration
compensation is zero. The number of shares remaining unvested
under each executive’s stock option and restricted stock awards is set
forth in the “Outstanding Equity Awards” table.
|
|
(2)
Under all the executive employment agreements, upon a change of control or
termination by the Company without Cause or by the executive for Good
Reason, the executive is entitled to placement counseling assistance in
the form of reimbursement for reasonable expenses incurred by the
executive within 12 months following the date of termination, up to a
maximum amount of $40,000.
|
|
(3)
Under all the executive employment agreements, to the extent that the
executives are subject to certain excise taxes under Section 4999 of the
Internal Revenue Code, the executives are eligible for reimbursement of
those excise taxes and any additional federal, state, local and excise tax
resulting from such gross-up payments. The amounts reported in the
table are calculated assuming an excise tax rate of 20% and a federal tax
rate of 35%.
|
|
(4)
Under this executive’s employment agreement, upon a Change in Control and
assuming the executive remains employed with the acquirer, the executive’s
annual bonus in each of the three fiscal years immediately following the
Change in Control must be at least equal to the largest annual cash bonus
received by the executive in the three fiscal years immediately preceding
the Change in Control. In addition, a termination is considered
“termination in connection with a change of control” if the executive’s
employment is terminated other than for cause or by the executive for Good
Reason during the 36 months following the change of control, or if the
executive terminates his employment for any reason during the 30-day
period commending on the sixth-month anniversary of a Change of
Control.
|
|
(5)
Under all the executive employment agreements, upon a change of control or
termination by the Company without Cause or by the executive for Good
Reason, outstanding unvested stock options and the 2007 Restricted Stock
vest in full and become fully exercisable. As of December 31,
2008, the assumed termination date for purposes of this table, all of the
executives’ unvested stock options had an exercise price that was greater
than the fair market value of our common stock on that
date. Therefore, the compensation reported above relates solely
to the acceleration of unvested 2007 Restricted Stock.
|
|
(6)
Under this executive’s employment agreement, upon termination in
connection with a change of control, the executive is entitled to a lump
sum payment that is equal to three times the sum of his base salary then
in effect and the largest annual cash bonus received by the executive in
the 3 fiscal years immediately preceding the Change in
Control.
|
|
(7)
Under all the executive employment agreements, upon a change of control or
termination by the Company without Cause or by the executive for Good
Reason, the executive is entitled to a lump sum payment that is equal to
the largest annual cash bonus received by the executive in the 3 fiscal
years immediately preceding the Change in Control or termination,
multiplied by a fraction the numerator of which is the number of days the
executive was employed with the Company in the current fiscal year and the
denominator of which is 365.
|
|
(8)
Under this executive’s employment agreement,
upon termination in connection with a change of control, the executive is
entitled to continuation of health benefits (or their equivalent) for the
executive and the members of the executive’s family who were participating
in the Company’s health and welfare plans at the time of
termination for a period of three years following the date of termination,
reduced to the extent that a subsequent employer provides the executive
with substantially similar coverage (on a benefit-by-benefit
basis).
|
|
(9)
Under this executive’s employment agreement, upon termination by the
Company without Cause or by the executive for Good Reason, the executive
is entitled to a lump sum payment that is equal to two times the sum of
his base salary then in effect and the largest annual cash bonus received
by the executive in the 3 fiscal years immediately preceding the date of
termination.
|
|
(10)
Under this executive’s employment agreement, upon termination by the
Company without Cause or by the executive for Good Reason, the executive
is entitled to continuation of health benefits (or their equivalent) for
the executive and the members of the executive’s family who were
participating in the Company’s health and welfare plans at the time of
termination for a period of two years following the date of termination,
reduced to the extent that a subsequent employer provides the executive
with substantially similar coverage (on a benefit-by-benefit
basis).
|
18
|
(11)
Under this executive’s employment agreement, upon a Change in Control and
assuming the executive remains employed with the acquirer, the executive’s
annual bonus in each of the two fiscal years immediately following the
Change in Control must be at least equal to the largest annual cash bonus
received by the executive in the three fiscal years immediately preceding
the Change in Control. In addition, a termination is considered
“termination in connection with a change of control” if the executive’s
employment is terminated other than for cause or by the executive for Good
Reason during the 24 months following the change of
control.
|
|
(12)
Under this executive’s employment agreement, upon termination in
connection with a change of control, the executive is entitled to a lump
sum payment that is equal to two and one half times the sum of his base
salary then in effect and the largest annual cash bonus received by the
executive in the 3 fiscal years immediately preceding the Change in
Control.
|
|
(13)
Under this executive’s employment agreement, upon termination in
connection with a change of control, the executive is entitled to
continuation of health benefits (or their equivalent) for the executive
and the members of the executive’s family who were participating in the
Company’s health and welfare plans at the time of termination for a period
of two years following the date of termination, reduced to the extent that
a subsequent employer provides the executive with substantially similar
coverage (on a benefit-by-benefit basis).
|
|
(14)
Under this executive’s employment agreement, upon termination by the
Company without Cause or by the executive for Good Reason, the executive
is entitled to a lump sum payment that is equal to one and one half times
the sum of his base salary then in effect and the largest annual cash
bonus received by the executive in the 3 fiscal years immediately
preceding the date of termination.
|
|
(15)
Under this executive’s employment agreement, upon termination by the
Company without Cause or by the executive for Good Reason, the executive
is entitled to continuation of health benefits (or their equivalent) for
the executive and the members of the executive’s family who were
participating in the Company’s health and welfare plans at the time of
termination for a period of one year following the date of termination,
reduced to the extent that a subsequent employer provides the executive
with substantially similar coverage (on a benefit-by-benefit
basis).
|
|
(16)
Under this executive’s employment agreement, upon termination in
connection with a change of control, the executive is entitled to a lump
sum payment that is equal to two times the sum of his base salary then in
effect and the largest annual cash bonus received by the executive in the
3 fiscal years immediately preceding the Change in
Control.
|
|
(17)
Under this executive’s employment agreement, upon termination by the
Company without Cause or by the executive for Good Reason, the executive
is entitled to a lump sum payment that is equal to the sum of his base
salary then in effect and the largest annual cash bonus received by the
executive in the 3 fiscal years immediately preceding the Change in
Control.
|
|
(18)
Under this executive’s employment agreement, upon termination in
connection with a change of control, the executive is entitled to a lump
sum payment that is equal to the sum of his base salary then in effect and
the largest annual cash bonus received by the executive in the 3 fiscal
years immediately preceding the Change in Control.
|
|
(19)
Under this executive’s employment agreement, upon termination in
connection with a change of control, the executive is entitled to
continuation of health benefits (or their equivalent) for the executive
and the members of the executive’s family who were participating in the
Company’s health and welfare plans at the time of termination for a period
of one year following the date of termination, reduced to the extent that
a subsequent employer provides the executive with substantially similar
coverage (on a benefit-by-benefit basis).
|
|
(20)
Under this executive’s employment agreement, upon termination by the
Company without Cause or by the executive for Good Reason, the executive
is entitled to a lump sum payment that is equal to one-half the sum of his
base salary then in effect and the largest annual cash bonus received by
the executive in the 3 fiscal years immediately preceding the date of
termination.
|
|
(21)
Under this executive’s employment agreement, upon termination by the
Company without Cause or by the executive for Good Reason, the executive
is entitled to continuation of health benefits (or their equivalent) for
the executive and the members of the executive’s family who were
participating in the Company’s health and welfare plans at the time of
termination for a period of six months following the date of termination,
reduced to the extent that a subsequent employer provides the executive
with substantially similar coverage (on a benefit-by-benefit
basis).
|
19
Director
Compensation
During
2008, each of the Company’s non-employee directors received cash compensation
for his services in the amount of $4,500 per quarter, as well as the following
additional amounts, as applicable: (i) $6,000 per quarter to Mr. Amick for
serving as the Chairman of the Board of Directors; (ii) $1,000 per quarter for
each director who served on one or more of the standing committees of the Board
of Directors; and (iii) $500 per quarter for each director who served as
Chairman of any of the standing committees. Directors who are also
employees of the Company are not compensated separately for serving on the Board
or any of its standing committees. The following chart summarizes the
annual cash compensation for the Company’s non-employee directors during the
fiscal year ended December 31, 2008.
|
Name
|
Fees
Earned or Paid in Cash
|
Stock
Awards
|
Option Awards
(1)
|
Non-Equity
Incentive Plan Compen-sation
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
|
All
Other Compen-sation
|
Total
|
|||||||||||||||||||||
|
W.
Thomas Amick
|
$ | 50,000 | $ | - | $ | 69,018 | $ | - | $ | - | $ | - | $ | 119,018 | ||||||||||||||
|
Antonio Esteve,
Ph.D.
|
18,000 | - | 57,258 | - | - | - | 75,258 | |||||||||||||||||||||
|
Max E. Link,
Ph.D.
|
24,000 | - | 57,258 | - | - | - | 81,258 | |||||||||||||||||||||
|
Herbert
H. McDade, Jr.
|
22,000 | - | 57,258 | - | - | - | 79,258 | |||||||||||||||||||||
|
Marvin E. Rosenthale,
Ph.D.
|
24,000 | - | 57,258 | - | - | - | 81,258 | |||||||||||||||||||||
|
(1)
Represents the compensation costs
for the year under FAS 123R of outstanding stock options, and is not an
amount paid to, or realized by, the director. There can be no
assurance that these FAS 123R amounts will ever be realized. The FAS 123R value as of the
grant date for each option is spread over the number of months of service
required for the grant to become non-forfeitable. This amount
includes ratable amounts expensed for options granted in prior
years.
See
Note 11
– “Stock
Options and Stock-based Employee Compensation” to our consolidated financial
statements for the
year ended December
31, 2008, in the
Form 10-K. As of December 31, 2008, the aggregate number of option
awards outstanding for each director was as follows: Mr. Amick – 180,000; Dr. Esteve – 175,000; Dr. Link – 155,000; Mr. McDade – 205,000; and Dr. Rosenthale – 155,000. The
FAS 123R grant date value per share
for options granted in 2008 was $1.32.
|
||||||||||||||||||||||||||||
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
The
following table sets forth certain information regarding the beneficial
ownership of the common stock of the Company (i) as of February 27, 2009, by
each Named Executive Officer and director of the Company listed in the chart
below and by all executive officers and directors as a group, and (ii) as of
December 31, 2008, by each person or entity known by the Company to be the
beneficial owner of more than five percent of the outstanding shares of common
stock of the Company. The address of each person is c/o Discovery
Laboratories, Inc., 2600 Kelly Road, Suite 100, Warrington,
Pennsylvania 18976-3622, unless otherwise indicated.
20
|
Name
and Address of
Beneficial Owner (1)
|
Common
Stock
|
Common
Stock Equivalents (2)
|
Total
Beneficial
Ownership
|
Percentage
of Class
Beneficially
Owned (1)
|
||||||||||||
|
Named
Executive Officers and
Directors
|
||||||||||||||||
|
W.
Thomas Amick
|
40,000 | 150,000 | 190,000 | * | ||||||||||||
|
Robert J. Capetola,
Ph.D.
|
432,755 | 2,854,250 | 3,287,005 | 3.12 | % | |||||||||||
|
John G. Cooper
|
48,276 | 1,267,500 | 1,315,776 | 1.27 | % | |||||||||||
|
Antonio Esteve,
Ph.D. (3)
|
3,206,689 | 196,174 | 3,402,863 | 3.31 | % | |||||||||||
|
Charles F. Katzer
|
20,000 | 218,750 | 238,750 | * | ||||||||||||
|
Max E. Link,
Ph.D.
|
166,821 | 125,000 | 291,821 | * | ||||||||||||
|
David
L. Lopez, Esq., CPA
|
62,156 | 1,178,500 | 1,240,656 | 1.20 | % | |||||||||||
|
Herbert H. McDade,
Jr.
|
- | 175,000 | 175,000 | * | ||||||||||||
|
Marvin E. Rosenthale,
Ph.D.(4)
|
350,000 | 125,000 | 475,000 | * | ||||||||||||
|
Robert Segal,
M.D., F.A.C.P.
|
16,273 | 757,250 | 773,523 | * | ||||||||||||
|
Executive
Officers and Directors as
a group (14 persons)
|
4,436,190 | 7,989,924 | 12,426,114 | 11.24 | % | |||||||||||
|
5%
Security Holders
|
||||||||||||||||
|
Heartland
Advisors, Inc. (5)
789
North Water Street
Milwaukee,
WI 53202
|
7,954,900 | - | 7,954,900 | 7.76 | % | |||||||||||
|
Barclays
Global Investors NA (6)
45
Fremont Street
San
Francisco, CA 94105-2228
|
5,515,896 | - | 5,515,896 | 5.38 | % | |||||||||||
* Less
than 1%
|
(1)
Beneficial ownership is determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934 and includes voting and
investment power with respect to shares of common stock. Shares
of common stock, and shares of common stock subject to options or warrants
currently exercisable or exercisable within 60 days after February 27,
2009 held by each person or group named above, are deemed outstanding for
computing the percentage ownership of the person or group holding such
options or warrants, but are not deemed outstanding for purposes of
computing the percentage ownership of any other person or
group.
|
|||||||
|
(2)
common stock Equivalents include shares of common stock subject to
options or warrants currently exercisable or exercisable within 60 days
after February 27, 2009 held by each person or group named
above.
|
|||||||
21
|
(3)
Beneficial ownership of common stock includes 2,884,410 shares
owned by Laboratorios Esteve, 317,164 shares owned by Laboratorios
P.E.N., S.A., an affiliate of Laboratorios Esteve, and 5,115 shares
owned directly by Dr. Esteve. Common Stock Equivalents
includes 145,000 shares of common stock issuable upon the exercise of
outstanding options held by Dr. Esteve and 51,174 shares of common
stock issuable on the exercise of outstanding warrants owned by
Laboratorios Esteve. As a consequence of Dr. Esteve’s
relationship with Laboratorios Esteve, including, serving as
President of Laboratorios Esteve, he may be deemed to have beneficial
ownership of the shares owned by Laboratorios Esteve and Laboratorios
P.E.N.
|
|||||||
|
(4) Total
beneficial ownership shown in the table includes 125,000 shares as to
which Dr. Rosenthale disclaims beneficial ownership (shares held by
spouse).
|
|||||||
|
(5)
This information is based on Schedule 13G/A filed with the
Securities and Exchange Commission on February 8, 2008 by Heartland
Advisors, Inc., a registered investment advisor. The clients of
Heartland Advisors, Inc. have the right to receive or the power to direct
the receipt of dividends and proceeds from the sale of all reported
shares. The Heartland Value Fund, a series of the Heartland
Group, Inc., a registered investment company, owns 7,185,000 shares or
7.2% of the class of securities reported.
|
|||||||
|
(6)
This information is based on Schedule 13G filed with the Securities and
Exchange Commission on February 5, 2008 by Barclays Global Investors,
NA and includes 3,266,465 shares owned by its affiliate, Barclays Global
Fund Advisors. The shares are reported held in trust accounts
for the benefit of the beneficiaries of those
accounts.
|
|||||||
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Transactions between the
Company and Related Parties
There
were no transactions between the Company and any related party to the Company in
the fiscal year ended December 31, 2008.
Committees of the
Board
The Board
of Directors appoints all members of the Board committees. Presently,
the Board of Directors has the following committees: (i) the Standing
Committees, consisting of the Audit Committee, Compensation Committee,
Nomination Committee, Compliance and Quality Committee, and (ii) the Strategic
Partnering Committee.
Director Independence
The Board
of Directors presently consists of six members, one of whom is an employee of
the Company. Presently, Messrs. Amick and McDade
and Drs. Link and Rosenthale are “independent” directors within the
meaning of the rules of the SEC and the qualitative listing requirements of
The Nasdaq Global
Market. Each director who serves on a Standing Committee of
the Board is “independent” within the meaning of the SEC rules and the
qualitative listing requirements of The Nasdaq Global
Market.
|
ITEM
14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
Audit
and Non-Audit Fees
The
following table presents fees for professional audit services rendered by Ernst
& Young LLP for the audit of the Company’s annual consolidated financial
statements for the fiscal years ended December 31, 2008 and December 31, 2007,
fees for the review of quarterly reports on Form 10-Q during these periods and
fees for other services rendered by Ernst & Young LLP during those
periods:
22
|
Fee
Category:
|
Fiscal
2008
|
%
of Total
|
Fiscal
2007
|
%
of Total
|
||||||||||||
|
Audit
Fees
|
$ | 222,000 | 65 | % | $ | 241,000 | 68 | % | ||||||||
|
Audit-Related
Fees
|
84,000 | 24 | % | 84,000 | 24 | % | ||||||||||
|
Tax
Fees
|
34,000 | 10 | % | 25,000 | 7 | % | ||||||||||
|
All
Other Fees
|
2,000 | 1 | % | 2,000 | 1 | % | ||||||||||
|
Total
Fees
|
$ | 342,000 | 100 | % | $ | 352,000 | 100 | % | ||||||||
Audit
Fees are fees that the Company paid to Ernst & Young LLP for: the audit of
the Company’s annual consolidated financial statements; the review of the
consolidated financial statements included in the Company’s quarterly reports on
Form 10-Q and services related to registration statements and other offering
memoranda.
Audit
Related Fees are fees related to the audit of the Company’s internal control
over financial reporting with the objective of obtaining reasonable assurance
about whether effective internal control over financial reporting was maintained
in all material respects.
Tax Fees
consisted of tax compliance/preparation and other tax services. No
portion of these tax fees related to financial information or operational system
design or implementation services.
All Other
Fees are fees for any services not included in
another category.
The Audit
Committee or a designated member of the Audit Committee pre-approved all audit
and non-audit services rendered by Ernst & Young LLP to the Company in
2008.
The Audit
Committee has considered whether the provision of all other services by Ernst
& Young LLP is compatible with maintaining the independence of Ernst &
Young LLP and has concluded that Ernst & Young LLP is
independent.
Pre-Approval
Policies
The Audit
Committee pre-approves all audit and non-audit services provided by the
Company’s independent auditors prior to the engagement of the independent
auditors with respect to such services. A designated member of the
Audit Committee has the authority to approve any additional audit services and
permissible non-audit services, provided the Chairman of the Audit Committee
informs the Audit Committee of such approval at its next regularly scheduled
meeting. If specific pre-approval for any services to be provided by
the Company’s independent auditors is not required, the Company’s Chief
Financial Officer has the authority to determine whether such services are
included within the list of services that have received the general pre-approval
of the Audit Committee. The Audit Committee must be informed on a
timely basis of any such services provided by the Company’s independent
auditors.
On an
ongoing basis, management communicates specific projects and categories of
services for which advance approval of the Audit Committee is
required. The Audit Committee reviews these requests and advises
management and the independent auditors if the Audit Committee pre-approves the
engagement of the independent auditors for such projects and
services. On a periodic basis, management reports to the Audit
Committee the actual spending for such projects and services compared to the
approved amounts. The Audit Committee may delegate the ability to
pre-approve audit and permitted non-audit services to a sub-committee of the
Audit Committee, provided that any such pre-approvals are reported at the next
Audit Committee meeting.
PART
IV
|
ITEM
15.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES.
|
The
consolidated financial statements required to be filed in this Annual Report on
Form 10-K are included in Part II, Item 8 of the Form 10-K.
Exhibits
are listed on the Index to Exhibits at the end of this Annual Report on Form
10-K. The exhibits required to be filed pursuant to Item 601 of
Regulation S-K, which are listed on the Index in response to this Item, are
incorporated herein by reference.
23
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this Amendment No. 1 to be signed on its
behalf by the undersigned, thereunto duly authorized.
| DISCOVERY LABORATORIES, INC. | |||
|
Date:
April 30, 2009
|
By:
|
/s/ Robert J. Capetola | |
| Robert J. Capetola, Ph.D. | |||
| President and Chief Executive Officer | |||
24
INDEX
TO EXHIBITS
The
following exhibits are included with this Annual Report on Form
10-K. All management contracts or compensatory plans or arrangements
are marked with an asterisk.
|
Exhibit No.
|
Description
|
Method of Filing
|
||
|
3.1
|
Restated
Certificate of Incorporation of Discovery Laboratories, Inc. (Discovery),
dated September 18, 2002.
|
Incorporated
by reference to Exhibit 3.1 to Discovery’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2002, as filed with the SEC on March
31, 2003.
|
||
|
3.2
|
Certificate
of Designations, Preferences and Rights of Series A Junior Participating
Cumulative Preferred Stock of Discovery, dated February 6,
2004.
|
Incorporated
by reference to Exhibit 2.2 to Discovery’s Form 8-A, as filed with the SEC
on February 6, 2004.
|
||
|
3.3
|
Certificate
of Amendment to the Certificate of Incorporation of Discovery, dated as of
May 28, 2004.
|
Incorporated
by reference to Exhibit 3.1 to Discovery’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2004, as filed with the SEC on August 9,
2004.
|
||
|
3.4
|
Certificate
of Amendment to the Restated Certificate of Incorporation of Discovery,
dated as of July 8, 2005.
|
Incorporated
by reference to Exhibit 3.1 to Discovery’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2005, as filed with the SEC on August 5,
2005.
|
||
|
3.5
|
Amended
and Restated By-Laws of Discovery, as amended effective December 11,
2007.
|
Incorporated
by reference to Exhibit 3.5 to Discovery’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2007, as filed with the SEC on March
14, 2008.
|
||
|
4.1
|
Shareholder
Rights Agreement, dated as of February 6, 2004, by and between Discovery
and Continental Stock Transfer & Trust Company.
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on February 6, 2004.
|
||
|
4.2
|
Form
of Class A Investor Warrant.
|
Incorporated
by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on June 20, 2003.
|
||
|
4.3
|
Class
B Investor Warrant dated July 7, 2004, issued to Kingsbridge Capital
Limited.
|
Incorporated
by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K as
filed with the SEC on July 9, 2004.
|
||
|
4.4
|
Warrant
Agreement, dated as of November 3, 2004, by and between Discovery and
QFinance, Inc.
|
Incorporated
by reference to Exhibit 4.1 of Discovery’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2004, as filed with the SEC on
November 9, 2004.
|
||
|
4.5
|
Class
C Investor Warrant, dated April 17, 2006, issued to Kingsbridge Capital
Limited
|
Incorporated
by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on April 21,
2006.
|
25
|
Exhibit No.
|
Description
|
Method of Filing
|
||
|
4.6
|
Second
Amended and Restated Promissory Note, dated as of October 25, 2006, issued
to PharmaBio Development Inc. (“PharmaBio”)
|
Incorporated
by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on October 26, 2006.
|
||
|
4.7
|
Warrant
Agreement, dated as of October 25, 2006, by and between Discovery and
PharmaBio
|
Incorporated
by reference to Exhibit 4.2 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on October 26, 2006.
|
||
|
4.8
|
Warrant
Agreement, dated November 22, 2006
|
Incorporated
by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on November 22, 2006.
|
||
|
4.9
|
Warrant
Agreement dated May 22, 2008 by and between Kingsbridge Capital Limited
and Discovery.
|
Incorporated
by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K as
filed with the SEC on May 28, 2008.
|
||
|
4.10
|
Warrant
Agreement dated December 12, 2008 by and between Kingsbridge Capital
Limited and Discovery.
|
Incorporated
by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on December 15, 2008.
|
||
|
10.1+
|
Sublicense
Agreement, dated as of October 28, 1996, between Johnson & Johnson,
Ortho Pharmaceutical Corporation and Acute Therapeutics,
Inc.
|
Incorporated
by reference to Exhibit 10.6 to Discovery’s Registration Statement on Form
SB-2, as filed with the SEC on January 7, 1997 (File No.
333-19375).
|
||
|
10.2
|
Registration
Rights Agreement, dated June 16, 1998, among Discovery, Johnson &
Johnson Development Corporation and The Scripps Research
Institute.
|
Incorporated
by reference to Exhibit 10.28 to Discovery’s Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1998, as filed with the SEC on
April 9, 1999.
|
||
|
10.3*
|
Restated
1993 Stock Option Plan of Discovery.
|
Incorporated
by reference to Discovery’s Registration Statement on Form SB-2 (File No.
33-92-886).
|
||
|
10.4*
|
1995
Stock Option Plan of Discovery.
|
Incorporated
by reference to Discovery’s Registration Statement on Form SB-2 (File No.
33-92-886).
|
||
|
10.5*
|
Amended
and Restated 1998 Stock Incentive Plan of Discovery (amended as of May 13,
2005).
|
Incorporated
by reference to Exhibit 4.1 to Discovery’s Registration Statement on Form
S-8, as filed with the SEC on August 23, 2005 (File No.
333-116268).
|
||
|
10.6*
|
Form
of Notice of Grant of Stock Option under the 1998 Stock Incentive
Plan.
|
Incorporated
by reference to Exhibit 10.2 to Discovery’s Quarterly Report on Form
10-QSB for the quarter ended September 30, 1999, as filed with the SEC on
November 17, 1999.
|
||
|
10.7*
|
Discovery’s
2007 Long Term Incentive Plan
|
Incorporated
by reference to Exhibit 1.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on June 28,
2007.
|
26
|
Exhibit No.
|
Description
|
Method of Filing
|
||
|
10.8*
|
Form
of 2007 Long-Term Incentive Plan Stock Option Agreement
|
Incorporated
by reference to Exhibit 10.3 to Discovery’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2007, as filed with the SEC on August 9,
2007.
|
||
|
10.9*
|
Form
of Stock Issuance Agreement, dated as of October 30, 2007, between the
Discovery and the Grantees
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on November 5, 2007.
|
||
|
10.10+
|
Amended
and Restated Sublicense and Collaboration Agreement made as of December 3,
2004, between Discovery and Laboratorios del Dr. Esteve,
S.A.
|
Incorporated
by reference to Exhibit 10.28 to Discovery’s Annual Report on Form 10-K
for the year ended December 31, 2004, as filed with the SEC on March 16,
2005.
|
||
|
10.11+
|
Amended
and Restated Supply Agreement, dated as of December 3, 2004, by and
between Discovery and Laboratorios del Dr. Esteve, S.A.
|
Incorporated
by reference to Exhibit 10.29 to Discovery’s Annual Report on Form 10-K
for the year ended December 31, 2004, as filed with the SEC on March 16,
2005.
|
||
|
10.12
|
Assignment
of Lease and Termination and Option Agreement, dated as of December 30,
2005, between Laureate Pharma, Inc. and Discovery.
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2005, as filed with the SEC on March
16, 2006.
|
||
|
10.13
|
Common
Stock Purchase Agreement, dated April 17, 2006, by and between Discovery
and Kingsbridge Capital Limited.
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on April 21, 2006.
|
||
|
10.14
|
Second
Amended and Restated Loan Agreement, dated as of December 10, 2001,
amended and restated as of October 25, 2006, by and between Discovery and
PharmaBio
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on October 26, 2006.
|
||
|
10.15*
|
Amended
and Restated Employment Agreement, dated as of May 4, 2006, by and between
Discovery and Robert J. Capetola, Ph.D.
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2006, as filed with the SEC on May 10,
2006.
|
||
|
10.16*
|
Amendment
to the Amended and Restated Employment Agreement dated as of May 4, 2006
between Robert J. Capetola and Discovery Laboratories,
Inc.
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on January 3, 2008
|
||
|
10.17*
|
Amended
and Restated Employment Agreement, dated as of May 4, 2006, by and between
Discovery and John G. Cooper.
|
Incorporated
by reference to Exhibit 10.2 to Discovery’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2006, as filed with the SEC on May 10,
2006.
|
||
|
10.18*
|
Amendment
to the Amended and Restated Employment Agreement dated as of May 4, 2006
between John G. Cooper and Discovery Laboratories,
Inc.
|
Incorporated
by reference to Exhibit 10.3 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on January 3,
2008
|
27
|
Exhibit No.
|
Description
|
Method of Filing
|
||
|
10.19*
|
Amended
and Restated Employment Agreement, dated as of May 4, 2006, by and between
Discovery and David L. Lopez, Esq., CPA
|
Incorporated
by reference to Exhibit 10.3 to Discovery’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2006, as filed with the SEC on May 10,
2006.
|
||
|
10.20*
|
Amendment
to the Amended and Restated Employment Agreement dated as of May 4, 2006
between David L. Lopez and Discovery Laboratories, Inc.
|
Incorporated
by reference to Exhibit 10.2 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on January 3, 2008
|
||
|
10.21*
|
Amended
and Restated Employment Agreement, dated as of May 4, 2006, by and between
Discovery and Robert Segal, M.D.
|
Incorporated
by reference to Exhibit 10.4 to Discovery’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2006, as filed with the SEC on May 10,
2006.
|
||
|
10.22*
|
Amendment
to the Amended and Restated Employment Agreement dated as of May 4, 2006
between Robert Segal, M.D., F.A.C.P., and Discovery
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on July 15, 2008
|
||
|
10.23*
|
Amendment
dated December 12, 2008 to the Amended and Restated Employment Agreement
dated as of May 4, 2006 between Robert Segal, M.D., F.A.C.P., and
Discovery
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on December 18, 2008
|
||
|
10.24*
|
Amended
and Restated Employment Agreement, dated as of May 4, 2006, by and between
Discovery and Charles Katzer.
|
Incorporated
by reference to Exhibit 10.31 to Discovery’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2006, as filed with the SEC on
March 16, 2007
|
||
|
10.25*
|
Amendment
to the Amended and Restated Employment Agreement dated as of May 4, 2006
between Charles F. Katzer and Discovery
|
Incorporated
by reference to Exhibit 10.2 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on July 15, 2008
|
||
|
10.26*
|
Amendment
dated December 12, 2008 to the Amended and Restated Employment Agreement
dated as of May 4, 2006 between Charles F. Katzer and Discovery
Laboratories, Inc.
|
Incorporated
by reference to Exhibit 10.2 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on December 18, 2008
|
||
|
10.27
|
Lease
Agreement dated May 26, 2004, and First Amendment to Lease Agreement,
dated April 2, 2007, by and between TR Stone Manor Corp. and Discovery
Laboratories, Inc.
|
Incorporated
by reference to Exhibits 10.1 and 10.2 to Discovery’s Current Report on
Form 8-K, as filed with the SEC on April 6, 2007.
|
||
|
10.28
|
Credit
and Security Agreement, dated as of May 21, 2007, by and between Discovery
and Merrill Lynch Capital, a division of Merrill Lynch Business Financial
Services, Inc.
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on May 24,
2007.
|
28
|
Exhibit No.
|
Description
|
Method of Filing
|
||
|
10.29
|
First
Amendment to Credit and Security Agreement (the “Amendment”) dated May 30,
2008, between the Company and GE Business Financial Services Inc.
(formerly Merrill Lynch Business Financial Services, Inc.)
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on June 2, 2008.
|
||
|
10.30
|
Master
Services Agreement between Discovery and Kloehn Ltd., dated as of August
10, 2007
|
Incorporated
by reference to Exhibit 10.35 to Discovery’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2007, as filed with the SEC on
March 14, 2008.
|
||
|
10.31
+
|
Amended
and Restate License Agreement by and between Discovery and Philip Morris
USA Inc., d/b/a/ Chrysalis Technologies, dated March 28,
2008
|
Incorporated
by reference to Exhibit 10.4 to Discovery’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2008, as filed with the SEC on May 9,
2008.
|
||
|
10.32
+
|
License
Agreement by and between and Philip Morris Products S.A., dated March 28,
2008
|
Incorporated
by reference to Exhibit 10.5 to Discovery’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2008, as filed with the SEC on May 9,
2008.
|
||
|
10.33
|
Common
Stock Purchase Agreement, dated as of May 22, 2008, by and between
Kingsbridge Capital and Discovery
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on May 27, 2008.
|
||
|
10.34
|
Registration
Rights Agreement, dated as of December 12, 2008, by and between
Kingsbridge Capital and Discovery
|
Incorporated
by reference to Exhibit 10.2 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on May 27, 2008.
|
||
|
10.35
|
Common
Stock Purchase Agreement, dated December 12, 2008, by and between
Discovery and Kingsbridge Capital Limited.
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on December 15, 2008.
|
||
|
10.36
|
Registration
Rights Agreement, dated as of December 12, 2008, by and between
Kingsbridge Capital and Discovery
|
Incorporated
by reference to Exhibit 10.2 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on December 15, 2008.
|
||
|
21.1
|
Subsidiaries
of Discovery.
|
Incorporated
by reference to Exhibit 21.1 to Discovery’s Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1997, as filed with the SEC on
March 31, 1998.
|
||
|
23.1
|
Consent
of Ernst & Young LLP, independent registered public accounting
firm.
|
Incorporated
by reference to Exhibit 23.1 to Discovery’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2008, as filed with the SEC on March
13, 2009.
|
||
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange
Act.
|
Incorporated
by reference to Exhibit 31.1 to Discovery’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2008, as filed with the SEC on March
13, 2009.
|
29
|
Exhibit No.
|
Description
|
Method of Filing
|
||
|
31.2
|
Certification
of Chief Financial Officer and Principal Accounting Officer pursuant to
Rule 13a-14(a) of the Exchange Act.
|
Incorporated
by reference to Exhibit 31.2 to Discovery’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2008, as filed with the SEC on March
13, 2009.
|
||
|
31.3
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange
Act.
|
Filed
herewith.
|
||
|
31.4
|
Certification
of Chief Financial Officer and Principal Accounting Officer pursuant to
Rule 13a-14(a) of the Exchange Act.
|
Filed
herewith.
|
||
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
Incorporated
by reference to Exhibit 32.1 to Discovery’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2008, as filed with the SEC on March
13, 2009.
|
||
|
32.2
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
Filed
herewith.
|
30
Exhibit
31.3
CERTIFICATIONS
I,
Robert J. Capetola, certify that:
1.
I
have reviewed this Amendment No. 1 on Form 10-K/A for the fiscal year ended
December 31, 2008 of Discovery Laboratories, Inc.; and
2. Based on my knowledge, this report
does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect
to the period covered by this report.
|
Date: April
30, 2009
|
|
/s/ Robert J. Capetola | |
| Robert J. Capetola, Ph.D. | |||
| President and Chief Executive Officer | |||
Exhibit
31.4
CERTIFICATIONS
I,
John G. Cooper, certify that:
1.
I
have reviewed this Amendment No. 1 on Form 10-K/A for the fiscal year ended
December 31, 2008 of Discovery Laboratories, Inc.; and
2. Based on my knowledge, this report
does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect
to the period covered by this report.
|
Date: April
30, 2009
|
|
/s/ John G. Cooper | |
| John G. Cooper | |||
| Executive Vice President, Chief Financial Officer | |||
Exhibit
32.2
CERTIFICATIONS
Pursuant to 18 U.S.C. § 1350, each of
the undersigned officers of Discovery Laboratories, Inc. (the “Company”) hereby
certifies that our Amendment No. 1 on Form 10-K/A for the fiscal year ended
December 31, 2008 (the “Report”) fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934, and that the information
contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date:
April 30, 2009
/s/ Robert J. Capetola
Robert J. Capetola,
Ph.D.
President
and Chief Executive Officer
/s/ John G. Cooper
John G. Cooper
Executive
Vice President,
Chief Financial Officer
A signed
original of this written statement required by Section 906 of the Sarbanes-Oxley
Act of 2002 has been provided to the Company and will be retained by the Company
and furnished to the SEC or its staff upon request.
This
certification is being furnished pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 and shall not be deemed “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, or otherwise subject to the liability of that
section. This certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934.