Momenta Pharmaceuticals, Inc.
MOMENTA PHARMACEUTICALS INC (Form: DEF 14A, Received: 04/27/2017 08:15:45)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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MOMENTA PHARMACEUTICALS, INC.
675 West Kendall Street
Cambridge, Massachusetts 02142
April 27, 2017
To Our Stockholders:
You are cordially invited to attend the 2017 Annual Meeting of Stockholders of Momenta Pharmaceuticals, Inc. to be held at 10:30 a.m., Eastern time, on Tuesday, June 20, 2017, at the Hotel Marlowe, 25 Edwin H. Land Blvd, Cambridge, Massachusetts 02141.
The Notice of Meeting and Proxy Statement on the following pages describe the matters to be presented at the meeting.
It is important that your shares be represented at this meeting to assure the presence of a quorum. Whether or not you plan to attend the meeting, we hope that you will have your stock represented by voting your shares over the Internet or by telephone as provided in the instructions set forth on the enclosed proxy card, or by completing, signing, dating and returning your proxy in the enclosed envelope, as soon as possible . Your stock will be voted in accordance with the instructions you have given in your proxy.
Thank you for your continued support.
 
Sincerely,
 
CWHEELERSIGNATURE.JPG

 
Craig A. Wheeler
President and Chief Executive Officer





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MOMENTA PHARMACEUTICALS, INC.
675 West Kendall Street
Cambridge, Massachusetts 02142
NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 20, 2017
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 2017 Annual Meeting of Stockholders of Momenta Pharmaceuticals, Inc., or the Annual Meeting, will be held on Tuesday, June 20, 2017, at 10:30 a.m., Eastern time, at the Hotel Marlowe, 25 Edwin H. Land Blvd, Cambridge, Massachusetts 02141. At the Annual Meeting, stockholders will consider and vote on the following matters:
1.
to elect Bruce L. Downey, Corey N. Fishman, and Georges Gemayel to our board of directors to serve as Class I directors, each for a term of three years;
2.
to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017;
3.
to approve, on an advisory (non-binding) basis, the compensation of our named executive officers;
4.
to approve, on an advisory (non-binding) basis, the frequency of future advisory votes on the compensation of our named executive officers;
5.
to approve the amendment and restatement of the Momenta Pharmaceuticals, Inc. 2013 Incentive Award Plan, which, among other things, increases the number of shares authorized for issuance by 4,300,000 shares; and
6.
to approve the amendment and restatement of the Momenta Pharmaceuticals, Inc. 2004 Employee Stock Purchase Plan, which increases the number of shares authorized for issuance by 1,400,000 shares.

The stockholders will also act on any other business that may properly come before the Annual Meeting or any postponement, continuation or adjournment thereof.
Stockholders of record at the close of business on Monday, April 24, 2017, are entitled to notice of, and to vote at, the Annual Meeting or any postponement, continuation or adjournment thereof. Your vote is important regardless of the number of shares you own.
We hope that all stockholders will be able to attend the Annual Meeting in person. However, to ensure that a quorum is present at the Annual Meeting, please vote your shares over the Internet or by telephone as provided in the instructions set forth on the enclosed proxy card, or complete, date, sign and promptly return the enclosed proxy card whether or not you expect to attend the Annual Meeting. A postage-prepaid envelope, addressed to Broadridge Financial Solutions, which is serving as proxy tabulator, has been enclosed for your convenience. If you attend the Annual Meeting in person, your proxy will, upon your written request, be returned to you and you may vote your shares in person.
 
By Order of the Board of Directors,
 
BLEICHERSIGNATURE.JPG

 
Bruce A. Leicher
Secretary
Cambridge, Massachusetts
April 27, 2017




Table of Contents
 
Page






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MOMENTA PHARMACEUTICALS, INC.
675 WEST KENDALL STREET
CAMBRIDGE, MASSACHUSETTS 02142
PROXY STATEMENT
For the 2017 Annual Meeting of Stockholders
To Be Held on Tuesday, June 20, 2017
GENERAL INFORMATION ABOUT VOTING
This proxy statement and the enclosed proxy card are being furnished in connection with the solicitation of proxies by the board of directors of Momenta Pharmaceuticals, Inc., also referred to in this proxy statement as the “Company”, “Momenta”, “we” or “us”, for use at the 2017 Annual Meeting of Stockholders to be held on Tuesday, June 20, 2017, at 10:30 a.m., Eastern time, at the Hotel Marlowe, 25 Edwin H. Land Blvd., Cambridge, Massachusetts 02141, and at any postponement, continuation or adjournment thereof. You may obtain directions to the location of the Annual Meeting by contacting Bruce A. Leicher, Secretary, Momenta Pharmaceuticals, Inc., 675 West Kendall Street, Cambridge, Massachusetts 02142, telephone: (617) 491‑9700.
Our 2016 Annual Report to Stockholders for the fiscal year ended December 31, 2016 is being mailed to stockholders with the mailing of these proxy materials on or about May 1, 2017.
Important Notice Regarding the Availability of Proxy Materials for the Annual
Meeting of Stockholders To Be Held on June 20, 2017:
This proxy statement and our 2016 Annual Report on Form 10‑K to Stockholders are available for viewing, printing and downloading at http://ir.momentapharma.com/annuals-proxies.cfm .
A copy of our Annual Report on Form 10‑K for the fiscal year ended December 31, 2016 as filed with the Securities and Exchange Commission, except for exhibits, will be furnished without charge to any stockholder upon request to Momenta Pharmaceuticals, Inc., 675 West Kendall Street, Cambridge, Massachusetts 02142, Attention: Bruce A. Leicher, facsimile: (617) 621‑0431, by calling (617) 491‑9700 or is available on our website at http://ir.momentapharma.com/annuals-proxies.cfm.
Momenta’s Voting Securities
Holders of record of our common stock at the close of business on Monday, April 24, 2017, will be entitled to notice of, and to vote at, the Annual Meeting or any postponement, continuation or adjournment of the Annual Meeting. On that date, 74,427,954 shares of our common stock were issued and outstanding. Each share of common stock entitles the holder thereof to one vote with respect to all matters submitted to stockholders at the Annual Meeting. We have no other securities entitled to vote at the Annual Meeting.
Voting Your Shares
If you are the record holder of your shares, you may vote in one of four ways. You may vote by submitting your proxy over the Internet, by telephone, or by mail or you may vote in person at the Annual Meeting.
You may vote over the Internet. If you have Internet access, you may vote your shares from any location in the world by following the “Vote by Internet” instructions set forth on the enclosed proxy card.

1




You may vote by telephone. You may vote your shares by following the “Vote by Phone” instructions set forth on the enclosed proxy card.
You may vote by mail. You may vote by completing, dating and signing the proxy card that accompanies this proxy statement and promptly mailing it in the enclosed postage‑prepaid envelope. You do not need to put a stamp on the enclosed envelope if you mail it in the United States.
You may vote in person. If you attend the Annual Meeting, you may vote by delivering your completed proxy card in person or you may vote by completing a ballot. Ballots will be available at the meeting.
If the shares you own are held in your bank or brokerage firm account in a fiduciary capacity (typically referred to as being held in “street name”), you can vote by following the directions provided to you by your bank or brokerage firm. If the shares you own are held in street name and you wish to vote in person at the Annual Meeting, you must obtain a “legal proxy” from the organization that holds your shares. A legal proxy is a written document that will authorize you to vote your shares held in street name at the Annual Meeting. Please contact the organization that holds your shares for instructions on how to obtain a legal proxy. You must bring a copy of the legal proxy to the Annual Meeting and present it with your ballot in order for your vote to be counted.
Your Voting Instructions
The shares represented by all valid proxies will be voted as specified in those proxies. If the shares you own are held in your name and you return a duly executed proxy without specifying how your shares are to be voted, they will be voted as follows in accordance with the recommendations of our board of directors:
FOR the election of Bruce L. Downey, Corey N. Fishman, and Georges Gemayel as Class I directors;

FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm;

FOR the approval, on an advisory (non‑binding) basis, of the compensation of our named executive officers;

ONE YEAR on the frequency of future advisory (non-binding) votes on the compensation of our named executive officers;

FOR the approval of the amendment and restatement of the Momenta Pharmaceuticals, Inc. 2013 Incentive Award Plan;

FOR the approval of the amendment and restatement of the Momenta Pharmaceuticals, Inc. 2004 Employee Stock Purchase Plan; and

in the discretion of the persons appointed as proxies on any other items that may properly come before the Annual Meeting.

If the shares you own are held in street name, the bank or brokerage firm, as the record holder of your shares, is required to vote your shares in accordance with your instructions. You should direct your broker how to vote the shares held in your account. Under applicable stock exchange rules, if you do not instruct your broker on how to vote your shares, your broker will be able to vote your shares with respect to certain “routine” matters, but will not be allowed to vote your shares with respect to certain “non‑routine” matters. The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm is a routine matter. Each other proposal to be voted on at the Annual Meeting is a non‑routine matter. A broker “non‑vote” occurs when a broker submits a proxy form but declines to vote on a particular matter because the broker has not received voting instructions from the beneficial owner.

2




Revoking Your Proxy or Changing Your Vote
Voting over the Internet or by telephone or execution of a proxy will not in any way affect a stockholder’s right to attend the Annual Meeting and vote in person. A proxy may be revoked before it is used to cast a vote. If the shares you own are held in your name, you can revoke a proxy by doing one of the following:
file with our Secretary, at or before the taking of the vote at the Annual Meeting, a written notice of revocation bearing a later date than the proxy;

duly execute a later-dated proxy relating to the same shares and deliver it to our Secretary before the taking of the vote; or

attend the Annual Meeting and vote in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting.

Any written notice of revocation or subsequent proxy should be sent to us at the following address: Momenta Pharmaceuticals, Inc., 675 West Kendall Street, Cambridge, MA 02142, Attention: Bruce A. Leicher, Secretary.
If the shares you own are held in street name, you will need to follow the directions provided to you by your bank or brokerage firm to change your vote.
Votes Required
The presence in person or representation by proxy of the holders of a majority of the shares of common stock issued and outstanding and entitled to vote at the Annual Meeting is necessary to establish a quorum for the transaction of business. If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained.
The proposal regarding the election of directors requires, for each director nominee, that the votes cast for such nominee exceed the votes cast against such nominee. This means that each of the director nominees for election at our Annual Meeting must receive more “FOR” votes than “AGAINST” votes in order to be elected as a Class I director. The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm, the approval, on an advisory (non-binding) basis, of the compensation of our named executive officers, the approval, on an advisory (non-binding) basis, of the frequency of the advisory vote on the compensation of our named executive officers (the “say-on-frequency” vote), the approval of the amendment and restatement of the Momenta Pharmaceuticals, Inc. 2013 Incentive Award Plan, and the approval of the amendment and restatement of the Momenta Pharmaceuticals, Inc. 2004 Employee Stock Purchase Plan, each requires the approval of a majority of the voting power of the stock present or represented and voting on such matter. With respect to the “say-on-frequency” vote, if none of the three frequency options receives the vote of the holders of a majority of the votes cast, we will consider the frequency option (one year, two years or three years) receiving the highest number of votes cast by stockholders to be the frequency that has been recommended by stockholders. However, as described in more detail in Proposal Four below, because this proposal is non-binding, our board of directors may decide that it is in our and our stockholders’ best interests to hold future executive compensation advisory votes more or less frequently. The votes will be counted, tabulated and certified by a representative of Broadridge Financial Solutions, the Company’s inspector of elections for the Annual Meeting.
Counting of Votes
Votes withheld, abstentions and broker non-votes are included in the shares present or represented at the Annual Meeting for purposes of determining whether a quorum is present. With respect to the election of directors, abstentions and broker non-votes will not affect the voting results. With respect to the proposal regarding the ratification of the appointment of the Company’s independent registered public accounting firm, abstentions will not affect the voting results. Because brokers have discretionary authority to vote on the ratification of the independent registered public accounting firm, we do not expect any broker non-votes in connection with the ratification. With respect to all other proposals to be voted on at the Annual Meeting, abstentions and broker non-votes will not affect the voting results.


3




PROPOSAL ONE—
ELECTION OF DIRECTORS
Board Recommendation
The board of directors recommends a vote FOR the election of each of Bruce L. Downey, Corey N. Fishman, and Georges Gemayel as Class I directors.
We have three classes of directors, currently consisting of three Class I directors, three Class II directors and three Class III directors. At each annual meeting, directors are elected for a term expiring on the date of the third annual meeting following the annual meeting at which they are elected. The terms of the three classes are staggered in a manner so that only one class is elected by stockholders annually. Bruce L. Downey, Corey N. Fishman, and Georges Gemayel are currently serving as Class I directors, and are being nominated by the Board for re-election as Class I directors at the Annual Meeting. The Class I directors elected this year will serve as members of our board of directors until the 2020 annual meeting of stockholders and until their respective successors are elected and qualified or their earlier death, resignation or removal.
In accordance with our corporate governance guidelines, if any of the directors nominated for re-election at the Annual Meeting fail to receive more votes cast “FOR” his re-election than “AGAINST” his re-election, such director must promptly tender his resignation for the board of directors' consideration. Our nominating and corporate governance committee or a committee of independent directors designated by our board of directors will then make a recommendation to our board of directors to accept or reject the tendered resignation. Our board of directors will have 90 days from the date the election results from our Annual Meeting are certified to notify the resigning director of its decision. Our board of directors may consider all relevant factors in making its decision, including any stated reasons for “AGAINST” votes, whether the underlying cause of the “AGAINST” votes are curable, the length of service and contributions to the Company of the resigning director, and whether the resignation would cause us to fail to comply with any applicable rules or requirements, would lead to a "change of control" as determined pursuant to any financing or other material agreement, or would cause us to default under any material agreements. If the resigning director’s tendered resignation is not accepted or the director does not otherwise submit his resignation, such director will continue to serve on our board of directors until his successor is duly elected and qualified, or his earlier resignation or removal. If the resigning director’s tendered resignation is accepted by our board of directors, then our board of directors, in its sole discretion, may fill any resulting vacancy or decrease the size of the board in accordance with our bylaws.
The persons named in the enclosed proxy card will vote as directed on the proxy card (or through the Internet or telephonic voting) or, if you return a duly executed proxy card without specifying how your shares are to be voted, the persons named in the enclosed proxy card will vote to elect Messrs. Downey and Fishman and Dr. Gemayel as Class I directors. Messrs. Downey and Fishman and Dr. Gemayel currently serve on our board of directors. The nominees have indicated their willingness to continue to serve if elected. However, if any director nominee should be unable to serve, or for good cause will not serve, the shares of common stock represented by proxies may be voted for a substitute nominee designated by our board of directors, or our board of directors may reduce the number of Class I directors. Our board of directors has no reason to believe that any of the nominees will be unable to serve if elected.
No director, nominee for election as a director or executive officer is related by blood, marriage or adoption to any other director, nominee for election as a director or executive officer. No arrangements or understandings exist between any director or nominee for election as a director and any other person pursuant to whom such person is to be selected as a director or nominee for election as a director.

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Our Board of Directors
The biographies of each of our current Class II and Class III directors and the three Class I directors, who are also our Class I director nominees, are below. Each of the biographies also highlights specific experience, qualifications, attributes and skills that led our board to conclude that such person should serve as a director. We also believe that all of our director nominees have a reputation for integrity, honesty and adherence to high ethical standards and have each demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to our Company and our board.
Marsha H. Fanucci was a Class I director who retired from the board effective December 31, 2016. Ms. Fanucci served as a member of the audit committee and the nominating and corporate governance committee. Bennett M. Shapiro was a Class III director who did not stand for re-election at the 2016 annual meeting of stockholders, and his term expired on June 22, 2016. Dr. Shapiro served as a member of the compensation and science committees.
Name
Age
Director
Since
Principal Occupation, Other Business Experience
During the Past Five Years and Other Directorships
Class I directors, nominees to be elected at the 2017 Annual Meeting (if elected, terms to expire in 2020)
Bruce L. Downey(1)(2)
69
2009
Bruce L. Downey has been a director since June 2009. Mr. Downey has served as a partner at NewSpring Capital, a venture capital firm, since April 2009. Previously, Mr. Downey was chairman and chief executive officer of Barr Pharmaceuticals, Inc., a global specialty pharmaceutical company that operated in more than 30 countries worldwide and was acquired by Teva Pharmaceutical Industries Ltd. in 2008. Mr. Downey is a member of the board of directors of Cardinal Health, Inc., as well as privately held companies. Mr. Downey graduated with honors from Miami University in 1969 and received his law degree, cum laude, from Ohio State. Mr. Downey’s qualifications to sit on the board include his significant experience serving as a chief executive officer of a global generic pharmaceutical company that also had a substantial brand business and an active biologics research and development program, his years serving as a lawyer in private practice and his experience serving on other boards of directors in the biopharmaceutical industry.
Corey N. Fishman(1)(3)
52
2016
Corey N. Fishman has been a director since September 2016. Mr. Fishman has served as chief executive officer and director of Iterum Therapeutics Limited, a biopharmaceutical company, since 2015. From 2010 to 2015, he served as chief financial officer and chief operating officer of Durata Therapeutics, Inc., a pharmaceutical company, where he managed a successful IPO and secondary offering, and led the negotiation and sale of Durata to Actavis plc. Prior to Durata, Mr. Fishman served as chief financial officer of Ganic Pharmaceuticals, Inc., a pharmaceutical company, and served in several other leadership roles, including chief financial officer, at Meda Pharmaceuticals, formerly MedPointe, a pharmaceutical company. Mr. Fishman holds a B.A. in Economics from the University of Illinois at Urbana-Champaign and an M.S.M. in Finance from Purdue University. Mr. Fishman’s qualifications to sit on the board include his experience with public and financial accounting matters, and his senior executive experience at companies within the biopharmaceutical industry.

5




Georges Gemayel(1)(3)
57
2016
Georges Gemayel, Ph.D., has been a director since January 2016. Since 2010, he has served as a consultant for several biotechnology companies and venture capital funds. From February 2011 to December 2012, Dr. Gemayel served as executive chairman of Syndexa Pharmaceuticals Corp., a privately held drug development company. Prior to that, in 2010, Dr. Gemayel served as executive chairman of FoldRx Pharmaceuticals, Inc. until its acquisition by Pfizer Inc. From June 2008 until November 2009, Dr. Gemayel served as president and chief executive officer of Altus Pharmaceuticals Inc., a publicly traded pharmaceutical company. In November 2009, while Dr. Gemayel was president, chief executive officer and a director, Altus Pharmaceuticals Inc. filed a voluntary petition for relief under Chapter 7 of the U.S. Bankruptcy Code and ceased operations at such time. Dr. Gemayel received his doctorate in pharmacy from St. Joseph University in Beirut, Lebanon, and his Ph.D. in pharmacology from Paris-Sud University in Paris, France. Dr. Gemayel currently serves as chairman of the boards of directors of several privately held companies, and on the boards of directors of Dimension Therapeutics, Inc. and Supernus Pharmaceuticals, Inc., which are publicly traded biotechnology companies. He was previously a director of publicly traded biotechnology companies, Raptor Pharmaceuticals, Inc., which was acquired by Horizon Pharma plc, Adolor Corporation, which was acquired by Cubist Pharmaceuticals, Inc., Prosensa Holding N.V., which was acquired by BioMarin Pharmaceutical Inc. and NPS Pharmaceuticals, Inc., which was acquired by Shire plc. Dr. Gemayel's qualifications to sit on the board include his over 25 years of experience in the biopharmaceutical industry, including management and executive positions.
 
 
 
 
Class II directors (terms to expire in 2018)
James R. Sulat(1)(3)
66
2008
James R. Sulat has been a director since June 2008 and has served as chairman of the board since December 2008. From October 2009 to June 2013, Mr. Sulat served as the chief executive officer and chief financial officer of Maxygen, Inc., a publicly traded biopharmaceutical company. Mr. Sulat is on the boards of directors of publicly traded biotechnology companies, Valneva SE, AMAG Pharmaceuticals, Inc. and Arch Therapeutics, Inc. During the last five years, Mr. Sulat served as a director of Maxygen, Inc. and Diadexus, Inc., a publicly traded biotechnology company. Mr. Sulat received a B.S. in Administrative Sciences from Yale University, and an M.B.A. and an M.S. in Health Services Administration from Stanford University. Mr. Sulat’s qualifications to sit on the board include his experience with public and financial accounting matters, his senior executive experience at companies within the biopharmaceutical industry and his experience serving on other boards of directors in the biopharmaceutical industry.
Craig A. Wheeler
56
2006
Craig A. Wheeler has served as our president and a director since August 2006 and was appointed our chief executive officer effective September 2006. Prior to joining Momenta, Mr. Wheeler served as president of Chiron Biopharmaceuticals, a division of Chiron Corporation, a biotechnology company, from August 2001 until June 2006. Mr. Wheeler serves on the board of Amicus Therapeutics, Inc., including serving on the science and compensation committees. Mr. Wheeler served as a director of Avanir Pharmaceuticals, Inc., which was acquired by Otsuka Pharmaceuticals Co., Ltd., from September 2005 to January 2015, including serving on the corporate governance and audit committees, and serving as chairman of the board beginning May 2007. Mr. Wheeler has been a member of the board of the Association for Accessible Medicines, or AAM, formerly known as the Generic Pharmaceutical Association, for over eight years, including serving as chairman of the board from 2014 to 2016 and as a member of the executive committee for the past six years. Mr. Wheeler received B.S. and M.S. degrees in chemical engineering from Cornell University and an M.B.A. degree from the Wharton School of the University of Pennsylvania. Mr. Wheeler’s qualifications to sit on the board include his years of senior executive management experience in the biotechnology industry, including over ten years as our president and chief executive officer, and his experience serving on other boards of directors in the biotechnology industry.

6




Jose-Carlos Gutiérrez-Ramos(2)(4)
54
2016
Jose-Carlos Gutiérrez-Ramos, Ph.D., has served as a director since March 2016. Since 2015, he has served as chief executive officer and president of Synlogic, Inc., a pharmaceutical company. Prior to joining Synlogic, Dr. Gutiérrez‑Ramos was group senior vice president of Worldwide Research and Development and global head of Biotherapeutics Research and Development at Pfizer Inc., a pharmaceutical company, from 2010 to 2015. Dr. Gutiérrez‑Ramos received a B.S. from Universidad Complutense de Madrid and his Ph.D. in immunochemistry from the Universidad Autonoma de Madrid. Dr. Gutiérrez‑Ramos’ qualifications to sit on the board include his senior executive experience in the pharmaceutical industry, including his significant experience in research and development.
Class III directors (terms to expire in 2019)
Thomas P. Koestler(2)(4)
65
2011
Thomas P. Koestler, Ph.D., has been a director since January 2011. Since March 2010, Dr. Koestler has served as executive-in-residence at Vatera Healthcare Partners, a private equity company. Prior to joining Vatera Healthcare Partners, Dr. Koestler was executive vice president of Schering‑Plough Corporation, a pharmaceutical company, and president of Schering‑Plough Research Institute, the pharmaceutical research and development arm of Schering‑Plough Corporation, which he joined in 2003. Dr. Koestler has also held senior positions at Pharmacia Corporation, Novartis AG, Ortho‑McNeil and Bristol‑Myers Squibb. Dr. Koestler is also a member of the board of directors of Novo Nordisk A/S and a number of privately‑held companies. Dr. Koestler holds a B.S. degree in biology and genetics from Daemen College and a Ph.D. from the State University of New York, where he studied medicine and pathology. Dr. Koestler’s qualifications to sit on the board include his years of senior executive experience in the pharmaceutical industry, including his involvement with over 80 product approvals during his career, including 30 related to new molecular entities.
Elizabeth Stoner(3)(4)
66
2007
Elizabeth Stoner, M.D., has been a director since October 2007. Since September 2012, Dr. Stoner has been the chief development officer at Vascular Pharmaceuticals, Inc., a biotechnology company. From 2010 to 2014, Dr. Stoner was the chief development officer of Rhythm Pharmaceuticals, and since December 2014, she has been a member of Rhythm’s Scientific Advisory Board. Since October 2007, Dr. Stoner has served as a managing director at MPM Capital, a healthcare venture capital firm. Prior to joining MPM Capital, Dr. Stoner had a distinguished 22‑year career at Merck Research Laboratories. At the time of her retirement from Merck, Dr. Stoner was senior vice president of Global Clinical Development Operations with responsibility for the company’s clinical development activities in more than 40 countries, including Merck’s Japanese subsidiary. Prior to her position at Merck, she was an assistant professor of Pediatrics at Cornell University Medical College. Dr. Stoner served on the board of Radius Health, Inc. from 2011 to 2015. Dr. Stoner received her B.S. in Chemistry from Ottawa University, KS, her M.S. in Chemistry from the State University of New York at Stony Brook, and her M.D. from Albert Einstein College of Medicine. Dr. Stoner’s qualifications to sit on the board include her more than 20 years of senior executive experience in the pharmaceutical industry, including her expertise in leading clinical development organizations.

7




Steven C. Gilman (2)(4)
64
2016
Steven C. Gilman, Ph.D., has been a director since June 2016. In 2016, Dr. Gilman was appointed as the chief executive officer and the chairman of the board of directors of ContraFect Corporation, a publicly traded biotechnology company. In March 2017, Dr. Gilman began a medical leave of absence from active employment as the chief executive officer of ContraFect. Until 2015, he served as the executive vice president, Research & Development and chief scientific officer at Cubist Pharmaceuticals, a biopharmaceutical company, until its acquisition by Merck & Co. Before joining Cubist in 2008, Dr. Gilman served as chairman of the board of directors and chief executive officer of ActivBiotics, a privately held biopharmaceutical company. In addition to his service on ContraFect Corporation's board of directors, Dr. Gilman currently serves on the boards of directors of publicly traded biotechnology companies, Keryx Biopharmaceuticals, Inc., SCYNEXIS Inc., and Vericel Corporation. Dr. Gilman received his Ph.D. and M.S. degrees in microbiology from Pennsylvania State University, his post-doctoral training at Scripps Clinic and Research Foundation, and a B.A. in microbiology from Miami University of Ohio. Dr. Gilman’s qualifications to sit on the board include his leadership experience in the biopharmaceutical industry, including his senior executive positions at ContraFect and Cubist and his experience serving on other boards of directors in the biotechnology industry.

(1)
Member of audit committee.

(2)
Member of compensation committee.

(3)
Member of nominating and corporate governance committee.

(4)
Member of the science committee.

For information relating to compensation of our directors, including shares of our common stock owned by and options granted to each of our directors, see the disclosure set forth under the headings “Director Compensation” and “Security Ownership of Certain Beneficial Owners and Management.”




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MOMENTA’S CORPORATE GOVERNANCE
General
We believe that good corporate governance is important to ensure that Momenta is managed for the long‑term benefit of our stockholders. We continuously review our corporate governance policies and practices, and compare them to those suggested by various authorities in corporate governance and the practices of other public companies.
This section describes key corporate governance practices that we have adopted, including the criteria we use in selecting director nominees, our board leadership structure and certain responsibilities and activities of the board of directors and its committees. Complete copies of our corporate governance guidelines, committee charters and code of conduct described below are available on the “Investors—Corporate Governance” section of our website at www.momentapharma.com . Alternatively, you may request a copy of any of these documents by writing to Momenta Pharmaceuticals, Inc., 675 West Kendall Street, Cambridge, Massachusetts 02142, Attention: Bruce A. Leicher, Secretary, fax: (617) 621‑0431.
Corporate Governance Guidelines
Our board of directors has adopted corporate governance guidelines to assist our directors in the exercise of their duties and responsibilities and to serve the best interests of Momenta and its stockholders. These guidelines, which provide a framework for the conduct of the board of directors’ business, provide, among other things, that:
the principal responsibility of the directors is to oversee the management of Momenta;

a majority of the members of the board of directors must be independent directors;

the independent directors will meet periodically in executive session;

directors have full and free access to management and, as necessary and appropriate, independent advisors;

new directors will participate in an orientation program and all directors are expected to participate in continuing director education funded by the Company on an ongoing basis; and

at least annually the board of directors and its committees will conduct a self‑evaluation to evaluate whether they are functioning effectively.

Board Determination of Independence
Under applicable NASDAQ rules, a director will only qualify as an “independent director” if, in the opinion of our board of directors, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that none of Bruce L. Downey, Corey N. Fishman, Georges Gemayel, Steven C. Gilman, Jose-Carlos Gutiérrez‑Ramos, Thomas P. Koestler, Elizabeth Stoner and James R. Sulat has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent” director as that term is defined under applicable NASDAQ rules. Furthermore, our board of directors determined that during their service as directors, neither Marsha H. Fanucci nor Bennett M. Shapiro had a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors was an “independent” director as that term is defined under applicable NASDAQ rules. Craig A. Wheeler is not an independent director under the NASDAQ rules due to his employment as Chief Executive Officer and President of the Company.
Board Leadership Structure
Our board separated the positions of chairman of the board and chief executive officer in 2005. Separating these positions allows our chief executive officer to focus on our day-to-day business, while allowing the chairman of the board to lead the board in its fundamental role of providing advice to and independent oversight of management and corporate governance. The board recognizes the time, effort, and energy that the chief executive officer is required to devote to his position, and further recognizes the commitment required to serve as chairman of the board, particularly as the board’s

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oversight responsibilities continue to grow. While our by-laws and corporate governance guidelines do not require that our chairman and chief executive officer positions be separate, the board believes that our practice of having separate positions and having an independent outside director serve as chairman is the appropriate leadership structure for the Company at this time. However, in the event that in the future the chairman of the board is not an independent director, our corporate governance guidelines provide that the nominating and corporate governance committee will nominate an independent director to serve as “Lead Director” who will be approved by a majority of the independent directors.
The Board’s Role in Risk Oversight
Our board of directors administers its risk oversight function directly and through our board committees. The audit committee’s role in the risk oversight process includes receiving regular reports from our compliance officer, who oversees our compliance program, members of senior management on our compliance committee who have functional compliance responsibility, and other members of senior management on areas of material risk to us, including operational, financial, legal, regulatory, strategic and reputational risks. The audit committee receives these reports from the appropriate compliance “risk owner” within the Company to enable the audit committee to understand our risk identification, risk management and risk mitigation strategies. The chair of the audit committee reports on these discussions to the full board during each regularly-scheduled board meeting. The compensation committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The nominating and governance committee assists the board in fulfilling its oversight responsibilities with respect to corporate enterprise risk management as well as the management of risks associated with board organization, membership and structure, succession planning for our directors and executive officers, corporate governance, and potential legal issues that may impact the Company, and also by reviewing the code of business conduct and ethics which creates a foundation for our compliance program. Our board of directors does not believe that its role in the oversight of our risks affects the board’s leadership structure.
Board Meetings and Attendance
Our board of directors met five times during the fiscal year ended December 31, 2016, either in person or by teleconference. During 2016, each director attended at least 75% of the aggregate of the total number of board meetings and committee meetings on which she or he then served.
Director Attendance at Annual Meetings of Stockholders
Our corporate governance guidelines provide that directors are expected to attend the annual meeting of stockholders. All of our then‑current directors, other than Bennett M. Shapiro, whose term expired on the date of the 2016 annual meeting of stockholders, attended the 2016 annual meeting of stockholders.
Board Committees
Our board of directors has established four standing committees—audit, compensation, nominating and corporate governance and science—each of which operates under a charter that has been approved by our board of directors. Current copies of the audit, compensation, nominating and corporate governance and science committee charters are posted on the “Investors—Corporate Governance” section of our website located at www.momentapharma.com .
Our board of directors has determined that all of the members of each of the audit, compensation and nominating and corporate governance committees are independent as defined under applicable NASDAQ rules, including, in the case of all members of the audit committee, the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, in the case of all members of the compensation committee, the NASDAQ rules specific to the independence of compensation committee members.
Audit Committee
The audit committee currently consists of Bruce L. Downey, Corey N. Fishman, Georges Gemayel and James R. Sulat. Mr. Sulat chairs the audit committee. The audit committee held ten meetings in 2016. Our audit committee’s responsibilities include:

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appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm;

overseeing the work of our independent registered public accounting firm, including the receipt and consideration of reports from the firm;

reviewing and discussing with management our annual and quarterly financial statements and related disclosures;

monitoring our internal control over financial reporting and disclosure controls and procedures;

discussing and monitoring our corporate compliance program and financial and accounting risk management policies;

establishing procedures for the receipt and retention of accounting related complaints and concerns;

meeting with management and independently with our independent registered public accounting firm;

reviewing and approving or ratifying any related person transactions; and

preparing the audit committee report required by Securities and Exchange Commission rules, which is included below under “Report of the Audit Committee.”

Our board of directors has determined that each of Bruce L. Downey, Corey N. Fishman and James R. Sulat is an “audit committee financial expert” as defined by applicable Securities and Exchange Commission rules.
Compensation Committee
The compensation committee currently consists of Bruce L. Downey, Steven C. Gilman, Jose-Carlos Gutiérrez‑Ramos and Thomas P. Koestler. Mr. Downey chairs the compensation committee. The compensation committee held nine meetings in 2016. Our compensation committee’s responsibilities include:
reviewing and approving, or recommending for board approval, the compensation of our chief executive officer, or CEO, and our other executive officers;

overseeing an evaluation of our senior executives;

overseeing and administering our equity incentive plans;

reviewing and making recommendations to the board of directors with respect to director compensation;

reviewing and discussing annually with management our “Compensation Discussion and Analysis,” which is included below; and

preparing the compensation committee report required by Securities and Exchange Commission rules, which is included below under “Compensation Committee Report.”

The compensation committee may delegate its authority to one or more subcommittees as it deems appropriate. The processes and procedures followed by our compensation committee in considering and determining executive compensation are described below under the heading “Executive Compensation Processes.”
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee currently consists of Corey N. Fishman, Georges Gemayel, Elizabeth Stoner and James R. Sulat. Dr. Gemayel chairs the nominating and corporate governance committee. The nominating and corporate governance committee held five meetings in 2016. Our nominating and corporate governance committee’s responsibilities include:

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identifying individuals qualified to become board members;

recommending to the board of directors the persons to be nominated for election as directors and to each of the board’s committees;

monitoring and assessing the independence of existing directors and all director nominees under applicable NASDAQ rules and in accordance with the Company's corporate governance guidelines;

overseeing an annual review by the board of directors with respect to management succession planning;

reviewing and assessing our code of business conduct and ethics;

overseeing our enterprise risk management program;

reviewing and assessing the adequacy of the Company's corporate governance principles; and

overseeing an annual self-evaluation of the board of directors.

The processes and procedures followed by our nominating and corporate governance committee in identifying and evaluating director candidates are described below under the heading “Director Nomination Process.”
Science Committee
Our science committee currently consists of Steven C. Gilman, Jose-Carlos Gutiérrez-Ramos, Thomas P. Koestler, and Elizabeth Stoner. Dr. Stoner chairs the science committee. The science committee held four meetings in 2016. Our science committee’s responsibilities include:
reviewing the scientific, clinical, regulatory and intellectual property strategies that underlie our major research and development programs;

reviewing the annual research and development budget and allocation of resources to certain of our programs;

reviewing the capability and skill set of the research and development organization; and

reviewing the attainment of research and development milestones.

Compensation Committee Interlocks and Insider Participation
The compensation committee currently consists of Bruce L. Downey, who serves as chair, Steven C. Gilman, Jose-Carlos Gutiérrez-Ramos, and Thomas P. Koestler. Bennett M. Shapiro also served on the compensation committee until June 2016, when his term as a director expired. No member of our compensation committee is or has been an officer or employee of the Company.
During 2016, none of our executive officers served as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our board of directors or compensation committee.
Report of the Audit Committee
The audit committee has reviewed our audited consolidated financial statements for the fiscal year ended December 31, 2016 and has discussed these consolidated financial statements with our management and our independent registered public accounting firm. Management is responsible for the preparation of our consolidated financial statements and for maintaining an adequate system of disclosure controls and procedures and internal control over financial reporting for that purpose. Our independent registered public accounting firm is responsible for conducting an independent audit of our annual consolidated financial statements in accordance with generally accepted auditing standards and issuing a report on the results of their audit. The audit committee is responsible for providing independent, objective oversight of these processes.

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The audit committee has also received from, and discussed with, our independent registered public accounting firm various communications that they are required to provide to the audit committee, including the matters required to be discussed by Public Company Accounting Oversight Board’s Auditing Standard No. 1301, Communications with Audit Committees.
Our independent registered public accounting firm also provided the audit committee with the written disclosures and letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and our audit committee has discussed with our independent registered public accounting firm its independence.
Based on the review and discussions referred to above, the audit committee recommended to our board of directors that the audited consolidated financial statements be included in our Annual Report on Form 10‑K for the year ended December 31, 2016 for filing with the Securities and Exchange Commission.
By the Audit Committee of the Board of Directors of Momenta Pharmaceuticals, Inc.:
                
James R. Sulat (Chair)
Bruce L. Downey
Corey N. Fishman
Georges Gemayel
Executive Compensation Processes
We have implemented an annual performance review program for our employees, including our executives, with annual corporate goals that are proposed by management, reviewed by the compensation committee and approved by the board of directors. These corporate goals target the achievement of specified operational and financial goals; specific research, clinical, regulatory, commercial and/or compliance milestones; and business development and financing initiatives. Individual performance is evaluated in part by reviewing the extent to which an employee’s performance facilitates the achievement of our annual corporate and business goals. Annual salary adjustments, annual incentive cash bonus awards and equity awards for each of our Chief Executive Officer, Chief Financial Officer, and each of our three other most highly compensated executive officers are tied to a combination of achievement of corporate goals and individual performance.
The compensation committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation of executive officer compensation. To assist the compensation committee in discharging its responsibilities, since mid‑2010, the compensation committee retained Radford Survey and Consulting, an Aon Hewitt company, an independent compensation consultant that we refer to as Radford, to evaluate certain aspects of our compensation practices and assist the compensation committee with setting executive compensation.
For further information about our executive compensation, please see the “Executive Compensation—Compensation Discussion and Analysis” section below.
Director Nomination Process
The process followed by our nominating and corporate governance committee to identify and evaluate director candidates includes requests to board members for recommendations as well as use of a third‑party professional search firm. The committee meets from time to time to evaluate biographical information and background material relating to potential candidates as well as to discuss the results of interviews of selected candidates by members of the nominating and corporate governance committee and other members of the board of directors. Each of Dr. Gilman and Mr. Fishman was recommended to serve on our board of directors by a third-party professional search firm.
In considering whether to recommend any particular candidate for inclusion in the board’s slate of director nominees, the nominating and corporate governance committee applies the criteria attached to its charter. These criteria include the candidate’s integrity, business acumen, commitment to understanding the Company and its industry, experience, diligence and the ability to act in the interests of all stockholders. The nominating and corporate governance committee also considers whether a candidate has any conflicts of interest that would impair his or her ability to represent the interests of the Company’s stockholders and to fulfill the responsibilities of a director. The criteria further specify that the value of diversity

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on the board should be considered by the nominating and corporate governance committee in the director identification and nomination process. While we do not have a formal policy on diversity, the nominating and corporate governance committee proactively seeks nominees with a broad diversity of experience, professions, skills, gender, race, national origin and backgrounds and considers such factors in evaluating prospective nominees. The nominating and corporate governance committee does not assign specific weights to particular criteria and no particular trait is a prerequisite for each prospective nominee. We believe that the backgrounds and qualifications of our directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow the board of directors to fulfill its responsibilities. Nominees are not discriminated against on the basis of race, religion, national origin, gender, sexual orientation, disability or any other basis proscribed by law.
Stockholders may recommend individuals to the nominating and corporate governance committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least a year as of the date such recommendation is made, to the nominating and corporate governance committee, c/o Bruce A. Leicher, Secretary, Momenta Pharmaceuticals, Inc., 675 West Kendall Street, Cambridge, Massachusetts 02142. Assuming that appropriate biographical and background material has been provided on a timely basis, the nominating and corporate governance committee will evaluate stockholder‑recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others.
Stockholders also have the right under our by-laws to directly nominate director candidates, without any action or recommendation on the part of the nominating and corporate governance committee or the board of directors, by following the procedures set forth in our amended and restated by-laws that are described below under the heading “Additional Information—Stockholder Proposals.”
Communicating with the Independent Directors
Our board of directors will give appropriate attention to written communications that are submitted by stockholders and will respond if and as appropriate. The chairman of the board of directors (an independent director) or otherwise the chair of the nominating and corporate governance committee, subject to advice and assistance from the general counsel and secretary and, if requested, outside legal counsel, is primarily responsible for monitoring communications from stockholders and for providing copies of summaries of such communications to the other directors as he considers appropriate.
Under procedures approved by a majority of the independent directors, communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that the chairman of the board considers to be important for the directors to know. In general, communications relating to corporate governance and corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we tend to receive repetitive or duplicative communications.
Stockholders who wish to send communications on any topic to the board of directors should address such communications to board of directors c/o Bruce A. Leicher, Secretary, Momenta Pharmaceuticals, Inc., 675 West Kendall Street, Cambridge, Massachusetts 02142, fax: (617) 621‑0431.
Code of Business Conduct and Ethics
Our written code of business conduct and ethics applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The code is intended to deter wrongdoing and to promote the conduct of all Company business in accordance with high standards of integrity and in compliance with all applicable laws and regulations. The code covers a wide range of professional conduct, including compliance with laws and regulations applicable to the conduct of our business, conflicts of interest, insider trading, the protection of confidential information, honest and ethical fair dealing, acceptance and giving of gifts and gratuities, accuracy of our books and records, concerns regarding accounting matters, dealings with our independent auditor, and reporting and compliance procedures.

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Prohibition of Hedging or Pledging the Company’s Securities
Our Insider Trading Policy generally prohibits pledging and hedging activities by employees and directors with respect to Company securities. No employees or directors engage in pledging or hedging activities with respect to Company securities.
Succession Planning
Our management conducts formal succession planning for our chief executive officer and other executive officers, which is reviewed at least annually by the board of directors under the oversight of the nominating and corporate governance committee.
Our Executive Officers
The following table sets forth the names, ages and positions of our current executive officers:
Name
Age
Position
Craig A. Wheeler*
56
President and Chief Executive Officer
Scott M. Storer
42
Senior Vice President and Chief Financial Officer
Ganesh V. Kaundinya, Ph.D.
50
Chief Scientific Officer and Senior Vice President, Research
Bruce A. Leicher
61
Senior Vice President, General Counsel and Secretary
Matthew P. Ottmer
46
Chief Operating Officer
*
Mr. Wheeler is a member of our board of directors. See "Proposal One—Election of Directors" for more information about Mr. Wheeler.
Scott M. Storer has been our Senior Vice President and Chief Financial Officer since November 2016. Prior to joining Momenta, Mr. Storer was Senior Vice President of Finance at Baxalta, Inc., a pharmaceutical company, following its spin-out from Baxter International in July 2015, where he provided financial leadership, internal controls, and business partnership support for Baxalta's global commercial, manufacturing, research and development, and functional teams. In addition, he led Baxalta's corporate financial planning and analysis team. Before that, from 2008 to July 2015, Mr. Storer served as Vice President of BioScience Finance at Baxter, where he provided financial leadership, internal controls and business partnership support to the BioScience US commercial organization, global manufacturing, research and development, business development and all support functions. From 1997 to 2008, Mr. Storer held various other positions at Baxter, including Vice President of BioScience Operations Finance from 2006 to 2008. Mr. Storer received his B.S. from the University of Colorado, Boulder, and his M.B.A. from Northwestern University’s Kellogg School of Management.
Ganesh V. Kaundinya, Ph.D. , is a co-founder of our Company and has been our Chief Scientific Officer since September 2007 and our Senior Vice President, Research since April 2005. From January 2002 through April 2005, he served as our Vice President, Technology. Dr. Kaundinya received his M.S. and Ph.D. in Chemical Engineering from the Massachusetts Institute of Technology.
Bruce A. Leicher has been our Senior Vice President and General Counsel since July 2008 and Secretary since September 2008. Prior to joining Momenta, Mr. Leicher served in senior legal positions at several biopharmaceutical companies. Mr. Leicher also practiced with the law firms Hill & Barlow, Hale and Dorr, and Butler and Binion. Mr. Leicher currently serves as a member of the National Biomedical Research Foundation and as Chair of the Board of the Biosimilars Council, a division of the Association for Accessible Medicines, formerly known as the Generic Pharmaceutical Association. Mr. Leicher received his B.A. from the University of Rochester and his J.D. from Georgetown University Law Center. Mr. Leicher served as a law clerk to the Honorable Thomas F. Hogan, U.S. District Court Judge for the District of Columbia.
Matthew P. Ottmer has been our Chief Operating Officer since December 2015. Mr. Ottmer served as Senior Vice President, Strategy & Emerging Businesses of Biogen, Inc., a biotechnology company, from July 2014 to July 2015. Prior to that, he served as Head of the Tysabri business at Biogen from March 2012 to July 2014, and as Chief of Staff to the Chief Executive Officer of Biogen from October 2010 to March 2012. Mr. Ottmer joined Biogen in 1999. Mr. Ottmer received his B.A. in Political Science from the University of Michigan and his M.B.A. from Northwestern University’s Kellogg School of Management.

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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following discussion provides information regarding compensation earned by the following executive officers during 2016:
Craig A. Wheeler, our President and Chief Executive Officer,

Scott M. Storer, our Senior Vice President and Chief Financial Officer,

Matthew P. Ottmer, our Chief Operating Officer,

Ganesh V. Kaundinya, our Senior Vice President, Research and Chief Scientific Officer,

Bruce A. Leicher, our Senior Vice President, General Counsel and Secretary, and

Richard P. Shea, our former Senior Vice President and Chief Financial Officer.

We refer to these executive officers as our “Named Executives.” In June 2015, Mr. Shea notified the Company of his intention to resign as chief financial officer upon the Company’s identification and appointment of a successor chief financial officer, or CFO. The Company appointed Mr. Storer as its CFO commencing November 28, 2016. As part of the CFO succession plan developed by Mr. Shea and the Company, in order to assist with the transition to a new CFO, Mr. Shea remained an employee of the Company until December 30, 2016, after which he entered into a six-month consulting contract with the Company.
Executive Summary
The objectives of our executive compensation program are to align the interests of management with the interests of stockholders. We correlate compensation to Company and individual performance and design our programs to attract, retain and motivate talented employees. We reward both short- and long-term company and individual performance, with the goal of increasing stockholder value over the long term. In determining executive compensation for 2016, we considered the results of the most recent advisory, non-binding vote of stockholders on the compensation of the Named Executives, which was approved by 97% of the votes cast at the 2016 annual meeting of stockholders. We also reach out to stockholders from time to time to discuss important issues, including our compensation program, to inform our practices and confirm that they are aligned with our stockholders’ interests.
In 2016, the compensation committee updated
our annual incentive cash bonus program by narrowing the range of the milestone target percentages for each corporate goal from 70%-130% to 75%-125%, which we believe is a more appropriate range reflective of the level of difficulty of the high and low milestones within each goal; and
our peer group for executive compensation and performance reference purposes to help ensure the group is comprised of appropriately representative companies.
In addition, our board of directors adopted an equity award retirement policy to provide for the treatment of time-based options and restricted stock units upon an eligible participant’s qualifying retirement from the Company. The policy is described in more detail under the caption “Other Elements of Compensation and Perquisites–Equity Award Retirement Policy” below.
Our compensation committee reviews competitive market data provided by Radford, the committee’s independent compensation consultant, in making compensation decisions. The compensation committee generally targets base salary, annual incentive cash bonus opportunities and equity based awards for our Named Executives at the 50 th  percentile of our peer group on an aggregate basis; however, the compensation committee retains discretion to allow for individual adjustments based on factors and considerations specific to the individual, including but not limited to, the Named Executive’s performance during the year, leadership qualities, business responsibilities, role within the Company, industry experience, career and tenure with the Company, knowledge, qualifications, overall impact on the organization, current compensation arrangements, and long-term potential to enhance stockholder value. We more heavily weight equity based awards than other

16




forms of compensation because we believe equity based awards are a powerful tool for encouraging performance and aligning the interests of our executives with those of our stockholders.
Our key compensation decisions for 2016 included the following:
The compensation committee increased base salaries for each of our Named Executives effective January 1, 2016, ranging from a 3.5% to 4% increase. This increase was based in part on the compensation committee’s review of industry trends in base salary increases as well as individual performance reviews of the Named Executives.

The compensation committee determined that the Company achieved 115% of its corporate goals for 2016 and set the corporate goal achievement component of each Named Executive’s annual incentive cash bonus award at 115%. Based on this corporate performance and individual performances for the Named Executives (except the chief executive officer, or CEO, whose bonus is completely dependent upon achievement of corporate goals), the compensation committee approved an annual incentive cash bonus of 81% of base salary for our CEO and annual incentive cash bonuses ranging from 46% to 56% of base salary for our other Named Executives, representing between 112% to 116% of the Named Executives’ target bonuses for 2016.

In early 2016, Mr. Wheeler, Dr. Kaundinya and Mr. Leicher received grants of both stock options and restricted stock for 2015 performance, the amounts of which were based in part on each such individual's position in the Company and in part on his individual achievements in 2015. Messrs. Ottmer and Storer commenced employment with the Company in December 2015 and November 2016, respectively, and were therefore ineligible to receive equity awards for 2015 performance.

In April 2016, our compensation committee adopted a company-wide performance-based restricted stock program under which shares vest subject to the Company achieving up to two of three specified performance milestones on or before April 13, 2019. Upon achieving each of the first and second milestones, 25% of the shares will vest on the later of the milestone achievement date and the first anniversary of the grant date, and an additional 25% of the shares will vest on the one year anniversary of such achievement date, subject to a requirement that recipients remain employees through each applicable vesting date. One of the three possible milestones was related to our necuparanib program, which we discontinued in the third quarter of 2016. As a result, only two performance milestones remain possible to achieve within the three year performance period.

Highlights of our compensation practices and policies include:
Stock ownership guidelines designed to foster alignment between the board, management, and stockholders, by requiring all directors and executive officers to maintain a meaningful investment in our stock.

Use of periodic long-term performance-based stock grants that are tied to the achievement of important corporate value generating events and are generally earned over a multi-year period, to supplement annual stock option grants and incent key business and strategic objectives.

Double-trigger executive severance protection, whereby cash severance and equity acceleration occurs only in the context of a qualifying termination of employment, not merely upon a change of control of the Company.

Explicit prohibition of hedging the economic risk of ownership of our equity securities by our executive officers and directors.

Overview of Compensation Program and Philosophy
Our “pay-for-performance” philosophy forms the foundation for the compensation committee’s decisions regarding executive compensation. We use a combination of fixed and variable compensation programs to reward and incentivize strong performance, and to align the interests of our executives with our stockholders. This compensation philosophy, and the program structure approved by the compensation committee, is central to our ability to attract, retain and motivate individuals who can achieve the results that our stockholders expect.
Our compensation committee has determined that our compensation program should be designed to:

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link pay to performance, measured on the corporate and individual level;

reinforce and reflect our business strategy and values;

reward teamwork and integrity;

motivate our employees to achieve meaningful results in support of our Company goals;

keep things simple to promote understanding and enable employees to make informed decisions; and

retain our management team and our other employees.

Our executive compensation philosophy is based on the following principles:
Competitive and Fair Compensation . We believe that the performance of our Named Executives should be viewed, and their overall compensation should be determined, in the context of our industry, our competitive landscape and our corporate performance. While we do not have an exact formula for allocating between cash and non‑cash compensation, we try to balance short‑term cash compensation and long-term equity compensation by offering competitive base salaries, market‑competitive benefits and perquisites, annual incentive cash bonus awards and opportunities for financial growth through our equity incentive programs.

Sustained Performance . In determining total compensation, we stress a philosophy that is performance driven. Our Named Executives are primarily rewarded based upon an assessment of corporate performance and secondarily on individual performance. Corporate performance is evaluated by reviewing the extent to which established corporate goals are met and individual performance is evaluated by reviewing each Named Executive’s contributions in the context of the overall corporate goals. Considerations taken into account in evaluating individual performance include, but are not limited to, an individual’s demonstration of leadership, teamwork and operational success in his or her functional area, as well as across the Company. Our compensation philosophy emphasizing performance permeates total compensation for both executives and non-executives. We believe that the design of our executive compensation program affects all of our employees and, because the performance of every employee is important to our success, we are cognizant of the effect that executive compensation may have on other employees.

Compensation for employees at all levels, including for our Named Executives, includes base salary, annual incentive cash bonuses, annual equity awards and other benefits. Our Named Executives are also entitled to specified benefits in connection with a termination of employment or change of control.
Realizable Pay Aligned with Stockholder Value
The Company’s stock price has been and may continue to be extremely volatile. This volatility is due in part to regulatory, legal and other events and factors whose impact on our business is often unrelated or disproportionately related to our operating performance. The current value of outstanding equity awards can fluctuate considerably over time, falling well above or below the target or reported value of the awards at the time of grant. To help ensure our total compensation program is aligned with performance, our compensation committee regularly reviews the “realizable value” of equity awards in the context of the overall compensation program and continuing performance of the Company.
We believe that the compensation of our Named Executives is appropriate and aligned with the interests of our stockholders. Specifically, a substantial portion of total compensation for our Named Executives is attributable to stock options, the realizable value of which depends upon an increase in our stock price (and thereby an increase in stockholder value) following the date of grant. We believe that stock options are one of the most effective tools available to development stage growth companies for aligning executive interests with those of our stockholders. We have also granted restricted stock to our Named Executives subject to performance-based vesting conditions tied to attaining goals that our compensation committee believes are key to creating value for our stockholders and restricted stock and restricted stock units subject to time-based vesting conditions which encourages stock ownership by and retention of our Named Executives.

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CEO Pay for Performance
A significant portion of Mr. Wheeler’s compensation is variable, performance-based compensation that we consider to be “at risk” because it is dependent on the success of our Company. At-risk compensation includes long-term equity based awards, the value of which depends on sustained, long-term increases in the price of our common stock, and annual incentive cash bonuses, which require attaining meaningful performance goals established by our board of directors with the intent of driving short‑term value creation for our stockholders. The following charts and tables highlight the alignment between Mr. Wheeler’s compensation and our Company’s performance.
2016 Pay Mix*
MOMENTAPAYMIXCHART.JPG

*
Percentages calculated from values reported in the 2016 Summary Compensation Table
We believe that the design of our compensation program, heavily weighted towards performance-based vehicles, provides a strong linkage between the level of actual pay delivered and our performance. As the table above demonstrates, 69% of Mr. Wheeler’s 2016 compensation was granted in the form of equity-based awards which are tied to the future appreciation in value of our stock and 13% of Mr. Wheeler’s 2016 compensation was based on actual performance tied to the achievement of annual targets under our 2016 bonus program. This strong focus on aligning pay and performance is a foundation of our executive compensation philosophy.

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The following chart illustrates the alignment over the past five years of Mr. Wheeler’s total compensation (as reported in the Summary Compensation Table) and our total stockholder return (presented on an indexed basis, reflecting the value of $100 invested in our stock on December 31, 2011 as measured based on the closing price of our common stock on the final day of each indicated year).
MOMENTACHART.JPG
 
2011

2012

2013

2014

2015

2016
CEO Pay ($000s)    

$4,991


$3,230


$2,858


$3,921


$5,345

$4,161
Indexed TSR 12/31    

$100.0


$67.8


$101.7


$69.2


$85.3

$86.5


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We have also examined Mr. Wheeler’s realizable pay and our Company’s performance relative to our selected peer group, which is described below under the heading “–Use of Competitive Market Compensation Data”. We have ranked Mr. Wheeler’s three‑year total realizable pay for 2014-16 relative to his counterparts in our peer group and compared the result to our rank in total stockholder return versus the stockholder return of our peers over the same period. Realizable pay includes cumulative salary and bonus paid for the past three years, plus the value of stock options, performance‑based restricted stock and time-based restricted stock granted during the same period, valued based on the Company’s stock price on December 31, 2016. The following chart illustrates that we fall squarely within the “zone of alignment” that has been identified by certain corporate governance advocates as a key measure of pay for performance.
2014-2016 CEO Realizable Pay Rank versus 2016 Total Shareholder Return Rank*
MOMENTAREALIZABLEPAYCHART.JPG

*
2016 pay information was not available for all peer group companies. 2013-2015 pay information was used for ACOR, AMAG, ARNA, DEPO, EBS, EXEL, IPXL, INSY, IRWD, KERX, MACK, NKTR, SPPI, SUPN, MDCO, and VNDA.
Stock Ownership Guidelines
We maintain a stock ownership and retention program for our executive officers and directors to ensure that each of our executive officers and directors has a long‑term equity stake in Momenta, to more closely align the interests of the executive officers and directors with those of our stockholders and to further promote our commitment to sound corporate governance.
Under the program’s guidelines:
our President and CEO is expected to hold shares of our common stock having an aggregate value equal to or greater than three times his or her annual base salary;

other executive officers are expected to hold shares of our common stock having an aggregate value equal to or greater than their annual base salary; and

non-employee directors are expected to hold shares of our common stock having an aggregate value equal to or greater than three times their then current annual base retainer for general board membership, excluding committee retainers, per‑meeting or other similar fees.

Our executive officers and directors are expected to comply with these guidelines within five years of becoming subject to the guidelines. Until the applicable minimum share requirement is achieved, each executive officer and director is

21




required to retain all shares of restricted stock upon the lapse of vesting restrictions, net of shares surrendered or sold to pay applicable withholding taxes. In addition, in the event that the applicable minimum share requirement is not achieved as of each determination date, such executive officer or director may not exercise and sell any stock options (other than to sell or surrender shares for payment of any taxes related to stock option exercises), including without limitation any sales pursuant to a 10b5‑1 plan. Once an executive officer or director has met these guidelines, he or she must continue to satisfy the guidelines so long as he or she remains subject to the guidelines. Each executive officer and director’s satisfaction of the minimum share requirement is measured on at least an annual basis. Shares that count toward satisfaction of the guidelines include:
shares of common stock owned outright by the executive officer or director or his or her spouse or minor children;

shares of common stock held in trust for the benefit of the executive officer or director or his or her spouse or minor children; and

restricted stock or restricted stock units for which applicable restrictions have lapsed.

The minimum share requirement may be waived, at the discretion of the compensation committee, if compliance would create severe hardship or would prevent an executive officer or director from complying with a court order. As of April 1, 2017, all executive officers and all but two directors met the ownership requirements under the program.
Determining Executive Compensation—Roles and Process
Utilizing the philosophy and background outlined above, our compensation committee determines the parameters of the executive compensation program, including appropriate target levels and performance measures, and administers our executive compensation program. This section discusses in greater detail the roles and process underlying the application of our executive compensation philosophy.
Role of the Compensation Committee
Our compensation committee recognizes the importance of maintaining sound principles for the development and administration of our compensation program, which is intended to strengthen the link between executive pay and performance. The compensation committee, in accordance with its written charter, oversees all aspects of our director, officer and other executive compensation policies. Based on the recommendations of the CEO and our Senior Vice President, Human Resources regarding each Named Executive’s compensation, except his and her own, the compensation committee determines the compensation of each of these Named Executives. The chairman of the board and the chair of the compensation committee evaluate the CEO’s performance, utilizing input from the board of directors and from selected executive officers, and make recommendations to the compensation committee, which then determines the CEO’s compensation. The compensation committee also directly engages the services of an independent compensation consultant to assist the committee in evaluating its compensation practices and levels, as described in more detail under the caption “–Role of External Advisors” below.
Role of CEO in Compensation Decisions
The CEO’s role in the compensation process begins with the establishment of our corporate and business performance objectives against which the payment of annual incentive cash bonus awards will be measured. Our CEO, together with our executive team, discusses and formulates annual corporate and business goals. These goals are presented to our compensation committee, which reviews and finalizes the goals and recommends them for approval by our board of directors. The CEO’s role in the compensation process continues with his review of our Named Executives. Our CEO elicits 360-performance reviews with respect to each of our Named Executives. These 360-performance reviews are evaluations of each Named Executive that are submitted to our CEO by our employees who interact with these Named Executives. Each executive also completes a written self‑assessment which is submitted to the CEO. The CEO then assimilates the feedback from the 360-performance reviews, the self‑assessment and the CEO’s own evaluation into formal written evaluations of each Named Executive. The CEO’s evaluation includes documenting each Named Executive’s performance during the year, detailing accomplishments, areas of strength and areas for development. Each Named Executive is then rated based on his or her performance during the year. The CEO then works directly with our Senior Vice President, Human Resources to provide comprehensive recommendations for salary changes, individual components of annual incentive cash bonus awards and equity awards for each of our Named Executives. These recommendations are presented to, reviewed by, modified or accepted, and approved by our compensation committee. The CEO then meets with each Named Executive and reviews his or her respective performance evaluation and compensation changes, if any.

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At the request of the compensation committee, our CEO attends all or portions of periodic meetings of the compensation committee, but does not attend portions of any meeting in which the compensation committee discusses the CEO’s compensation or performance. In addition, our compensation committee reviews information prepared by its compensation consultants with respect to executive compensation trends among our peer-group companies, including the overall blend of salary, incentive cash bonus and equity compensation within such group.
The compensation committee has delegated to our CEO the authority to make stock option grants under our 2013 Incentive Award Plan to newly-hired employees below the senior director level based on a number of options within a range as set forth in a matrix previously approved by the board of directors. All other stock options are granted by the compensation committee.
Role of External Advisors
To assist the compensation committee in discharging its responsibilities, the compensation committee directly engages its independent compensation consultant, Radford, to evaluate aspects of our compensation practices, provide advice and make recommendations in determining compensation practices and levels, including making recommendations for our board of directors and executive compensation programs. As part of this process, members of the compensation committee reviewed materials provided by Radford and had the opportunity to meet independently with Radford periodically throughout the year to discuss our executive and director compensation and to receive input and advice. The compensation committee has access to all written reports and studies provided by Radford to management. In 2016, Radford, with the compensation committee's consent, surveyed and analyzed annual incentive bonus practices among the Company's peer group companies and broader market data, informing the design of the Company's annual incentive cash bonus program. After review and consultation with Radford, the compensation committee has determined that Radford is independent and there is no conflict of interest resulting from retaining Radford currently or during the year ended December 31, 2016. In reaching these conclusions, the compensation committee considered the factors set forth in Exchange Act Rule 10C-1 and NASDAQ listing standards.
We do not use “internal pay equity” as a constraint on compensation paid to our CEO or other Named Executives. Such systems typically put a ceiling on part or all of an executive’s compensation based on a specified multiple of compensation awarded to another executive or a class of employees of the Company. Our management and our compensation committee do not believe that such limitations are an appropriate way to make compensation decisions for our executives. Instead, we rely on the judgment of the compensation committee, after considering recommendations from management and external advisors, available market data and evaluations of executive performance, in the context of a program that is weighted heavily in favor of performance-based compensation for our Named Executives.
Use of Competitive Market Compensation Data
We maintain a peer group for executive compensation and performance reference purposes. The compensation committee, in consultation with Radford, determines the peer group using benchmarks based on revenue, market capitalization, and number of employees, among other factors, and uses a multi-year period perspective in determining the peer group.
We believe that our business, which consists of three product areas: complex generics, biosimilars and novel drugs, is more complex than many companies of our size and impacts the quality and breadth of talent that we need to attract and retain. We often compete for talent with much larger companies that have greater resources.
Our generics and biosimilars programs have the potential to produce significant levels of free cash flow (cash flows from a product above the costs associated with making and selling that product) as compared to a traditional, novel biotechnology business. Any such free cash flows may, due to the nature of the generic and biosimilar businesses, be subject to accelerated and substantial decreases, as compared to a traditional, novel biotechnology business, as other directly-competing generic or biosimilar products enter the market. For example, we had approximately $340 million in free cash flows from our first product, enoxaparin during the first 14 months following commercial launch prior to entry of other directly competing generics. Three years after launch, our annual free cash flows from enoxaparin had decreased to approximately $20 million and five years after launch had decreased to approximately $5 million as multiple directly-competing generics have entered the market. In years in which we have significant free cash flows, we will generally have a greater profit than most of our peer group companies, and in the years in which we have less free cash flows, we will generally have less profit or a greater loss, as the case may be, than most of our peer group companies. We take into account the possibility of such drastic swings in free cash flows from these programs when we review and select our peer group companies.

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We have fewer shares of common stock outstanding than many companies of our size. The total number of shares of our common stock outstanding was approximately at the 36 th percentile of our 2016 peer group. In large part due to our reinvestment of prior free cash flows to grow our business, we have been able to avoid over-reliance on equity financings and the extensive equity dilution to our investors that can result from such financings, which are often necessary to fund traditional, novel biotechnology companies that generally do not have significant free cash flows, if any, until much later in their products’ lifecycles. While we believe avoiding dilution has benefited our investors, our lower number of shares outstanding can be disadvantageous when we are benchmarked against other companies using metrics based on shares outstanding, for example, percentage of shares outstanding represented by our employee compensation equity grants.
Our biosimilar and novel drug programs involve multi-year development and regulatory (and legal, in the case of biosimilars) timelines, with commercial product launches that may not be anticipated for several years into the future. The businesses of some of our peer group companies consist of more commercial programs or more established commercial programs and these companies may have business and financial metrics and results that more directly impact their near-term stock price.
While the compensation committee reviews the peer group annually and makes changes when appropriate, we do not believe it is appropriate or informative to necessarily change our peer group or our benchmark practices to reflect changes in the development stages of our programs or periods of significantly high or low free cash flows. We believe that doing so would not accurately reflect our current or long-term talent and performance requirements. In addition, there is potential that frequent changes to our peer group or benchmarking practices could result in dramatic swings in compensation that do not reflect long‑term performance leading to long-term stockholder value. Instead, we generally take a longer term, multi‑year perspective in reviewing and selecting our peer group companies.
In assisting the compensation committee to review and select potential peer group companies for 2016 compensation purposes, Radford first identified all publicly traded, U.S. headquartered companies in the biotechnology/pharmaceutical industry at the commercial stage. Based on projected company metrics for 2016, Radford next refined the pool to reflect companies with 100 to 800 employees, annual revenue between $50 million and $440 million and a market capitalization between $520 million to $4.65 billion. Radford next qualitatively evaluated and refined the pool to identify each company’s business focus and corporate strategy, where publicly disclosed. Radford then selected companies that were similar to us, taking into consideration the business focus, financial profile and stage of development for each company. In addition, the compensation committee also considered our 2015 peer group, the peer group companies selected for us by certain proxy advisory firms and the guidelines used by those proxy advisory firms in selecting peer companies. Based on this review and analysis and Radford’s recommendation, in September 2015, the compensation committee approved the following 2016 peer group companies:
2016 Peer Group Companies
Acorda Therapeutics, Inc.
Horizon Pharma plc
Aegerion Pharmaceuticals, Inc.
Impax Laboratories, Inc.
AMAG Pharmaceuticals, Inc.
INSYS Therapeutics Inc.
Arena Pharmaceuticals, Inc.
Ironwood Pharmaceuticals, Inc.
Ariad Pharmaceuticals, Inc.
Nektar Therapeutics
Depomed, Inc.
Raptor Pharmaceuticals Corp.
Dyax Corp.
Spectrum Pharmaceuticals, Inc.
Emergent BioSolutions, Inc.
Supernus Pharmaceuticals, Inc.
Exelixis, Inc.
The Medicines Company
Halozyme Therapeutics, Inc.
 
Based upon an assessment of the parameters described above, the 2016 peer group used for 2016 compensation purposes included certain changes from the 2015 peer group as follows: the removal of Auxilium Pharmaceuticals, Inc. and Avanir Pharmaceuticals, Inc. and the addition of Ironwood Pharmaceuticals Inc., Raptor Pharmaceuticals Corp., Supernus Pharmaceuticals, Inc. and The Medicines Company. Auxilium Pharmaceuticals, Inc. and Avanir Pharmaceuticals, Inc. were removed from the peer group because they were acquired by other companies. Companies were added to the peer group because they fell within the parameters for the peer group described above and the compensation committee believed the business of each aligned well with the Company.

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In assisting the compensation committee to review and select potential peer group companies for 2017 compensation purposes, Radford similarly first identified all publicly traded, U.S.-headquartered companies in the biotechnology/pharmaceutical industry at the commercial stage. Based on projected company metrics for 2017, Radford next refined the pool to reflect companies with 100 to 1,000 employees, annual revenue between $30 million and $300 million and a market capitalization between $300 million to $2.6 billion. Radford next qualitatively evaluated and refined the pool to identify each company’s business focus and corporate strategy, where publicly disclosed. Radford then selected companies that were similar to us, taking into consideration the business focus, financial profile and stage of development for each company. In addition, the compensation committee also considered our 2016 peer group, the peer group companies selected for us by certain proxy advisory firms and the guidelines used by those proxy advisory firms in selecting peer companies. Based on this review and analysis and Radford’s recommendation, in September 2016, the compensation committee approved the following 2017 peer group companies:
2017 Peer Group Companies
Acorda Therapeutics, Inc.
INSYS Therapeutics Inc.
AMAG Pharmaceuticals, Inc.
Ironwood Pharmaceuticals, Inc.
Arena Pharmaceuticals, Inc.
Keryx Biopharmaceuticals, Inc.
Ariad Pharmaceuticals, Inc.
Merrimack Pharmaceuticals, Inc.
Depomed, Inc.
Nektar Therapeutics
Emergent BioSolutions, Inc.
Raptor Pharmaceuticals Corp.
Exelixis, Inc.
Spectrum Pharmaceuticals, Inc.
Halozyme Therapeutics, Inc.
Supernus Pharmaceuticals, Inc.
Horizon Pharma plc
The Medicines Company
ImmunoGen, Inc.
Vanda Pharmaceuticals Inc.
Impax Laboratories, Inc.
 
Based upon an assessment of the parameters described above, the 2017 peer group used for 2017 compensation purposes included certain changes from the 2016 peer group as follows: the removal of Aegerion Pharmaceuticals, Inc. and Dyax Corp. and the addition of ImmunoGen, Inc., Keryx Biopharmaceuticals, Inc., Merrimack Pharmaceuticals, Inc. and Vanda Pharmaceuticals Inc. Dyax Corp. was removed from the peer group because it was acquired by another company. Aegerion Pharmaceuticals, Inc. was removed because it fell outside the parameters for the peer group as described above. Companies were added to the peer group because they fell within the parameters for the peer group described above and the compensation committee believed the business of each aligned well with the Company. In October 2016, Raptor Pharmaceuticals Corp. was acquired by another company, and in February 2017, Ariad Pharmaceuticals, Inc. was acquired by another company; therefore, we anticipate that these companies will not be included in the peer group for 2017 compensation purposes.
Although we maintain the peer group for executive compensation and performance reference purposes, the peer group compensation data is limited to publicly available information and therefore does not necessarily provide enough comparisons for all officers. By contrast, survey data has the advantage of including data on executive positions beyond what is available in public filings, but may not be specific to the selected companies in the peer group. In light of this, in order to determine the appropriate target level for Company-wide salary increases for 2016, in the fall of 2015 we obtained survey data from the following survey sources: Mercer (all industries—national) and Radford (life sciences industry). These surveys were utilized to assure that our proposed merit salary increases were competitive in the market. The projected merit salary increases for 2016 contained in the surveys were between 3.0% and 3.5% of current base salaries. Using these data, we set a Company-wide target level of merit salary increase for 2016 at 3.5%, with the goals of retaining a competitive compensation package and aligning internal compensation with external candidates coming into the Company. In February 2016, Radford utilized survey data from the Radford (life sciences industry) survey source in recommending 2016 compensation levels for the Named Executives. With respect to the survey data presented to the compensation committee, the identities of the individual companies included in the survey were not provided to the compensation committee, and the compensation committee did not refer to individual compensation information for such companies.
We believe that by utilizing both publicly available peer group data and the survey data from the published surveys in which we participate, we are able to develop the best set of competitive data reasonably available for use in making compensation decisions. Based on the objectives outlined above, the compensation committee strives to set target compensation opportunity levels to be competitive with the market in which we compete for executive talent and that are

25




appropriate for the skills, experience and performance of each individual. While the compensation committee generally targets the 50 th percentile of our peer group when determining compensation for our Named Executives, the compensation committee does not establish compensation levels based directly on benchmarking. The compensation committee instead relies on the judgment of its members in making compensation decisions regarding base salaries, target bonus levels and long-term equity incentive awards after reviewing our performance and carefully evaluating each Named Executive’s performance during the year, leadership qualities, business responsibilities, role within the Company, industry experience, career and tenure with the Company, knowledge, qualifications, overall impact on the organization, current compensation arrangements, and long-term potential to enhance stockholder value. The compensation committee does not guarantee that any executive will receive a specific market-derived compensation level.
In addition, the compensation committee determines the mix of compensation elements, such as base salary, annual incentive cash bonuses and equity awards, on an individual basis. The compensation committee allocates total compensation between cash and equity compensation based on a number of objective and subjective factors, including the role and responsibilities of the individual executive, and the nature of the behaviors the incentives are intended to motivate. The compensation committee’s philosophy is to balance compensation between long-term and short-term compensation, cash and non-cash compensation, and to take into the account the roles and responsibilities of the individual officer.
Elements of Compensation
Our compensation program is designed to reward each Named Executive based upon a combination of corporate and individual performance. Corporate performance is evaluated by reviewing the extent to which pre-set goals are met, which generally include the achievement of specified operational and financial goals; specific research, clinical, regulatory, commercial or compliance milestones; and business development and financing initiatives. We evaluate individual performance in part by reviewing the extent to which individual performance facilitated the achievement of our corporate and business goals.
The compensation package offered to each Named Executive is comprised of a combination of:
base salary;

annual incentive cash bonus awards;

annual equity awards;

other benefits, such as health, dental, disability and life insurance; and

severance and change of control agreements.

Base Salary
Base salaries for our Named Executives are set at levels intended to reflect the scope of each Named Executive’s leadership qualities, business responsibilities, role within the Company, industry experience, career and tenure with the Company, knowledge, qualifications, overall impact on the organization, current compensation arrangements, and long-term potential to enhance stockholder value. In setting base salary, our compensation committee reviews salary levels in effect for comparable positions within our peer group companies and also from survey data of comparable positions within our industry. We believe that base salaries are a fundamental element of our executive compensation program because they provide a stable source of income for our Named Executives at a competitive level. Base salaries are reviewed at least annually by our compensation committee and are adjusted from time to time to ensure that our executive compensation structure remains aligned with our compensation objectives. Any adjustments are based upon various subjective criteria and the compensation paid by peer group companies. Subjective performance criteria include an executive’s ability to lead through motivating and inspiring others, demonstrate the skills necessary to perform effectively in his or her area of responsibility, recognize and pursue new business opportunities and initiate programs that enhance our growth and success. The compensation committee generally targets base salaries for our Named Executives at the 50 th percentile of our peer group.
2016 Base Salary. The compensation committee reviewed the salaries of the Named Executives at its February 2016 meeting, except with respect to Mr. Ottmer, who commenced employment with us in December 2015, and Mr. Storer, who commenced employment with us in November 2016. As discussed in “Use of Competitive Market Compensation Data” above, the compensation committee had previously approved a 3.5% merit increase for all employees based on the committee’s review of survey data of merit salary increase trends within our industry. The compensation committee used that

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target percentage increase as well as performance review input for each of the Named Executives to approve salary increases to be effective as of January 1, 2016 as set forth below:
Name
2015
Base Salary ($)
 
2016
Base Salary ($)
 
Increase (%)
Craig A. Wheeler
665,873
 
689,179
 
3.5
Scott M. Storer
n/a
 
420,000
(1)
n/a
Matthew P. Ottmer
450,000
(2)
450,000
 
Ganesh V. Kaundinya
416,682
 
433,350
 
4.0
Bruce A. Leicher
400,633
 
414,655
 
3.5
Richard P. Shea
386,064
 
399,576
 
3.5
(1)
Mr. Storer commenced his employment with us in November 2016. $420,000 represents the base salary payable to Mr. Storer pursuant to the terms of his employment agreement.
(2)
Mr. Ottmer commenced his employment with us in December 2015. $450,000 represents the base salary payable to Mr. Ottmer pursuant to the terms of his employment agreement.
2017 Base Salary. The compensation committee reviewed the salaries of the Named Executives at its January 2017 meeting, except with respect to Mr. Storer, who commenced employment with us in November 2016. The compensation committee had previously approved a 3.5% merit increase for all employees in connection with its review of survey data of industry trends consistent with our approach and considerations taken into account in setting base salaries. The compensation committee approved higher increases for Messrs. Wheeler and Leicher to more accurately reflect their career experience and value contributed to the Company. The compensation committee used the merit increases for all employees as well as performance review input for each of the Named Executives to approve salary increases to be effective as of January 1, 2017 as set forth below:
Name
2016
Base Salary ($)
 
2017
Base Salary ($)
Increase (%)
Craig A. Wheeler
689,179
 
750,000
8.8
Scott M. Storer
420,000
(1)
420,000
Matthew P. Ottmer
450,000
 
463,500
3.0
Ganesh V. Kaundinya
433,350
 
448,517
3.5
Bruce A. Leicher
414,655
 
450,626
8.7
(1)
Mr. Storer commenced his employment with us in November 2016. $420,000 represents the base salary payable to Mr. Storer pursuant to the terms of his employment agreement.
Annual Incentive Cash Bonus
We use annual incentive cash bonuses to motivate and reward our Named Executives to achieve and exceed specified goals in a time frame that is one year in duration. Annual incentive cash bonuses are determined on the basis of our achievement of corporate performance targets and individual contribution toward those corporate goals. Our corporate goals are typically focused upon the achievement of specific research, clinical, regulatory, commercial, financial, compliance or operational milestones. We consider these goals to be difficult to attain, conducive to the creation of stockholder value and designed to contribute to our current and future financial success. The goals we believe will have the greatest impact on stockholder value during the performance period receive the heaviest weighting. Most of our product and product candidate programs involve multi-year development and regulatory, and in some cases, legal, timelines, with commercial product launches, if any, often projected to occur several years into the future. While some of our goals may not necessarily have a direct or correlated impact on our current or near-term stock price, we believe they are value‑driving achievements that are critical to our ability to achieve future commercial and financial success, and in turn, long‑term stockholder value.
Under our annual incentive cash bonus program, corporate goals are proposed by management, reviewed by the compensation committee and the board of directors and then adopted by the compensation committee and the board of directors. We develop corporate goals for each of our key program areas as well as corporate goals related to financial discipline and cash usage. Corporate goals are based on metrics or events that we believe will lead to increases in stockholder

27




value over the one-year performance period. Each corporate goal is assigned a percentage weighting, for example, 10%, and consists of three achievement milestones that correspond to achievement levels of 75%, 100% and 125%, respectively, of the goal. Achievement milestones for any corporate goal may represent different levels of achievement of the same condition or event, cumulative achievement of similar conditions or events, or may be independent conditions or events that are separately achievable. Our compensation committee retains discretion to set achievement levels for each corporate goal along a continuous range from 50% to 150% of the target level to more accurately reflect, where appropriate, extenuating or mitigating factors, extraordinary circumstances or other considerations relating to the achievement of one or more milestones for each goal or the resulting value of such achievement to stockholders and the Company.

Based upon our achievement level with respect to corporate goals, the compensation committee approves an aggregate amount to fund all bonus payments to all employees, which we refer to as the annual bonus pool. For example, if we were to achieve 70% for each of our corporate goals, the annual bonus pool would be equal to 70% of the aggregate target bonuses for all employees.
The CEO’s annual incentive cash bonus award is determined based entirely upon the achievement of corporate goals. In the case of our other Named Executives, 75% of their annual incentive cash bonus awards is determined based upon the achievement of corporate goals and 25% upon the subjective analysis of their individual performance in relation to the corporate goals as determined by their performance review. The individual performance component of bonuses for our non-CEO Named Executives is also adjusted by the percentage achievement of corporate goals. The individual performance reviews are presented to our compensation committee along with compensation recommendations. However, the compensation committee makes the final determination of each Named Executive’s individual achievement level subjectively, based on its own analysis of performance and not formulaically by reference to pre-determined performance objectives.
Target bonuses for 2016 were 70% of base salary for our CEO, 50% of base salary for our COO, and 40% of base salary for our other Named Executives. The CEO has a maximum bonus opportunity equal to 150% of his base salary, as required by his employment agreement. Our other Named Executives do not have specified maximum bonus opportunities. Bonuses, if any, are determined and paid on an annual basis after completion of the fiscal year in which bonuses are earned.
The 2016 corporate goals and their respective weightings were:
advancing our GLATOPA 20 mg/mL and GLATOPA 40 mg/mL programs based on achievements in revenue, regulatory and litigation milestones (25%);

development of our biosimilar programs based on clinical trial, collaboration and regulatory milestones (45%);

advancing our novel therapeutics programs based on clinical trial and collaboration milestones (20%); and

achievement of financial discipline goals (10%).

In assessing the achievement of these goals, the compensation committee considered the recommendations of our CEO, who, with input from other executive officers, reviewed the Company’s performance against the goals and made recommendations to the board of directors and the compensation committee. The compensation committee also considered assessments and guidance by the science committee relating to the achievement of technical and scientific goals. In January 2017, the compensation committee met and determined achievement of the corporate goals was 115%, as set forth in the chart below. In making this determination, the compensation committee used its discretion to set the achievement level for the GLATOPA programs goal at 105% in recognition of the Company’s achieving the goal’s 100% achievement milestone and partially achieving the goal's 125% achievement milestone. The Committee set the achievement level for the novel therapeutics goal at 112.5% in recognition of the Company achieving the goal's 75% and 125% achievement milestones, but not the goal's 100% achievement milestone. The overall achievement level was determined as follows:

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Corporate Goal
Percentage
Value (%)
Actual Level of
Achievement (%)
Percentage Earned (%)
Advancement of our GLATOPA 20 mg/mL and GLATOPA 40 mg/mL programs
25
105
26.25
Advancement of our biosimilar programs
45
125
56.25
Advancement of our novel therapeutics programs
20
112.5
22.5
Financial discipline goals
10
100
10
Total    
100
 
115
Based on 115% achievement of corporate goals, the corporate goal achievement component of each of Mr. Wheeler’s, Mr. Ottmer’s, Dr. Kaundinya’s and Mr. Leicher’s bonus award was set at 115% and the annual bonus pool was set at 115% of the aggregate target bonuses for all employees. In light of his commencing employment with us in November 2016, Mr. Storer did not receive a bonus award for 2016. Because Mr. Shea was not an employee when bonus awards for 2016 were paid in February 2017, he did not receive a bonus award for 2016. However, under the terms of the consulting agreement between the Company and Mr. Shea, Mr. Shea received a one-time payment on March 31, 2017, equal to what his 2016 target bonus would have been, calculated at 100% of target.
In February 2017, the compensation committee reviewed the performance recommendation for each of Mr. Ottmer, Dr. Kaundinya and Mr. Leicher as submitted by the CEO and our Senior Vice President, Human Resources. Individual performance was assessed, in part, on the Named Executive’s contribution towards achievement of corporate goals, managerial and departmental success and leadership within the organization.
Based on the assessment of corporate goal achievement and, in the case of Mr. Ottmer, Dr. Kaundinya, and Mr. Leicher, the subjective analysis of individual performance, we paid bonuses to our Named Executives for their performance in 2016 representing the following percentages of base salary and target bonus payment as of December 31, 2016:
Name (1)
Target Bonus
as a
Percentage of
Base Salary
(%)
Target Bonus
Payment
(at 100%)
($)
Corporate
Goal
Component
as a
Percentage of
Target Bonus
(%)
Individual
Performance
Component
as a
Percentage of
Target Bonus
(%)
Corporate
Goal
Achievement
Level
(%)
2016 Bonus
Payment
($)
2016 Bonus
Payment as a
Percentage of
Target Bonus
Payment
(at 100%)
(%)
Craig A. Wheeler
70
482,425

100
0
115
554,789

115
%
Matthew P. Ottmer
50
225,000

75
25
115
252,281

112
%
Ganesh V. Kaundinya
40
173,340

75
25
115
201,833

116
%
Bruce A. Leicher
40
165,862

75
25
115
193,126

116
%
(1)
Mr. Storer commenced employment with us on November 28, 2016, and did not receive a bonus with respect to 2016 performance. Mr. Shea entered into a consulting agreement with us on December 30, 2016 pursuant to which he received, on March 31, 2017, a one-time cash payment in an amount equal to his 2016 target bonus, or $159,830.
Equity Awards
Compensation for employees, including our Named Executives, also includes equity awards designed to align the long-term interests of our employees and our stockholders, to reward the achievement of individual performance goals and to assist in the retention of employees and executives. We believe that equity compensation is a critical component of competitive compensation in the industry in which we operate. We have historically provided for annual grants of stock options and restricted stock to our Named Executives, including during 2016. Beginning in 2017, our compensation committee elected to replace our annual restricted stock awards with awards of restricted stock units. Each restricted stock unit represents the right to receive one share of our common stock or, at the administrator's discretion, its cash value equivalent shortly following vesting. We generally utilize a high percentage of options for our long-term incentive compensation because we believe options reflect our compensation objective of providing performance-based equity compensation due to their value being tied to an increase in the value of the Company. The compensation committee believes that time‑based equity grants align Named Executives’ interests with those of our stockholders. The realizable value of these grants depends greatly upon an increase in our stock price (and thereby an increase in stockholder value) following their grant. Furthermore, we have

29




historically maintained at least one outstanding long-term performance-based grant of restricted stock for our executives. Performance-based equity grants have been designed with conditions we expect will require several years to attain and create significant value for our stockholders, such as receipt of approval for a specific product from governmental entities. Consequently, we make performance‑based equity grants less frequently than time‑based equity grants, which we generally utilize as annual compensatory tools for the Named Executives. The size of annual awards for our Named Executives are determined, in part, by reference to the compensation committee’s subjective assessment of a Named Executive’s performance over the preceding year, and in this sense are further tied to performance notwithstanding their time-based vesting conditions.
The compensation committee does not use a quantitative formula to relate equity awards to the degree to which an individual achieved his or her goals for a particular year. The compensation committee intends that the annual aggregate value of awards (using the Black Scholes model or equivalent valuation methodology) to executives will be targeted at the 50 th percentile of our peer group, with an opportunity to achieve above or below that amount based on performance. Our equity grants awarded in 2016 for 2015 performance positioned our Named Executives collectively between the 50 th  and the 75 th  percentile of our peer group. Annual equity awards are generally made on an annual basis after completion of the fiscal year to which performance relates.
Performance Equity Awards. In 2016, we granted our Named Executives performance-based restricted stock awards that vest based on the Company achieving up to two of three specified performance milestones on or before April 13, 2019. The milestones are comprised of a commercial milestone relating to our GLATOPA 40 mg/mL program, a clinical trial milestone relating to our necuparanib program, and a clinical trial milestone relating to at least two of our biosimilar programs. Upon achieving each of the first and second milestones, 25% of the shares subject to the award will vest on the later of the milestone achievement date and the first anniversary of the grant date, and an additional 25% of the shares will vest on the one year anniversary of such achievement date, subject to the Named Executive’s continued employment through each applicable vesting date. Following discontinuation of our necuparanib program, we determined that one of the performance milestones is no longer possible to achieve prior to April 13, 2019.
Annual Equity Awards for 2016 Performance. For 2016 performance, our compensation committee approved annual stock option grants and awards of restricted stock units to the Named Executives. The compensation committee reviewed equity awards for 2016 performance of the Named Executives in February 2017. At that meeting, the compensation committee approved the following equity awards for our Named Executives:
Name(1)(2)
Shares of Common Stock
Underlying Stock Options
(#)(3)
Restricted
Stock Units
(#)(4)
Craig A. Wheeler
185,000
92,500
Matthew P. Ottmer
48,000
24,000
Ganesh V. Kaundinya
45,100
22,550
Bruce A. Leicher
43,050
21,525

(1)
Mr. Storer commenced employment with us on November 28, 2016 and did not receive an annual equity award for 2016 performance. In December 2016, the compensation committee granted Mr. Storer an option to purchase 125,000 shares of common stock and 48,000 shares of performance-based restricted stock. Mr. Storer’s option award vests as to 25% of the shares on the first anniversary of the grant date and as to an additional 6.25% of the shares at the end of every three month period thereafter. His restricted stock award vests in accordance with the performance-based vesting schedule described above under “Performance Equity Awards” for performance-based awards granted to our other Named Executives in 2016.

(2)
In June 2015, Mr. Shea notified the Company of his intention to resign as CFO upon the Company’s identification and appointment of a successor CFO. The notice was given in connection with a CFO succession plan developed by Mr. Shea and the Company and the announcement of Mr. Shea’s plan to retire in 2016. On November 28, 2016, Mr. Storer succeeded Mr. Shea as our CFO, and Mr. Shea retired as our CFO. In light of Mr. Shea’s retirement in 2016, he was not granted any equity awards in 2017.

(3)
The shares of common stock underlying these options vest as to 25% of the shares on the first anniversary of the date of grant and an additional 6.25% of the shares vest at the end of each successive three-month period thereafter.

(4)
These restricted stock units vest as to 25% of the shares on the first anniversary of the date of grant and an additional 6.25% of the shares vest at the end of each successive three-month period thereafter.

30




Annual Equity Awards for 2015 Performance. For 2015 performance, our compensation committee approved annual stock option grants and awards of restricted stock to the Named Executives. The compensation committee reviewed equity awards for 2015 performance of the Named Executives in February 2016. At that meeting, the compensation committee approved the following equity awards for our Named Executives:
Name(1)(2)(3)
Shares of Common Stock
Underlying Stock Options
(#)(4)
Shares of Restricted
Common Stock
(#)(5)
Craig A. Wheeler
126,000
63,000
Ganesh V. Kaundinya
37,800
18,900
Bruce A. Leicher
34,200
17,100

(1)
Mr. Ottmer commenced employment with us on December 7, 2015, and therefore did not receive an annual equity award for 2015 performance. In December 2015, the compensation committee granted Mr. Ottmer an option to purchase 175,000 shares of common stock. Mr. Ottmer’s option award vests as to 25% of the shares on the first anniversary of the grant date and as to an additional 6.25% of the shares at the end of every three month period thereafter. In April 2016, Mr. Ottmer received 75,000 shares of performance-based restricted stock. His restricted stock award vests in accordance with the performance-based vesting schedule described above under “Performance Equity Awards” for performance-based awards granted to our other Named Executives in 2016.

(2)
Mr. Storer commenced employment with us on November 28, 2016, and therefore did not receive an annual equity award for 2015 performance.

(3)
In June 2015, Mr. Shea notified the Company of his intention to resign as CFO upon the Company’s identification and appointment of a successor CFO. The notice was given in connection with a CFO succession plan developed by Mr. Shea and the Company and the announcement of Mr. Shea’s plan to retire in 2016. In light of Mr. Shea’s expected retirement in 2016, he was not granted any equity awards in 2016.

(4)
The shares of common stock underlying these options vest as to 25% of shares on the first anniversary of the date of grant and an additional 6.25% of the shares vest at the end of each successive three-month period thereafter.

(5)
These shares of common stock are subject to a restricted stock agreement, pursuant to which 25% of such shares vest and become free from forfeiture on the first anniversary of the date of grant and an additional 6.25% of the shares vest and become free from forfeiture at the end of each successive three-month period thereafter.

Timing and Pricing of Option Grants. The annual equity grant date for all eligible employees, including the Named Executives, is the date of the regularly scheduled meeting of the compensation committee following completion of company-wide performance reviews, which meeting date is generally set a year in advance. The grant date timing is driven by the fact that it coincides with our calendar-year-based performance management cycle, allowing us to deliver the equity awards close in time to performance assessments, which increases the impact of the awards by strengthening the link between pay and performance.
Aside from the annual equity grant to employees, it has been our policy that options be granted:
to non-employee members of the board of directors, on the date of the scheduled board meeting coinciding with our annual stockholders’ meeting each calendar year; and

to newly-hired employees on the date of the next scheduled meeting of the compensation committee occurring after their date of hire.

Initial stock option grants typically vest as to 25% of the shares subject to such option one year from the date of grant and 6.25% of the shares subject to such option on a quarterly basis thereafter. Annual restricted stock awards typically vest as to 25% of the shares on the first anniversary of the date of grant and an additional 6.25% of the shares at the end of each successive three-month period thereafter. Annual option awards have historically vested quarterly over a four-year period commencing three months from the date of grant. Awards granted to our employees, directors or consultants after June 9, 2015 are generally subject to a minimum one year vesting requirement, subject to certain exceptions set forth in our 2013 Incentive Award Plan.

31




The compensation committee sets the exercise price of all employee stock options to equal the closing price of our common stock on The NASDAQ Global Select Market on the date of grant.
Other Elements of Compensation and Perquisites
We maintain broad-based benefits that are provided to eligible employees, including health, dental, life and disability insurance and a 401(k) plan. Our Named Executives are eligible to participate in our employee benefit plans, on the same basis as other employees. In order to attract and retain our employees and provide benefits packages aligned with market levels, we provide our Named Executives and other employees the following benefits and perquisites:
Medical Insurance. We provide to our Named Executives, their spouses, domestic partners and children, health, dental and vision insurance coverage that we generally make available to other employees. We pay a portion of the premiums for this insurance for all employees.
Life and Disability Insurance. We provide each Named Executive disability and/or life insurance that we may from time to time make available to other executive employees. Our CEO also receives reimbursement for an additional $3.0 million life and disability policy, capped at a maximum of $5,000 of reimbursement premium per year.
Defined Contribution Plan. We offer a Section 401(k) Savings/Retirement Plan, or the 401(k) Plan, a tax‑qualified retirement plan, to eligible employees. The 401(k) Plan permits eligible employees to defer up to 60% of their annual eligible compensation, subject to certain limitations imposed by the Internal Revenue Code, or the Code. The employees’ elective deferrals are immediately vested and non-forfeitable in the 401(k) Plan. In any plan year, we will contribute to each participant a matching contribution equal to 50% of the first 6% of the participant’s compensation that he or she has contributed to the 401(k) Plan. Our contribution is subject to vesting at the rate of 25% at the end of each year over the first four years of employment. All of our Named Executives, except Mr. Storer, who commenced employment with us on November 28, 2016, participated in the 401(k) Plan in 2016.
Employee Stock Purchase Plan. We also offer an Employee Stock Purchase Plan, or the ESPP. The ESPP is available to all of our employees, including the Named Executives, who work more than 20 hours per week and five months per year. Under the ESPP, eligible participants purchase shares of our common stock at a discount of 15% from the fair market value of the lower of the beginning date or end date of the applicable purchase period. The purchase dates occur on the last business day of January and July of each year. To pay for the shares, each participant may authorize periodic payroll deductions ranging from 1% to 15% of his or her cash compensation, subject to certain limitations imposed by applicable law. All payroll deductions collected from the participant during a plan period are automatically applied to the purchase of common stock on that period’s purchase date provided the participant remains an eligible employee and has not withdrawn from the ESPP prior to that date.
Equity Award Retirement Policy. In December 2016 our board of directors adopted the Momenta Pharmaceuticals, Inc. Equity Award Retirement Policy, or the Retirement Policy, to provide for the treatment of time-based stock options and restricted stock units upon a participant’s qualifying retirement from the Company. Under the Retirement Policy, following the qualifying retirement of any employee of the Company, including the Named Executives, or non-employee member of the board of directors, the participant’s then-outstanding time-based options and restricted stock units will continue to vest during the one year period following the retirement date. In addition, the participant will have until the first anniversary of the retirement date (or 90 days following the date an option becomes first exercisable if such date is within the 90 days preceding the first anniversary of the retirement date) to exercise any vested options, except that no option may be exercised following the date upon which it would have expired under the applicable option award agreement if the participant had remained in service with us. Benefits under the Retirement Policy are conditioned upon a participant’s continued compliance with any non-competition, non-solicitation, confidentiality or other restrictive covenants with the Company.
Other. We make available certain other perquisites or fringe benefits to all eligible employees, including the Named Executives, such as tuition reimbursement, parking subsidies, mass transit commuting passes, professional society dues, gym subsidies, cell phones and food and recreational fees incidental to official company functions, including board meetings. The CEO is also entitled to financial and tax advice, up to a maximum of $5,000 annually, and reimbursement of expenses in connection with using his personal airplane for business purposes (up to the equivalent amount of a first class commercial fare per usage).

32




Severance and Change of Control Benefits
Pursuant to employment agreements, our Named Executives are entitled to specified benefits in the event of the termination of their employment under specified circumstances, including termination without cause or for good reason.
We believe that severance protections, particularly in the context of a change of control transaction, can play a valuable role in attracting and retaining executive officers, are an important part of an executive’s total compensation package and are consistent with competitive practices. Accordingly, we provide such protections for our Named Executives and certain other executives. We believe that the occurrence, or potential occurrence, of a change of control will create uncertainty regarding the continued employment of our Named Executives. This uncertainty results from the fact that many change of control transactions result in significant organizational changes, particularly at the senior executive level. Our practice, in the case of our employment agreements, has been to structure these change of control benefits as “double trigger” benefits. In other words, the change of control does not itself trigger benefits; rather, benefits are paid only if the employment of the Named Executive is terminated during the twelve‑month (or 24-month in the case of the CEO) period after the change of control. We believe a “double trigger” benefit maximizes stockholder value because it prevents an unintended windfall to executives in the event of a friendly change of control, while still providing them appropriate incentives to cooperate in negotiating any change of control in which they believe they may lose their jobs. Because we believe that a termination by the executive for good reason is conceptually the same as a termination by us without cause, and that in the context of a change of control potential acquirers would otherwise have an incentive to constructively terminate the executive’s employment to avoid paying severance, we provide severance benefits in these circumstances. We have provided more detailed information about these benefits, along with estimates of their value under various circumstances, under the captions “—Employment, Severance and Change of Control Arrangements” and “—Potential Termination and Change of Control Payments” below.
Tax Considerations
Section 162(m) of the Code places a limit of $1,000,000 per person on the amount of compensation that a public company may deduct in any year with respect to its chief executive officer and the three most highly compensated named executive officers employed by the Company at the end of the year (other than the Company’s chief financial officer). However, some forms of performance‑based compensation are excluded from the $1,000,000 deduction limit if certain requirements are met. Our compensation committee has not adopted a policy requiring all executive compensation to be fully deductible. However, our compensation committee reviews the potential impact of section 162(m) periodically and, if consistent with its goals of sustained profitability and creation of long‑term stockholder value, may seek to structure executive officer compensation to allow deductions under section 162(m). Our compensation committee reserves the right to use its judgment to authorize compensation payments that may be subject to the section 162(m) limitation when it believes these payments are appropriate.
Risk Assessment of Compensation Policies and Programs
We periodically assess our compensation policies and programs for purposes of determining the relationship of such policies and programs to our enterprise risks. This assessment typically occurs in connection with the establishment of corporate goals and annual incentive programs for our employees. We do not believe that our compensation policies or programs create risks that are reasonably likely to have a material adverse effect on us.
Compensation Committee Report
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis with the Company’s management. Based on this review and discussion, the compensation committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
By the Compensation Committee of the Board of Directors of Momenta Pharmaceuticals, Inc.:
Bruce L. Downey (Chair)
Steven C. Gilman
Jose-Carlos Gutiérrez-Ramos
Thomas P. Koestler

33




Summary Compensation Table for 2016
The following table sets forth information regarding compensation earned by the Named Executives:
Name and Principal Position
Year
Salary(1)
($)
Stock
Awards(2)
($)
Option
Awards(2)
($)
Non‑Equity
Incentive Plan
Compensation
($)
All Other
Compensation(3)
($)
Total
($)
Craig A. Wheeler
2016
689,179

2,149,290

737,818

554,789

29,948

4,161,024

President, Chief Executive Officer and Director
2015
691,484

3,064,900

1,046,052

512,723

29,503

5,344,662

2014
643,356

1,257,200

1,558,564

432,335

29,610

3,921,065

Scott M. Storer (4)
2016
40,385

684,000

940,375


150

1,664,910

Senior Vice President and Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Matthew P. Ottmer (5)(6)
2016
450,000

733,500


252,281

13,091

1,448,872

Chief Operating Officer
2015
34,615


1,507,975


29

1,542,619

Ganesh V. Kaundinya
2016
433,350

791,487

221,345

201,833

13,091

1,661,106

Chief Scientific Officer and Senior Vice President, Research
2015
432,708

927,139

310,065

187,924

13,014

1,870,850

2014
400,656

346,844

429,440

163,468

12,852

1,353,260

Bruce A. Leicher
2016
414,655

771,993

200,265

193,126

12,998

1,593,037

Senior Vice President, General Counsel and Secretary
2015
416,042

902,583

281,874

176,279

12,932

1,789,710

2014
387,085

364,193

450,915

144,925

12,731

1,359,849

Richard P. Shea (7)
2016
399,576


233,022


12,743

645,341

Senior Vice President and Chief Financial Officer
2015
400,912

878,028

253,690

165,621

12,666

1,710,917

2014
374,819

346,844

429,440

134,935

12,516

1,298,554


(1)
There were 26 pay periods in each of 2014 and 2016, and there were 27 pay periods in 2015.

(2)
Valuation based on the aggregate grant date fair value of stock and option awards granted in 2016 computed in accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718, Stock Compensation (excluding the effect of estimated forfeitures). The aggregate grant date fair value of stock and option awards does not correspond to the actual value that will be realized by the Named Executive upon vesting or exercise of such award. The assumptions used by us with respect to the valuation of stock and option awards are set forth in Note 2 and Note 11 to our financial statements contained in our Annual Report on Form 10-K for year ended December 31, 2016, as filed with the Securities and Exchange Commission on February 24, 2017.

(3)
The following table sets forth information regarding all other compensation for the year ended December 31, 2016:
Name
Tax
Advice
Expense
($)
Insurance
Expense
($)
Tax
Gross‑up
($)
401(k)
Match
($)
Parking/
Transit ($)
Gym
Fees
($)
Insurance
Premiums
($)
Total
($)
Craig A. Wheeler
5,000

5,000

4,563

7,950

5,894

348

1,193

29,948

Scott M. Storer




150



150

Matthew P. Ottmer



7,950

3,600

348

1,193

13,091

Ganesh V. Kaundinya



7,950

3,600

348

1,193

13,091

Bruce A. Leicher



7,950

3,855


1,193

12,998

Richard P. Shea



7,950

3,600


1,193

12,743


(4)
Mr. Storer commenced employment with us on November 28, 2016, and the amounts shown for 2016 represent compensation paid to him for the portion of 2016 following such date.

(5)
Mr. Ottmer commenced employment with us on December 7, 2015, and the amounts shown for 2015 represent compensation paid to him for the portion of 2015 following such date.

(6)
Since Mr. Ottmer commenced employment with us on December 7, 2015, he did not receive annual option or time-based restricted stock awards in 2016 for 2015 performance.

(7)
In June 2015, Mr. Shea notified the Company of his intention to resign as CFO upon the Company’s identification and appointment of a successor CFO. The notice was given in connection with a CFO succession plan developed by

34




Mr. Shea and the Company and the announcement of Mr. Shea’s plan to retire in 2016. In light of Mr. Shea’s expected retirement in 2016, he was not granted any stock options or shares of restricted stock in 2016. The amount shown in the "Option Awards" column for Mr. Shea reflects the incremental fair value attributable to the modification of stock options granted to Mr. Shea prior to 2016 that resulted from the adoption of the Retirement Policy in 2016, which amount does not correspond to the actual value that will be realized by Mr. Shea upon vesting or exercise of such awards.
2016 Grants of Plan-Based Awards
The following table sets forth information regarding awards made to our Named Executives during the year ended December 31, 2016:
 
 
 
 
Estimated Future
Payouts Under
Non‑Equity
Incentive
Plan Awards(4)
Estimated
Future Payouts
Under Equity
Incentive Plan
Awards
 
 
 
 
Name(1)
Type of
Award(3)
Grant
Date
 
Target
($)
Maximum
($)
Target
(#)
All Other
Stock
Awards:
Number of
Shares of
Stock (#)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
Exercise
Price of
Option
Awards(8)
($/Sh)
Grant Date
Fair Value
of Stock
and
Option
Awards(9)
($)
Craig A. Wheeler
RS
2/09/2016

(5)



63,000



682,290

 
SO
2/09/2016

(6)




126,000

10.83

737,818

 
PSA
4/13/2016

(7)


150,000




1,467,000

 
AIBP
N/A

 
482,425

1,033,769






Scott M. Storer (2)
RS

 







 
SO
12/14/2016

(6)




125,000

14.25

940,375

 
PSA
12/14/2016

(7)


48,000




684,000

 
AIBP

 







Matthew P. Ottmer
RS

 







 
SO

 







 
PSA
4/13/2016

(7)


75,000




733,500

 
AIBP
N/A

 
225,000







Ganesh V. Kaundinya
RS
2/09/2016

(5)



18,900



204,687

 
SO
2/09/2016

(6)




37,800

10.83

221,345

 
PSA
4/13/2016

(7)


60,000




586,800

 
AIBP
N/A

 
173,340







Bruce A. Leicher
RS
2/09/2016

(5)



17,100



185,193

 
SO
2/09/2016

(6)




34,200

10.83

200,265

 
PSA
4/13/2016

(7)


60,000




586,800

 
AIBP
N/A

 
165,862








(1)
In June 2015, Mr. Shea notified the Company of his intention to resign as CFO upon the Company’s identification and appointment of a successor CFO. The notice was given in connection with a CFO succession plan developed by Mr. Shea and the Company and the announcement of Mr. Shea’s plan to retire in 2016. In light of Mr. Shea’s expected retirement in 2016, he was not granted any plan-based awards in 2016.

(2)
Mr. Storer commenced employment with us on November 28, 2016, and did not receive an annual equity or cash bonus plan award for 2016 performance; however, he received an option award and an award of performance-based restricted stock in connection with his commencement of employment with us.

(3)
Type of Award:
AIBP = Annual Incentive Bonus Plan
RS = Restricted Stock
SO = Stock Option
PSA = Performance Share Award

35





(4)
All awards in these columns were granted under our annual incentive cash bonus plan. The actual amounts awarded are reported in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table above. See “Executive Compensation—Compensation Discussion and Analysis—Elements of Compensation—Annual Incentive Cash Bonus” for a description of this plan.

(5)
These shares of common stock are subject to a restricted stock agreement dated February 9, 2016, pursuant to which 25% of such shares vested and became free from forfeiture on February 9, 2017, and an additional 6.25% of the shares vest and become free from forfeiture at the end of each successive three-month period thereafter.

(6)
The shares of common stock underlying this option vest as to 25% of the shares on the one year anniversary of the grant date, and an additional 6.25% of the shares vest at the end of each successive three-month period thereafter.

(7)
Represents performance‑based restricted stock awards that vest based on the Company achieving up to two of three performance milestones on or before April 13, 2019. Upon achieving each of the first and second milestones, 25% of the shares will vest on the later of the milestone achievement date and the first anniversary of the grant date, and an additional 25% of the shares will vest on the one year anniversary of such achievement date. Following discontinuation of our necuparanib program, only two of the three milestones are possible to achieve prior to April 13, 2019.

(8)
The exercise price of the applicable stock option is equal to the closing price of our common stock as reported by The NASDAQ Global Select Market on the date of grant.

(9)
Valuation is based on the aggregate grant date fair value of stock and option awards computed in accordance with FASB ASC Topic 718 (excluding the effect of estimated forfeitures), and for performance-based restricted stock awards, reflects as estimate of the probable outcome of the performance conditions as of the grant date. The aggregate grant date fair value of stock and option awards does not correspond to the actual value that will be realized by the Named Executive upon vesting or exercise of such award. The assumptions used by us with respect to the valuation of stock and option awards are set forth in Note 2 and Note 11 to our financial statements contained in our Annual Report on Form 10‑K for year ended December 31, 2016, as filed with the Securities and Exchange Commission on February 24, 2017.


36




Outstanding Equity Awards at 2016 Year-End
The following table sets forth information regarding outstanding stock options and awards of restricted stock held by our Named Executives as of December 31, 2016:
 
Option Awards
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
of Stock
That Have
Not Vested
(#)
 
Market Value
of Shares
of Stock
That Have
Not Vested(1)
($)
Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested
(#)
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares That Have Not Vested (1)
($)
Craig A. Wheeler
77,000

 

 
7.41
2/22/2018
3,750
(2)
56,438
 
 
 
 
100,000

 

 
10.43
2/25/2019
21,875
(3)
329,219
 
 
 
 
100,000

 

 
15.37
2/18/2020
39,375
(4)
592,594
 
 
 
 
100,000

 

 
13.26
2/22/2021
63,000
(5)
948,150
 
 
 
 
150,000

 

 
15.44
2/14/2022

 

150,000

(6)
2,257,500
 
140,625

(7)
9,375

(7)
12.58
2/19/2023
 
 
 
 
 
 
 
96,250

(8)
43,750

(8)
17.96
2/18/2024
 
 
 
 
 
 
 
61,250

(9)
78,750

(9)
13.02
2/18/2025
 
 
 
 
 
 
 

 
126,000

(10)
10.83
2/9/2026
 
 
 
 
 
 
Scott M. Storer

 
125,000

(11)
14.25
12/14/2026
 
 

48,000

(6)
722,400
Matthew P. Ottmer
43,750

(12)
131,250

(12)
16.17
12/10/2025
 
 

75,000

(6)
1,128,750
Ganesh V. Kaundinya
15,000

 

 
12.81
2/21/2017
688
(2)
10,354
 
 
 
 
34,750

 

 
7.41
2/22/2018
6,035
(3)
90,827
 
 
 
 
18,050

 

 
10.43
2/25/2019
11,671
(4)
175,649
 
 
 
 
26,125

 

 
15.37
2/18/2020
18,900
(5)
284,445
 
 
 
 
25,495

 

 
13.26
2/22/2021

 

60,000

(6)
903,000
 
26,183

 

 
15.44
2/14/2022
 
 
 
 
 
 
 
26,250

(7)
1,750

(7)
12.58
2/19/2023
 
 
 
 
 
 
 
26,520

(8)
12,055

(8)
17.96
2/18/2024
 
 
 
 
 
 
 
18,155

(9)
23,343

(9)
13.02
2/18/2025
 
 
 
 
 
 
 
 
 
37,800

(10)
10.83
2/9/2026
 
 
 
 
 
 
Bruce Leicher
23,750

 

 
15.37
2/18/2020
688
(2)
10,354
 
 
 
 
23,178

 

 
13.26
2/22/2021
6,338
(3)
95,387
 
 
 
 
30,000

 

 
15.44
2/14/2022
10,611
(4)
159,696
 
 
 
 
26,250

(7)
1,750

(7)
12.58
2/19/2023
17,100
(5)
257,355
 
 
 
 
27,846

(8)
12,658

(8)
17.96
2/18/2024

 

60,000

(6)
903,000
 
16,504

(9)
21,221

(9)
13.02
2/18/2025
 
 

 
 
 
 

 
34,200

(10)
10.83
2/9/2026
 
 

 
 
 
Richard P. Shea (13)
7,000

 

 
12.81
2/21/2017
688
(2)
10,354
 
 
 
 
15,000

 

 
10.41
8/14/2017
6,035
(3)
90,827
 
 
 
 
34,750

 

 
7.41
2/22/2018
9,549
(4)
143,712
 
 
 
 
17,100

 

 
10.43
2/25/2019
 
 
 
 
 
 
 
23,750

 

 
15.37
2/18/2020
 
 
 
 
 
 
 
23,178

 

 
13.26
2/22/2021
 
 
 
 
 
 
 
20,000

 

 
15.44
2/14/2022
 
 
 
 
 
 
 
26,250

(7)
1,750

(7)
12.58
2/19/2023
 
 
 
 
 
 
 
26,520

(8)
12,055

(8)
17.96
2/18/2024
 
 
 
 
 
 
 
14,854

(9)
19,099

(9)
13.02
2/18/2025
 
 
 
 
 
 

(1)
Based on $15.05 per share, the last sale price of Momenta common stock on December 30, 2016.

(2)
These shares of common stock are subject to a restricted stock agreement dated February 19, 2013, pursuant to which 25% of such shares vested and became free from forfeiture on February 19, 2014, and an additional 6.25% of the shares vested and became free from forfeiture at the end of each successive three-month period thereafter.


37




(3)
These shares of common stock are subject to a restricted stock agreement dated February 18, 2014, pursuant to which 25% of such shares vested and became free from forfeiture on February 18, 2015, and an additional 6.25% of the shares vest and become free from forfeiture at the end of each successive three-month period thereafter.

(4)
These shares of common stock are subject to a restricted stock agreement dated February 18, 2015, pursuant to which 25% of such shares vested and became free from forfeiture on February 18, 2016, and an additional 6.25% of the shares vest and become free from forfeiture at the end of each successive three-month period thereafter.

(5)
These shares of common stock are subject to a restricted stock agreement dated February 9, 2016, pursuant to which 25% of such shares vested and became free from forfeiture on February 9, 2017, and an additional 6.25% of the shares vest and become free from forfeiture at the end of each successive three-month period thereafter.

(6)
Represents performance-based restricted stock awards that vest based on the Company achieving up to two of three performance milestones on or before April 13, 2019. Upon achieving each of the first and second milestones, 25% of the shares will vest on the later of the milestone achievement date and the first anniversary of the grant date, and an additional 25% of the shares will vest on the one year anniversary of such achievement date. Following discontinuation of our necuparanib program, only two of the three milestones are possible to achieve prior to April 13, 2019.

(7)
The shares of common stock underlying these options vested as to 6.25% of the shares on May 19, 2013, and at the end of each successive three-month period thereafter.

(8)
The shares of common stock underlying these options vested as to 6.25% of the shares on May 18, 2014, and at the end of each successive three-month period thereafter.

(9)
The shares of common stock underlying these options vested as to 6.25% of the shares on May 18, 2015, and at the end of each successive three-month period thereafter.

(10)
The shares of common stock underlying these options vested as to 25% of the shares on February 9, 2017, and an additional 6.25% of the shares vest at the end of each successive three-month period thereafter.

(11)
The shares of common stock underlying these options vest as to 25% of the shares on December 14, 2017, and an additional 6.25% of the shares vest at the end of each successive three-month period thereafter.

(12)
The shares of common stock underlying these options vested as to 25% of the shares on December 10, 2016, and an additional 6.25% of the shares vest at the end of each successive three-month period thereafter.

(13)
Mr. Shea remained an employee of the Company until December 30, 2016, after which he entered into a six-month consulting contract with the Company. Mr. Shea did not incur a termination of service under our 2013 Incentive Award Plan since he simultaneously remained in service with the Company in a consulting role, and he remains eligible to vest in his outstanding equity awards during the consulting period. In addition, pursuant to the Retirement Policy, Mr. Shea's unvested options will continue to vest during the one year period following his retirement date of December 30, 2016.


38




2016 Option Exercises and Stock Vested
The following table sets forth information regarding options exercised by our Named Executives and shares of restricted stock that vested and became free from forfeiture during the fiscal year ended December 31, 2016.
 
Option Awards
Stock Awards
Name
Number of
Shares Acquired
on Exercise
(#)
Value Realized
on Exercise
($)
Number of
Shares Acquired
on Vesting
(#)
Value Realized
on Vesting (1)
($)
Craig A. Wheeler


129,562

1,354,581

Scott M. Storer (2)




Matthew P. Ottmer (3)




Ganesh V. Kaundinya


36,435

377,895

Bruce A. Leicher


36,008

373,537

Richard P. Shea


34,568

357,597


(1)
Value realized upon vesting is based on the closing sale price of our common stock on the applicable vesting date.

(2)
Mr. Storer commenced employment with us on November 28, 2016, and none of his equity awards vested during the fiscal year ended December 31, 2016.

(3)
Mr. Ottmer commenced employment with us on December 7, 2015, and none of his equity awards vested during the fiscal year ended December 31, 2016.

Employment, Severance and Change of Control Arrangements
Craig A. Wheeler Employment Agreement
On August 22, 2006, we entered into an employment agreement with Craig A. Wheeler, pursuant to which Mr. Wheeler serves as our President and CEO and as a member of the board of directors. In December 2010, Mr. Wheeler’s employment agreement was amended.
Salary, Bonus and Benefits
Pursuant to his employment agreement, Mr. Wheeler receives an annual base salary determined by the compensation committee, which is $750,000 for 2017. Mr. Wheeler is also eligible to receive bonuses of up to 150% of his base salary for the applicable fiscal year. Details of Mr. Wheeler’s 2016 cash bonus are described above under the caption “Elements of Compensation—Annual Incentive Cash Bonus.” Mr. Wheeler is also entitled to specified benefits, including: participation in our sponsored benefit programs; reimbursement for life and disability insurance premium expenses up to $5,000 per year and related tax gross-up payments; and reimbursement of tax and financial advisor fees incurred by Mr. Wheeler, up to $5,000 per year, during the period of his employment.
Payments Upon Termination by Reason of Death or Disability, Termination Without Cause or Resignation for Good Reason
Under Mr. Wheeler’s employment agreement, Mr. Wheeler or Momenta may terminate Mr. Wheeler’s employment at any time. In the event Mr. Wheeler’s employment is terminated without cause by us, as the result of death or disability or Mr. Wheeler terminates his employment for good reason, other than in connection with a change of control, we have agreed to pay Mr. Wheeler a lump sum equal to:
12 months of Mr. Wheeler’s highest base salary in effect during the 12 months prior to the date of termination; and

an amount equal to the greater of 60% of such base salary or Mr. Wheeler’s last paid bonus.

Additionally, Mr. Wheeler and his dependents will continue to receive benefits under the Company’s medical and dental plans, or will receive comparable benefits, at subsidized rates to the same extent as active employees, for a maximum of 12 months following such termination subject to his re-employment with comparable benefits. In addition, any time-based

39




awards that would have vested if Mr. Wheeler had remained employed for an additional 12 months and 25% of any unvested performance-based awards will fully and immediately vest.
Payments Upon Termination in Connection with a Change of Control
If Mr. Wheeler terminates his employment for good reason within 24 months following a change of control of Momenta, or if we terminate Mr. Wheeler’s employment without cause within 24 months following a change of control, we have agreed to pay Mr. Wheeler a lump-sum cash payment equal to:
24 months of Mr. Wheeler’s highest base-salary in effect during the 12 months prior to the date of termination;

an amount equal to the greater of 60% of two years of such base salary or two times the last bonus paid to Mr. Wheeler; and

if the aggregate purchase price paid in a change of control transaction equals or exceeds $1.1 billion, an additional amount equal to 12 months of base salary in effect at the time of Mr. Wheeler’s termination and the greater of 60% of one year of such base salary or the last bonus paid to Mr. Wheeler.

Additionally, Mr. Wheeler and his dependents will continue to receive benefits under the Company’s medical and dental plans, or will receive comparable benefits for 24 months (or a maximum of 36 months if the purchase price of the transaction equals or exceeds $1.1 billion) following such termination at subsidized rates to the same extent as active employees subject to his re-employment with comparable benefits. In addition, Mr. Wheeler is entitled to reimbursement for excise taxes due under Section 4999 of the Code (as well as income and employment taxes due on the reimbursement payment) following a change of control and, if terminated as described above after a change of control, the unvested portions of all stock-based awards shall fully and immediately vest.
Non‑Competition, Non‑Solicitation, Confidential Information and Developments
Our employment agreement with Mr. Wheeler also contains non‑disclosure, non‑competition and assignment of intellectual property terms. These terms provide for the protection of our confidential information and the transfer of ownership rights to intellectual property developed by Mr. Wheeler to us and a 12‑month non‑compete provision.
Executive Employment Agreements with Scott M. Storer, Matthew P. Ottmer, Ganesh V. Kaundinya and Bruce A. Leicher
We have also entered into executive employment agreements, as amended, or the Executive Employment Agreements, with Scott M. Storer, Matthew P. Ottmer, Ganesh V. Kaundinya and Bruce A. Leicher.
Salary, Bonus and Benefits
Pursuant to the Executive Employment Agreements, we have agreed to pay Mr. Storer, Mr. Ottmer, Dr. Kaundinya and Mr. Leicher annual base salaries as determined by the compensation committee. If our board of directors approves an annual bonus, each of them will be eligible for a discretionary bonus award. The annual target for each executive’s bonus is currently 40% of the executive’s annualized base salary, except Mr. Ottmer's, which is 50% of his annualized base salary. The compensation committee will determine, in its sole discretion, whether (and in what amount) a bonus award is payable to each executive. In order to be eligible for any bonus hereunder, the executive must be an active employee of the Company on the date such bonus is paid.
Each executive is entitled to participate in all benefit plans and programs that we establish and make available to our employees to the extent that the executive is eligible under (and subject to the provisions of) the plan documents governing those programs.
Payments Upon Resignation by the Executive Without Good Reason or Termination by Us for Cause
If the executive voluntarily resigns his employment other than for good reason (as defined in each Executive Employment Agreement), or if we terminate the executive for cause (as defined in each Executive Employment Agreement), we will pay the executive all accrued and unpaid base salary through the executive’s date of termination and any vacation that is accrued but unused as of such date. The executive will not be eligible for any severance or separation payments or any continuation of benefits (other than those provided for under COBRA), or any other compensation pursuant to the Executive

40




Employment Agreement or otherwise. The executive will also have such rights, if any, with respect to outstanding stock options and restricted stock grants as may be provided under each applicable award agreement.
Payments Upon Termination by Reason of Death or Disability, Termination Without Cause or Resignation for Good Reason
If the executive’s employment with us is terminated by reason of the executive’s death or disability (as defined in each Executive Employment Agreement), by us without cause, or by the executive’s voluntary resignation for good reason, other than in connection with a change of control (as defined in each Executive Employment Agreement), then the executive will be paid all accrued and unpaid base salary and any accrued but unused vacation through the date of termination. In addition, the executive will be eligible to receive the following separation benefits:
an amount equal to the sum of 12 months of the executive’s base salary as of the date of termination and the greater of (i) the annual discretionary target bonus established by our board of directors (or any other person or persons having authority with respect thereto) for the executive for the fiscal year in which the date of termination occurs or (ii) the annual bonus paid to the executive for the most recently completed fiscal year;

insurance, medical, dental, health and accident and disability benefits as in effect immediately prior to the termination date for a period of 12 months; and

continued vesting of any unvested stock options for a period of 12 months from the date of termination and an extension of the right to exercise any outstanding stock options through the earlier of three months after such 12‑month period or the original expiration date of the applicable stock option. The executive will also be entitled to immediate vesting, on the date of termination, of any restricted stock awards with underlying shares that vest solely through the passage of time (i.e., service-based vesting) and not upon the achievement of specified conditions or milestones (i.e., performance-based vesting), in each case that would have vested during the period of 12 months from the date of termination.

Payments Upon Termination in Connection with a Change of Control
If the executive’s employment with the Company is terminated without cause or if the executive terminates his employment with good reason, in each case, within one year following a change of control (as defined in each Executive Employment Agreement), the executive will be entitled to all accrued and unpaid base salary and any accrued but unused vacation through the date of termination. In addition, the executive will be eligible to receive the following separation benefits:
an amount equal to the sum of 12 months of the executive’s base salary as of the date of termination and the greater of (i) the annual discretionary target bonus established by our board of directors (or any other person or persons having authority with respect thereto) for the executive for the fiscal year in which the date of termination occurs or (ii) the annual bonus paid to the executive for the most recently completed fiscal year;

insurance, medical, dental, health and accident and disability benefits as in effect immediately prior to the termination date for a period of 12 months; and

immediate vesting of any unvested stock options, restricted stock awards and any other outstanding equity-based awards. All such equity awards (whether stock options or restricted stock grants) will remain exercisable in accordance with the applicable stock option plan or grant agreement.

Non-Competition, Non-Solicitation, Confidential Information and Developments
Each of the executives have entered into agreements providing for the protection of our confidential information, the transfer of ownership rights to intellectual property developed by each such executive to us and a 12-month non-compete provision.
Retirement Arrangement with Richard P. Shea
In June 2015, Mr. Shea notified the Company of his intention to resign as chief financial officer upon the Company’s identification and appointment of a successor CFO. As part of the CFO succession plan developed by Mr. Shea and the Company, Mr. Shea remained an employee of the Company through December 30, 2016 to assist with the transition to a new CFO. On December 30, 2016, the Company entered into a six month consulting agreement with Mr. Shea to provide post-

41




retirement consulting and advisory services to the Company in connection with the CFO transition. Pursuant to the consulting agreement, Mr. Shea is entitled to receive an hourly fee for services rendered, up to a maximum aggregate amount of $100,000, reasonable travel and other expenses incurred by him in rendering his services and a one-time cash payment, paid on March 31, 2017, equal to his 2016 target cash bonus award for which he would have been eligible had he remained an employee when those bonuses were paid in February 2017. Under the Retirement Policy, Mr. Shea will continue vesting in his unvested time-based options for 12 months following his retirement date of December 30, 2016, and will generally have until the first anniversary of his retirement date to exercise any vested options. The value of this continued option vesting, calculated by multiplying the number of shares subject to the portion of the options that will vest during the 12 months following Mr. Shea’s retirement by the excess, if any, of the closing price of our common stock on December 30, 2016, which was $15.05, over the applicable per share option exercise price, was $587,805. Except as required by law, Mr. Shea did not receive any other retirement payments or benefits from the Company.
Potential Termination and Change of Control Payments
Potential Termination and Change of Control Payments for Craig A. Wheeler
The following table summarizes the potential payments, benefits and acceleration of vesting applicable to stock options and restricted stock awards under our employment agreement with Mr. Wheeler. The amounts shown below assume that the termination of Mr. Wheeler was effective as of December 31, 2016. Actual amounts payable to Mr. Wheeler upon his termination can only be determined definitively at the time of his actual departure.
Benefit
Voluntary
Termination or
Termination for
Cause
($)
Termination
Without
Cause, Termination
by Reason of
Death
or Disability,
or Resignation
for Good Reason
($)
 
Termination
Without
Cause
or Resignation
for Good
Reason Within
24 Months
of a Change
of Control
($)

 
Accrued Obligations
 
 
 
 
 
Unused Vacation
79,515

79,515

 
79,515

 
Severance Benefits
 
 
 
 
 
Lump-sum cash payment

1,201,902

(2)
2,403,804

(3)
Lump-sum payment with respect to business combination


 
1,201,902

(4)
Insurance/Healthcare benefits

24,696

(5)
74,088

(6)
Market Value of Stock Vesting on Termination (1)

1,944,854

(7)
5,884,571

(8)
Gross‑Up Payments    


 
4,444,728

(9)
Total
79,515

3,250,967

 
14,088,608

 

(1)
Based on the last sale price of our common stock on December 30, 2016, which was $15.05 per share.

(2)
Represents a lump sum payment equal to 12 months of the highest base salary in effect for Mr. Wheeler during the 12 months prior to his termination, or $689,179, plus an amount equal to his last paid bonus, or $512,723. This amount is to be paid in full six months and one day after the date of Mr. Wheeler’s termination.

(3)
Represents a lump sum payment equal to 24 months of the highest base salary in effect for Mr. Wheeler during the 12 months prior to his termination, or $1,378,358, plus an amount equal to two times Mr. Wheeler’s last paid bonus, or $1,025,446. This amount is to be paid in full six months and one day after the date of Mr. Wheeler’s termination.

(4)
Assumes that the change of control involves a business combination with an aggregate purchase price exceeding $1.1 billion. In such event, Mr. Wheeler is entitled to an additional lump sum payment equal to 12 months of the highest base salary in effect for Mr. Wheeler during the 12 months prior to his termination, or $689,179, plus an amount equal to his last paid bonus, or $512,723.


42




(5)
Represents benefits payable over 12 months for continuation of coverage under medical and dental plans for Mr. Wheeler and his dependents subject to Mr. Wheeler’s re-employment with comparable healthcare benefits. The value is based upon the type of insurance coverage we carried for Mr. Wheeler as of December 31, 2016 and is valued at the premiums in effect on December 31, 2016.

(6)
Assumes that the change of control involves a business combination with an aggregate purchase price exceeding $1.1 billion, and represents benefits payable over 36 months for continuation of coverage under medical and dental plans for Mr. Wheeler and his dependents subject to Mr. Wheeler’s re-employment with comparable healthcare benefits. In the event the aggregate purchase price is less than $1.1 billion, Mr. Wheeler would be entitled to 24 months continuation of coverage under medical and dental plans for Mr. Wheeler and his dependents subject to Mr. Wheeler’s re-employment with comparable healthcare benefits, with a value equal to $49,392. This value is based upon the type of insurance coverage we carried for Mr. Wheeler as of December 31, 2016 and is valued at the premiums in effect on December 31, 2016.

(7)
Represents the acceleration of vesting of: 3,750 shares of common stock subject to a restricted stock agreement between us and Mr. Wheeler dated February 19, 2013; 9,375 shares of common stock underlying stock options granted to Mr. Wheeler dated February 19, 2013; 17,500 shares of common stock subject to a restricted stock agreement between us and Mr. Wheeler dated February 18, 2014; 17,500 shares of common stock subject to a restricted stock agreement between us and Mr. Wheeler dated February 18, 2015; 35,000 shares of common stock underlying stock options granted to Mr. Wheeler dated February 18, 2015; 27,562 shares of common stock subject to a restricted stock agreement between us and Mr. Wheeler dated February 9, 2016; 55,125 shares of common stock underlying stock options granted to Mr. Wheeler dated February 9, 2016. If Mr. Wheeler’s employment with us is terminated without cause, he resigns for good reason or his employment is terminated due to his death or disability in periods after December 31, 2016, acceleration of vesting to additional equity awards will apply. See the discussion in this proxy statement under the heading “Employment, Severance and Change of Control Arrangements--Craig A. Wheeler Employment Agreement.”

(8)
Represents the acceleration of vesting of: 3,750 shares of common stock subject to a restricted stock agreement between us and Mr. Wheeler dated February 19, 2013; 9,375 shares of common stock underlying stock options granted to Mr. Wheeler dated February 19, 2013; 21,875 shares of common stock subject to a restricted stock agreement between us and Mr. Wheeler dated February 18, 2014; 39,375 shares of common stock subject to a restricted stock agreement between us and Mr. Wheeler dated February 18, 2015; 78,750 shares of common stock underlying stock options granted to Mr. Wheeler dated February 18, 2015; 63,000 shares of common stock subject to a restricted stock agreement between us and Mr. Wheeler dated February 9, 2016; 126,000 shares of common stock underlying stock options granted to Mr. Wheeler dated February 9, 2016. If Mr. Wheeler’s employment with us is terminated without cause, he resigns for good reason or his employment is terminated due to his death or disability in periods after December 31, 2016, acceleration of vesting to additional equity awards will apply. See the discussion in this proxy statement under the heading “Employment, Severance and Change of Control Arrangements--Craig A. Wheeler Employment Agreement.”

(9)
Represents the excise tax payable under section 280G of the United States Internal Revenue Code.

In addition, if Mr. Wheeler had retired on December 31, 2016, the value of the benefits received under the Retirement Policy, calculated by multiplying the number of shares subject to the portion of Mr. Wheeler’s stock options that would have vested during the 12 months following his retirement by the excess, if any, of the closing price of our common stock on December 30, 2016, which was $15.05, over the applicable per share option exercise price, would have been $2,027,795.
Potential Termination and Change of Control Payments for Mr. Storer, Mr. Ottmer, Dr. Kaundinya and Mr. Leicher
The following table summarizes the potential payments, benefits and acceleration of vesting applicable to stock options and restricted stock awards under our Executive Employment Agreements with each of Mr. Storer, Mr. Ottmer, Dr. Kaundinya and Mr. Leicher. The amounts shown below assume that the termination of each executive was effective as of December 31, 2016, and that each of the Executive Employment Agreements was effective as of December 31, 2016. Actual amounts payable to each Named Executive listed below upon his termination can only be determined definitively at the time of each Named Executive’s actual departure.

43




Name
Benefit
Voluntary
Termination or
Termination
for Cause
($)
Termination for Death,
Disability, Without Cause
or for Good Reason
Other than in
Connection with
Change of Control
($)

 
Termination
Without Cause or
Resignation for
Good Reason Within
12 Months of a
Change of Control
($)

 
Scott M. Storer
Accrued Obligations
 
 
 
 
 
 
Unused Vacation
2,962

2,962

 
2,962

 
 
Severance Benefits
 
 
 
 
 
 
Lump Sum Cash Severance

420,000

(3)
420,000

(3)
 
Insurance/Healthcare Benefits (1)


 

 
 
Market Value of Stock Vesting on Termination (2)

25,000

(5)
822,400

(6)
 
Total
2,962

447,962

 
1,245,362

 
Matthew P. Ottmer
Accrued Obligations
 
 
 
 
 
 
Unused Vacation
10,962

10,962

 
10,962

 
 
Severance Benefits
 
 
 
 
 
 
Lump Sum Cash Severance

675,000

(3)
675,000

(3)
 
Insurance/Healthcare Benefits

24,696

(4)
24,696

(4)
 
Market Value of Stock Vesting on Termination (2)


(5)
1,128,750

(6)
 
Total
10,962

710,658

 
1,839,408

 
Ganesh V. Kaundinya
Accrued Obligations
 
 
 
 
 
 
Unused Vacation
43,335

43,335

 
43,335

 
 
Severance Benefits
 
 
 
 
 
 
Lump Sum Cash Severance

621,274

(3)
621,274

(3)
 
Insurance/Healthcare Benefits

24,696

(4)
24,696

(4)
 
Market Value of Stock Vesting on Termination (2)

380,696

(5)
1,675,499

(6)
 
Total
43,335

1,070,001

 
2,364,804

 
Bruce A. Leicher
Accrued Obligations
 
 
 
 
 
 
Unused Vacation
27,113

27,113

 
27,113

 
 
Severance Benefits
 
 
 
 
 
 
Lump Sum Cash Severance

590,934

(3)
590,934

(3)
 
Insurance/Healthcare Benefits

24,696

(4)
24,696

(4)
 
Market Value of Stock Vesting on Termination (2)

356,830

(5)
1,901,332

(6)
 
Total
27,113

999,573

 
2,544,075

 

(1)
Mr. Storer commenced employment with us on November 28, 2016, and did not participate in our insurance or healthcare benefits until January 1, 2017.

(2)
Based on the last sale price of our common stock on December 30, 2016, which was $15.05 per share.

(3)
Represents an amount equal to the Named Executive’s annual base salary payable over the applicable severance period. For Mr. Ottmer, the amount shown also includes his target bonus for 2016, and for Dr. Kaundinya and Mr. Leicher, the amount shown also includes the annual bonus paid to the Named Executive for the most recently completed fiscal year. Such amounts are to be paid within 30 days after the Named Executive’s termination date. For more information relating to compensation earned by our Named Executives, see the section of this proxy statement entitled “Executive Compensation—Summary Compensation Table.”

(4)
Represents amounts payable over 12 months for continuation of coverage for insurance, medical, dental, health and accident and disability benefits for each Named Executive and his family members subject to the Named Executive’s re-employment with comparable healthcare benefits. The value is based upon the type of insurance coverage we carried for each Named Executive as of December 31, 2016 and is valued at the premiums in effect on December 31, 2016. For more information relating to compensation earned by our Named Executives, see the section of this proxy statement entitled “Executive Compensation—Summary Compensation Table.”

(5)
Represents continued vesting for an additional 12-month period of all unvested stock options and all time-based restricted stock awards held by the Named Executives as of December 31, 2016. For more information concerning

44




option and restricted common stock awards held by our Named Executives, see the section of this proxy statement entitled “Executive Compensation—Outstanding Equity Awards at 2016 Year End.”

(6)
Represents immediate vesting of all unvested equity awards held by the Named Executives as of December 31, 2016. For more information concerning equity awards held by our Named Executives, see the section of this proxy statement entitled “Executive Compensation—Outstanding Equity Awards at 2016 Year End.”

In addition, if Mr. Leicher had retired on December 31, 2016, the value of the benefits received under the Retirement Policy, calculated by multiplying the number of shares subject to the portion of Mr. Leicher’s stock options that would have vested during the 12 months following his retirement by the excess, if any, of the closing price of our common stock on December 30, 2016, which was $15.05, over the applicable per share option exercise price, would have been $226,436. Mr. Storer, Mr. Ottmer and Dr. Kaundinya did not satisfy the requirements for eligibility under the Retirement Policy as of December 31, 2016.


45




DIRECTOR COMPENSATION
Non-employee director compensation is set by our board of directors at the recommendation of the compensation committee. Our 2016 compensation for non-employee directors consisted of:
Grant of Stock Options Upon Appointment. Each non-employee director elected in 2016 prior to the meeting of the board of directors coinciding with the 2016 annual meeting of stockholders received an option to purchase up to 30,000 shares of our common stock upon appointment to the board of directors, and each non-employee director elected in 2016 thereafter received an option to purchase up to 33,000 shares of our common stock upon appointment to the board of directors. These options vest as to 1/3 of the underlying shares on the first anniversary of the grant date and in eight quarterly installments over the two years following the grant date, subject to such director’s continued service to the Company.
Annual Grant of Options and Restricted Stock. Non-employee directors who served on our board of directors during the prior calendar year and who continue to serve on the board of directors are granted, on the date of the board meeting coinciding with the annual meeting of stockholders, an option to purchase up to 11,000 shares of our common stock and 5,500 restricted shares of our common stock. These options and restricted shares vest in full on the first anniversary of the grant date, subject to the non-employee director’s continued service to the Company.
Payment of Retainer Fee; Reimbursement of Travel and Other Expenses. In addition to equity grants, each non-employee director receives an annual retainer for his or her service on our board of directors as well as additional fees for committee service as follows:
 
Fees ($)
Annual Retainer
40,000
Non‑Employee Chairman of the Board
30,000
Audit Committee Chair
20,000
Audit Committee Members (other than the Chair)
10,000
Compensation Committee Chair
15,000
Compensation Committee Members (other than the Chair)
7,500
Nominating and Corporate Governance Committee Chair
12,000
Nominating and Corporate Governance Committee Members (other than the Chair)
6,000
Science Committee Chair
10,000
Science Committee Members
7,500
Science Committee, Chair and Members
3,000 for each all day session attended (up to a
maximum of $15,000 per year), which is in addition to the standard quarterly
meetings of the Science Committee
All retainer amounts are paid quarterly in arrears. Non-employee directors also received reimbursement for reasonable travel and other expenses in connection with attending meetings of our board of directors.
The following table sets forth the fees earned by each of our non-employee directors for his or her service on the board of directors and the aggregate grant date fair value of option and restricted stock awards granted to our non-employee directors for the year ended December 31, 2016:

46




2016 Director Compensation
Name
Fees Earned or
Paid in
Cash ($)(1)
Stock Awards ($)(2)
Option
Awards ($)(2)
Total ($)
James R. Sulat(3)
92,000

60,335

61,232

213,567

Georges Gemayel(4)
56,000


226,155

282,155

Bruce L. Downey(3)
65,000

60,335

61,232

186,567

Marsha H. Fanucci(3)(5)
66,000

60,335

165,831

292,166

Thomas P. Koestler(3)
55,000

60,335

61,232

176,567

Corey N. Fishman(4)
15,370


209,857

225,227

Elizabeth Stoner(3)
54,806

60,335

61,232

176,373

Steven C. Gilman(4)
28,875


195,291

224,166

Jose-Carlos Gutiérrez-Ramos(4)
44,725


140,289

185,014

Bennett M. Shapiro(6)
27,486



27,486

(1)
The fees earned by the non-employee directors in 2016 consist of the following: (i) an annual retainer; (ii) a fee to the non-employee chairman of the board; and (iii) an annual fee for chairing and being a member of each of the audit, compensation, nominating and corporate governance and science committees.

(2)
Valuation of these awards is based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, Stock Compensation (excluding the effect of estimated forfeitures). These amounts do not correspond to the actual value that will be realized by the director upon vesting or exercise of such award. The assumptions used by us with respect to the valuation of stock and option awards are set forth in Note 2 and Note 11 to our financial statements contained in our Annual Report on Form 10‑K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission on February 24, 2017. The following table shows the aggregate number of stock option grants and restricted shares outstanding for each non-employee director as of December 31, 2016:
Name
Aggregate Number of Shares
Subject to Outstanding
Stock Options(#)
Aggregate Number of Restricted Shares Outstanding(#)
James Sulat
144,750

5,500

Georges Gemayel
30,000


Bruce L. Downey
134,750

5,500

Marsha H. Fanucci

168,150


Thomas P. Koestler
112,000

5,500

Corey N. Fishman
33,000


Elizabeth Stoner
143,950

5,500

Steven C. Gilman
33,000


Jose-Carlos Gutiérrez-Ramos
30,000


Bennett M. Shapiro

88,900


(3)
On June 23, 2016, the day following the date of our 2016 annual meeting of stockholders, the non-employee director received an option to purchase 11,000 shares of our common stock and 5,500 restricted shares of our common stock.

(4)
Messrs. Gemayel, Gutiérrez-Ramos, Gilman and Fishman were appointed to our board in January, March, June and September 2016, respectively. Upon such appointment, each of Messrs. Gemayel and Gutiérrez-Ramos received an initial award of an option to purchase 30,000 shares of our common stock, and each of Messrs. Gilman and Fishman received an initial award of an option to purchase 33,000 shares of our common stock.

(5)
Ms. Fanucci retired from our board effective December 31, 2016. The amount shown in the "Option Awards" column for Ms. Fanucci includes $104,599, which is the incremental fair value attributable to the modification of stock options granted to Ms. Fanucci that resulted from the adoption of the Retirement Policy in 2016, which amount does not correspond to the actual value that will be realized by Ms. Fanucci upon vesting or exercise of such awards.

(6)
Dr. Shapiro did not stand for re-election at the 2016 annual meeting of stockholders, and his term expired on June 22, 2016.

47




SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of our common stock as of April 18, 2017, by:
each person, or group of affiliated persons, known to us to be the beneficial owner of more than 5% of the outstanding shares of our common stock as of such date based on currently available Schedules 13D and 13G filed with the Securities and Exchange Commission;

each of our directors (which includes all nominees);

our Named Executives; and

all of our directors and executive officers as a group.

The number of shares of common stock beneficially owned by each person or entity is determined in accordance with the applicable rules of the Securities and Exchange Commission and includes voting or investment power with respect to shares of our common stock. The information is not necessarily indicative of beneficial ownership for any other purpose. Shares of our common stock issuable under stock options exercisable on or before June 17, 2017, are deemed beneficially owned for computing the percentage ownership of the person holding the options, but are not deemed outstanding for computing the percentage ownership of any other person. Unless otherwise indicated, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under community property laws. Unless otherwise indicated, the address of all directors and executive officers is c/o Momenta Pharmaceuticals, Inc., 675 West Kendall Street, Cambridge, Massachusetts 02142. The inclusion of any shares deemed beneficially owned in this table does not constitute an admission of beneficial ownership of those shares.

48




Name and Address of Beneficial Owner
Total Number
of Shares
Beneficially Owned
 
Percentage of
Common Stock
Beneficially Owned(1)
 
Holders of more than 5% of our Common Stock
 
 
 
 
FMR LLC
245 Summer Street
Boston, MA 02210
10,684,248

(2)
14.4
 
BlackRock, Inc.
55 East 52
nd  Street
New York, NY 10055
8,228,311

(3)
11.1
 
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
5,757,681

(4)
7.8
 
Discovery Capital Management, LLC
20 Marshall Street, Suite 310
South Norwalk, CT 06854
4,468,368

(5)
6.0
 
Invesco Ltd.
1555 Peachtree Street NE, Suite 1800
Atlanta, GA 30309
3,623,003

(6)
4.9
 
Directors (including all nominees) and Named Executives
 
 
 
 
Bruce L. Downey
139,250

(7)
*
 
Corey N. Fishman

 
*
 
Georges Gemayel
16,501

(8)
*
 
Steven C. Gilman

 
*
 
Jose-Carlos Gutiérrez‑Ramos
12,501

(9)
*
 
Thomas P. Koestler
106,500

(10)
*
 
Elizabeth Stoner
151,690

(11)
*
 
James R. Sulat
154,250

(12)
*
 
Craig A. Wheeler
1,571,976

(13)
2.1
 
Richard P. Shea
200,992

(14)
*
 
Scott M. Storer
48,000

(15)
*
 
Bruce A. Leicher
343,159

(16)
*
 
Ganesh V. Kaundinya
688,927

(17)
*
 
Matthew P. Ottmer
140,625

(18)
*
 
All current directors and executive officers as a group (13 persons)    
3,373,379

(19)
4.4
 

*    Less than 1% of our outstanding common stock.

(1)
Applicable percentage of ownership for each holder is based on 74,149,981 shares of common stock outstanding on April 18, 2017, plus any common stock equivalents and presently exercisable stock options held by each such holder, and options held by each such holder that will become exercisable as of June 17, 2017.

(2)
Information is based on a Schedule 13G/A filed by FMR LLC, Abigail P. Johnson and Fidelity Growth Company Fund on February 14, 2017, and is as of December 30, 2016. According to the Schedule 13G/A, FMR LLC has sole voting power over 2,521,649 shares and sole dispositive power over all 10,684,248 shares, Abigail P. Johnson does not have voting power over any shares and has sole dispositive power over all 10,684,248 shares, and Fidelity Growth Company Fund has sole voting power over 5,140,165 shares and does not have dispositive power over any shares.

(3)
Information is based on a Schedule 13G/A filed by BlackRock, Inc. on January 12, 2017, and is as of December 31, 2016. According to the Schedule 13G/A, BlackRock, Inc. has sole voting power over 8,081,437 of such shares and sole dispositive power over all 8,228,311 shares.


49




(4)
Information is based on a Schedule 13G/A filed by The Vanguard Group on February 10, 2017, and is as of December 31, 2016. According to the Schedule 13G/A, The Vanguard Group has sole voting power with respect to 88,552 shares, sole dispositive power with respect to 5,662,040 shares, shared voting power with respect to 10,489 shares, and shared dispositive power with respect to 95,641 shares.

(5)
Information is based on a Schedule 13G/A filed by Discovery Capital Management, LLC and Robert K. Citrone on February 14, 2017, and is as of December 31, 2016. According to the Schedule 13G/A, Discovery Capital Management, LLC and Robert K. Citrone have shared voting and dispositive power over all 4,468,368 shares.

(6)
Information is based on a Schedule 13G/A filed by Invesco Ltd. on February 8, 2017, and is as of December 30, 2016. According to the Schedule 13G/A, Invesco Ltd. has sole voting and dispositive power over all 3,623,003 shares.

(7)
Consists of 15,500 shares of common stock, of which 5,500 shares are unvested restricted stock, and 123,750 shares of common stock underlying options exercisable on or before June 17, 2017.

(8)
Consists of 4,000 shares of common stock and 12,501 shares of common stock underlying options exercisable on or before June 17, 2017.

(9)
Consists entirely of shares of common stock underlying options exercisable on or before June 17, 2017.

(10)
Consists of 5,500 shares of common stock, of which 5,500 shares are unvested restricted stock, and 101,000 shares of common stock underlying options held by Dr. Koestler exercisable on or before June 17, 2017.

(11)
Consists of 18,740 shares of common stock, of which 5,500 shares are unvested restricted stock, and 132,950 shares of common stock underlying options exercisable on or before June 17, 2017.

(12)
Consists of 20,500 shares of common stock, of which 5,500 shares are unvested restricted stock, and 133,750 shares of common stock underlying options exercisable on or before June 17, 2017.

(13)
Consists of 670,976 shares of common stock, of which 249,750 shares are unvested restricted stock, and 901,000 shares of common stock underlying options exercisable on or before June 17, 2017.

(14)
Consists of 119,906 shares of common stock, of which 13,316 shares are unvested restricted stock, and 81,086 shares of common stock underlying options exercisable on or before June 17, 2017. Mr. Shea remained an employee of the Company until December 30, 2016, after which he entered into a six-month consulting contract with the Company. Mr. Shea did not incur a termination of service under our 2013 Incentive Award Plan since he simultaneously remained in service with the Company in a consulting role, and he remains eligible to vest in his outstanding equity awards during the consulting period. In addition, pursuant to the Retirement Policy, Mr. Shea's unvested options will continue to vest during the one year period following his retirement date of December 30, 2016.

(15)
Consists entirely of shares of unvested restricted stock.

(16)
Consists of 175,552 shares of common stock, of which 87,238 shares are unvested restricted stock, and 167,607 shares of common stock underlying options exercisable on or before June 17, 2017.

(17)
Consists of 490,837 shares of common stock, of which 89,378 shares are unvested restricted stock, and 198,090 shares of common stock underlying options exercisable on or before June 17, 2017.

(18)
Consists of 75,000 shares of unvested restricted stock and 65,625 shares of common stock underlying options exercisable on or before June 17, 2017.

(19)
Consists of an aggregate of 1,524,605 shares of common stock, of which 571,456 shares are unvested restricted stock, and 1,848,774 shares of common stock underlying options exercisable on or before June 17, 2017.


50




Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and the holders of more than 10% of our common stock to file with the Securities and Exchange Commission initial reports of ownership of our common stock and other equity securities on a Form 3 and reports of changes in such ownership on a Form 4 or Form 5. Officers, directors and 10% stockholders are required by Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of copies of Section 16(a) reports furnished to us and representations made to us, we believe that during 2016 our officers, directors and holders of more than 10% of our common stock complied with all Section 16(a) filing requirements.






51




EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the securities authorized for issuance under our equity compensation plans as of December 31, 2016:
Plan Category
Number of
securities
to be issued upon
exercise of
outstanding options
(a)(#)
Weighted-average
exercise price of
outstanding options
(b)($)
Number of securities
remaining available
for future issuance under
equity compensation
plans (excluding
securities reflected
in column(a))
(c)(#)
 
Equity compensation plans approved by security holders(1)(2)(3)
7,009,293

13.68

5,654,583

(4)
Equity compensation plans not approved by security holders



 
Total
7,009,293

13.68

5,654,583

(4)

(1)
Includes information regarding the following equity compensation plans: 2013 Incentive Award Plan, as amended and restated, 2004 Stock Incentive Plan, as amended, and the 2004 Employee Stock Purchase Plan, as amended and restated. As of December 31, 2016, there were 1,992,038 shares of restricted stock outstanding under the 2013 Incentive Award Plan, as amended and restated, and the 2004 Stock Incentive Plan, as amended.

(2)
Since the approval of our 2004 Stock Incentive Plan, we have not granted further stock options under the Amended and Restated 2002 Stock Incentive Plan.

(3)
Since the approval of the 2013 Incentive Award Plan, we have not granted further stock options under our amended 2004 Stock Incentive Plan, as amended.

(4)
Includes 282,286 shares available under the 2004 Employee Stock Purchase Plan, as amended and restated. As of December 31, 2016, there were 57,007 shares of common stock subject to purchase under such plan.


52




CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policies and Procedures for Related Person Transactions
Our board of directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which we are a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members), each of whom we refer to as a “related person,” has a direct or indirect material interest.
If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our General Counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by our audit committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the audit committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chair of the audit committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the audit committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.
A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the audit committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the audit committee will review and consider:
the related person’s interest in the related person transaction;

the approximate dollar value of the amount involved in the related person transaction;

the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;

whether the transaction was undertaken in the ordinary course of our business;

whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;

the purpose of, and the potential benefits to us of, the transaction; and

any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

Our audit committee may approve or ratify the transaction only if the audit committee determines that, under all of the circumstances, the transaction is in our best interests. Our audit committee may impose any conditions on the related person transaction that it deems appropriate.
In addition to the transactions that are excluded by the instructions to the Securities and Exchange Commission’s related person transaction disclosure rule, our board of directors has determined that the following transactions, among others, do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy: