DURHAM – Aerie Pharmaceuticals is paying a hefty price to secure the services of its new chief executive officer.
Raj Kannan negotiated a $5 million incentive package, Aerie announced Wednesday after the markets closed. The veteran executive was named CEO last week with Aerie (Nasdaq: AERI), which focuses on eye disease, agreeing to a package of stock worth millions.
Kannan was selected after Aerie’s longtime CEO and chairman Vincent Anido left the company and a board post for reasons not disclosed other than as part of a succession plan, according to Aerie.
“In connection with his acceptance of the position of Chief Executive Officer, and in accordance with the terms of Mr. Kannan’s employment agreement, Mr. Kannan will receive inducement equity awards with a grant date fair value of $5.5 million in the aggregat,” Aerie said in the incentive announcement desccribed as an “inducement grant.”
“These awards will be granted in two parts. The first set of awards, granted on December 20, 2021 and representing $3.5 million of grant date fair value, consists of 387,169 stock options that will vest over 4 years, with 25% vesting on the first anniversary of his start date and the remainder vesting ratably on each of the subsequent 36 monthly anniversaries of his start date, and 215,783 shares of restricted stock that will vest in substantially equal installments on each of the first four anniversaries of his start date.
“The second set of awards, representing $2.0 million of grant date fair value, will be granted at the same time as other senior executives receive an annual equity grant in February 2022, for which 50% of the value will be granted in the form of stock options that will vest over 4 years, with 25% vesting on the first anniversary of the date of grant and the remainder vesting ratably on each of the subsequent 36 monthly anniversaries of the date of grant, and 50% of the value will be granted in the form of performance-vested restricted shares, the vesting conditions of which remain subject to determination by the Compensation Committee of the Board of Directors of the Company.”
Aerie added that the “awards are being made outside of Aerie’s stockholder-approved equity incentive plan and were approved by the Company’s independent directors as an inducement material to Mr. Kannan entering into employment with the Company in reliance on Nasdaq Listing Rule 5635(c)(4), which requires this public announcement.”