REGENERON PHARMACEUTICALS, INC. Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Effective
In revising the compensation structure, the Board took into account shareholder preference for this type of performance-based award. The Board also recognized the Company's long track record of success for patients, shareholders, and employees achieved under the leadership of Drs. Schleifer and Yancopoulos, as well as the Board's confidence in their vision for the Company and stewardship of Regeneron for the foreseeable future. The awards are 100% performance-based and are designed to:
· further align CEO and CSO interests with those of Regeneron's long-term
shareholders by rewarding top performance and eliminating time-based stock
options from their compensation program;
· reward exceptional shareholder value creation over the next eight years (i.e.,
over the five-year performance period and the subsequent three-year mandatory
deferral and holding period); and
· ensure stability and continuity of leadership to support the achievement of the
next phase of Regeneron's ambitious product, pipeline, and talent development plans.
Historically, annual equity awards to Drs. Schleifer and Yancopoulos
overwhelmingly consisted of time-based stock options. In contrast, the current
awards consist entirely of performance restricted stock units ("PSUs"). The PSUs
will be earned based on predetermined, cumulative total shareholder return
("TSR") goals with respect to the Company's common stock over five years based
on
The awards were designed following detailed and extensive analysis conducted by
the Compensation Committee's independent compensation consultant under the
Compensation Committee's direction. As a condition to the grant of these awards,
it has been agreed that Drs. Schleifer and Yancopoulos will not be entitled to
any additional equity or equity-based awards from the Company until the
Company's regular year-end grant cycle in
The terms of the PSUs are further described below.
Primary Performance Measure, Performance Period, and
Performance Level Absolute TSR Goal1 TSR CAGR Price Target2 Payout3 Maximum +140.4% +19.2%$ 1,150 250 % +125.6% +17.7%$ 1,079 225 % +112.4% +16.3%$ 1,016 200 % +99.9% +14.9%$ 956 175 % +87.7% +13.4%$ 898 150 % +76.5% +12.0%$ 844 125 % Target +65.6% +10.6%$ 792 100 % +47.6% +8.1%$ 706 75 % Threshold +31.3% +5.6%$ 628 50 %
1 Starting from the Initial Share Price; to be adjusted for any dividends or
other shareholder distributions paid during the performance period.
2 Determined by applying the five-year TSR CAGR goals to the Initial Share Price;
to be adjusted for any dividends or other shareholder distributions paid out
during the performance period.
3 Payouts are expressed as a percentage of the target number of PSUs awarded to
each recipient. Payouts for performance between the levels set forth in this
table are determined by interpolation.
Performance Goal Measurement. The PSUs may be earned at the threshold level
beginning
Secondary Performance Measure. If no PSUs have been earned during the five-year performance period, then the recipient will have an opportunity to earn a threshold payout at 50% of the target number of PSUs if the Company's cumulative TSR over such five-year period exceeds, on a relative basis, the cumulative TSR of the Nasdaq Biotech Index (composite return) by at least 200 basis points. The rationale for the minimum payout for exceeding the industry five-year index is that there may be circumstances in which Regeneron outperforms the broader market without reaching the minimum absolute TSR goals, such as in the case of a recession or industry-wide developments outside management's control.
Holding Period. Earned PSUs are generally subject to a mandatory deferral and
holding period of three years after vesting (the "Holding Period"). Earned and
vested PSUs are not forfeited upon termination of the recipient's service with
the Company, but the shares deliverable in respect of the PSUs may not be sold
or otherwise transferred during the Holding Period (except as described below).
The Holding Period ends early upon the recipient's death or disability or a
change in control involving the
Termination Treatment. The PSUs will continue to be outstanding and may be earned and vest for so long as the recipient serves as an employee or consultant of the Company or a member of the Board. The following provisions further apply to the PSUs in the circumstances described below:
· Voluntary Termination or Retirement. Upon voluntary termination or retirement
from the Company (except where the recipient's service continues as noted above), any unvested PSUs are forfeited.
· Termination without Cause/Departure for Good Reason. If the recipient's
employment with Regeneron is terminated without Cause or the recipient leaves his employment with Regeneron for a Good Reason (each as defined in or incorporated by reference into the Equity Plan or the applicable PSU Award Agreement (as defined below)), earnout is measured as of termination and all PSUs earned as of that date vest and remain subject to the Holding Period. In this circumstance, PSUs not earned as of such termination date have 12 additional months to be earned and, to the extent earned, will vest on the fifth anniversary of the Grant Date or the first anniversary of the termination, whichever comes first (with the Holding Period beginning upon such vesting). Unearned PSUs are forfeited at the end of the 12 months.
· Change in Control. In the case of a CIC, earnout is measured as of the CIC date
(using the CIC transaction price), and all PSUs earned as of that date vest with no Holding Period and any unearned PSUs are forfeited immediately.
· Death or Disability. In the case of the recipient's death or disability, the
PSUs remain outstanding and may be earned during their term and, to the extent earned, are not subject to the Holding Period.
PSU Award Agreements. The PSU awards are made pursuant to PSU agreements under
the Equity Plan (the "PSU Award Agreements") and are subject to the terms of the
Company's Policy Regarding Recoupment or Reduction of Incentive Compensation for
Compliance Violations (clawback policy), as in effect from time to time. A form
of the PSU Award Agreement will be filed with the
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