UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K/A
(Amendment
No. 1)
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x
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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, 2009
or
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¨
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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:
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Title of each class
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Name of each exchange on which
registered
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Common
Stock, $0.001 par value
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The
Nasdaq Global Market
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Preferred
Stock Purchase Rights
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Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. YES ¨ 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 ¨ 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 x NO ¨
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files). YES ¨ NO ¨
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. x
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.
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Large
accelerated filer
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¨
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Accelerated filer x
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Non-accelerated
filer
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¨
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Smaller reporting
company
¨
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YES ¨ 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 30,
2009, the last business day of the registrant’s most recently completed second
fiscal quarter, was approximately $126 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 1, 2009 that it is the beneficial owner of 10%
or more of the outstanding shares of common stock of the
registrant.
As of
April 23, 2010, 154,012,467 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, 2009, which was filed
with the Securities and Exchange Commission (“SEC”) on March 10, 2010 (“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.
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.
(ii)
DISCOVERY
LABORATORIES, INC.
Table
of Contents to Annual Report on Form 10-K/A
For
the Fiscal Year Ended December 31, 2009
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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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7
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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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24
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ITEM
13.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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26
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ITEM
14.
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PRINCIPAL
ACCOUNTING FEES AND SERVICES
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27
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ITEM
15.
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EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES.
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28
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SIGNATURES
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28
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(iii)
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 (the “Board”). 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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67
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Director,
Chairman of the Board of Directors and Chief Executive
Officer
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Antonio
Esteve, Ph.D.
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52
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Director
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Max
E. Link, Ph.D.
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69
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Director
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Herbert
H. McDade, Jr.
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83
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Director
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Marvin
E. Rosenthale, Ph.D.
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76
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Director
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W. Thomas Amick has served as
a member of the Board since September 2004, as our Chairman since March 2007,
and as our Chief Executive Officer (on an interim basis) since August
2009. Since March 2005, Mr. Amick has served as President and Chief
Executive Officer of Aldagen, Inc. In 2004, Mr. Amick retired from a
distinguished 30 year career with Johnson & Johnson, having most recently
served, from 2003 to 2004, as Vice President, Business Development at Johnson
& Johnson Development Corporation, and, from 2001 to 2003, as President of
Ortho Biotech Europe. Previously at Johnson & Johnson, he served
as President of Janssen-Ortho, Inc., managing the entire Johnson & Johnson
pharmaceutical and biotechnology portfolio for Canada, Vice President of the
Oncology Franchise of Ortho Biotech, and held various other sales and executive
positions throughout his career. Mr. Amick is also 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.
Mr. Amick
brings to our Board broad management experience, having more than 30 years of
pharmaceutical and biotechnology experience as a senior executive with Johnson
& Johnson. While at Johnson and Johnson, Mr. Amick was
instrumental in starting that company’s biotechnology/oncology
business. His expertise and track record of leadership in developing
successful businesses adds significant depth to our management team and our
Board. In addition, Mr. Amick also serves as an advisor to several
private equity firms focused on the biopharmaceutical industry and provides the
Board important information about current funding practices of significant
investors in the biotechnology sector.
Antonio Esteve, Ph.D. has served as a member of
the Board 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). In 2009, Dr. Esteve was 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). Dr. 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 (Business School of the University of
Navarra is in Barcelona and Madrid, Spain).
We have
entered into a strategic alliance agreement with Laboratorios del Dr. Esteve,
S.A. for the development, marketing and sales of a broad portfolio of potential
surfactant
products in Andorra, Greece, Italy, Portugal, and Spain. With
his significant experience in drug development, marketing and sales practices in
Europe, and a full complement of development and marketing experts employed by
his company, Dr. Esteve is positioned to advise our Board on current trends and
developments in the drug development industry in Europe and specifically on
matters related to drug development and marketing of our products
overseas.
Max E. Link, Ph.D. has served
as a member of the Board 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. Dr. Link holds a Ph.D. in
Economics from the University of St. Gallen, Switzerland.
Dr.
Link’s significant management experience is a key consideration in assessing his
qualifications to serve as a member of our Board. In addition, his
doctorate in Economics, his experience in overseeing the preparation of
financial statements in his capacity as Chief Financial Officer at Sandoz, Inc.,
and his experience as a Chief Executive Officer in actively supervising
principal financial officers of public companies form the basis of the Board’s
decision to designate him as the Chairman of the Audit Committee and qualify him
to serve as the audit committee financial expert within the meaning of the rules
of the SEC.
Herbert H. McDade, Jr. has
served as a member of the Board since June 1996 and as our Chairman of the Board
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.
Mr.
McDade brings to our Board over 14 years of general management experience in the
pharmaceutical industry. He has served on six Boards of Directors of
publicly-held biotech companies and has served as Chairman of the Board for four
of these companies. In his career, he has been responsible for
pharmaceutical research worldwide and has considerable experience in the conduct
of pharmaceutical research in Europe, England, Japan and Australia.
Marvin E. Rosenthale, Ph.D.
has served as a member of the Board 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.
Dr.
Rosenthale brings to our Board over 49 years of management and executive
experience in the pharmaceutical industry. In addition, since 1998,
he has served as a member of the board of directors of nine pharmaceutical
companies which provides him a broad perspective of the customs, practices and
strategic priorities of pharmaceutical companies in today’s challenging
competitive and financial markets.
2
Executive
Officers
The
following table sets forth the names and positions of our executive officers,
with the exception of Mr. Amick, Chairman of the Board and Chief Executive
Officer, whose information appears above. The Board approves the election
of officers annually and such officers serve until the meeting of the Board
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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Kathryn
A. Cole
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44
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Senior
Vice President, Human Resources
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John
G. Cooper
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51
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Executive
Vice President, Chief Financial Officer and Treasurer
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Charles
F. Katzer
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60
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Senior
Vice President, Manufacturing Operations
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David
L. Lopez, Esq., CPA
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52
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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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39
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Senior
Vice President, Commercialization and Corporate
Development
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Gerald
J. Orehostky
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44
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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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53
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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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63
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Senior
Vice President, Deputy General
Counsel
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Kathryn A. Cole has been with
the Company since January 2006 and 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, primarily in the Life Sciences industry, and extensive experience in
public and private equity financings, investor relations, strategic alliances,
mergers and acquisitions, and management of financial operations. Mr. Cooper’s
previous positions include 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
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 joint venture
with Baxter Healthcare), Chief Financial Officer of Taratec Development
Corporation (a venture capital backed provider of information technology to life
science 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, Pharmaceutical and Medical
Device Development, Engineering and Research with MedImmune, U.S. Bioscience,
several divisions of Rhone Poulenc Rorer, Baxter Travenol, McGaw Laboratories
and Biological Specialties. Mr. Katzer holds a B.S. degree in Zoology from
the University of Wisconsin.
3
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
(“SEC”). 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.
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 University, 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.
4
Additional Information With
Respect to Certain Officers
Certain
of our executives have been with us for less than five
years. They include Ms. Cole, Messrs. Katzer and Orehostky and Ms.
Templeton. The following is additional information intended to
provide adequate disclosure of each such executive’s business experience and
professional competence.
We
recruited Ms. Cole based in part on her 20 plus years of experience in broad
based strategic human resources initiatives in both public and privately-held
organizations. In her prior positions, she successfully established
programs to implement compensation plans and total reward systems,
organizational development initiatives, succession planning, as well as training
and recruitment. Ms. Cole has experience in recruiting key executives in
both US and European-based organizations. Her diversified experiences
ranges from establishing a fully-featured Human Resources function for a small,
privately-held start-up biotechnology company to providing HR support and
compliance oversight for an organization of over 25,000 employees.
We
recruited Mr. Katzer based in part on his specific operational experience in the
manufacture of drug products requiring aseptic manufacturing conditions and, in
particular, in processes similar to those needed for the manufacture of our drug
products. He has successfully supervised and directed both large (i.e.
> 800 employees) and small (i.e. < 100 employees) operations in the past
and has expertise in the organization and management of specialized
personnel. Mr. Katzer’s previous direct responsibilities have included
operations both within the U.S. and Europe. He also brought to us
long-term experience in troubleshooting manufacturing issues such as those we
encountered during our transfer of activities to a new contract manufacturer in
2005-2006. We also wanted to bring in-house broad multi-functional
operational and manufacturing experience that we believed would be needed to
become a fully-integrated manufacturer of our products. We are pleased
that under his oversight and management, we were able to successfully
manufacture process validation lots in 2007 and successfully completed a
pre-approval inspection of our manufacturing facility by the FDA in anticipation
of the potential approval of our lead product in 2008. Finally, Mr.
Katzer’s broad based functional background also make him uniquely qualified to
lead the Company’s Pharmaceutical and Medical Device Development
programs.
We
recruited Mr. Orehostky based on his extensive background in the manufacture and
quality control aspects of aseptic biotechnology products, as well as hands-on
technical experience in the development and deployment of analytical methods,
including biological assays, which are an important component of our drug
product release and stability testing. Prior to joining our company, Mr.
Orehostky was responsible for overseeing quality operations supporting global
drug development and commercial pharmaceutical operations for small (<100
employees) and large, international (>1,000 employees) firms. He has
worked in both quality and regulatory affairs organizations and has led and
participated in efforts to resolve CMC (Chemistry, Manufacturing and Controls)
and regulatory compliance deficiencies leading up first-time marketing
authorizations and/or continuance of commercial operations. Furthermore,
Mr. Orehostky has successfully designed and deployed robust quality systems and
infrastructure required to assure ongoing regulatory compliance in both
start-up biotech and large pharmaceutical companies. We are pleased that
under his oversight and management of quality and analytical activities, we were
able to successfully complete the manufacture of process validation lots in 2007
and successfully completed a pre-approval inspection of our manufacturing
facility by the FDA in anticipation of the potential approval of our lead
product in 2008.
We
recruited Ms. Templeton based in part on her demonstrated experience with
complex business transactions (she represented us in our negotiations to acquire
our manufacturing operations in Totowa, New Jersey), and her leadership and
project management skills, as evidenced by her success in building two
fully-featured corporate legal departments (with staffs of 20-40), her
involvement in a number of risk management initiatives, and her participation in
the successful development of a number of new financial products and services in
the securities industry, including spearheading the development of the first
mutual fund market place in the United States. In her legal practice,
she has counseled both publicly- and privately-held companies and been a key
contributor to a wide range of business transactions and projects. Moreover, Ms.
Templeton has significant securities and commercial laws experience that is
directly relevant to our financing activities and public disclosures under the
securities laws.
Family
Relationships
There are
no family relationships among directors or executive officers of the
Company.
5
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, 2009.
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. To receive a copy of our Code of Ethics, without
charge, send a written request to Discovery Laboratories, Inc., Suite 100, 2600
Kelly Rd., Warrington, PA 18976, to the attention of the Corporate
Secretary. 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 the Form 10-K.
Procedures
for Recommending Nominees to our Board
There
have been no material changes to the procedures by which stockholders may
recommend nominees to our Board since we described those procedures in our
proxy statement for 2009 Annual Meeting of Stockholders, which we filed with the
SEC on October 19, 2009.
Audit
Committee
The Audit
Committee of the Board is a 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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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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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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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.
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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 Board
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
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 5605(a)(2) of the Nasdaq Listing Rules and the
financial sophistication requirements of the SEC rules and Nasdaq Listing Rule
5605(c)(2)(A). The Board has determined that Max E. Link, Ph.D. is an
“audit committee financial expert” as defined under SEC rules. See, Dr. Link’s biographical
information in “Directors of the Company”, above.
6
ITEM
11. EXECUTIVE
COMPENSATION
Compensation
Committee of the Board of Directors
The
Compensation Committee of the Board of Directors is a Standing Committee and
currently consists of Max E. Link, Ph.D. and Marvin E. Rosenthale,
Ph.D. The primary functions of the Compensation Committee
include:
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reviewing
and approving corporate goals and objectives related to compensation of
executive officers;
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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;
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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
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reviewing
and discussing with management disclosures in the Company's annual report
and proxy statement related to executive compensation
matters.
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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.
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, 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:
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attract,
engage and retain the workforce to ensure our long-term
success;
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align
our employees’ interests with our short- and long-term strategic goals and
objectives;
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promote
the interests of our stockholders with a goal of increasing stockholder
value;
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acknowledge
and respond to changes in compensation for similar executive positions at
comparable companies in our highly competitive marketplace;
and
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link
compensation to our performance and also acknowledge the performance of
individuals who contribute to the advancement of our corporate
objectives.
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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 500 biotech and
pharmaceutical companies, and may be 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
As of
December 31, 2009, we had employment agreements with our executive officers that
expire in May 2010, 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 without cause 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.
These
agreements provide for automatic one-year renewal at the end of each term,
unless otherwise terminated by either party. We generally believe
that employment 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.
In
February 2010, we provided notice of non-renewal with respect to these
agreements except for those that we maintain with the following officers: Chief
Financial Officer, General Counsel, and the senior officers in charge of
Manufacturing, Corporate Development, and Human Resources. The
employment of the officers whose agreements will not be renewed was not
terminated and they are expected to continue their employment relationship as
at-will employees. In lieu of their employment agreements, we have
committed to provide these officers a new form of retention letter that will
provide for certain severance benefits and will take effect upon expiration of
their executive employment agreements in May 2010. We expect that the
new arrangements will allow greater flexibility for the Company. Although we
expect these new arrangements will allow us to remain competitive in the current
employment marketplace, the loss of services from these executives could
significantly adversely affect our ability to develop and market our products
and obtain necessary regulatory approvals.
Management Compensation
Committee
Our 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. The
Compensation Committee considers the Management Compensation Committee
recommendations and separately evaluates and determines the total compensation
of all executives annually.
8
The
Compensation Committee generally holds meetings in conjunction with the regular
meetings of the Board, 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 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 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 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.
Our
corporate goals at the outset of 2009 included:
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Continue
to focus our research and development activities on the management of RDS,
including for our lead products, Surfaxin®,
Surfaxin LS™, and Aerosurf®,
and to address other serious neonatal and pediatric conditions, such as
Acute Respiratory Failure (ARF), with respect to which we are conducting a
Phase 2 clinical trial for children up to two years of age suffering with
ARF;
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In
anticipation of the potential approval of Surfaxin for the prevention of
Respiratory Distress Syndrome (RDS), continue to invest in a
commercialization capability to execute the launch of
Surfaxin;
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Continue
to invest opportunistically in a number of exploratory development
programs, including for Cystic Fibrosis, with respect to which there is an
ongoing investigator-initiated Phase 2a clinical trial to evaluate the
safety, tolerability and short-term effectiveness of our aerosolized KL4
surfactant in CF patients;
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Continue
to invest in maintaining and perfecting our potential competitive position
by protecting our exclusive rights in and to our KL4
surfactant technology, pipeline products and capillary aerosolization
technology through patents, patent extensions, trademarks, trade secrets
and regulatory exclusivities;
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Continue
to seek infusions of capital from a variety of potential
sources, including from strategic partnerships in the international and
domestic markets for the development and potential commercialization of
our product candidates that are focused on RDS, including Surfaxin and
Aerosurf, and from business alliances, commercial and development
partnerships, equity financings and other similar opportunities;
and
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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” in the Form
10-K.
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A
discussion of the key individual components of our compensation packages are set
forth below.
9
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 and
become effective the first day of the following calendar year.
Annual Incentive
Bonus
Incentive
compensation in each year may include 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 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.
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.
10
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.
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 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.
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.
Incentive Equity Granting
Practices
The
Compensation Committee reviews and may approve the grant of long-term incentive
equity awards to executives at various times throughout the
year. Generally, the initial consideration of grants related to
annual performance reviews of executive officers is taken up at the year-end
Compensation Committee meeting in each year or, if schedules require, early in
the following year. The Compensation Committee 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. All
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.
11
We do not
enforce specific equity or other security ownership requirements in connection
with our compensation practices. Subject to the discretion of the
Compensation Committee, the provisions of the 2007 Plan generally prohibit
assignment, pledge, alienation, attachment, sale or transfer of awards otherwise
than by will or by laws of descent and distribution. A 2007 Plan
participant may designate one or more beneficiaries pursuant to procedures
established by the Compensation Committee. We do not have
restrictions on executives engaging in certain hedging transactions, such as
forward contracts and collars, designed to protect investment value over
time. We prohibit short-selling activities with respect to our common
stock under our insider trading policies.
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 valued at
the lower of the reported Nasdaq closing price at the end of the quarter or the
average Nasdaq closing price over the entire quarter.
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.
The
retention letters that we anticipate entering into with certain of our executive
officers will take effect upon expiration of the current executive employment
agreement on May 3, 2010. They will generally provide severance benefits
in the event of termination of employment for any reason other than for Cause
(as defined in the retention letter) or by the executive for Good Reason (as
defined in the retention letter, including in the event any for Cause or Good
Reason termination within 24 months after a change of control) in an amount that
is determined by reference to the executive’s title. In addition, under
the retention letters, the executive will be 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 up to either six months or one
year (depending upon title) following the date of termination, which
continuation will be implemented in the same manner as provided under the
expiring executive employment agreement in the event of termination Without
Cause (as defined therein) or by the executive for Good Reason (as defined
therein), except that the continuation of benefits under the retention letters
are intended to be provided first under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) to the extent that COBRA benefits are
available. In any event, the benefits that we provide will also be
reduced to the extent that a subsequent employer provides the executive with
substantially similar coverage (on a benefit-by-benefit basis).
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.
12
2009
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 2009, the consequential erosion of our cash position and the
current conditions in the financial markets that affect our ability to raise
capital on acceptable terms, the Compensation Committee did not approve any
increase in base salary over the base salaries in effect in 2008 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. The Compensation Committee did indicate that it
would re-evaluate its decision not to pay bonuses in light of our financial
condition as it may exist at mid-year 2010.
During
2009, the Compensation Committee did not authorize any performance-based
stock option awards to Named Executive Officers. This decision was
primarily due to the fact that, of the 8.5 million shares originally approved by
our stockholders for issuance under the 2007 Plan, as of December 31, 2009, 1.8
million remained available for future awards. Prior to the 2009
Annual Meeting of Stockholders, the Compensation Committee had recommended, and
the Board had approved, a proposal that was presented to the stockholders to
increase the number of shares available under the Plan by 3.4 million shares.
However, this proposal did not achieve the majority vote required for
approval. The Compensation Committee and management remain very
concerned that we will be unable to retain and attract key management talent
needed to manage our operations and achieve the stretch corporate goals
established by the Board. In order to allow the Compensation
Committee and the Board to exercise discretion in granting equity-based
incentives to management, we expect that the Board will authorize presenting to
stockholders at a future meeting of stockholders a new proposal to increase the
number of shares reserved for issuance under the 2007 Plan.
On
September 3, 2009, the Board approved an amendment (the “RSA Amendment”) to the
vesting provisions of restricted shares of common stock, par value $0.001 per
share, (the “RSAs”) that were awarded as of October 31, 2007 to certain of our
key employees, including Messrs. Cooper and Lopez, each of whom had received
9,000 shares, Dr. Segal, who had received 4,000 shares, and Dr. Miller, who had
received 3,000 shares. The RSAs were awarded as replacement grants to
shares of phantom stock previously granted to certain key employees on December
16, 2005 and January 3, 2006. The RSA’s were originally scheduled to
vest fully on the date that our first drug product becomes widely commercially
available. Under the Amendment, the RSAs vested on the fourth
anniversary of the original date of the phantom grant. Accordingly,
on January 3, 2010, shares were issued to each of the Named Executive Officers
representing the Named Executive Officer’s RSAs, net of that number of shares
(determined by reference to the closing price of our common stock on the vesting
date) required to satisfy the tax withholding requirements.
Resignation
of our President and Chief Executive Officer
Effective
August 13, 2009, Robert J. Capetola, Ph.D., resigned as our President, Chief
Executive Officer and as a member of the Board. Dr. Capetola’s
resignation did not result from any disagreement with us concerning our
operations, policies, or practices. We entered into a separation
agreement and general release (the “Separation Agreement”) with Dr. Capetola
providing for:
|
|
·
|
an
upfront severance payment of $250,000
cash;
|
|
|
·
|
periodic
additional severance cash payments, in accordance with our standard
payroll practices and less required withholdings, in an amount equal to
his base salary (calculated at a rate of $490,000 per annum), through the
earlier of (x) May 3, 2010 or (y) the date, if ever, that a Corporate
Transaction (described below) would occur, resulting in an aggregate
severance, before adjustments for Corporate Transactions, of
$604,622;
|
13
|
|
·
|
the
accelerated vesting of all outstanding restricted shares and options,
which remain exercisable to the end of their stated
terms;
|
|
|
·
|
continuation
of medical and insurance coverage through May 3, 2010; or in the event of
a Corporate Transaction prior to May 3, 2010, for a period of 24 months
from the date of execution of the Separation Agreement; or in the event of
a Corporate Transaction that constitutes a Change of Control (as defined
in the Separation Agreement) prior to May 3, 2010, for a period of 27
months;
|
|
|
·
|
in
the event of a Corporate Transaction prior to May 3, 2010, Dr. Capetola
would become entitled to receive a payment of up to $1,580,000 or, if any
such Corporate Transaction also constitutes a Change of Control, a payment
of up to $1,777,500; provided, however, that
in each case, any such payment is reduced by the sum of the aggregate cash
severance amounts already paid under the Separation
Agreement.
|
A
“Corporate Transaction” is defined in the Separation Agreement as (1) one or
more corporate partnering or strategic alliance transactions, Business
Combinations or public or private financings that (A) are completed between
August 13, 2009 and May 3, 2010 (the “Severance Period”) and (B) result in cash
proceeds (net of transaction costs) to the Company of at least $20 million
received during the Severance Period or within 90 calendar days after the
Severance Period, or (2) an acquisition of the Company, by business combination
or other similar transaction, that occurs during the Severance Period and the
consideration paid to stockholders of the Company, in cash or securities, is at
least $20 million. For this purpose, net proceeds is be calculated
without taking into account any amounts received by the Company as reimbursement
for costs of development and research activities to be performed in connection
with any such transaction. This summary of the Separation Agreement
is qualified in its entirety, and the reader is encouraged to read by the full
text of the Separation Agreement, which is attached to our Current Report on
Form 8-K that we filed with the SEC on August 19, 2009.
On
February 23, 2010, we completed a public offering of securities, which when
aggregated with financings under our Committed Equity Financing Facilities
(CEFFs) that were completed after August 13, 2009, resulted in net proceeds to
us in excess of $20 million. Accordingly, in accordance with the
Separation Agreement, on March 3, 2010, we paid to Dr. Capetola an additional
$1.06 million, representing $1.58 million reduced by the sum of the cash
severance amounts already paid under the Separation Agreement.
Appointment
of an Interim Chief Executive Officer
Following
the resignation of Dr. Capetola, on August 13, 2009, the Board approved the
election of Mr. Amick to serve as our Chief Executive Officer on an interim
basis. He served as a member of the Compensation Committee and the
Nominating Committee, but resigned these posts upon his election as Chief
Executive Officer. Mr. Amick has been a member of our Board since
September 2004 and its Chairman since March 2007. He is an industry
veteran with more than 30 years of pharmaceutical and biotechnology experience
as a senior executive with Johnson & Johnson. He also serves as
an advisor to several private equity firms focused on the biopharmaceutical
industry, as President and Chief Executive Officer of Aldagen, Inc. a private
biotechnology company, and as either a member or chairman of the boards of
directors of several other private biotechnology companies. The Board
believes that he has the experience and management style that we need at this
critical time.
On
September 3, 2009, the Board approved the execution and delivery of a
non-employee executive agreement (the “CEO Agreement”) with Mr. Amick.
Under the CEO Agreement, Mr. Amick agreed to devote, on a part-time basis, such
of his business time, attention and efforts as reasonably necessary to the
proper performance of his duties, which we anticipated would involve on average
two days per week. Under the CEO Agreement, we agreed to pay Mr.
Amick compensation at a per diem rate of $3,000, payable in arrears at the end
of each calendar month. In addition, on September 3, 2009, in
accordance with the CEO Agreement, the Compensation Committee of the Board
authorized a grant of options to Mr. Amick to purchase 60,000 shares of our
common stock of under the 2007 Plan at an exercise price of $0.49 per
share, the closing market price of our common stock on the date of
grant. The option grant, in part, replaces an automatic grant of
options to purchase 30,000 shares of our common stock that Mr. Amick would have
received under the Plan as a non-executive Chairman of the Board. The
options vest in full on the first anniversary date of the grant. This
summary of the CEO Agreement is qualified in its entirety by the full text of
the CEO Agreement, which is attached to our Current Report on Form 8-K that we
filed with the SEC on September 4, 2009. See also, “Grants of Plan-Based
Awards” Table, below.
14
SUMMARY
COMPENSATION TABLES
Named
Executive Officers
The
following table summarizes the compensation of our Named Executive Officers,
including our principal executive officer, principal financial officer, and the
three other most highly-compensated executive officers other than the principal
executive officer and the principal financial officer who were serving as
executive officers on December 31, 2009 ranked by their total compensation for
the fiscal year ended December 31, 2009. In addition, the table
summarizes the compensation of our former President and Chief Executive Officer,
who would have been a Named Executive Officer but for the fact that he was not
serving as an executive officer at December 31, 2009.
To
improve readability, the following columns have been removed from the
table as there is no reportable information with respect to these items:
“Stock Awards”, “Non-Equity Incentive Plan Compensation”, and “Nonqualified
Deferred Compensation Earnings”.
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
(1)
|
Option
Award
($)
(2)
|
All Other
($)
|
Total
|
||||||||||||||||
|
W.
Thomas Amick
|
2009
|
$ | 131,090 |
(3)
|
$ | – | $ | 19,926 |
(3)
|
$ | 50,000 |
(4)
|
$ | 201,016 | ||||||||
|
Chairman
of the Board and
|
– | – | 39,513 |
(4)
|
50,000 |
(4)
|
89,513 | |||||||||||||||
|
Chief
Executive Officer
|
– | – | 99,524 |
(4)
|
30,000 |
(4)
|
129,524 | |||||||||||||||
|
John
G. Cooper
|
2009
|
307,000 | – | – | 8,250 | 315,250 | ||||||||||||||||
|
Executive
Vice President,
|
2008
|
307,000 | – | 302,053 | 7,750 | 616,803 | ||||||||||||||||
|
Chief
Financial Officer and Treasurer
|
2007
|
292,000 | 150,000 | 652,106 | 7,750 | 1,101,856 | ||||||||||||||||
|
David
L. Lopez, Esq., CPA
|
2009
|
307,000 | – | – | 7,500 | 314,500 | ||||||||||||||||
|
Executive
Vice President,
|
2008
|
307,000 | – | 183,783 | 7,500 | 498,283 | ||||||||||||||||
|
General
Counsel, Chief Compliance Officer and Secretary
|
2007
|
290,000 | 152,000 | 652,106 | 7,500 | 1,101,606 | ||||||||||||||||
|
Robert
Segal, M.D., F.A.C.P.
|
2009
|
290,000 | – | – | 8,250 | 298,250 | ||||||||||||||||
|
Senior
Vice President, Medical
|
2008
|
290,000 | – | 75,513 | 7,750 | 373,263 | ||||||||||||||||
|
and
Scientific Affairs and Chief Medical Officer
|
2007
|
273,000 | 70,000 | 445,222 | 7,750 | 795,972 | ||||||||||||||||
|
Thomas
F. Miller, Ph.D., MBA
|
2009
|
250,000 | – | – | 8,250 | 258,250 | ||||||||||||||||
|
Senior
Vice President,
|
2008
|
250,000 | – | 113,270 | 7,750 | 371,020 | ||||||||||||||||
|
Commercialization
and
Corporate
Development
|
2007
|
235,000 | 68,000 | 385,322 | 7,750 | 696,072 | ||||||||||||||||
|
Former
Officer
|
||||||||||||||||||||||
|
Robert
J. Capetola,
Ph.D.
|
2009
|
306,250 | – | 257,117 | 662,697 |
(5)
|
1,226,064 | |||||||||||||||
|
Former
President and
|
2008
|
490,000 | – | 566,350 | 34,450 | 1,090,800 | ||||||||||||||||
|
Chief
Executive Officer
|
2007
|
470,000 | 300,000 | 2,339,560 | 29,556 | 3,139,116 | ||||||||||||||||
|
|
(1)
|
Bonuses
for 2007 include 2007-related bonus paid in cash in 2008. No
bonuses were paid with respect to 2008. None have been paid to
date with respect to 2009, although the Compensation Committee may
re-evaluate its decision mid-year 2010 should our financial circumstances
change. See, “Compensation
Discussion and Analysis – 2009 Compensation Reviews for Named Executive
Officers.”
|
|
|
(2)
|
Represents
the grant date fair value of the stock options computed in accordance with
Financial Accounting Standards Board Accounting Standards Codification
Topic 718 (ASC Topic 718), “Stock Compensation,”
using the modified-prospective-transition method. The
assumptions that we utilized are described in Note 11, “Stock Options and Stock-based
Employee Compensation,” to our consolidated
financial statements for the year ended December 31, 2009, in the Form
10-K. The amounts reported in the table have not been paid to,
nor realized by, the Named Executive Officer. There can be no
assurance that these amounts will ever be
realized.
|
15
|
(3)
|
Represents
amounts paid under the CEO Agreement pursuant to which we agreed to pay
Mr. Amick at a rate of $3,000 per day. In 2009, we paid
Mr. Amick $131,090, which is reported in the column titled
“Salary.” In addition, in accordance with the CEO Agreement,
the Compensation Committee approved a grant to Mr. Amick of an option to
purchase 60,000 shares, the fair value of which is reported in the column
titled “Option Award.” The option has a term of 10 years and
will vest as to all shares on September 3, 2010. The exercise
price, $0.49, is the closing price of our common stock on The Nasdaq
Global Market on the date of
grant.
|
|
(4)
|
Represents
director compensation paid to Mr. Amick in each of 2009, 2008 and 2007,
respectively, as follows: Fees Earned or Paid in Cash (reported
in the column titled “All Other”) - $50,000, $50,000, and $30,000; and
automatic non-employee option awards under our 2007 Plan, reported in the
column titled “Option Award” - $0, $39,512, and
$99,524. As a result of his assuming the role of Chief
Executive Officer, Mr. Amick was not eligible in 2009 for an automatic
non-employee director option award. See also, “Director
Compensation.”
|
|
(5)
|
This
amounts represents severance and benefits under Dr. Capetola’s Separation
Agreement – $604,622 and $31,000, respectively (see, “Compensation
Discussion and Analysis – Resignation of our President and Chief Executive
Officer”) ; personal car allowance – $6,250; 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 –
$4,125.
|
Grants
of Plan-Based Awards
No stock
option grants were made to the Named Executive Officers for the fiscal year
ended December 31, 2009, with the exception of the grant to Mr. Amick reported
in the table below. No stock appreciation rights were granted to
Named Executive Officers during the period. There can be no assurance
that the Grant Date Fair Value of Stock and Option Awards reported below will
ever be realized by a grantee.
To
improve readability, the following columns have been removed from the
table as there is no reportable information with respect to these items:
“Estimated Future Payouts Under Non-Equity Incentive Plan Awards,” “Estimated
Future Payouts Under Equity Incentive Plan Awards,” and “All Other Stock Awards;
Number of Shares of Stock”
|
Named Executive Officer
|
Grant Date
|
All Other Option
Awards; Number of
Securities Underlying
Options
(#)
|
Exercise Price of
Option Awards
($/Sh)
|
Grant Date Fair
Value of Stock and
Option Awards (1)
|
||||||||||
|
W.
Thomas Amick
|
09/03/09
|
60,000 | $ | 0.49 | $ | 19,926 | ||||||||
|
|
(1)
|
Grant Date Fair Value represents
the aggregate ASC
Topic 718 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, 2009, in the Form
10-K. There can be no assurance that the stock options will
ever be exercised or that the ASC Topic 718 amounts set forth above will
ever be realized.
|
The
option granted to Mr. Amick under the CEO Agreement has a term of 10 years and
will vest as to all shares on September 3, 2010. The exercise price,
$0.49, is the closing price of our common stock on The Nasdaq Global Market on
the date of grant.
16
Outstanding
Equity Awards at Fiscal Year-End 2009
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
Named Executive Officers on December 31, 2009. The market values
reported below were computed on the basis of the closing market price of our
stock on December 31, 2009 of $0.63.
To
improve readability, the following columns have been removed from the
table as there is no reportable information with respect to these items:
“Option Awards – Equity Incentive Plan Awards: No. of Securities Underlying
Unexercised Unearned Options”, “Stock Awards – Equity Incentive Plan Awards:
Number of Unearned Shares, Units or Other Rights That Have Not Vested”, and “
–Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not
Vested”.
|
Option
Awards
|
Stock
Awards
|
||||||||||||||||||||
|
Named
Executive
Officer
|
No.
of
Securities
Underlying
Unexercised
Options
–
Exercisable |
No.
of
Securities
Underlying
Unexercised
Options
–
Unexercisable
|
Option
Exercise
Price
|
Option
Expiration
Date
|
No.
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|||||||||||||||
|
W.
Thomas Amick
|
25,000 | (1) | $ | 5.06 |
3/23/2014
|
$ | – | ||||||||||||||
| 30,000 | (1) | 1.72 |
9/14/2014
|
||||||||||||||||||
| 25,000 | (1) | 1.89 |
5/13/2015
|
||||||||||||||||||
| 30,000 | (1) | 2.75 |
6/8/2016
|
||||||||||||||||||
| 40,000 | (1) | 2.75 |
6/21/2017
|
||||||||||||||||||
| 30,000 | (1) | 8.08 |
6/11/2018
|
||||||||||||||||||
| 60,000 |
(1)
|
9.17 |
9/3/2019
|
||||||||||||||||||
|
John
G. Cooper
|
80,000 | (2) | 2.97 |
12/10/11
|
|||||||||||||||||
| 105,000 | (2) | 1.72 |
6/27/12
|
||||||||||||||||||
| 30,000 | (2) | 1.89 |
11/5/12
|
||||||||||||||||||
| 80,000 | (4) | 2.75 |
12/13/12
|
||||||||||||||||||
| 80,000 | (3) | 8.08 |
9/12/13
|
||||||||||||||||||
| 200,000 | (5) | 9.17 |
12/15/13
|
||||||||||||||||||
| 75,000 | (6) | 6.47 |
8/12/14
|
||||||||||||||||||
| 75,000 | (5) | 9.02 |
12/17/14
|
||||||||||||||||||
| 50,000 | (2) | 7.01 |
1/3/16
|
||||||||||||||||||
| 250,000 | (2) | 2.25 |
5/17/16
|
||||||||||||||||||
| 200,000 | (2) | 2.46 |
12/15/16
|
||||||||||||||||||
| 120,000 | (2) | 40,000 | (2) | 3.27 |
6/21/17
|
||||||||||||||||
| 112,500 | (2) | 37,500 | (2) | 2.61 |
12/11/17
|
||||||||||||||||
| 88,889 | (7) | 177,778 | (7) | 1.93 |
12/12/18
|
||||||||||||||||
| 44,445 | (7) | 88,888 | (7) | 1.21 |
12/12/18
|
||||||||||||||||
| 9,000 | (8) | 5,670 | |||||||||||||||||||
|
David
L. Lopez
|
40,000 | (6) | 4.13 |
5/15/10
|
|||||||||||||||||
| 26,000 | (2) | 5.06 |
9/16/10
|
||||||||||||||||||
| 15,000 | (2) | 4.09 |
5/10/11
|
||||||||||||||||||
| 45,000 | (2) | 2.10 |
9/21/11
|
||||||||||||||||||
| 25,000 | (2) | 1.72 |
6/27/12
|
||||||||||||||||||
| 30,000 | (2) | 1.89 |
11/5/12
|
||||||||||||||||||
| 70,000 | (4) | 2.75 |
12/13/12
|
||||||||||||||||||
| 100,000 | (3) | 8.08 |
9/12/13
|
||||||||||||||||||
| 150,000 | (5) | 9.17 |
12/15/13
|
||||||||||||||||||
| 50,000 | (6) | 6.47 |
8/12/14
|
||||||||||||||||||
| 70,000 | (5) | 9.02 |
12/17/14
|
||||||||||||||||||
| 50,000 | (2) | 7.01 |
1/3/16
|
||||||||||||||||||
| 250,000 | (2) | 2.25 |
5/17/16
|
||||||||||||||||||
| 220,000 | (2) | 2.46 |
12/15/16
|
||||||||||||||||||
| 120,000 | (2) | 40,000 | (2) | 3.27 |
6/21/17
|
||||||||||||||||
| 112,500 | (2) | 37,500 | (2) | 2.61 |
12/11/17
|
||||||||||||||||
| 55,55 | (7) | 111,111 | (7) | 1.93 |
12/12/18
|
||||||||||||||||
| 27,77 | (7) | 55,555 | (7) | 1.21 |
12/12/18
|
||||||||||||||||
| 9,000 | (8) | 5,670 | |||||||||||||||||||
17
|
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 | (7) | 4.34 |
8/1/10
|
|||||||||||||||||
| 16,000 | (2) | 5.06 |
9/16/10
|
||||||||||||||||||
| 15,000 | (2) | 4.09 |
5/10/11
|
||||||||||||||||||
| 40,000 | (2) | 2.10 |
9/21/11
|
||||||||||||||||||
| 20,000 | (2) | 1.89 |
11/5/12
|
||||||||||||||||||
| 80,000 | (4) | 2.75 |
12/13/12
|
||||||||||||||||||
| 35,000 | (3) | 8.08 |
9/12/13
|
||||||||||||||||||
| 125,000 | (5) | 9.17 |
12/15/13
|
||||||||||||||||||
| 20,000 | (6) | 6.47 |
8/12/14
|
||||||||||||||||||
| 50,000 | (5) | 9.02 |
12/17/14
|
||||||||||||||||||
| 25,000 | (2) | 7.01 |
1/3/16
|
||||||||||||||||||
| 75,000 | (2) | 2.25 |
5/17/16
|
||||||||||||||||||
| 100,000 | (2) | 2.46 |
12/15/16
|
||||||||||||||||||
| 37,500 | (2) | 12,500 | (2) | 2.66 |
1/22/17
|
||||||||||||||||
| 45,000 | (2) | 15,000 | (2) | 3.27 |
6/21/17
|
||||||||||||||||
| 86,250 | (2) | 28,750 | (2) | 2.61 |
12/11/17
|
||||||||||||||||
| 22,223 | (7) | 44,444 | (7) | 1.93 |
12/12/18
|
||||||||||||||||
| 11,111 | (7) | 222,22 | (7) | 1.21 |
12/12/18
|
||||||||||||||||
| 4,000 | (8) | 2,520 | |||||||||||||||||||
|
Thomas
F. Miller
|
30,000 | (2) | 6.69 |
6/10/2015
|
|||||||||||||||||
| 35,000 | (2) | 7.01 |
1/3/2016
|
||||||||||||||||||
| 35,000 | (7) | 7.90 |
8/31/2014
|
||||||||||||||||||
| 25,000 | (5) | 9.02 |
12/14/2014
|
||||||||||||||||||
| 100,000 | (2) | 2.46 |
12/15/2016
|
||||||||||||||||||
| 70,000 | (2) | 1.40 |
6/12/2016
|
||||||||||||||||||
| 15,000 | (2) | 1.99 |
7/6/2016
|
||||||||||||||||||
| 60,000 | (2) | 20,000 | (2) | 3.27 |
6/21/2017
|
||||||||||||||||
| 82,500 | (2) | 27,500 | (2) | 2.61 |
12/11/2017
|
||||||||||||||||
| 33,334 | (7) | 66,666 | (7) | 1.93 |
12/12/2018
|
||||||||||||||||
| 16,667 | (7) | 33,333 | (7) | 1.21 |
12/12/2018
|
||||||||||||||||
|
Former Officer
|
|||||||||||||||||||||
|
Robert
J. Capetola
|
125,000 | (2) | $ | 5.06 |
9/16/10
|
||||||||||||||||
| 31,250 | (2) | 1.72 |
6/27/12
|
||||||||||||||||||
| 20,000 | (2) | 1.89 |
11/5/12
|
||||||||||||||||||
| 85,000 | (4) | 2.75 |
12/13/12
|
||||||||||||||||||
| 165,000 | (4) | 2.75 |
1/3/13
|
||||||||||||||||||
| 200,000 | (3) | 8.08 |
9/12/13
|
||||||||||||||||||
| 450,000 | (5) | 9.17 |
12/15/13
|
||||||||||||||||||
| 88,000 | (6) | 6.47 |
8/12/14
|
||||||||||||||||||
| 500,000 | (5) | 9.02 |
12/17/14
|
||||||||||||||||||
| 190,000 | (2) | 7.01 |
1/3/16
|
||||||||||||||||||
| 300,000 | (2) | 2.25 |
5/17/16
|
||||||||||||||||||
| 300,000 | (9) | 2.46 |
12/15/16
|
||||||||||||||||||
| 600,000 | (9) | 3.27 |
6/21/17
|
||||||||||||||||||
| 500,000 | (9) | 2.61 |
12/11/17
|
||||||||||||||||||
| 500,000 | (9) | 1.93 |
12/12/18
|
||||||||||||||||||
| 250,000 | (9) | 1.21 |
12/12/18
|
||||||||||||||||||
18
|
|
(1)
|
These
options vested and became exercisable on the first anniversary of the date
of grant, and expire as listed above, which is the tenth anniversary of
the grant.
|
|
|
(2)
|
These
options vested and became exercisable (or will 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.
|
|
|
(3)
|
These
options vested and became 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.
|
|
|
(4)
|
These
options vested and became exercisable on December 13, 2006. The
options expire, as listed above, on the tenth anniversary of the
grant.
|
|
|
(5)
|
As
granted, these options vested and became 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, subject to a written “lock-up”
agreement which has since expired. The options expire, as listed
above, on the tenth anniversary of the
grant.
|
|
|
(6)
|
These
options vested and became 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.
|
|
|
(7)
|
These
options vest and become exercisable in three equal installments on the
first, second and third anniversary of the date of grant, and expire as
listed above, which is the tenth anniversary of the
grant.
|
|
|
(8)
|
These
RSAs were granted to replace certain shares of phantom stock previously
granted to each grantee and originally were scheduled to vest upon
commercialization of the Company’s first product. On September
3, 2009, the Compensation Committee amended the vesting provisions to
provide that these RSAs would vest on the fourth anniversary of the date
of the phantom stock grant. The RSAs issued to the above Named
Executive Officers vested on January 3,
2010.
|
|
|
(9)
|
These
options vested on August 13, 2009 pursuant to an acceleration provision in
Dr. Capetola’s Separation Agreement. The options expire, as
listed above, on the tenth anniversary of the
grant.
|
Option
Exercises and Vested Stock Awards
During
2009, none of the Named Executive Officers exercised any stock options and none
of the 2007 Restricted Stock awarded to a Named Executive Officer
vested.
Non-qualified
Defined Contribution and Other Non-qualified Deferred Compensation
Plans
During
2009, none of our Named Executive Officers participated in any non-qualified
defined contribution or other deferred compensation plans.
19
Pension
Benefits
During
2009, none of our Named Executive Officers participated in any plan that
provides for specified retirement benefits, or payments and benefits that will
be provided primarily following retirement, other than defined contribution
plans such as our 401(k) savings plan.
Potential
Payments upon Termination or Change in Control
Our
employment agreements for Named Executive Officers 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
in certain instances upon a “change in control.” In addition, these
agreements provide for non-competition and non-solicitation agreements of
varying duration as follows: Messrs. Cooper, Lopez and Katzer and Dr. Segal –
12 months from the date of termination, and Dr. Capetola – 15 months from
the date of termination. Dr. Capetola’s employment was terminated
effective August 13, 2009 and his non-competition agreement expires on November
13, 2010.
The
following table describes and quantifies estimated payments and benefits that
would become payable under the Named Executive Officers’ employment agreements
as in effect on December 31, 2009 at, following, or in connection with any
termination, including without limitation resignation, severance, retirement or
a constructive termination, or in the event of a change in control assuming that
the executive’s employment was terminated, or a change of control occurred on
December 31, 2009. 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, 2009, which was $0.63.
|
Severance
|
Bonus
|
Equity
Acceleration(1)
|
Health
Benefits
|
Out-
Placement
Counseling
(2)
|
Excise
Tax
&
Gross-
up(3)
|
TOTAL
|
||||||||||||||||||||||
|
W.
Thomas Amick(4)
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
John
G. Cooper
|
||||||||||||||||||||||||||||
|
Change in Control
|
– |
(5)
|
– | – | – | – | – | |||||||||||||||||||||
|
Termination by Company
|
||||||||||||||||||||||||||||
|
– Change in
Control (6)
|
1,142,500 | (7) | 150,000 | (8) | – | 29,835 | (9) | 40,000 | 117,243 | 1,479,578 | ||||||||||||||||||
|
– for
Cause
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– without
Cause
|
685,500 | (10) | 150,000 | (8) | – | 14,918 | (11) | 40,000 | 890,418 | |||||||||||||||||||
|
Termination by Executive
|
||||||||||||||||||||||||||||
|
– without Good
Reason
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– for Good
Reason
|
685,500 | (10) | 150,000 | (8) | – | 14,918 | (11) | 40,000 | 890,418 | |||||||||||||||||||
|
Death or Disability
|
– | – | – | – | – | – | ||||||||||||||||||||||
|
David
L. Lopez, Esq., CPA
|
||||||||||||||||||||||||||||
|
Change in Control
|
– |
(5)
|
– | – | – | – | – | |||||||||||||||||||||
|
Termination by Company
|
||||||||||||||||||||||||||||
|
– Change in
Control (6)
|
1,147,500 | (7) | 152,000 | (8) | – | 42,690 | (9) | 40,000 | 132,317 | 1,514,507 | ||||||||||||||||||
|
– for
Cause
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– without
Cause
|
688,500 | (10) | 152,000 | (8) | – | 21,345 | (11) | 40,000 | 901,845 | |||||||||||||||||||
|
Termination by Executive
|
||||||||||||||||||||||||||||
|
– without Good
Reason
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– for Good
Reason
|
688,500 | (10) | 152,000 | (8) | – | 21,345 | (11) | 40,000 | 901,845 | |||||||||||||||||||
|
Death or Disability
|
– | – | – | – | – | |||||||||||||||||||||||
20
|
Severance
|
Bonus
|
Equity
Acceleration(1)
|
Health
Benefits
|
Out-
Placement
Counseling
(2)
|
Excise
Tax
&
Gross-
up(3)
|
TOTAL
|
||||||||||||||||||||||
|
Robert Segal, M.D.,
F.A.C.P.(14)
|
||||||||||||||||||||||||||||
|
Change in Control
|
– |
(5)
|
– | – | – | – | ||||||||||||||||||||||
|
Termination by Company
|
||||||||||||||||||||||||||||
|
– Change in
Control (6)
|
720,000 | (12) | 70,000 | (8) | – | 54,506 | (9) | 40,000 | – | 884,506 | ||||||||||||||||||
|
– for
Cause
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– without
Cause
|
360,000 | (13) | 70,000 | (8) | – | 27,253 | (11) | 40,000 | 497,253 | |||||||||||||||||||
|
Termination by Executive
|
||||||||||||||||||||||||||||
|
– without Good
Reason
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– for Good
Reason
|
360,000 | (13) | 70,000 | (8) | – | 27,253 | (11) | 40,000 | 497,253 | |||||||||||||||||||
|
Death or Disability
|
– | – | – | – | – | |||||||||||||||||||||||
|
Thomas
F. Miller
|
||||||||||||||||||||||||||||
|
Change in Control
|
– |
(5)
|
– | – | – | – | – | |||||||||||||||||||||
|
Termination by Company
|
||||||||||||||||||||||||||||
|
– Change in
Control (6)
|
636,000 | (12) | 68,000 | (8) | – | 40,839 | (9) | 40,000 | – | 784,839 | ||||||||||||||||||
|
– for
Cause
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– without
Cause
|
318,000 | (13) | 68,000 | (8) | – | 20,419 | (11) | 40,000 | 446,491 | |||||||||||||||||||
|
Termination by Executive
|
||||||||||||||||||||||||||||
|
– without Good
Reason
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
– for Good
Reason
|
318,000 | (13) | 68,000 | (8) | – | 20,419 | (11) | 40,000 | 446,491 | |||||||||||||||||||
|
Death or Disability
|
– | – | – | – | – | |||||||||||||||||||||||
|
Former Officer
|
||||||||||||||||||||||||||||
|
Robert J. Capetola,
Ph.D(15)
|
||||||||||||||||||||||||||||
|
Separation Agreement
|
1,172,878 | 62,600 | – | 1,235,478 | ||||||||||||||||||||||||
|
Change in Control
|
||||||||||||||||||||||||||||
|
|
(1)
|
Under
certain executive employment agreements, under certain conditions, the
vesting of unvested stock options and the RSAs would be
accelerated. Equity acceleration represents the incremental
value, as defined in ASC Topic 718, resulting from such acceleration on
the assumed termination date, December 31, 2009. 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. As the RSAs vested on January 3, 2010,
the next business day following December 31, 2009, no additional benefit
would have been realized in connection with the acceleration of the
RSAs. The number of shares remaining unvested as of December
31, 2009 for each executive 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 outplacement 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)
|
With
respect to Mr. Amick, there is no contract, agreement, plan or arrangement
that provides for payment(s) to him at, following, or in connection with
any termination, including without limitation, resignation, severance
retirement or a constructive
termination.
|
21
|
|
(5)
|
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.
|
|
|
(6)
|
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.
|
|
|
(7)
|
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
three fiscal years immediately preceding the Change in
Control.
|
|
|
(8)
|
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 pro rata bonus payable in a lump
sum payment that is equal to the largest annual cash bonus received by the
executive in the three 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.
|
|
|
(9)
|
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 (except that the period under Messrs.
Cooper and Lopez agreements is two and one-half years), reduced to the
extent that a subsequent employer provides the executive with
substantially similar coverage (on a benefit-by-benefit
basis).
|
|
(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 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 three fiscal years immediately preceding
the date of termination.
|
|
(11)
|
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 (except that the
period under Messrs. Cooper and Lopez agreements is one and one-half
years), reduced to the extent that a subsequent employer provides the
executive with substantially similar coverage (on a benefit-by-benefit
basis).
|
|
(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 times the sum of his base salary then in effect and the
largest annual cash bonus received by the executive in the three fiscal
years immediately preceding the Change in
Control.
|
|
(13)
|
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 three fiscal years immediately preceding the Change in
Control.
|
|
(14)
|
See, “Compensation
Discussion and Analysis – Executive Employments Agreements”, and “–
Severance and Change in Control Benefits” for a discussion of the
retention letters that we expect to enter into with certain of our
executives, including Dr. Segal. Dr. Segal’s retention letter
will take effect upon expiration of his current executive employment
agreement on May 3, 2010. Under the form of retention letter,
upon termination of employment, Dr. Segal will be entitled to severance
equal to one year of his then-current base salary plus a prorated bonus
award based on his target bonus amount, which is currently 30% of his base
salary. In addition, Dr. Segal will be entitled to continuation
of his health benefits for a period of one
year.
|
22
|
(15)
|
Under
Dr. Capetola’s Separation Agreement, he was entitled to a one-time
severance payment of $250,0000 upon execution of the Separation Agreement
and periodic severance payments through May 3, 2010 (the “Severance
Period”) totaling $604,622, of which $168,987 remained unpaid as of
December 31, 2009. In addition, upon the occurrence of a
Corporate Transaction during the Severance Period, Dr. Capetola would be
entitled to an additional payment such that his total severance payments
would then equal $1.58 million. If the Corporate Transaction
were to constitute a Change of Control, Dr. Capetola would then be
entitled to an additional payment such that his total severance payments
would equal $1.78 million. In addition, Dr. Capetola is
entitled to continuation of health benefits (or their equivalent) during
the Severance Period for himself and the members of his family who were
participating in our health and welfare plans at the time of termination,
reduced to the extent that a subsequent employer provides the executive
with substantially similar coverage (on a benefit-by-benefit
basis). His health benefits were to be extended in the event of
a Corporate Transaction for a period ending 24 months from the date of
termination of termination of employment or, in the event of a Corporate
Transaction, 27 months from the date of termination of
employment. See, “Compensation
Discussion and Analysis –Resignation of our President and Chief Executive
Officer.”
|
Director
Compensation
During
2009, each of the Company’s non-employee directors received cash compensation
for his services in the amount of $4,500 per quarter. Directors who
are also employees of the Company are not compensated separately for
serving on the Board or any of its Standing Committees. In addition,
directors are paid the following additional amounts, as applicable: (i) $6,000
per quarter to Mr. Amick for serving as the Chairman of the Board; (ii) $1,000
per quarter for each director who served on one or more of the Standing
Committees; and (iii) $500 per quarter for each director who served as Chairman
of any of the Standing Committees. The following chart summarizes the
annual cash compensation for the Company’s non-employee directors during the
fiscal year ended December 31, 2009. Board-related compensation paid
to Mr. Amick is included in the information provided in the Summary Compensation
Table, above.
To
improve readability, the following columns have been removed from the
table as there is no reportable information with respect to these items:
“Stock Awards”, “Non-Equity Incentive Compensation”, “Change in Pension Value
and Nonqualified Deferred Compensation Earnings”, and “All Other
Compensation.”
|
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
|
|||||||||||
|
Antonio
Esteve, Ph.D.
|
18,000 | $ | 17,268 | $ | 35,268 | |||||||||||||
|
Max
E. Link, Ph.D.
|
24,000 | 17,268 | 41,268 | |||||||||||||||
|
Herbert
H. McDade, Jr.
|
22,300 | 17,268 | 39,268 | |||||||||||||||
|
Marvin
E. Rosenthale, Ph.D.
|
24,000 | 17,268 | 41,268 | |||||||||||||||
|
(1)
|
Represents the grant date fair value computed in
accordance with ASC Topic 718 of outstanding stock options,
and is not an amount paid to, or realized by, the director. There can be
no assurance that these ASC Topic 718 amounts will ever be
realized.
See
Note 11
– “Stock
Options and Stock-based Employee Compensation” to our consolidated financial
statements for the
year ended December 31, 2009, in the Form 10-K. As of December 31, 2009, the aggregate number of option
awards outstanding for each director was as follows: Mr.
Amick – 240,000; Dr.
Esteve – 205,000;
Dr. Link – 185,000; Mr. McDade – 235,000; and Dr. Rosenthale –
185,000. The ASC Topic 718 grant date value per share for
options granted in 2009 was $0.58.
|
23
Our
Compensation Policies and Practices as They Relate to Risk
Management
We have
reviewed our compensation policies and practices for our employees and have
concluded that any risks arising from our policies and programs are not
reasonably likely to have a material adverse effect on our operations. By
referring to available published surveys of biotech companies’ compensation
practices to inform our decisions with respect to long-term incentive
compensation, we believe that we maintain competitive pay arrangements and also
intend, when possible, to allocate our compensation among base salary and short
and long-term compensation target opportunities in a manner that does not
encourage excessive risk-taking by our employees. To mitigate against a risk of
inappropriate discrimination or unintended consequences, we attempt to apply our
compensation policies and procedures uniformly to all eligible employees.
The Compensation Committee believes that the design of our compensation program
and the relative mix of the various components are appropriate to our industry
and encourage our executive officers to maximize stockholder value as they
pursue achievement of our broad corporate goals (see, “Compensation Discussion
and Analysis – Corporate Goals”). While the Compensation Committee weighs
the achievement of corporate goals more heavily for executives in senior
executive positions and seeks to reward less senior personnel based more on
progress made in achieving narrower individual goals, the individual goals of
all employees are defined with a view to connecting the achievement of each
employee with the broad corporate goals established by the Compensation
Committee. Moreover, in making key corporate decisions, we seek to gain
agreement among representatives of the various functions within our
organization, thereby reducing the risk that decisions could have an
unidentified adverse impact on our business or on the achievement of our broad
corporate goals.
Compensation
Committee Interlocks and Insider Participation
The
Compensation Committee is composed entirely of independent directors. Mr. Amick
was a member of the Compensation Committee throughout 2009 until August 13,
2009. He resigned from the Compensation Committee on August 13, 2009
at the time that that Board elected him to the position of Chief Executive
Officer. 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
Max E.
Link, Ph.D.
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
Securities
Authorized for Issuance Under Equity Compensation Plans
The
following table describes as of December 31, 2009 the number of shares of our
common stock issuable upon exercise of outstanding options. As there
are no equity incentive plans not approved by security holders (other than our
401(k) Plan under which the company match is made in shares of our common
stock), that line of the table has been omitted.
24
|
Plan Category (1)
|
Number of Securities to
be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(a)
|
Weighted-average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
|
Number of Securities Remaining
Available for Future Issuance
Under Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
|
|||||||||
|
Equity
compensation plans approved by security holders
|
||||||||||||
|
2007
Long-Term Incentive Plan
|
6,687,719 | $ | 2.45 | 1,812,281 | ||||||||
|
Amended
and Restated 1998 Stock Incentive Plan (1)
|
9,297,792 | $ | 4.87 | – | ||||||||
|
Total
|
15,985,511 | $ | 3.76 | 1,812,281 | ||||||||
|
|
(1)
|
The
1998 Plan expired on the effective date of the 2007 Plan. All
awards granted under the 1998 Plan continue to be governed by the terms of
the 1998 Plan.
|
Security
Ownership of Certain Beneficial Owners
The
following table sets forth certain information regarding the beneficial
ownership of the common stock of the Company (i) as of March 31, 2010, 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, 2009, 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.
|
Name and Address
of Beneficial Owner (1)
|
Common
Stock
|
Common
Stock
Equivalents
(2)
|
Total
Beneficial
Ownership
|
Percentage of Class
Beneficially Owned (1)
|
||||||||||||
|
Non-Executive
Directors
|
||||||||||||||||
|
Antonio
Esteve, Ph.D. (3)
|
3,206,689 | 226,174 | 3,432,863 | 2.23 | % | |||||||||||
|
Max
E. Link, Ph.D.
|
166,821 | 155,000 | 351,821 | * | ||||||||||||
|
Herbert
H. McDade, Jr.
|
– | 235,000 | 235,000 | * | ||||||||||||
|
Marvin
E. Rosenthale, Ph.D.(4)
|
350,000 | 185,000 | 475,000 | * | ||||||||||||
|
Named
Executive Officers
|
||||||||||||||||
|
W.
Thomas Amick
|
40,000 | 180,000 | 220,000 | * | ||||||||||||
|
John
G. Cooper
|
68,248 | 1,590,834 | 1,659,082 | 1.07 | % | |||||||||||
|
David
L. Lopez, Esq., CPA
|
80,829 | 1,456,834 | 1,537,663 | * | ||||||||||||
|
Thomas
F. Miller Ph.D., MBA
|
32,890 | 502,501 | 535,391 | * | ||||||||||||
|
Robert
Segal, M.D., F.A.C.P.
|
33,088 | 890,584 | 923,672 | * | ||||||||||||
|
Former
Executive
|
||||||||||||||||
|
Robert
J. Capetola, Ph.D. (5)
|
436,417 | 4,304,250 | 4,740,667 | 2.99 | % | |||||||||||
25
|
Name and Address
of Beneficial Owner (1)
|
Common
Stock
|
Common
Stock
Equivalents
(2)
|
Total
Beneficial
Ownership
|
Percentage of Class
Beneficially Owned (1)
|
||||||||||||
|
Executive Officers and
Directors as a group (14
persons)(6)
|
4,129,827 | 6,527,345 | 10,657,173 | 6.64 | % | |||||||||||
|
5%
Security Holders
|
||||||||||||||||
|
Wellington
Management Company (7) 75
State Street Boston, MA 02109
|
11,387,100 | 4,454,200 | 15,841,300 | 10.00 | % | |||||||||||
* Less
than 1%
|
(1)
|
Beneficial
ownership is determined in accordance with Rule 13d-3 under the Exchange
Act 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 March 31, 2010 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 March
31, 2010 held by each person or group named
above.
|
|
|
(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 205,000 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 a Form 5 filed by Dr. Capetola with the SEC on
February 9, 2010.
|
|
(6)
|
This
information does not include the shares attributable to Dr.
Capetola.
|
|
(7)
|
This
information is based on Schedule 13G filed with the SEC on
February 12, 2010 by Wellington Management Company,
LLP (“Wellington”) with respect to shares which are held by clients
of Wellington, and includes 15,588,800 shares as to which Wellington holds
shared power to vote and 15,841,300 shares as to which Wellington holds
shared power to dispose of or direct the disposition of. We
have calculated the amount of shares and equivalents based on our
corporate records of warrants issued to and held by
Wellington.
|
|
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, 2009.
26
Committees
of the Board
The Board
appoints all members of the Board committees. Presently, the Board
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
presently consists of five members, one of whom serves as Chief Executive
Officer. Presently, Messrs. McDade and Drs. Link and Rosenthale are
“independent” directors within the meaning of the rules of the SEC and the
listing requirements of The Nasdaq Stock Market (“Nasdaq”). Each
director who serves on a Standing Committee, including the Compensation
Committee, the Nominating Committee and the Audit Committee, is “independent”
within the meaning of the SEC rules and the qualitative listing requirements of
Nasdaq.
|
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, 2009 and December 31, 2008,
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:
|
Fee Category:
|
Fiscal 2009
|
% of Total
|
Fiscal 2008
|
% of Total
|
||||||||||||
|
Audit
Fees
|
$ | 212,000 | 65 | % | $ | 222,000 | 65 | % | ||||||||
|
Audit-Related
Fees
|
83,000 | 25 | % | 84,000 | 24 | % | ||||||||||
|
Tax
Fees
|
29,000 | 9 | % | 34,000 | 10 | % | ||||||||||
|
All
Other Fees
|
2,000 | 1 | % | 2,000 | 1 | % | ||||||||||
|
Total
Fees
|
$ | 326,000 | 100 | % | $ | 342,000 | 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
2009.
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.
27
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 Amendment No. 1 to the
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.
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, 2010
|
By:
|
/s/ W. Thomas Amick
|
|
W.
Thomas Amick
|
||
|
Chairman
of the Board and
|
||
|
Chief
Executive Officer
|
||
28
INDEX
TO EXHIBITS
The
following exhibits are included with this Annual Report on Form
10-K/A.
|
Exhibit No.
|
Description
|
Method of Filing
|
||
|
3.1
|
Amended
and Restated Certificate of Incorporation of Discovery Laboratories, Inc.
(Discovery), dated December 9, 2009.
|
Incorporated
by reference to Exhibit 3.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on December 9, 2009.
|
||
|
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
|
Amended
and Restated By-Laws of Discovery, as amended effective September 3,
2009.
|
Incorporated
by reference to Exhibit 3.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on September 4, 2009
|
||
|
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.
|
||
|
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.
|
29
|
Exhibit No.
|
Description
|
Method of Filing
|
||
|
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.
|
||
|
4.11
|
Form
of Stock Purchase Warrant issued in May 2009
|
Incorporated
by reference to Exhibit 10.3 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on May 8, 2009.
|
||
|
4.12
|
Form
of Stock Purchase Warrant issued in February 2010
|
Incorporated
by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on February 18, 2010.
|
||
|
4.13
|
Warrant
Agreement, dated as of April 30, 2010, by and between Discovery and
PharmaBio
|
Incorporated
by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on April 28, 2010.
|
||
|
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.
|
30
|
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
|
31
|
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.
|
32
|
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
+
|
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.
|
||
|
10.31
+
|
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.
|
||
|
10.32
|
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.
|
||
|
10.33
|
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.
|
||
|
10.34
|
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.
|
||
|
10.35
|
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.
|
||
|
10.36*
|
Agreement,
dated as of August 13, 2009, by and between Discovery and W. Thomas Amick
Regarding Service as Chief Executive Officer on a Part-Time, Interim
Basis
|
Incorporated
by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on September 4,2009.
|
||
|
10.37*
|
Separation
of Employment Agreement and General Release, dated as of August 13, 2009,
by and between Discovery and Robert J. Capetola
|
Incorporated
by reference to Exhibit 10.2 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on September 4, 2009.
|
||
|
10.38
|
Payment
Agreement and Loan Amendment (amending the Second Amended and Restated
Loan Agreement, dated as of December 10, 2001, amended and restated as of
October 25, 2006) dated April 27, 2010, by and between Discovery and
PharmaBio
|
Incorporated
by reference to Exhibit 1.1 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on April 28, 2010.
|
||
|
10.39
|
Third
Amended Promissory Note dated April 27, 2010 (amending and restating the
Second Amended Promissory Note dated as of October 25, 2006), payable to
PharmaBio
|
Incorporated
by reference to Exhibit 1.2 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on April 28,
2010.
|
33
|
Exhibit No.
|
Description
|
Method of Filing
|
||
|
10.40
|
Securities
Purchase Agreement dated April 27, 2010, by and between Discovery and
PharmaBio
|
Incorporated
by reference to Exhibit 1.3 to Discovery’s Current Report on Form 8-K, as
filed with the SEC on April 28, 2010.
|
||
|
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, 2009, as filed with the SEC on March
10, 2010.
|
||
|
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, 2009, as filed with the SEC on March
10, 2010.
|
||
|
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, 2009, as filed with the SEC on March
10, 2010.
|
||
|
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, 2009, as filed with the SEC on March
10, 2010.
|
||
|
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.
|
+ Confidential
treatment requested as to certain portions of these exhibits. Such
portions have been redacted and filed separately with the
Commission.
* A
management contract or compensatory plan or arrangement required to be filed as
an exhibit to this annual report pursuant to Item 15(b) of Form
10-K.
34
Exhibit
31.3
CERTIFICATIONS
I, W.
Thomas Amick, certify that:
1. I
have reviewed this Amendment No. 1 on Form 10-K/A for the fiscal year ended
December 31, 2009 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/ W. Thomas Amick
|
|
W.
Thomas Amick
|
|
|
Chairman
of the Board
|
|
|
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, 2009 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, 2009 (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/ W. Thomas Amick
|
|
W.
Thomas Amick
|
|
Chairman
of the Board
|
|
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.