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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
| ¨ | Preliminary Proxy Statement | |||
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| x | Definitive Proxy Statement | |||
| ¨ | Definitive Additional Materials | |||
| ¨ | Soliciting Material Pursuant to § 240.14a-12 | |||
| Horizon Pharma Public Limited Company | ||||
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HORIZON PHARMA PUBLIC LIMITED COMPANY
ANNUAL GENERAL MEETING OF SHAREHOLDERS
May 6, 2015
NOTICE AND PROXY STATEMENT
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April 7, 2015
Dear Fellow Shareholder:
You are cordially invited to attend the Annual General Meeting of Shareholders on Wednesday, May 6, 2015. The Annual General Meeting will begin at 12:00 p.m. local time at our corporate headquarters, located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, Ireland.
The attached Notice of Annual General Meeting and Proxy Statement describes how our Board of Directors operates, provides biographical information on our director nominees, gives information for the voting matters to be acted upon at the Annual General Meeting and explains the proxy voting process.
Our Board of Directors urges you to read the accompanying Proxy Statement and recommends that you vote FOR all of the proposed nominees for election to the Board of Directors, FOR the approval of our Amended and Restated 2014 Equity Incentive Plan, FOR the approval of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2015 and the authorization of the Audit Committee of our Board of Directors to determine the auditors’ remuneration and FOR the approval, on an advisory basis, of the compensation of our named executive officers, as disclosed in the accompanying Proxy Statement.
Whether or not you plan to attend the Annual General Meeting, it is important that your shares be represented and voted. Please take a moment now to vote your shares by internet, by toll-free telephone call or by signing and dating the enclosed proxy card and returning it in the pre-addressed, postage-paid envelope provided.
We look forward to seeing you on May 6, 2015, and urge you to vote as soon as possible.
Sincerely,
Timothy P. Walbert
Chairman of the Board, President and Chief Executive Officer
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NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 2015
Dear Shareholder:
We will be holding the Annual General Meeting of Shareholders of Horizon Pharma plc on Wednesday, May 6, 2015 at 12:00 p.m. local time at our corporate headquarters, located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, Ireland. You are being asked to vote on the following matters (the “Proposals”):
| 1. | To elect by separate resolutions the two nominees for Class I directors named herein to hold office until the 2018 Annual General Meeting of Shareholders. |
| 2. | To approve our Amended and Restated 2014 Equity Incentive Plan. |
| 3. | To approve the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2015 and to authorize the Audit Committee of our Board of Directors to determine the auditors’ remuneration. |
| 4. | To approve, on an advisory basis, the compensation of our named executive officers, as disclosed in this Proxy Statement. |
| 5. | To conduct any other business properly brought before the meeting. |
Our Irish statutory accounts for the fiscal year ended December 31, 2014, including the reports of the directors and auditors thereon, will be presented at the Annual General Meeting. There is no requirement under Irish law that such statements be approved by the shareholders, and no such approval will be sought at the Annual General Meeting.
For the purposes of our articles of association, Proposals 1 and 3 and the receipt and consideration of the Irish statutory accounts by us at the Annual General Meeting are deemed to be ordinary business, and Proposals 2 and 4 are deemed to be special business.
Only shareholders of record at the close of business on March 6, 2015, the record date for the Annual General Meeting, are entitled to notice of the Annual General Meeting and to vote at the Annual General Meeting or any adjournment or postponement thereof. On or about April 7, 2015, we will mail to our shareholders proxy materials. We ask that you review the Proxy Statement carefully and complete, sign, date and return the enclosed proxy card in the envelope provided or vote over the internet or by telephone as instructed in these materials, as promptly as possible in order to ensure your representation at the meeting. A return envelope (which is postage prepaid if mailed in the United States) has been provided for your convenience. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.
Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting of Shareholders to Be Held on Wednesday, May 6, 2015 at 12:00 p.m. local time at our corporate headquarters, located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, Ireland.
The Proxy Statement and Annual Report to shareholders
are available at www.edocumentview.com/hznp.
By Order of the Board of Directors
David G. Kelly
Company Secretary
Connaught House, 1st Floor
1 Burlington Road
Dublin 4, Ireland
April 7, 2015
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HORIZON PHARMA PUBLIC LIMITED COMPANY
ANNUAL GENERAL MEETING OF SHAREHOLDERS
May 6, 2015
PROXY STATEMENT
Your proxy is solicited by the Board of Directors (the “Board” or “Board of Directors”) of Horizon Pharma plc, a public limited company formed under the laws of Ireland, for the Annual General Meeting of Shareholders (the “Annual General Meeting”) to be held at 12:00 p.m. local time on Wednesday, May 6, 2015, at the Company’s corporate headquarters, located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, Ireland, for the purposes set forth in the Notice of Annual General Meeting of Shareholders, and at any adjournment or postponement thereof. The mailing address of the principal executive office of the Company is Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, Ireland. The Company expects that this Proxy Statement, the related proxy and Notice of Annual General Meeting of Shareholders will first be mailed to shareholders on or about April 7, 2015.
The Merger
On September 19, 2014, the businesses of Horizon Pharma Inc. (“HPI”) and Vidara Therapeutics International Public Limited Company (“Vidara”) were combined in a merger transaction (the “Merger”), accounted for as a reverse acquisition under the acquisition method of accounting for business combinations, with HPI treated as the acquiring company in the Merger for accounting purposes. As part of the Merger, a wholly-owned subsidiary of Vidara merged with and into HPI, with HPI surviving the Merger as a wholly-owned subsidiary of Vidara and Vidara changed its name to Horizon Pharma plc. Upon the consummation of the Merger, the historical financial statements of HPI became our historical financial statements.
Unless otherwise indicated or the context otherwise requires, references to the “Company”, “Horizon”, “we”, “us” and “our” refer to Horizon Pharma plc and its consolidated subsidiaries, including its predecessor, HPI. All references to “Vidara” are references to Horizon Pharma plc (formerly known as Vidara Therapeutics International Public Limited Company) and its consolidated subsidiaries prior to the effective time of the Merger on September 19, 2014. The disclosures in this Proxy Statement relating to the pre-Merger business of Horizon Pharma plc, as well as statements relating to pre-Merger compensation, board of director and corporate governance matters, unless noted as being the business of Vidara prior to the Merger, pertain to the business of HPI prior to the Merger. In addition, references in this Proxy Statement to “shares,” “stock” or “voting stock” refer to HPI’s common stock, par value $0.0001 per share, prior to the effective time of the Merger and to our ordinary shares, nominal value $0.0001 per share, from and since the effective time of the Merger.
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Why am I receiving these materials?
We have sent you these proxy materials because our Board of Directors is soliciting your proxy to vote at the Annual General Meeting, including at any adjournments or postponements of the meeting. You are invited to attend the Annual General Meeting to vote on the proposals described in this Proxy Statement. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy over the telephone or through the internet.
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How do I attend the Annual General Meeting?
The meeting will be held on Wednesday, May 6, 2015, at 12:00 p.m. local time at our corporate headquarters, located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, Ireland. Information on how to vote in person at the Annual General Meeting is provided below. However, you do not need to attend the Annual General Meeting to vote your ordinary shares.
Who can vote at the Annual General Meeting?
Only shareholders of record at the close of business on March 6, 2015 will be entitled to vote at the Annual General Meeting. On this record date, there were 126,167,435 of our ordinary shares outstanding and entitled to vote.
Shareholder of Record: Shares Registered in Your Name
If on March 6, 2015, your shares were registered in your name in Horizon’s Register of Members which is maintained by Horizon’s transfer agent, Computershare Shareowner Services LLC, then you are a shareholder of record. As a shareholder of record, you may vote in person at the meeting or vote by proxy. Whether or not you plan to attend the meeting, we urge you to fill out and return the enclosed proxy card or vote by proxy over the telephone or on the internet as instructed below to ensure your vote is counted.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If on March 6, 2015, your shares were not registered in your name in our Register of Members, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the shareholder of record for purposes of voting at the Annual General Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the Annual General Meeting. However, since you are not the shareholder of record, you may not vote your shares in person at the meeting unless you request and obtain a valid proxy from your broker or other agent.
What am I voting on?
There are four matters scheduled for a vote:
| • | Election of two Class I directors named in this Proxy Statement to hold office until the 2018 Annual General Meeting of Shareholders (Proposal 1); |
| • | Approval of our Amended and Restated 2014 Equity Incentive Plan, which is referred to in this Proxy Statement as the “Amended 2014 Plan” (Proposal 2); |
| • | Approval of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2015 and the authorization of the Audit Committee of our Board of Directors to determine the auditors’ remuneration (Proposal 3); and |
| • | Advisory approval of the compensation of our named executive officers, as disclosed in this Proxy Statement (Proposal 4). |
What if another matter is properly brought before the meeting?
The Board of Directors knows of no other matters that will be presented for consideration at the Annual General Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance with their best judgment.
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How do I vote?
You may vote “For” or “Against” each Class I director nominee or you may abstain from voting for all or any of the nominees. For each of the other matters to be voted on, you may vote “For” or “Against” or abstain from voting.
The procedures for voting are fairly simple:
Shareholder of Record: Shares Registered in Your Name
If you are a shareholder of record, you may vote in person at the Annual General Meeting, vote by proxy using the enclosed proxy card, vote by proxy over the telephone, or vote by proxy through the internet. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the meeting and vote in person even if you have already voted by proxy.
| • | To vote in person, come to the Annual General Meeting and we will give you a ballot when you arrive. |
| • | To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the Annual General Meeting, we will vote your shares as you direct. |
| • | To vote over the telephone, dial toll-free 1-800-652-VOTE (8683) using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m., Eastern Time on May 5, 2015, to be counted. |
| • | To vote through the internet, go to http://www.envisionreports.com/hznp to complete an electronic proxy card. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m. Eastern Time on May 5, 2015, to be counted. |
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a voting instruction form with these proxy materials from that organization rather than from us. Simply complete and mail the voting instruction form to ensure that your vote is counted. Alternatively, you may vote by telephone or through the internet as instructed by your broker or bank. To vote in person at the Annual General Meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.
Joint Holders
In the case of joint holders of record, the vote of the senior holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Company’s Register of Members.
Internet proxy voting is being provided to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies.
How many votes do I have?
On each matter to be voted upon, you have one vote for each ordinary share you own as of March 6, 2015.
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What happens if I do not vote?
Shareholder of Record: Shares Registered in Your Name
If you are a shareholder of record and do not vote by completing your proxy card, by telephone, through the internet or in person at the Annual General Meeting, your shares will not be voted.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If you are a beneficial owner and do not instruct your broker, bank, or other agent how to vote your shares, the question of whether your broker or nominee will still be able to vote your shares depends on whether the New York Stock Exchange (“NYSE”) deems the particular proposal to be a “routine” matter. Brokers and nominees can use their discretion to vote “uninstructed” shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. Under the rules and interpretations of the NYSE, “non-routine” matters are matters that may substantially affect the rights or privileges of shareholders, such as mergers, shareholder proposals, elections of directors (even if not contested), executive compensation (including any advisory shareholder votes on executive compensation) and certain corporate governance proposals, even if management-supported. Accordingly, your broker or nominee may not vote your shares on Proposals 1, 2 or 4 without your instructions, but may vote your shares on Proposal 3.
What if I return a proxy card or otherwise vote but do not make specific choices?
If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable, “For” Proposal 1, the election of all nominees named in this Proxy Statement for Class I directors, “For” Proposal 2, the approval of our Amended 2014 Plan, “For” Proposal 3, the approval of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2015 and the authorization of the Audit Committee of our Board of Directors to determine the auditors’ remuneration and “For” Proposal 4, the advisory approval of executive compensation. If any other matter is properly presented at the meeting, your proxy holder (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.
Who is paying for this proxy solicitation?
We have retained MacKenzie Partners, Inc. (“MacKenzie”), a proxy solicitation firm, to solicit proxies in connection with the Annual General Meeting at a cost of approximately $20,000 plus expenses. The cost of soliciting proxies incurred by the Company and MacKenzie, including the preparation, assembly and mailing of the proxies and soliciting material, as well as the cost of forwarding such material to beneficial owners of the Company’s ordinary shares, will be borne by the Company. Directors, officers and regular employees of the Company may, without compensation other than their regular remuneration, solicit proxies personally or by telephone.
What does it mean if I receive more than one set of proxy materials?
If you receive more than one set of proxy materials, your shares may be registered in more than one name or in different accounts. Please follow the voting instructions on the proxy cards in each set of proxy materials to ensure that all of your shares are voted.
Can I change my vote after submitting my proxy?
Shareholder of Record: Shares Registered in Your Name
Yes. You can revoke your proxy at any time before the final vote at the meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:
| • | You may submit another properly completed proxy card with a later date. |
| • | You may grant a subsequent proxy by telephone or through the internet. |
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| • | You may send a timely written notice that you are revoking your proxy to Horizon’s Company Secretary at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, Ireland. |
| • | You may attend the Annual General Meeting and vote in person. Simply attending the meeting will not, by itself, revoke your proxy. |
Your most current proxy card or telephone or internet proxy is the one that is counted.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank.
Do I need a ticket to attend the Annual General Meeting?
You will need an admission ticket or proof of ownership of ordinary shares to enter the Annual General Meeting. If you are a shareholder of record, your admission ticket is the top half of the proxy card sent to you. If you plan to attend the Annual General Meeting, please so indicate when you vote and bring the ticket with you to the Annual General Meeting. If your shares are held in the name of a bank, broker or other holder of record, you do not need an admission ticket, but you will need proof of ownership to be admitted to the Annual General Meeting. A recent brokerage statement or letter from a bank or broker is an example of proof of ownership. If you arrive at the Annual General Meeting without an admission ticket or proof of ownership of ordinary shares, we will admit you only if we are able to verify that you are a shareholder of our company.
How are votes counted?
Votes will be counted by the inspector of election appointed for the meeting, who will separately count, for each of the proposals, votes “For” and “Against,” abstentions and, as applicable, broker non-votes. Abstentions and broker non-votes will be treated as shares present for the purpose of determining the presence of a quorum for the transaction of business at the Annual General Meeting. Abstentions and broker non-votes will not, however, be considered votes cast at the Annual General Meeting. Because the approval of all of the proposals is based on the votes cast at the Annual General Meeting, abstentions and broker non-votes will not have any effect on the outcome of voting on the proposals.
What are “broker non-votes”?
As discussed above, when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed by the NYSE to be “non-routine,” the broker or nominee cannot vote the shares. These un-voted shares are counted as “broker non-votes.”
How many votes are needed to approve each proposal?
Assuming that a quorum is present at the Annual General Meeting, the following votes will be required for approval:
| • | Proposal 1: For the election of Class I directors, each nominee named herein for election to the Board of Directors who receives the affirmative vote of a majority of the votes cast in person or by proxy at the Annual General Meeting on his election will be elected to the Board of Directors. |
| • | Proposal 2: The approval of our Amended 2014 Plan, will be approved if it receives the affirmative vote of a majority of the votes cast in person or by proxy at the Annual General Meeting. |
| • | Proposal 3: The approval of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2015 and the authorization of the Audit Committee of our Board of Directors to determine the auditors’ remuneration, will be approved if it receives the affirmative vote of a majority of the votes cast in person or by proxy at the Annual General Meeting. |
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| • | Proposal 4: The advisory approval of the compensation of our named executive officers, will be considered to be approved if it receives the affirmative vote of a majority of the votes cast in person or by proxy at the Annual General Meeting. |
What is the quorum requirement?
A quorum of shareholders is necessary to hold a valid meeting. A quorum will be present if shareholders holding a majority of the issued and outstanding ordinary shares entitled to vote are present at the meeting in person or represented by proxy. On the record date, there were 126,167,435 ordinary shares outstanding and entitled to vote. Thus, the holders of 63,083,718 ordinary shares must be present in person or represented by proxy at the meeting to have a quorum.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or, provided that you are a shareholder of record, if you vote in person at the meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, within one hour of the time appointed for the Annual General Meeting, the Annual General Meeting will stand adjourned to May 13, 2015 at 12:00 p.m. local time at the same location, or such other time or place as the Board of Directors may determine.
How can I find out the results of the voting at the Annual General Meeting?
Preliminary voting results will be announced at the Annual General Meeting. In addition, final voting results will be published in a current report on Form 8-K that we expect to file within four business days after the Annual General Meeting. If final voting results are not available to us in time to file a Form 8-K within four business days after the meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.
What are the Irish statutory accounts?
We are presenting our Irish statutory accounts, including the reports of the directors and the auditors thereon, at the Annual General Meeting, and we are mailing those accounts to shareholders of record and making a copy of them available on our website (wwww.horizonpharma.com) on or before April 13, 2015. Since we are an Irish company, we are required to prepare Irish statutory accounts under applicable Irish company law and to deliver those accounts to shareholders of record in connection with our annual general meetings of shareholders. The Irish statutory accounts cover the results of operations and financial position of Horizon Pharma plc for the year ended December 31, 2014. Irish law requires the directors to prepare financial statements for each financial year giving a true and fair view of the state of the group’s and parent company’s affairs at the end of the financial year and of the group’s profit or loss for the financial year. Under that law, the directors have prepared the group’s consolidated financial statements in accordance with US generally accepted accounting principles, as defined in Section 1(1) of the Companies (Miscellaneous Provisions) Act 2009, to the extent that the use of those principles in the preparation of the consolidated financial statements does not contravene any provision of the Companies Act or of any regulations made thereunder and the parent company financial statements in accordance with accounting standards issued by the Financial Reporting Council and promulgated by the Institute of Chartered Accountants in Ireland (Generally Accepted Accounting Practice in Ireland).
We will mail without charge, upon written request, a copy of the Irish statutory accounts to beneficial owners of our ordinary shares. Requests should be sent to: Horizon Pharma plc, Attention: Company Secretary, Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, Ireland.
What proxy materials are available on the internet?
The Proxy Statement and the Annual Report to shareholders are available at www.edocumentview.com/hznp.
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CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of the Company’s ordinary shares as of January 31, 2015 by: (i) each director and nominee for director; (ii) each of the named executive officers in the Summary Compensation Table; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than five percent of its ordinary shares. The table is based upon information supplied by our officers, directors and principal stockholders and/or a review of Schedules 13D and 13G, if any, documents filed with the Securities and Exchange Commission (“SEC”) and other sources.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to the securities. Except as indicated by footnote, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all ordinary shares shown as beneficially owned by them. The number of ordinary shares used to calculate the percentage ownership of each listed person includes the ordinary shares underlying options, warrants or other rights held by such persons that are exercisable as of April 1, 2015, which is 60 days after January 31, 2015.
Percentage of beneficial ownership is based on 124,254,009 ordinary shares outstanding as of January 31, 2015. Unless otherwise indicated, the address for the following shareholders is c/o Horizon Pharma plc, Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, Ireland.
| Name and Address of Beneficial Owner or Identity of Group |
Number and Percentage of Shares Beneficially Owned |
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| Ordinary Shares | Percentage | |||||||
| 5% or greater shareholders: |
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| Deerfield Management, L.P.(1) |
11,849,047 | 9.5 | % | |||||
| 780 Third Avenue, 37th Floor |
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| New York, NY 10017 |
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| Balaji Venkataraman(2) |
9,586,317 | 7.7 | % | |||||
| 13185 Owens Way |
||||||||
| Alpharetta, GA 30004 |
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| Broadfin Capital, LLC(3) |
8,917,975 | 7.2 | % | |||||
| 237 Park Avenue, Suite 900 |
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| New York, NY 10017 |
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| Fidelity and its affiliates(4) |
6,482,766 | 5.1 | % | |||||
| 82 Devonshire St. |
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| Boston, Massachusetts 02109 |
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| Kingdon Capital Management, L.L.C. (5) |
6,374,616 | 5.1 | % | |||||
| 152 West 57th Street, 50th Floor |
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| New York, NY 10019 |
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| Directors and named executive officers: |
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| William F. Daniel(6) |
5,547 | * | ||||||
| Michael Grey(7) |
50,795 | * | ||||||
| Jeff Himawan, Ph.D.(8) |
2,305,100 | 1.8 | % | |||||
| Virinder Nohria, M.D., Ph.D. |
214,836 | * | ||||||
| Ronald Pauli(9) |
50,795 | * | ||||||
| Gino Santini(10) |
50,795 | * | ||||||
| H. Thomas Watkins(11) |
57,666 | * | ||||||
| Timothy P. Walbert(12) |
772,893 | * | ||||||
| Robert F. Carey(13) |
223,680 | * | ||||||
| Paul W. Hoelscher |
— | * | ||||||
| John J. Kody |
— | * | ||||||
| Barry J. Moze(14) |
5,022 | * | ||||||
| Robert J. De Vaere |
154,514 | * | ||||||
| All executive officers and directors as a group (14 persons)(15) |
4,193,242 | 3.3 | % | |||||
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| * | Represents beneficial ownership of less than one percent. |
| (1) | Includes (a) 11,699,047 ordinary shares and (b) 150,000 ordinary shares issuable upon exercise of warrants. The shares are beneficially owned by Deerfield Partners, L.P., Deerfield Management Company, L.P., Deerfield International Master Fund, |
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| L.P., Deerfield Special Situations Fund, L.P., Deerfield Special Situations International Master Fund, L.P., Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P. and James E. Flynn. This information is based on the Schedule 13G filed on February 17, 2015 with the SEC. |
| (2) | Includes 6,152,720 ordinary shares held by Mayura Trust A. Mayura One LLC is the trustee of the Mayura Trust A. The managing members of Mayura One LLC are Balaji Venkataraman, Christopher Graham and Christopher Manning. The beneficiaries of Mayura Trust A are Mr. Venkataraman and his descendants. Mr. Graham and Mr. Manning disclaim beneficial ownership of any ordinary shares held by Mayura Trust A. Also includes 3,433,597 ordinary shares held by Altiva Capital, LLC of which Mr. Venkataraman is the sole managing member. 78% of Altiva Capital, LLC is owned by Mayura Trust A and the remaining 22% is owned by family trusts of which Mr. Venkataraman’s wife and children are the beneficiaries and he and his wife are each trustees. |
| (3) | Includes 8,917,975 ordinary shares beneficially owned by Broadfin Capital, LLC, Broadfin Healthcare Master Fund, Ltd. and Kevin Kotler. This information is based on the Schedule 13G/A filed on February 17, 2015 with the SEC. |
| (4) | Includes (a) 4,382,766 ordinary shares and (b) 2,100,000 ordinary shares issuable upon exercise of warrants. This information is based on the Schedule 13G filed with the SEC on January 10, 2014 by FMR LLC and other sources. FMR LLC has beneficial ownership of, and sole dispositive power with respect to, 4,382,766 ordinary shares and 2,100,000 ordinary shares issuable upon exercise of warrants. Fidelity Management & Research Company, Fidelity SelectCo, LLC and Strategic Advisers, Inc. are all wholly-owned subsidiaries of FMR LLC and are beneficial owners as a result of acting as investment advisers to various registered investment companies (the “Fidelity funds”). Edward C. Johnson, III is Chairman of FMR LLC. Mr. Johnson and various family members, through their ownership of FMR LLC common stock and the execution of a shareholders’ voting agreement, may be deemed a controlling group with respect to FMR LLC. Neither FMR LLC nor Mr. Johnson has the sole power to vote or direct the voting of the shares owned directly by the Fidelity funds, which power resides with the Fidelity funds’ boards of trustees pursuant to established guidelines. |
| (5) | Includes 6,374,616 ordinary shares beneficially owned by Kingdon Capital Management, LLC and Mark Kingdon. This information is based on the Schedule 13G filed on February 17, 2015 with the SEC. |
| (6) | Includes 5,547 ordinary shares that Mr. Daniel has the right to acquire from us within 60 days of January 31, 2015 pursuant to the exercise of stock options. |
| (7) | Includes 50,795 ordinary shares that Mr. Grey has the right to acquire from us within 60 days of January 31, 2015 pursuant to the exercise of stock options. |
| (8) | Includes (a) 1,614,731 ordinary shares and (b) 690,369 ordinary shares issuable upon the exercise of warrants, all held by Essex Woodlands Health Ventures Fund VII, L.P. Dr. Himawan shares voting and investment power over the shares held by Essex Woodlands Health Ventures Fund VII, L.P. and disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. |
| (9) | Includes 50,795 ordinary shares that Mr. Pauli has the right to acquire from us within 60 days of January 31, 2015 pursuant to the exercise of stock options. |
| (10) | Includes 50,795 ordinary shares that Mr. Santini has the right to acquire from us within 60 days of January 31, 2015 pursuant to the exercise of stock options. |
| (11) | Includes (a) 6,000 ordinary shares and (b) 51,666 ordinary shares that Mr. Watkins has the right to acquire from us within 60 days of January 31, 2015 pursuant to the exercise of stock options. |
| (12) | Includes (a) 88,527 ordinary shares and (b) 684,366 ordinary shares that Mr. Walbert has the right to acquire from us within 60 days of January 31, 2015 pursuant to the exercise of stock options. |
| (13) | Includes (a) 57,655 ordinary shares held by the Robert F. Carey III Trust dated April, 24, 2001, of which Mr. Carey is a trustee, (b) 31,025 ordinary shares issuable within 60 days of January 31, 2015 pursuant to the vesting of restricted stock units, and (c) 135,000 shares that Mr. Carey has the right to acquire from us within 60 days of January 31, 2015 pursuant to the exercise of stock options. |
| (14) | Includes 5,022 ordinary shares that Mr. Moze has the right to acquire from us within 60 days of January 31, 2015 pursuant to the exercise of stock options. |
| (15) | Includes the following held by our executive officers (which excludes Mr. Robert De Vaere and includes Mr. David Kelly and Dr. Jeffrey Sherman) and directors, in the aggregate: (a) 2,209,970 ordinary shares, (b) 1,261,878 ordinary shares that can be acquired within 60 days of January 31, 2015 pursuant to the exercise of stock options, (c) 31,025 ordinary shares issuable within 60 days of January 31, 2015 pursuant to the vesting of restricted stock units and (d) 690,369 ordinary shares issuable upon the exercise of warrants. |
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ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Each class consists, as nearly as possible, of one-third of the total number of directors, and each class has a three-year term. Vacancies on the Board of Directors may be filled only by persons elected by a majority of the directors then in office, provided that a quorum is present. A director elected by the Board of Directors to fill a vacancy in a class, including vacancies created by an increase in the number of directors, shall serve for the remainder of the full term of that class and until the director’s successor is duly elected and qualified.
The Board of Directors presently has eight members. There are two directors in the class whose term of office expires on the date of the Annual General Meeting. Each of the nominees listed below is currently a director of the Company who was nominated for election by the Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee. If elected at the Annual General Meeting, each of these nominees would serve until the 2018 Annual General Meeting of Shareholders and until his successor has been duly elected and qualified, or, if sooner, until the director’s death, resignation or removal. It is the Company’s policy to encourage directors and nominees for director to attend annual general meetings of shareholders. All of HPI’s then-current directors attended its 2014 Annual Meeting of Stockholders.
In order to be elected as a director, each nominee must receive the affirmative vote of a majority of the votes cast by the holders of ordinary shares represented at the Annual General Meeting in person or by proxy. Only two nominees are proposed for election as Class I directors. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the two nominees named below. If any nominee becomes unavailable for election as a result of an unexpected occurrence, shares that would have been voted for that nominee will instead will be voted for the election of a substitute nominee proposed by the Company. Each person nominated for election has agreed to serve if elected. The Company’s management has no reason to believe that any nominee will be unable to serve.
The following is a brief biography of each nominee and each director whose term will continue after the Annual General Meeting, including their respective ages as of April 7, 2015.
Nominees for Election for a Three-Year Term Expiring at the 2018 Annual General Meeting of Shareholders
William F. Daniel. Mr. Daniel, 63, has served on the Board of Directors since the Merger. Mr. Daniel, a Chartered Director and Chartered Accountant, was elected to the position of President of the Institute of Directors of Ireland in May 2013, and was originally elected to the board of the Institute of Directors in Ireland in June 2010. In February 2015, Mr. Daniel was appointed to the board of directors of Malin Corporation plc, a newly established Irish-based global life sciences company. Most recently, he was Executive Vice President and Company Secretary of Elan Corporation plc, a biotechnology company, and served in that role from December 2001 until the merger of Elan with Perrigo Company plc in December 2013. He was previously an Executive Director of Elan between 2003 and 2007, having joined the organization as Financial Controller in 1994. Mr. Daniel was previously Financial Director of Xtravision plc from 1990 to 1992 and prior to that, he held the position of Head of Finance of An Post for a period of three years. He is also a former President of the Financial Executives’ Association of Ireland. Mr. Daniel graduated with a degree in Commerce from the University College Dublin. The Nominating and Corporate Governance Committee and the Board of Directors believe that Mr. Daniel is qualified to serve as a director of the Company on the basis of his valuable financial and corporate governance expertise, which brings important strategic insight to the Board of Directors as it plans the Company’s future growth.
H. Thomas Watkins. Mr. Watkins, 62, has served on the Board of Directors since the Merger and was a director of HPI from April 2014 until the Merger. Mr. Watkins, in his most recent role, was director, president and chief executive officer of Human Genome Sciences (HGS), a biopharmaceutical company, from 2004 until HGS was acquired by GlaxoSmithKline in 2012. Before leading HGS, Mr. Watkins spent over twenty years in
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senior roles at Abbott Laboratories and its affiliates in the United States and Asia, most recently serving as the president of TAP Pharmaceutical Products, Inc., which was jointly owned by Abbott and Takeda Pharmaceutical Company, Inc. During his tenure, he led the growth of TAP from approximately $2 billion to over $4 billion in annual revenue. Mr. Watkins began his career in 1974 with Arthur Andersen & Co. From 1979 to 1985, he was a management consultant with McKinsey and Company, Inc., working with multinational companies in the United States, Europe and Japan. Mr. Watkins holds a bachelor’s degree from the College of William and Mary, and a master’s degree in business administration from the University of Chicago Graduate School of Business. Mr. Watkins is the chairman of the board of directors of Vanda Pharmaceuticals, Inc., a public biopharmaceutical company. He is also a member of the board of directors of the Biotechnology Industry Organization (BIO) and a member of the board of visitors of The College of William and Mary. The Nominating and Corporate Governance Committee and the Board of Directors believe that Mr. Watkins is qualified to serve as a director of the Company on the basis of his valuable industry experience, which brings important strategic insight to the Board of Directors as it plans the Company’s future growth.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE
Directors Continuing in Office Until the 2016 Annual General Meeting of Shareholders
Michael Grey. Mr. Grey, 62, has served on the Board of Directors and as lead independent director since the Merger, was director of HPI from September 2011 until the Merger and was lead independent director of HPI from August 2012 until the Merger. Mr. Grey has served as chairman and chief executive officer of Reneo Pharmaceuticals, Inc., a biotechnology company, since September 2014 and as a venture partner at Pappas Ventures since January 2010. From February 2011 to June 2014, Mr. Grey served as president and chief executive officer of Lumena Pharmaceuticals, Inc., a biopharmaceutical company, which was acquired by Shire plc in June 2014. Mr. Grey holds over 30 years of experience in the pharmaceutical and biotechnology industries, and has held senior positions at a number of companies, including president and chief executive officer of SGX Pharmaceuticals, Inc. (sold to Eli Lilly and Company in 2008), president and chief executive officer of Trega Biosciences, Inc. (sold to LION Bioscience, Inc. in 2001) and president of BioChem Therapeutic Inc. For approximately 20 years, Mr. Grey served in various roles with Glaxo, Inc. and Glaxo Holdings, P.L.C., culminating in his position as vice president, corporate development and director of international licensing. Mr. Grey also serves on the board of directors of BioMarin Pharmaceutical Inc. and Mirati Therapeutics, Inc., each a public biopharmaceutical company, and on the board of directors of Balance Therapeutics, Inc., Selventa, Inc. and Ziarco Group Ltd. Mr. Grey received a B.S. in chemistry from the University of Nottingham in the United Kingdom. The Nominating and Corporate Governance Committee and the Board of Directors believe that Mr. Grey is qualified to serve as a director of the Company on the basis of his extensive experience managing pharmaceutical and biopharmaceutical companies, which brings important strategic insight to the Board of Directors as it plans the Company’s future growth.
Jeff Himawan, Ph.D. Dr. Himawan, 49, has served on the Board of Directors since the Merger and was a director of HPI from its inception in March 2010 until the Merger. Dr. Himawan served on the board of directors of Horizon Pharma USA beginning in July 2007 until the formation of HPI. In 1999, Dr. Himawan joined Essex Woodlands Health Ventures, L.P., a venture capital firm, where he now serves as a managing director. Dr. Himawan also currently serves on the boards of directors of MediciNova, Inc., a public biopharmaceutical company, Light Sciences Oncology, Inc., Catalyst Biosciences, Inc. and Symphogen, Inc. Dr. Himawan previously served on the board of directors of Iomai Corporation from 2001 to 2007, when it was acquired by Intercell AG. Dr. Himawan co-founded Seed-One Ventures, a venture capital firm, where from 1996 to 2001 he served as a managing director. Dr. Himawan received his B.S. in biology from the Massachusetts Institute of Technology and his doctorate in biological chemistry and molecular pharmacology from Harvard University. The Nominating and Corporate Governance Committee and the Board of Directors believe that, as a successful venture capitalist, Dr. Himawan brings important strategic insight to the Board of Directors, as well as experience working with the investment community.
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Ronald Pauli. Mr. Pauli, 54, has served on the Board of Directors since the Merger and was a director of HPI from September 2011 until the Merger. Mr. Pauli has served as Chief Financial Officer of BioQuiddity, Inc., a biotechnology company since August 2014. Prior to that, Mr. Pauli held senior positions at a number of biopharmaceutical companies, including chief financial officer at Sagent Pharmaceuticals, Inc. from April 2007 to August 2012, chief financial officer at NeoPharm, Inc. from 2006 to 2007 and corporate controller and interim chief financial officer at Abraxis BioScience, Inc. (formerly American Pharmaceutical Partners, Inc.) from 2002 to 2006. In addition, Mr. Pauli previously served as corporate controller for Applied Power, Inc. and R.P. Scherer Corporation, held multiple finance positions at Kmart Corporation and began his career with Ernst & Whinney. Mr. Pauli received a B.S. in accounting from Michigan State University and a master’s degree in finance from Walsh College. The Nominating and Corporate Governance Committee and the Board of Directors believe that Mr. Pauli is qualified to serve as a director of the Company on the basis of his financial experience at numerous biotechnology and pharmaceutical companies, which adds valuable expertise in guiding the strategic direction of the Company and working with the investment community.
Directors Continuing in Office Until the 2017 Annual General Meeting of Shareholders
Virinder Nohria, M.D., Ph.D. Dr. Nohria, 60, has served on the Board of Directors since the Merger and was designated a member of the Board of Directors by Vidara pursuant to an agreement between the parties to the Merger. Previously, Dr. Nohria was director of Vidara from December 20, 2011 until the Merger. Dr. Nohria also serves on the board of directors of Promentis Pharmaceuticals Inc. and Sabela Pharmaceuticals, Inc. Dr. Nohria co-founded Vidara Therapeutics, Inc. in 2011 and most recently served as its President and Chief Medical Officer. Previously, Dr. Nohria was part of the founding team of Alaven Pharmaceutical LLC, a biopharmaceutical company, and served as its Chief Medical Officer, Chief Compliance Officer and Executive Vice President from 2008 until its sale to Meda AB in October 2010. Between 2003 and 2005, Dr. Nohria was Vice President and Chief Medical Officer of Xcel Pharmaceuticals Inc. Prior to that, Dr. Nohria served as Clinical Research Physician for Eli Lilly and Company. Dr. Nohria is a board-certified neurologist with special qualification in child neurology. Dr. Nohria received his medical training at the University of Cambridge in England and his postgraduate training at Great Ormond Street Children’s Hospital in London and at Duke University. He also holds a Ph.D. in neuropharmacology from University of Bradford in the United Kingdom. The Nominating and Corporate Governance Committee and the Board of Directors believe that Dr. Nohria is qualified to serve as a director of the Company on the basis of his valuable industry experience, which brings important strategic insight to the Board of Directors as it plans the Company’s future growth.
Gino Santini. Mr. Santini, 58, has served on the Board of Directors since the Merger and was a director of HPI from March 2012 until the Merger. Mr. Santini currently serves on the board of directors of AMAG Pharmaceuticals, Inc., and Vitae Pharmaceuticals, Inc., each a public biopharmaceutical company, Sorin SpA, a public medical products group, Collegium Pharmaceutical, Inc., Intarcia Therapeutics, Artax Biopharma Inc. and Allena Pharmaceuticals, Inc. and is retired from a distinguished career with Eli Lilly and Company, a pharmaceutical company. During his tenure at Eli Lilly and Company from June 1983 to December 2010, Mr. Santini held various leadership positions of increasing responsibility, including manager of various international regions, president of the women’s health franchise and president of U.S. operations. Mr. Santini capped his career at Eli Lilly and Company as a member of the company’s executive committee and as the senior vice president of corporate strategy and business development. Mr. Santini, fluent in four languages, holds an undergraduate degree in mechanical engineering from the University of Bologna and a master’s in business administration from the University of Rochester. The Nominating and Corporate Governance Committee and the Board of Directors believe that Mr. Santini’s extensive international and domestic commercial and business development experience brings important insight to the Board of Directors as it plans the Company’s future growth.
Timothy P. Walbert. Mr. Walbert, 48, has served as chairman of the Board of Directors and as our president and chief executive officer since the Merger and was chairman of the Board of Directors of HPI and HPI’s president and chief executive officer from inception in March 2010 until the Merger. Mr. Walbert has also served
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as the president and chief executive officer of Horizon Pharma USA since June 2008 and on its board of directors since July 2008. From May 2007 to June 2009, Mr. Walbert served as president, chief executive officer and director of IDM Pharma, Inc., a biopharmaceutical company which was acquired by Takeda America Holdings, Inc. in June 2009. From January 2006 to May 2007, Mr. Walbert served as executive vice president, commercial operations of NeoPharm, Inc., a biopharmaceutical company. From June 2001 to August 2005, Mr. Walbert served as divisional vice president and general manager, Immunology, where he led the global development and launch of HUMIRA, which exceeded $12.0 billion in 2014 sales, and divisional vice president, global cardiovascular strategy at Abbott, a broad-based healthcare company. From April 1998 to June 2001, Mr. Walbert served as director, Celebrex North America and arthritis team leader, Asia Pacific, Latin America and Canada at G.D. Searle & Company, a pharmaceutical company. From 1991 to 1998, Mr. Walbert also held sales and marketing roles with increasing responsibility at G.D. Searle, Merck & Co., Inc. and Wyeth. Mr. Walbert received his B.A. in business from Muhlenberg College, in Allentown, Pennsylvania. Mr. Walbert also serves on the boards of directors of XOMA Corp., a public biotechnology company, Egalet Corporation, a public pharmaceutical company, the Biotechnology Industry Organization (BIO), the Illinois Biotechnology Industry Organization (iBIO), ChicagoNEXT, a World Business Chicago (WBC) led council of technology leaders and the Greater Chicago Arthritis Foundation. In 2013, Mr. Walbert was appointed by former Illinois Governor Pat Quinn to the Illinois Innovation Council. The Nominating and Corporate Governance Committee and the Board of Directors believe that Mr. Walbert is qualified to serve as a director of the Company on the basis of his valuable industry experience, which brings important strategic insight to the Board of Directors as it plans the Company’s future growth.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Board Composition
The Board of Directors currently consists of eight members and is divided into three classes, as follows:
| • | Class I, which consists of Mr. Daniel and Mr. Watkins, and whose term will expire at the Annual General Meeting of Shareholders; |
| • | Class II, which consists of Mr. Grey, Dr. Himawan and Mr. Pauli, and whose term will expire at our 2016 Annual General Meeting of Shareholders; and |
| • | Class III, which consists of Dr. Nohria, Mr. Santini and Mr. Walbert, and whose term will expire at our 2017 Annual General Meeting of Shareholders. |
At each Annual General Meeting of Shareholders, the successors to directors whose terms then expire will serve until the third Annual General Meeting of Shareholders following their election and until their successors are duly elected and qualified. The authorized number of directors may be changed only by resolution of the Board of Directors. Any additional directorships resulting from an increase in the number of directors will be distributed between the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of the Board of Directors may have the effect of delaying or preventing changes in our control or management. Our directors may be removed by ordinary resolution with majority vote of the Company’s shareholders at a general meeting provided that extended notice of such resolution has been given in accordance with section 142 of the Irish Companies Act 1963.
Independence of the Board of Directors
As required under the NASDAQ Stock Market (“NASDAQ”) listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. The Board consults with the Company’s counsel to ensure that the Board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of NASDAQ, as in effect from time to time.
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Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his or her family members, and the Company, its senior management and its independent registered public accounting firm, the Board has affirmatively determined that the following six directors are independent directors within the meaning of the applicable NASDAQ listing standards: Mr. Daniel, Mr. Grey, Dr. Himawan, Mr. Pauli, Mr. Santini and Mr. Watkins. In making this determination, the Board found that none of these directors or nominees for director had a material or other disqualifying relationship with the Company.
Mr. Walbert, the Company’s President and Chief Executive Officer, and Dr. Nohria, a prior employee of Vidara, are not independent directors by virtue of their current and prior employment with the Company, respectively.
Code of Ethics
The Company has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all officers, directors and employees. The Code is available on the Company’s website at www.horizonpharma.com. If the Company makes any substantive amendments to the Code or grants any waiver from a provision of the Code to any executive officer or director, the Company will promptly disclose the nature of the amendment or waiver on its website.
Board Leadership Structure
The Company’s Board of Directors is currently chaired by the President and Chief Executive Officer of the Company, Mr. Walbert. The Company believes that combining the positions of Chief Executive Officer and Chairman of the Board helps to ensure that the Board and management act with a common purpose. In the Company’s view, separating the positions of Chief Executive Officer and Chairman of the Board has the potential to give rise to divided leadership, which could interfere with good decision-making or weaken the Company’s ability to develop and implement strategy. Instead, the Company believes that combining the positions of Chief Executive Officer and Chairman of the Board provides a single, clear chain of command to execute the Company’s strategic initiatives and business plans. In addition, the Company believes that a combined Chief Executive Officer/Chairman of the Board is better positioned to act as a bridge between management and the Board, facilitating the regular flow of information. The Company also believes that it is advantageous to have a Chairman of the Board with an extensive history with and knowledge of the Company (as is the case with the Company’s Chief Executive Officer) as compared to a relatively less informed independent Chairman of the Board.
The Company requires the election, by the independent directors of the Board, of an independent lead director to serve during any period when there is no independent Chairman of the Board. Because Mr. Walbert is currently serving as Chief Executive Officer and Chairman of the Board, in September 2014, in connection with the Merger, the independent directors of the Board named Mr. Grey as the lead independent director. Mr. Grey also served as the lead independent director of HPI from August 2012 until the Merger. The lead independent director periodically establishes the agenda for meetings of the independent directors, coordinates with the committee chairs to report committee matters to the full Board, presides over executive sessions and other meetings of the independent directors, conveys messages from meetings of the independent directors to the Chief Executive Officer and makes himself available to discuss with other directors any concerns they may have about the Company and its performance. The Company believes that this leadership structure provides the appropriate level of independent oversight necessary to ensure that the Board meets its fiduciary obligations to the Company’s shareholders, that the interests of management and our shareholders are properly aligned, and that we establish and follow sound business practices and strategies that are in the best interests of our shareholders.
Shareholder Communications With the Board of Directors
While we have not adopted a formal process by which shareholders may communicate with the Board or any of its directors, shareholders who wish to communicate with the Board may do so by sending written
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communications addressed to the Company Secretary of Horizon at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, Ireland or communicate online to the Board of Directors as a group. This information is available on the Company’s website at www.horizonpharma.com.
Each communication will be reviewed by Horizon’s Company Secretary to determine whether it is appropriate for presentation to the Board or such director. Examples of inappropriate communications include advertisements, solicitations or hostile communications. Communications determined by the Company Secretary to be appropriate for presentation to the Board or such director will be submitted to the Board or such director on a periodic basis.
All communications directed to the Audit Committee in accordance with the Company’s Whistleblower Hotline that relate to questionable accounting or auditing matters involving the Company will be promptly and directly forwarded to the Audit Committee.
Role of the Board in Risk Oversight
One of the Board’s key functions is informed oversight of the Company’s risk management process. The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various Board standing committees that address risks inherent in their respective areas of oversight. In particular, the Board is responsible for monitoring and assessing strategic risk exposure, including a determination of the nature and level of risk appropriate for the Company. Our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors compliance with legal, regulatory and ethical requirements, in addition to oversight of the performance of our external auditors. Our Nominating and Corporate Governance Committee monitors the effectiveness of our corporate governance guidelines, including whether they are successful in preventing illegal or improper liability-creating conduct. Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. Our Transaction Committee (known prior to the Merger as our Business Development Committee) evaluates potential strategic transactions and financing opportunities, including the risks that such transactions could pose to the Company.
Meetings of the Board of Directors
The Horizon Pharma plc Board of Directors held two meetings and did not act by unanimous written consent without a meeting during 2014. The HPI board of directors held nine meetings and did not act by unanimous written consent without a meeting during 2014. Each Board member attended 75% or more of the aggregate number of meetings of the Board and of the committees on which he served, held during the portion of the last fiscal year for which he was a director or committee member of Horizon Pharma plc or HPI.
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Information Regarding Committees of the Board of Directors
The Board has four standing committees: an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and a Transaction Committee (known prior to the Merger as our Business Development Committee). The following table provides membership and meeting information for fiscal 2014 for each of the Board committees (which includes the membership and meeting information of HPI prior to the Merger):
| Name |
Audit | Compensation | Nominating and Corporate Governance |
Transaction | ||||||||||||
| Jeffrey W. Bird, M.D., Ph.D.(1) |
X | |||||||||||||||
| William F. Daniel(2) |
X | X | ||||||||||||||
| Jean-François Formela, M.D.(3) |
X | |||||||||||||||
| Michael Grey(4) |
X | X | X | * | ||||||||||||
| Jeff Himawan, Ph.D.(5) |
X | X | * | X | ||||||||||||
| Ronald Pauli |
X | * | X | |||||||||||||
| Gino Santini(6) |
X | X | * | X | * | |||||||||||
| Timothy P. Walbert(7) |
X | |||||||||||||||
| H. Thomas Watkins(8) |
X | * | X | |||||||||||||
| Total meetings in fiscal 2014 |
4 | 5 | 6 | 3 | ||||||||||||
| * | Committee Chairperson during 2014 |
| (1) | Dr. Bird served on the HPI Board of Directors and the HPI Nominating and Corporate Governance Committee until June 2014. |
| (2) | Mr. Daniel has served on the Board of Directors, the Audit Committee and the Nominating and Corporate Governance Committee since September 2014. |
| (3) | Dr. Formela served on the HPI Board of Directors and the HPI Nominating and Corporate Governance Committee until April 2014. |
| (4) | Mr. Grey served on the HPI Audit Committee and as the Chairperson of the HPI Business Development Committee (known as the Transaction Committee following the Merger) until September 2014. |
| (5) | Dr. Himawan served on the HPI Business Development Committee (known as the Transaction Committee following the Merger) until September 2014. |
| (6) | Mr. Santini served on the HPI Audit Committee and as the Chairperson of the HPI Nominating and Corporate Governance Committee until September 2014. Mr. Santini has served as the Chairperson of the Transaction Committee since September 2014. |
| (7) | Mr. Walbert served on the HPI Business Development Committee (known as the Transaction Committee following the Merger) until September 2014. |
| (8) | Mr. Watkins has served on the Board of Directors, the Nominating and Corporate Governance Committee and the Business Development Committee (known as the Transaction Committee following the Merger) since April 2014 and as the Chairperson of the Nominating and Corporate Governance Committee since September 2014. |
Each of the committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities. The Board of Directors has determined that each member of each committee meets the applicable NASDAQ rules and regulations regarding “independence” and that each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to the Company.
Below is a description of each committee of the Board of Directors.
Audit Committee
The Audit Committee of the Board of Directors was established by the Board in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to oversee the
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Company’s corporate accounting and financial reporting processes and audits of its financial statements. The Audit Committee is composed of three non-employee directors: Mr. Pauli, Mr. Daniel and Dr. Himawan, with Mr. Pauli serving as the chairperson of the Audit Committee. All members of the Audit Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ listing standards). The Horizon Pharma plc Audit Committee met one time during the last fiscal year and the HPI Audit Committee met three times during the last fiscal year. The Audit Committee has adopted a written charter that is available to shareholders on the Company’s website at www.horizonpharma.com.
The Audit Committee performs numerous functions including, among other things:
| • | evaluating the performance, independence and qualifications of the Company’s independent registered public accounting firm and determining whether to retain the Company’s existing independent registered public accounting firm or engage a new independent registered public accounting firm; |
| • | reviewing and approving the engagement of the Company’s independent registered public accounting firm to perform audit services and any permissible non-audit services; |
| • | monitoring the rotation of partners of the Company’s independent registered public accounting firm on the Company’s engagement team as required by law; |
| • | reviewing the Company’s annual and quarterly financial statements and reports and discussing the statements and reports with the Company’s independent registered public accounting firm and management; |
| • | reviewing with the Company’s independent registered public accounting firm and management significant issues that arise regarding accounting principles and financial statement presentation, and matters concerning the scope, adequacy and effectiveness of the Company’s financial controls; |
| • | as appropriate, reviewing any earnings announcements and other public announcements regarding material developments; |
| • | establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding financial controls, accounting or auditing matters and other matters; |
| • | preparing the report that the SEC requires in the Company’s annual proxy statement; |
| • | reviewing and providing oversight with respect to any related party transactions and monitoring compliance with the Code; |
| • | reviewing the Company’s major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management is implemented; |
| • | reviewing the Company’s investment policy on a periodic basis; and |
| • | reviewing and evaluating, at least annually, the performance of the Audit Committee, including compliance of the Audit Committee with its charter. |
The Board of Directors reviews the NASDAQ listing standards definition of independence for Audit Committee members on an annual basis and has determined that all members of the Company’s Audit Committee are independent (as independence is currently defined in Rule 5605(c)(2)(A)(i) and (ii) of the NASDAQ listing standards).
The Board of Directors has also determined that Mr. Pauli qualifies as an “audit committee financial expert,” within the meaning of SEC regulations and the NASDAQ Listing Rules. In making this determination, the Board of Directors has considered Mr. Pauli’s formal education and the nature and scope of his previous experience, coupled with past and present service on various audit committees. Both the independent registered public accounting firm and management periodically meet privately with the Audit Committee.
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Report of the Audit Committee of the Board of Directors
The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
The Audit Committee reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2014 with management of the Company. The Audit Committee discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T. The Audit Committee also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and discussed with the independent registered public accounting firm the accounting firm’s independence. Based on the foregoing, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
Audit Committee
Ronald Pauli, Chairman
William F. Daniel
Jeff Himawan, Ph.D.
Compensation Committee
The Compensation Committee is composed of three non-employee directors: Mr. Grey, Dr. Himawan and Mr. Pauli, with Dr. Himawan serving as the chairperson of the Compensation Committee. All members of the Compensation Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ listing standards). The Horizon Pharma plc Compensation Committee met one time during the last fiscal year and the HPI Compensation Committee met four times during the last fiscal year. The Compensation Committee has adopted a written charter that is available to shareholders on the Company’s website at www.horizonpharma.com.
The Compensation Committee of the Board of Directors acts on behalf of the Board of Directors to review and approve or recommend for adoption and oversee the Company’s compensation strategy, policies, plans and programs, including:
| • | reviewing and approving (or if it deems appropriate, recommending to the Board of Directors regarding) the compensation and other terms of employment of the Company’s executive officers; |
| • | reviewing and approving (or if it deems appropriate, recommending to the Board of Directors regarding) performance goals and objectives relevant to the compensation of the Company’s executive officers and assessing their performance against these goals and objectives; |
| • | evaluating and approving the equity incentive plans, compensation plans and similar programs advisable for the Company, as well as modification or termination of existing plans and programs; |
| • | evaluating and approving (or if it deems appropriate, recommending to the Board of Directors regarding) the type and amount of compensation to be paid or awarded to non-employee members of the Board of Directors; |
| • | administering the Company’s equity incentive plans; |
| • | establishing policies with respect to equity compensation arrangements; |
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| • | reviewing the competitiveness of the Company’s executive compensation programs and evaluating the effectiveness of the Company’s compensation policy and strategy in achieving expected benefits to the Company; |
| • | reviewing and approving (or if it deems appropriate, recommending to the Board of Directors regarding) the terms of any employment agreements, severance arrangements, change in control protections and any other compensatory arrangements for its executive officers; |
| • | preparing the report that the SEC requires in the Company’s annual proxy statement; |
| • | reviewing the adequacy of the Company’s Compensation Committee charter on a periodic basis; |
| • | reviewing and evaluating, at least annually, the performance of the Compensation Committee; and |
| • | evaluating risks associated with the Company’s compensation policies and practices and assessing whether risks arising from the Company’s compensation policies and practices for its employees are reasonably likely to have a material adverse effect on the Company. |
Each year, the Compensation Committee reviews with management the Company’s Compensation Discussion and Analysis and considers whether to recommend that it be included in proxy statements and other filings.
In making its compensation decisions and recommendations, the Compensation Committee may take into account the recommendations of the Chief Executive Officer and other senior management, which, as defined in the Compensation Committee charter, includes any officer who reports directly to the Chief Executive Officer and any other officer of the Company or its subsidiaries so designated by the Chief Executive Officer. Other than giving such recommendations, however, the Chief Executive Officer and other senior management have no formal role and no authority to determine the amount or form of executive and director compensation.
The Compensation Committee may, at the expense of the Company, retain legal counsel (which may, but need not be, the regular corporate counsel to the Company) and other consultants and advisors to assist it with its functions. The Compensation Committee has authority to approve such advisors’ fees and other retention terms and to terminate its relationship with any advisor that it retains. In addition, the Compensation Committee has authority to delegate its responsibilities to subcommittees or individual committee members.
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee has ever been an executive officer or employee of the Company. None of the Company’s officers currently serves, or has served during the last completed year, on the compensation committee or board of directors of any other entity that has one or more officers serving as a member of our Board of Directors or Compensation Committee.
Compensation Committee Report
The material in this report is not “soliciting material,” is furnished to, but not deemed “filed” with, the SEC and is not to be incorporated by reference in any filing of Horizon under the Securities Act or Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis (“CD&A”) contained in this Proxy Statement. Based on this review and discussion, the Compensation Committee has recommended to the Board of Directors that the CD&A be included in this Proxy Statement.
Compensation Committee
Jeff Himawan, Ph.D., Chairman
Michael Grey
Ronald Pauli
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Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is composed of three non-employee directors: Mr. Daniel, Mr. Santini and Mr. Watkins, with Mr. Watkins serving as the chairperson of the Nominating and Corporate Governance Committee. All members of the Nominating and Corporate Governance Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ listing standards). The Horizon Pharma plc Nominating and Corporate Governance Committee met four times during the last fiscal year and the HPI Nominating and Corporate Governance Committee met two times during the last fiscal year. The Nominating and Corporate Governance Committee has adopted a written charter that is available to shareholders on the Company’s website at www.horizonpharma.com.
The functions of the Nominating and Corporate Governance Committee include, among other things:
| • | identifying, reviewing and evaluating candidates to serve on the Board of Directors; |
| • | determining the minimum qualifications for service on the Board of Directors; |
| • | evaluating director performance on the Board and applicable committees of the Board; |
| • | considering nominations by shareholders of candidates for election to the Board; |
| • | considering and assessing the independence of members of the Board of Directors; |
| • | developing, as appropriate, a set of corporate governance principles, and reviewing and recommending to the Board of Directors any changes to such principles; |
| • | reviewing, on a periodic basis, as appropriate, the Code and approve (or, if deemed appropriate, recommend to the Board of Directors) any changes to the Code; |
| • | periodically reviewing the Company’s policy statements to determine their adherence to its Code and considering any request by the Company’s directors or executive officers for a waiver from such Code; |
| • | reviewing the adequacy of its charter on an annual basis; and |
| • | evaluating, at least annually, the performance of the Nominating and Corporate Governance Committee. |
The Nominating and Corporate Governance Committee will consider candidates for the Board of Directors who are recommended by shareholders, directors, third party search firms engaged by the Company and other sources. When selecting candidates for recommendation to the Board of Directors, the Nominating and Corporate Governance Committee will consider the attributes of the candidates and the needs of the Board of Directors and will review all candidates in the same manner, regardless of the source of the recommendation. In evaluating director nominees, a candidate should have certain minimum qualifications, including being able to read and understand basic financial statements, having familiarity with our business and industry, having high moral character and mature judgment, and being able to work collegially with others. In addition, factors such as the following may be considered:
| • | the independence standards established by the Company, the presence of any material interests that could cause a conflict between the Company’s interests and the interests of the director nominee, and the director nominee’s ability to exercise his or her best business judgment in the interest of all shareholders; |
| • | the director nominee’s willingness to adhere to the Code; |
| • | the director nominee’s ability to devote sufficient time to the business of the Board of Directors and at least one of the standing committees of the Board of Directors, in light of the number of other boards on which the director nominee serves (for profit and not-for-profit) and the other business and professional commitments of the director nominee; |
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| • | the appropriate size and the diversity of the Company’s Board of Directors; |
| • | the knowledge, skills and experience of the director nominee, including experience in the industry in which the Company operates, as well as in the general areas of business, finance, management and public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board of Directors; |
| • | the director nominee’s familiarity with domestic and international business matters; |
| • | legal and regulatory requirements that are applicable to the Company; |
| • | the director nominee’s experience with accounting rules and practices; |
| • | the director nominee’s ability to enhance the relationship of the Company’s business to the changing needs of society; and |
| • | the desire of the Board of Directors to balance the considerable benefit of continuity with the periodic injection of the fresh perspective provided by new members. |
The Nominating and Corporate Governance Committee believes in an expansive definition of diversity that includes differences of experience, education and talents, among other things. While the Nominating and Corporate Governance Committee does not have a formal policy in this regard, the diversity of the Board is listed as a factor to be considered in evaluating candidates for the Board, among others, in the Horizon Pharma plc Nominating and Corporate Governance Committee Charter, which is available on our website. The Nominating and Corporate Governance Committee seeks to achieve a range of talents, skills and expertise on the Board and evaluates each nominee with regard to the extent to which he or she contributes to this overall mix.
The Nominating and Corporate Governance Committee will consider director candidates recommended by Horizon shareholders. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates a candidate for nomination to the Board based on whether or not the candidate was recommended by a Horizon shareholder.
Shareholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board at an Annual General Meeting of Shareholders must do so by delivering a written recommendation to the Nominating and Corporate Governance Committee c/o Horizon Pharma plc, Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, Ireland, Attn: Company Secretary, (i) no earlier than the close of business on November 9, 2015, which is 150 days prior to the first anniversary of the date this Proxy Statement was first released to members in connection with the Annual General Meeting, if such nomination is to be included in the Company’s proxy statement and form of proxy relating to an annual general meeting of shareholders, and (ii) no later than the close of business on January 8, 2016, which is 90 days prior to the first anniversary of the date this Proxy Statement was first released to shareholders in connection with the Annual General Meeting, if such nomination is not to be included in the Company’s proxy statement and form of proxy relating to an annual general meeting of shareholders. Each submission must:
| • | set forth the name, age, business address and residence address of each individual whom the shareholder proposes to nominate for election or re-election as a director; |
| • | set forth the principal occupation or employment of such nominee; |
| • | set forth the class and number of our ordinary shares which are owned of record and beneficially by such nominee; |
| • | set forth the date or dates on which such ordinary shares were acquired and the investment intent of such acquisition; |
| • | include a completed and signed questionnaire, representation and agreement required by article 99.4 of our articles of association; |
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| • | include such other information concerning such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved), or that is otherwise required pursuant to Regulation 14A under the Exchange Act and the rules and regulations promulgated thereunder (including such proposed nominee’s written consent to being named as a nominee and to serving as a director if elected); and |
| • | include the information required by article 99.3 of our articles of association. |
Transaction Committee
The Transaction Committee is composed of three directors: Mr. Grey, Mr. Santini and Mr. Watkins, with Mr. Santini serving as the chairperson of the Transaction Committee. All members of the Transaction Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ listing standards).
The functions of the Transaction Committee include, among other things:
| • | reviewing, considering and evaluating proposed product or business acquisitions or divestitures, licensing, distribution, promotion, collaboration and other commercial agreements and arrangements, joint ventures, and any other business development transactions; |
| • | reviewing, considering and evaluating proposed financing opportunities, including the issuance of equity, debt and convertible securities; |
| • | reviewing, considering and evaluating proposed Existing Debt Dealings (as defined in the charter of the Transaction Committee); |
| • | monitoring negotiations and other communications with third parties in connection with potential business development transactions, financing opportunities and debt discharge opportunities; |
| • | considering historical and current information regarding the Company’s business, prospects, financial condition, operations, capabilities, products, management, advisors, competitive position and industry, and how these factors may affect business development, financing opportunities and debt discharge opportunities; |
| • | considering general economic, industry and financial market conditions and trends, and how these factors may affect business development, financing opportunities and debt discharge opportunities; |
| • | meeting with management to identify and assist the Board in evaluating opportunities that will further the Company’s business development strategy; and |
| • | periodically reviewing and evaluating prior transactions and financings for consistency with, and achievement of, the Company’s strategic business goals, objectives or plans. |
The Transaction Committee met two times during the last fiscal year. The HPI Business Development Committee met one time during the last fiscal year. The Transaction Committee has adopted a written charter that is available to shareholders on the Company’s website at www.horizonpharma.com.
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The following table sets forth information regarding executive officers as of April 7, 2015:
| Name |
Age | Position with the Company | ||||
| Timothy P. Walbert |
48 | President, Chief Executive Officer and Chairman of the Board of Directors | ||||
| Robert F. Carey |
56 | Executive Vice President, Chief Business Officer | ||||
| Paul W. Hoelscher |
50 | Executive Vice President, Chief Financial Officer | ||||
| David G. Kelly |
54 | Executive Vice President, Company Secretary and Managing Director, Ireland | ||||
| John J. Kody |
47 | Executive Vice President, Chief Commercial Officer | ||||
| Barry J. Moze |
61 | Executive Vice President, Corporate Development | ||||
| Jeffrey W. Sherman, M.D., FACP |
60 | Executive Vice President, Research and Development and Chief Medical Officer | ||||
The following is biographical information as of April 7, 2015 for our executive officers other than Mr. Walbert, whose biographical information is included above.
Robert F. Carey. Mr. Carey has served as our executive vice president, chief business officer since the Merger. Mr. Carey previously served as executive vice president and chief business officer of HPI from March 2014 until the Merger. Prior to joining the Company, Mr. Carey spent more than 11 years as managing director and head of the life sciences investment banking group at JMP Securities LLC, a full-service investment bank. Prior to JMP, Mr. Carey was a managing director in the healthcare groups at Dresdner Kleinwort Wasserstein and Vector Securities. Mr. Carey also has held roles at Red Hen Bread, InStadium, Shearson Lehman Hutton and Ernst & Whinney. Mr. Carey received his B.S. in accounting from the University of Notre Dame.
Paul W. Hoelscher. Mr. Hoelscher has served as our executive vice president, chief financial officer since October 2014. Previously, he was executive vice president, finance of HPI from June 2014 through September 2014. Mr. Hoelscher also served as company secretary from the Merger until November 2014. Prior to joining HPI, Mr. Hoelscher served as senior vice president, finance — treasury and corporate development of OfficeMax, Inc., an office supply company, from August 2013 to May 2014, and as vice president, finance — treasury and corporate development of OfficeMax from August 2012 to July 2013. From May 2011 to May 2012, Mr. Hoelscher served as vice president, finance integration of Alberto Culver Company, a beauty care company which was acquired by Unilever in 2011. Prior to that, Mr. Hoelscher served as vice president, international finance and treasurer from 2010 to May 2011 and vice president, corporate controller from 2004 to 2010. From 1993 to 2004, Mr. Hoelscher served in other positions of increasing responsibility at Alberto Culver, including manager, corporate accounting; director, corporate finance; senior director, corporate finance; and corporate controller. Mr. Hoelscher also served in various positions in the audit practice at KPMG LLP from 1986 to 1993. Mr. Hoelscher received his B.S. in accountancy from the University of Illinois at Urbana-Champaign and is a certified public accountant.
David G. Kelly. Mr. Kelly has served as our company secretary since November 2014 and as our executive vice president, managing director, Ireland, since the Merger. Prior to joining Horizon, Mr. Kelly served as chief financial officer of the Vidara Therapeutics Group from February 2012 to September 2014, and was previously chief financial officer of AGI Therapeutics plc, a publicly-listed Irish pharmaceutical company, from May 2005 to January 2012. Mr. Kelly also served as senior vice president, finance and planning of Warner Chilcott plc (formerly Galen Holdings plc), a fully integrated specialty pharmaceutical company based in Northern Ireland. In addition, Mr. Kelly held roles at Elan Corporation and KPMG. Mr. Kelly holds a B.A. in economics from Trinity College, Dublin and is also a member of the Institute of Chartered Accountants in Ireland (ACA).
John J. Kody. Mr. Kody has served as our executive vice president, chief commercial officer since November 2014. Previously, Mr. Kody was president of Leica Biosystems Richmond Inc., a biotechnology
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company and subsidiary of Danaher Corporation, from April 2010 to November 2014. Before joining Leica, Mr. Kody held various vice president level positions at Baxter Healthcare Corporation, a diversified healthcare company, from 2006 to 2010. Prior to joining Baxter in 2006, Mr. Kody was a business unit director and then a sales director at Abbott. He previously served as director of strategy for the neuroscience division at Eli Lilly and Company from 1997 to 2003. Earlier in his career, Mr. Kody was employed with Hill-Rom Holdings, Inc. and Ford Motor Company. Mr. Kody received a bachelor’s degree in mechanical engineering from the University of Michigan and an MBA from the University of Michigan’s Ross School of Business.
Barry J. Moze. Mr. Moze has served as our executive vice president, corporate development since the Merger and is responsible for corporate strategy, human resources, information technology, project management, business operations and government affairs. Mr. Moze previously served as executive vice president, corporate development of HPI from May 2014 until the Merger. In addition, Mr. Moze has spent more than 28 years as Partner of Crystal Clear Communications, a consulting firm focused on the development and execution of corporate strategies. Prior to Crystal Clear, Mr. Moze was a founder and president of Review Services and Asset Management Group, a licensed investment advisory firm. Mr. Moze serves on the board of Palermo Villa.
Jeffrey W. Sherman, M.D., FACP. Dr. Sherman has served as our executive vice president, research and development and chief medical officer since the Merger. From June 2011 until the Merger, Dr. Sherman served as executive vice president, development, manufacturing and regulatory affairs and chief medical officer of HPI, and from HPI’s inception in March 2010 to June 2011, Dr. Sherman served as HPI’s executive vice president, development and regulatory affairs and chief medical officer. Dr. Sherman joined Horizon Pharma USA as executive vice president, development and regulatory affairs and chief medical officer in June 2009. From June 2009 to June 2010, Dr. Sherman served as president and board member of the Drug Information Association, or DIA, a nonprofit professional association of members who work in government regulatory, academia, patient advocacy, and the pharmaceutical and medical device industry. Dr. Sherman is now a past president of DIA and serves as DIA liaison to the Clinical Trial Transformation Initiative, a public-private partnership founded by the U.S. Food and Drug Administration and Duke University to improve the quality and efficiency of clinical trials. He also serves on the Board of Advisors of the Center for Information and Study on Clinical Research Participation, a nonprofit organization dedicated to educating and informing the public, patients, medical/research communities, the media, and policy makers about clinical research and the role each party plays in the process. Dr. Sherman is an adjunct assistant professor of Medicine at the Northwestern University Feinberg School of Medicine and is a member of a number of professional societies as well as a diplomat of the National Board of Medical Examiners and the American Board of Internal Medicine. From August 2007 to June 2009, Dr. Sherman served as senior vice president of research and development and chief medical officer at IDM which was acquired by Takeda in 2009. From June 2007 to August 2007, Dr. Sherman served as vice president of clinical science at Takeda, a pharmaceutical research and development center. From September 2000 to June 2007, Dr. Sherman served as chief medical officer and executive vice president at NeoPharm, Inc., a biopharmaceutical company. From October 1992 to August 2000, Dr. Sherman served as director, senior director and executive director of clinical research and head of oncology global medical operations at Searle/Pharmacia, a pharmaceutical company. Prior to joining Searle, Dr. Sherman worked in clinical pharmacology and clinical research at Bristol-Myers Squibb Company, a biopharmaceutical company. Dr. Sherman received his M.D. from the Rosalind Franklin University/Chicago Medical School. Dr. Sherman completed an internal medicine internship, residency and chief medical residency at Northwestern University as well as fellowship training at the University of California, San Francisco. Dr. Sherman was also a research associate at the Howard Hughes Medical Institute at UCSF.
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Compensation Discussion and Analysis
Overview
This Compensation Discussion and Analysis discusses the compensation philosophy, policies and principles underlying our executive compensation decisions for 2014. On September 19, 2014, the businesses of Horizon Pharma, Inc. and Vidara Therapeutics International Public Limited Company were combined in a merger transaction which we refer to as the Merger, with Vidara changing its name to Horizon Pharma plc in connection with the Merger. The following discussion and analysis applies to executive compensation of Horizon Pharma, Inc. through closing of the Merger and to Horizon Pharma plc after closing of the Merger. It provides qualitative information on the factors relevant to these decisions and the manner in which compensation is awarded to the following executive officers who have been named in the Summary Compensation Table included in this Proxy Statement and whom we refer to as our named executive officers:
| Named Executive Officer |
Title | |
| Timothy P. Walbert |
Chairman, President and Chief Executive Officer | |
| Robert F. Carey(1) |
Executive Vice President, Chief Business Officer | |
| Paul W. Hoelscher(2) |
Executive Vice President, Chief Financial Officer | |
| John J. Kody(3) |
Executive Vice President, Chief Commercial Officer | |
| Barry J. Moze(4) |
Executive Vice President, Corporate Development | |
| Robert J. De Vaere(5) |
Former Executive Vice President, Chief Financial Officer |
| (1) | Mr. Carey was hired as our Executive Vice President, Chief Business Officer in March 2014. |
| (2) | Mr. Hoelscher joined Horizon as our Executive Vice President, Finance in June 2014 and became our Chief Financial Officer on October 1, 2014. |
| (3) | Mr. Kody was hired as our Executive Vice President, Chief Commercial Officer in November 2014. |
| (4) | Mr. Moze was hired as our Executive Vice President, Corporate Development in May 2014. |
| (5) | Mr. De Vaere was our Executive Vice President and Chief Financial Officer until his retirement from the Company on September 30, 2014 in connection with the appointment of Mr. Hoelscher as our Chief Financial Officer. Mr. De Vaere continues to serve as a consultant to the Company. |
Executive Summary
Our Compensation Committee believes that our executive compensation program is appropriately designed and reasonable in light of the executive compensation programs of our industry group and peer group companies in that it both encourages our named executive officers to work for our long-term prosperity and reflects a pay-for-performance philosophy, without encouraging our employees to assume excessive risks.
2014 was a transformational year for Horizon. The highlights of our performance during 2014 included:
| • | The price of our ordinary shares increased approximately 69% over the period from January 1 to December 31, 2014, outperforming our peer group. |
| • | On September 19, 2014, we completed the Merger, with the resulting company, Horizon Pharma plc, headquartered in Dublin, Ireland. |
| • | Presented encouraging data from a Phase 2 clinical study of ACTIMMUNE (interferon gamma-1b) treatment in children with FA and announced plans to file an IND for a Phase 3 study for ACTIMMUNE, which was filed the first quarter of 2015. |
| • | We received Orphan Drug Designation from the FDA for ACTIMMUNE in Friedreich’s Ataxia. |
| • | We acquired the U.S. rights to PENNSAID 2% on October 17, 2014 along with an eight-year exclusive manufacturing agreement. |
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| • | We received three additional patents from the U.S. Patent and Trademark Office with claims covering VIMOVO with patent terms through 2022 and a Notice of Allowance from the U.S. Patent and Trademark Office on a patent application covering VIMOVO and titled “Method for Treating a Patient at Risk for Developing an NSAID-associated Ulcer” as well as subsequently received the corresponding patent in February 2015 with patent terms out to 2031 and we received an additional Notice of Allowance from the U.S. Patent and Trademark Office with expected claims covering RAYOS out to 2027. |
| • | We achieved strong revenue growth, primarily from the sales of our marketed products, VIMOVO, DUEXIS and RAYOS, as well as ACTIMMUNE, acquired in connection with the Merger. Net revenues were $297 million in 2014, representing an increase of 301% over net revenues of $74 million in 2013. |
| • | We significantly increased the breadth and depth of our management team with the addition of Robert F. Carey, Paul W. Hoelscher, David G. Kelly, John J. Kody and Barry J. Moze as executive vice presidents and multiple positions filled at the senior vice president and vice president levels. |
We have had strong stock price performance and revenue growth as measured against our peer group for a sustained period. The following charts illustrate the level of our stock price performance and revenue growth as measured against our peer group over a three year period:
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The major aspects of our 2014 executive compensation program include the following:
| • | No Guaranteed Salary Increases or Bonus Awards. We do not provide our named executive officers with guaranteed salary increases or bonuses. Our named executive officers are employed at-will and are expected to demonstrate strong performance in order to continue serving as members of the executive team. |
| • | 2014 Annual Cash Incentive Program. Payouts under our 2014 Annual Cash Incentive Program were linked to attainment of our 2014 key corporate performance objectives. |
| • | Equity Grants. We granted options and restricted stock unit awards which serve as retention device, because the executive must continue employment with us for the awards to vest, and also serve to align our named executive officer’s interest with those of our shareholders. |
| • | Cash Long-Term Incentive Program. We adopted a new cash long-term incentive program which is designed to put a large portion of our named executive officers’ total potential compensation at risk, with payout levels tied to our level of total shareholder return and contingent upon the creation of long-term shareholder value. |
| • | Share Ownership Guidelines. In 2014, our Board of Directors adopted minimum share ownership guidelines for our Board of Directors, Chief Executive Officer, Executive Vice Presidents and certain other employees who serve on our executive leadership team. |
| • | No Excessive Perquisites. We do not provide personal lifestyle perquisites, such as country club memberships, vacation units, personal use of aircraft, personal entertainment accounts or similar perquisites. |
2015 Compensation Program Changes
In March 2015 we granted stock options, restricted stock units, and performance-based stock unit awards to our leadership team, including our named executive officers, to recognize the outstanding stock performance and significant value delivered to shareholders over the past several years, and more recently since the Merger, as well as to provide incentives going forward that continue to align our executive and shareholder interests. The performance-based stock unit awards will vest at different amounts based upon our level of total shareholder return over a three-year performance period beginning on March 23, 2015. The performance based stock unit awards are intended to put a large portion of our named executive officers’ total compensation at risk and with payouts contingent upon the creation of significant long-term shareholder value as further described below under “Proposed Equity Long-Term Incentive Program.”
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Consideration of Shareholder Advisory Votes
At our 2012 Annual Meeting of Stockholders, the Board recommended and our shareholders agreed to hold an advisory vote on executive compensation each year. In addition to holding an annual advisory vote on executive compensation, we are committed to ongoing engagement with our shareholders on executive compensation and corporate governance issues. Our say-on-pay vote held at our 2014 Annual Meeting of Stockholders was supported by approximately 91.3% of the votes affirmatively cast, excluding abstentions and broker non-votes. While this vote was only advisory, our Compensation Committee interpreted it to be a very positive affirmation from our shareholders that they strongly endorse our historical compensation philosophy, policies and decisions.
Compensation Objectives
We believe in providing a competitive total compensation package to our executive management team through a combination of base salary, annual bonuses, grants under our cash long-term incentive program, grants under our equity incentive compensation plan and severance and change in control benefits. Our executive compensation programs are designed to achieve the following objectives:
| • | attract and retain talented and experienced executives to manage our business to meet our long-term objectives; |
| • | motivate and reward executives whose knowledge, skills and performance are critical to our success; |
| • | align the interests of our executive officers and shareholders by motivating executive officers to achieve performance objectives that will increase shareholder value; |
| • | provide a competitive compensation package in which total compensation is determined in part by market factors, key performance objectives and milestones and the achievement level of these performance objectives and milestones by our executive officers; and |
| • | reward the achievement of key corporate and individual performance measures. |
Our Compensation Committee believes that our executive compensation programs should include short- and long-term performance incentive components, including cash and equity-based compensation, and should reward consistent performance that meets or exceeds expectations by increasing base salary levels, awarding cash bonuses and granting additional equity awards, as appropriate. The Compensation Committee evaluates both performance and compensation to make sure that the total compensation provided to our executives remains competitive relative to compensation paid by companies of similar size and stage of development operating in the pharmaceutical industry, taking into account our relative performance and our own strategic objectives.
Setting Executive Compensation
Our Board of Directors has delegated to the Compensation Committee of our Board of Directors, which is composed of independent directors under SEC regulations and the NASDAQ Listing Rules, responsibility for creating, reviewing and approving, or, if it deems appropriate, making recommendations for approval to the Board, the compensation of our executive officers. The Compensation Committee also oversees our compensation and benefit plans and policies and administers our equity incentive plans.
Generally on an annual basis the Compensation Committee reviews and approves, or recommends for Board approval, the compensation to be paid to our Chief Executive Officer and other executive officers. As part of this process, the Compensation Committee conducts an annual review of the aggregate level of our executive compensation, the mix of elements used to compensate our executive officers and historic compensation levels, including prior equity award gains and losses.
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When setting executive compensation levels the Compensation Committee has historically considered compensation paid by life sciences companies included in the Radford Global Life Sciences Survey, together with other information made available to it, such as compensation analysis performed by independent, third-party compensation specialists. The Compensation Committee generally believes that gathering this information is an important part of our compensation-related decision-making process and typically provides additional context and validation for our executive compensation decisions. Although our Compensation Committee has historically used the Radford survey data as a tool in determining executive compensation, it typically has not used a formula to set our executives’ compensation in relation to this data. In addition, our Compensation Committee has typically taken into account advice from other non-employee members of our Board of Directors and publicly available data relating to the compensation practices and policies of other companies within and outside our industry.
The Compensation Committee has also considered and intends to continue to consider key performance objectives and milestones and the achievement level of these performance objectives and milestones by our executive officers as well as market factors in setting their base compensation and target bonus levels, and awarding bonuses and long-term incentives.
Compensation Consultants
The Compensation Committee retains the services of third-party executive compensation specialists and consultants from time to time, as it sees fit, in connection with the establishment of cash and equity compensation and related policies. In 2013 and 2014, we engaged Compensia Inc., an executive compensation specialist to analyze our executive compensation practices. In the second half of 2014, we engaged ClearBridge Compensation Group as our new compensation consultant because of ClearBridge’s experience in developing long-term equity incentive programs for other companies that have successfully aligned management and shareholder interests. In November 2014, ClearBridge was engaged to develop a new comprehensive long-term incentive compensation program for our executive team, including our named executive officers, as further described below under “Cash Long-Term Incentive Program” and “Proposed Equity Long-Term Incentive Program.”
Peer Group
In mid-2014, in anticipation of the closing of the Merger and the increased responsibilities that would apply to our executive team members following its completion, we had Compensia prepare an analysis of our compensation practices with respect to base salaries, annual bonuses, and long-term incentive grant practices against the practices of an industry peer group of 24 pharmaceutical companies with similar market capitalizations, number of employees and revenue levels as anticipated to be in effect for the Company following the closing of the Merger. The following table shows the companies that made up our benchmark peer group. As of December 31, 2014, these peer group companies have a median market capitalization of approximately $3.5 billion, as compared to our current market capitalization of approximately $2.8 billion.
| Peer Group | ||
| Acorda Therapeutics | InterMune | |
| Aegerion Pharmaceuticals | Isis Pharmaceuticals | |
| Alkermes | Jazz Pharmaceuticals | |
| ARIAD Pharmaceuticals | Medicines Co. | |
| Auxillium Pharma | Medivation | |
| Avanir Pharmaceuticals | Myriad Genetics | |
| BioMarin Pharmaceuticals | Nektar Therapeutics | |
| Cubist Pharmaceuticals | NPS Pharmaceuticals | |
| Depomed | Pacira Pharmaceuticals | |
| Endo International | Pharmacyclics | |
| Impax Laboratories | Salix Pharmaceuticals | |
| Incyte | United Therapeutics | |
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Benchmarking
In September 2014, the Compensation Committee reviewed our compensation philosophy. The philosophy is to attract and retain top talent with experience in building and leading a successful specialty pharmaceutical organization, provide competitive compensation and benefits opportunities that motivate appropriate risk taking to achieve success, clearly communicate the drivers of business success to create a sense of urgency and ownership among employees, create a direct, meaningful link between business results, individual performance and rewards to motivate over-achievement, to provide flexibility in our compensation plans to allow differentiation for our employees with the highest performance and potential, to create equitable pay opportunities for management and high-level individual contributors and to align interests of management, employees and shareholders to set priorities and focus. In September 2014, the Compensation Committee determined that it would change to generally referencing the 50th percentile of comparable companies in combination with multiple other factors, such as the executives’ respective levels of experience and responsibility, internal pay equity, and the other compensation elements provided to the executives, in determining the total target cash compensation for all executives. Prior to September 2014, the philosophy was to generally reference the 50th to 75th percentile of the total compensation of comparable companies in combination with multiple other factors in determining total target cash compensation.
Independence of Compensation Consultants
In June 2014, the Compensation Committee conducted an independence and performance assessment of Compensia. In conducting the independence assessment, the Compensation Committee considered the following factors: whether Compensia provided any other services to the Company; the amount of fees received by Compensia from the Company as a percentage of Compensia’s total revenues; the policies and procedures of Compensia that are designed to prevent conflicts of interest; any business or personal relationship of the individual representative of Compensia who worked directly with the Compensation Committee; any of the Company’s stock owned by the individual representative of Compensia who worked directly with the Compensation Committee; and any business or personal relationship of the individual representative of Compensia who worked directly with the Compensation Committee, or of Compensia, with any of our executive officers. After conducting this assessment, the Compensation Committee concluded that the retention of Compensia did not raise any conflict of interest.
In June 2014, the Compensation Committee also conducted an independence assessment of ClearBridge as a precursor to engaging ClearBridge as its new compensation consultant. In conducting the independence assessment, the Compensation Committee considered the following factors: whether ClearBridge would provide any other services to the Company; the amount of fees anticipated to be received by ClearBridge from the Company as a percentage of ClearBridge’s total revenues; the policies and procedures of ClearBridge that are designed to prevent conflicts of interest; any business or personal relationship of the individual representative of ClearBridge who would work directly with the Compensation Committee; any of the Company’s stock owned by the individual representative of ClearBridge who would work directly with the Compensation Committee; and any business or personal relationship of the individual representative of ClearBridge who would work directly with the Compensation Committee, or of ClearBridge, with any of our executive officers. After conducting this assessment, the Compensation Committee concluded that the planned engagement of ClearBridge did not raise any conflict of interest.
Role of Chief Executive Officer in Compensation Decisions
The Chief Executive Officer typically evaluates the performance of other executive officers and employees, along with the performance of the Company as a whole against previously determined objectives, on an annual basis and makes recommendations to the Compensation Committee with respect to annual base salary adjustments, bonuses, cash performance incentives and annual equity awards for the other executives. The
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Compensation Committee exercises its own independent discretion in approving or recommending to the Board for approval base salary adjustments and cash bonuses, cash performance incentives and equity-based awards for all executive officers. The Chief Executive Officer is not present during deliberations or voting with respect to his own compensation.
Ownership Guidelines for Directors and Executive Officers
In September 2014, our Board of Directors adopted share ownership guidelines for the Company’s non-employee directors, Chief Executive Officer, Executive Vice Presidents and certain other employees who serve as members of our executive leadership team, including the named executive officers, or the covered individuals. Under the guidelines, these individuals are expected to own a number of the Company’s ordinary shares with a value equal to: five times (5x) base salary, for the Chief Executive Officer; two times (2x) base salary, for the Executive Vice Presidents, and one time (1x) base salary for each other member of the executive leadership team; and two times (2x) the director’s annual equity grant value, for each non-employee director of the Company.
The guidelines provide that the individuals subject to the guidelines are expected to establish the minimum ownership levels within five years of the adoption of the guidelines (or within five years of the date an officer or director first becomes subject to them).
The value of the Company’s ordinary shares for purposes of determining the number of shares subject to these guidelines in a given year is determined as the product of (i) the number of ordinary shares credited as held by the individual and (ii) the greater of (a) the closing price of the company’s ordinary shares on the applicable date, or (b) the purchase or exercise price paid for such shares. Shares that count toward satisfaction of these guidelines include: shares owned outright by the individual (including stock units that have vested but not yet settled); shares retained after an option exercise or issuance under another type of equity award granted under the company’s equity incentive plans; shares retained after purchase under our Employee Stock Purchase Plan; shares subject to time-based vesting stock units that have not vested; shares held in a 401(k) plan account; and shares held in trust for the benefit of the individual. Any unvested performance stock units and unexercised stock options, whether vested or unvested, will not count toward satisfaction of these ownership guidelines.
Elements of Executive Compensation
The compensation program for our executive officers consists principally of base salary, annual cash incentive compensation and long-term compensation in the form of our Cash Long-Term Incentive Program and equity awards, as well as severance protection for certain of our executive officers through employment agreements with those executive officers. As discussed in more detail below, base salary is based primarily on market factors and annual cash incentive compensation is a target percentage of base salary, with the actual amount awarded determined by the Compensation Committee based upon its determination of the level of attainment of performance goals. The amount of cash compensation and the amount of equity awards granted to our executives are both considered in determining total compensation for our executive officers.
Historically, we have not specified a target percentage of the overall compensation to be represented by the various compensation elements. The Compensation Committee’s intention was that performance-based cash incentive bonuses and long-term equity compensation should be a significant part of the executive’s compensation, and historically, it has represented a significant portion of an executive’s total pay package (consisting of base salary, bonus, performance-based cash incentive compensation and equity compensation), so that approximately 30% to 70% of our named executive officers total pay package is at risk. This helps with implementing a culture in which our named executive officers know that their take home pay depends, to a large extent, upon the Company’s performance. Employees in more senior roles have an increasing proportion of their total pay package at risk and tied to performance because they are in a position to have greater influence on the Company’s performance results. For example, approximately 82% of our Chief Executive Officer’s total pay
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package was at risk. For purposes of such calculations, with respect to stock option grants, the Black-Scholes value on the date of grant was used and with respect to stock unit award values, the value of the underlying shares on the date of grant was used.
The following charts illustrate the elements of the 2014 total pay package for our Chief Executive Officer and other named executive officers and the respective percentages which were at risk:
We have selected each of the executive compensation components for the following reasons:
| • | Taken as a whole, the components of the executive compensation program (base pay, annual cash incentive compensation, long-term incentive compensation and our severance benefit protections) are comparable to the programs offered by other companies of our size in the pharmaceutical industry; therefore, our compensation program generally helps us attract new executive talent and retain, motivate, and reward the executives that we currently employ. |
| • | The annual cash incentive program rewards executives for the satisfaction of our pre-established annual corporate performance goals. Compensation under this program directly rewards satisfaction of our corporate objectives and individual performance. We provide this program so that our executives will focus their efforts on annual company goals that are driven by our longer term strategy, and to take actions that maximize shareholder value. Our Compensation Committee rewards executives only in the event of satisfactory corporate and individual performance. |
| • | Long-term incentive awards serve several purposes: first, they are a retention device, because the executive must continue employment with us for the awards to vest; and second, our Cash Long-Term Incentive Program awards that vest upon satisfaction of corporate performance goals incentivize our executives to satisfy key performance objectives that will maximize shareholder value, and long-term equity incentive awards that vest over time become more valuable as shareholder value increases. |
Base Salary
Base salaries for our executives are established based on the scope of their responsibilities, individual experience and market factors. Base salaries are reviewed annually, typically in connection with our annual performance review process. In December 2013, our Compensation Committee recommended increases to the base salaries for our executive officers, effective January 1, 2014, after a review of the Radford survey data for comparable companies and executive officer positions, executive officer salaries at the peer group companies, and individual and company performance. The Compensation Committee recommended and the Board of Directors approved a 3.0% increase to the annual base salary of Mr. De Vaere to $386,168 and a 9.3% increase to
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the base salary for Mr. Walbert to $644,100. These 2014 base salary increases were approved because the Board of Directors determined that these named executive officers should be rewarded for our above target performance during 2013 and their individual efforts in contributing to such performance.
In connection with the hiring of Mr. Carey in March 2014 and the hiring of Messrs. Moze and Hoelscher in May and June 2014, respectively, our Compensation Committee considered their base salaries provided at their prior employers and the base salaries for similarly situated executives at our peer companies, as well as internal pay equity. Based on its evaluation of these factors, our Compensation Committee approved that an annual base salary of $400,000 was appropriate for Mr. Carey, an annual base salary of $375,000 was appropriate for Mr. Hoelscher, and an annual base salary of $300,000 was appropriate for Mr. Moze, each of which became effective on their respective dates of hire. In September 2014, the Compensation Committee, after referencing the 50th percentile of base salary compensation provided to individuals in similar positions at the new peer group companies and considering other factors, approved base salary increases for each of Messrs. Walbert, Carey, Hoelscher and Moze which would become effective upon the closing of the Merger in order to reflect their increased responsibilities. Additionally, with respect to Mr. Moze, an increase was approved to reflect his transition from part-time to full-time employment in September 2014. The base salary increases became effective on September 19, 2014 and are reflected in the table below.
In connection with the hiring of Mr. Kody in November 2014, our Compensation Committee considered his base salary provided at his prior employer and the base salaries for similarly situated executives at our peer companies, as well as internal pay equity. Based on its evaluation of these factors, our Compensation Committee approved that an annual base salary of $427,000 was appropriate for Mr. Kody effective on his date of hire.
Base salaries for each of our named executive officers as of the end of 2014 were as follows:
| Named Executive Officer |
Final 2014 Base Salaries |
|||
| Timothy P. Walbert |
$ | 805,000 | ||
| Robert F. Carey |
$ | 427,000 | ||
| Paul W. Hoelscher |
$ | 427,000 | ||
| John J. Kody |
$ | 427,000 | ||
| Barry J. Moze |
$ | 427,000 | ||
| Robert J. De Vaere(1) |
N/A | |||
| (1) | Mr. De Vaere retired from the Company on September 30, 2014. |
Short-Term Incentive Compensation
VIMOVO Acquisition Bonus. In December 2013, the Compensation Committee recommended and the Board of Directors approved a one-time bonus payment to certain employees, including named executive officers, related to the completion of the acquisition of the U.S. rights to VIMOVO from AstraZeneca AB in November 2013. The Compensation Committee deliberated and determined that the VIMOVO acquisition was a significant value creation event for the Company and that the executive officers should be compensated separately for their completion of the acquisition. The one-time bonus amounts approved were $300,000 for Mr. Walbert and $150,000 for Mr. De Vaere. The Compensation Committee and the Board further determined that these one-time bonus payments should be made in the form of fully vested stock units for a number of shares of our common stock with a value equal to the bonus payment amounts as of the award date, so that the Board of Directors approved 43,290 stock units for Mr. Walbert and 21,640 stock units for Mr. De Vaere. Shares of common stock were issued in settlement of the stock units on May 15, 2014.
Signing and Relocation Bonus. We have not historically paid any guaranteed bonuses to the named executive officers. From time to time, we pay signing bonuses in connection with the commencement of
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employment of executive officers, contingent upon their continued service, such as the signing and relocation bonuses paid to Messrs. Carey and Kody pursuant to their employment agreements. Mr. Carey’s employment agreement provided for a relocation bonus of $155,339. The relocation bonus was provided to Mr. Carey in order to compensate him for the costs of relocating his residence to the Chicago, Illinois area. If Mr. Carey had been terminated for cause or had resigned without good reason prior to March 5, 2015, the one year anniversary of his date of hire, he would have been required to repay his retention and signing bonus in full. Mr. Kody’s employment agreement provided for a signing bonus of $150,000 which was intended to compensate him for the annual bonus he forfeited upon termination of employment with his former company. If Mr. Kody is terminated with cause or resigns without good reason prior to November 24, 2015, the one year anniversary of his date of hire, he will be required to repay his retention and signing bonus in full.
2014 Annual Cash Incentive Compensation. In addition to base salaries, we provide performance-based cash bonuses as an incentive for our executives to achieve defined annual corporate goals. In December 2013, the Compensation Committee approved raising Mr. Walbert’s target cash bonus as a percentage of his base salary from 60% to 70% and to recommend raising Mr. De Vaere’s target cash bonus as a percentage of his base salary from 40% to 50% in order to reflect their above target performance during 2013 and to bring their target total cash compensation in line with the targeted peer group level. Target cash bonuses of 50% of their base salaries were established for each of Messrs. Carey, Hoelscher, Kody and Moze pursuant to the terms of their respective employment agreements, which were approved by the Compensation Committee. These established target bonus percentages were deemed market competitive based on Radford survey data and peer group data available at the time of hire of the executive officers and based on other then-current data. Bonus target percentages are reviewed annually and may be adjusted by the Board of Directors or the Compensation Committee, in its discretion, although pursuant to their respective employment agreements, such percentages may not be reduced without the consent of the executive.
In September 2014, the Compensation Committee approved increasing Mr. Walbert’s target cash bonus opportunity to 100% of his then current base salary effective upon the closing of the Merger in order to reflect his increased responsibilities and to align his total cash compensation with the 50th percentile of the new peer group companies.
Target cash bonus opportunities for 2014 as a percentage of current base salary for each of our named executive officers were as follows:
| Named Executive Officer |
2014 Target Bonus as Percentage of Base Salary |
|||
| Timothy P. Walbert |
100 | % | ||
| Robert F. Carey |
50 | % | ||
| Paul W. Hoelscher |
50 | % | ||
| John J. Kody |
50 | % | ||
| Barry J. Moze |
50 | % | ||
| Robert J. De Vaere(1) |
50 | % | ||
| (1) | Pursuant to the terms of his Transition Agreement, Mr. De Vaere is eligible to earn a 2014 performance bonus based on his contributions to the Company during 2014. |
At the beginning of 2014, the Compensation Committee, in consultation with management, approved the 2014 corporate goals and milestones for the executive officers. Each of these corporate objectives and milestones was assigned a certain weight, with 2014 bonus payments to be determined based on achievement of the various objectives. Final determinations as to 2014 bonus levels would be generally based on the achievement of these corporate goals or milestones, as well as the Compensation Committee’s assessment as to each executive’s contribution to the overall development of our business and corporate accomplishments during 2014.
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The 2014 quantitative and qualitative corporate objectives established as guidelines at the beginning of 2014 by the Compensation Committee and their relative weightings were:
Quantitative Objectives (80%)
| • | Achieve total net revenue of $226 million (30%). |
| • | Achieve adjusted non-GAAP net income of $35 million (25%). |
| • | Finish 2014 with cash balance of at least $70 million without a capital raise (10%). |
| • | Acquire new product(s) with expected annual net revenues of $50 million (15%). |
Qualitative Objectives (20%)
| • | Ensure corporate culture of compliance by achieving our corporate objectives while operating in a fully compliant manner (10%). |
| • | Continue to build organization through recruitment and retention of key talent and providing opportunities for development and advancement of organization (5%). |
| • | Ensure any product and/or company acquisitions are integrated seamless to achieve board-approved deal financial models (5%). |
The Compensation Committee determined that with respect to the quantitative objectives, the minimum and maximum performance levels and corresponding payout levels would be as follows, with a minimal threshold of attainment of 90% of the objective required for any payout and a maximum payout level of 200% with respect to each objective:
| Quantitative Objective |
Percent of Target Bonus |
Minimum Level 90% of objective (75% payout)* |
100% of objective (100% payout)* |
125% Payout* |
150% Payout* |
200% Payout (Maximum Level)* |
||||||||||||||||||
| Total Net Revenue |
30 | % | $ | 200 | $ | 226 | $ | 249 | $ | 271 | $ | 316 | ||||||||||||
| Adjusted Net Income |
25 | % | $ | 30 | $ | 35 | $ | 39 | $ | 42 | $ | 47 | ||||||||||||
| Year-end Cash Balance |
10 | % | $ | 60 | $ | 70 | $ | 75 | $ | 80 | $ | 85 | ||||||||||||
| Acquire New Products |
15 | % | $ | 25 | $ | 50 | $ | 75 | $ | 100 | $ | 125 | ||||||||||||
| * | All dollar amounts in the table above are in the millions. |
Additionally, the Compensation Committee determined that the 2014 performance-based cash bonuses would be capped at 150% of base salary.
The Compensation Committee recommended and the Board of Directors approved these goals because it believed that they were the best indicators of the achievement of the execution of our operating plan and are the factors that were most critical to increasing total shareholder value. These goals, therefore, were determined to be the most well suited to align the financial interests of the named executive officers with those of our shareholders. In February 2015, the Compensation Committee determined that these 2014 quantitative corporate objectives had been attained at an aggregate level of 184.4% of the targeted levels and that the 2014 qualitative objectives had been attained at 100.0% of the targeted levels. The Compensation Committee determined that 2014 bonus award levels would be generally determined based on the level of attainment of the foregoing 2014 quantitative and qualitative corporate objectives, with adjustments made to reflect the personal contributions of individual executives in helping to attain those objectives and the overall development of our business and corporate accomplishments during 2014.
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In determining their applicable 2014 performance bonus award levels the Compensation Committee considered the personal contributions that the named executive officers had made in attaining the following transformative results during 2014:
In February 2015, based on management’s recommendations and the Compensation Committee’s own review, deliberation and determination of achievement of the corporate objectives and milestones listed above, along with determination of the named executive officers individual contributions toward meeting those objectives and milestones described above, the Compensation Committee approved cash bonus awards for our named executive officers as follows, which were paid in March 2015:
| Named Executive Officer |
2014 Awarded Performance Bonus |
Percentage of 2014 Target Bonus Awarded |
||||||
| Timothy P. Walbert |
$ | 1,207,500 | 150 | % | ||||
| Robert F. Carey |
$ | 457,613 | 214 | % | ||||
| Paul W. Hoelscher |
$ | 400,000 | 187 | % | ||||
| John J. Kody |
$ | 37,231 | 167 | % | ||||
| Barry J. Moze |
$ | 400,000 | 187 | % | ||||
| Robert J. De Vaere(1) |
$ | 400,000 | 207 | % | ||||
| (1) | Pursuant to the terms of his Transition Agreement, Mr. De Vaere was eligible to earn a 2014 performance bonus based on his contributions to the Company during 2014. |
Discretionary Bonus. Additionally, in February 2015 the Compensation Committee approved an additional discretionary bonus of $292,500 for Mr. Walbert due to his individual contributions in attaining our corporate objectives and transformative results during 2014. Mr. Walbert’s additional 2014 performance discretionary bonus was paid in March 2015.
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Long-Term Incentive Compensation
Cash Long-Term Incentive Program. In November 2014 we adopted our Cash Long-Term Incentive Program, or Cash LTIP, which is intended to provide significant economic incentives for our executive team to create significant long-term shareholder value by tying the program payout levels to our applicable level of total shareholder return, or TSR, over the designated performance period of November 5, 2014 through May 5, 2015 and to also require a minimum level of TSR over a three year period ending on November 5, 2017 as a general condition to payment of any amounts under the Cash LTIP. For such purposes, TSR means the percentage change in the price of the Company’s ordinary shares on a compounded annualized basis plus the dollar value of dividends and distributions made or declared divided by the closing price of the Company’s ordinary shares on the record date of the dividends and distributions.
Each of our named executive officers, with the exception of Mr. De Vaere, has been designated as a participant in the Cash LTIP. To earn a Cash LTIP bonus, the named executive officer must remain employed by us through November 4, 2017 unless the earlier departure from employment is due to death, disability, termination without cause or a change in control transaction. Bonus payments under the Cash LTIP, if any, will be made after November 4, 2017 unless a change in control occurs prior to such date.
Participants in the Cash LTIP will be eligible for a specified cash bonus, the amount of which bonus is determined by whether our total compounded annualized TSR for the period from November 5, 2014 through May 5, 2015 is greater than or equal to a specified threshold that ranges between 15% and 60%, and which bonus will be earned and payable only if the TSR for the period from November 5, 2014 to November 4, 2017 is greater than 15%.
The TSR for the period from November 5, 2014 through May 5, 2015 will be calculated using the 20-trading-day volume weighted average trading price of our ordinary shares, or VWAP, on each of November 5, 2014 and May 5, 2015, and the TSR for the period from November 5, 2014 to November 4, 2017 will be calculated using the VWAP on each of November 5, 2014 and November 4, 2017. The VWAP on November 5, 2014 was $12.08. If the VWAP as of May 5, 2015 is less than $12.95, the TSR for the period from November 5, 2014 through May 5, 2015 would be less than 15%, so no bonuses would be paid under the Cash LTIP. Even if the TSR for the period from November 5, 2014 through May 5, 2015 is 15% or greater, if the VWAP as of November 4, 2017 is less than or equal to $18.37, the TSR for the period from November 5, 2014 to November 4, 2017 would not be greater than 15%, so no bonuses would be paid under the Cash LTIP. The ordinary share price thresholds above do not take into account possible dividends during the measurement period.
In determining the applicable award levels under the Cash LTIP to our named executive officers, the Compensation Committee considered the overall increase in our value that would be necessary to achieve such payouts and amounts that would be sufficient to motivate our executive team to exert extraordinary efforts to increase our value. For example, in order to receive the maximum payout under the Cash LTIP, our total shareholder return from November 5, 2014 through May 5, 2015 would have to increase by at least 60%, resulting in an overall increase in our value of approximately $390 million during such period. The applicable potential payout levels to our named executive officers under the Cash LTIP are as follows:
| TSR Level | ||||||||||||||||
| Named Executive Officer |
> 15% and < 25% | > 25% and < 40% | > 40% and < 60% | > 60% | ||||||||||||
| Timothy P. Walbert |
$ | 1,202,000 | $ | 2,137,000 | $ | 3,205,000 | $ | 4,541,000 | ||||||||
| Robert F. Carey |
$ | 414,000 | $ | 737,000 | $ | 1,105,000 | $ | 1,566,000 | ||||||||
| Paul W. Hoelscher |
$ | 414,000 | $ | 737,000 | $ | 1,105,000 | $ | 1,566,000 | ||||||||
| John J. Kody |
$ | 414,000 | $ | 737,000 | $ | 1,105,000 | $ | 1,566,000 | ||||||||
| Barry J. Moze |
$ | 332,000 | $ | 589,000 | $ | 884,000 | $ | 1,253,000 | ||||||||
2014 Equity Incentives. We believe that providing our executives the opportunity to increase their ownership of our stock better aligns the interests of shareholders and executives and encourages long-term
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performance. The stock awards enable our executive officers to benefit from the appreciation of shareholder value, while personally participating in the risks of business setbacks. Our equity incentive plans have provided our executive officers the primary means to acquire equity or equity-linked interests in the Company. These equity awards are generally approved and granted in the first quarter of each year.
In January 2014, based on the recommendation of the Compensation Committee, the Board of Directors granted restricted stock units and stock options to Messrs. Walbert and De Vaere as part of their overall compensation package. The stock option grants were as follows: 223,000 stock options for Mr. Walbert and 70,000 stock options for Mr. De Vaere. The restricted stock unit grants were as follows: 198,000 restricted stock units for Mr. Walbert and 62,000 restricted stock units for Mr. De Vaere. These equity award levels were determined by the Compensation Committee as appropriate in order to reward them for our above-target performance in 2013, as well as compensate for the lower level of equity awards previously granted to them in January 2013 due to the limited number of shares available for grant under the equity incentive plan at that time. Subject to continued services, the restricted stock units vest in four equal annual installments, and the options vest in 48 equal monthly installments, in each case commencing January 2, 2014.
In January 2014, the Board of Directors approved the grant of 10,000 stock options to Mr. Moze in consideration of the services he was then providing to Horizon as a consultant. These options vest in 48 equal monthly installments commencing January 2, 2014, subject to continued services.
In connection with the hiring of Messrs. Carey, Moze, Hoelscher and Kody they were each granted new-hire stock options and new hire restricted stock unit awards as part of their overall compensation package which was approved by the Board of Directors. The new-hire stock option grants were as follows: 140,000 stock options for Mr. Carey, 72,300 stock options for Mr. Moze, 90,000 stock options for Mr. Hoelscher and 128,000 stock options for Mr. Kody. Subject to continued services, the new hire stock options vest 25% on the first anniversary of the date of hire and thereafter in 36 equal monthly installments. The new-hire restricted stock unit grants were as follows: 124,000 restricted stock units for Mr. Carey, 80,000 restricted stock units for Mr. Hoelscher, 64,300 restricted stock units for Mr. Moze and 75,900 restricted stock units for Mr. Kody. Subject to continued services, the new-hire restricted stock units vest in four equal annual installments commencing on the date of hire. In connection with his hiring, Mr. Carey was also granted 100,000 inducement stock options which fully vest on the first anniversary of his date of employment. It was determined that these level of grants of new-hire equity awards were appropriate in order to provide the executives with sufficient equity to induce them to join Horizon. Mr. Moze was initially granted fewer stock options and restricted stock units than our other Executive Vice Presidents to reflect his initial part-time employment status.
In September 2014 the Board of Directors determined to grant an additional 17,700 stock options and an additional 15,700 restricted stock units to Mr. Moze in order to reflect his transition from part-time to full-time employment at that time so that his total equity award levels would be consistent with those provided to our other Executive Vice Presidents.
2015 Equity Incentives. In March 2015 the Compensation Committee granted stock option and restricted stock unit awards subject to time-based vesting, or the Time-Based Grants, and performance-based vesting stock unit awards, or PSU Awards, to our named executive officers, which are the 2015 equity awards. The Compensation Committee granted the 2015 equity awards in order to recognize the outstanding stock performance and significant value delivered to shareholders over the past several years, and more recently since the Merger, as well as to provide incentives going forward that continue to align our executive and shareholder interests. The Time-Based Grants and PSU Awards are up-front grants intended to cover the next three years of equity grants for the executive team. The Time-Based Grants also recognize the fact that, due to management’s low ownership relative to our peer group, management has not had the opportunity to share in the value created to date consistent with competitive market practice.
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The Company’s performance has been outstanding, with significant returns delivered to shareholders over time, specifically:
| • | 72% stock price appreciation year-to-date in 2015 through March 23, 2015. |
| • | 79% stock price appreciation since the close of the Merger. |
| • | 850% total stock price appreciation since January 1, 2013, or approximately 160% compound annual stock price appreciation. |
At the same time, the executive team’s ownership is generally below the 25th percentile of the peer group and in case of the Chief Executive Officer, significantly below the 25th percentile, and therefore executives have not had the full opportunity to share in the value delivered to shareholders.
| Horizon | Peer Group Ownership | |||||||||||||||
| Current Ownership(1) | 25th | 50th | ||||||||||||||
| Named Executive Officer |
Shares | %
of OSO(2) |
Percentile | Percentile | ||||||||||||
| Timothy P. Walbert |
1,366,643 | 0.8 | % | 1.6 | % | 2.5 | % | |||||||||
| Robert F. Carey |
427,678 | 0.3 | % | 0.3 | % | 0.5 | % | |||||||||
| Paul W. Hoelscher |
170,000 | 0.1 | % | 0.2 | % | 0.4 | % | |||||||||
| John J. Kody |
203,900 | 0.1 | % | n/a | (3) | n/a | (3) | |||||||||
| Barry J. Moze |
182,106 | 0.1 | % | 0.2 | % | 0.4 | % | |||||||||
| (1) | Horizon Current Ownership includes shares held directly, exercisable and unexercisable stock options, and unvested stock units. |
| (2) | Based on 165,378,725 fully diluted Ordinary Shares Outstanding, or OSO, as of March 20, 2015 (includes (i) outstanding shares, (ii) potential shares to be issued from outstanding stock options, stock units and warrants and (iii) potential shares to be issued from outstanding convertible notes and exchangeable notes). |
| (3) | Data is not available for the comparable management role at peer companies. |
The compensation committee approved the 2015 equity awards to achieve the following objectives:
| • | Set executive officers’ ownership at more market-competitive levels, reward for performance achieved to date and continue to align executives with future value creation through time-vested equity grants in a combination of stock options and restricted stock units. See “Time-Based Grants” below for further discussion. |
| • | Provide executives an additional performance-based equity opportunity tied to delivering future total shareholder returns over the next three years at levels above expected market rates of return through a grant of PSU Awards. |
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Time-Based Grants. The following table reflects the number of options and restricted stock units subject to the Time-Based Grants. These grant amounts were set to provide our named executive officers with more competitive ownership levels, using the 50th percentile of our peer group as a reference point. Except for a portion of Mr. Walbert’s option, all the options were granted effective March 23, 2015 and have an exercise price per share of $22.14, which was the closing share price on the grant date. Mr. Walbert’s stock option was granted effective March 23, 2015 with respect to 1,050,000 shares subject to the option and because of the Section 162(m) limits on annual grants of options contained in the 2014 Plan 1,650,000 shares subject to the option were approved contingent and effective upon shareholder approval of the Amended 2014 Plan pursuant to Proposal 2 of this Proxy Statement. If Proposal 2 is approved by the shareholders, then the option exercise price for 1,650,000 of Mr. Walbert’s options will be equal to the closing share price on May 6, 2015. Subject to continued services, the options vest 25% on the first anniversary of the date of grant and thereafter in 36 equal monthly installments and the restricted stock units vest in four equal annual installments commencing on the date of grant.
| March 23, 2015
Grant (Time-Based Grants) |
Time-Based Option Grant Subject to Shareholder Approval |
Pro Forma Ownership |
Peer Group Ownership Percentile |
|||||||||||||||||||||||||||||
| Named Executive Officer |
Options | RSUs | Shares | % of OSO(1) | 25th | 50th | 75th | |||||||||||||||||||||||||
| Timothy P. Walbert |
1,050,000 | 500,000 | 1,650,000 | 4,566,643 | 2.6 | % | 1.6 | % | 2.5 | % | 3.1 | % | ||||||||||||||||||||
| Robert F. Carey |
276,000 | 124,000 | — | 827,678 | 0.5 | % | 0.3 | % | 0.5 | % | 0.8 | % | ||||||||||||||||||||
| Paul W. Hoelscher |
276,000 | 124,000 | — | 570,000 | 0.3 | % | 0.2 | % | 0.4 | % | 0.7 | % | ||||||||||||||||||||
| John J. Kody |
276,000 | 124,000 | — | 603,900 | 0.3 | % | n/a | (2) | n/a | (2) | n/a | (2) | ||||||||||||||||||||
| Barry J. Moze |
173,000 | 77,000 | — | 432,106 | 0.3 | % | 0.2 | % | 0.4 | % | 0.5 | % | ||||||||||||||||||||
| (1) | Based on 172,819,725 fully diluted OSO as of March 23, 2015 (includes (i) outstanding shares, (ii) potential shares to be issued from outstanding stock options, stock unit and warrants, (iii) potential shares to be issued from outstanding convertible notes and exchangeable notes and (iv) the Time-Based Grants, including grants subject to shareholder approval). |
| (2) | Data not available for the comparable management role at peer companies. |
PSU Awards. In order to further align our leadership team with delivering outstanding returns to shareholders, in March 2015 the Compensation Committee granted PSU Awards to our leadership team members including our named executive officers, which is a group of approximately 30 employees who serve at the chief executive officer, executive vice president, senior vice president and vice president levels. The PSU Awards are intended to provide significant economic incentives for our leadership team to create significant long-term shareholder value by tying the PSU Award vesting levels to significant total shareholder return hurdles over a three-year performance period commencing March 23, 2015. Specifically, the total shareholder return, or TSR, during the three-year performance period starting on March 23, 2015 must be at least 15% compounded annually (implied 20-day volume weighted average trading price of our ordinary shares (“20-day VWAP”) of at least $32.70 on March 22, 2018) in order for any portion of a PSU Award to vest and must be at least 60% compounded annually (implied 20-day VWAP of at least $88.06 on March 22, 2018) for the maximum PSU Award to vest, as shown in the table below.
TSR will be measured using a base price of $21.50, which is equal to the 20-day VWAP ending on March 23, 2015, the date of grant. TSR will be measured through three separate ending measurement dates occurring on December 22, 2017, March 22, 2018, and June 22, 2018. One-third of the target PSU Award will be measured at each measurement date and the PSU Award vesting level will be determined pursuant to the schedule below based on the compound annual TSR from March 23, 2015 through the applicable measurement date. To the extent that the compound annual TSR falls between the levels shown on the chart below, straight-line interpolation will be applied to determine the number of PSU Awards to vest. If the compound annual TSR falls below the 15% threshold hurdle as determined on each of the measurement dates, and no earlier change in control has occurred prior to such measurement dates, the PSU Award will be forfeited in its entirety. For purposes of measurement of the PSU Awards, TSR means the percentage change in the price of the Company’s ordinary shares on a compounded annualized basis, plus the value of reinvested dividends.
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The implied future 20-day VWAP to achieve the TSR hurdles are shown in the table below:
| Three-Year Compound Annual TSR |
Implied 20-day VWAP on March 22, 2018 (Assuming No Dividends) |
Implied Total Market Value |
PSU Award Payout as a Multiple | |||
| Less than 15% |
Less than $32.70 | Less than $5.4 billion | No award earned (all PSUs cancelled) | |||
| 15% |
$32.70 | $5.4 billion | 1X Target Award | |||
| 30% |
$47.24 | $7.8 billion | 2X Target Award | |||
| 45% |
$65.55 | $10.8 billion | 3X Target Award | |||
| 60% or greater |
Greater than or equal to $88.06 | $14.6 billion | 4X Target Award |
In determining the PSU Award levels granted to our executive officers, the compensation committee considered the overall increase in our total market value that would be necessary to achieve the applicable PSU Award vesting levels and amounts that would be sufficient to reward our executive officers for exerting extraordinary efforts to increase our value. For example, in order for the maximum PSU Awards to vest, our total shareholder return from March 23, 2015 to March 22, 2018 would have to equal at least 60% (implied 20-day VWAP of $88.06 on March 22, 2018), resulting in an overall increase in our value of approximately $10.9 billion during such period (based on a 20-day VWAP of $21.50 on March 23, 2015 and assuming no change in fully diluted common shares outstanding). The compensation committee determined that such compensation levels would be appropriate for our executive officers in the event that we meet these aggressive performance goals. The PSU Award levels and resulting pro-forma ownership for each of our named executive officers are as follows:
| Compound Annual TSR at Each TSR Hurdle Rate | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| < 15%
TSR (Implied Price <$32.70) |
15%
TSR (Implied Price =$32.70) |
30%
TSR (Implied Price =$47.24) |
45%
TSR (Implied Price =$65.55) |
60% TSR (Implied Price =$88.06) |
Peer
Group Ownership Percentiles |
|||||||||||||||||||||||||||||||||||||||||||||||
| Total PSUs Earned |
Pro-Forma Ownership % of OSO (1) |
Total PSUs Earned |
Pro-Forma Ownership % of OSO(1) |
Total PSUs Earned |
Pro-Forma Ownership % of OSO(1) |
Total PSUs Earned |
Pro-Forma Ownership % of OSO(1) |
Total PSUs Earned |
Pro-Forma Ownership % of OSO(1) |
|||||||||||||||||||||||||||||||||||||||||||
| Named Executive Officer |
25th | 50th | 75th | |||||||||||||||||||||||||||||||||||||||||||||||||
| Timothy P. Walbert |
— | 2.6 | % | 675,000 | 3.0 | % | 1,350,000 | 3.3 | % | 2,025,000 | 3.6 | % | 2,700,000 | 4.0 | % | 1.6 | % | 2.5 | % | 3.1 | % | |||||||||||||||||||||||||||||||
| Robert F. Carey |
— | 0.5 | % | 233,000 | 0.6 | % | 466,000 | 0.7 | % | 699,000 | 0.8 | % | 932,000 | 1.0 | % | 0.3 | % | 0.5 | % | 0.8 | % | |||||||||||||||||||||||||||||||
| Paul W. Hoelscher |
— | 0.3 | % | 233,000 | 0.5 | % | 466,000 | 0.6 | % | 699,000 | 0.7 | % | 932,000 | 0.8 | % | 0.2 | % | 0.4 | % | 0.7 | % | |||||||||||||||||||||||||||||||
| John J. Kody |
— | 0.3 | % | 233,000 | 0.5 | % | 466,000 | 0.6 | % | 699,000 | 0.7 | % | 932,000 | 0.8 | % | n/a | (2) | n/a | (2) | n/a | (2) | |||||||||||||||||||||||||||||||
| Barry J. Moze |
— | 0.3 | % | 186,000 | 0.4 | % | 372,000 | 0.5 | % | 558,000 | 0.5 | % | 744,000 | 0.6 | % | 0.2 | % | 0.3 | % | 0.5 | % | |||||||||||||||||||||||||||||||
| (1) | Pro-Forma Ownership % of OSO based on (a) pro-forma ownership, which includes shares held directly, exercisable and unexercisable stock options, and unvested RSUs, including the Time-Based Grants, and PSU Awards corresponding with the TSR level of achievement shown in the table above, divided by (b) fully diluted common shares outstanding, which includes 172,819,725 potentially fully diluted OSO as of March 23, 2015 (which includes the Time-Based Grants), as well as PSU Awards corresponding with the TSR level of achievement shown in the table above. |
| (2) | Data not available for the comparable management role. |
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The Compensation Committee determined that the PSU Awards are aligned with shareholder interests and support a strong pay-for-performance orientation. The design of the PSU Awards, with aggressive TSR hurdles (15% minimum and 60% max), strongly aligns management with continuing to deliver outstanding returns to shareholders over the next three years. If these aggressive TSR hurdles are met, the increase in our share price will deliver a significant increase in our total shareholder value as shown in the following table:
| Horizon Pharma Total Outstanding Equity Grants |
||||||||||||||||||||
| Date |
Required Share Price Achievement(1) |
Implied Total Market Value (Billions)(2) |
Total Outstanding Equity Grants (Millions)(3) |
% of Fully Diluted Common Shares Outstanding(4) |
Estimated Percentile Rank Relative to Peers |
|||||||||||||||
| Prior to 3/23/2015 |
n/a | $ | 3.7 | 9.1 | 5.5 | % | 5 | th | ||||||||||||
| With 3/23/2015 Time-Based Grants |
$ |
22.14 for Options |
|
$ | 3.7 | 16.6 | 9.6 | % | 52 | nd | ||||||||||
| With 3/23/2015 Time-Based Grants + TSR Grants at 1x |
$ | 32.70 | $ | 5.4 | 19.2 | 11.0 | % | 69 | th | |||||||||||
| With 3/23/2015 Time-Based Grants + TSR Grants at 2x |
$ | 47.24 | $ | 7.8 | 21.9 | 12.3 | % | 80 | th | |||||||||||
| With 3/23/2015 Time-Based Grants + TSR Grants at 3x |
$ | 65.55 | $ | 10.8 | 24.5 | 13.6 | % | 82 | nd | |||||||||||
| With 3/23/2015 Time-Based Grants + TSR Grants at 4x |
$ | 88.06 | $ | 14.6 | 27.2 | 14.8 | % | 89 | th | |||||||||||
| (1) | On March 22, 2018, assuming no dividends. |
| (2) | Uses diluted OSO for Horizon of 165,378,725 as of 3/20/2015 for each scenario. |
| (3) | Excludes shares directly held as direct ownership data is not available for all employees for Horizon or the peer group. |
| (4) | Diluted OSO for Horizon includes 165,378,725 diluted shares outstanding as of 3/20/2015 plus additional shares granted in each scenario. |
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Pursuant to the current terms of the 2014 Equity Incentive Plan, there is a limit of 631,844 shares that can be subject to performance-based awards that can be granted to any individual annually. As reflected in the “New Plan Benefits” table in Proposal 2 of this Proxy Statement, for each of the named executive officers, the number of ordinary shares that may be earned for each PSU Award for TSR achievement above the 15% TSR hurdle level is subject to shareholder approval of the Amended 2014 Plan, which includes an increase to the maximum number of performance-based awards that can be granted to any individual annually, In addition, for our Chief Executive Officer, 45,000 ordinary shares of his PSU Award at the 15% TSR level is also subject to shareholder approval of the Amended 2014 Plan. The following table details the portion of the PSU Awards which are subject to shareholder approval for each named executive officer:
| 15% TSR | 30%, 45% and 60% TSR PSU Grant Subject to Shareholder Approval |
|||||||||||||||
| Named Executive Officer |
PSU Grant Not Subject to Shareholder Approval |
PSU Grant Subject to Shareholder Approval |
Low | High | ||||||||||||
| Timothy P. Walbert |
630,000 | 45,000 | 675,000 | 2,025,000 | ||||||||||||
| Robert F. Carey |
233,000 | 233,000 | 699,000 | |||||||||||||
| Paul W. Hoelscher |
233,000 | 233,000 | 699,000 | |||||||||||||
| John J. Kody |
233,000 | 233,000 | 699,000 | |||||||||||||
| Barry J. Moze |
186,000 | 186,000 | 558,000 | |||||||||||||
Additionally, in order for any portion of the PSU Awards granted under the program to vest, the grantee must remain employed by us through March 22, 2018 unless the earlier departure from employment is due to death, disability, termination without cause or a change in control transaction. In the event of a termination without cause or good reason resignation prior to the end of the performance period, the grantee is still eligible to vest in a pro-rated portion of the award based on the number of months the grantee was employed during the performance period, still subject to the attainment of the TSR levels during the full performance period. In the event of a termination for any reason other than death, disability, termination without cause, good reason resignation or termination in connection with a change in control transaction that occurs prior to the end of the performance period, the grantee will forfeit the entire PSU Award.
If a change in control of Horizon occurs during the performance period, then the portion of the PSU Award that may be earned will be calculated based on the level of annualized TSR attained through the date of the change in control. In order for the PSU Award to vest and be earned following any change in control, the grantee will still be generally required to remain employed by us or our successor through March 22, 2018 unless the earlier departure from employment is due to (i) death, (ii) disability, or (iii) termination without cause or a good reason resignation.
To further align executives’ interests with those of shareholders and to discourage excessive risk-taking, to the extent that the PSU Awards granted to our executives vest, any vested shares will be subject to an additional two-year holding requirement. Specifically, shares will be issued in settlement of 50% of the vested PSU Award on March 22, 2019 (one year following vesting) and for the remaining 50% on March 22, 2020 (two years following vesting). However, the vested PSU Award shares will be issued immediately in the event of the named executive officer’s death or disability or upon a change in control of Horizon which occurs prior to such scheduled issuance dates.
Severance Benefits
Our named executive officers are entitled to certain severance benefits. We believe these severance benefits are in line with those provided by our peer group and are an essential element of our overall executive compensation package and assist us in recruiting and retaining talented individuals and aligning the executives’ interests with the best interests of the shareholders.
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Our named executive officers each have severance benefit protection under the terms of their employment agreements which provide for up to 12 months’ base salary and COBRA health insurance premiums in the event of an involuntary or constructive termination. Mr. Walbert is also entitled to receive his target annual bonus amount in the event of his involuntary termination. In the event of an involuntary or constructive termination in connection with a change in control, Mr. Walbert has severance benefit protection under the terms of his employment agreement which provides for up to 24 months’ base salary, two years of target bonus and 12 months COBRA health insurance premiums, and each of our other named executive officers has severance benefit protection under the terms of his employment agreement which provides for up to 12 months’ base salary, one year of target bonus and 12 months COBRA health insurance premiums. In addition, stock option and other equity awards are subject to acceleration under the terms of their employment agreements in the event of a qualifying termination within 90 days prior to or within 18 months following a change in control. Each of our named executive officers must enter into a non-competition agreement that is to be effective during the period that the severance benefits are payable.
Severance benefits to our executives are payable only if the executive’s employment is involuntarily terminated without cause or constructively terminated under certain circumstances. The Compensation Committee believes that these benefits are an important element of the named executive officers’ retention and motivation and are consistent with compensation arrangements provided in a competitive market for executive talent, and that the benefits of such severance rights agreements, including generally requiring a release of claims against us as a condition to receiving any severance benefits are in our best interests. The severance benefits are also intended to eliminate, or at least reduce, the reluctance of our executive officers to diligently consider and pursue potential change of control transactions that may be in the best interests of our shareholders.
De Vaere Transition Agreement
In June 2014, we entered into an executive employment and transition agreement with Mr. De Vaere, or Transition Agreement, which replaced and superseded Mr. De Vaere’s prior executive employment agreement with the Company and which provided for Mr. De Vaere’s retirement from the Company to be effective on September 30, 2014. The Transition Agreement provides that Mr. De Vaere would continue to serve as a full-time consultant for a fee of $50,000 per month from October 1, 2014 through March 31, 2015 and would serve as a part-time consultant for a fee of $20,000 per month from April 1, 2015 through September 30, 2015. The Compensation Committee determined that the consulting fees were appropriate in comparison with Mr. De Vaere’s base salary as in effect during his employment and the need to have Mr. De Vaere provide consulting transition services in order to provide continuity and efficiency in connection with the Company’s hiring of a new Chief Financial Officer.
The Transition Agreement also provides that Mr. De Vaere would be eligible to receive an annual 2014 performance bonus based on Mr. De Vaere’s service to the Company during calendar year 2014. The Compensation Committee determined that Mr. De Vaere should be eligible to earn an annual cash performance incentive bonus for 2014 in light of the exceptional services he had previously provided to the Company and the importance of the transition consulting services that he would be providing to us for the remainder of 2014.
Mr. De Vaere’s Transition Agreement also provides for full accelerated vesting of all equity awards held by him effective on September 30, 2014. The Transition Agreement further provides that Mr. DeVaere would receive severance benefits effective commencing April 1, 2015 in the form of regular payments equivalent to Mr. De Vaere’s monthly base salary at the rate in effect prior to his termination of employment for a period of 12 months and up to 12 months’ COBRA health insurance premiums. The Compensation Committee recommended and our Board of Directors approved these severance benefits for Mr. De Vaere as consistent with the severance terms of his employment agreement.
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Section 4985 Excise Tax
In connection with the Merger, each individual who is or was an executive officer or director of Horizon and subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, at any time during the period commencing six months before and ending six months after the closing of the transaction, including each of our named executive officers, became subject to an excise tax under Section 4985 of the Internal Revenue Code on the value of certain stock compensation held at any time during the same period by the covered individual.
The excise tax applied to all payments (or rights to payment) granted to the covered individuals by Horizon in connection with the performance of services if the value of such payment were based on (or determined by reference to) the value of stock in Horizon (excluding certain statutory incentive stock options and holdings in tax qualified plans). This includes any outstanding nonqualified stock options, whether vested or unvested, restricted stock awards that remain subject to forfeiture, unvested restricted stock unit awards, vested but deferred shares and unvested performance restricted stock unit awards, in each case which are held by the covered individuals during this twelve month period. However, even if the excise tax is applicable generally, the excise tax did not apply to (i) any stock option which was exercised prior to the closing date of the Merger, or to the stock acquired in such exercise, if the related income were recognized on or before the closing date of the transaction, and (ii) any other specified stock compensation which is exercised, sold, distributed, cashed-out, or otherwise paid prior to the closing date of the Merger in a transaction in which income was recognized by the security holder.
Our Board of Directors carefully considered the impact of the potential Section 4985 excise tax on the named executive officers, determining that the imposition of the tax on the named executive officers, when the vesting of outstanding equity awards subject to the excise tax is not being accelerated and the named executive officers would receive no additional benefit in connection with the transaction, would result in the affected individuals being deprived of a substantial portion of the value of their equity awards. The Board of Directors concluded that it would not be appropriate to permit a significant burden arising from a transaction expected to bring significant strategic and financial benefits to Horizon and its shareholders, including operational and tax synergies, to be imposed on the individuals most responsible for consummating the transaction and promoting the success of the combined companies.
In addition, the Board of Directors assessed and compared the relative costs and benefits of two potential approaches for mitigating the possible impact of the Section 4985 excise tax: (1) reimbursing the covered individuals for the Section 4985 excise tax that would be payable by them as a result of the transaction (and any resulting income), and (2) accelerating the vesting of and/or canceling the equity awards held by the covered individuals. In weighing these alternatives, and deciding in favor of reimbursing the covered individuals for the Section 4985 excise tax and the resulting income, as opposed to accelerating the vesting and delivery of outstanding equity awards, the Board of Directors considered the high cost to Horizon and its shareholders of accelerating the vesting of the equity awards. Specifically the Board of Directors determined that accelerating the vesting and payment of outstanding equity awards to avoid the excise tax could result in Horizon incurring an unnecessary compensation expense following the Merger because it would also be necessary to make new equity grants in order to incentivize and retain key individuals and align the interests of the named executive officers following the transaction. Conversely, if the named executive officers were reimbursed for the excise tax, Horizon would only incur additional expense when and to the extent it were determined that the excise tax was applicable.
In addition, the Board of Directors considered the strong desire to continue to align the interests of executive officers and directors with stockholder interests through substantial and meaningful officer and director equity ownership. Each of Horizon’s executive officers has a significant number of unvested equity awards. The board determined that the effect of accelerating the vesting of, or canceling, such awards would be to lose significant retention value during a crucial period. Furthermore, our Board of Directors considered the preference that
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Horizon’s executive officers hold long-term performance-based compensation, which represents a large percentage of the unvested awards outstanding, and that accelerating the vesting of these performance-based awards could result in unearned compensation being paid to the executives.
Therefore, after careful consideration, the Board of Directors concluded that Horizon would provide the covered individuals with a payment with respect to the Section 4985 excise tax, so that, on a net after-tax basis, they would be in the same position as if no such excise tax had applied to them, referred to as the “excise tax and gross up payment.” When compared against the enhanced value of the Merger to Horizon’s stockholders, the potential cost of the excise tax and gross up payment to the named executive officers is relatively insignificant. The estimated amount of the Section 4985 excise tax and gross up payment for each of the named executive officers is set forth in the table below:
| Named Executive Officer |
Estimated 4985 Excise Tax and Gross Up Payment |
|||
| Timothy P. Walbert |
$ | 4,057,715 | ||
| Robert F. Carey |
$ | 1,270,715 | ||
| Paul W. Hoelscher |
$ | 527,477 | ||
| John J. Kody |
$ | 605,711 | ||
| Barry J. Moze |
$ | 593,137 | ||
| Robert J. De Vaere(1) |
$ | 1,148,158 | ||
| (1) | Mr. De Vaere retired from the Company on September 30, 2014. |
Clawback Policy
As a public company, if we are required to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws as a result of misconduct, the Chief Executive Officer and Chief Financial Officer may be legally required to reimburse our company for any bonus or other incentive-based or equity-based compensation they receive in accordance with the provisions of section 304 of the Sarbanes-Oxley Act of 2002. Additionally, we intend to implement a Dodd-Frank Wall Street Reform and Consumer Protection Act-compliant clawback policy promptly after its clawback requirements are more clearly defined by the SEC.
Other Compensation
All of our executive officers are eligible to receive our standard employee benefits, such as our 401(k) Plan, medical, dental, vision coverage, short-term disability, long-term disability, group life insurance, cafeteria plan, and the 2014 Employee Stock Purchase Plan, in each case on the same basis as our other employees. The Compensation Committee periodically reviews the levels of benefits provided to executive officers to ensure they remain reasonable and consistent with its compensation philosophy.
Timing of Equity Awards
Grants of equity awards to our executive officers are generally determined and approved at our pre-scheduled Compensation Committee meetings whenever practicable. However, the Compensation Committee may otherwise approve the grant of equity awards in advance of its next schedule meeting in connection with a new hire, promotion, and other circumstances where the Compensation Committee deems it appropriate to make such grants. All stock options are granted with an exercise price that is not less than the closing price of our common stock on The Nasdaq Global Select Market on the the grant date. It is our policy not to purposely accelerate or delay the public release of material information in consideration of a pending equity grant to allow the grantee to benefit from a more favorable stock price. We recognize that a release of information by the Company in close proximity to an equity grant may appear to be an effort to time the announcement to a
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grantee’s benefit (even if no such benefit was intended). Accordingly, it is our policy that our management team makes a good faith effort to advise the Compensation Committee whenever it is aware that material non-public information is planned to be released to the public in close proximity to the grant of equity awards.
Risk Analysis
The Compensation Committee has reviewed our compensation policies as generally applicable to our employees and believes that our policies do not encourage excessive and unnecessary risk-taking, and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us. The design of our compensation policies and programs encourages our employees to remain focused on both our short- and long-term goals. For example, while our annual cash incentive plan measures performance on an annual basis, our equity awards typically vest over a number of years and our Cash-Long Term Incentive Program requires that we achieve a specified level of TSR over a three year period which we believe encourages our employees to focus on sustained potential stock price appreciation, thus limiting the potential value of excessive risk-taking.
Accounting and Tax Considerations
We account for stock-based awards exchanged for employee services in accordance with the Compensation–Stock Compensation topic of the Financial Accounting Standards Board Accounting Standards Codification. In accordance with the topic, we are required to estimate and record an expense for each award of equity compensation over the vesting period of the award. Accounting rules also require us to record cash compensation as an expense over the period during which it is earned.
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits our deduction for federal income tax purposes to not more than $1 million of compensation paid to certain executive officers in a calendar year. Compensation above $1 million may be deducted if it is “performance-based compensation.” To maintain flexibility in compensating our executive officers in a manner designed to promote our objectives, the Compensation Committee has not adopted a policy that requires all compensation to be deductible. However, the Compensation Committee intends to evaluate the effects of the compensation limits of Section 162(m) on any compensation it proposes to grant, and the Compensation Committee intends to provide future compensation in a manner consistent with our best interests and those of our shareholders.
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Summary Compensation Table
The following table provides information regarding the compensation earned during the years ended December 31, 2014, 2013 and 2012 by our named executive officers.
| Name and Principal Position |
Year | Salary | Bonus | Option Awards(1) |
Stock Awards(1) |
Non
Equity Incentive Plan(2) |
All Other Compensation(3) |
Total | ||||||||||||||||||||||||
| Timothy P. Walbert |
2014 | $ | 689,792 | $ | 292,500 | (4) | $ | 1,208,660 | $ | 1,506,780 | $ | 1,207,500 | $ | 4,065,796 | $ | 8,971,028 | ||||||||||||||||
| Chairman, President and Chief Executive Officer |
2013 | $ | 589,160 | $ | — | $ | 257,250 | $ | 606,282 | $ | 441,870 | $ | 600 | $ | 1,895,162 | |||||||||||||||||
| 2012 | $ | 572,000 | $ | — | $ | — | $ | 588,000 | $ | 275,000 | $ | 1,218 | $ | 1,436,218 | ||||||||||||||||||
| Robert F. Carey(5) |
2014 | $ | 336,641 | $ | 155,339 | (6) | $ | 2,210,200 | $ | 1,655,494 | $ | 457,613 | $ | 1,282,249 | $ | 6,097,536 | ||||||||||||||||
| Executive Vice President, Chief Business Officer |
||||||||||||||||||||||||||||||||
| Paul W. Hoelscher(7) |
2014 | $ | 210,920 | $ | — | $ | 1,024,291 | $ | 1,276,800 | $ | 400,000 | $ | 531,445 | $ | 3,443,456 | |||||||||||||||||
| Executive Vice President, Chief Financial Officer |
||||||||||||||||||||||||||||||||
| John J. Kody(8) |
2014 | $ | 44,479 | $ | 150,000 | (9) | $ | 1,099,306 | $ | 922,185 | $ | 37,231 | $ | 613,492 | $ | 2,866,693 | ||||||||||||||||
| Executive Vice President, Chief Commercial Officer |
||||||||||||||||||||||||||||||||
| Barry J. Moze(10) |
2014 | $ | 223,426 | $ | — | $ | 1,022,203 | $ | 1,116,481 | $ | 400,000 | $ | 598,979 | $ | 3,361,089 | |||||||||||||||||
| Executive Vice President, Corporate Development |
||||||||||||||||||||||||||||||||
| Robert J. De Vaere(11) |
2014 | $ | 289,626 | $ | — | $ | 379,400 | $ | 471,820 | $ | 400,000 | $ | 1,371,143 | $ | 2,911,989 | |||||||||||||||||
| Former Executive Vice President, Chief Financial Officer |
|
2013 2012 |
|
$ $ |
374,920 364,000 |
|
$ $ |
— — |
|
$ $ |
89,250 — |
|
$ $ |
256,667 462,000 |
|
$ $ |
187,460 120,000 |
|
$ $ |
600 1,156 |
|
$ $ |
908,897 947,156 |
| ||||||||
| (1) | Amounts shown in this column do not reflect actual compensation received by our named executive officers. The amounts reflect the grant date fair value of the awards and are calculated in accordance with the provisions of FASB Accounting Standards Codification Topic 718 Compensation–Stock Compensation, or ASC Topic 718. Assumptions used in the calculation of these awards are included in Note 18 “Equity Incentive Plans” in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the named executive officers. |
| (2) | As applicable, reflects amounts earned in fiscal years 2014, 2013 and 2012 and paid in March 2015, January 2014 and January 2013, respectively, pursuant to our annual cash incentive compensation plan in effect for such fiscal year. For further information please see our Compensation Discussion and Analysis above. |
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| (3) | Amounts shown in this column include the following items: |
| Year | Imputed Income on Life Insurance Benefits |
401(k) Matching Contributions |
Estimated Section 4985 Excise Tax and Gross Up Payments That Became Payable in Connection with the Merger |
Legal Fees Reimbursements |
Accrued Vacation and Sick Time Payout in Connection with Termination of Employment |
Consulting Fees |
Total | |||||||||||||||||||||||||
| Timothy P. Walbert |
2014 | $ | 378 | $ | 7,703 | $ | 4,057,715 | $ | — | $ | — | $ | — | $ | 4,065,796 | |||||||||||||||||
| 2013 | $ | 600 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 600 | ||||||||||||||||||
| 2012 | $ | 1,218 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,218 | ||||||||||||||||||
| Robert F. Carey |
2014 | $ | 315 | $ | — | $ | 1,270,715 | $ | 11,219 | $ | — | $ | — | $ | 1,282,249 | |||||||||||||||||
| Paul W. Hoelscher |
2014 | $ | 205 | $ | — | $ | 527,477 | $ | 3,763 | $ | — | $ | — | $ | 531,445 | |||||||||||||||||
| John J. Kody |
2014 | $ | 47 | $ | — | $ | 605,711 | $ | 7,734 | $ | — | $ | — | $ | 613,492 | |||||||||||||||||
| Barry J. Moze |
2014 | $ | 237 | $ | 5,605 | $ | 593,137 | $ | — | $ | — | $ | — | $ | 598,979 | |||||||||||||||||
| Robert J. De Vaere |
2014 | $ | 284 | $ | 6,365 | $ | 1,148,158 | $ | — | $ | 66,336 | $ | 150,000 | $ | 1,371,143 | |||||||||||||||||
| 2013 | $ | 600 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 600 | ||||||||||||||||||
| 2012 | $ | 1,156 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,156 | ||||||||||||||||||
| (4) | Represents an additional discretionary bonus approved by the Compensation Committee in February 2015 and paid in March 2015. |
| (5) | Mr. Carey was hired as our Executive Vice President, Chief Business Officer in March 2014. |
| (6) | Represents Mr. Carey’s relocation bonus which was provided to Mr. Carey in order to compensate him for the costs of relocating his residence to the Chicago, Illinois area. |
| (7) | Mr. Hoelscher joined Horizon as our Executive Vice President, Finance in June 2014 and became our Chief Financial Officer on October 1, 2014. |
| (8) | Mr. Kody was hired as our Executive Vice President, Chief Commercial Officer in November 2014. |
| (9) | Represents Mr. Kody’s signing bonus of $150,000 which was intended to compensate him for the annual bonus he forfeited upon termination of employment with his former company. If Mr. Kody is terminated with cause or resigns without good reason prior to November 24, 2015, the one year anniversary of his date of hire, he will be required to repay his retention and signing bonus in full. |
| (10) | Mr. Moze was hired as our Executive Vice President, Corporate Development in May 2014. |
| (11) | Mr. De Vaere retired from the Company on September 30, 2014. |
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Grants of Plan-Based Awards
The following table sets forth certain information regarding grants of non-equity incentive plan and equity incentive plan-based awards to our named executive officers for 2014:
| Name |
Award Type | Grant Date |
|
Estimated Future Payouts Under Non- Equity Incentive Plan Awards |
|
All
Other Stock Awards: Number of Shares of Stock or Units (#) |
All Other Option Awards: Number of Securities Underlying Options |
Exercise Price of Option Awards ($) |
Grant Date Fair Value of Stock and Options Awards ($)(1) |
|||||||||||||||||||||||||||
| Minimum | Target | Maximum | ||||||||||||||||||||||||||||||||||
| Timothy P. Walbert |
Annual Cash | — | $ | 805,000 | (2) | |||||||||||||||||||||||||||||||
| Cash LTIP | 11/5/2014 | $ | 1,202,000 | $ | 4,541,000 | (3) | $ | 4,541,000 | ||||||||||||||||||||||||||||
| Option | 1/2/2014 | 223,000 | (4) | $ | 7.61 | $ | 1,208,660 | |||||||||||||||||||||||||||||
| RSU | 1/2/2014 | 198,000 | (5) | $ | 1,506,780 | |||||||||||||||||||||||||||||||
| Robert F. Carey |
Annual Cash | — | $ | 213,500 | (6) | |||||||||||||||||||||||||||||||
| Cash LTIP | 11/5/2014 | $ | 414,000 | $ | 1,566,000 | (3) | $ | 1,566,000 | ||||||||||||||||||||||||||||
| Option | 3/5/2014 | 140,000 | (7) | $ | 13.34 | $ | 1,327,200 | |||||||||||||||||||||||||||||
| Option | 3/5/2014 | 100,000 | (8) | $ | 13.34 | $ | 883,000 | |||||||||||||||||||||||||||||
| RSU | 3/5/2014 | 124,100 | (5) | $ | 1,655,494 | |||||||||||||||||||||||||||||||
| Paul W. Hoelscher |
Annual Cash | — | $ | 213,500 | (6) | |||||||||||||||||||||||||||||||
| Cash LTIP | 11/5/2014 | $ | 414,000 | $ | 1,566,000 | (3) | $ | 1,566,000 | ||||||||||||||||||||||||||||
| Option | 6/27/2014 | 90,000 | (9) | $ | 15.96 | $ | 1,024,291 | |||||||||||||||||||||||||||||
| RSU | 6/27/2014 | 80,000 | (10) | $ | 1,276,800 | |||||||||||||||||||||||||||||||
| John J. Kody |
Annual Cash | — | $ | 22,240 | (6) | |||||||||||||||||||||||||||||||
| Cash LTIP | 11/5/2014 | $ | 414,000 | $ | 1,566,000 | (3) | $ | 1,566,000 | ||||||||||||||||||||||||||||
| Option | 11/24/2014 | 128,000 | (7) | $ | 12.15 | $ | 1,099,306 | |||||||||||||||||||||||||||||
| RSU | 11/24/2014 | 75,900 | (5) | $ | 922,185 | |||||||||||||||||||||||||||||||
| Barry J. Moze |
Annual Cash | — | $ | 213,500 | (6) | |||||||||||||||||||||||||||||||
| Cash LTIP | 11/5/2014 | $ | 332,000 | $ | 1,253,000 | (3) | $ | 1,253,000 | ||||||||||||||||||||||||||||
| Option | 1/10/2014 | 10,000 | (4) | $ | 8.50 | $ | 125,299 | |||||||||||||||||||||||||||||
| Option | 6/6/2014 | 72,300 | (11) | $ | 14.48 | $ | 748,082 | |||||||||||||||||||||||||||||
| RSU | 6/6/2014 | 64,300 | (12) | $ | 931,064 | |||||||||||||||||||||||||||||||
| RSU | 9/12/2014 | 15,700 | (12) | $ | 185,417 | |||||||||||||||||||||||||||||||
| Option | 9/12/2014 | 17,700 | (11) | $ | 11.81 | $ | 148,822 | |||||||||||||||||||||||||||||
| Robert J. De Vaere |
Annual Cash | — | $ | 193,084 | (13) | |||||||||||||||||||||||||||||||
| Cash LTIP | 1/2/2014 | 70,000 | (4) | $ | 7.61 | $ | 379,400 | |||||||||||||||||||||||||||||
| RSU | 1/2/2014 | 62,000 | (5) | $ | 471,820 | |||||||||||||||||||||||||||||||
| (1) | Amounts shown in this column do not reflect dollar amounts actually received by our named executive officers. Instead, these amounts reflect the grant date fair value of such awards and are calculated in accordance with the provisions of ASC Topic 718. Assumptions used in the calculation of these amounts and further information on our restricted stock units are included in Note 18 “Equity Incentive Plans” in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the named executive officers. |
| (2) | Mr. Walbert’s target bonus for 2014 was $805,000, or 100% of his base salary. In February 2015, the Compensation Committee approved Mr. Walbert’s bonus in the amount of $1,207,500, or 150% of his target bonus, which was paid in March 2015. |
| (3) | The Cash LTIP awards do not include a “target” amount. The representative target amount disclosed in the table above was calculated based on the amount payable under the Cash LTIP if it were determined based upon the level of attainment of TSR during the corresponding performance period which ended in the previous fiscal year (TSR attained from November 5, 2013 through May 5, 2014). |
| (4) | The shares subject to the stock option vest in 48 equal monthly installments following the vesting commencement date, which is the grant date. |
| (5) | The restricted stock units vest in four equal annual installments following the grant date. |
| (6) | Mr. Carey’s, Mr. Hoelscher’s and Mr. Moze’s target bonus for 2014 was $213,500, or 50% of their respective base salaries. Mr. Kody’s target bonus for 2014 was $22,240, or 50% of his pro-rated base salary for 2014. In February 2015, the Compensation Committee approved Mr. Carey’s bonus in the amount of $457,613, or 214% of Mr. Carey’s target bonus, approved Mr. Hoelscher’s and Mr. Moze’s bonuses, each in the amount of $400,000, or 187% of their respective target bonuses, and approved Mr. Kody’s bonus in the amount of $37,231, or 167% of Mr. Kody’s target bonus, each of which was paid in March 2015. |
| (7) | 1/4th of the shares subject to the stock option vest one year after the vesting commencement date, which is the same date as the grant date, and the remaining shares vest in 36 equal monthly installments thereafter. |
| (8) | The shares subject to the stock option vest in 12 equal monthly installments following the vesting commencement date, which is the grant date. |
| (9) | 1/4th of the shares vest on June 23, 2014 and the remaining shares vest in 36 equal monthly installments thereafter. |
| (10) | The restricted stock units vest in four equal annual installments following the hire date on June 23, 2014. |
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| (11) | 1/4th of the shares vest on May 19, 2015 and the remaining shares vest in 36 equal monthly installments thereafter. |
| (12) | The restricted stock units vest in four equal annual installments following the hire date on May 19, 2014. |
| (13) | Mr. De Vaere retired from the Company on September 30, 2014. Pursuant to the Transition Agreement, Mr. De Vaere was eligible to receive an annual performance bonus based on Mr. De Vaere’s service to us during calendar year 2014. Mr. De Vaere’s target bonus amount was $193,084. In February 2015, the Compensation Committee approved Mr. De Vaere’s bonus in the amount of $400,000, which was paid in March 2015. |
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Employment Agreements. Each of our named executive officers has entered into a written employment agreement with us that provides for payment of base salary, target annual cash incentive compensation, eligibility for employee benefit programs, potential severance benefits, and in some cases, bonus compensation provided as an inducement to commencement of employment. For further information regarding the base salaries, bonuses and incentive compensation payable to our named executive officers and their eligibility for our employee benefit programs, please see “Base Salary,” “Bonus,” “2014 Annual Cash Incentive Compensation” and “Other Compensation” in our Compensation Discussion and Analysis above. For further information regarding the severance benefits provided under the employment agreements, please see “Severance and Change in Control Benefit Arrangements” below.
Transition Agreement with Mr. De Vaere. We entered into a Transition Agreement with Mr. De Vaere which provides for the payment of consulting fees. For further information regarding the Transition Agreement, please see “De Vaere Transition Agreement” described in our Compensation Discussion and Analysis above.
Cash Long-Term Incentive Program. We have also adopted our Cash LTIP, which is intended to provide significant economic incentives for our executive team to create long-term shareholder value by tying the program payout levels to our applicable level of TSR. For further information regarding our Cash LTIP, please see “Cash Long-Term Incentive Program” in our Compensation Discussion and Analysis above.
Equity Awards. We have granted equity awards to our named executive officers under our 2011 Equity Incentive Plan, which is referred to in this Proxy Statement as the “2011 Plan,” and our 2014 Equity Incentive Plan, which is referred to in this Proxy Statement as the “2014 Plan.” For further information regarding such equity awards, including the vesting schedules, please see the “Grants of Plan-Based Awards” table and related footnotes above and “2014 Equity Incentives” in our Compensation Discussion and Analysis above.
Estimated Section 4985 Excise Tax and Gross Up Payments. We approved payments to each of the named executive officers with respect to the Section 4985 excise tax that applied to their equity awards in connection with the Merger, so that, on a net after-tax basis, they would be in the same position as if no such excise tax had applied to them. For further information, please see “4985 Excise Tax” in our Compensation Discussion and Analysis above.
Option Repricings. We did not engage in any repricings or other modifications to any of our named executive officers’ outstanding equity awards during the year ended December 31, 2014 other than in connection with the Merger where outstanding equity awards of Horizon Pharma, Inc. became our outstanding equity awards on substantially the same terms and conditions.
Salary and Bonus Compared to Total Compensation. The ratio of salary and bonus to total compensation in 2014 (each as set forth in the Summary Compensation Table above) is set forth below for each named executive officer.
| • | Timothy P. Walbert, 10.9% |
| • | Robert F. Carey, 8.1% |
| • | Paul W. Hoelscher, 6.1% |
| • | John J. Kody, 6.8% |
| • | Barry J. Moze, 6.6% |
| • | Robert J. De Vaere, 9.9% |
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Outstanding Equity Awards at December 31, 2014
The following table sets forth certain information regarding outstanding stock options and restricted stock units held by our named executive officers on December 31, 2014.
| Award Grant Date |
Option Award | Stock Awards | ||||||||||||||||||||||||||
| Name |
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock that Have Not Vested |
Market Value of Stock that Has Not Vested(1) |
||||||||||||||||||||||
| Timothy P. Walbert |
7/16/2008 | 121,701 | (2) | — | $ | 10.43 | 7/15/2018 | |||||||||||||||||||||
| 2/3/2010 | 128,937 | (3) | — | $ | 5.20 | 2/2/2020 | ||||||||||||||||||||||
| 6/16/2010 | 112,787 | (3) | — | $ | 12.94 | 6/15/2020 | ||||||||||||||||||||||
| 12/8/2011 | 162,716 | (4) | 54,239 | (4) | $ | 4.96 | 12/7/2021 | 33,211 | (5) | $ | 428,090 | |||||||||||||||||
| 1/2/2013 | 70,437 | (4) | 76,563 | (4) | $ | 2.40 | 1/1/2023 | 96,525 | (5) | 1,244,207 | ||||||||||||||||||
| 1/2/2014 | 51,104 | (4) | 171,896 | (4) | $ | 7.61 | 1/1/2024 | 198,000 | (5) | 2,552,220 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| 647,682 | 302,698 | 327,736 | 4,224,517 | |||||||||||||||||||||||||
| Robert F. Carey |
3/5/2014 | — | 140,000 | (3) | $ | 13.34 | 3/4/2024 | |||||||||||||||||||||
| 3/5/2014 | 75,000 | (6) | 25,000 | (6) | $ | 13.34 | 3/4/2024 | 124,100 | (5) | 1,599,649 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| 75,000 | 165,000 | 124,100 | 1,599,649 | |||||||||||||||||||||||||
| Paul W. Hoelscher |
6/27/2014 | — | 90,000 | (7) | $ | 15.96 | 6/26/2024 | 80,000 | (8) | 1,031,200 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| — | 90,000 | 80,000 | 1,031,200 | |||||||||||||||||||||||||
| John J. Kody |
11/24/2014 | 128,000 | (3) | $ | 12.15 | 11/23/2024 | 75,900 | (5) | 978,351 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| — | 128,000 | 75,900 | 978,351 | |||||||||||||||||||||||||
| Barry J. Moze |
6/16/2010 | 2,106 | (6) | — | $ | 12.94 | 6/15/2020 | |||||||||||||||||||||
| 1/10/2014 | 2,291 | (4) | 7,709 | (4) | $ | 8.50 | 1/9/2024 | |||||||||||||||||||||
| 6/6/2014 | — | 72,300 | (9) | $ | 14.48 | 6/5/2024 | 64,300 | (10) | 828,827 | |||||||||||||||||||
| 9/12/2014 | — | 17,700 | (9) | $ | 11.81 | 9/11/2024 | 15,700 | (10) | 202,373 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| 4,397 | 97,709 | 80,000 | 1,031,200 | |||||||||||||||||||||||||
| Robert J. De Vaere(11) |
— | — | — | $ | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| — | — | — | — | |||||||||||||||||||||||||
| (1) | The market value of stock awards that have not vested is based on the closing stock price of our ordinary shares of $12.89 per share on December 31, 2014. |
| (2) | 1/4th of the shares vest one year after the vesting commencement date of June 30, 2008 and 1/48th of the shares vest monthly thereafter over the next three years. |
| (3) | 1/4th of the shares vest one year after the vesting commencement date, which is the same date as the grant date, and 1/48th of the shares vest monthly thereafter over the next three years. |
| (4) | 1/48th of the shares vest in equal monthly installments over the four years following the vesting commencement date, which is the grant date. |
| (5) | Stock awards represent restricted stock units granted which vest in four equal annual installments following the grant date. |
| (6) | The shares subject to the stock option vest in 12 equal monthly installments following the vesting commencement date, which is the grant date. |
| (7) | 1/4th of the shares vest on June 23, 2015 and the remaining shares vest in 36 equal monthly installments thereafter. |
| (8) | The restricted stock units vest in four equal annual installments following the hire date on June 23, 2014. |
| (9) | 1/4th of the shares vest on May 19, 2015 and the remaining shares vest in 36 equal monthly installments thereafter. |
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| (10) | The restricted stock units vest in four equal annual installments following the hire date on May 19, 2014. |
| (11) | Mr. De Vaere retired from the Company on September 30, 2014. |
Option Exercises and Stock Vested
Our named executive officers did not exercise any stock option awards during the fiscal year ended December 31, 2014.
The following table sets forth certain information regarding stock vested for our named executive officers for the fiscal year ended December 31, 2014.
| Stock Awards | ||||||||
| Name |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($) |
||||||
| Timothy P. Walbert |
33,210 | (1) | $ | 384,240 | ||||
| 32,175 | (2) | $ | 244,852 | |||||
| Robert F. Carey |
— | — | ||||||
| Paul W. Hoelscher |
— | — | ||||||
| John J. Kody |
— | — | ||||||
| Barry J. Moze |
— | — | ||||||
| Robert J. De Vaere(3) |
16,416 | (4) | $ | 201,588 | ||||
| 45,000 | (5) | $ | 500,063 | |||||
| 62,000 | (6) | $ | 761,360 | |||||
| (1) | Represents restricted stock units granted on December 8, 2011, vesting over 4 annual installments. |
| (2) | Represents restricted stock units granted on January 2, 2013, vesting over 4 annual installments. |
| (3) | Mr. De Vaere retired from the Company on September 30, 2014. |
| (4) | Represents, pursuant to the terms of the Transition Agreement, full acceleration of restricted stock units granted on December 8, 2011 in connection with Mr. De Vaere’s retirement date. |
| (5) | Represents, pursuant to the terms of the Transition Agreement, full acceleration of restricted stock units granted on January 2, 2013 in connection with Mr. De Vaere’s retirement date. |
| (6) | Represents, pursuant to the terms of the Transition Agreement, full acceleration of restricted stock units granted on January 2, 2014 in connection with Mr. De Vaere’s retirement date. |
Pension Benefits
None of our named executive officers participate in or have account balances in qualified or non-qualified defined benefit plans sponsored by us. The Compensation Committee may elect to adopt qualified or non-qualified benefit plans in the future if it determines that doing so is in our best interests.
Nonqualified Deferred Compensation
During 2014 none of our named executive officers participated in or had account balances in non-qualified deferred contribution plans or other non-qualified deferred compensation plans maintained by us. In February 2015, the Compensation Committee adopted a non-qualified deferred compensation plan that became effective on April 1, 2015 and pursuant to which selected employees including our named executive officers may elect to defer receipt of their salary and incentive cash compensation.
Potential Payments Upon Termination or Change in Control
In January 2014, we entered into an amendment to the amended and restated employment agreement with Mr. Walbert, our President and Chief Executive Officer, that provides if we terminate Mr. Walbert without cause
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or if Mr. Walbert resigns for good reason, he will be entitled to (1) be compensated at his then annual base salary for 12 months from the date of his termination, (2) receive his target bonus in effect at the time of termination or, if none, his last target bonus, and (3) receive COBRA health insurance premiums for up to 12 months from the date of his termination. If Mr. Walbert is terminated without cause or if Mr. Walbert resigns for good reason within 90 days prior to or within 18 months following a change in control, 100% of the shares subject to options and restricted stock awards granted to Mr. Walbert will fully vest as of the termination date, and Mr. Walbert will be entitled to (1) be compensated at his then annual base salary for two years from the date of his termination, (2) receive two times his target bonus in effect at the time of termination or, if none, two times his last target bonus, and (3) receive COBRA health insurance premiums for up to 12 months from the date of his termination. In the event of termination due to Mr. Walbert’s death or complete disability, he and/or his heirs shall be eligible to receive a pro-rated bonus for the year in which such termination occurs, as determined by the Board of Directors or Compensation Committee based on actual performance.
In March 2014, we entered into an employment agreement with Mr. Carey, our Executive Vice President, Chief Business Officer, that provides if we terminate Mr. Carey without cause or if Mr. Carey resigns for good reason, he will be entitled to be compensated at his then annual base salary for 12 months from the date of his termination and will also be entitled to receive COBRA health insurance premiums for up to 12 months from the date of his termination. If Mr. Carey is terminated without cause or resigns for good reason within 90 days prior to or within 18 months following a change in control, 100% of the shares subject to options and restricted stock awards granted to Mr. Carey will fully vest as of the termination date, and Mr. Carey will be entitled to (1) be compensated at his then annual base salary for 12 months from the date of his termination, (2) receive his target bonus in effect at the time of termination or, if none, his last target bonus, and (3) receive COBRA health insurance premiums for up to 12 months from the date of his termination. In the event of termination due to Mr. Carey’s death or complete disability, he and/or his heirs shall be eligible to receive a pro-rated bonus for the year in which such termination occurs, as determined by the Board of Directors or Compensation Committee based on actual performance.
In June 2014, September 2014, and November 2014 we entered into an employment agreements with Messrs. Hoelscher, Moze and Kody, respectively, that provides each of them with severance benefits on the same terms and conditions as provided in Mr. Carey’s employment agreement as described above.
The following key terms are defined in the employment agreements as follows:
| • | Cause is generally defined as gross negligence or willful failure to substantially perform duties and responsibilities to us or willful and deliberate violation of any of our policies; conviction of a felony involving commission of any act of fraud, embezzlement or dishonesty against us or involving moral turpitude; the unauthorized use or disclosure of any of our proprietary information or trade secrets and willful and deliberate breach of the executive’s obligations under the employment agreement that cause material injury to us. |
| • | Resignation for good reason is generally defined as a material reduction in duties, authority or responsibilities; the relocation of the place of employment by more than 50 miles; or a material reduction of salary or annual target bonus opportunity. |
| • | A change in control is defined generally as (1) the sale of all or substantially all of our assets; (2) a merger or consolidation in which we are not the surviving entity and in which the holders of our outstanding voting stock immediately prior to such transaction own less than 50% of the voting power of the entity surviving the transaction or, where the surviving entity is a wholly-owned subsidiary of another entity, the surviving entity’s parent; (3) a reverse merger in which we are the surviving entity but the ordinary shares outstanding prior to the merger are converted into other property and in which the holders of our voting stock immediately prior to such transaction own less than 50% of the voting power of our stock, or where we are a wholly-owned subsidiary of another entity, of our parent; or (4) an acquisition by any person, entity or group of beneficial ownership of at least 75% of the combined voting power entitled to vote in an election of our directors. |
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Mr. De Vaere retired from the Company on September 30, 2014. In June 2014, we entered into the Transition Agreement with Mr. De Vaere described under the heading “De Vaere Transition Agreement” described in our Compensation Discussion and Analysis above and which provides for the payment of severance benefits to him consistent with the terms of his prior employment agreement.
Releases. All termination-based payments (other than due to death or complete disability) provided to our named executive officers pursuant to their employment agreements are contingent upon (1) the executive’s execution of a standard release of claims in our favor and (2) the executive’s entering into a non-competition agreement to be effective during the period during which the executive receives severance benefits.
Sections 280G and 4999. Any payment or benefit provided under our named executive officers’ employment agreements or otherwise in connection with a change in control may be subject to an excise tax under Section 4999 of the IRC. These payments also may not be eligible for a company tax deduction pursuant to Section 280G of the IRC. If any of these payments or benefits are subject to the excise tax, they may be reduced to provide the individual with the best after-tax result. Specifically, the individual will receive either a reduced amount so that the excise tax is not triggered, or the individual will receive the full amount of the payments and benefits and then be liable for any excise tax.
The following table sets forth potential payments payable to our named executive officers upon a termination of employment without cause or resignation for good reason or termination of employment without cause or resignation for good reason in connection with a change in control. The table below reflects amounts payable to our named executive officers assuming their employment was terminated on December 31, 2014 and, if applicable, a change in control also occurred on such date:
| Upon Termination Without Cause or Resignation for Good Reason - No Change of Control |
Upon Termination Without Cause or Resignation for Good Reason - Change of Control(1) |
|||||||||||||||||||||||||||||||||||||||
| Name |
Cash Severance |
Continuation of Medical Benefits |
Bonus | Value of Accelerated Vesting |
Total | Cash Severance |
Continuation of Medical Benefits |
Bonus(2) | Value
of Accelerated Vesting(3) |
Total | ||||||||||||||||||||||||||||||
| Timothy P. Walbert |
$ | 805,000 | $ | 18,906 | $ | 805,000 | $ | — | $ | 1,628,906 | $ | 1,610,000 | $ | 18,906 | $ | 6,151,000 | $ | 6,365,389 | $ | 14,145,295 | ||||||||||||||||||||
| Robert F. Carey |
$ | 427,000 | $ | 13,058 | $ | — | $ | — | $ | 440,058 | $ | 427,000 | $ | 13,058 | $ | 1,779,500 | $ | 1,599,649 | $ | 3,819,207 | ||||||||||||||||||||
| Paul W. Hoelscher |
$ | 427,000 | $ | 18,906 | $ | — | $ | — | $ | 445,906 | $ | 427,000 | $ | 18,906 | $ | 1,779,500 | $ | 1,031,200 | $ | 3,256,606 | ||||||||||||||||||||
| John J. Kody |
$ | 427,000 | $ | 18,906 | $ | — | $ | — | $ | 445,906 | $ | 427,000 | $ | 18,906 | $ | 1,779,500 | $ | 1,073,071 | $ | 3,298,477 | ||||||||||||||||||||
| Barry J. Moze |
$ | 427,000 | $ | 13,058 | $ | — | $ | — | $ | 440,058 | $ | 427,000 | $ | 13,058 | $ | 1,466,500 | $ | 1,084,159 | $ | 2,990,717 | ||||||||||||||||||||
| Robert J. De Vaere(4) |
$ | 386,163 | (5) | $ | 18,906 | (5) | $ | — | $ | 2,060,406 | (6) | $ | 2,465,475 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
| (1) | Amounts in these columns assume that termination occurs within 90 days immediately preceding or during the 18 months immediately following a change in control. |
| (2) | Amounts in this column include maximum payments payable under our Cash LTIP and payments pursuant to our employment agreements with such named executive officer. |
| (3) | The value of accelerated vesting is equal to the closing stock price of $12.89 per share on December 31, 2014, multiplied by the number of shares subject to accelerated vesting, less the stock option exercise price, if applicable. |
| (4) | Mr. De Vaere retired from the Company on September 30, 2014. The amounts disclosed in the table above reflect the actual amount of severance benefits triggered by his retirement. For further information please see “De Vaere Transition Agreement” in our Compensation Discussion and Analysis above. |
| (5) | Payment shall be made over a period of 12 months commencing on April 1, 2015 pursuant to the terms of the De Vaere Transition Agreement. |
| (6) | The value of accelerated vesting is equal to the closing stock price of $12.28 per share on September 30, 2014, the date vesting accelerated, multiplied by the number of shares subject to accelerated vesting, less the stock option exercise price, if applicable. |
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The following table sets forth potential payments payable to our named executive officers under our Cash LTIP upon a change in control, assuming a change in control occurred on December 31, 2014. For further information regarding our Cash LTIP, please see “Cash Long-Term Incentive Program” in our Compensation Discussion and Analysis above.
| Name |
Payout Upon a Change in Control |
|||
| Timothy P. Walbert |
$ | 4,541,000 | ||
| Robert F. Carey |
$ | 1,566,000 | ||
| Paul W. Hoelscher |
$ | 1,566,000 | ||
| John J. Kody |
$ | 1,566,000 | ||
| Barry J. Moze |
$ | 1,253,000 | ||
| Robert J. De Vaere(1) |
$ | — | ||
| (1) | Mr. De Vaere retired from the Company on September 30, 2014 and he is not eligible to participate in our Cash LTIP. |
Non-Employee Director Compensation
Pre-Merger Arrangements. Our compensation policy for non-employee directors who are not affiliated with any holder of more than 5% of our ordinary shares that was in place prior to the Merger, provided for an annual board service retainer, payable in quarterly installments, of $50,000 for a non-executive chairman of the Board of Directors or lead independent director and $40,000 for all other eligible non-employee directors, and committee member service fees ranging from $3,750 to $20,000 per year. In addition, eligible non-employee directors elected to the Board of Directors received a stock option grant for 40,000 shares, vesting in equal installments over 36 month from the date of grant. Thereafter, on the date of each Annual Meeting of Stockholders, eligible non-employee directors automatically received stock option grants of 20,000 shares, vesting in equal installments over 12 months from the date of grant.
Post-Merger Arrangements. Our current compensation policy for non-employee directors who are not affiliated with any holder of more than 5% of our ordinary shares, which was established in September 2014, provides for the annual cash compensation, payable in equal quarterly installments, set forth below:
| • | $100,000 for a non-executive chairman of the Board of Directors or lead independent director; |
| • | $60,000 for all other eligible non-employee directors; |
| • | $30,000 for the chairman of the Audit Committee, $20,000 for the chairman of the Compensation Committee, $15,000 for the chairman of the Nominating and Corporate Governance Committee and $20,000 for the chairman of the Transaction Committee; and |
| • | $15,000 for each member of the Audit Committee other than the chairman, $10,000 for each member of the Compensation Committee other than the chairman, $7,500 for each member of the Nominating and Corporate Governance Committee other than the chairman and $12,500 for each member of the Transaction Committee other than the chairman. |
In addition, eligible non-employee directors elected or appointed to the Board of Directors will automatically be granted (i) a stock option to purchase ordinary shares with an aggregate Black-Scholes option value of $300,000 and (ii) restricted stock units with an aggregate value of $300,000 on the date of that they are first elected or appointed to the Board of Directors. The stock option will vest in 36 equal monthly installments from the date of grant and the restricted stock units will vest in three equal annual installments from the date of grant. Thereafter, on the date of each Annual General Meeting of Shareholders, eligible non-employee directors will automatically be granted (i) a stock option to purchase ordinary shares with an aggregate Black-Scholes option value of $150,000 and (ii) restricted stock units with an aggregate value of $150,000. The stock option
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will vest in 12 equal monthly installments from the date of grant and the restricted stock units will vest in full upon the first anniversary of the date of grant. Under our current compensation policy, we also will reimburse eligible non-employee directors up to $15,000 annually for financial counseling services.
Also, we have reimbursed and will continue to reimburse our directors for their travel-related expenses, including lodging and other reasonable expenses incurred in attending meetings of the Board of Directors and committees of the Board of Directors.
We approved the Section 4985 excise tax and gross up payment for each of our non-employee directors for the same reasons that we approved it for each of our named executive officers. For additional information regarding the excise tax and gross up payment, please see “4985 Excise Tax” in our Compensation Discussion and Analysis.
The following table sets forth compensation information for our non-employee directors who earned or received compensation under our non-employee director compensation policy or otherwise in 2014:
| Name |
Fees Earned or Paid in Cash |
Stock Awards(1) | All Other Compensation |
Total | ||||||||||||
| Jeffrey W. Bird, M.D., Ph.D.(2) |
$ | 21,875 | $ | — | $ | 81,722 | (3) | $ | 103,597 | |||||||
| William F. Daniel(4) |
$ | 23,337 | $ | 599,650 | $ | 237,281 | (3) | $ | 860,268 | |||||||
| Michael Grey |
$ | 87,543 | $ | 206,230 | $ | 209,227 | (3) | $ | 503,000 | |||||||
| Virinder Nohria, M.D., Ph.D.(5) |
$ | 16,973 | $ | — | $ | 763,223 | (6) | $ | 780,196 | |||||||
| Ronald Pauli |
$ | 73,750 | $ | 206,230 | $ | 190,166 | (3) | $ | 470,146 | |||||||
| Gino Santini |
$ | 68,750 | $ | 206,230 | $ | 198,849 | (3)(7) | $ | 473,829 | |||||||
| H. Thomas Watkins(8) |
$ | 45,365 | $ | 530,117 | $ | 193,625 | (3) | $ | 769,107 | |||||||
| (1) | The amounts shown in this column reflect the grant date fair value of the awards issued to our non-employee directors during 2014, calculated in accordance with the provisions of ASC Topic 718. See the assumptions used in the Black-Scholes model in the notes to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014. |
| (2) | Dr. Bird served on the Board of Directors until June 27, 2014. |
| (3) | Represents estimated Section 4985 excise tax and gross up payments which became payable in connection with the Merger. |
| (4) | Mr. Daniel has served on the Board of Directors since September 19, 2014. |
| (5) | Dr. Nohria has served on the Board of Directors since September 19, 2014. |
| (6) | Represents (a) $729,890 paid to Dr. Nohria as an additional inducement to participate in an underwritten secondary offering of ordinary shares in November 2014 and (b) $33,333 earned by Dr. Nohria for consulting services under our consulting agreement with Dr. Nohria, which provides for the payment to Dr. Nohria of $10,000 per month for such services for a period of twelve months following the Merger with Vidara on September 19, 2014. In November 2014, certain of our shareholders, including Dr. Nohria and an affiliated trust, sold a number of our ordinary shares in an underwritten public offering. As part of the offering, we agreed to reimburse Dr. Nohria and his affiliated trust, as well as another selling shareholder, for certain of the underwriting discounts otherwise payable by them in the offering. |
| (7) | Mr. Santini was reimbursed $15,000 for financial planning services. |
| (8) | Mr. Watkins has served on the Board of Directors since April 15, 2014. |
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EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2014, with respect to our ordinary shares that may be issued under our equity compensation plans:
| (a) | (b) | (c) | ||||||||||
| Plan Category |
Number of securities to be issued upon exercise of outstanding options, warrants, and rights |
Weighted- average exercise price of outstanding options, warrants, and rights(1) |
Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a)) |
|||||||||
| Equity compensation plans approved by shareholders: |
||||||||||||
| 2005 Stock Plan (HPI) |
1,133,798 | $ | 14.04 | — | ||||||||
| 2011 Equity Incentive Plan (HPI) |
6,446,879 | $ | 5.62 | — | ||||||||
| 2014 Equity Incentive Plan (Horizon Pharma plc) |
958,600 | $ | 10.51 | 14,264,001 | ||||||||
| 2014 Non-Employee Equity Incentive Plan (Horizon Pharma plc) |
106,908 | $ | 6.84 | 2,386,242 | ||||||||
| 2011 Employee Stock Purchase Plan (HPI) |
— | — | 929,336 | |||||||||
| 2014 Employee Stock Purchase Plan (Horizon Pharma plc) |
— | — | 9,000,000 | |||||||||
| Equity compensation plans not approved by shareholders: |
||||||||||||
| None. |
||||||||||||
| (1) | The weighted average exercise price of outstanding options and rights under our 2011 Plan, our 2014 Plan and our 2014 Non-Employee Equity Incentive Plan (the “2014 Non-Employee Equity Plan”) include the effect of our grant of restricted stock units under our 2011 Plan, our 2014 Plan and our 2014 Non-Employee Equity Plan, which restricted stock units were granted in consideration of services rendered to us and do not carry an exercise price. The weighted average exercise price as of December 31, 2014 of outstanding options and rights under our 2011 Plan, our 2014 Plan and our 2014 Non-Employee Equity Plan was $7.20, $12.44 and $12.55, respectively, excluding the grant of such restricted stock units. |
2005 Stock Plan. In October 2005, HPI adopted the 2005 Stock Plan (the “2005 Plan”). Upon the signing of the underwriting agreement related to HPI’s initial public offering, on July 28, 2011, no further option grants were made under the 2005 Plan. All stock awards granted under the 2005 Plan prior to July 28, 2011 continue to be governed by the terms of the 2005 Plan. Upon consummation of the Merger, we assumed the 2005 Plan.
2011 Equity Incentive Plan. In July 2010, HPI’s board of directors adopted the 2011 Plan. In June 2011, HPI’s stockholders approved the 2011 Plan, and it became effective upon the signing of the underwriting agreement related to HPI’s initial public offering on July 28, 2011. Upon consummation of the Merger, we assumed the 2011 Plan, and upon the effectiveness of the 2014 Plan, no additional stock awards were or will be made under the 2011 Plan, although all outstanding stock awards granted under the 2011 Plan continue to be governed by the terms of the 2011 Plan.
2014 Equity Incentive Plan and 2014 Non-Employee Equity Incentive Plan. On May 17, 2014, HPI’s board of directors adopted the 2014 Plan and the 2014 Non-Employee Equity Plan. On September 18, 2014, at a special meeting of the stockholders of HPI (the “Special Meeting”), HPI’s stockholders approved the 2014 Plan and 2014 Non-Employee Equity Plan. Upon consummation of the Merger, we assumed the 2014 Plan and 2014 Non-Employee Equity Plan, which serve as successors to the 2011 Plan.
2011 Employee Stock Purchase Plan. In July 2010, HPI’s board of directors adopted the 2011 Employee Stock Purchase Plan (the “2011 ESPP”). In June 2011, HPI’s stockholders approved the 2011 ESPP, and it
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became effective upon the signing of the underwriting agreement related to HPI’s initial public offering in July 2011. Upon consummation of the Merger, we assumed the 2011 ESPP, and upon the effectiveness of the 2014 ESPP, no additional offerings were or will be commenced and no additional purchase rights were or will be granted under the 2011 ESPP, although all purchase rights outstanding under any offering that commenced under the 2011 ESPP prior to the Merger remain outstanding pursuant to their existing terms.
2014 Employee Stock Purchase Plan. On May 17, 2014, HPI’s board of directors adopted the 2014 Employee Stock Purchase Plan. On September 18, 2014, at the Special Meeting, HPI’s stockholders approved the 2014 Employee Stock Purchase Plan. Upon consummation of the Merger, the Company assumed the 2014 Employee Stock Purchase Plan, which serves as the successor to the 2011 ESPP.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policies and Procedures for Transactions with Related Persons
Prior to the Merger, HPI maintained and we continue to maintain a written Related-Person Transactions Policy that sets forth our policies and procedures regarding the identification, review, consideration, approval and oversight of “related-person transactions.” For purposes of our policy only, a “related-person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any “related person” are participants and a related person has a direct or indirect material interest. Transactions involving compensation for services provided to the Company as an employee, director, consultant or similar capacity by a related person are not covered by this policy. A “related person” is any executive officer, director or nominee to become director, a holder of more than 5% of our ordinary shares, including any immediate family members of such persons, any entity owned or controlled by such persons or the trustees of any trust of which the principal beneficiaries are any of such persons. Any related-person transaction may only be consummated if our Audit Committee has approved or ratified the transaction in accordance with the policy guidelines set forth below.
The policy imposes an affirmative duty upon each director and executive officer to identify, and we will request that significant shareholders identify, any transaction involving them, their affiliates or family members that may be considered a related-party transaction before such person engages in the transaction. Under the policy, where a transaction has been identified as a related-person transaction, management must present information regarding the proposed related-person transaction to our Audit Committee (or, where review by our Audit Committee would be inappropriate, to another independent body of the Board of Directors) for review. The presentation must include a description of, among other things, the material facts, the direct and indirect interests of the related persons, the benefits of the transaction to us and whether any alternative transactions are available. In considering related-person transactions, our Audit Committee takes into account the relevant available facts and circumstances including, but not limited to:
| • | the risks, costs and benefits to the Company; |
| • | the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated; |
| • | the terms of the transaction; |
| • | the terms available to or from, as the case may be, unrelated third parties; and |
| • | the availability of other sources for comparable services or products. |
In the event a director has an interest in the proposed transaction, the director is expected to recuse himself or herself from the deliberations and approval process.
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Certain Related Transactions
We describe below transactions and series of similar transactions, since the beginning of fiscal year 2014, with respect to which we were a party, will be a party, or otherwise benefited, in which:
| • | the amounts involved exceeded or will exceed $120,000; and |
| • | a director, executive officer, holder of more than 5% of our ordinary shares or any member of their immediate family had or will have a direct or indirect material interest. |
We also describe below certain other transactions with our directors, executive officers and shareholders. We believe that the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.
Commitment Letter
On March 18, 2014, HPI entered into the Commitment Letter with Deerfield Management Company, L.P. (“Deerfield”) and certain funds managed by Deerfield (the “Deerfield Funds”) pursuant to which the Deerfield Funds had committed to provide up to $250.0 million of senior secured loans to finance the Merger. The Company paid Deerfield a commitment fee of $5.0 million upon execution of the Commitment Letter. The Company allowed the Commitment Letter to expire on June 30, 2014 as a result of the execution of a Senior Secured Credit Facility by and among the Company, a group of lenders and Citibank, N.A., as administrative and collateral agent, dated June 17, 2014.
Employment Agreements and Change of Control Arrangements
We have entered into employment agreements with our named executive officers, including an executive employment and transition agreement with Mr. De Vaere, each of which are described in the “Compensation Discussion and Analysis” section of this Proxy Statement.
Stock Options and Stock Awards Granted to Executive Officers and Directors
We have granted stock options and stock awards to our named executive officers and directors, which are described in the “Compensation Discussion and Analysis” section of this Proxy Statement.
Other Agreements
In connection with the Merger, our subsidiary HZNP USA Inc. (formerly Vidara Therapeutics, Inc.) entered into an amendment to its employment agreement with Dr. Nohria that become effective on the closing date of the Merger. Pursuant to the amendment to the employment agreement, Dr. Nohria’s employment with HZNP USA Inc. was terminated, and Dr. Nohria received a $0.5 million lump sum payment that was contingent on his execution of a general release of claims. In connection with the Merger, we also entered into a consulting agreement with Dr. Nohria pursuant to which Dr. Nohria has been retained as a consultant for a term of one year commencing as of the closing date of the Merger, and is being paid $10,000 per month of service as a consultant.
Mr. Moze is partner of Crystal Clear Communications, a consulting firm. In 2014, we paid Crystal Clear approximately $155,000 in connection with consulting services provided to us pursuant to an Independent Contractor Agreement with Crystal Clear, dated July 7, 2008. Such agreement was later terminated on August 6, 2014.
Secondary Offering
In November 2014, we entered into an underwriting agreement with Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., Cowen and Company, LLC and Jefferies LLC and certain selling shareholders, pursuant to which the selling shareholders sold to the underwriters an aggregate of 13,409,511 of our ordinary shares at a
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purchase price of $12.05 per ordinary share, resulting in aggregate gross proceeds to the selling shareholders of approximately $154.7 million. The offering closed on November 19, 2014. We did not receive any proceeds from the sale of our ordinary shares by the selling shareholders in the offering. The names of the selling shareholders and number of shares sold to the underwriters in the offering are included in a table below.
| Selling Shareholder |
Number of Shares Sold | |||
| Principal Shareholder or Affiliated Entities: |
||||
| Altiva Capital, LLC(1) |
7,000,000 | |||
| Essex Woodlands Health Ventures Fund VII, L.P.(2) |
3,450,000 | |||
| Entities affiliated with Virinder Nohria, M.D., Ph.D.(3) |
2,784,512 | |||
| Directors and Executive Officers: |
||||
| Timothy P. Walbert |
150,000 | |||
| Jeffrey W. Sherman, M.D., FACP |
24,999 | |||
| (1) | Altiva Capital, LLC is affiliated with Mr. Venkataraman. |
| (2) | Dr. Himawan is affiliated with Essex Woodlands Health Ventures Fund VII, L.P. |
| (3) | Dr. Nohria sold 2,000,000 shares in the offering, and his affiliated trust, Mohun Patrick Nohria 2013 Gift Trust, sold 784,512 shares in the offering |
As part of the offering, we agreed to reimburse Dr. Nohria and his affiliated trust and Altiva Capital, LLC, an entity affiliated with Mr. Venkataraman, for certain of the underwriting discounts otherwise payable by them in the offering. Based upon the sale by Dr. Nohria and his affiliated trust of an aggregate of 2,784,512 shares in the offering, we reimbursed Dr. Nohria and his affiliated trust a total of approximately $0.7 million. Based upon the sale by Altiva Capital, LLC of 7,000,000 shares in the offering, we reimbursed Altiva Capital, LLC a total of approximately $1.8 million. The Audit Committee approved these reimbursements.
Indemnification of Officers and Directors
On or after the effective time of the Merger, we entered into indemnification agreements with our directors and executive officers. The indemnification agreements require us, under the circumstances and to the extent provided for therein, to indemnify such persons to the fullest extent permitted by applicable law against certain expenses and other amounts incurred by any such person as a result of such person being made a party to certain actions, suits, proceedings and other actions by reason of the fact that such person is or was a director, officer, employee, consultant, agent or fiduciary of our company or any of our subsidiaries or other affiliated enterprises. The rights of each person who is a party to an indemnification agreement are in addition to any other rights such person may have under our memorandum and articles of association, the Companies Acts 1963 to 2014 of Ireland, any other agreement, a vote of the shareholders of our company, a resolution of directors of our company or otherwise. We believe that these agreements are necessary to attract and retain qualified persons as our officers and directors. We also maintain directors’ and officers’ liability insurance.
Certain of our executive officers and directors have also entered into separate indemnification agreements with HPI prior to the Merger.
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APPROVAL OF THE AMENDED 2014 PLAN
In May 2014, the HPI board of directors adopted the 2014 Plan, and our shareholders subsequently approved the 2014 Plan in September 2014. The 2014 Plan became effective on September 19, 2014 in connection with the Merger. The 2014 Plan was the successor to and continuation of the 2011 Plan.
On March 23, 2015, the Compensation Committee of our Board of Directors approved amending the 2014 Plan subject to shareholder approval to, among other things, increase the aggregate number of shares authorized for issuance under the 2014 Plan beyond those remaining available for future grant under the 2014 Plan by an additional 14,000,000 shares. We refer to the 2014 Plan, as amended by the Compensation Committee of our Board of Directors on March 23, 2015, as the “Amended 2014 Plan” throughout this Proxy Statement.
In this Proposal 2, we are requesting shareholder approval of the Amended 2014 Plan in order to:
| • | increase the number of ordinary shares authorized for issuance under the Amended 2014 Plan beyond those remaining available for future grant under the 2014 Plan by an additional 14,000,000 ordinary shares; and |
| • | for purposes of Section 162(m) of the Internal Revenue Code, (a) increase the maximum number of shares that may be granted per calendar year to any one participant pursuant to stock options, stock appreciation rights and other stock awards whose value is determined by reference to an increase over an exercise price or strike price of at least 100% of the fair market value of the underlying Horizon ordinary shares on the date of grant to 3,000,000 ordinary shares, (b) increase the maximum number of shares that may be granted per calendar year to any one participant as a “performance stock award” to 3,000,000 ordinary shares, (c) confirm the other applicable award limits for purposes of compliance with Section 162(m), (d) confirm existing performance criteria upon which performance goals may be based with respect to performance awards under the Amended 2014 Plan, and (e) confirm existing permitted means of adjustment when calculating the attainment of performance goals for performance awards granted under the Amended 2014 Plan. |
If our shareholders do not approve this Proposal 2, the 2014 Plan will continue to be effective in accordance with its current terms following the Annual General Meeting.
2014 Plan Share Reserve Information
| Total Shares Available as of Record Date (March 6, 2015)* |
13,285,993 | |||
| March 23, 2015 Grants (Not Subject to Shareholder Approval)** |
(9,681,120 | ) | ||
|
|
|
|||
| Total Shares Available after March 23, 2015 Grants |
3,604,873 | |||
| Additional Share Request Under Proposal 2 |
14,000,000 | |||
| Grants Approved March 23, 2015 (Subject to Shareholder Approval of this Proposal 2)** |
(11,967,420 | ) | ||
|
|
|
|||
| Shares Remaining Available After Annual General Meeting (Intended to Cover Employee Equity Grants for Next 3 Years following the Annual General Meeting) |
5,637,453 | |||
|
|
|
| * | Excludes 2,386,242 shares available under Non-Employee Plan as of March 6, 2015 |
| ** | Number of grants made reflects the 2014 Plan’s fungible share counting ratio where one full value share depletes the share reserve by 1.29 shares. |
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Reasons to Approve the Amended 2014 Plan
Implementation of a Highly Performance-Based Equity Incentive Plan. Intended to further align management with delivering outstanding returns to shareholders, on March 23, 2015 the Compensation Committee approved a highly performance-based equity incentive program that provides management the opportunity to earn performance share units awards, or PSU Awards, based on compound annual total shareholder returns “TSR” over the next three years. The PSU Award payout levels are tied to TSR levels above expected market rates of return in order to emphasize a strong pay-for-performance orientation, as shown below:
| 3 Year Compound-Annual TSR Achievement |
Number of Performance Share Units Earned (All Participants)(1)(2) | |
| < 15% | — | |
| 15% | 2,651,000 | |
| 30% | 5,302,000 | |
| 45% | 7,953,000 | |
| 60% | 10,604,000 |
| (1) | Number of performance share units earned shown in the table does not reflect the 2014 Plan’s fungible share counting ratio where one full value share depletes the share reserve by 1.29 shares. |
| (2) | Any of the PSU Awards that are not earned at the end of the performance period will be cancelled and the related ordinary shares will not be added back in the pool of shares available for grant under the 2014 Plan. |
The PSU Awards that may be earned subject to achievement of 15% three-year compound annual TSR have been granted by the Compensation Committee. PSU Awards that may be earned based on attainment of three-year compound annual TSR achievement above 15% have been approved by the Compensation Committee but will be granted effective upon shareholder approval of this Proposal 2. For such purposes TSR will be measured using a base price of $21.50, which is equal to the implied 20-day, volume weighted, average trading price of our ordinary shares (“20-day VWAP”) ending on March 23, 2015, the date of approval of the program. TSR will be measured through three separate ending measurement dates occurring on December 22, 2017, March 22, 2018, and June 22, 2018. One-third of the target PSU Award that may be earned will be measured based on performance attained at each measurement date and the PSU Award vesting level will be determined based on the compound annual TSR from March 23, 2015 through the applicable measurement date. For further information regarding the terms of the PSU Awards and applicable vesting levels, please see “Compensation Discussion and Analysis — Long-Term Incentive Compensation — 2015 Equity Incentives — PSU Awards.”
Ability to Continue to Grant Equity Awards. Approval of the Amended 2014 Plan by Horizon’s shareholders is necessary to enable Horizon to continue to grant stock options and other awards to employees of Horizon and its subsidiaries at levels reasonably necessary to attract, retain and motivate talent. The Amended 2014 Plan will also allow Horizon to utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of employees of the Company and its subsidiaries, and to provide long-term incentives that align the interests of employees with the interests of Horizon shareholders. In addition to the Performance Share Units described above, the remaining shares requested in this proposal are intended to be granted in the form of new hire, annual refresher and promotional grants. While the share request was developed with the intent that the shares under the plan will cover the Company’s share needs for the next approximately three years, actual share usage may vary from projections as the Company continues on its high-growth trajectory.
Section 162(m) Compensation Approval. Approval of the Amended 2014 Plan by Horizon’s shareholders is also required to ensure that stock options and performance-based awards granted under the Amended 2014 Plan will qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, which is referred to in this proxy statement/prospectus as “Section 162(m).” Section 162(m) denies a deduction to any publicly held corporation and its affiliates for certain compensation paid to “covered employees” in a taxable year to the extent that compensation to a covered employee exceeds $1 million. However, some kinds of compensation, including qualified “performance-based compensation,” are not subject to this deduction
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limitation. For the grant of awards under a plan to qualify as “performance-based compensation” under Section 162(m), among other things, the plan must (i) describe the employees eligible to receive such awards, (ii) provide a per-person limit on the number of shares subject to stock options and performance-based stock awards, and the amount of cash that may be subject to performance-based cash awards, granted to any employee under the plan in any year, and (iii) include one or more pre-established business criteria upon which the performance goals for performance-based awards may be granted (or become vested or exercisable). These terms must be approved by the shareholders and, accordingly, Horizon shareholders are requested to approve the Amended 2014 Plan, which includes terms regarding eligibility for awards, per-person limits on awards and the business criteria for performance-based awards granted under the Amended 2014 Plan (as described in “— Description of the Amended 2014 Plan” below).
Overhang
The following table provides certain additional information regarding Horizon’s equity incentive plans. As of March 6, 2015 there were 126,167,435 ordinary shares of Horizon outstanding. The closing price of Horizon’s ordinary shares as reported on the NASDAQ Global Select Market as of March 6, 2015 was $21.90 per share.
| As of March 6, 2015 (Record Date) |
||||
| Total Shares Subject to Outstanding Stock Options |
7,740,946 | |||
| Total Shares Subject to Outstanding Full Value Awards |
1,424,142 | |||
| Weighted-Average Exercise Price of Outstanding Stock Options |
$ | 10.25 | ||
| Weighted-Average Remaining Term of Outstanding Stock Options (in years) |
8.20 | |||
| Total Shares Available for Grant* |
15,672,235 | |||
| * | Includes 2,386,242 shares available for grant under our 2014 Non-Employee Plan as of March 6, 2015. |
Burn Rate
The following table provides detailed information regarding the activity related to Horizon’s equity incentive plans and weighted average shares outstanding for the fiscal year ending December 31, 2014.
| Fiscal Year 2014 |
||||
| Stock Options Granted |
3,902,836 | |||
| Full Value Awards Granted |
1,312,722 | |||
| Stock Options Cancelled |
789,151 | |||
| Full Value Awards Cancelled |
188,701 | |||
| Weighted-Average Ordinary Shares Outstanding |
83,751,129 | |||
Note Regarding Forward-Looking Statements
We do not as a matter of course make public forecasts as to our total shares outstanding and utilization of various equity awards due to the unpredictability of the underlying assumptions and estimates.
The inclusion of the information set forth above should not be regarded as an indication or prediction of actual future outcomes, and the statements should not be relied upon as such. Neither Horizon nor any other person makes any representation to any of our shareholders regarding actual outcomes compared to the information contained in the forward-looking statements set forth above. Although presented with some numerical specificity, these statements are not fact and reflect numerous assumptions and estimates as to future events made by our management that our management believed were reasonable at the time this filing was prepared and other factors such as industry performance and general business, economic, regulatory, market and financial conditions, as well as factors specific to our business, all of which are difficult to predict and many of which are beyond the control of
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our management. The forecasts are forward-looking statements within the meaning of Section 27A of the 1933 Act and Section 21A of the 1934 Act. These statements involve risks and uncertainties that could cause actual outcomes to differ materially from those in the forward-looking statements, including our ability to attract and retain talent, achievement of performance metrics, if any, with respect to certain equity awards, the extent of option exercise activity, and other factors described in this proxy statement/prospectus.
The Amended 2014 Plan Combines Compensation and Governance Best Practices
The Amended 2014 Plan includes provisions that are designed to protect the Horizon shareholders’ interests and to reflect corporate governance best practices including:
| • | Repricing is not allowed without shareholder approval. The Amended 2014 Plan prohibits the repricing of outstanding equity awards and the cancelation of any outstanding equity awards that have an exercise price or strike price greater than the current fair market value of Horizon ordinary shares in exchange for cash or other stock awards under the Amended 2014 Plan without prior shareholder approval. |
| • | Shareholder approval is required for additional shares. The Amended 2014 Plan does not contain an annual “evergreen” provision. The Amended 2014 Plan authorizes a fixed number of shares, so that shareholder approval is required to issue any additional shares, allowing our shareholders to have direct input on our equity compensation programs. |
| • | Fungible share reserve. The Amended 2014 Plan has a fungible share reserve, which increases the rate at which the share reserve is depleted for stock awards other than stock options and stock appreciation rights, in order to minimize shareholder dilution. The number of shares available for issuance under the Amended 2014 Plan will be reduced by one share for each ordinary share subject to a stock option or stock appreciation right and by 1.29 shares for each ordinary share subject to any other type of award issued pursuant to the Amended 2014 Plan, and such ordinary shares will return to the share reserve at the same rates upon cancellation or other forfeiture of such awards or shares. |
| • | Reasonable share counting provisions. In general, when awards granted under the Amended 2014 Plan lapse or are canceled, the shares reserved for those awards will be returned to the share reserve and be available for future awards. However, ordinary shares tendered to Horizon or withheld by Horizon as consideration for of the exercise price of stock options or stock appreciation rights, to cover tax withholding obligations upon exercise of stock options or stock appreciation rights, or to cover tax withholding obligations related to any other stock awards will not be returned to the Amended 2014 Plan’s share reserve. |
| • | No liberal change in control provisions. The definition of change in control in the Amended 2014 Plan requires the consummation of an actual transaction so that no vesting acceleration benefits may occur without an actual change in control transaction occurring. |
| • | No discounted stock options or stock appreciation rights. All stock options and stock appreciation rights granted pursuant to the Amended 2014 Plan must have an exercise price equal to or greater than the fair market value of Horizon ordinary shares on the date the stock option or stock appreciation right is granted. |
Description of the Amended 2014 Plan
The material features of the Amended 2014 Plan are outlined below. The following summary describes the material features of the 2014 Plan as it would be in effect upon approval of this Proposal 2. This summary is qualified in its entirety by reference to the complete text of the Amended 2014 Plan which also reflects the changes described in the preceding sentence. Shareholders are urged to read the actual text of the Amended 2014 Plan, which is appended to this proxy statement/prospectus as Annex A and may be accessed from the SEC’s website at www.sec.gov.
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Types of Awards
The Amended 2014 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other forms of stock awards, or collectively, stock awards. The Amended 2014 Plan also provides the ability to grant performance stock awards and performance cash awards, or together, performance awards, that may qualify the compensation attributable to those awards as performance-based compensation for purposes of Section 162(m) of the Code, as explained in greater detail below.
Incentive stock options granted under the Amended 2014 Plan are intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code. Nonstatutory stock options granted under the Amended 2014 Plan are not intended to qualify as incentive stock options under the Code. See “U.S. Federal Income Tax Information” for a discussion of the tax treatment of stock awards.
Purpose
Our Board of Directors adopted the Amended 2014 Plan to provide a means to secure and retain the services of the employees employed by us to provide incentives for such persons to exert maximum efforts for the success of Horizon and to provide a means by which such eligible recipients may be given an opportunity to benefit from increases in the value of our ordinary shares through the granting of stock awards pursuant to the Amended 2014 Plan. The Amended 2014 Plan is the successor plan to the 2011 Plan, which in turn was the successor plan to the HPI 2005 Stock Plan, which is referred to in this proxy statement/prospectus as the “2005 Plan.” For purposes of this Proposal 2 the 2011 Plan and the 2005 Plan are together “Prior Plans.”
Shares Available for Awards under the Amended 2014 Plan
The total number of Horizon ordinary shares reserved for issuance under the Amended 2014 Plan will not exceed 36,052,130 shares, which is the sum of (i) 22,052,130 ordinary shares, which is the total reserve that was approved in connection with the adoption of the 2014 Plan, including, but not limited to, the shares remaining available for issuance under the Prior Plans and the Returning Shares and (ii) 14,000,000 new shares. The “Returning Shares” are shares subject to awards granted under the Prior Plans that expire or terminate for any reason prior to exercise or settlement or are forfeited, redeemed or repurchased because of the failure to meet a contingency or condition required to vest such shares.
The number of ordinary shares available for issuance under the Amended 2014 Plan will be reduced by (1) one share for each ordinary share issued pursuant to an option grant or stock appreciation right with a strike price of at least 100% of the fair market value of the underlying ordinary shares on the date of grant, and (2) 1.29 shares for each ordinary share issued pursuant to restricted stock awards, restricted stock unit awards, performance stock awards, or other stock awards granted under the Amended 2014 Plan.
To the extent there is an ordinary share issued pursuant to a stock award (whether granted under the Amended 2014 Plan, 2011 Plan or the 2005 Plan), other than a stock option or stock appreciation right with a strike price of at least 100% of the fair market value of the underlying ordinary shares on the date of grant, and such ordinary share becomes available for issuance under the Amended 2014 Plan, then the number of ordinary shares available for issuance under the Amended 2014 Plan will increase by 1.29 shares.
Any shares subject to a stock award that are not delivered to a participant because the stock award is exercised through a reduction of shares subject to the stock award (i.e., “net exercised”) and any shares tendered as payment for the exercise or purchase price of a stock award will not again become available for issuance under the Amended 2014 Plan. Additionally, any shares withheld by us pursuant to our withholding obligations in connection with a stock option, stock appreciation right or other stock award will not again become available for issuance under the Amended 2014 Plan.
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However, if a stock award expires or otherwise terminates without all of the shares covered by such stock award having been issued in full or is settled in cash, such expiration, termination or settlement will not reduce (or otherwise offset) the number of ordinary shares that may be available for issuance under the Amended 2014 Plan. If any ordinary shares issued pursuant to a stock award are forfeited back to, redeemed or repurchased by us because of the failure to meet a contingency or condition required to vest such shares, then the shares that are forfeited, redeemed or repurchased will revert to and again become available for issuance under the Amended 2014 Plan.
Section 162(m) Limits
Under the Amended 2014 Plan, a maximum of 3,000,000 Horizon ordinary shares may be granted to any one participant during any one calendar year pursuant to stock options, stock appreciation rights and other stock awards whose value is determined by reference to an increase over an exercise price or strike price of at least 100% of the fair market value of the underlying Horizon ordinary shares on the date of grant. In addition, the maximum amount covered by performance awards that may be granted to any one participant in any one calendar year (whether the grant, vesting or exercise is contingent upon the attainment during a performance period of the performance goals described below) is 3,000,000 Horizon ordinary shares in the case of performance stock awards and $3,000,000 in the case of performance cash awards. Such limits are designed to allow Horizon to grant awards that are exempt from the $1,000,000 million limitation on the income tax deductibility of compensation paid per covered employee imposed by Section 162(m) of the Code. In seeking shareholder approval of the Amended 2014 Plan, we are also seeking shareholder approval of the above limits under Section 162(m) of the Code, as well as confirming the existing performance criteria upon which performance goals may be based with respect to performance awards under the Amended 2014 Plan, and confirming the existing permitted means of adjustment when calculating the attainment of performance goals for performance awards granted under the Amended 2014 Plan.
Administration
Our Board of Directors has authority to administer the Amended 2014 Plan. Subject to the provisions of the Amended 2014 Plan, our Board of Directors has the authority to construe and interpret the Amended 2014 Plan, to determine the persons to whom and the dates on which awards will be granted, the number of ordinary shares to be subject to each stock award, the time or times during the term of each stock award within which all or a portion of the award may be exercised, the fair market value applicable to a stock award, the exercise price of stock options and stock appreciation rights, the type of consideration permitted to exercise or purchase each stock award, and other terms and conditions.
Our Board of Directors has the authority to delegate some or all of the administration of the Amended 2014 Plan to a committee or committees. In the discretion of our Board of Directors, a committee may consist solely of two or more “non-employee directors” within the meaning of Rule 16b-3 of the Exchange Act or solely of two or more “outside directors” within the meaning of Section 162(m) of the Code. For this purpose, a “non-employee director” generally is a director who does not receive remuneration from us other than compensation for service as a director (except for amounts not in excess of specified limits applicable pursuant to Rule 16b-3 under the Exchange Act). An “outside director” generally is a director who is neither a current or former officer nor a current employee of Horizon, does not receive any remuneration from Horizon other than compensation for service as a director, and is not employed by and does not have ownership interests in an entity that receives remuneration from Horizon (except within specified limits applicable under regulations issued pursuant to Section 162(m) of the Code). If administration is delegated to a committee, the committee has the authority to delegate certain administrative powers to a subcommittee. As used herein in this Proposal 2 with respect to the Amended 2014 Plan, the “2014 Plan Administrator” refers to any committee our Board of Directors appoints or, if applicable, any subcommittee, as well as to our Board of Directors.
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Repricing; Cancellation and Re-Grant of Stock Awards
Subject to the approval of this Proposal 2, under the Amended 2014 Plan, the 2014 Plan Administrator does not have the authority to reprice any outstanding stock option or stock appreciation right by reducing the exercise, purchase, or strike price of the stock option or stock appreciation right or to cancel any outstanding stock option or stock appreciation right that has an exercise price greater than the current fair market value of Horizon ordinary shares in exchange for cash or other stock awards without obtaining the approval of our shareholders within 12 months prior to the repricing or cancellation and re-grant event.
Eligibility
All of the employees (including officers) of Horizon will be eligible to participate in the Amended 2014 Plan and may receive all types of stock awards and performance awards (including performance cash awards) under the Amended 2014 Plan after the Merger. As of the record date, there were approximately 588 employees (including officers) of Horizon who would be eligible to receive grants under the Amended 2014 Plan. Non-employee directors and consultants of Horizon are not eligible to participate in the Amended 2014 Plan.
Terms of Stock Options
Stock options may be granted under the Amended 2014 Plan pursuant to stock option agreements adopted by the 2014 Plan Administrator. The Amended 2014 Plan permits the grant of stock options that qualify as incentive stock options and nonstatutory stock options. The following is a description of the permissible terms of stock options under the Amended 2014 Plan. Individual stock option agreements may be more restrictive as to any or all of the permissible terms described below.
Exercise Price. The exercise price of nonstatutory stock options may not be less than 100% of the fair market value of the ordinary shares subject to the stock option on the date of grant unless certain conditions apply; provided that in all cases the exercise price is not less than the nominal value of an ordinary share of Horizon. The exercise price of incentive stock options may not be less than 100% of the fair market value of the ordinary shares subject to the stock option on the date of grant and, in some cases (see “Limitations on Incentive Stock Options” below), may not be less than 110% of such fair market value.
Consideration. Acceptable forms of consideration for the purchase of Horizon ordinary shares pursuant to the exercise of a stock option under the Amended 2014 Plan will be determined by the 2014 Plan Administrator and may include any combination of the following, provided, however, that where ordinary shares are issued pursuant to the exercise of an option, the nominal value of each newly issued ordinary share is fully paid up: (1) cash, check, bank draft or money order made payable to Horizon, (2) payment pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board, (3) for nonstatutory stock options only a “net exercise” arrangement, provided, however, that irrespective of whether a “net exercise” arrangement is used, the nominal value of each newly issued ordinary share will be fully paid up in cash, (4) deduction from salary due and payable to an employee by Horizon or a subsidiary, or (5) other legal consideration approved by the 2014 Plan Administrator and permissible under applicable law.
Vesting. Stock options granted under the Amended 2014 Plan may become exercisable in cumulative increments, or “vest,” as determined by the 2014 Plan Administrator at the rate specified in the stock option agreement. Shares covered by different stock options granted under the Amended 2014 Plan may be subject to different vesting schedules as the 2014 Plan Administrator may determine. The 2014 Plan Administrator also has flexibility to provide for accelerated vesting of stock options in certain events.
Term. The term of stock options granted under the Amended 2014 Plan may not exceed ten years and, in some cases (see “Limitations” below), may not exceed five years.
Termination of Service. Except as explicitly provided otherwise in an optionholder’s stock option agreement, stock options granted under the Amended 2014 Plan generally terminate three months after
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termination of the optionholder’s service unless (1) termination is due to the optionholder’s disability, in which case the stock option may be exercised (to the extent the stock option was exercisable at the time of the termination of service) at any time within 12 months following termination; (2) the optionholder dies before the optionholder’s service has terminated, or within the period (if any) specified in the stock option agreement after termination of service for a reason other than death, in which case the stock option may be exercised (to the extent the stock option was exercisable at the time of the optionholder’s death) within 18 months following the optionholder’s death by the person or persons to whom the rights to such stock option have passed; (3) the optionholder is terminated for cause in which case the stock option will cease to be exercisable immediately upon the optionholder’s termination, or (4) the stock option by its terms specifically provides otherwise. A stock option term may be extended in the event that exercise of the stock option following termination of service is prohibited by applicable securities laws or if the sale of stock received upon exercise of a stock option would violate our insider trading policy. In no event may a stock option be exercised after its original expiration date.
For purposes of the Amended 2014 Plan, “cause” generally means (i) a participant’s repeated failure to perform one or more essential duties and responsibilities to Horizon; (ii) a participant’s failure to follow the lawful directives of manager(s); (iii) a participant’s material violation of any Horizon policy; (iv) a participant’s commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct or gross misconduct; (v) a participant’s unauthorized use or disclosure of any proprietary information, confidential information or trade secrets of Horizon or any other party to whom he or she owes an obligation of nondisclosure as a result of his or her relationship with Horizon; or (vi) a participant’s willful breach of any of obligations under any written agreement or covenant with us or violation of any statutory duty owed to us. The determination that a termination of the participant’s continuous service is either for “cause” or without “cause” will be made by Horizon, in our sole discretion.
Restrictions on Transfer. Generally, a participant may not transfer a stock option other than by will or the laws of descent and distribution or a domestic relations, official marital settlement agreement or other divorce or separation instrument permitted under applicable law. During the lifetime of the participant, only the participant may exercise an incentive stock option. However, the 2014 Plan Administrator may grant nonstatutory stock options that are transferable in certain limited instances. The 2014 Plan Administrator may also allow a participant to designate a beneficiary who may exercise an option following the participant’s death.
Limitations on Incentive Stock Options
The aggregate fair market value, determined at the time of grant, of shares of Horizon ordinary shares with respect to incentive stock options that are exercisable for the first time by an optionholder during any calendar year under all of our stock plans may not exceed $100,000. The stock options or portions of stock options that exceed this limit are treated as nonstatutory stock options. No incentive stock option may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any affiliate unless the following conditions are satisfied:
| • | the exercise price of the incentive stock option must be at least 110% of the fair market value of the stock subject to the incentive stock option on the date of grant; and |
| • | the term of the incentive stock option must not exceed five years from the date of grant. |
The aggregate maximum number of ordinary shares that may be issued pursuant to the exercise of incentive stock options granted under the Amended 2014 Plan is the number of shares subject to the Amended 2014 Plan share reserve.
Terms of Stock Appreciation Rights
Stock appreciation rights may be granted under the Amended 2014 Plan pursuant to stock appreciation right agreements approved by the 2014 Plan Administrator.
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Exercise. Each stock appreciation right is denominated in ordinary share equivalents. Upon exercise of a stock appreciation right, we will pay the participant an amount equal to the excess of (a) the aggregate fair market value on the date of exercise of a number of ordinary share equivalents with respect to which the participant is exercising the stock appreciation right, over (b) the strike price determined by the 2014 Plan Administrator on the date of grant. The appreciation distribution upon exercise of a stock appreciation right may be paid in cash, Horizon ordinary shares, a combination of cash and ordinary shares, or any other form of consideration determined by the 2014 Plan Administrator, provided, however, that where ordinary shares are issued pursuant to a stock appreciation right, the nominal value of each newly issued ordinary share is fully paid up.
Strike Price. The strike price of each stock appreciation right will be determined by the 2014 Plan Administrator but will in no event be less than 100% of the fair market value of Horizon ordinary shares on the date of grant.
Vesting. Stock appreciation rights vest and become exercisable at the rate specified in the stock appreciation right agreement as determined by the 2014 Plan Administrator.
Term. The term of stock appreciation rights granted under the Amended 2014 Plan may not exceed ten years.
Termination of Service and Restrictions on Transferability. Stock appreciation rights will be subject to the same conditions upon termination of a participant’s service and restrictions on transfer as stock options under the Amended 2014 Plan.
Terms of Restricted Stock Awards
Restricted stock awards may be granted under the Amended 2014 Plan pursuant to restricted stock award agreements adopted by the 2014 Plan Administrator.
Consideration. Payment of any purchase price may be made in any legal form acceptable to the 2014 Plan Administrator, provided, however, that where ordinary shares are issued pursuant to a restricted stock award, the nominal value of each newly issued ordinary share is fully paid up.
Vesting. Horizon ordinary shares acquired under a restricted stock award may be subject to forfeiture to Horizon in accordance with a vesting schedule to be determined by the 2014 Plan Administrator.
Termination of Service. Generally, restricted stock awards that have not vested will be forfeited upon the participant’s termination of continuous service for any reason.
Restrictions on Transfer. Generally, a restricted stock award may be transferred only upon such terms and conditions as are set forth in the restricted stock award agreement.
Terms of Restricted Stock Unit Awards
Restricted stock unit awards may be granted under the Amended 2014 Plan pursuant to restricted stock unit award agreements adopted by the 2014 Plan Administrator.
Consideration. Payment of any purchase price may be made in any legal form acceptable to the 2014 Plan Administrator, provided, however, that where ordinary shares are issued pursuant to a restricted stock unit award, the nominal value of each newly issued ordinary share is fully paid up.
Settlement of Awards. We will settle a payment due to a recipient of a restricted stock unit award by delivery of our ordinary shares, by cash, by a combination of cash and stock, or in any other form of consideration determined by the 2014 Plan Administrator and set forth in the restricted stock unit award agreement.
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Vesting. Horizon ordinary shares acquired under a restricted stock unit award may be subject to forfeiture to us in accordance with a vesting schedule to be determined by the 2014 Plan Administrator.
Dividend Equivalents. Dividend equivalents may be credited in respect of Horizon ordinary shares covered by a restricted stock unit award.
Termination of Service. Generally, restricted stock unit awards that have not vested will be forfeited upon the participant’s termination of continuous service for any reason.
Restrictions on Transfer. Generally, restricted stock unit awards may be transferred only upon such terms and conditions as are set forth in the restricted stock unit award agreement.
Terms of Performance Awards
General. The Amended 2014 Plan is designed to allow us to grant cash and stock based performance awards that may qualify as performance-based compensation that is not subject to the $1,000,000 limitation on the income tax deductibility of compensation paid to a covered employee imposed by Section 162(m) of the Code, if certain conditions are met.
Performance Goals. Performance awards may be granted, vest or be exercised based upon the attainment during a specified period of time of specified performance goals. The length of any performance period, the performance goals to be achieved during the performance period, and the measure of whether and to what degree such performance goals have been attained will be determined by the Horizon compensation committee, except that our Board of Directors also may make any such determinations to the extent that the award is not intended to comply with Section 162(m) of the Code.
In granting a performance award intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Compensation Committee will set a period of time, or a performance period, over which the attainment of one or more goals, or performance goals, will be measured. Within the time period prescribed by Section 162(m) of the Code, at a time when the achievement of the performance goals remains substantially uncertain (typically no later than the earlier of the 90th day of a performance period and the date on which 25% of the performance period has elapsed), the Compensation Committee will establish the performance goals, based upon one or more criteria, or performance criteria, enumerated in the Amended 2014 Plan and described below. As soon as administratively practicable following the end of the performance period, the Compensation Committee will certify (in writing) whether the performance goals have been satisfied.
Performance goals under the Amended 2014 Plan will be based on any one or more of, or a combination of the following performance criteria: (1) earnings (including earnings per share and net earnings); (2) earnings before interest, taxes and depreciation; (3) earnings before interest, taxes, depreciation and amortization; (4) total shareholder return; (5) return on equity or average shareholder’s equity; (6) return on assets, investment, or capital employed; (7) stock price; (8) margin (including gross margin); (9) income (before or after taxes); (10) operating income; (11) operating income after taxes; (12) pre-tax profit; (13) operating cash flow; (14) sales or revenue targets; (15) increases in revenue or product revenue; (16) expenses and cost reduction goals; (17) improvement in or attainment of working capital levels; (18) economic value added (or an equivalent metric); (19) market share; (20) cash flow; (21) cash flow per share; (22) share price performance; (23) debt reduction; (24) implementation or completion of projects or processes; (25) customer satisfaction; (26) shareholders’ equity; (27) capital expenditures; (28) debt levels; (29) operating profit or net operating profit; (30) workforce diversity; (31) growth of net income or operating income; (32) billings; and (33) to the extent that an Award is not intended to comply with Section 162(m) of the Code, other measures of performance selected by our Board of Directors.
Performance goals may be based on a company-wide basis, with respect to one or more business units, divisions, affiliates, or business segments, and in either absolute terms or relative to the performance of one or
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more comparable companies or the performance of one or more relevant indices. In establishing a performance goal, the Compensation Committee (and the board of directors, to the extent that an award is not intended to comply with Section 162(m) of the Code) may provide that performance will be appropriately adjusted as follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated performance goals; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; and (5) to exclude the effects of any “extraordinary items” as determined under generally accepted accounting principles. In addition, our Board of Directors retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of performance goals and to define the manner of calculating the performance criteria it selects to use for a performance period.
Terms of Other Stock Awards
General. The 2014 Plan Administrator may grant other stock awards based in whole or in part by reference to the value of Horizon ordinary shares. Subject to the provisions of the Amended 2014 Plan, the 2014 Plan Administrator has the authority to determine the persons to whom and the dates on which such other stock awards will be granted, the number of shares of Horizon ordinary shares (or cash equivalents) to be subject to each award, and other terms and conditions of such awards, provided, however, that where ordinary shares are issued pursuant to other stock awards, the nominal value of each newly issued ordinary share is fully paid up. Such awards may be granted either alone or in addition to other stock awards granted under the Amended 2014 Plan.
Vesting. Other stock awards may be subject to vesting in accordance with a vesting schedule to be determined by the 2014 Plan Administrator.
Changes to Capital Structure