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SEC Filings

OREXIGEN THERAPEUTICS, INC. filed this Form S-1/A on 04/09/2007
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objectives to be determined by our board of directors or compensation committee. In 2006, the compensation committee awarded annual performance bonuses to Dr. Tollefson, Mr. McKinney, Mr. Cooper, Dr. Dunayevich and Dr. Landbloom in the amounts of $91,875, $71,500, $43,134, $21,896, and $15,781, respectively, in recognition of such executives’ outstanding performance and, for those executives who commenced employment with Orexigen in 2006, pro-rated for start date. The compensation committee expects to adopt a more formal process for annual performance bonuses in 2007. The compensation committee intends to utilize annual incentive bonuses to compensate the executives for achieving financial and operational goals and for achieving individual annual performance objectives. These objectives will vary depending on the individual executive, but will relate generally to strategic factors such as clinical trial progress, formulations development, continued establishment of intellectual property and implementation of appropriate financing strategies. The compensation committee believes that the annual performance bonus provides incentives necessary to retain executive officers and reward them for short-term company performance.
Long-Term Incentive Program.  We believe that long-term performance will be enhanced through stock and equity awards that reward our executives for maximizing shareholder value over time and that align the interests of our employees and management with those of stockholders. The compensation committee believes that the use of stock and equity awards offers the best approach to achieving our compensation goals because equity ownership ties a significant portion of an executive’s compensation to the performance of our company’s stock. We have historically elected to use stock options as the primary long-term equity incentive vehicle.
Stock Options.  Our 2007 equity incentive award plan, or the 2007 plan, and our 2004 Stock Plan, or the 2004 plan, authorize us to grant options to purchase shares of common stock to our employees, directors and consultants. Our compensation committee oversees the administration of our stock option plans. Stock option grants are made at the commencement of employment and, occasionally, following a significant change in job responsibilities or to meet other special retention objectives. The compensation committee reviews and approves stock option awards to executive officers based upon a review of competitive compensation data, its assessment of individual performance, a review of each executive’s existing long-term incentives, and retention considerations. Periodic stock option grants are made at the discretion of the compensation committee to eligible employees and, in appropriate circumstances, the compensation committee considers the recommendations of members of management, such as Dr. Tollefson. In 2006, certain named executive officers were awarded stock options in the amounts indicated in the section entitled “Grants of Plan-Based Awards.” This includes stock options granted to Mr. Cooper, Dr. Dunayevich and Dr. Landbloom in May 2006 and September 2006 in connection with the commencement of their employment and options granted to Dr. Tollefson and Mr. McKinney in September 2006, based on their performance, to encourage continued service with us and to recalibrate their ownership on a percentage basis, taking into account equity dilution resulting from stock issuance and grants made to recently hired executives. Stock options granted by us have an exercise price equal to the fair market value of our common stock on the day of grant, typically vest over a four-year period (with 25% vesting 12 months after the vesting commencement date and the remainder vesting ratably each month thereafter based upon continued employment) and generally expire ten years after the date of grant. Incentive stock options also include certain other terms necessary to assure compliance with the Internal Revenue Code.
We expect to continue to use stock options as a long-term incentive vehicle because:
  •      Stock options and the vesting period of stock options attract and retain executives.
  •      Stock options are performance based. Because all the value received by the recipient of a stock option is based on the growth of the stock price, stock options enhance the executives’ incentive to increase our stock price and maximize stockholder value.
  •      Stock options help to provide a balance to the overall executive compensation program as base salary and our annual performance bonus program focus on short-term compensation, while stock options reward executives for increases in shareholder value over the longer term.