PRE 14A


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant:  x
Filed by a Party other than the Registrant:  o
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o
Definitive Proxy Statement
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Definitive Additional Materials
o
Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12
CTI BioPharma Corp.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
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No fee required.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Date Filed:







CTI BIOPHARMA CORP.
Notice of Annual Meeting of Shareholders
April 29, 2016

NOTICE OF 2016 ANNUAL MEETING OF SHAREHOLDERS
Location:
Company’s Principal Executive Offices
3101 Western Avenue, Suite 600
Seattle, Washington 98121, U.S.A.
 
Date: April 29, 2016
Time: 10:00 a.m. Pacific Time
The Notice of Meeting, Proxy Statement and Annual Report on Form 10-K are available free of charge at
http://www.ctibiopharma.com.

Items of Business:

(1)
To elect directors to the Company’s Board of Directors to serve one-year terms;
(2)
To approve an amendment to the Company’s amended and restated articles of incorporation to increase the total number of authorized shares from 315,333,333 to 415,333,333 and to increase the total number of authorized shares of common stock from 315,000,000 to 415,000,000;
(3)
To approve an amendment and restatement of the Company’s 2015 Equity Incentive Plan;
(4)
To ratify the selection of Marcum LLP as the Company’s independent auditor for the year ending December 31, 2016;
(5)
To approve, by non-binding advisory vote, the compensation of the Company’s named executive officers;
(6)
To approve the adjournment of the Annual Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Annual Meeting to adopt any of Proposals 1 through 5; and
(7)
To transact such other business as may properly come before the Annual Meeting and all adjournments and postponements thereof.

Record Date:

Close of business on February 26, 2016.

YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the 2016 Annual Meeting of Shareholders, we urge you to please cast your vote as soon as possible using one of the methods described in the accompanying Proxy Statement.

By Order of the Board of Directors
Louis A. Bianco
Executive Vice President, Finance and Administration, and Secretary

Seattle, Washington
March [ ], 2016



TABLE OF CONTENTS

 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
 
PROPOSAL 3: APPROVAL OF THE COMPANY’S AMENDED AND RESTATED 2015 EQUITY INCENTIVE PLAN
 
PROPOSAL 4: RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITOR
 
PROPOSAL 5: ADVISORY VOTE ON EXECUTIVE COMPENSATION
 
PROPOSAL 6: APPROVAL OF THE ADJOURNMENT OF THE ANNUAL MEETING, IF NECESSARY OR APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES
 
 
 
Summary   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
APPENDIX A: Amendment to 2015 Equity Incentive Plan
 



CTI BIOPHARMA CORP.
3101 Western Avenue, Suite 600
Seattle, Washington 98121, U.S.A.

PROXY STATEMENT


PROXY SUMMARY

This summary highlights information described in more detail elsewhere in this Proxy Statement. It does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting. Page references are provided to help you find further information.

The Annual Meeting of Shareholders (the “Annual Meeting”) of CTI BioPharma Corp. (the “Company”, “our”, “us”, or “we”) will be held at the following time and location:
Date and Time:
 
April 29, 2016
10:00 a.m. Pacific Time
 
 
 
Location:
 
Company’s Principal Executive Offices
3101 Western Avenue, Suite 600
Seattle, Washington 98121, U.S.A.

Delivery of Proxy Materials (see page 5)

On or about March [ ], 2016, proxy materials for the Annual Meeting, including this Proxy Statement, are being made available to shareholders entitled to vote at the Annual Meeting. We are utilizing the United States (the “U.S.”) Securities and Exchange Commission (the “SEC”) rules that allow issuers to furnish proxy materials to their shareholders on the Internet.

Eligibility to Vote (see page 5)

You may vote if you were a shareholder of record at the close of business on February 26, 2016.

How to Cast Your Vote (see page 7)

For non-Italian Shareholders
•    
Log on to www.proxyvote.com and follow the instructions, using the Control Number shown on the Notice of Internet Availability of Proxy Materials (or paper proxy or voting instruction card if you receive one), until 11:59 p.m. Eastern Time on April 28, 2016;
 
 
 
•    
If you receive a proxy card, call the telephone number and follow the instructions shown on the proxy or voting instruction card, using the Control Number shown on the card, until 11:59 p.m. Eastern Time on April 28, 2016;
 
 
 
•    
If you receive a proxy or voting instruction card, mark, sign and date the card and promptly return it in the prepaid envelope so that it is received prior to the adjournment of the Annual Meeting on April 29, 2016; or
 
 
 
•    
In person, if you are a shareholder of record, by voting your shares at the Annual Meeting. If your shares are held in the name of a broker, nominee or other intermediary, you must obtain a proxy, executed in your favor, to bring to the meeting.

For Italian Shareholders

If you are an Italian shareholder (as such term is defined below), please refer to the section entitled “General Information Concerning the Annual Meeting - Important Information for our Shareholders in Italy” for information pertaining to applicable voting procedures starting on page 7.


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Summary of Voting Matters
 
 
Board Vote
Recommendation
 
Page
Reference
1.

Approval of proposal to elect directors to the Board of Directors (the “Board”) to serve one-year terms.

FOR ALL nominees
 

10
2.

Approval of an amendment to the Company’s amended and restated articles of incorporation (the “Articles”).

FOR
 

19
3.

Approval of an amendment and restatement of the Company’s 2015 Equity Incentive Plan (the “2015 Plan”).

FOR
 

22
4.

Ratification of selection of Marcum LLP as our independent auditor for the year ending December 31, 2016.

FOR
 

36
5.

Approval, by non-binding advisory vote, of the compensation of the Company’s named executive officers.

FOR
 

39
6.

Approval of adjournment of the Annual Meeting, if necessary or appropriate.

FOR
 

41
 
Your Vote Matters! (see page 7)

It is very important that you cast your vote and play a part in the future of the Company. Under rules of the New York Stock Exchange (the “NYSE”), if you hold your shares through a broker, bank or other nominee, they cannot vote on your behalf on the foregoing proposals 1, 2, 3 or 5 at the Annual Meeting because they are considered non-routine matters. Thus, it is important that you cast your vote on these and all proposals to make sure your voice is heard.

Director Nominees (see page 10)
Nominee
Director Since
James A. Bianco, M.D.
1991
Richard L. Love
2007
Phillip M. Nudelman, Ph. D.
1994
Matthew D. Perry
2016
Jack W. Singer, M.D.
1991
Frederick W. Telling, Ph.D.
2006
Reed V. Tuckson, M.D., F.A.C.P.
2011
 
Governance Highlights

During 2014, our Board and shareholders voted to declassify our Board over the subsequent two years, and, as such, our Board will be fully declassified following the Annual Meeting. Once fully declassified, shareholders will have the opportunity to vote annually on all director nominees who will stand for one-year terms.
Five of our seven director nominees are independent and our independent directors meet regularly in executive sessions.
Board policy stipulates that the positions of Chief Executive Officer and Chairman of the Board are to be held by separate individuals.
Performance evaluations of the Board and its committees are performed annually.
The Board and its committees, as applicable, are responsible for risk oversight.
Senior executives, financial officers and directors are subject to codes of ethics.
The Board is diverse as to gender, ethnicity, experience and skills.
We have a standing Scientific Advisory Board comprised of industry veterans to, among other things, assist the Board in its oversight of the Company’s oncology portfolio and clinical trial design.


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Fiscal Year 2015 Business Highlights

Select key recent 2016 and fiscal year 2015 highlights include:  

Research and Development

In January 2016, we announced the completion of the rolling New Drug Application ("NDA") to the U.S. Food and Drug Administration ("FDA") for pacritinib seeking U.S. marketing approval of pacritinib for the treatment of patients with intermediate and high-risk myelofibrosis with low platelet counts of less than 50,000 per microliter (<50,000/µL). In February 2016, the FDA placed pacritinib’s investigational new drug ("IND") application on a full clinical hold. As a result of the full clinical hold of pacritinib’s IND, we have withdrawn the NDA until such time that we have reviewed the safety and efficacy data from PERSIST-2 and decide next steps.

In December 2015, we reported significant data presentations on our pipeline candidates at the American Society of Hematology Annual Meeting.

In November 2015, we announced that the United Kingdom’s National Cancer Research Institute (NCRI) Haematological Oncology Clinical Studies Group has chosen to advance tosedostat to the second stage of a randomized clinical trial of low-dose cytarabine plus or minus tosedostat in older patients with acute myeloid leukemia ("AML") or high risk myelodysplastic syndrome ("MDS").

In June 2015, Patient Reported Outcome ("PRO") and other quality of life measures from the registration-directed PERSIST-1 Phase 3 trial of pacritinib in patients with myelofibrosis, without exclusion for low platelet counts, were presented at a late-breaking oral session at the 20th Congress of the European Hematology Association and showed significant improvements in symptom score with pacritinib therapy compared to best available therapy (exclusive of a JAK inhibitor) across the symptoms reported in the presentation.

In May 2015, the final results from PERSIST-1, were presented at a late-breaking oral session at the 51st Annual Meeting of the American Society of Clinical Oncology Annual Meeting. Data from PERSIST-1 showed that compared to best available therapy (exclusive of a JAK inhibitor) pacritinib therapy resulted in a significantly higher proportion of patients with spleen volume reduction and control of disease-related symptoms.

Corporate

In January 2016, we announced that Matthew Perry had been appointed to the Board of Directors. Mr. Perry is the President of BVF Partners L.P. ("BVF Partners") and the co-portfolio manager for the underlying funds managed by the firm. BVF Partners is a private investment partnership that manages over $1 billion and focuses on small-cap, value oriented investment opportunities.

In September 2015, we completed a registered direct offering and in each of October 2015 and December 2015, we completed an underwritten public offering resulting in aggregate net proceeds of approximately $115 million. 

In July 2015, Bruce J. Seeley was appointed as Executive Vice President and Chief Commercial Officer to lead all aspects of commercial operations.

In January 2015, Alan K. Burnett, M.D. was appointed Therapeutic Area Lead, Myeloid Diseases.

Executive Compensation (see page 42)

Our executive compensation program embraces a number of features intended to reflect best practices in the market and help ensure that the program reinforces shareholder interests. Such features include the following:

Executives’ bonuses under our annual incentive program are principally based on the achievement of specific performance objectives established early in the fiscal year by the Compensation Committee of the Board (the “Compensation Committee”).

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Vesting of a significant percentage of executives’ equity awards is contingent on the achievement of specific operational and financial performance goals established by the Compensation Committee.
In recent years, the Compensation Committee approved arrangements for each of the named executive officers that eliminated any gross-up payments for “parachute payment” taxes under Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) for our named executive officers, and approved revisions to the severance agreements with certain of our named executive officers to eliminate “walkaway” right provisions that would have permitted them to voluntarily terminate employment for any reason following a change in control and receive severance benefits. For a discussion of benefits payable to the named executive officers in connection with a termination of employment or a change in control of the Company, see “Potential Payments upon Termination or Change in Control.”

Our executive compensation program is designed to align the compensation of our named executive officers with shareholders’ interests. To create this alignment, a significant portion of such compensation is “at-risk.” In this Proxy Statement, we refer to compensation as being “at risk” if it is subject to performance-based vesting criteria and/or time-based vesting criteria (whereby the awards will generally be forfeited unless the executive remains at the Company for the designated period of time), and/or the value of the award is based on the price of our common stock. Under the program, the portion of compensation guaranteed and not at risk for any fiscal year represents only a fraction of the total potential compensation.

Consistent with our executive compensation program’s emphasis on pay-for-performance, we believe that compensation awarded to our named executive officers for fiscal year 2015 reflected our operational performance and achievements. For more information on our named executive officer compensation, see “Compensation Discussion and Analysis” starting on page 42.



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GENERAL INFORMATION CONCERNING THE ANNUAL MEETING

Annual Meeting Agenda

This Proxy Statement and the accompanying form of proxy card are furnished in connection with the solicitation of proxies by the Board for use at our Annual Meeting.
 
At the Annual Meeting, shareholders will be asked to:

(1)
elect directors to the Company’s Board to serve one-year terms (“Proposal 1”);
(2)
approve an amendment to the Articles (“Proposal 2”);
(3)
approve an amendment and restatement of the 2015 Plan (“Proposal 3”);
(4)
ratify the selection of Marcum LLP as the Company’s independent auditor for the year ending December 31, 2016 (“Proposal 4”);
(5)
approve, by non-binding advisory vote, the compensation of the Company’s named executive officers (“Proposal 5”);
(6)
approve the adjournment of the Annual Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Annual Meeting to adopt any of Proposals 1 through 5 (“Proposal 6” and, collectively with Proposals 1 through 6, the “Proposals”); and
(7)
transact such other business as may properly come before the Annual Meeting and all adjournments and postponements thereof.

Shareholder approval of Proposals 1, 2 and 3 are required by statutes or regulations applicable to us based on our listing on The NASDAQ Stock Market LLC (“NASDAQ”) and our incorporation in the State of Washington.

Delivery of Proxy Materials

On or about March [ ], 2016, proxy materials for the Annual Meeting, including this Proxy Statement, are being made available to shareholders entitled to vote at the Annual Meeting. We are utilizing the SEC rules that allow issuers to furnish proxy materials to their shareholders on the Internet. We believe these rules allow us to provide you with the information you need while lowering the costs of delivery and reducing the environmental impact of the Annual Meeting. Pursuant to such rules, we are mailing to many of our shareholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Annual Report”). The Notice contains instructions on how to access those documents and vote online. The Notice also contains instructions on how each of those shareholders can receive a paper copy of the proxy materials, including this Proxy Statement, the 2015 Annual Report and a form of proxy card or voting instruction card. Shareholders (other than Italian shareholders) who do not receive a Notice, such as shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail. In the case of Italian shareholders, such shareholders will be able to obtain a copy of the proxy materials in the manner outlined under the heading “Important Information for our Shareholders in Italy - Availability of Meeting Materials”.

Solicitation of Proxies

This solicitation is made on behalf of the Board. All expenses in connection with the solicitation of proxies will be borne by us. In addition to solicitation by mail, our officers, directors or other regular employees may solicit proxies by telephone, facsimile, electronic communication or in person. These individuals will not receive any additional compensation for these services. We have engaged The Proxy Advisory Group, LLC to assist in the solicitation of proxies and provide related advice and informational support, for a service fee, plus customary disbursements, which are not expected to exceed $30,000 in the aggregate.
 
Record Date, Eligibility to Vote, Voting Rights and Outstanding Shares

Only shareholders of record on our shareholder books at the close of business on February 26, 2016 (the “Record Date”) will be entitled to notice of, and to vote at, the Annual Meeting. Each holder of record of our common stock, no par value per share, outstanding on the Record Date will be entitled to one vote per share on all matters to be voted upon at the Annual Meeting. As of the close of business on the Record Date, there were 280,543,833 shares of the Company’s common stock issued and outstanding and no shares of any other class of capital stock outstanding.


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Dissenters Rights or Appraisal Rights

Pursuant to applicable Washington law, there are no dissenters or appraisal rights relating to the matters to be acted upon at the Annual Meeting.

Quorum, Abstentions, Required Vote and Broker Non-Votes

Overview

All votes will be tabulated by the inspector of election appointed for the Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions, withheld votes and broker non-votes. Abstentions represent a shareholder’s affirmative choice to decline to vote on a proposal. Properly executed proxy cards that are marked “abstain” or “withhold all” on any proposal, as applicable, will be treated as abstentions for that proposal.

Broker non-votes occur when a broker holding shares for a beneficial owner does not vote on a particular matter because such broker does not have discretionary authority to vote on that matter and has not received voting instructions from the beneficial owner. Brokers typically do not have discretionary authority to vote on non-routine matters. Under the applicable rules of the NYSE (the “NYSE Rules”), brokers have discretionary authority to vote on routine matters when they have not received timely voting instructions from the beneficial owner. The routine versus non-routine matters to be voted upon at the Annual Meeting are discussed in greater detail below.

Quorum

A quorum of shareholders must be established at the Annual Meeting in order to transact business at the Annual Meeting. Under the Washington Business Corporation Act, a quorum may be established in one of two ways. Pursuant to the first quorum standard, the presence in person, by telephone or by proxy of the holders of at least one-third of the shares outstanding and entitled to vote at the Annual Meeting constitutes a quorum (“Quorum Standard 1”). Therefore, we will need at least 93,514,611 shares of our common stock present in person, by telephone or by proxy at the Annual Meeting for a quorum pursuant to Quorum Standard 1 to be established. Alternatively, we may establish a quorum under a second quorum standard, which requires that a majority of the shares outstanding and entitled to vote at the Annual Meeting, other than shares held of record by Depository Trust Company (“DTC”), and credited to the account of stock depositories located in a member state of the European Union (the “E.U.”), must be present in person, by telephone or by proxy at the Annual Meeting, provided the number of votes comprising such majority equals or exceeds one-sixth of the shares outstanding and entitled to vote at the Annual Meeting (“Quorum Standard 2”). As of the close of business on the Record Date, there were 182,729,463 shares of our common stock issued and outstanding other than shares held of record by DTC and credited to the account of stock depositories located in a member state of the E.U. Accordingly, 91,364,732 of the shares of our common stock, other than shares held of record by DTC and credited to the account of stock depositories located in a member state of the E.U., must be present in person, by telephone or by proxy at the Annual Meeting for Quorum Standard 2 to be established. All shares of our common stock are eligible to vote for the Proposals. Under Quorum Standard 2, certain shares are not counted for quorum purposes. However, even if a quorum is established under Quorum Standard 2, all shares are eligible to vote and all such votes will be counted.

While our Amended and Restated Bylaws (the “Bylaws”) provide that a quorum shall consist of shareholders representing, either in person or by proxy, one-third of the votes entitled to be cast on the matter by each voting group at the Annual Meeting, applicable Washington law expressly provides that Quorum Standard 2 shall also apply.

In the absence of a quorum, the Chairman of the Annual Meeting may adjourn the Annual Meeting.

Abstentions

Abstentions will be counted in determining whether a quorum is present, except that abstentions of shares credited to the account of stock depositories located in a member state of the E.U. (including shares that are held through Monte Titoli, S.p.A., the Italian central clearing agency (“Monte Titoli”)) will not be counted in determining whether a quorum is present for purposes of establishing Quorum Standard 2.

Vote Required and Effect of Abstentions and Broker Non-Votes on Vote

The nominees for director seats who receive the most votes cast in Proposal 1, either at the Annual Meeting in person, by telephone or by proxy shall be elected. Abstentions will have no effect on the outcome of Proposal 1. No cumulative voting for directors is permitted under our Articles.


6


The affirmative vote of a majority of votes actually cast that are present in person, by telephone or by proxy is required to approve Proposals 2, 3, 4, 5 and 6. Abstentions will not be counted as votes cast against Proposals 2, 3, 4, 5 and 6 and will have no effect on the outcome of Proposals 2, 3, 4, 5 and 6 because approval is based on the number of votes actually cast.

Proposals 1, 2, 3 and 5 are considered to be non-routine matters under the NYSE Rules, and, as a result, if you do not instruct your broker, bank or other nominee on how to vote the shares in your account for Proposals 1, 2, 3 and 5, brokers will not be permitted to exercise their voting authority and uninstructed shares will constitute broker non-votes. However, broker non-votes for Proposals 1, 2, 3 and 5 will have no effect on the outcome of such proposals because approval is based on the number of votes actually cast. Proposals 4 and 6 are considered to be routine matters under the NYSE Rules and, accordingly, if you do not instruct your broker, bank or other nominee on how to vote the shares in your account for Proposals 4 and 6, brokers will be permitted to exercise their discretionary authority to vote for such proposals.

Methods of Voting (other than for shareholders in Italy, which are discussed below)

Beneficial Shareholders

If you own shares through a broker, bank or other holder of record, you will need to instruct the holder of record how to vote your shares. In order to provide voting instructions to the holder of record of your shares, please refer to the materials forwarded by your broker, bank or other holder of record. You may not vote your shares in person at the Annual Meeting unless you obtain a “legal proxy” from the bank, broker or other holder of record that holds your shares, giving you the right to vote the shares at the Annual Meeting.

Registered Shareholders

If you own shares that are registered in your name, you may vote by proxy before the Annual Meeting by internet at www.proxyvote.com, by calling 1-800-690-6903 or by signing and returning your proxy card. To vote by internet or telephone, you will need your 16-digit voting control number, which can be found on your proxy card or Notice. If you return a signed proxy card but do not provide voting instructions for some or all of the matters to be voted on, your shares will be voted on all uninstructed matters in accordance with the recommendations of the Board. You may also vote your shares in person at the Annual Meeting. If you choose to do so, you can vote using the ballot that will be provided at the Annual Meeting.

Important Information for our Shareholders in Italy

Voting Methods

Our Italian shareholders whose shares are held directly by a U.S. brokerage account in that shareholder’s name or who are registered directly with us as a record holder (i.e., you hold your shares in registered form) may vote via the internet or phone methods described above. Persons holding shares of our common stock through Monte Titoli (which shareholders are referred to in this Proxy Statement as our shareholders in Italy or our Italian shareholders) are not able to vote via the internet or phone methods described above and must instead vote in the manner described below.

If you hold shares of our common stock as a result of our 2004 merger with Novuspharma S.p.A. or if you acquired shares of our common stock through an account with an Italian bank on the Mercato Telematico Azionario stock market in Italy, you most likely hold these shares indirectly through the facilities of Monte Titoli, and through the banks and brokers participating in the Monte Titoli system (unless you or your broker has taken action to remove your shares from the Monte Titoli system and requested to have shares registered in your name). Monte Titoli, in turn, holds these shares of our common stock through the U.S. clearing agency, DTC. Pursuant to U.S. law, DTC will transfer its voting power over the shares in Monte Titoli’s account to Monte Titoli. Monte Titoli has agreed with us that it will re-transfer its voting power over such shares to the persons holding certifications of participation (each, a “Certification”) in the Italian Central Depository System issued pursuant to Italian law (Section 21 (and the following sections) of the Regulation enacted by the Bank of Italy and the Commissione Nazionale per le Società e la Borsa (“CONSOB”) on February 22, 2008).

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Italian shareholders who have requested and received a Certification may vote in the following manner:

In person. You may attend the Annual Meeting and vote in person. To do so, please present your Certification at the door, together with proof of your identity.
By mail or facsimile. An Italian proxy card accompanies this Proxy Statement. You may also print an Italian proxy card from our website at http://www.ctibiopharma.com. You may use such proxy card to vote by mail or facsimile. Please mark your votes on the Italian proxy card and return it and your Certification by mail to the address shown on the card or by facsimile to the facsimile number shown on the card by the deadline shown on the card. Your name as you write it on your Italian proxy card must exactly match your name as printed on your Certification. Italian privacy law prevents us from learning in advance the names of the persons holding Certifications. Thus, you must include your Certification (or a complete copy) in the same envelope as your Italian proxy card in order for your vote to be counted (that is, in order to prove to our inspector of election that you have the right to vote).
By proxy. You may name another person as a substitute proxy by any means permitted by Washington law and our Bylaws. That substitute proxy may then attend the Annual Meeting, provided that he or she provides your Certification or a complete copy thereof, together with your written authorization naming such person as your proxy, to our inspector of election at the Annual Meeting in order to verify the authenticity of your proxy designation.

For future meetings, an Italian shareholder may also vote via Internet or by phone if the shares owned by such Italian shareholder are either (i) registered directly with us in that shareholder’s name as record holder or (ii) transferred to and held by a U.S. brokerage account in that shareholder’s name. If you are an Italian shareholder and wish to use this method of voting for future meetings, then, prior to the record date for such future meeting, you will need to do one of the following:

Register as a Direct Record Holder: Contact your bank for more information on the procedures required for direct registration of your shares in your name, which would include, among other things, the submission of a registration request (together with a Certification) to our transfer agent, the removal of your shares from Monte Titoli’s account and the transfer of such shares to the U.S. directly in your name. Please note that registration in our shareholder books may require you to take additional steps if and when you decide to dispose of your shares.
Transfer Shares to U.S. Brokerage Account: Contact your bank and inform the bank that you would like to transfer your shares to a U.S. brokerage account (to be held in your name and for your account). Your bank can explain the procedure and costs associated with that transfer. Please note that you will be required by your bank to bear the costs relating to such a transfer, including those debited or claimed by the U.S. broker-dealer for the management of the account in the U.S.

Once your shares are registered on our records in your name or held by a U.S. broker-dealer in your name, you will receive the Annual Meeting documentation for any future meetings (including the Proxy Statement) at your address, together with a security code and instructions on how to vote your shares through the relevant website or by calling the telephone number provided in connection with that meeting.

Availability of Meeting Materials

Copies of this Proxy Statement may be obtained by our Italian shareholders from any of the following places:

the office of the Italian branch of our subsidiary, CTI Life Sciences Limited (Attention: Investor Relations), at Via Amedei 8, 20123 Milan, Italy;
the office of any of the depository banks having our shares in their accounts, subject to their availability to provide a copy of the Proxy Statement and/or the proxy card;
the SEC website at http://www.sec.gov; or
our website at http://www.ctibiopharma.com.

This Proxy Statement will be available for our Italian shareholders at least twenty days before the Annual Meeting date of April 29, 2016. If you hold shares of our common stock in Italy through Monte Titoli, your broker is required by Italian law, upon your request, to provide you with a Certification in the Italian Central Depository System. All of our shareholders, including our Italian shareholders, are cordially invited to attend the Annual Meeting.


8


Importance of Your Vote

In the past, a significant percentage of our shares were held by persons in Italy. If our Italian shareholders do not take the time to vote, we may not be able to obtain a quorum, in which case we would be unable to conduct any business at the Annual Meeting and will not be able to obtain approval of the Proposals. Your vote is important. Please obtain a Certification and an Italian proxy card and vote today.

Deadline to Vote Shares

If you are a shareholder of record who holds shares in record name, your proxy must be received by telephone or the internet by 11:59 p.m. Eastern Time on April 28, 2016 in order for your shares to be voted at the Annual Meeting. You also have the option of completing, signing, dating and returning the proxy card enclosed with the Proxy Statement so that it is received prior to the adjournment of the Annual Meeting on April 29, 2016 in order for your shares to be voted at the Annual Meeting. If you hold your shares through a broker, bank or other nominee (e.g. as a beneficial owner), please comply with the deadlines included in the voting instruction card provided by the bank, broker or other nominee that holds your shares.

If you are an Italian shareholder who has requested and received a Certification, and you are not intending to vote in person, then, in order for your vote to be counted at the Annual Meeting, your Certification and Italian proxy card must be returned by mail to the address shown on the card or by facsimile to the facsimile number shown thereon prior to the adjournment of the Annual Meeting.

Revocability of Proxies

You may change your vote or revoke your proxy at any time before your proxy is voted at the Annual Meeting. Any shareholder of record executing a proxy has the power to revoke it at any time prior to the voting thereof on any matter by delivering written notice of revocation of your proxy to our Secretary, Louis A. Bianco, at our principal executive offices, or by executing and delivering another proxy dated as of a later date or by voting in person at the Annual Meeting. For shares held through a broker, bank or other nominee, you may change your vote by submitting new voting instructions to your broker, bank or other nominee, or by obtaining a legal proxy from your broker, bank or other nominee giving you the right to vote your shares at the Annual Meeting.

Attendance at the Annual Meeting will not, by itself, revoke a proxy. For our Italian shareholders, any written notice of revocation or another proxy, in either case dated as of a later date, must also be accompanied by another Certification.

Absence of Specific Voting Instruction; Additional Matters That May Come Before Annual Meeting

If a quorum is established at the Annual Meeting, all shares of our common stock represented by properly executed proxies that are not revoked will be voted in accordance with the instructions, if any, given therein. Proxy cards that are signed and returned without specifying a vote or an abstention on any proposal specified therein will be voted according to the recommendations of the Board on such proposals, which recommendations are in favor of each of the Proposals, and will be voted, in the proxies’ discretion, upon such other matter or matters that may properly come before the Annual Meeting and any such postponements or adjournments thereof. As of the date of this Proxy Statement, we know of no business other than the Proposals that will be presented for action at the Annual Meeting. All proxy cards, whether received prior to or after the original date of the Annual Meeting, will be valid as to any postponements or adjournments of the Annual Meeting.

Voting Agreement

At the time of our merger with Novuspharma, S.p.A., we entered into an agreement with Monte Titoli in order to ensure that persons receiving beneficial interests in shares of our common stock as a result of the merger or subsequently acquiring shares of our common stock through an account with an Italian bank on the Mercato Telematico Azionario stock market in Italy would be able to vote those shares. Monte Titoli agreed that each time it is designated as proxy by DTC, Monte Titoli will execute a further omnibus proxy transferring its voting power to the persons who hold Certifications issued pursuant to Italian law (Section 21 (and the following sections) of the Regulation enacted by the Bank of Italy and CONSOB on February 22, 2008).

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PROPOSAL 1:
ELECTION OF DIRECTORS

Summary

In connection with the 2014 annual meeting of the shareholders, the Board adopted and the shareholders approved an amendment to the Articles to declassify the Board and provide for the annual election of directors to one-year terms. Such declassification is being phased-in through this Annual Meeting. As a result of the declassification, seven of our directors will stand for election to one-year terms at the Annual Meeting.

The Board has fixed the number of directors at eight. Dr. Mundinger notified the Board that she will not stand for re-election at the Annual Meeting and will no longer serve on the Board following the Annual Meeting. If the seven director nominees are elected to the Board at the Annual Meeting, our Board will consist of seven directors immediately following the Annual Meeting. Proxies cannot be voted for a greater number of persons than the nominees named.

Under our Bylaws, the number of directors constituting the entire Board may be decreased or increased by majority action of either the Board or the shareholders. Unless a director dies, resigns or is removed, no decrease in the number of directors may have the effect of shortening the term of any incumbent director. In the event of a vacancy on the Board, our Bylaws permit a majority of the remaining directors in office to fill the vacancy, and the director then chosen will hold office until the next shareholders’ meeting at which directors are elected. At such meeting, the director will stand for election until his or her successor is elected.

Nominees for Election as Directors

Dr. Bianco, Mr. Love, Dr. Nudelman, Mr. Perry, Dr. Singer, Dr. Telling and Dr. Tuckson have each been nominated by the Board for election at the Annual Meeting for a one-year term, each expiring at the annual meeting of shareholders held in 2017 (the “2017 Annual Meeting”). All of our directors up for election to the Board are incumbent directors, except for Mr. Perry, who joined the Board in January 2016. BVF Partners proposed Mr. Perry to the Board for nomination by the Board. The Board then met, discussed and approved BVF Partners’ selection. See “Other Information - Certain Transactions with Related Persons” for additional information.

If elected, each nominee will hold office until the later of the expiration of his or her term or until his or her successor is elected. It is intended that the accompanying proxy will be voted for the election as directors of the aforementioned persons unless the proxy contains contrary instructions.

Each nominee has consented to being named in this proxy statement and has agreed to serve if elected. If any nominee of the Board is unable to serve or, for good cause, will not serve as a director at the time of the Annual Meeting, the persons named as proxies may vote for a substitute nominee designated by our existing Board to fill the vacancy or for the balance of the nominees, leaving a vacancy, unless our Board chooses to reduce the number of directors serving on our Board. As of the date of this proxy statement, we have no reason to believe that any of the nominees will be unable or unwilling to stand as a nominee or to serve as a director if elected.

Vote Required and Board Recommendation

The seven nominees for director seats who receive the most votes cast at the Annual Meeting in person, by telephone or by proxy shall be elected. No cumulative voting for directors is permitted under our Articles. Abstentions and broker non-votes will have no effect on the outcome of the election of directors.


THE BOARD RECOMMENDS
A VOTE “FOR ALL” OF THE NOMINEES NAMED ABOVE.


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Information about the Current Directors

The table below provides biographical information as of March 2, 2016 for each of our current directors.
 
Name
Age
Director
Since
James A. Bianco, M.D.(2)
59
1991
Richard L. Love(1)(2)(3)(4)
72
2007
Mary O. Mundinger, DrPH(3)(4)
79
1997
Phillip M. Nudelman, Ph.D.(1)(2)(3)(4)(5)
80
1994
Matthew D. Perry
43
2016
Jack W. Singer, M.D.
73
1991
Frederick W. Telling, Ph.D.(1)(2)(3)
64
2006
Reed V. Tuckson, M.D.(4)
65
2011
 
(1)
Member of the Audit Committee.
(2)
Member of the Executive Committee.
(3)
Member of the Compensation Committee.
(4)
Member of the Nominating and Governance Committee.
(5)
Chairman of the Board.

Nominees for Election as Director at the Annual Meeting

The following directors are standing for election at the Annual Meeting for a one-year term:

Dr. Bianco is our principal founder and has served as our Chief Executive Officer and director since September 1991. He has also served as our President since July 2012, as well as from February 1992 through July 2008. Prior to co-founding the Company, Dr. Bianco was an assistant professor of medicine at the University of Washington, Seattle, and an assistant member in the clinical research division of the Fred Hutchinson Cancer Research Center. From 1990 to 1992, Dr. Bianco was the director of the Bone Marrow Transplant Program at the Veterans Administration Medical Center in Seattle. Dr. Bianco received his B.S. in biology and physics from New York University and his M.D. from Mount Sinai School of Medicine. Dr. Bianco is the brother of Louis A. Bianco, our Executive Vice President, Finance and Administration.

Dr. Bianco’s experience as a founder and executive of the Company and his knowledge of biopharmaceuticals were the primary qualifications that have led the Board to conclude that he should serve as a director of the Company.

Mr. Love has been one of our directors since September 2007. Mr. Love is presently a manager of Translational Accelerator, LLC. Mr. Love is also a director of PAREXEL International Corporation (NASDAQ: PRXL), a publicly traded company, and is a director of the following private companies: Applied MicroArrays Inc., PMed Management LLC, SynDevRx Inc., Cancer Prevention Pharmaceuticals Inc. and CerRx Inc. He was previously a director of ImaRx Therapeutics Inc., and, prior to its acquisition by us in July 2007, served as chairman of the board of Systems Medicine, Inc. He started two biopharmaceutical companies, Triton Biosciences Inc. and ILEX Oncology Inc., and he served as chief executive officer for Triton Biosciences from 1983 to 1991 and as chief executive officer for ILEX Oncology 1994 to 2001. In addition, Mr. Love has served in executive positions at not-for-profit organizations, including the Cancer Therapy and Research Center, The San Antonio Technology Accelerator Initiative and the Translational Genomics Research Institute. Mr. Love received his B.S. and M.S. in chemical engineering from Virginia Polytechnic Institute.

Mr. Love’s many years of experience as an executive in the pharmaceutical, biotechnology and medical research industries were the primary qualifications that have led the Board to conclude that he should serve as a director of the Company.

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Dr. Nudelman has been one of our directors since March 1994. From 2000 to 2007, he served as the President and Chief Executive Officer of The Hope Heart Institute. From 1998 to 2000, he was the Chief Executive Officer and Chairman of the board of directors of Kaiser/Group Health. He held various executive positions at Group Health from 1973 through 1990 and, from 1990 to 2000, Dr. Nudelman was the President and Chief Executive Officer of Group Health Cooperative of Puget Sound, a consumer governed healthcare delivery and financing organization. He retired from Group Health as President and CEO Emeritus. He also served on the board of directors of OptiStor Technologies, Inc. He previously served as an independent director and as the non-executive Chairman of SpaceLabs Medical, Inc. prior to its 2002 acquisition by Instrumentarium Corporation (which was subsequently acquired by General Electric Company in 2003). Additionally, he served as an independent director on the Board of ATL Ultrasound Inc. from 1994 to 1999 and First Medic Inc. from 1988 to 1992 and on a number of community non-profit boards. Dr. Nudelman served on the White House Task Force for Health Care Reform from 1992 to 1994 and the President’s advisory Commission on Consumer Protection and Quality in Health Care from 1996 to 1998. He has also served on the Pew Health Professions Commission, the AMA Task Force on Ethics and the Woodstock Ethics Commission, and he is the past Chairman of the American Association of Health Plans. Dr. Nudelman received his B.S. in microbiology, zoology and pharmacy from the University of Washington, and holds an M.B.A. and a Ph.D. in health systems management from Pacific Western University. Dr. Nudelman also continues to teach and lecture on operations and governance.

Dr. Nudelman’s business and management experience in the healthcare industry, as well as his familiarity with the Company’s business garnered through his tenure as a director, were the primary qualifications that have led the Board to conclude that he should serve as a director of the Company.

Mr. Perry has been one of our directors since January 2016. Mr. Perry is the President of BVF Partners and portfolio manager for the underlying funds managed by the firm. BVF Partners is a private investment partnership that has focused on small-cap, value oriented investment opportunities for more than 20 years. Mr. Perry joined BVF Partners in December 1996 and has been a successful lead investor in dozens of transactions and has positively influenced corporate direction for numerous biotechnology companies during the course of his career. Mr. Perry is also a co-founder and director of Nordic Biotech Advisors ApS, a venture capital firm based in Copenhagen, Denmark. He holds a B.S. degree from the Biology Department at the College of William and Mary.

Mr. Perry’s management consulting experience and his experience investing in biotechnology companies were the primary qualifications that have led the Board to conclude that he should serve as a director of the Company.

Dr. Singer is one of our founders and directors and currently serves as our Executive Vice President, Chief Scientific Officer, Interim Chief Medical Officer and Global Head of Translational Medicine. Dr. Singer has been one of our directors since our inception in September 1991. From July 1995 to January 2004, Dr. Singer was our Executive Vice President, Research Program Chairman and from April 1992 to July 1995, he served as our Executive Vice President, Research and Development. Prior to joining us, Dr. Singer was a professor of medicine at the University of Washington and a full member of the Fred Hutchinson Cancer Research Center. From 1975 to 1992, Dr. Singer was the Chief of Medical Oncology at the Veterans Administration Medical Center in Seattle. Dr. Singer currently serves as a clinical professor of medicine at the University of Washington and an attending physician at Harborview Medical Center. Dr. Singer received his M.D. from State University of New York, Downstate Medical College.

Dr. Singer’s experience as a founder and executive of the Company and experience as a medical doctor and in the pharmaceutical and biotechnology industries were the primary qualifications that have led the Board to conclude that he should serve as a director of the Company.

Dr. Telling has been one of our directors since December 2006. Prior to his retirement in 2007, Dr. Telling was a corporate officer of Pfizer, most recently as Vice President of Corporate Policy and Strategic Management since 1994. He joined Pfizer in 1977 and was responsible for strategic planning and policy development throughout the majority of his career. He currently serves as Chairman of Oragenics Inc. and on the board of directors of Eisai N.A., and Aequus Biopharma, Inc., our majority-owned subsidiary (“Aequus”). Dr. Telling received his B.A. from Hamilton College and his Masters of Industrial and Labor Relations and Ph.D. in Economics and Public Policy from Cornell University.

Dr. Telling’s business and industry experience as well as experience as a director of public companies were the primary qualifications that have led the Board to conclude that he should serve as a director of the Company.


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Dr. Tuckson has been one of our directors since September 2011. Dr. Tuckson serves as the Managing Director of Tuckson Health Connections, a private consulting company. From December 2006 to March 2014, Dr. Tuckson served as the Executive Vice President and Chief of Medical Affairs of UnitedHealth Group and, from November 2000 to December 2006, he served as Senior Vice President of Clinical Affairs of UnitedHealth Group. Dr. Tuckson also served as Senior Vice President, Professional Standards, for the American Medical Association, President of the Charles R. Drew University of Medicine and Science in Los Angeles, Senior Vice President for Programs of the March of Dimes Birth Defects Foundation and Commissioner of Public Health for the District of Columbia. He currently serves on the board of directors of the Alliance for Health Reform, the American Telemedicine Association, Project Sunshine, the Arnold P. Gold Foundation and the Advisory Committee of the National Institutes of Health for Alternate and Integrative Medicine. Dr. Tuckson received his B.S. in zoology from Howard University and his M.D. from the Georgetown University School of Medicine, and he completed the Hospital of the University of Pennsylvania’s General Internal Medicine Residency and Fellowship programs.

Dr. Tuckson’s experience as a healthcare executive and consultant across health and medical care sectors were the primary qualifications that have led the Board to conclude that he should serve as a director of the Company.

Board and Committee Meetings

The Board held twenty-four meetings during the year ended December 31, 2015. All directors who served during fiscal 2015 attended at least 75% of the total number of meetings of the Board and of all committees of the Board on which each director served that year. Independent directors of the Board meet in regularly scheduled sessions without management. Our policy is to encourage attendance at the Annual Meeting. Two of the directors in office at the time of our 2015 Annual Meeting were in attendance at such meeting.

The Board has an Audit Committee, a Compensation Committee, an Executive Committee and a Nominating and Governance Committee. The Company also has a Scientific Advisory Board, which serves an advisory role to management and the Board.

Audit Committee

The Company has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee has responsibility for assisting the Board in overseeing our accounting and financial reporting processes and audits of our financial statements. The Audit Committee assists the Board in oversight and monitoring of (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications, independence and performance and (iv) our internal controls over financial reporting and systems of disclosure controls and procedures. The Audit Committee has a written charter, which is available on our website at http://www.ctibiopharma.com. The composition of the Audit Committee, the attributes of Audit Committee members and the responsibilities of the Audit Committee as reflected in its charter adopted by the Board are intended to be in accordance with SEC rules and NASDAQ Stock Market Rules with regard to corporate audit committees.

The Audit Committee held twelve meetings during the year ended December 31, 2015. The Audit Committee currently consists of three non-employee directors: Mr. Love (Chairperson), Dr. Nudelman and Dr. Telling.

The Board has determined that each of the current members of the Audit Committee meets the requirements of “independence” as set forth in Section 10A-3 of the Exchange Act, the rules and regulations promulgated by the SEC and the NASDAQ Stock Market Rules. Additionally, the Board has determined that Mr. Love qualifies as an “audit committee financial expert” as defined under the rules and regulations of the SEC and that he has accounting and related financial management expertise within the meaning of the NASDAQ Stock Market Rules.

Compensation Committee

The Compensation Committee has responsibility for:

carrying out the Board’s responsibilities relating to compensation of the Company’s Chief Executive Officer, all other officers with the title of Executive Vice President and above and any other employee of the Company to the extent required under applicable law or NASDAQ Stock Market Rules;
carrying out any other Board responsibilities relating to the Company’s overall compensation and benefit structure, policies and programs;
administering our equity compensation plans; and
reviewing and approving our annual compensation disclosure and analysis included in our annual report and proxy statement.


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The Compensation Committee charter authorizes the Compensation Committee to delegate any of its responsibilities to a subcommittee as and when it deems appropriate, solely to the extent permitted by applicable law and the applicable rules of NASDAQ.

The Compensation Committee held twenty meetings during the year ended December 31, 2015. The Compensation Committee currently consists of four non-employee directors: Dr. Telling (Chairperson), Mr. Love, Dr. Mundinger and Dr. Nudelman, each of whom meets the requirements of independence as set forth in the rules and regulations promulgated by the SEC and the NASDAQ Stock Market Rules. Immediately following the Annual Meeting, the Compensation Committee will consist of Dr. Telling (Chairperson), Mr. Love and Dr. Nudelman. The Compensation Committee has a written charter, which is available on our website at http://www.ctibiopharma.com. For a discussion of the processes and procedures for determining compensation for our named executive officers, please see “Compensation Discussion and Analysis.” In 2015, the Compensation Committee engaged Frederic W. Cook & Co., Inc. ("FW Cook"), an independent compensation consultant, to provide compensation consulting services with regard to the compensation of our executive officers and directors. For more information regarding the services provided by FW Cook, please see “Compensation Discussion and Analysis.”

Executive Committee

The Executive Committee has the responsibility for (i) assuring that Board advice and counsel are available to management on urgent issues between regularly-scheduled Board meetings and (ii) assisting the Board in fulfilling its strategic planning duties in the areas of (a) new product initiatives, (b) joint ventures, alliances and collaborations, (c) mergers, acquisitions and dispositions, (d) other strategic transactions, and (e) financings. The Executive Committee meets on an ad hoc basis in its sole discretion. The members of the Executive Committee are Dr. Bianco, Mr. Love, Dr. Nudelman and Dr. Telling.

Nominating and Governance Committee

The Nominating and Governance Committee is responsible for establishing standards and processes so that the Board can be properly constituted to meet its fiduciary obligations to us and our shareholders and so that we have and follow appropriate governance standards. The Nominating and Governance Committee is responsible for reviewing with the Board, on an annual basis, the desired Board qualifications, expertise, characteristics and other factors for potential consideration, which review includes consideration of diversity, skills and experience. The Nominating and Governance Committee is responsible for conducting searches for potential Board members with corresponding attributes and evaluating and proposing nominees for election to the Board. Our Corporate Governance Guidelines set forth the qualifications that should be met by director nominees, which include, but are not limited to, the following: (i) a background that demonstrates an understanding of the business, financial affairs and complexities of our business, as well as general health care, science and technology matters, (ii) fundamental qualities such as intelligence, honesty, perceptiveness, good judgment, maturity, high ethics and standards, integrity, fairness and responsibility, (iii) a genuine interest in our business and recognition that each director is accountable to all shareholders, (iv) a willingness to invest significant time in reviewing detailed and technical background information in preparation for Board meetings, (v) experience in a senior position in a complex organization, (vi) no legal impediment that would interfere with the duty of loyalty to the Company and our shareholders, (vii) the ability and willingness to spend the time required to function effectively as a director in our industry, which requires ad-hoc Board and committee meetings, (viii) be compatible and able to work well with the other directors, management and legal counsel, and (ix) possesses independent opinions and a willingness to state them in a constructive manner. Each of the nominees for election as a director at the Annual Meeting holds or has held senior executive positions in, and/or has experience serving on the boards of directors and board committees of, large, complex organizations and has operating experience that meets this objective. In these positions, they have also gained experience in core management skills, such as strategic and financial planning, public company financial reporting, corporate governance, risk management and leadership development.

The Nominating and Governance Committee also believes that each of the nominees and current directors has other key attributes that are important to an effective board: integrity and demonstrated high ethical standards; sound judgment; analytical skills; the ability to engage management and each other in a constructive and collaborative fashion; diversity of origin, background, experience and thought; and the commitment to devote significant time and energy to service on the Board and its committees.

The Nominating and Governance Committee ensures that nominations to the Board are made such that the Board is properly constituted in terms of overall composition and governance of the Board. Although we do not have a policy regarding diversity, the Nominating and Governance Committee seeks a broad range of perspectives and considers both the personal characteristics (gender, ethnicity and age) and experience (industry, profession and public service) of directors and prospective nominees to the Board. The Nominating and Governance Committee will consider nominees to the Board recommended by a shareholder in accordance with the procedures set forth below under “Shareholder Proposals and Recommendations.”

The Nominating and Governance Committee is responsible for recommending director nominees to the Board for its consideration, while the Board is ultimately responsible for determining the Board slate for election by shareholders and for filling any vacancies on the Board in accordance with the Bylaws. All of the director nominees named in this Proxy Statement satisfied the Board’s criteria for membership and were recommended to the Board by the Nominating and Governance Committee for election by shareholders at the Annual Meeting.

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The Nominating and Governance Committee held eight meetings during the year ended December 31, 2015. The Nominating and Governance Committee currently consists of four non-employee directors: Dr. Nudelman (Chairperson), Mr. Love, Dr. Mundinger and Dr. Tuckson, all of whom meet the independence requirements as set forth in the rules and regulations promulgated by the SEC and the NASDAQ Stock Market Rules. Immediately following the Annual Meeting, the Nominating and Governance Committee will consist of Dr. Nudelman (Chairperson), Mr. Love and Dr. Tuckson. The Nominating and Governance Committee has a written charter, which is available on our website at http://www.ctibiopharma.com.

Scientific Advisory Board

The Company’s Scientific Advisory Board assists management with respect to the strategic development of the Company’s oncology portfolio and clinical programs, its business development relating to in-licensing and out-licensing opportunities and research and development activities in general, regulatory matters and the Company’s use of translational and personalized approaches to therapeutic targets. The Scientific Advisory Board also assists the Board in its oversight of these activities. The current members of the Scientific Advisory Board, which meets on an ad hoc basis in its sole discretion, are Dr. Bianco and Dr. Singer, together with the following four non-management members: Daniel Von Hoff (Chairperson), Brian Druker, Ross Levine, and Alan List.

Attributes and Independence

We believe that the Board as a whole should encompass a range of talent, skill, diversity and expertise enabling it to provide sound guidance with respect to our operations and interests. In addition to considering a candidate’s background and accomplishments, candidates are reviewed in the context of the current composition of the Board and the evolving needs of our business. In addition, all directors should possess the qualifications set forth in our and our Amended and Restated Corporate Governance Guidelines (the “Corporate Governance Guidelines”), which are available on our website at http://www.ctibiopharma.com.

Our policy is to have at least a majority of directors qualify as “independent” under the NASDAQ Stock Market Rules. The Company, the Nominating and Governance Committee and the Board are involved in the process of determining the independence of acting directors and director nominees. We solicit relevant information from directors and director nominees via a questionnaire, which covers material relationships, compensatory arrangements, employment and any affiliation with us. In addition to reviewing information provided in the questionnaire, we ask our executive officers on an annual basis regarding their awareness of any existing or currently proposed transactions, arrangements or understandings involving us in which any director or director nominee has or will have a direct or indirect material interest. We share our findings with the Nominating and Governance Committee and the Board regarding the NASDAQ and SEC independence requirements and any information regarding the director or director nominee that suggests that such individual is not independent. The Board discusses all relevant issues, including consideration of any transactions, relationships or arrangements that are not required to be disclosed under Item 404(a) of Regulation S-K, prior to making a determination with respect to the independence of each director. In making the independence determination with respect to Dr. Telling, the Board considered Dr. Telling's relationship with our majority-owned subsidiary, Aequus, which is discussed under “Other Information - Certain Transactions with Related Persons.” With respect to the independence of Mr. Perry, the Board considered Mr. Perry’s position as President of BVF, our largest shareholder, which is discussed under “Other Information - Certain Transactions with Related Persons.”

Based on the review described above, the Board affirmatively determined that:

A majority of the directors of the Board are independent, and all members of the Audit Committee, Compensation Committee and Nominating and Governance Committee are independent, under the applicable NASDAQ standards and, in the case of the Audit Committee and the Compensation Committee, the applicable SEC standards.
All of the non-management directors of the Board are independent under the NASDAQ standard. The independent directors are: Richard L. Love, Mary O. Mundinger, Dr.P.H., Phillip M. Nudelman, Ph.D., Matthew D. Perry, Frederick W. Telling, Ph.D. and Reed V. Tuckson, M.D.
James A. Bianco, M.D. and Jack W. Singer, M.D. are not independent by virtue of their officer positions with the Company.
Mr. John H. Bauer and Ms. Karen Ignagni were independent under the NASDAQ standard during their respective service on the Board until October 20, 2015 and November 5, 2015.

Other than as described above, in 2015, there were no transactions, relationships or arrangements not disclosed as related person transactions that were considered by the Board in determining that the applicable independence standards were met by each of the directors.


15


Leadership Structure

The Board has a formal policy that the positions of Chief Executive Officer and Chairman of the Board shall continue to be held by separate individuals. Dr. Nudelman has served as the Chairman of the Board since October 2005. Because Dr. Nudelman meets the independence standards of the NASDAQ Stock Market Rules, he also presides over separate meetings for the independent directors. The Board regularly provides such independent directors separate meeting time. This structure ensures a greater role for the independent directors in our oversight and active participation of the independent directors in setting agendas and establishing Board priorities and procedures. Further, this structure permits the Chief Executive Officer to focus on the management of our day-to-day operations, while the Chairman of the Board presides at all meetings of the Board at which he is present; calls and prepares the agenda for and presides over separate sessions of the independent directors; acts as a liaison between the independent directors and our management; and performs such other powers and duties as may from time to time be assigned to him by the Board or as may be prescribed by our Bylaws.

Annual Board and Committee Performance Evaluations

The Nominating and Governance Committee is responsible for developing policies and procedures for the Board performance evaluation process, and for overseeing such policies and procedures. The Nominating and Governance Committee’s current practice is to conduct a performance evaluation of the Board and each of its committees on an annual basis.

Risk Oversight

Companies face a variety of risks, including credit risk, liquidity risk and operational risk. The Board believes an effective risk management system will (i) timely identify the material risks that we face, (ii) communicate necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant committee of the Board, (iii) implement appropriate and responsive risk management strategies consistent with our risk profile and (iv) integrate risk management into our decision-making.

The Board takes the lead in overseeing risk management, and the Audit Committee makes periodic reports to the Board regarding briefings provided by management and advisers, as well as the Audit Committee’s own analysis and conclusions regarding the adequacy of our risk management processes. Material risks are identified and prioritized by management, and each prioritized risk is referred to a committee of the Board or the full Board for oversight. For example, management refers strategic risks to the full Board, while financial risks are referred to the Audit Committee. The Board regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each, and annually reviews our risk management program as a whole. Also, the Compensation Committee reviews our compensation programs to help ensure that they do not encourage excessive risk-taking. Please see “Compensation Discussion and Analysis - Risk Considerations” for more information.

In addition to the formal compliance program, the Board encourages management to promote a corporate culture that incorporates risk management into our corporate strategy and day-to-day business operations. The Board also continually works, with the input of our executive officers, to assess and analyze the most likely areas of future risk for us.

Our Board believes that the processes it has established for overseeing risk would be effective under a variety of leadership frameworks and therefore do not materially affect its choice of leadership structure as described under “Leadership Structure” above.

Code of Ethics

We have adopted a code of ethics for our senior executive and financial officers (including our principal executive officer and principal financial officer), as well as a code of business conduct and ethics applicable to all officers, directors and employees. Both codes of ethics are available on our website at http://www.ctibiopharma.com. Shareholders may request a free copy of the codes of ethics by contacting the Company at (206) 282-7100 or at CTI BioPharma Corp., Attention: Investor Relations, 3101 Western Avenue, Suite 600, Seattle, Washington 98121, U.S.A. Any amendments to, of waivers from, our code of ethics for our directors and executive officers will be posted on our website at http://www.ctibiopharma.com to the extent required by applicable SEC and NASDAQ rules.

Corporate Governance Guidelines

We have adopted Corporate Governance Guidelines, which are available on our website at http://www.ctibiopharma.com. Shareholders may request a free copy of the Corporate Governance Guidelines at the address and phone number set forth above.

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Shareholder Proposals and Recommendations

Proposals for Inclusion in Proxy Materials. Shareholder proposals submitted pursuant to Rule 14a-8 of the Exchange Act and intended for inclusion in the proxy statement related to the 2017 Annual Meeting should be sent to our Secretary at 3101 Western Avenue, Suite 600, Seattle, Washington 98121, U.S.A. and must be received by November 11, 2016. Shareholders interested in submitting a proposal for inclusion in the proxy materials for our 2017 Annual Meeting must follow the procedures prescribed in Rule 14a-8 under the Exchange Act.

Nomination of Director Candidates and Proposals Not Intended for Inclusion in Proxy Materials. If you intend to nominate an individual for election to our Board at our 2017 Annual Meeting or wish to present a proposal at the 2017 Annual Meeting but do not intend for such proposal to be included in the proxy statement for such meeting, our Bylaws require that, among other things, shareholders give written notice of the nomination or proposal to our Secretary at our principal executive offices no less than the close of business on January 29, 2017 (the 90th day prior to the first anniversary of the Annual Meeting) and no more than the close of business on December 30, 2016 (the 120th day prior to the first anniversary of the Annual Meeting). Notwithstanding the foregoing, in the event that we change the date of the 2017 Annual Meeting to a date that is more than 30 days before or after the date one year from the date of the Annual Meeting, written notice by a stockholder must be received by later than the close of business on the tenth day following the date on which the public announcement is first made of the date of the 2017 Annual Meeting. Shareholder proposals not intended to be included in the proxy statement or nominations for director candidates that do not meet the notice requirements set forth above and further described in Sections 13 and 14 of Article II of our Bylaws will not be acted upon at the 2017 Annual Meeting.

As set forth in our Bylaws, each notice of a director nomination should contain the following information: (i) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (ii) a representation that the shareholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (iv) such other information regarding each nominee proposed by such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had each nominee been nominated, or intended to be nominated, by the Board; and (v) the consent of each nominee to serve as a director of the Company if so elected. The Chairman of the meeting may in his discretion determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedures, and if so determined, he will so declare to the meeting and the defective nomination will be disregarded.

As set forth in our Bylaws, each notice of a shareholder proposal (whether or not to be included in the proxy statement) should contain the following information: (i) the address of the shareholder who intends to make the proposal(s); (ii) a representation that the shareholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to vote for the proposal(s); and (iii) such other information regarding each proposal as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC. The Chairman of the meeting may in his discretion determine and declare to the meeting that a proposal was not made in accordance with the foregoing procedures, and if so determined, he shall so declare to the meeting and the defective proposal will be disregarded.

Shareholder Recommendations. A shareholder may recommend a director to the Nominating and Governance Committee by delivering a written notice to our Secretary at our principal executive offices and including in the notice the items required by Section 13 of Article II of our Bylaws as well as (i) a comprehensive written resume of the nominee’s business experience and background, and (ii) the consent of the director candidate to serve as a member of the Board if elected. Properly communicated shareholder recommendations will be considered in the same manner as recommendations received from other sources and using the same criteria as used for any other director candidate. See “Nominating and Governance Committee” above for additional information.

Communicating Concerns to Directors

Shareholders who wish to communicate with our directors to report complaints or concerns related to accounting, internal accounting controls or auditing may do so using the Audit Committee procedures for the receipt of such communication. The procedures allow submitting the complaint or concern either online or telephonically, with a more detailed description of the procedures set forth in our Whistleblower Policy, which is contained in our Code of Business Conduct and Ethics available on our website at http://www.ctibiopharma.com.


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Shareholders and other interested parties may communicate with the Board and the Chairman on other matters by writing to Dr. Nudelman, c/o CTI BioPharma Corp., Legal Department, 3101 Western Avenue, Suite 600, Seattle, Washington 98121, U.S.A. The Legal Department will perform a legal review in the normal discharge of duties to ensure that communications forwarded to Dr. Nudelman are appropriate. Items that are unrelated to the duties and responsibilities of the Board such as mass mailings, junk mail, personal employee complaints not related to accounting, internal controls, auditing or officer conduct (which are reviewed and forwarded by the Legal Department), inquiries regarding clinical trials or our operations generally, job inquiries, surveys, business solicitations or advertisements will not be forwarded to Dr. Nudelman. In addition, material that is threatening or similarly unsuitable will not be forwarded to Dr. Nudelman. Any communication that is relevant to the conduct of our business and is not forwarded will be retained for one year and made available to Dr. Nudelman and any other independent director upon request. The independent directors have granted the Legal Department discretion to decide what correspondence shall be forwarded to Dr. Nudelman and what shall be shared with our management, with specific instructions that any personal employee complaints of the nature addressed under our Whistleblower Policy be forwarded as set forth therein. If items are forwarded to Dr. Nudelman, he will decide in his own discretion whether to circulate them to other members of the Board.




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PROPOSAL 2:
APPROVAL OF AN AMENDMENT TO THE COMPANY’S
AMENDED AND RESTATED ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES

Summary

On March 2, 2016, our Board approved, subject to shareholder approval, an amendment (the “Amendment”) to our Articles to (a) increase the total number of authorized shares from 315,333,333 to 415,333,333 and (b) increase the total number of authorized shares of common stock from 315,000,000 to 415,000,000 shares. Pursuant to this Proposal 2, our shareholders are being asked to approve the Amendment.

The proposed Amendment would replace Section 1 of Article II of our Articles with the following language:

“ARTICLE II
AUTHORIZED CAPITAL STOCK

1. Classes. The Corporation shall be authorized to issue two classes of shares of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Corporation shall have authority to issue shall be Four Hundred Fifteen Million Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three (415,333,333); the total number of authorized shares of Common Stock shall be Four Hundred Fifteen Million (415,000,000); and the total number of authorized shares of Preferred Stock shall be Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three (333,333).”

Purpose and Rationale for Amendment

The Board believes it is in the best interest of the Company to increase the number of authorized shares of common stock. Article II of our Articles currently authorizes us to issue up to 315,333,333 shares of stock, 315,000,000 of which are designated as common stock, no par value per share, and 333,333 shares of which are designated as preferred stock, no par value per share. As of February 16, 2016, 24,662,360 shares of common stock were reserved for issuance under our equity compensation plans, 4,296,813 shares of common stock were reserved for issuance upon exercise of outstanding warrants, 1,976,178 shares of common stock were reserved for issuance under our employee stock purchase plan and 13 shares of common stock were reserved for issuance upon exercise of outstanding restricted share rights. As a result, currently, there are only approximately 3,515,112 shares of authorized common stock available for future issuance under our existing Articles for other corporate purposes.

Adoption of the Amendment would increase the number of authorized shares of common stock by 100,000,000. Our common stock is all of a single class, with equal voting, distribution, liquidation and other rights. The additional shares of common stock to be authorized by adoption of the Amendment would have rights identical to our currently authorized and outstanding shares of common stock. The Amendment would not affect the rights of the holders of currently outstanding common stock, except to the extent additional shares are actually issued, which may have certain effects, including dilution of the earnings per share of current holders of common stock. The Amendment would not change the authorized number of shares of preferred stock.

Shareholders do not have preemptive rights with respect to our common stock. Therefore, should the Board determine to issue additional shares of common stock currently authorized or authorized by the Amendment, existing shareholders would not have any preferential rights to purchase such shares in order to maintain their proportionate ownership thereof.

We are proposing the Amendment due to the fact that we anticipate the need to issue additional shares of common stock in the future in connection with one or more of the following:

financing transactions, such as public or private offerings of common stock or derivative securities;
our equity incentive plans and employee stock purchase plan;
debt, warrant or other equity restructuring or refinancing transactions, such as debt or warrant exchanges or offerings of new convertible debt or modifications to existing securities, or as payments of interest on debt securities;
acquisitions, strategic partnerships, collaborations, joint ventures, restructurings, divestitures, business combinations and strategic investments;
our Shareholder Rights Agreement, dated December 28, 2009, as amended (the "Rights Plan");
corporate transactions, such as stock splits or stock dividends; and
other corporate purposes that have not yet been identified.

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If Proposal 2 is adopted, following the filing of the Amendment with the Secretary of State of the State of Washington, the additional authorized shares of common stock would become issuable upon the approval of the Board at such times, in such amounts, and upon such terms as the Board may determine, without further approval of the shareholders, unless such approval is expressly required by applicable law, regulatory agencies, The NASDAQ Stock Market LLC, Mercato Telematico Azionario stock market in Italy or any other exchange or quotation service on which the Company’s common stock may then be listed. Shareholder approval of this Amendment will not, by itself, cause any change in the Company’s capital accounts. However, any future issuance of additional shares of common stock authorized pursuant to this Proposal 2 would ultimately result in dilution of existing shareholders’ equity interests.

We do not believe that our presently authorized but unissued and unreserved shares of common stock will be sufficient to enable us to raise the capital necessary to fund our future operations. One of the ways the Company has historically raised such capital was by issuing shares of common stock and derivative securities convertible into or exercisable for shares of common stock from time to time. Without additional authorized shares of common stock, the Company will be unable to raise all of the financing it will likely need to maintain its operations. In this regard, we engage from time to time in discussions concerning fund raising opportunities. In addition to such periodic discussions regarding fund raising opportunities, we also engage in periodic discussions with potential partners, collaborators, strategic investors and acquisition candidates as part of our business model. In the event a fund raising or other strategic transaction opportunity were to arise, we may not have sufficient time to seek shareholder approval of a specific transaction given our limited cash resources. The additional authorized shares of common stock would enable us to act quickly in response to capital raising and other strategic transactions that may arise, in most cases without the necessity of holding a special shareholders’ meeting and obtaining further shareholder approval before the issuance of common stock could proceed (except as may be required by applicable law, regulatory agencies, The NASDAQ Stock Market LLC, Mercato Telematico Azionario stock market in Italy or any other exchange or quotation service on which the Company’s common stock may then be listed).

As of the date of this Proxy Statement, the Board has no commitments, arrangements or understandings, written or oral, relating to the issuance of the newly-authorized shares that would be available in the event this Proposal 2 is adopted. However, if this Proposal 2 is adopted by our shareholders and if any discussions regarding a fund raising or strategic transaction come to a definitive understanding, it is possible that we could issue some or all of the newly-authorized shares in one or more such transactions subsequent to the increase in the number of authorized shares pursuant to this Proposal 2. We anticipate that, if Proposal 2 is adopted by our shareholders, we will issue some or all of the newly-authorized shares for fund raising purposes. However, we cannot provide assurances that any such transactions will be consummated on favorable terms or at all, that they would enhance shareholder value or that they would not adversely affect our business or the trading price of our common stock. Further, certain of such transactions may require us to incur non-recurring or other charges and may pose significant integration challenges and/or management and business disruptions, any of which could materially and adversely affect our business and financial results. The Company also plans to continue to issue shares of common stock pursuant to its existing or future equity incentive plans and employee stock purchase plan subsequent to the increase in the number of authorized shares.

Determination of the Size of the Proposed Share Increase

In determining the size of the proposed authorized share increase under this Proposal 2, a number of factors were considered, including the number of shares issuable upon conversion or exercise of our outstanding derivative securities (including warrants and securities issued under our equity incentive plans), the need to issue future additional shares under our existing or future equity incentive plans in order to recruit and retain directors, officers, employees and other service providers, and under our existing or future employee stock purchase plan, that we expect to need additional shares in connection with future financing transactions in order to fund our operations or for other potential strategic transactions, and the potential that the Board may determine to effect one or more stock splits (in the form of stock dividends) in the future.

Anti-Takeover Effects

Although this proposal to increase the number of authorized shares of common stock has not been prompted by any current or threatened hostile takeover attempt, shareholders should be aware that approval of this proposal could facilitate future attempts by the Company to oppose changes in control of the Company and to perpetuate our then-current management. For example, without further shareholder approval, the Board could sell shares of our common stock in a private transaction to purchasers who would oppose a takeover attempt or favor our current Board. While the issuance of shares in certain instances may have the effect of forestalling a hostile takeover, as of the date of this Proxy Statement, the Board does not intend or view the increase in authorized common stock as an antitakeover measure, nor are we aware of any proposed or contemplated transaction of this nature.

In addition to the foregoing, existing anti-takeover provisions in our charter documents, in our Rights Plan, and under Washington law could have anti-takeover effects. For example, provisions of our Articles and Bylaws that may have an anti-takeover effect include:

elimination of cumulative voting in the election of directors;

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procedures for advance notification of shareholder nominations and proposals;
the ability of our Board to amend our Bylaws without shareholder approval; and
the ability of our Board to issue shares of preferred stock without shareholder approval upon the terms and conditions and with the rights, privileges and preferences as our Board may determine.

In addition, under our Rights Plan, an acquisition of 20% or more of our common stock by a person or group, subject to certain exceptions, could result in the exercisability of the preferred stock purchase right accompanying each share of our common stock (except those held by a 20% shareholder, which become null and void), thereby entitling the holder to receive upon exercise, in lieu of a number of units of preferred stock, that number of shares of our common stock having a market value of two times the exercise price of the right. The existence of our Rights Plan could have the effect of delaying, deterring or preventing a third party from making an acquisition proposal for us and may inhibit a change in control that some, or a majority, of our shareholders might believe to be in their best interest or that could give our shareholders the opportunity to realize a premium over the then-prevailing market prices for their shares.

As a Washington corporation, we are subject to Washington’s anti-takeover statute, which imposes restrictions on some transactions between a corporation and certain significant shareholders. These provisions, alone or together, could have the effect of deterring or delaying changes in incumbent management, proxy contests or changes in control.

Other existing provisions applicable to us that might have a material anti-takeover effect include our executive employment agreements and certain provisions of outstanding employee options and other equity awards that, in each case, accelerate vesting if there is a change in control of our Company.

We have no knowledge of any present efforts to accumulate shares of our common stock in the market or to gain control of us, and we have no present intention to adopt any other provisions or enter into any other arrangements that would have a material anti-takeover effect.

Consequences of Failure to Obtain Shareholder Approval

Without an increase in the number of authorized shares of common stock, the Company may be constrained in its ability to raise capital when needed, and may lose important business opportunities, including to competitors, which could adversely affect our financial performance, growth and ability to continue our operations. As opportunities or circumstances that require prompt action frequently arise, it is the belief of the Board that the delay necessitated for shareholder approval of a specific issuance could be to the detriment of the Company and its shareholders.

Effectiveness of the Amendment; Required Vote and Board Recommendation

If the Amendment is approved by our shareholders, the Amendment will become effective upon its filing with the Secretary of State of the State of Washington, which filing is expected to occur promptly after the Annual Meeting. If the Amendment is not approved by our shareholders, the Amendment will not be filed and the number of authorized shares of common stock under our Articles will remain unchanged. Our Board reserves the right, notwithstanding shareholder approval of the Amendment and without further action by our shareholders, not to proceed with the filing of the Amendment.

Approval of this Proposal 2 requires the affirmative vote of a majority of votes cast that are present in person, by telephone or by proxy, provided that the affirmative vote for Proposal 2 equals or exceeds 15% of the votes entitled to be cast. If the affirmative vote does not equal or exceed 15% of the votes entitled to be cast, abstentions will have the effect of votes cast against Proposal 2. However, if the affirmative vote equals or exceeds the 15% threshold, then abstentions will not have the effect of votes cast against Proposal 2. Broker non-votes will not be counted and will have no effect on the outcome of this Proposal 2.

THE BOARD UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO THE COMPANY’S
AMENDED AND RESTATED ARTICLES OF INCORPORATION.




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PROPOSAL 3:
APPROVAL OF THE COMPANY’S
AMENDED AND RESTATED 2015 EQUITY INCENTIVE PLAN

Summary

We are asking you to approve an amended and restated 2015 Plan. The amended and restated 2015 Plan reflects the following amendments that are subject to shareholder approval of this proposal:

Increase in Aggregate Share Limit. If shareholders approve this 2015 Plan proposal the number of shares of the Company’s common stock that may be delivered pursuant to awards granted under the 2015 Plan will be increased by an additional 18,000,000 shares.

Increase in Individual Stock Option Limit. Currently, the maximum number of shares subject to those options and stock appreciation rights that are granted during any calendar year to any individual under the 2015 Plan is 2,700,000 shares. If shareholders approve this 2015 Plan proposal, this limit will increase from 2,700,000 shares to 12,000,000 shares.

Approval of Non-Employee Director Award Limit. The proposed amendments would add new limits on awards that may be granted under the 2015 Plan to members of the Board who are not employed by the Company or one of our subsidiaries (“non-employee directors”). The maximum grant date fair value of awards granted under the 2015 Plan during any one calendar year to any one individual who, on the date of grant of the award, is a non-employee director will be $375,000, except that this limit will be $475,000 as to a non-employee director who is serving as the Chairman of the Board.

The Board approved the proposed amendment and restatement of the 2015 Plan on March 2, 2016, subject to shareholder approval.

We also maintain the CTI BioPharma Corp. 2007 Equity Incentive Plan, as amended (the “2007 Plan”). However, no new awards may be granted under the 2007 Plan. As of January 15, 2016, (i) a total of 18,258,696 shares of our common stock were then subject to outstanding options granted under the 2007 Plan or the 2015 Plan, (ii) 3,073,863 shares of our common stock were then subject to unvested restricted stock awards and unvested restricted stock unit awards granted under the 2007 Plan or the 2015 Plan, (iii) no shares were available for new award grants under the 2007 Plan, and (iv) 6,099,232 shares of our common stock were available for new award grants under the 2015 Plan. However, such available shares do not take into account any stock options that may be granted if one or more of the performance goals applicable to the Long-Term Performance Awards that were unsatisfied as of January 15, 2016 are satisfied on or before December 31, 2016, as discussed below under “Long-Term Performance Awards.” If shareholders approve the proposed amendment of the 2015 Plan, the number of shares available for new award grants under the 2015 Plan will increase by an additional 18,000,000 shares. In addition, in accordance with the existing terms of the 2015 Plan, any shares of Company common stock subject to outstanding stock options and restricted stock awards under the 2007 Plan that expire, are canceled or otherwise terminate (other than shares withheld for the payment of any applicable exercise price or tax withholding) will also be available for award grant purposes under the 2015 Plan.

If shareholders do not approve the proposed amendment of the 2015 Plan, the Company will continue to have the authority to grant awards under the current terms of the 2015 Plan but the proposed 18,000,000 share increase in the 2015 Plan share limit as well as the proposed amendment of the individual annual stock option and stock appreciation right limit under the 2015 Plan and the proposed non-employee director award limit will not be effective.

Please see the discussion below under “New Plan Benefits,” “Long-Term Performance Awards,” “Award Burn Rate” and “Dilution” for detailed information on past award grants under the 2007 Plan and the 2015 Plan and the potential dilutive impact of this Proposal 3.

Reasons for Approving the Proposal

We believe the additional number of shares that would be available for award grants under the 2015 Plan as well as the greater flexibility afforded by a larger individual annual stock option and stock appreciation right limit under the 2015 Plan if shareholders approve this Proposal 3 will facilitate our ability to continue to grant equity incentives, which we believe are vital to our ability to attract and retain outstanding and highly skilled individuals in the extremely competitive service provider markets in which we must compete. We believe that our employees are some of our most valuable assets, and such awards are crucial to our ability to motivate individuals in our service to achieve our goals. Equity awards are a significant component of total compensation for our executive officers, other employees and service providers. If we were to grant fewer equity awards to these individuals, we believe that we would nonetheless need to provide compensation in other forms (such as cash) to provide a total compensation package that is competitive with other companies. We strongly believe that the approval of this Proposal 3 is instrumental to our continued success. We also believe that the proposed limit on non-employee director awards under the 2015 Plan is consistent with good governance practices.


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Vote Required and Board Recommendation

The Board believes that the adoption of the proposed amendment and restatement of the 2015 Plan will promote the interests of the Company and its shareholders and will help the Company and its subsidiaries continue to be able to attract, motivate, retain and reward persons important to our success. All members of the Board and all of the Company’s executive officers are eligible for awards under the 2015 Plan and thus have a personal interest in the approval of the proposed amendment and restatement of the 2015 Plan.

Approval of the proposed amendment and restatement of the 2015 Plan requires the affirmative vote of the holders of a majority of the shares of our common stock voting on this Proposal 3 in person, by telephone or by proxy at the Annual Meeting. Abstentions and broker non-votes will not be counted and will have no effect on the outcome of this Proposal 3.


THE BOARD RECOMMENDS
A VOTE “FOR” THE APPROVAL OF
THE PROPOSED AMENDMENT AND RESTATEMENT OF THE 2015 PLAN.

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Summary Description of the 2015 Plan

The principal terms of the 2015 Plan, as proposed to be amended and restated, are summarized below. The following summary is qualified in its entirety by the full text of the 2015 Plan, as proposed to be amended and restated, which appears as Appendix A to this Proxy Statement.

Purpose

The purpose of the 2015 Plan is to promote the success of the Company and the interests of our shareholders by providing an additional means for us to attract, motivate, retain and reward selected employees, directors, officers and other eligible persons through the grant of awards. Equity-based awards are also intended to further align the interests of award recipients and our shareholders.

Administration

Our Board or one or more committees appointed by our Board administers the 2015 Plan. A committee may delegate some or all of its authority with respect to the 2015 Plan to another committee of directors, and certain limited authority to grant awards to employees may be delegated to one or more officers of the Company. The Board has delegated general administrative authority for the 2015 Plan to the Compensation Committee, except for authority with respect to awards granted or to be granted to our non-employee directors. The Board has retained sole authority under the 2015 Plan with respect to non-employee directors’ awards, although the Compensation Committee has authority under its charter to make recommendations to the Board concerning such awards. (The appropriate body acting as the administrator of the 2015 Plan, be it the Board, a committee within its delegated authority or an officer within his or her delegated authority, is referred to in this Proposal 3 as the “Administrator”).

The Administrator has broad authority under the 2015 Plan including, without limitation, the authority:

to select eligible participants and determine the type(s) of award(s) that they are to receive;
to grant awards and determine the terms and conditions of awards, including but not limited to the price (if any) to be paid for the shares or the award and the number of shares (if a securities-based award) to be offered or awarded;
to determine any applicable vesting and exercise conditions for awards, or determine that no delayed vesting or exercise is required, and to accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards (subject, in the case of stock options and stock appreciation rights, to the maximum ten-year term applicable to those awards);
to cancel, modify or waive the Company’s rights with respect to, or modify, discontinue, suspend or terminate any or all outstanding awards, subject to any required consents;
subject to the other provisions of the 2015 Plan, to make certain adjustments to an outstanding award and to authorize the conversion, succession or substitution of an award;
to determine the method of payment of the purchase price (if any) for any award or shares of the Company’s common stock, as well as any tax-related items with respect to the award, which may be in the form of cash, check, or electronic funds transfer, by the delivery of already-owned shares of the Company’s common stock or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and third party payment or cashless exercise on such terms as the Administrator may authorize, or any other lawful consideration as determined by the Administrator;
to modify the terms and conditions of any award, establish sub-plans and agreements and determine different terms and conditions that the Administrator deems necessary or advisable to comply with laws in the countries where the Company or one of its subsidiaries operates or where one or more eligible participants reside or provide services;
to approve the form of any award agreements used under the 2015 Plan; and
to construe and interpret the 2015 Plan, make rules for the administration of the 2015 Plan and make all other determinations necessary or advisable for the administration of the 2015 Plan.


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No Repricing

In no case (except due to an adjustment to reflect a stock split or other event referred to under “Adjustments” below, or any repricing that may be approved by shareholders) will the Administrator (i) amend an outstanding stock option or stock appreciation right to reduce the exercise price or base price of the award, (ii) cancel, exchange or surrender an outstanding stock option or stock appreciation right in exchange for cash or other awards for the purpose of repricing the award or (iii) cancel, exchange or surrender an outstanding stock option or stock appreciation right in exchange for an option or stock appreciation right with an exercise or base price that is less than the exercise or base price of the original award.

Eligibility

Persons eligible to receive awards under the 2015 Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company and certain consultants and advisers to the Company or any of its subsidiaries. As of January 15, 2016, approximately 154 officers and employees of the Company and its subsidiaries (including all of the Company’s named executive officers), each of the Company’s six non-employee directors and approximately 41 other individuals who provide services to the Company and its subsidiaries as consultants or advisers, are considered eligible under the 2015 Plan. While consultants and advisers to the Company and our subsidiaries are generally considered eligible under the 2015 Plan to preserve flexibility for the Company, over the last five years we have only granted equity awards under the 2015 Plan or its predecessor the 2007 Plan to six individuals who, at the time of grant of the awards, were neither employed by the Company, or one of our subsidiaries, nor members of the Board.

Authorized Shares; Limits on Awards

The maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 2015 Plan currently equals the sum of: (i) 16,721,817 shares (which is the sum of 12,000,000 shares plus the 4,721,817 shares that were available for additional award grant purposes under the 2007 Plan as of the date of the 2015 Annual Meeting that became available for new awards under the 2015 Plan in connection with shareholder approval of the 2015 Plan at the 2015 Annual Meeting), plus (ii) the number of any shares subject to stock options or restricted stock awards granted under the 2007 Plan and outstanding as of the date of the 2015 Annual Meeting that expire, or for any reason are canceled, terminated or forfeited or otherwise reacquired, after the date of the 2015 Annual Meeting without being exercised or vested, as applicable. As of January 15, 2016, (i) a total of 6,344,696 shares of our common stock were then subject to outstanding options granted under the 2007 Plan, (ii) a total of 11,914,000 shares of our common stock were then subject to outstanding options granted under the 2015 Plan, (iii) 2,511,931 shares of our common stock were then subject to unvested restricted stock awards granted under the 2007 Plan, (iv) 143,500 shares of our common stock were then subject to unvested restricted stock awards granted under the 2015 Plan, (v) no shares of our common stock were subject to unvested restricted stock unit awards granted under the 2007 Plan, (vi) 418,432 shares of our common stock were subject to unvested restricted stock unit awards granted under the 2015 Plan, (vii) no shares were available for new award grants under the 2007 Plan, and (viii) 6,099,232 shares of our common stock were available for new award grants under the 2015 Plan (which number of available shares includes 1,853,347 shares subject to stock options or restricted stock awards granted under the 2007 Plan and outstanding as of the date of the 2015 Annual Meeting that had expired, or for any reason were canceled, terminated or forfeited or otherwise reacquired, after the date of the 2015 Annual Meeting and on or before January 15, 2016 without being exercised or vested, as applicable). However, such available shares do not take into account any stock options that may be granted if one or more of the performance goals applicable to the Long-Term Performance Awards that were unsatisfied as of January 15, 2016 is satisfied on or before December 31, 2016, as discussed below under “Long-Term Performance Awards.” If shareholders approve this Proposal 3, the number of shares available for new award grants under the 2015 Plan will increase by an additional 18,000,000 shares.

The following other limits are also contained in the 2015 Plan:

The maximum number of shares that may be delivered pursuant to options qualified as incentive stock options granted under the 2015 Plan is 12,000,000 shares.
The maximum number of shares subject to those options and stock appreciation rights that are granted during any calendar year to any individual under the plan currently is 2,700,000 shares. If shareholders approve this Proposal 3, this individual annual limit will increase from 2,700,000 shares to 12,000,000 shares.
“Qualified Performance-Based Awards” under Section 5.2 of the 2015 Plan granted to a participant in any one calendar year under the 2015 Plan will not provide for payment of more than (i) in the case of such awards payable only in cash and not related to shares, $650,000 and (ii) in the case of such awards related to shares (and in addition to options and stock appreciation rights which are subject to the limit referred to above), 2,700,000 shares.

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Subject to shareholder approval of this Proposal 3, the maximum grant date fair value for awards granted to a non-employee director under the 2015 Plan during any one calendar year after 2015 will be $375,000, except that this limit will be $475,000 as to a non-employee director who is serving as the Chairman of the Board at the time the applicable grant is made. For purposes of this limit, the “grant date fair value” of an award means the value of the award on the date of grant of the award determined using the equity award valuation principles applied in the Company’s financial reporting. This limit does not apply to, and will be determined without taking into account, any award granted to an individual who, on the grant date of the award, is an officer or employee of the Company or one of its subsidiaries. This limit applies on an individual basis and not on an aggregate basis to all non-employee directors as a group.

Except as described in the next sentence, shares that are subject to or underlie awards that expire or for any reason are canceled or terminated, are forfeited, fail to vest or for any other reason are not paid or delivered under the 2015 Plan will again be available for subsequent awards under the 2015 Plan. Notwithstanding the foregoing, shares that are exchanged by a participant or withheld by the Company to pay the exercise or purchase price of an award granted under the 2015 Plan, as well as any shares exchanged or withheld to satisfy the tax withholding obligations related to any award granted under the 2015 Plan, will not be available for subsequent awards under the 2015 Plan. To the extent that an award is settled in cash or a form other than shares, the shares that would have been delivered had there been no such cash or other settlement will not be counted against the shares available for issuance under the 2015 Plan. In the event that shares are delivered in respect of a dividend equivalent right, the actual number of shares delivered with respect to the award shall be counted against the share limit of the 2015 Plan. (For purposes of clarity, if 1,000 dividend equivalent rights are granted and outstanding when the Company pays a dividend, and 50 shares are delivered in payment of those rights with respect to that dividend, 50 shares shall be counted against the share limit of the plan.) To the extent that shares are delivered pursuant to the exercise of a stock appreciation right or stock option, the number of underlying shares as to which the exercise related shall be counted against the applicable share limits, as opposed to only counting the shares actually issued. (For purposes of clarity, if a stock appreciation right relates to 100,000 shares and is exercised at a time when the payment due to the participant is 15,000 shares, 100,000 shares shall be charged against the applicable share limits with respect to such exercise.) In addition, the 2015 Plan generally provides that shares issued in connection with awards that are granted by or become obligations of the Company through the assumption of awards (or in substitution for awards) in connection with an acquisition of another company will not count against the shares available for issuance under the 2015 Plan. The 2015 Plan does not permit the Company to increase the applicable share limits of the 2015 Plan by repurchasing shares of common stock on the market (by using cash received through the exercise of stock options or otherwise).

Types of Awards

The 2015 Plan authorizes stock options, stock appreciation rights and other forms of awards granted or denominated in the Company’s common stock or units of the Company’s common stock, as well as cash bonus awards. The 2015 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Any award may be structured to be paid or settled in cash.

A stock option is the right to purchase shares of the Company’s common stock at a future date at a specified price per share (the “exercise price”). The per share exercise price of an option generally may not be less than the fair market value of a share of the Company’s common stock on the date of grant. The maximum term of an option is ten years from the date of grant. An option may either be an incentive stock option or a non-qualified stock option. Incentive stock option benefits are taxed differently from non-qualified stock options, as described under “U.S. Federal Income Tax Consequences of Awards under the 2015 Plan” below. Incentive stock options are also subject to more restrictive terms and are limited in amount by the Internal Revenue Code and the 2015 Plan. Incentive stock options may only be granted to employees of the Company or a subsidiary.

A stock appreciation right is the right to receive payment of an amount equal to the excess of the fair market value of share of the Company’s common stock on the date of exercise of the stock appreciation right over the base price of the stock appreciation right. The base price will be established by the Administrator at the time of grant of the stock appreciation right and generally may not be less than the fair market value of a share of the Company’s common stock on the date of grant. Stock appreciation rights may be granted in connection with other awards or independently. The maximum term of a stock appreciation right is ten years from the date of grant. Options and stock appreciation rights may be fully vested at grant or may be subject to time- and/or performance-based vesting requirements.

The other types of awards that may be granted under the 2015 Plan include, without limitation, stock awards, restricted stock, restricted stock units or phantom stock (which are contractual rights to receive shares of stock, or cash based on the fair market value of a share of stock), dividend equivalents that represent the right to receive a payment based on the dividends paid on a share of stock over a stated period of time, or similar rights to purchase or acquire shares and cash awards. Any awards under the 2015 Plan may be fully-vested at grant or may be subject to time- and/or performance-based vesting requirements.


26


Qualified Performance-Based Awards

Under Section 162(m) of the Internal Revenue Code (“Section 162(m)”), a public corporation generally cannot take a tax deduction in any tax year for compensation it pays to its Chief Executive Officer and certain other executive officers in excess of $1,000,000 as to each covered executive. Compensation that qualifies as “performance-based” under Section 162(m), however, is excluded from the $1,000,000 limit if, among other requirements, the compensation is payable only upon attainment of pre-established, objective performance goals under a plan approved by the Company’s shareholders.

The Administrator may grant awards under the 2015 Plan with performance-based vesting requirements that are intended to qualify as “performance-based” compensation within the meaning of Section 162(m) (“Qualified Performance-Based Awards”). Qualified Performance-Based Awards are in addition to stock options and stock appreciation rights that may also qualify as “performance-based” compensation for Section 162(m) purposes. Qualified Performance-Based Awards may be in the form of restricted stock, performance stock, restricted stock units, and other rights or cash bonus opportunities. While the Administrator may grant awards under the 2015 Plan that qualify (or are intended to qualify) as “performance-based” awards within the meaning of Section 162(m), the 2015 Plan does not require that any award qualify as “performance-based” within the meaning of Section 162(m) or otherwise be deductible for tax purposes, and awards granted under the 2015 Plan that are not intended to qualify as “performance-based” awards within the meaning of Section 162(m) will not be subject to the limitations imposed on Qualified Performance-Based Awards.

The vesting or payment of Qualified Performance-Based Awards (other than options or stock appreciation rights) will depend on the absolute or relative performance of the Company on a consolidated, subsidiary, segment, division, or business unit basis. The Administrator will establish the criterion or criteria and target(s) on which performance will be measured. To qualify an award as “performance-based” under Section 162(m), the Administrator must consist of solely two or more outside directors (as this requirement is applied under Section 162(m)), the Administrator must establish criteria and targets in advance of applicable deadlines under Section 162(m) and while the attainment of the performance targets remains substantially uncertain, and the Administrator must certify that any applicable performance goals and other material terms of the grant were satisfied. The performance criteria that the Administrator may use for this purpose will include one or more of the following: earnings per share, cash flow (which means cash and cash equivalents derived from either net cash flow from operations or net cash flow from operations, financing and investing activities), cash position, regulatory approval, stock price, total shareholder return, gross revenue, revenue growth, operating income (before or after taxes), net earnings (before or after interest, taxes, depreciation and/or amortization), return on equity or on assets or on net investment, or on sales, cost containment or reduction, or any combination thereof. The performance measurement period with respect to an award may range from three months to ten years. To the extent provided by the Administrator, performance targets (or performance against the targets, as the case may be) will be adjusted to mitigate the unbudgeted impact of material, unusual or nonrecurring gains and losses, accounting changes or other items specified by the Administrator at the time of establishing the goal(s).

Qualified Performance-Based Awards may be paid in stock or in cash (in either case, subject to the limits described under the heading “Authorized Shares; Limits on Awards” above). The Administrator has discretion to determine the performance target or targets and any other restrictions or other limitations of Qualified Performance-Based Awards and may reserve discretion to reduce payments below maximum award limits.

Dividend Equivalents; Deferrals

The Administrator may provide for the deferred payment of awards, and may determine the other terms applicable to deferrals. The Administrator may provide that awards under the 2015 Plan (other than options or stock appreciation rights), and/or deferrals, earn dividends or dividend equivalents based on the amount of dividends paid on outstanding shares of common stock, provided that as to any dividend equivalent rights granted in connection with an award granted under the 2015 Plan that is subject to performance-based vesting requirements, no dividend equivalent payment will be made unless the related performance-based vesting conditions of the award are satisfied (or, in the case of a restricted stock or similar award where the dividend must be paid as a matter of law, the dividend payment will be subject to forfeiture or repayment, as the case may be, if the related performance-based vesting conditions are not satisfied).

Assumption and Termination of Awards

If the Company dissolves or undergoes certain corporate transactions such as a merger, business combination, or other reorganization, or a sale of substantially all of its assets, awards then-outstanding under the 2015 Plan will not automatically become fully vested pursuant to the provisions of the 2015 Plan so long as such awards are assumed, substituted for or otherwise continued. However, except as described below, if awards then-outstanding under the 2015 Plan are to be terminated in such circumstances (without being assumed or substituted for), such awards would generally become fully vested. The Administrator also has the discretion to establish and provide for alternative change in control provisions in a particular award agreement with respect to awards granted under the 2015 Plan. For example, the Administrator could provide in such an award agreement for the automatic acceleration of vesting or payment of an award in connection with a corporate event or a termination of the award recipient's employment.


27


Transfer Restrictions

Subject to certain exceptions contained in Section 5.7 of the 2015 Plan, awards under the 2015 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution and are generally exercisable, during the recipient’s lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient’s beneficiary or legal representative. The Administrator has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable securities and exchange control laws and are not made for value (other than nominal consideration, settlement of marital property rights, or for interests in an entity in which more than 50% of the voting securities are held by the award recipient or by the recipient’s family members).

Adjustments

As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2015 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other similar events that change the number or kind of shares outstanding and extraordinary dividends or distributions of property to the shareholders.

No Limit on Other Authority

The 2015 Plan does not limit the authority of the Board or any committee to grant awards or authorize any other compensation, with or without reference to the Company’s common stock, under any other plan or authority.

Termination of or Changes to the 2015 Plan

The Board may amend or terminate the 2015 Plan at any time and in any manner. Shareholder approval for an amendment will be required only to the extent then required by applicable law. Adjustments as a result of stock splits or similar events will not, however, be considered an amendment requiring shareholder approval. Unless terminated earlier by the Board, the authority to grant new awards under the 2015 Plan will terminate effective at the close of business on July 26, 2025, subject to any extension that may be approved by our shareholders. Following the expiration or termination of the 2015 Plan, outstanding awards will generally continue to remain outstanding, and the Administrator’s authority with respect thereto shall persist. Generally, outstanding awards may be amended by the Administrator (subject to the no repricing provision discussed above), but the consent of the award holder is required if the amendment (or any 2015 Plan amendment) materially and adversely affects the holder.

U.S. Federal Income Tax Consequences of Awards under the 2015 Plan

The U.S. federal income tax consequences of the 2015 Plan under current federal law, which is subject to change, are summarized in the following discussion of the general tax principles applicable to the 2015 Plan. This summary is not intended to be exhaustive and, among other considerations, does not describe the deferred compensation provisions of Section 409A of the Internal Revenue Code to the extent an award is subject to and does not satisfy those rules, nor does it describe state, local or international tax consequences.

With respect to non-qualified stock options, the Company is generally entitled to deduct and the participant recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. With respect to incentive stock options, the Company is generally not entitled to a deduction nor does the participant recognize income at the time of exercise, although the participant may be subject to the U.S. federal alternative minimum tax.

The current federal income tax consequences of other awards authorized under the 2015 Plan generally follow certain basic patterns: nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); bonuses, stock appreciation rights, cash and stock-based performance awards, dividend equivalents, restricted stock units and other types of awards are generally subject to tax at the time of payment; and compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes income.

If an award is accelerated under the 2015 Plan in connection with a “change in control” (as this term is used under the Internal Revenue Code), the Company may not be permitted to deduct the portion of the compensation attributable to the acceleration (“parachute payments”) if it exceeds certain threshold limits under the Internal Revenue Code (and certain related excise taxes may be triggered). Furthermore, the aggregate compensation in excess of $1,000,000 attributable to awards that are not “performance-based” within the meaning of Section 162(m) may not be permitted to be deducted by the Company in certain circumstances.


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New Plan Benefits

Except as described below, we have not approved any awards that are conditioned upon shareholder approval of the amendment and restatement of the 2015 Plan, and we are not currently considering any other specific award grants under the 2015 Plan. Future grants under the 2015 Plan will be determined by the Administrator and may vary from year to year and from participant to participant and are not determinable at this time.

If the 2015 Plan, as proposed to be amended and restated, had been in existence in fiscal year 2015, the Company expects that its award grants for fiscal year 2015 would not have been substantially different from those actually made in that year except as described below. For information regarding stock-based awards granted to the Company’s named executive officers during fiscal year 2015, see “Executive Compensation”.

Our non-employee directors who continue in office after the Annual Meeting will receive a grant of restricted stock units under the 2015 Plan. See “Director Compensation-Non-Employee Director Compensation Overview” for additional information pertaining to equity awards under our Director Compensation Policy. The annual grants made to our non-employee directors are determined based on the closing price of our common stock on the grant date, which will be April 29, 2016 as to the 2016 annual non-employee director grants. Assuming, for illustrative purposes only, that the price of the common stock used to convert the $175,000 (and, in the case of the Board chair, $200,000) restricted stock unit grant date dollar amounts for the non-employee director awards into shares was $0.6185 (which was the closing market price of our common stock on March 2, 2016), the aggregate number of restricted stock units that would be granted to our non-employee directors in connection with the Annual Meeting would be approximately 1,455,135, assuming five non-employee directors continue in office after the Annual Meeting. The number of shares underlying such restricted stock unit awards in any year will vary based on such factors as the number of non-employee directors and new non-employee directors in the year, and our stock price. The Board may also modify our Director Compensation Policy from time to time.

As discussed in the “Compensation Discussion and Analysis” below, on December 23, 2015 the Compensation Committee approved the intent to grant Dr. Bianco, the Company’s Chief Executive Officer and President, stock options covering 6,000,000 shares of Company common stock. In light of the current 2,700,000 individual annual limit on stock options and stock appreciation rights under the 2015 Plan, the Company granted Dr. Bianco covering 2,700,000 shares of Company common stock on December 23, 2015 and stock options covering an additional 2,700,000 shares of Company common stock on January 7, 2016. If shareholders approve this Proposal 3, which includes an increase in the individual annual limit on stock options and stock appreciation rights under the 2015 Plan, we expect the Company would grant Dr. Bianco stock options covering an additional 600,000 shares of Company common stock at that time. If shareholders do not approve this Proposal 3, we currently expect that such additional stock options would be granted to Dr. Bianco in 2017 or the Company would consider another form of award for Dr. Bianco, such as additional restricted stock units within the existing limitations of the 2015 Plan, in 2016.

Long-Term Performance Awards

Overview

As described in more detail in the “Compensation Discussion and Analysis” and “Director Compensation” sections below, in each of 2012, 2013 and 2014, each person then serving as a director or officer of the Company has been granted certain performance equity awards (the “Long-Term Performance Awards”), which were originally payable in fully vested shares of the Company’s common stock upon the achievement of the performance goals identified in the “Compensation Discussion and Analysis”, subject to the goal’s achievement by the applicable deadline and the share limits of the applicable equity plan. A portion of the Long-Term Performance Awards was originally granted in the form of shares of restricted stock (the “LTIP Restricted Stock”) and the remaining portion was granted in restricted stock units (the “LTIP RSUs”). The Company has canceled and the Company’s non-employee directors agreed to the rescission of all of the Company’s equity awards previously granted to the non-employee directors that were outstanding as of May 13, 2015 that included performance-based vesting metrics and as to which the performance goals remained unsatisfied as of May 13, 2015. Accordingly, all outstanding and unvested Long-Term Performance Awards held by the non-employee directors as of May 13, 2015 were terminated in December 2015. In addition, in December 2015 the Company’s named executive officers who held LTIP Restricted Stock agreed to the following:

(1) the forfeiture of the then-outstanding and unvested LTIP Restricted Stock back to the Company; and

29


(2)
the modification of the then-outstanding and unvested Long-Term Performance Awards so that, as to any particular performance goal that is achieved after December 23, 2015 and on or before December 31, 2016, the executive will be granted a stock option with respect to the number of shares that would have otherwise vested upon attainment of the goal (as opposed to receiving or retaining such number of fully-vested shares). Any such option will have an exercise price per share equal to the closing market price of a share of the Company’s common stock on the grant date (or as of the last trading day prior to the grant date if the grant date is not a trading day) and will be scheduled to vest in semi-annual installments over a three-year period following the grant date.

Accordingly, as of December 31, 2015, the remaining outstanding Long-Term Performance Awards consisted entirely of the obligation to grant stock options to the named executive officers if one or more of the performance goals under the Long-Term Performance Awards is achieved on or before December 31, 2016, the scheduled expiration date of the Long-Term Performance Awards, and certain LTIP RSUs held by other employees of the Company that are also scheduled to expire on December 31, 2016.

No shares have been reserved or set aside under the 2007 Plan or under the 2015 Plan for satisfaction of the shares underlying the outstanding Long-Term Performance Awards. Rather, in accordance with the terms of the Long-Term Performance Awards, shares or stock options, as the case may be, will only be issuable under such awards to the extent that sufficient shares are available under the share limits of the applicable equity plan (currently, the 2015 Plan) at the time a performance goal applicable to the awards is satisfied. In the event that sufficient shares are not available under the share limits of the applicable equity plan at that time, the Company may elect to amend the awards to, but is not required to, settle the Long-Term Performance Awards in cash or any other asset. As discussed below, even after taking into account the 18,000,000 additional shares that would become available for award grant purposes if shareholders approve this Proposal 3, sufficient shares would not be available to satisfy all of the shares or stock options, as the case may be, underlying the Long-Term Performance Awards if all of the applicable performance goals were achieved before the December 31, 2016 scheduled expiration of the awards.

Except as otherwise noted in this Proposal 3, the number of shares of our common stock subject to outstanding awards granted under the 2007 Plan and under the 2015 Plan at any particular time, the number of shares of our common stock available for new award grants under the 2015 Plan at any particular time, the number of shares of our common stock granted subject to awards under the 2007 Plan and under the 2015 Plan over any particular period of time, and the number of shares that have become available for new award grants under the 2007 Plan and the 2015 Plan as a result of cancellations, terminations and forfeitures of 2007 Plan awards is presented in this Proposal 3 without giving effect to the Long-Term Performance Awards since the number of shares issuable under these awards is dependent upon the number of our shares of common stock issued and outstanding when the applicable performance goal is met and will be subject to share availability under the applicable equity plan at the time of vesting.

Underlying Shares and Share Shortfall

If one or more of the performance goals under the Long-Term Performance Awards is timely achieved, the number of underlying shares in the aggregate that will ultimately vest with respect to such award (or the number of shares subject to the stock options to be granted, as the case may be) will be determined by multiplying (i) an award percentage corresponding to the particular performance goal by (ii) the total number of outstanding shares of our common stock, determined on a non-fully diluted basis, as of the vesting date, subject to the then applicable share limits of the 2015 Plan. As of January 15, 2016, applying such formula and assuming the satisfaction of all remaining vesting conditions applicable to the awards, the total number of shares that would have vested (or been granted subject to stock options, as the case may be) with respect to the Long-Term Performance Awards would have been as follows:

stock options covering an aggregate of 24,169,274 shares would have been granted to the Company’s named executive officers, subject to the share limits of the 2015 Plan; and
1,744,406 shares of fully-vested stock underlying the LTIP RSUs would have been issuable to other Company employees who continue to hold LTIP RSUs, subject to the share limits of the 2015 Plan.

Such 25,913,680 shares in the aggregate exceeded the number of shares available for issuance under the 2015 Plan as of January 15, 2016 by approximately 19,814,448 shares (such deficiency of shares being referred to herein as “LTIP Plan Shortfall”), as only approximately 6,099,232 shares were then available for new award grants under the 2015 Plan. In addition, the number of shares deliverable to certain of the Company’s named executive officers would have been subject to the individual annual stock option and stock appreciation right grant limit of the 2015 Plan.


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The table below shows the following information regarding the Long-Term Performance Awards as to the persons and groups identified below as of January 15, 2016, based on the total number of outstanding shares of our common stock as of such date (and, in the case of stock options and LTIP RSUs, assuming achievement of all performance goals under the awards by December 31, 2016):

the total number of shares of our common stock previously issued with respect to Long-Term Performance Awards as a result of the prior vesting of the applicable performance-based vesting condition;
number of shares underlying the LTIP RSUs;
number of shares that would be granted subject to stock options; and
the number of shares representing the LTIP Plan Shortfall.
Name and Position
Total Shares Underlying
Previously
Vested
Long-Term Performance Awards(1)
Total Shares Underlying
Unvested
LTIP RSUs
Total Shares That May Be Granted as Stock Options
Named Executive Officers:
 
 
 
James A. Bianco, M.D.
582,066
10,000,886
Chief Executive Officer and President
 
 
 
Louis A. Bianco
236,212
4,086,172
Executive Vice President, Finance and Administration
 
 
 
Jack W. Singer, M.D.
236,212
4,086,172
Executive Vice President, Chief Scientific Officer, Interim Chief Medical Officer and Global Head of Translational Medicine
 
 
 
Bruce J. Seeley
2,998,022
Executive Vice President, Chief Commercial Officer
 
 
 
Matthew Plunkett, Ph.D.
151,739
2,998,022
Executive Vice President, Chief Business Officer
 
 
 
Total for All Current Executive Officers, as a group (5 persons)
1,206,229
24,169,274
Non-Employee Directors:
 
 
 
Richard L. Love
22,339
Mary O. Mundinger, DrPH
22,339
Phillip M. Nudelman, Ph.D.
33,756
Matthew D. Perry
Frederick W. Telling, Ph.D.
22,339
Reed V. Tuckson, M.D.
22,339
Total for All Current Non-Executive Directors, as a group (6 persons)
123,112
All employees, including all current officers who are not executive officers or directors, as a group
1,744,406
Total
1,329,341
1,744,406
24,169,274
2015 Plan Shares Available as of January 15, 2016
 
 
6,099,232
LTIP Plan Shortfall as of January 15, 2016 (total shares underlying unvested LTIP RSUs plus the total number of shares that would have been granted as stock options, less the 2015 Plan shares available)
 
 
(19,814,448)

(1)
Portions of these awards vested in 2012 and 2015 following the Compensation Committee’s certification that the Company had satisfied the applicable performance condition, which for the 2012 vesting portions was receipt of the conditional marketing authorization from the European Commission for PIXUVRI as a monotherapy for the treatment of adult patients with multiply relapsed or refractory aggressive non-Hodgkin B-cell lymphomas (the “PIX MAA Authorization”) and, for the 2015 vesting portions, was the completion of a Phase 3 trial for pacritinib that satisfied the primary endpoint set forth in the statistical plan then in effect (“Pacritinib Phase 3”).

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Aggregate Past Grants Under the 2007 Plan and the 2015 Plan

Except as set forth below, as of January 15, 2016, awards covering 45,442,031 shares of our common stock have been granted under the 2007 Plan and the 2015 Plan. Such number of shares, and the information reflected in the table below:

includes shares subject to awards that expired or terminated without having been exercised and paid and became available for new award grants under the 2015 Plan; and
does not include the shares underlying the outstanding Long-Term Performance Awards. Because such shares are excluded, this table should be read in conjunction with the immediately preceding table, which does reflect the outstanding Long-Term Performance Awards. 

The following table shows information regarding the distribution of awards covering such 45,442,031 shares as of January 15, 2016 among the persons and groups identified below, including option exercises and restricted stock and restricted stock units vesting prior to and option and unvested restricted stock and restricted stock unit holdings as of that date, as well as restricted stock and restricted stock unit grants that were forfeited prior to that date without being vested or paid.


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STOCK OPTIONS
 
RESTRICTED STOCK/UNITS
 
Number of
Shares
Subject to
Past
Option
Grants
Number of
Shares
Acquired
on Exercise
Number of Shares
Underlying Options as of
January 15, 2016
 
Number of
Shares/
Units
Subject to
Past
Awards
Number of
Shares/
Units
Vested as of
January 15, 2016
Number of
Shares/Units
Outstanding
and Unvested
as of
January 15, 2016
Number of
Shares/
Units
Canceled 
as of
January 15, 2016
Name and Position
 
 
Exercisable
Unexercisable
 
 
 
 
 
Named Executive Officers:
 
 
 
 
 
 
 
 
 
James A. Bianco, M.D.
5,900,844
—  
500,533
5,400,000
 
6,252,999
4,636,978
530,283
1,085,738
Chief Executive Officer and President
 
 
 
 
 
 
 
 
 
Louis A. Bianco
1,800,477
—  
200,203
1,600,000
 
2,054,379
1,454,988
159,085
440,306
Executive Vice President, Finance and Administration
 
 
 
 
 
 
 
 
 
Jack W. Singer, M.D.
2,100,490
—  
200,203
1,900,000
 
2,054,379
1,454,988
159,085
440,306
Executive Vice President, Chief Scientific Officer, Interim Chief Medical Officer and Global Head of Translational Medicine
 
 
 
 
 
 
 
 
 
Bruce J. Seeley
1,100,000
—  
1,100,000
 
300,000
300,000
Executive Vice President, Chief Commercial Officer
 
 
 
 
 
 
 
 
 
Matthew Plunkett, Ph.D.
1,700,000
—  
300,000
1,400,000
 
1,419,898
1,260,813
159,085
—  
Executive Vice President, Chief Business Officer
 
 
 
 
 
 
 
 
 
Total for All Current Executive Officers, as a group (5 persons)
12,601,811
—  
1,200,939
11,400,000
 
12,081,655
8,807,767
1,307,538
1,966,350
Non-Employee Directors:
 
 
 
 
 
 
 
 
 
Richard L. Love
203,180
—  
103,180
100,000
 
727,017
543,690
63,695
119,632
Mary O. Mundinger, DrPH
203,203
—  
103,187
100,000
 
727,011
543,684
63,695
119,632
Phillip M. Nudelman, Ph.D.
253,210
—  
153,194
100,000
 
1,024,072
764,695
79,618
179,759
Matthew D. Perry
—  

 
84,034
84,034
_
Frederick W. Telling, Ph.D.
203,169
—  
103,169
100,000
 
727,509
544,182
63,695
119,632
Reed V. Tuckson, M.D.
202,200
—  
102,200
100,000
 
663,292
513,184
63,695
86,413
Total for All Current Non-Executive Directors, as a group (6 persons)
1,064,962
—  
564,930
500,000
 
3,952,935
2,909,435
418,432
625,068
Each other person who has received 5% or more of the options, warrants or rights under the 2007 Plan
—  
—  
—  
—  
 
—  
—  
—  
—  
All others, including any current officers who are not executive officers or directors, as a group
6,236,862
266,124
2,607,352
1,985,475
 
9,503,806
5,106,919
1,347,893
3,048,994
Total
19,903,635
266,124
4,373,221
13,885,475
 
25,538,396
16,824,121
3,073,863
5,640,412

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Award Burn Rate

The following table presents information regarding the Company’s net burn rate for the past three complete fiscal years, with average annual net burn rate over such three years being 6.5%. For this purpose, the “net burn rate” for any one particular fiscal year means the total number of shares of the Company’s common stock issuable upon exercise or payment, as the case may be, of the equity-based awards granted by the Company in that fiscal year, less the total number of such shares canceled, terminated or forfeited in the fiscal year without the awards having become vested or paid, as the case may be, divided by the Company’s weighted average number of basic shares of common stock issued and outstanding during that particular fiscal year. For purposes of this table, LTIP Restricted Stock is included in the year awarded (not in the year in which the applicable vesting conditions are satisfied), and LTIP RSUs are taken into account only to the extent the applicable performance-based vesting condition was satisfied in the year indicated (in which case the number of shares issued in payment of those LTIP RSUs has been included in the number of shares subject to restricted stock awards granted in that year; the only year indicated below in which LTIP RSUs vested was 2015).
 
2015
2014
2013
Options granted
11,491,850
1,015,000
4,351,590
Restricted stock/stock unit awards granted
6,160,807(1)
4,426,161
6,375,238
Less: shares subject to canceled, terminated or forfeited awards
(2,633,053)
(728,520)
(1,307,918)
Net shares granted
15,019,604
4,712,641
9,418,910
Weighted average basic common shares outstanding
188,373,379
148,530,629
114,195,403
Net burn rate (2)(3)
8.0%
3.2%
8.2%

(1)
Includes 1,071,024 shares delivered in payment of LTIP RSUs as to which the applicable performance-based vesting condition was satisfied in 2015.
(2)
Net burn rate is equal to (x) divided by (y), where (x) is equal to the sum of total options granted by the Company during the fiscal year, plus the total restricted stock/stock unit awards granted by the Company during the fiscal year, minus the total number of shares subject to stock options, restricted stock and restricted stock unit awards canceled, terminated or forfeited during the fiscal year without the awards having become vested or paid, as the case may be, and where (y) is equal to the Company's weighted average basic common shares outstanding for each respective year.
(3)
For the three-year period ended December 31, 2015, the Company's average annual net burn rate using the methodology described in note (2) above was 6.5%.

Assuming a level of grants consistent with the number of equity-based awards granted during 2015:

without giving effect to any potential additional performance goals being achieved under the Long-Term Performance Awards and disregarding any potential cancellations, terminations or forfeitures of any currently outstanding awards, given the speculative nature of these events, it is expected that the 18,000,000 additional shares requested for the 2015 Plan under this Proposal 3 (together with the approximately 8,842,762 shares that were available for additional award grant purposes under the 2015 Plan as of December 31, 2015) would provide the Company with flexibility to continue to grant equity-based awards under the 2015 Plan through the second quarter of 2017, assuming such grants occur at an equal rate throughout the projected period; and
if all of the vesting conditions applicable to the Long-Term Performance Awards were satisfied as of December 31, 2015 and the shares and options subject to these awards as of that date (approximately 1,744,468 shares subject to LTIP RSUs and approximately 24,170,135 shares that would be granted subject to stock options) were taken into account, it is expected that the 18,000,000 additional shares requested for the 2015 Plan under this Proposal 3 (together with the approximately 8,842,762 shares that were available for additional award grant purposes under the 2015 Plan as of December 31, 2015) would be used entirely to satisfy only a portion of the Long-Term Performance Awards. In such instance, not only would the Company not be able to deliver all of the shares covered by the Long-Term Performance Awards, but the Company would also be unable to issue any new awards under the 2015 Plan since all such shares would be consumed by such partial payout of the Long-Term Performance Awards. However, we do not expect all of the performance conditions applicable to the Long-Term Performance Awards to be satisfied before the scheduled expiration of the awards on December 31, 2016.

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However, these are only estimates, in the Company’s judgment, based on current circumstances. The total number of shares that are awarded under the 2015 Plan in any one year or from year-to-year may change based on any number of variables, including, without limitation, the value of our common stock (since higher stock prices generally require that fewer shares be issued to produce awards of the same grant date fair value), changes in competitors’ compensation practices or changes in compensation practices in the market generally, changes in the number of our employees, changes in the number of our directors and officers, acquisition activity and the potential need to grant awards to new employees in connection with acquisitions, the need to attract, retain and incentivize key talent, the type of awards we grant, the extent to which any applicable performance-based vesting requirements are satisfied and how we choose to balance total compensation between cash and equity-based awards. The type and terms of awards granted may also change in any one year or from year-to-year based on any number of variables, including, without limitation, changes in competitors’ compensation practices or changes in compensation practices generally, and the need to attract, retain and incentivize key talent. Without limiting the generality of the foregoing, we can’t predict the extent to which the outstanding vesting conditions applicable to the Long-Term Performance Awards will be satisfied, and hence, cannot predict their impact on shares available for future equity compensation award grants.

The closing market price of our common stock on the NASDAQ Capital Market on March 2, 2016 was $0.6185 per share.

Dilution

The following table shows the total number of shares of our common stock that were (i) subject to unvested restricted stock and restricted stock unit awards granted under the 2007 Plan and 2015 Plan, (ii) subject to outstanding stock options granted under the 2007 Plan and 2015 and (iii) available for new award grants under the 2015 Plan, in each case, as of each of December 31, 2015 and January 15, 2016. In this Proposal 3, the number of shares of our common stock subject to awards granted during any particular period or outstanding on any particular date is presented based on the actual number of shares of our common stock covered by those awards. This table does not include shares underlying the Long-Term Performance Awards as detail on those awards is presented separately above.
 
December 31,
2015
January 15,
2016
Shares subject to unvested restricted stock and restricted stock unit awards
2,999,829
3,073,863
Shares subject to outstanding stock options(1)
15,589,200
18,258,696
Shares available for new award grants(2)
8,842,762
6,099,232

(1)
The Company’s outstanding options generally may not be transferred to third parties for value and do not include dividend equivalent rights.
(2)
As noted above, this table does not include shares underlying the Long-Term Performance Awards. See the "Long-Term Performance Award" discussion for more information as to these awards.

To help assess the potential dilutive impact of this Proposal 3, the number of shares of our common stock outstanding in each of the last three fiscal years is as follows: 145,508,767 shares outstanding at the end of fiscal year 2013; 176,761,099 shares outstanding at the end of fiscal year 2014; and 280,461,097 shares outstanding at the end of fiscal year 2015. The number of shares of our common stock outstanding as of January 15, 2016 was 280,451,097. For these purposes, outstanding shares include unvested restricted shares of our common stock awarded and outstanding as of the applicable date.

The closing market price of our common stock on the NASDAQ Capital Market on March 2, 2016 was $0.6185 per share.

Equity Compensation Plan Information

For information concerning our equity compensation plans, please see “Other Information-Equity Compensation Plan Information.”


35


PROPOSAL 4:
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITOR

Summary

Marcum LLP served as our independent auditor and independent registered public accounting firm for the completion of our audit for the year ended December 31, 2015. The Audit Committee has again approved the appointment of Marcum LLP as our independent auditor for the year ending December 31, 2016, and the Board has further directed that we submit the selection of independent auditor and independent registered public accounting firm for 2016 for ratification by the shareholders at the Annual Meeting.

Representatives of Marcum LLP will have an opportunity to make a statement if they so desire at the Annual Meeting and are expected to be available to respond to appropriate questions.

Although ratification is not required by our Bylaws or otherwise, we are submitting the selection to our shareholders for ratification as a matter of good corporate practice and because we value our shareholders’ views. In the event the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent auditor and independent registered public accounting at any time during the year if the Audit Committee feels that such a change would be in our and our shareholders’ best interests.

Independent Auditor’s Fees and Services

The following table provides the aggregate fees billed for professional services rendered by our principal accountants during each of the past two fiscal years ended December 31, 2015 and 2014:
Services Rendered
2015
2014
Audit Fees(1)
$ 606,000
$574,000
Audit-Related Fees(2)
Tax Fees(3)
All Other Fees(4)

(1)
Audit Fees. This category includes fees for professional services provided in conjunction with the audit of our financial statements and with the audit of management’s assessment of internal control over financial reporting and the effectiveness of internal control over financial reporting, review of our quarterly financial statements, assistance and review of documents filed with the SEC, consents and comfort letters and attestation services provided in connection with statutory and other regulatory filings and engagements.
(2)
Audit Related Fees. This category pertains to fees for assurance and related professional services associated with due diligence related to mergers and acquisitions, consultation on accounting standards or transactions, consultation on internal control reviews and assistance with internal control reporting requirements, services related to the audit of employee benefit plans and other attestation services not required by statute or regulation.
(3)
Tax Fees. This category pertains to fees for professional services provided related to tax compliance, tax planning and tax advice.
(4)
Other Fees. There were no other fees for services not included above.

Pre-Approval Policy

Pursuant to the Amended and Restated Charter for the Audit Committee, the Audit Committee pre-approves all auditing services and permissible non-audit services to be performed by our independent auditor and the associated fees. The Audit Committee can delegate this responsible to one or more of its members, provided that such pre-approval decision is presented to the full Audit Committee and its next scheduled meeting. All services performed and related fees billed by Marcum LLP during fiscal year 2015 and fiscal year 2014 were pre-approved by the Audit Committee pursuant to regulations of the SEC.


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Vote Required and Board Recommendation

Ratification of the selection of Marcum LLP as our independent auditor for the year ending December 31, 2016 requires the affirmative vote of the holders of a majority of the shares of common stock voting on this Proposal 4 in person, by telephone or by proxy at the Annual Meeting. Abstentions and any broker non-votes will not be counted in the ratification of the selection of our independent auditor and will have no effect on the outcome of the selection of the independent auditor. If you do not instruct your broker on how to vote the shares in your account for this Proposal 4, brokers will be permitted to exercise their discretionary authority to vote for such proposal.

THE BOARD RECOMMENDS A VOTE “FOR” THE
RATIFICATION OF THE SELECTION OF MARCUM LLP
AS OUR INDEPENDENT AUDITOR.

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Report of the Audit Committee

The Audit Committee reviews and monitors the Company’s financial reporting process on behalf of the Board and reviews the Company’s system of internal controls. We act only in an oversight capacity, however, and it is management that has the primary responsibility for the financial statements, establishing and maintaining adequate internal controls, and the reporting process. Marcum LLP is responsible for expressing opinions on the conformity of the Company’s financial statements in accordance with generally accepted accounting principles, on management’s assessment of the effectiveness of the Company’s internal control over financial reporting, and on the effectiveness of the Company’s internal control over financial reporting. Each member of the Audit Committee is an independent director as determined by the Board, based on the NASDAQ Stock Market Rules promulgated by the NASDAQ Stock Market and the SEC’s independence requirements for members of audit committees. In addition, the Board has determined that Richard L. Love is an “audit committee financial expert,” as defined by SEC rules.

We operate under a written charter, a copy of which is available on the Company’s website at http://www.ctibiopharma.com. As more fully described in our charter, the purpose of the Audit Committee is to assist the Board in its oversight and monitoring of the Company’s financial statements, internal controls and audit matters. We meet each quarter with Marcum LLP and management to review the Company’s interim financial results before the publication of the Company’s quarterly reports. Management’s and Marcum LLP’s presentations to and discussions with the Audit Committee cover various topics and events that may have significant financial impact and/or are the subject of discussions between management and the independent auditor. In accordance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), we are directly responsible for the appointment, compensation, retention, oversight and, when appropriate, replacement of our independent registered public accounting firm, including the audit fee negotiations associated with the retention of the firm. We also lead the selection of the lead audit partner, working with Marcum LLP with input from management.

In accordance with existing Audit Committee policy and the requirements of the Sarbanes-Oxley Act, all services to be provided by Marcum LLP are subject to pre-approval by the Audit Committee or one of its members to whom such authority may from time to time be delegated. This includes audit services, audit-related services, tax services and other services. Such pre-approval relates to a particular category or group of services and is subject to a specific budget. The Sarbanes-Oxley Act prohibits an issuer from obtaining certain non-audit services from its auditing firm so as to avoid certain potential conflicts of interest; we have not in recent years obtained any of these services from Marcum LLP, and we are able to obtain such services from other service providers at competitive rates.  

In addition, we recommend the ratification of the appointment of the independent auditor and review their proposed audit scope, approach and independence. Marcum LLP has served as our independent auditor since 2010. In determining whether to reappoint Marcum LLP, we took into consideration a number of factors, including the length of time the firm has been engaged and the knowledge the firm has of our operations, accounting policies and practices and internal control over financial reporting, the quality of our ongoing discussions with Marcum LLP and an assessment of the professional qualifications and past performance of the lead audit partner and Marcum LLP. In order to assure continuing auditor independence, we also periodically consider whether there should be a regular rotation of our independent auditor. We discussed with Marcum LLP other matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board. In addition, we have received from, and discussed with, Marcum LLP their annual written report on their independence from us and our management, as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence and discussed with the auditor whether the provision of any non-audit services provided to the Company by them during 2015 were compatible with the auditor’s independence. Following this evaluation, we concluded that the selection of Marcum LLP as the independent auditor is in the best interest of the Company and its shareholders.

We are not professional accountants or auditors and our duties are not intended to duplicate or to certify the activities of management or the independent auditors. It is not the Audit Committee’s duty to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. Consequently, the Audit Committee is not providing any professional certification as to the independent auditors’ work or any expert assurance as to the financial statements.

We have reviewed and discussed the Company’s audited financial statements with management and Marcum LLP. Management has represented to the Audit Committee that the financial statements were prepared in accordance with generally accepted accounting principles.

Based upon the review and discussions described in this report, we recommended to the Board that the audited consolidated financial statements be included in the 2015 Annual Report for filing with the SEC.

Respectfully submitted by the Audit Committee:
Richard L. Love, Chair
Phillip M. Nudelman, Ph.D.
Frederick W. Telling, Ph.D.

38


PROPOSAL 5:
ADVISORY VOTE ON EXECUTIVE COMPENSATION

Summary

The Company is providing its shareholders with the opportunity to cast a non-binding advisory vote on the compensation of our named executive officers as disclosed pursuant to the SEC’s executive compensation disclosure rules and set forth in this Proxy Statement (including in the compensation tables and narratives accompanying those tables, as well as in the “Compensation Discussion and Analysis”).

As described more fully in the “Compensation Discussion and Analysis” of this Proxy Statement, the objectives of our executive compensation program are to allow us to recruit and retain superior talent, to create a direct relationship between executive compensation and performance and to create proper incentives to enhance the value of the Company and reward superior performance.

In furtherance of these objectives, the Company’s executive compensation program includes a number of features intended to reflect best practices in the market and help ensure that the program reinforces shareholder interests by directly linking the compensation we pay our executives to our performance. These features are described in more detail in the “Compensation Discussion and Analysis” and include the following:

Executives’ bonuses under our annual incentive program are principally based on the achievement of specific performance objectives established early in the fiscal year by the Compensation Committee.
A significant percentage of executives’ equity awards is contingent on the achievement of specific operational and financial performance goals established by the Compensation Committee or has a value that is directly dependent upon stock price appreciation. These awards are discussed in detail below.
The Compensation Committee determined in December 2015 to eliminate most of the perquisites we provide to our named executive officers in order to help simplify our compensation program.
In December 2015, the Compensation Committee recommended and the Board approved a Stock Ownership Policy, a Policy Regarding the Recoupment of Certain Compensation Payments (compensation “clawback” policy), and revisions to our Insider Trading Policy to prohibit certain hedging and pledging transactions in our securities by our directors and officers, all as discussed in more detail below.
In recent years, the Compensation Committee approved arrangements for each of the named executive officers that eliminated any gross-up payments for “parachute payment” taxes under Sections 280G and 4999 of the Internal Revenue Code, and approved revisions to the severance agreements with certain of our named executive officers to eliminate “walkaway” right provisions that would have permitted them to voluntarily terminate employment for any reason following a change in control and receive severance benefits. For a discussion of benefits payable to the named executive officers in connection with a termination of employment or a change in control of the Company, see “Potential Payments upon Termination or Change in Control”.
The Compensation Committee retained FW Cook in 2015 to serve as its independent compensation consultant and to perform a comprehensive review of the Company’s compensation arrangements for its executive officers and directors.

In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, our Board requests your advisory vote on the following resolution at the Annual Meeting:

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in the Company’s 2015 proxy statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved.

This vote is an advisory vote only and is not binding on the Company, the Board or the Compensation Committee, and will not be construed as overruling a decision by, or creating or implying any additional fiduciary duty for, the Board or the Compensation Committee. However, the Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by shareholders in their vote on this Proposal 5 and will consider the outcome of the vote when making future compensation decisions for named executive officers.

Our current policy is to provide shareholders with an opportunity to approve the compensation of the Company’s named executive officers every year at the annual meeting of shareholders. It is expected that the next such vote will occur at the 2017 Annual Meeting.


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Vote Required and Board Recommendation

Approval of this Proposal 5 requires the affirmative vote of the holders of a majority of shares of our common stock voting on this Proposal 5 in person, by telephone or by proxy at the Annual Meeting. Abstentions and broker non-votes will not be counted and will have no effect on the outcome of this Proposal 5.

THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.




40


PROPOSAL 6:
APPROVAL OF THE ADJOURNMENT OF THE ANNUAL MEETING, IF NECESSARY OR
APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES

Summary

If there are insufficient votes at the time of the Annual Meeting to adopt any of Proposals 1 through 5, the Board may in its discretion seek to, if necessary or appropriate, adjourn the Annual Meeting to solicit additional proxies. In that event, you will be asked to vote only upon this Proposal 6 and not on any other proposals. In this Proposal 6, we are asking the shareholders to authorize the holder of any proxy solicited by the Board to vote in favor of adjourning the Annual Meeting. If this Proposal 6 is approved, the Board may in its discretion, if necessary or appropriate, adjourn the Annual Meeting to use the additional time to solicit additional proxies in favor of any of the Proposals. Even if there are a sufficient number of votes at the time of the Annual Meeting to adopt one or more of the Proposals, the Board may in its discretion seek to, if necessary or appropriate, adjourn the Annual Meeting to solicit additional proxies for any of the Proposals for which there are insufficient votes, and the Board may do so without adopting any of the Proposals for which there are sufficient votes at the time of the Annual Meeting.

If it is necessary or appropriate to adjourn the Annual Meeting, no notice of the adjourned meeting is required to be given to shareholders, other than an announcement at the Annual Meeting of the time and place to which the Annual Meeting is adjourned (including publication of a notice of the adjourned meeting in an Italian newspaper), unless the Board fixes a new record date, which it must do if the Annual Meeting is adjourned to a date more than 120 days after the date fixed for the adjourned meeting. If the Board determines it is necessary or appropriate to adjourn the Annual Meeting and the record date for the Annual Meeting is changed because (i) the meeting is adjourned to a date more than 120 days after the date fixed for the adjourned meeting and/or (ii) the Board elects to change the record date, a notice of the adjourned meeting will be given to all shareholders pursuant to applicable U.S. and Italian law. At the adjourned meeting, we may transact any business which might have been transacted at the original meeting.

Vote Required and Board Recommendation

Approval of the adjournment of the Annual Meeting, if necessary or appropriate, to solicit additional proxies, requires the affirmative vote of the holders of a majority of the shares of our common stock voting on this Proposal 6 in person, by telephone or by proxy at the Annual Meeting. Abstentions and any broker non-votes will not be counted in the vote required to approve adjournment of the Annual Meeting, if necessary or appropriate, to solicit additional proxies. If you do not instruct your broker on how to vote the shares in your account for this Proposal 6, brokers will be permitted to exercise their discretionary authority to vote for such proposal.

THE BOARD RECOMMENDS A VOTE “FOR”
THE ADJOURNMENT OF THE ANNUAL MEETING, IF NECESSARY OR
APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES.


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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Executive Summary

This “Compensation Discussion and Analysis” describes the compensation we provide to our executive officers: Dr. James A. Bianco (Chief Executive Officer and President); Louis A. Bianco (Executive Vice President, Finance and Administration); Dr. Jack W. Singer (Executive Vice President, Chief Scientific Officer, Interim Chief Medical Officer and Global Head of Translational Medicine); Dr. Matthew Plunkett (Executive Vice President, Chief Business Officer); and Bruce J. Seeley (Executive Vice President, Chief Commercial Officer). These executives are referred to in this proxy statement as our “named executive officers.”

Compensation Process

The Compensation Committee evaluates and approves our executive compensation plans, policies and programs.

Fiscal Year 2015 Business Highlights

Select key recent 2016 and fiscal year 2015 highlights include:  

Research and Development

In January 2016, we announced the completion of the rolling NDA to the FDA for pacritinib seeking U.S. marketing approval of pacritinib for the treatment of patients with intermediate and high-risk myelofibrosis with low platelet counts of less than 50,000 per microliter (<50,000/µL). In February 2016, the FDA placed pacritinib’s IND on a full clinical hold. As a result of the full clinical hold of pacritinib’s IND, we have withdrawn the NDA until such time that we have reviewed the safety and efficacy data from PERSIST-2 and decide next steps.

In December 2015, we reported significant data presentations on our pipeline candidates at the American Society of Hematology Annual Meeting.

In November 2015, we announced that the United Kingdom’s National Cancer Research Institute (NCRI) Haematological Oncology Clinical Studies Group has chosen to advance tosedostat to the second stage of a randomized clinical trial of low-dose cytarabine plus or minus tosedostat in older patients with AML or high risk MDS.

In June 2015, PRO and other quality of life measures from the registration-directed PERSIST-1 Phase 3 trial of pacritinib in patients with myelofibrosis, without exclusion for low platelet counts, were presented at a late-breaking oral session at the 20th Congress of the European Hematology Association and showed significant improvements in symptom score with pacritinib therapy compared to best available therapy (exclusive of a JAK inhibitor) across the symptoms reported in the presentation.

In May 2015, the final results from PERSIST-1, were presented at a late-breaking oral session at the 51st Annual Meeting of the American Society of Clinical Oncology Annual Meeting. Data from PERSIST-1 showed that compared to best available therapy (exclusive of a JAK inhibitor) pacritinib therapy resulted in a significantly higher proportion of patients with spleen volume reduction and control of disease-related symptoms.

Corporate

In January 2016, we announced that Matthew Perry had been appointed to the Board of Directors. Mr. Perry is the President of BVF Partners and the co-portfolio manager for the underlying funds managed by the firm. BVF is a private investment partnership that manages over $1 billion and focuses on small-cap, value oriented investment opportunities.

In September 2015, we completed a registered direct offering and in each of October 2015 and December 2015, we completed an underwritten public offering resulting in aggregate net proceeds of approximately $115 million. 

In July 2015, Bruce J. Seeley was appointed as Executive Vice President and Chief Commercial Officer to lead all aspects of commercial operations.

In January 2015, Alan K. Burnett, M.D. was appointed Therapeutic Area Lead, Myeloid Diseases.


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Compensation Structure and Emphasis on Pay-for-Performance

Our executive compensation program embraces a number of features intended to reflect best practices in the market and help ensure that the program reinforces shareholder interests, including a number of enhancements adopted in 2015. Such features include the following:

We generally balance the total annual compensation opportunity for each of our named executive officers so that the greatest emphasis is on “at-risk” pay (annual cash incentive compensation opportunity and grant of equity incentive compensation), with the greatest portion of “at-risk” pay being in the form of equity incentive compensation in that it has a value derived from our stock price and also has either a significant performance-based vesting component or a value directly dependent on stock price appreciation.
Executives' bonuses under our annual incentive program are principally based on the achievement of specific performance objectives established early in the fiscal year by the Compensation Committee.
Since 2012, our equity award program for executives has included Long-Term Performance Awards that would vest only if we achieve specified operational and financial performance goals established by the Compensation Committee by December 31, 2016. In December 2015, the outstanding Long-Term Performance Awards held by our executive officers were modified so that as to any particular performance goal that is achieved after December 23, 2015 and on or before December 31, 2016, the executive will be granted a stock option with respect to the number of shares that would have otherwise vested upon attainment of the goal (as opposed to receiving or retaining such number of fully-vested shares). The amendments are intended to (i) further align the interests of our executives with those of our stockholders (as the options will have value only if our stock price increases after the grant date and thus enhance the pay-for-performance aspects of the program, whereas the fully-vested shares that would have otherwise been delivered under the program would have had value regardless of stock price appreciation after the grant date) and (ii) provide an additional retention incentive for our executives (as the options are scheduled to vest in semi-annual installments over a three-year period following the grant date).
The Compensation Committee also determined in December 2015 that the annual equity award grants for 2016 to our named executive officers would be made in the form of stock options (as opposed to prior years in which annual grants consisted of restricted stock). As with the amendment of the Long-Term Performance Awards described above, the change to granting stock options is intended to further align executives’ interests with those of stockholders since stock options will have value only if our stock price increases after the grant date and to provide an additional retention incentive.
In addition, the Compensation Committee determined in December 2015 to eliminate most of the perquisites we provide to our named executive officers in order to help simplify our compensation program.
In December 2015, the Compensation Committee recommended and the Board approved a Stock Ownership Policy, a Policy Regarding the Recoupment of Certain Compensation Payments (compensation “clawback” policy), and revisions to our Insider Trading Policy to prohibit certain hedging and pledging transactions in our securities by our directors and officers, all as discussed in more detail below.
In recent years, the Compensation Committee approved arrangements for each of the named executive officers that eliminated any gross-up payments for “parachute payment” taxes under Sections 280G and 4999 of the Internal Revenue Code, and approved revisions to the severance agreements with certain of our named executive officers to eliminate “walkaway” right provisions that would have permitted them to voluntarily terminate employment for any reason following a change in control and receive severance benefits. For a discussion of benefits payable to the named executive officers in connection with a termination of employment or a change in control of the Company, see “Potential Payments upon Termination or Change in Control”.

Our executive compensation program is designed to align the compensation of our named executive officers with shareholders’ interests. To create this alignment, a significant portion of compensation is “at risk.” In this Proxy Statement, we refer to compensation as being “at risk” if it is subject to performance-based vesting criteria and/or time-based vesting criteria (whereby the awards will generally be forfeited unless the executive remains at the Company for the designated period of time), and/or the value of the award is based on our stock price. Under the program, the portion of compensation guaranteed and not at risk for any fiscal year represents only a fraction of the total potential compensation.

In July 2015, Mr. Seeley joined us as our Executive Vice President, and Chief Commercial Officer. The structure of Mr. Seeley’s compensation package is generally consistent with the compensation provided to our other named executive officers and described in more detail in the applicable sections of this “Compensation Discussion and Analysis” below.


43


Compensation Objectives and Philosophy

We believe that compensation of our named executive officers should encourage creation of shareholder value and achievement of strategic corporate objectives. Our intent is to align the interests of our shareholders and management by integrating compensation with our short-term and long-term corporate strategic and financial objectives. In order to attract and retain the most qualified personnel, we intend to offer a total compensation package that we believe is competitive with those offered by similar companies in the pharmaceutical industries, taking into account relative company size, performance and to a limited degree geographic location as well as individual responsibilities and performance. However, we also believe that it is important to provide executives with performance-based incentives that are tied to key corporate goals critical to our long-term success and viability.

2015 Named Executive Officer Pay Mix

The primary elements of 2015 compensation for the named executive officers included base salaries, annual cash incentives and equity incentives. The principal rationale for each is noted in the following table:
 
Component
At Risk or 
Not At Risk
Summary
Base Salary
Not At Risk
Fixed pay that is not subject to performance risk. Primarily intended to attract and retain highly qualified executives.

Annual Cash Incentive Compensation
At Risk
Annual cash award opportunity that is principally based on corporate performance as measured against pre-established objectives. Individual performance may also be taken into account. Primarily intended to incentivize management to attain corporate objectives.

Equity Incentive Compensation
At Risk
Awards with a value determined by reference to our stock price, thus aligning executives’ interests with the interests of our shareholders. A significant portion of the executives’ equity awards is based on the achievement of pre-established objectives or stock price appreciation, further enhancing the link between pay and performance. In addition, through service-based vesting requirements for both the performance- and time-based equity awards, the awards serve as a retention incentive.


Consistent with our performance-based philosophy, we generally balance the total annual compensation opportunity for each of our named executive officers so that the greatest emphasis is on “at-risk” pay (annual cash incentive compensation opportunity and grant of equity incentive compensation), with the greatest portion of “at-risk” pay being in the form of equity incentive compensation in that it has a value derived from our stock price and also has either a significant performance-based vesting component or a value directly dependent on stock price appreciation.

We also provide the named executive officers with benefits that are available to most of our other employees in the United States, including a 401(k) plan, employee stock purchase plan, health and welfare programs and group life insurance and also with certain perquisites and termination of employment and change in control benefit protections. In general, these benefits, perquisites, and termination of employment and change in control benefit protections are intended to attract and retain highly qualified executives. As described in more detail below, the Compensation Committee determined in December 2015 to eliminate most of the perquisites we provide to our named executive officers.


44


Compensation Process; Compensation Consultant

For 2015 and 2016, the Compensation Committee did not set compensation levels benchmarked relative to any specific level or percentile against any peer group data. Except as otherwise noted in this "Compensation Discussion and Analysis," the Compensation Committee’s executive compensation determinations are subjective and the result of the Compensation Committee’s business judgment, which is informed by the experiences of the members of the Compensation Committee, and the analysis and input from executive compensation consultants it retains from time to time, as well as the Compensation Committee’s assessment of overall compensation trends and trends specific to the Company’s industry.

Differences in compensation levels for our named executive officers are driven by the Compensation Committee’s assessment, in its judgment, of each executive’s overall responsibilities and contributions, experience and performance history and/or potential for future responsibility and promotion and awareness of compensation differentials for similar positions based on the Compensation Committee’s business experience and input from its independent compensation consultants. The Compensation Committee also considers the recommendations of the Chief Executive Officer with respect to the compensation for each executive other than himself. The Compensation Committee does not assign a specific weight to these factors and none of these factors by itself will compel a particular compensation decision.

As noted above, our Chief Executive Officer makes recommendations to the Compensation Committee regarding the compensation of our executive officers. Our Chief Executive Officer also participates in the executive compensation decision-making process by presenting overall results of the Company’s performance and achievement of business objectives and goals from management’s perspective, and provides his evaluation of each executive’s individual performance. Our Executive Vice President, Finance and Administration, evaluates the financial implications and affordability of the Company’s compensation program and provides input regarding the achievement of financial metrics and goals. None of our named executive officers, however, is a member of the Compensation Committee, and the Compensation Committee has sole and final authority to determine the compensation of our named executive officers.

The Compensation Committee has sole authority to hire, retain and terminate the services of an independent compensation consultant to assist in its decision-making process. In making its compensation decisions at the beginning of fiscal 2015, the Compensation Committee did not retain a compensation consultant, as it did not expect to make significant changes to the executive compensation program. In July 2015, the Compensation Committee engaged FW Cook to provide compensation consulting services with regard to the compensation of our executive officers and directors and to perform a comprehensive review of our compensation arrangements for our executive officers and directors. Other than its engagement by the Compensation Committee, FW Cook provides no other services to us or any of our subsidiaries. The Compensation Committee has assessed the independence of FW Cook and concluded that its engagement of FW Cook does not raise any conflict of interest with us or any of our directors or executive officers.

In August 2015, the Compensation Committee, with input from FW Cook, selected a peer group of companies to be used to assess the Company’s executive compensation program. The companies selected are U.S.-based drug development and pharmaceutical companies that had been publicly traded for at least two years. The Compensation Committee focused on companies that it believes compete with the Company for talent and investment capital and that are comparable to the Company in size, development stage or business strategy. Based on these criteria, the following companies were selected as the peer companies (which we refer to as the “peer companies” in this "Compensation Discussion and Analysis"):

Arena Pharmaceuticals, Inc.
Nektar Therapeutics
ARIAD Pharmaceuticals, Inc.
Orexigen Therapeutics, Inc.
Array BioPharma Inc.
Puma Biotechnology, Inc.
Clovis Oncology, Inc.
Seattle Genetics, Inc.
Exelixis, Inc.
Spectrum Pharmaceuticals, Inc.
Geron Corporation
Threshold Pharmaceuticals, Inc.
Infinity Pharmceuticals, Inc.
VIVUS, Inc.
Merrimack Pharmaceuticals, Inc.
 

FW Cook provided data on the executive and director compensation practices of these peer companies, provided advice on the changes to our director compensation program implemented in 2015, provided advice on the December 2015 changes to our executive compensation program discussed in this "Compensation Discussion and Analysis," and provided advice on our executive compensation program for 2016.


45


Base Salaries

The Compensation Committee establishes base salary levels for the named executive officers in its judgment, taking into account its general assessment of each executive’s overall responsibilities and contributions and the executive’s performance history and/or potential for future responsibility and promotion. In January 2015, the Compensation Committee reviewed the base salaries provided to the named executive officers (other than Mr. Seeley) in fiscal year 2014 and determined, in its judgment, that they continued to be appropriate for 2015. Accordingly, no changes were made to the executives’ base salary levels for fiscal year 2015.

The Compensation Committee approved a base salary of $375,000 for Mr. Seeley upon his joining the Company in July 2015. This salary level was negotiated with Mr. Seeley and determined by the Compensation Committee in its judgment to be appropriate in light of Mr. Seeley’s qualifications and experience, as well as his potential contributions to the Company.

In December 2015, the Compensation Committee approved an increase in Dr. Bianco’s annual base salary from $650,000 to $750,000. Dr. Bianco’s increase was approved in conjunction with the Compensation Committee’s determination to eliminate most of the perquisites provided to our executive officers, as noted above, and intended to simplify Dr. Bianco’s compensation package. In December 2015, the Compensation Committee also approved increases in the existing base salary level for certain of the other named executive officers for fiscal year 2016 in order to bring their respective base salary levels closer to the market median levels for similar positions at the peer companies. Mr. Bianco's annual base salary was increased from $360,000 to $375,000; Dr. Singer's annual base salary was increased from $370,000 to $400,000; Mr. Plunkett's annual base salary was increased from $325,000 to $360,000; and Mr. Seeley did not receive an increase to his base salary.

Annual Cash Incentive Compensation

Size of the Award Opportunity

In addition to not increasing the salaries of the named executive officers, the Compensation Committee also determined, in its judgment, not to increase the maximum bonus opportunity for the named executive officers (other than Mr. Seeley) for fiscal year 2015 above the 2014 maximum level. Accordingly, each named executive officer’s maximum bonus opportunity for fiscal year 2015 was the same as was in effect for fiscal year 2014. The target and maximum bonus opportunities for each named executive officer corresponding to the performance objectives established by the Compensation Committee for 2015 are presented in the tables below. The determination of these target and maximum bonus levels, as well as the percentage of the overall bonus opportunity allocated to each performance goal, was inherently subjective, determined by the Compensation Committee in its discretion taking into account its general assessment of each executive’s overall responsibilities and contributions and the executive’s performance history and/or potential for future responsibility and promotion, the Compensation Committee’s assessment of the potential value of the award and its judgment as to the reasonableness of the compensation opportunities provided for the executive’s particular position. The Compensation Committee believes that each named executive officer’s bonus opportunities were appropriate taking into account the performance that would be required to earn these amounts.

Composition of the Award

Annual cash incentives for our named executive officers are designed to reward performance for achieving key corporate goals, which we believe when they are established will help to increase shareholder value. In general, the annual incentive awards for the named executive officers are subject to achievement of performance objectives established by the Compensation Committee for the fiscal year and an evaluation by the Compensation Committee of the contributions made by individual executives during the course of the year, including both realization of performance goals and other notable achievements that may not have been contemplated at the time the original performance goals were established. Although we have adopted the framework for our annual incentive program described below, the Compensation Committee retains discretion under the program to take into account developments in our business and changes in our strategic priorities that occur during the year in determining the amounts to be awarded to our executives, and to award bonuses beyond the levels contemplated by the 2015 cash incentive program.

2015 Cash Incentive Performance Objectives

In approving the 2015 cash incentive program, the Compensation Committee determined that whether the Company was permitted by the FDA to submit a NDA for pacritinib during 2015 on the basis of a single clinical trial would have an impact on the 2015 goals and responsibilities for the named executive officers most directly involved in the submission process. Accordingly, the Compensation Committee determined that it would be appropriate to establish two sets of performance goals for 2015. The first set of performance goals (which we refer to as “Single Trial Scenario”) would be used as a basis for determining the named executive officers’ bonuses for fiscal year 2015 if the Company were permitted by the FDA to submit a NDA for pacritinib during 2015 on the basis of a single clinical trial filing. Alternatively, if the Company did not receive permission from the FDA during 2015 to make such a filing on the basis of a single clinical trial (which we refer to as “Scenario 2”), the second set of performance goals would be used as a basis for determining the named

46


executive officers’ bonuses for the fiscal year. Under both the Single Trial Scenario and Scenario 2, the following three core elements comprised the 2015 cash incentive program, which together comprised each executive’s cash incentive opportunity under the program: financial performance; drug development; and individual performance. The total bonus opportunity allocated to a particular element was determined based on the Compensation Committee’s view of the relative importance of that element, as well as the executive’s position and ability to affect the outcome for the particular goals for that element.
 
The following tables present the approximate relative weightings of the various components for the 2015 cash incentives under the Single Trial Scenario:
 
 
 
2015 Annual Cash Incentive Compensation
Performance Objectives(1)
 
Potential Bonus Percentages(2)
 
Threshold
 
Target
 
Maximum
PIXUVRI Annual Sales Milestone(3)
 
 
 
 
 
 
James A. Bianco, M.D.
 
N/A
 
20%
 
25%
Louis A. Bianco
 
N/A
 
15%
 
25%
Jack W. Singer, M.D.
 
N/A
 
10%
 
20%
Matthew Plunkett, Ph.D.
 
N/A
 
5%
 
10%
 
 
 
 
 
 
 
Share Price Appreciation(4)
 
 
 
 
 
 
James A. Bianco, M.D.
 
5%
 
10%
 
35%
Louis A. Bianco
 
10%
 
15%
 
30%
Jack W. Singer, M.D.
 
N/A
 
N/A
 
N/A
Matthew Plunkett, Ph.D.
 
5%
 
15%
 
30%
 
 
 
 
 
 
 
License/Pipeline Milestone(5)
 
 
 
 
 
 
James A. Bianco, M.D.
 
N/A
 
N/A
 
N/A
Louis A. Bianco
 
N/A
 
N/A
 
N/A
Jack W. Singer, M.D.
 
N/A
 
N/A
 
N/A
Matthew Plunkett, Ph.D.
 
N/A
 
10%
 
10%
 
 
 
 
 
 
 
Pacritinib 326 Enrollment Milestone(6)
 
 
 
 
 
 
James A. Bianco, M.D.
 
N/A
 
5%
 
10%
Louis A. Bianco
 
N/A
 
10%
 
10%
Jack W. Singer, M.D.
 
N/A
 
5%
 
15%
Matthew Plunkett, Ph.D.
 
N/A
 
5%
 
5%
 
 
 
 
 
 
 
PIXUVRI 306 Enrollment Milestone(7)
 
 
 
 
 
 
James A. Bianco, M.D.
 
N/A
 
5%
 
5%
Louis A. Bianco
 
N/A
 
5%
 
5%
Jack W. Singer, M.D.
 
N/A
 
5%
 
5%
Matthew Plunkett, Ph.D.
 
N/A
 
10%
 
10%
 
 
 
 
 
 
 
Pacritinib 325 Top Line Data(8)
 
 
 
 
 
 
James A. Bianco, M.D.
 
N/A
 
5%
 
30%
Louis A. Bianco
 
N/A
 
N/A
 
N/A
Jack W. Singer, M.D.
 
N/A
 
5%
 
25%
Matthew Plunkett, Ph.D.
 
N/A
 
N/A
 
N/A
 
 
 
 
 
 
 
Pacritinib Study Submitted(9)
 
 
 
 
 
 
James A. Bianco, M.D.
 
N/A
 
5%
 
5%
Louis A. Bianco
 
N/A
 
N/A
 
N/A
Jack W. Singer, M.D.
 
N/A
 
N/A
 
N/A
Matthew Plunkett, Ph.D.
 
N/A
 
N/A
 
N/A
 
 
 
 
 
 
 

47


 
 
2015 Annual Cash Incentive Compensation
Individual Performance
 
 
 
 
 
 
James A. Bianco, M.D.
 
N/A
 
5%
 
15%
Louis A. Bianco
 
N/A
 
5%
 
10%
Jack W. Singer, M.D.
 
N/A
 
5%
 
10%
Matthew Plunkett, Ph.D.
 
N/A
 
5%
 
10%
 
 
 
 
 
 
 
 
 
Potential Bonus Percentages(2)
Total
 
 
 
 
 
Maximum
James A. Bianco, M.D.
 
 
 
 
 
125%
Louis A. Bianco
 
 
 
 
 
80%
Jack W. Singer, M.D.
 
 
 
 
 
75%
Matthew Plunkett, Ph.D.
 
 
 
 
 
75%

(1)
The Compensation Committee selected the particular financial measures because they were determined to be key indicators of Company performance, are subject to efficient and reliable tracking and monitoring and are routinely communicated to shareholders. The Compensation Committee selected the particular drug development measures because they were determined to be the key 2015 developmental goals for the Company.
(2)
The incentive opportunity for each component is expressed as a percentage of the executive’s base salary, and the relative weightings are intended as guidelines, with the Compensation Committee having final authority to determine weightings and the appropriate final bonus amounts. In some cases, the “target” and “maximum” potential bonus amounts for a particular measure are the same, reflecting that the Compensation Committee determined that this component of the opportunity would be awarded on an “all or nothing” basis, with no ability to under- or over-achieve the particular goal.
(3)
The target bonus level would be achieved if our gross sales for PIXUVRI were at least $10 million in 2015 and the maximum level would be achieved if our gross sales were at least $15 million in 2015.
(4)
The threshold bonus level would be achieved if the Company's stock price appreciated 10% during 2015. The target bonus level would be achieved if the Company's stock price appreciated 15% during 2015. The maximum bonus level would be achieved if the Company's stock price appreciated 30% during 2015.
(5)
The target/maximum award would be achieved if the Company (with the Board's approval) licensed significant new technology or product during 2015.
(6)
For Mr. Bianco and Dr. Plunkett, the target/maximum award would be achieved if enrollment in the Pacritinib 326 clinical trial were to be completed during fiscal year 2015. For Dr. Bianco and Dr. Singer, the target award would be achieved only if such enrollment were completed by the end of the third quarter of fiscal year 2015, and the maximum award would be achieved only if such enrollment were completed by the end of the second quarter of fiscal year 2015.
(7)
The target/maximum award would be achieved if the enrollment for the PIXUVRI 306 clinical trial was to be completed during fiscal year 2015 (“PIXUVRI Enrollment Milestone”).
(8)
The target award level would be achieved if the pacritinib 325 top line data were complete and available for analysis by the end of the third quarter of fiscal year 2015 (or, in the case of Dr. Singer, by the end of the second quarter). The maximum award level would be achieved if if the pacritinib 325 top line data were complete and available for analysis by the end of the second quarter of fiscal year 2015 (or, in the case of Dr. Singer, by the end of the first quarter).
(9)
The target/maximum award would be achieved if the Second Registration Study for pacritinib were to be submitted to the FDA during fiscal year 2015.

Scenario 2 was the same as the Single Trial Scenario, with the following adjustments: the License/Pipeline Milestone target and maximum bonus percentage levels for Dr. Plunkett were each 5%; the Pacritinib 326 Enrollment Milestone target and maximum bonus percentage levels were 5% and 15%, respectively, for Dr. Bianco, 10% and 20%, respectively, for Dr. Singer, and each 10% for Dr. Plunkett; the PIXUVRI 306 Enrollment Milestone target and maximum bonus percentage levels were each 15% for Dr. Bianco, each 15% for Dr. Singer, and each 5% for Dr. Plunkett; the Pacritinib 325 Top Line Data maximum bonus percentage levels for Drs. Bianco and Singer were 5% and 10%, respectively; and the Pacritinib Study Submitted target and maximum bonus percentage levels were each 15% for Dr. Bianco.

As noted above, Mr. Seeley joined the Company in July 2015 and was not designated as a participant in the 2015 cash incentive program at the time it was approved by the Compensation Committee. Accordingly, any 2015 bonus for Mr. Seeley would be determined by the Compensation Committee in its judgment.

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At the time this Proxy Statement was filed with the SEC, the Compensation Committee had not determined the cash incentives under the fiscal 2015 cash incentive program or any discretionary bonuses for 2015 for the named executive officers. When these amounts (if any) have been determined, the Company will file a report with the SEC on Form 8-K in accordance with SEC rules that provides the incentive amounts and a new total compensation figure for each of the named executive officers.

Equity Incentive Compensation

The Compensation Committee awards equity incentive compensation to our executive officers to further align their interests with those of our shareholders, to provide a retention incentive over the applicable vesting period, and, in the case of equity awards with performance-based vesting requirements, to provide additional incentives to our executive officers to achieve specified corporate goals and strategic objectives. Although our practice in recent years has been to grant equity incentive awards to the named executive officers in the form of shares of restricted stock or units payable in stock (or payable in a number of shares, as described below, based on our issued and outstanding shares of common stock on the applicable vesting date), we modified our program in December 2015 to provide for our executive officers to be granted stock options as described in detail below. Because stock options have value only if the price of our shares increases over the vesting period of the option, we believe these awards are performance-based, further link executives’ interests to those of our shareholders, and are consistent with common equity award grant practices for the peer companies.

2016 Annual Grants

In December 2015, the Compensation Committee determined that the annual equity grants for 2016 for each of our executive officers would be made in the form of stock options with respect to the following number of shares of the Company’s common stock: Dr. Bianco - 6,000,000 shares; Mr. Bianco - 1,600,000 shares; Dr. Singer - 1,900,000 shares; Dr. Plunkett - 1,400,000 shares; and Mr. Seeley - 1,100,000 shares. In considering these awards, the Compensation Committee determined that they would be “front-loaded,” representing the entire 2016 equity award and a portion of each of the 2017 and 2018 equity awards for each executive. The 2017 and 2018 awards for the executive would correspondingly be reduced from the levels that would have otherwise been granted to account for the front-loaded nature of the initial 2016 award. Since the Company’s existing Long-Term Performance Awards, described in more detail below, will expire at the end of 2016 to the extent the applicable performance-based vesting conditions are not satisfied, the Compensation Committee believed that the “front-loaded” nature of stock option awards was appropriate to increase the number of shares subject to the awards, and thus maintain a strong alignment with shareholder interests when the unvested Long-Term Performance Awards expire at the end of 2016. These option grants are also intended to provide a retention incentive as they are scheduled to vest in semi-annual installments over a four-year period following the grant date.

Although these stock options represent the named executive officers’ annual equity grants for 2016 (and, as noted, for a portion of 2017 and 2018), they were approved by the Compensation Committee and became effective in December 2015 (except as noted below in the case of the award for Dr. Bianco). Accordingly, under SEC rules, the stock options granted in 2015 are reflected in the “Summary Compensation Table” below as compensation for each executive for 2015. The 2015 Plan currently limits the number of shares of Company common stock that may be subject to stock options granted to any one individual in any one calendar year to 2,700,000 shares. The intended grant to Dr. Bianco of stock options on 6,000,000 shares would exceed this limit if the options were granted entirely in one calendar year. Accordingly, Dr. Bianco was granted stock options covering 2,700,000 shares in December 2015 (which, under SEC rules, will be reflected as 2015 compensation for Dr. Bianco in the “Summary Compensation Table” below), stock options covering an additional 2,700,000 shares in January 2016 (which, under SEC rules, will be reflected as 2016 compensation for Dr. Bianco in the “Summary Compensation Table” included in our proxy statement for our 2017 annual meeting of shareholders), and an additional 600,000 shares in 2017 or, if earlier, if shareholders approve the proposed amendment and restatement of the 2015 Plan which includes an increase in the applicable individual annual stock option and stock appreciation right limit under the 2015 Plan (which 600,000 share award will, under SEC rules, be reflected as compensation for Dr. Bianco in the “Summary Compensation Table” for the year in which the grant actually occurs).

49



Long-Term Performance Awards

Overview

Each of our named executive officers has been granted a Long-Term Performance Award, which is payable upon the achievement of certain performance goals identified below, subject to the goal’s achievement by December 31, 2016 and the share limits of the applicable Company equity plan. The Long-Term Performance Awards were each granted effective January 3, 2012, except that Dr. Plunkett’s award was granted in March 2013 and Mr. Seeley’s award was granted in July 2015 in connection with their joining the Company. Under the original terms of the awards, the award would be paid in fully vested shares of the Company’s common stock upon achievement of the applicable performance goal. As described in more detail below under “December 2015 Amendments,” the executives’ Long-Term Performance Awards were modified on December 23, 2015 so that as to any particular performance goal that is achieved after December 23, 2015 and on or before December 31, 2016, the executive will be granted a stock option with respect to the number of shares that would have otherwise vested upon attainment of the goal (as opposed to receiving or retaining such number of fully-vested shares).

The current performance goals for the Long-Term Performance Awards, are as follows:

Completion of a Phase 3 trial for tosedostat that satisfies the primary endpoint set forth in the statistical plan then in effect (“Tosedostat Phase 3”).
Approval of an NDA or a marketing authorization application for tosedostat (“Tosedostat Approval”).
Approval of an NDA or a marketing authorization application for pacritinib (“Pacritinib Approval”).
Approval of an NDA for Opaxio (“Opaxio NDA Approval”).
Achievement of fiscal year sales equal to or greater than $50,000,000 with respect to any fiscal year (the “$50M Sales Goal”).
Achievement of fiscal year sales equal to or greater than $100,000,000 with respect to any fiscal year (the “$100M Sales Goal”).
Achievement of cash flow breakeven for any two consecutive fiscal quarters (the “Cash Flow Breakeven”).
Achievement of earnings per share in any fiscal year ending equal to or greater than $0.30 per share of common stock (the “EPS Goal”).
Achievement of a market capitalization goal of $1,000,000,000 based on the average of the closing prices of the common stock over a period of five consecutive trading days (the “Market Cap Goal”).

In addition, the Long-Term Performance Awards in effect at the beginning of 2015 included the completion of a Phase 3 trial for pacritinib that satisfies the primary endpoint set forth in the statistical plan then in effect (“Pacritinib Phase 3”). As discussed below, the Compensation Committee certified in September 2015 that the Pacritinib Phase 3 performance goal had been achieved.

The Compensation Committee believes these awards at the grant levels identified below provide executives an appropriate level of incentives to help achieve these performance goals so as to maximize and restore shareholder value and to remain with us over a multi-year period. The Compensation Committee reviews these awards and the related performance goals annually and takes into account in establishing the performance period for the awards that the goals may not all be met within the specified period. Setting shorter performance periods gives the Compensation Committee flexibility to assess the goals in light of changes in our strategic priorities and to make changes in the goals and extend the performance period as it deems appropriate.

Size of the Awards and Vesting Conditions

Under the terms of the Long-Term Performance Awards as in effect prior to the December 2015 amendments described below, if a particular performance goal is timely achieved, the number of underlying shares subject to the award that would vest in connection with the attainment of such performance goal would be determined by multiplying (i) the award percentage (determined as set forth below) for that award corresponding to the particular performance goal that is achieved by (ii) the total number of outstanding shares of our common stock as of the vesting date (determined on a non-fully diluted basis), subject to the applicable share limits of our equity incentive plan then in effect. In the event that insufficient shares are available under our equity incentive plan at the time of vesting, the Company may elect to amend the awards to, but is not required to, settle the Long-Term Performance Awards in cash or any other asset.


50


The award percentages corresponding to the various performance goals of the Long-Term Performance Awards for each of the named executive officers are set forth in the following table:
 
Performance Goals and Applicable Award Percentages(1)
Name
 
Tosedostat
Phase 3
 
Tosedostat
Approval
 
Pacritinib
Approval
 
OPAXIO
NDA
Approval
 
$50M
Sales
Goal
 
$100M
Sales
Goal
 
Cash Flow
Breakeven
 
EPS
Goal
 
Market
Cap
Goal
 
Total
James A. Bianco, M.D.
 
0.281%
 
0.563%
 
0.563%
 
0.085%
 
0.3%
 
0.6%
 
0.3%
 
0.124%
 
0.75%
 
3.57%
Louis A. Bianco
 
0.114%
 
0.228%
 
0.228%
 
0.034%
 
0.122%
 
0.243%
 
0.122%
 
0.061%
 
0.305%
 
1.46%
Jack W. Singer, M.D.
 
0.114%
 
0.228%
 
0.228%
 
0.034%
 
0.122%
 
0.243%
 
0.122%
 
0.061%
 
0.305%
 
1.46%
Matthew Plunkett, Ph.D.
 
0.084%
 
0.169%
 
0.169%
 
0.025%
 
0.09%
 
0.18%
 
0.09%
 
0.037%
 
0.225%
 
1.07%
Bruce J. Seeley(2)
 
0.084%
 
0.169%
 
0.169%
 
0.025%
 
0.09%
 
0.18%
 
0.09%
 
0.037%
 
0.225%
 
1.07%
 

(1)
Percentages are stated as a percentage of the total number of outstanding shares of our common stock as of the vesting date (determined on a non-fully diluted basis).
(2)
Mr. Seeley’s award was granted in July 2015 in connection with his joining the Company.

A performance goal will not be considered achieved unless and until the Compensation Committee certifies that is has been achieved. Prior to the December 2015 amendments described below, if we experienced a change in control, and if the award recipient was then still employed by or is providing services to us or one of our subsidiaries, then the award recipient would be entitled to receive the following vested shares, in each case subject to share availability under the applicable equity plan at the time of vesting:

with respect to any performance goal other than the Market Cap Goal, the full award percentage that was not otherwise achieved before the date of the change in control, as though that performance goal had been fully achieved as of the time of the change in control); and
with respect to the Market Cap Goal (to the extent the goal was not otherwise achieved before the date of the change in control), the full number of shares allocated to the Market Cap Goal only if our market capitalization based on the price per share of our common stock in the change in control transaction (or, if there is no such price in the transaction, the closing price of our common stock on the last trading day preceding the date of the change in control) equals or exceeds $1.0 billion. If our market capitalization is less than $1.0 billion on the date of the change in control, the recipient will not be entitled to receive or retain any of the shares allocated to the Market Cap Goal.

Under the terms of the Long-Term Performance Awards as in effect at the beginning of 2015, a portion of the award would vest upon completion of the Pacritinib Phase 3 performance goal. On September 21, 2015, the Compensation Committee certified that the Pacritinib Phase 3 performance goal had been achieved. Accordingly, the portions of those awards subject to achievement of the Pacritinib Phase 3 performance goal vested as of the date of the Compensation Committee’s certification. The “award percentages” for the Pacritinib Phase 3 performance goal were as follows: Dr. Bianco - 0.281%; Mr. Bianco - 0.114%; Dr. Singer - 0.114%; and Dr. Plunkett - 0.084%. The number of shares that vested in connection with the achievement of this goal is included in the “Option Exercises and Stock Vested - Fiscal Year 2015” table below.
  

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Nature of the Awards Prior to December 2015 Amendments

The Long-Term Performance Awards as in effect prior to December 23, 2015 consisted of a combination of LTIP RSUs and LTIP Restricted Stock. In approving the Long-Term Performance Awards originally effective in January 2012, the Compensation Committee determined that it would be appropriate to grant a portion of the Long-Term Performance Awards to Dr. Bianco, Mr. Bianco and Dr. Singer in the form of restricted shares issued on the effective date of grant. The Compensation Committee believed, particularly in light of the economic environment at the time, that the link between executives’ interests and shareholders’ interests would be further enhanced if the executives held restricted shares (as opposed to a right to receive shares only upon the vesting of the awards), as shares (but not units) have voting rights. The LTIP Restricted Stock awarded as to a particular performance goal above would be forfeited back to us should the applicable performance-based vesting requirement described above not be satisfied. Should a performance goal noted above be satisfied, the LTIP RSUs provided for vesting and payment in connection with the attainment of such performance goal of a number of shares of our common stock determined by multiplying (i) the award percentage (determined as set forth above) for that award corresponding to that particular performance goal by (ii) the total number of outstanding shares of our common stock as of the vesting date (determined on a non-fully diluted basis), subject to the applicable share limits of our equity incentive plan then in effect. While restricted shares were issued under our equity incentive plans with regard to the LTIP Restricted Stock, no shares were reserved or set aside under the plans for satisfaction of the shares underlying the LTIP RSUs. Rather, in accordance with the terms of the LTIP RSUs, shares would only be issuable under such awards to the extent that sufficient shares were available under the share limits of the applicable equity plan at the time of vesting. In order to ensure that the LTIP Restricted Stock awards did not provide the executive the right to receive any shares beyond the payout levels described above, any restricted shares subject to an executive LTIP Restricted Stock award that vested in connection with the achievement of a performance goal would reduce on a share-for-share basis the number of shares that would otherwise have been delivered to that executive under his or her LTIP RSUs upon achievement of that performance goal. In addition and in furtherance of that intent, if the number of shares that would have been delivered under the executive’s LTIP RSUs on achievement of a performance goal (before taking the LTIP Restricted Stock awards into account) was less than the number of shares subject to the executive’s LTIP Restricted Stock Award that vested on achievement of that performance goal, a number of such restricted shares equal to the difference would be forfeited back to us so that the executive retained no more shares related to that particular performance goal than the number of shares that would have otherwise been deliverable with respect to that goal under the applicable award percentage. All Long-Term Performance Awards granted after the initial January 2012 tranche were granted solely in the form of LTIP RSUs with no corresponding LTIP Restricted Stock.

December 2015 Amendments

On December 23, 2015, the Compensation Committee approved amendments to the named executive officers’ Long-Term Performance Awards so that as to any particular performance goal that is achieved after December 23, 2015 and on or before the December 31, 2016 expiration of the awards, the executive will be granted a stock option with respect to the number of shares determined under the formula described above under “Size of the Awards and Vesting Conditions” (as opposed to receiving or retaining such number of fully-vested shares). Each option will have an exercise price equal to the closing price of the Company’s common stock on the grant date (which will be the date the Compensation Committee certifies the performance goal is achieved) and will be scheduled to vest in semi-annual installments over a three-year period following the grant date. In each case, the Company’s obligation to deliver stock options to the executives upon achievement of a performance goal is subject to the share limits of the applicable equity plan then in effect. To the extent the executives were issued any LTIP Restricted Stock pursuant to their Long-Term Performance Awards as described above that had not yet vested, the executives agreed to forfeit those shares to the Company.

In addition, the named executive officers’ Long-Term Performance Awards were modified so that any provisions for accelerated vesting of the award in connection with a termination of the executive’s employment or a change in control of the Company will apply only to the portion of the award that relates to the Pacritinib Approval performance goal and not to any of the other performance goals for the award. Please see “Potential Payments upon Termination or Change in Control” below for more information on the severance and change in control agreements that are generally applicable to our named executive officers.

The Compensation Committee believed these amendments aligned with shareholder interests as the vesting modifications help provide additional retention incentives for the management team and the shift from stock to stock options covering the same number of shares requires stock price appreciation after the date of grant of the awards in order for the awards to have value.


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Time-Based Restricted Stock Awards

On January 8, 2015, the Compensation Committee approved equity awards for 2015 to each of the Company’s named executive officers (other than Mr. Seeley) in the form of time-based restricted stock. Each award vests in three equal installments over approximately fourteen months after the date of grant, subject to the executive’s continued employment with the Company through the applicable vesting date. The final tranche of these awards vest on March 21, 2016. The number of shares subject to each award was calculated as a percentage of the Company’s total outstanding shares on the grant date, with the percentage for Dr. Bianco being 0.90% and the percentage for each of the other named executive officers being 0.27%. The particular award levels and vesting terms for these time-based grants were determined by the Compensation Committee in its judgment to be appropriate to both (i) provide an added retention incentive for the executive over the vesting period and (ii) increase the executives’ respective potential ownership interests in the Company, thereby enhancing the alignment of the executives’ interests with those of shareholders.

In connection with his joining the Company in July 2015, the Compensation Committee approved the grant to Mr. Seeley of 300,000 shares of time-based restricted stock (in addition to the grant of his Long-Term Performance Award noted above). This award vests in three annual installments after the date of grant, subject to Mr. Seeley’s continued employment with the Company through the applicable vesting date. This grant was negotiated with Mr. Seeley and approved by the Compensation Committee as an additional inducement to his accepting employment with the Company and to further align his interests with those of our shareholders.

Method for Determination of the Size of the Awards

The grant levels for the equity awards granted to each named executive officer were inherently subjective, determined by the Compensation Committee in its discretion taking into account its general assessment of each executive’s overall responsibilities and contributions and the executive’s performance history and/or potential for future responsibility and promotion, the Compensation Committee’s assessment of the potential value of the award and its judgment as to the reasonableness of the compensation opportunities provided for the executive’s particular position. The Compensation Committee believes that each named executive officer’s level of equity awards granted was appropriate taking into account, as to the Long-Term Performance Awards, the performance that would be required to satisfy applicable performance-based vesting requirements.

Perquisites and Other Benefits

We maintain executive health programs for the benefit of the named executive officers, and these executives are also entitled to participate in our benefit programs that are available to all of our employees, including our 401(k) and employee stock purchase plan. During 2015, certain of our named executive officers were also provided supplemental life insurance benefits, tax preparation and club dues reimbursement, and are reimbursed as a perquisite for certain personal and family travel expenses. In addition, we used a chartered aircraft from time to time for business related travel and, when space was available, certain spouses, other family members and other guests accompanied the named executive officers on such trips. In those cases, there was no additional cost to us of having additional passengers on such flights. The Company has also on occasion paid or reimbursed an executive for the cost of a chartered aircraft for personal travel when the Company required the executive to use a chartered aircraft for the travel due to security concerns. Certain executives have also been provided with or reimbursed for certain security expenses. The perquisites and other benefits provided by or paid for by us for the named executive officers are identified in the footnotes to the “Summary Compensation Table” below.

In December 2015, the Compensation Committee decided to eliminate most perquisites provided to the Company’s executives, in each case effective January 1, 2016, excluding certain life and disability insurance benefits provided to Dr. Bianco pursuant to his employment agreement with the Company, and travel by family members and other guests of executive officers, as described above, where there is no additional cost incurred by the Company.

Post-Termination and Change in Control Benefits

We have certain severance and change in control arrangements in place with each of our named executive officers. The Compensation Committee believes these agreements are important in attracting and retaining key executive officers and are consistent with competitive practices.

Under these agreements, the executive would be entitled to termination benefits in the event of a termination of the executive’s employment by us without cause or by the executive for good reason (in each case, within the meaning of the executives’ respective employment agreement). We have determined that it is appropriate to provide each named executive officer with termination benefits under these circumstances in light of his position with us and as part of his overall compensation package, and to motivate him to operate in the best interest of the Company, rather than in a manner potentially self-serving to secure employment. Because we believe that a termination by an executive for good reason (or constructive termination) is conceptually the same as an actual termination by us without cause, we believe it is appropriate to provide termination benefits following such a constructive termination of the executive’s employment.


53


In addition, if we experience a change in control, certain outstanding equity awards will generally either become fully vested or assumed by the successor entity. The Compensation Committee approved these change in control arrangements in order to offset the uncertainty and disruption that a change in control transaction (or potential transaction) would create during such a critical time for the Company.

In January 2015, the Compensation Committee approved revisions to the applicable severance agreements of Mr. Bianco, Dr. Singer and Dr. Plunkett primarily in order to harmonize the terms of these agreements. In the case of Mr. Bianco and Dr. Singer, the revisions included removing a provision under which the executive could voluntarily terminate employment for any reason following a change in control and receive severance benefits (generally referred to as a “walkaway” right) and a reduction in the period for the executive to exercise stock options following certain terminations of employment. (Dr. Bianco’s employment agreement and Dr. Plunkett’s severance agreement did not, and still do not, include walkaway right provisions.) Other than these changes, the severance benefits for each executive remain the same as in effect prior to the revisions. Upon his joining us in July 2015, we entered into a severance agreement with Mr. Seeley on the same terms as provided to Mr. Bianco, Dr. Singer and Dr. Plunkett.

For more information regarding these arrangements, please see “Potential Payments upon Termination or Change in Control” below.

Elimination of “Parachute Payments”

During the past few years, the Compensation Committee has approved arrangements with each of the named executive officers that eliminate the executive’s right to be reimbursed for any excise taxes imposed on his termination benefits and any other payments under Sections 280G and 4999 of the Internal Revenue Code (generally referred to as “parachute payments”).

Compensation Clawback Policy

In response to shareholder feedback, the Company implemented a Policy Regarding the Recoupment of Certain Compensation Payments (a compensation “clawback” policy) in December 2015 under which we may require reimbursement or cancellation of any cash bonus or incentive payment to an officer or employee where the amount of any such cash payment was determined based on the achievement of financial results that were subsequently the subject of an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws and a lesser payment would have been made to the individual based upon the restated financial results.

Anti-Hedging Policy

To help ensure that directors and officers do not engage in transactions that would allow them to gain from declines in the price of Company securities, the Company adopted an amendment to our Insider Trading Policy in December 2015 that restricts our directors and officers from engaging in any hedging or monetization transaction that might allow them to gain from or offset any decrease in the market value of Company securities.

Anti-Pledging Policy

To help ensure that the directors and officers maintain sufficient control over the timing of their transactions in Company securities, the Company adopted an amendment to our Insider Trading Policy in December 2015 that prohibits our directors and officers from margining any Company securities in a margin account or otherwise pledging any Company securities as collateral for a loan.

Stock Ownership Policy

We believe that members of the Board and our executive officers should hold Company stock to further align their interests with the interests of our shareholders. Accordingly, in December 2015 the Company adopted a Stock Ownership Policy applicable to members of the Board and all of our executive officers. Under the Stock Ownership Policy, our Chief Executive Officer should own Company common stock with a fair market value of at least six times his annual base salary, each of our executive officers should own Company common stock with a fair market value of at least one times his annual base salary, and each member of the Board not employed by us should own Company common stock with a fair market value of at least five times the base annual cash retainer then in effect under the Company’s Director Compensation Policy. Shares taken into account under the policy include shares beneficially owned by the individual, including shares held in trust for the benefit of the individual or his family members, and shares subject to Company equity awards held by the individual (other than shares subject to stock option grants and shares subject to awards with unsatisfied performance-based vesting requirements). An individual covered by the guidelines is expected to satisfy the applicable level of ownership by the later of December 31, 2020 or five years after he or she first becomes subject to the policy, need not satisfy any increased level of ownership resulting from a change in position or compensation until five years after the change, and need not satisfy any shortfall caused by a decline in stock price earlier than two years after the change in stock price. If an individual covered by the guidelines does not satisfy the applicable level

54


of ownership within the applicable time described above, the individual will be expected to hold toward satisfying the policy one-half of the net shares (after reducing the original number of shares for the exercise or purchase price of the award and the estimated tax liability resulting from the exercise, vesting, and payment of the award) acquired upon exercise or payment of a Company equity award that is exercised or paid after that time.

Tax Deductibility of Pay

Section 162(m) generally places a limit of $1,000,000 on the amount of compensation that we may deduct in any one year with respect to compensation provided to our Chief Executive Officer and certain other named executive officers. There is an exception to the $1,000,000 limitation for performance-based compensation meeting certain requirements. While the Compensation Committee has considered the limitations imposed by Section 162(m), it reserves the right to design programs that recognize a full range of performance criteria important to our success, even where the compensation paid under such programs may not be deductible. The Compensation Committee will continue to assess the tax and other consequences of our executive compensation program as part of its primary objective of ensuring that compensation paid to our named executive officers is reasonable, performance-based and consistent with our goals and the interests of our shareholders.

Risk Considerations

The Compensation Committee has reviewed our compensation programs to determine whether they encourage unnecessary or excessive risk taking and has concluded that they do not. The Compensation Committee believes that the design of our annual cash and equity incentives provides an effective and appropriate mix of incentives to help ensure our performance is focused on long-term shareholder value creation and does not encourage the taking of short-term risks at the expense of long-term results.

Base salaries are fixed in amount and thus do not encourage risk-taking. While the Compensation Committee considers the achievement of specific financial and operating performance goals in determining the cash bonuses to be awarded to executives under our cash incentive program, the Compensation Committee determines the actual amount of each executive’s bonus based on multiple Company and individual performance criteria as described above. The amount of such bonuses is also generally capped and represents only a portion of each individual’s overall total compensation opportunities, and we also generally have discretion to reduce bonus payments (or pay no bonus) based on individual performance and any other factors determined to be appropriate in the circumstances. Finally, a significant portion of the compensation provided to our executive officers is in the form of equity awards that further align executives’ interests with those of shareholders. The Compensation Committee believes that these awards do not encourage unnecessary or excessive risk-taking since the ultimate value of the awards is tied to our stock price. The vesting schedules imposed on the grants also help ensure that executives always have significant value tied to long-term stock price performance. In addition, the vesting of our Long-Term Performance Awards is tied to a number of different performance objectives, so the program is not overly dependent on any one performance metric.

Say-on-Pay Vote

At our annual meeting of shareholders held in September 2015, shareholders had the opportunity to cast an advisory vote on the compensation paid to our named executive officers as disclosed in the proxy statement for that annual meeting. The proposal to approve the executives’ compensation was approved by approximately 53% of the total number of votes actually cast (disregarding abstentions and broker non-votes). The Compensation Committee believes this result affirms shareholders’ support of our approach to executive compensation generally, particularly the performance-based nature of the executive compensation program, but the Compensation Committee would like to see a greater level of support for our compensation programs. As noted above, the Compensation Committee acted in January 2015 to eliminate “walkaway” rights for certain named executive officers that would have permitted them to voluntarily terminate employment for any reason following a change in control and receive severance benefits. The Compensation Committee also engaged FW Cook, compensation consultants, in July 2015 to perform a comprehensive review of the compensation of our named executive officers. In December 2015, the Compensation Committee recommended and the Board approved a Stock Ownership Policy, a Policy Regarding the Recoupment of Certain Compensation Payments (compensation “clawback” policy), and revisions to our Insider Trading Policy to prohibit certain hedging and pledging transactions in our securities by our directors and officers, all as discussed in more detail above. Also in December 2015, the Compensation Committee approved amendments to the named executive officers’ Long-Term Performance Awards as described above to provide that, if a particular performance goal is achieved, the executive will be granted a stock option with a multi-year vesting schedule (as opposed to fully-vested shares) and to eliminate provisions for accelerated vesting in connection with a termination of the executive’s employment or a change in control of the Company (other than as applied to one performance goal under the award). The Compensation Committee also determined that the executives’ annual equity awards for 2016 would be made in the form of stock options in order to provide additional incentives for increasing the price of our stock and delivering value to our shareholders. Finally, the Compensation Committee eliminated most of the perquisites we provide to our named executive officers in order to help simplify our executive compensation program. The Compensation Committee will continue to consider the opinions that shareholders express directly to the Compensation Committee or management and through say-on-pay votes.


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Summary

The Compensation Committee believes that our compensation philosophy and programs are designed to foster a performance-oriented culture that aligns employees’ interests with those of our shareholders, and as such that the compensation of our executives is both appropriate and responsive to the goal of improving shareholder value.

The following “Compensation Committee Report” and related disclosure shall not be deemed incorporated by reference by any general statement incorporating this Proxy Statement into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under the Exchange Act or the Securities Act.

Compensation Committee Report

The Compensation Committee reviewed this "Compensation Discussion and Analysis" and discussed its contents with Company’s management. Based on this review and discussions, the Compensation Committee has recommended to the Board that this "Compensation Discussion and Analysis" be included in this Proxy Statement.

Respectfully submitted by the Compensation Committee:

Frederick W. Telling, Ph.D., Chair
Richard L. Love
Mary O. Mundinger, DrPH
Phillip M. Nudelman, Ph.D.

Compensation Committee Interlocks and Insider Participation

The directors listed at the end of the Compensation Committee Report above were each members of the Compensation Committee during all of fiscal year 2015. No director who served on the Compensation Committee during fiscal year 2015 is or has been an executive officer of the Company or had any relationships requiring disclosure by us under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. None of our executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, any executive officer of which served as a member of the Board or the Compensation Committee during fiscal year 2015.




56


Summary Compensation Table - Fiscal Years 2013-2015

The following table sets forth information concerning compensation for fiscal years 2013, 2014 and 2015 for services rendered to the Company by the Chief Executive Officer and President, the Executive Vice President, Finance and Administration and the Company’s three other executive officers. Collectively, these persons are referred to as the “named executive officers.”
Name
Year
Salary
($)
Bonus
($)(1)
Stock Awards
($)(2)(3)
Option Awards
($)(2)
All Other Compensation
($)(4)
Total($)
James A. Bianco, M.D.
Chief Executive Officer and President(5)
2015
650,000
-
3,754,406
2,221,830
221,984
6,848,220
2014
650,000
617,500
4,937,569
-
473,270
6,678,339
2013
650,000
682,500
1,531,763
712,350
351,034
3,927,647
Louis A. Bianco
Executive Vice President, Finance and Administration

2015
360,000
-
1,126,322
1,316,640
28,145
2,831,107
2014
360,000
234,000
1,542,615
-
42,299
2,178,914
2013
337,500
216,000
493,158
284,940
44,886
1,376,484
Jack W. Singer, M.D.
Executive Vice President, Chief Scientific Officer, Interim Chief Medical Officer and Global Head of Translational Medicine(5)

2015
370,000
-
1,126,322
1,563,510
39,102
3,098,934
2014
370,000
175,750
1,542,615
-
55,234
2,143,599
2013
347,500
203,500
493,158
284,940
38,502
1,367,600
Matthew Plunkett, Ph.D.
Executive Vice President, Chief Business Officer

2015
325,000
-
1,126,322
1,152,060
9,137
2,612,519
2014
325,000
219,375
1,481,271
-
8,339
2,033,985
2013
325,000
260,000
501,854
427,410
9,119
1,523,383
Bruce J. Seeley
Executive Vice President, Chief Commercial Officer(6)
2015
163,461
-
697,429
905,190
-
1,766,080
2014
-
-
-
-
-
-
2013
-
-
-
-
-
-

(1)
As noted under “Compensation Discussion and Analysis - Annual Cash Incentive Compensation” above, at the time this Proxy Statement was filed with the SEC, the Compensation Committee had not determined the cash incentives under the fiscal 2015 cash incentive program or any discretionary bonuses for 2015 for the named executive officers. When these amounts (if any) have been determined, the Company will file a report with the SEC on Form 8-K in accordance with SEC rules that provides the incentive amounts and a new total compensation figure for each of the named executive officers. Please see the “Compensation Discussion and Analysis” above for a description of the cash incentive program for the named executive officers for fiscal 2015.
(2)
The amounts reported in the “Stock Awards” and “Option Awards” columns reflect the grant date fair value computed in accordance with FASB ASC Topic 718 of the stock awards and option awards, respectively, granted to the Company’s named executive officers during the applicable fiscal year, and, with respect to each fiscal year in which a stock award or option award, respectively, was modified, the incremental fair value of the modified award computed in accordance with FASB ASC Topic 718. In the case of awards with performance-based vesting conditions other than market (stock price) based vesting conditions, grant date fair values (and incremental fair values, as the case may be) are calculated for this purpose based upon the outcome (as of the grant date, or, if modified, as of the modification date) of the performance-based condition.
 
These amounts in the “Stock Awards” and “Option Awards” columns do not necessarily correspond to the actual cash value that will be recognized by the named executive officers pursuant to these awards. For a discussion of the assumptions and methodologies used to calculate the amounts reported, please see the discussion of equity awards contained in Note 13 (Share-Based Compensation) to the Company’s Consolidated Financial Statements for the fiscal year ended December 31, 2015, included in the Company’s 2015 Annual Report filed with the SEC on February 16, 2016.
Even though the option awards granted to the named executive officers in 2015 have value for purposes of and as disclosed in the Summary Compensation Table above in accordance with applicable SEC rules, these options have a per share exercise price of $1.24 and will have value for the award recipient only if the price of our common shares appreciates above $1.24.


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(3)
A portion of the “Stock Awards” compensation for each fiscal year for the named executive officers is the grant date fair value (or, in the case of modified awards, the incremental fair value as of the modification date) of Long-Term Performance Awards that include performance-based vesting conditions and were granted (or modified, as the case may be) in that year. These awards are included in Stock Award compensation for the applicable year based on the probable outcome (as of the grant date, or, if modified, as of the modification date) of the performance-based vesting condition of the award. The following table presents, as to these awards that were granted (or modified, as the case may be) in fiscal year 2015, 2014 or 2013: (i) the grant date fair value (or, in the case of modified awards, the incremental fair value as of the modification date) included in the “Stock Awards” column as to the awards granted (or modified, as the case may be) each year based on the probable outcome (as of the grant date, or, if modified, as of the modification date) of the performance-based vesting condition; and (ii) the grant date fair value (or, in the case of modified awards, the fair value as of the modification date) of the awards granted (or modified, as the case may be) each year assuming the maximum level of performance is achieved (in each case, with the fair value as otherwise determined under applicable accounting rules as noted in footnote (2) above):
Name
Aggregate 
Fair Value -
Based on
Probable
Outcome
($)
Aggregate 
Fair Value -
Based on
Maximum
Performance
($)
Aggregate 
Fair Value -
Based on
Probable
Outcome
($)
Aggregate
 Fair Value -
Based on
Maximum
Performance
($)
Aggregate 
Fair Value -
Based on
Probable
Outcome
($)
Aggregate
 Fair Value -
Based on
Maximum
Performance
($)
 
2015
2014
2013
James A. Bianco, M.D.
-
15,700,792
575,099
28,310,424
315,272
3,579,348
Louis A. Bianco
-
6,423,051
233,874
11,584,014
128,211
1,466,288
Jack W. Singer, M.D.
-
6,423,051
233,874
11,584,014
128,211
1,466,288
Matthew Plunkett, Ph.D.
-
4,705,779
172,530
8,484,383
136,907
1,073,804
Bruce J. Seeley
139,429
4,845,208
-
-
-
-
(4)
The following table provides detail on the amounts reported in the “All Other Compensation” column of the table above for each named executive officer:
Name
Executive
Health
Benefits
($)
Life
Insurance
Premiums
($)
401(k)
Match
($)
Other
Personal
Benefits
($)(a)
Total ($)
James A. Bianco, M.D.
42,414
32,774
-
146,796

(b)
221,984
Louis A. Bianco
315
14,509
3,975
9,346

(c)
28,145
Jack W. Singer, M.D.
23,250
4,800
3,975
7,077

(d)
39,102
Matthew Plunkett, Ph.D.
-
-
3,975
5,162

(e)
9,137
Bruce J. Seeley
-
-
-
-
-
(a)
Certain named executive officers were accompanied by spouses, other family members and other guests on trips using chartered aircraft where the use of the chartered aircraft was for business purposes. In those cases, there was no incremental cost to the Company of having additional passengers on the chartered aircraft, and as a result, no amount is reflected in this table with respect thereto.
(b)
This amount includes $1,510 for personal travel, $89,198 for family members’ travel on commercial aircraft, $6,185 for tax preparation fees, $9,014 for club membership dues, $38,126 for security expenses and $2,763 for miscellaneous expenses.
(c)
This amount includes $2,277 for tax preparation fees, $2,730 for security expenses and $4,339 for club membership dues.
(d)
This amount includes $3,975 for tax preparation fees, $372 for club membership dues and $2,730 for security expenses.
(e)
This amount includes $5,162 for family travel expenses.
(5)
All compensation reflected in this table for Dr. Bianco and Dr. Singer was paid in connection with their respective services as officers of the Company and not in connection with their services as directors of the Company. The Company does not pay director compensation to directors who are also employees of the Company.
(6)
Mr. Seeley was appointed our Executive Vice President, Chief Commercial Officer on July 27, 2015.


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The foregoing "Summary Compensation Table" should be read in conjunction with the tables and narrative descriptions that follow. The “Grants of Plan-Based Awards - Fiscal Year 2015” table provides information regarding the incentives awarded to the named executive officers in fiscal year 2015. The “Outstanding Equity Awards at Fiscal 2015 Year-End” and “Option Exercises and Stock Vested - Fiscal Year 2015” tables provide further information on the named executive officers’ potential realizable value and actual value realized with respect to their equity awards. The “Potential Payments upon Termination or Change in Control” section provides information on the benefits the named executive officers may be entitled to receive in connection with certain terminations of their employment and/or a change in control of the Company.

Description of Employment Agreements-Cash Compensation

The Company entered into an employment agreement with Dr. Bianco in March 2011, as amended. The employment agreement has a two-year term, with automatic one-year renewals unless either party gives notice that the term will not be extended. The agreement provides that Dr. Bianco will receive an initial annualized base salary of $650,000, subject to review by the Compensation Committee. Based on its review, the Compensation Committee may increase (but not reduce) the base salary level. In December 2015, the agreement was amended to increase Dr. Bianco’s annualized base salary to $750,000. The agreement also provides for annual bonuses for Dr. Bianco with a target annual bonus of at least 50% of his base salary and that his annual bonus may be up to 125% of his base salary if actual performance exceeds the target performance goals established by the Compensation Committee for the applicable year. The agreement also provides for Dr. Bianco to participate in the Company’s usual benefit programs for senior executives, payment by the Company of disability insurance premiums and premiums for universal life insurance with a coverage amount of not less than $5,000,000 (up to an aggregate annual limit for such premiums of $50,000, subject to adjustment) and reimbursement of his costs to maintain his medical license. Provisions of the agreement that provide for Dr. Bianco to receive certain executive health benefits and other personal benefits were eliminated in December 2015.

In July 2012, the Company entered into an offer letter with Dr. Plunkett. The letter does not have a specified term and provides for Dr. Plunkett to receive an initial annualized base salary of $325,000. Dr. Plunkett is eligible to receive an annual discretionary bonus, with a target bonus of 30% of base salary and a maximum bonus of 75% of base salary, and to participate in the benefit programs offered by the Company.

In July 2015, the Company entered into an offer letter with Mr. Seeley. The letter does not have a specified term and provides for Mr. Seeley to receive an initial annualized base salary of $375,000. Mr. Seeley is eligible to receive an annual discretionary bonus, with a target bonus of 30% of base salary and a maximum bonus of 75% of base salary, and to participate in the benefit programs offered by the Company.

Provisions of each of the foregoing agreements relating to equity incentive awards, as well as post-termination and change in control benefits, are discussed below under the applicable sections of this Proxy Statement.

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Grants of Plan-Based Awards - Fiscal Year 2015

The following table presents information regarding the equity awards granted to the named executive officers in fiscal year 2015.

 
 
Estimated Future
Payouts
Under Equity
Incentive Plan Awards(1)(2)
All Other
Stock Awards:
Number of
Shares of Stock or Units
(#)(1)
All Other
Option Awards:
Number of
Securities
Underlying Options
(#)(1)
Exercise
or Base
Price of
Option Awards
($/Sh)
Grant Date
Fair Value
of Stock
and Option Awards
($)(3)
Name/Award Type
Grant Date
Threshold(#)
Target
(#)
Maximum(#)
James A. Bianco, M.D.
 
 
 
 
 
 
 
 
Restricted Stock Award(4)
1/8/2015
-
-
-
1,590,850
-
-
3,754,406
Stock Option(5)
12/23/2015
-
-
-
-
2,700,000
1.24
2,221,830
 
 
 
 
 
 
 
 
 
Louis A. Bianco
 
 
 
 
 
 
 
 
Restricted Stock Award(4)
1/8/2015
-
-
-
477,255
-
-
1,126,322
Stock Option(5)
12/23/2015
-
-
-
-
1,600,000
1.24
1,316,640
 
 
 
 
 
 
 
 
 
Jack W. Singer, M.D.
 
 
 
 
 
 
 
 
Restricted Stock Award(4)
1/8/2015
-
-
-
477,255
-
-
1,126,322
Stock Option(5)
12/23/2015
-
-
-
-
1,900,000
1.24
1,563,510
 
 
 
 
 
 
 
 
 
Matthew Plunkett, Ph.D.
 
 
 
 
 
 
 
 
Restricted Stock Award(4)
1/8/2015
-
-
-
477,255
-
-
1,126,322
Stock Option(5)
12/23/2015
-
-
-
-
1,400,000
1.24
1,152,060
 
 
 
 
 
 
 
 
 
Bruce J. Seeley
 
 
 
 
 
 
 
 
Restricted Stock Award(6)
7/27/2015
-
-
-
300,000
-
-
558,000
Performance Award(7)
7/27/2015
-
45,165
-
-
-
-
-
Performance Award(8)
7/27/2015
-
406,483
-
-
-
-
139,429
Performance Award(9)
7/27/2015
-
162,593
-
-
-
-
-
Performance Award(10)
7/27/2015
-
325,186
-
-
-
-
-
Performance Award(11)
7/27/2015
-
162,593
-
-
-
-
-
Performance Award(12)
7/27/2015
-
66,844
-
-
-
-
-
Performance Award(13)
7/27/2015
-
305,314
-
-
-
-
-
Performance Award(14)
7/27/2015
-
151,754
-
-
-
-
-
Performance Award(15)
7/27/2015
-
305,314
-
-
-
-
-
Stock Option(5)
12/23/2015
-
-
-
-
1,100,000
1.24
905,190

(1)
The awards listed in these columns are granted under and subject to the terms of the 2015 Plan. The Compensation Committee administers and has authority to interpret the 2015 Plan provisions and make all required determinations thereunder, except the Board has authority to administer, construe, interpret and make determinations under these plans with respect to awards granted or to be granted to the non-employee directors. See “Potential Payments upon a Termination or Change in Control” below for additional discussion concerning the termination of employment and change in control terms applicable to these awards.

60


(2)
This column reflects the Long-Term Performance Award granted to Mr. Seeley in July 2015 that is subject to achievement by the Company of certain performance goals (discussed in the footnotes below) on or before December 31, 2016. Under the terms of the award as in effect prior to December 23, 2015, if a particular performance goal is timely achieved, the number of underlying shares subject to the award that would vest in connection with the attainment of such performance goal would be determined by multiplying (i) the award percentage for that award corresponding to the particular performance goal that is achieved by (ii) the total number of outstanding shares of our common stock as of the vesting date (determined on a non-fully diluted basis), subject to the applicable share limits of our equity incentive plan then in effect. In the event that insufficient shares are available under our equity incentive plan at the time of vesting, the Company may elect to amend the awards to, but is not required to, settle the award in cash or any other asset. As described in the “Compensation Discussion and Analysis” above, the award was modified on December 23, 2015 so that as to any particular performance goal that is achieved after December 23, 2015 and on or before December 31, 2016, Mr. Seeley will be granted a stock option with respect to the number of shares that would have otherwise vested upon attainment of the goal (as opposed to receiving or retaining such number of fully-vested shares). The “Target” column reflects the number of shares that would have vested or been issued under the award upon timely achievement of each performance goal based on the applicable payout percentages and the number of shares of the Company’s common stock issued and outstanding on July 27, 2015, which was the grant date of the award. However, the actual number of shares covered by a stock option issuable for the award upon the timely achievement of a performance goal may be different from the number reported in the table, as the actual number will be based on the number of shares of the Company’s common stock outstanding at the time the Compensation Committee determines the goal has been achieved. Mr. Seeley does not have the right to dispose of the Long-Term Performance Award or any other shareholder rights with respect to such award.
(3)
For a discussion of the assumptions and methodologies used to calculate the amounts reported in this column, please see the discussion of equity awards contained in Note 13 (Share-Based Compensation) to the Company’s Consolidated Financial Statements for the fiscal year ended December 31, 2015, included in the Company’s 2015 Annual Report filed with the SEC on February 16, 2016.
(4)
These shares vested in three equal installments on March 21, 2015, September 21, 2015 and March 21, 2016. Prior to the time the shares vested, the named executive officer generally did not have the right to dispose of the restricted shares, but had the right to vote and receive dividends (if any) paid by the Company in respect of the restricted shares.
(5)
These options vest in eight semi-annual installments over the four-year period following the grant date.
(6)
These shares vest in three equal installments on the first three anniversaries of the grant date. Prior to the time the shares vest, the named executive officer generally does not have the right to dispose of the restricted shares, but has the right to vote and receive dividends (if any) paid by the Company in respect of the restricted shares.
(7)
The vesting of this award is subject to the achievement of the Opaxio NDA Approval goal on or before December 31, 2016.
(8)
The vesting of this award is subject to the achievement of the Market Cap Goal on or before December 31, 2016.
(9)
The vesting of this award is subject to the achievement of the $50M Sales Goal on or before December 31, 2016.
(10)
The vesting of this award is subject to the achievement of the $100M Sales Goal on or before December 31, 2016.
(11)
The vesting of this award is subject to achievement of Cash Flow Breakeven goal on or before December 31, 2016.
(12)
The vesting of this award is subject to achievement of the EPS Goal on or before December 31, 2016.
(13)
The vesting of this award is subject to the achievement of the Pacritinib Approval on or before December 31, 2016.
(14)
The vesting of this award is subject to the achievement of the Tosedostat Phase 3 goal on or before December 31, 2016.
(15)
The vesting of this award is subject to the achievement of the Tosedostat Approval goal on or before December 31, 2016.


61



Outstanding Equity Awards at Fiscal 2015 Year-End

The following table presents information regarding the outstanding equity awards held by each of the Company’s named executive officers as of December 31, 2015, including the vesting dates for the portions of these awards that had not vested as of that date.
 
 
Option Awards 
 
Stock Awards 
Name/Award Type(1)
Grant
Date
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)(2)
Option
Exercise
Price
($)
Option
Expiration
Date
 
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3)
James A. Bianco, M.D.
 
 
 
 
 
 
 
 
 
Option
01/18/07
200
-
-
2,040.00
1/18/17
 
-
-
Option
12/27/07
333
-
-
567.00
12/27/17
 
-
-
Option
12/10/13
500,000
-
-
1.77
12/10/23
 
-
-
Option(4)
12/23/15
-
2,700,000
-
1.24
12/23/25
 
-
-
Restricted Stock(5)
01/08/15
-
-
-
-
-
 
530,283
652,248
Performance Award(6)
01/03/12
-
-
238,392
-
-
 
-
-
Performance Award(7)
01/03/12
-
-
2,103,458
-
-
 
-
-
Performance Award(8)
01/03/12
-
-
841,383
-
-
 
-
-
Performance Award(9)
01/03/12
-
-
1,682,767
-
-
 
-
-
Performance Award(10)
01/03/12
-
-
841,383
-
-
 
-
-
Performance Award(11)
01/03/12
-
-
347,772
-
-
 
-
-
Performance Award(12)
03/21/13
-
-
1,578,996
-
-
 
-
-
Performance Award(13)
01/30/14
-
-
788,096
-
-
 
-
-
Performance Award(14)
01/30/14
-
-
1,578,996
-
-
 
-
-
 
 
 
 
 
 
 
 
 
 
Louis A. Bianco
 
 
 
 
 
 
 
 
 
Option
06/22/06
25
-
-
1,704.00
6/22/16
 
-
-
Option
01/18/07
58
-
-
2,040.00
1/18/17
 
-
-
Option
12/27/07
120
-
-
567.00
12/27/17
 
-
-
Option
12/10/13
200,000
-
-
1.77
12/10/23
 
-
-
Option(4)
12/23/15
-
1,600,000
-
1.24
12/23/25
 
-
-
Restricted Stock(5)
01/08/15
-
-
-
-
-
 
159,085
195,675
Performance Award(6)
01/03/12
-
-
95,357
-
-
 
-
-
Performance Award(7)
01/03/12
-
-
855,406
-
-
 
-
-
Performance Award(8)
01/03/12
-
-
342,163
-
-
 
-
-
Performance Award(9)
01/03/12
-
-
681,520
-
-
 
-
-
Performance Award(10)
01/03/12
-
-
342,163
-
-
 
-
-
Performance Award(11)
01/03/12
-
-
171,081
-
-
 
-
-
Performance Award(12)
03/21/13
-
-
639,451
-