Item
10. Directors, Executive Officers and Corporate Governance.
Our Directors and Executive Officers
Our directors are elected at the annual
meeting of stockholders to hold office until the annual meeting of stockholders for the ensuing year or until their successors
have been duly elected and qualified. Officers are elected annually by the Board of Directors and serve at the discretion of the
Board. Following is information about our executive officers and directors. There are no family relationships among our executive
officers or directors.
Name
|
|
Age
|
|
Position
|
Edward Myles
|
|
42
|
|
Interim President, Chief Financial Officer and Executive Vice President of Corporate Development
|
Robert P. Lanza M.D.
|
|
58
|
|
Chief Scientific Officer
|
Eddy Anglade
|
|
52
|
|
Executive Vice President of Clinical Development
|
Michael Heffernan
|
49
|
|
Chairman of the Board of Directors
|
Alan C. Shapiro, Ph.D.
|
|
68
|
|
Member of the Board of Directors
|
Robert Langer, Sc.D.
|
65
|
|
Member of the Board of Directors
|
Zohar Loshitzer
|
56
|
|
Member of the Board of Directors
|
Gregory D. Perry
|
53
|
|
Member of the Board of Directors
|
Edward Myles
joined ACT in June
2013, as the Company’s Chief Financial Officer and Executive Vice President of Corporate Development. Effective January 21,
2014, the Board appointed Mr. Myles to the additional role of Interim President. From November 2008 to June 2013 Mr. Myles was
with PrimeraDx, a privately-held molecular diagnostics company, where he served as Chief Financial Officer and Vice President of
Operations. At PrimeraDx, Mr. Myles helped to lead the company from the proof-of-concept stage to become a fully integrated commercial
organization. Prior to joining PrimeraDx, Mr. Myles was the Chief Financial Officer and Senior Vice President of Finance at Pressure
BioSciences, a Nasdaq-listed, life-science tools company. Earlier in his career, Mr. Myles held financial positions of increasing
responsibility with EMD Pharmaceuticals (a subsidiary of Merck KGaA), SG Cowen Securities Corporation, Boston Biomedica and PriceWaterhouseCoopers.
Mr. Myles received a master’s degree in business administration from Washington University in St. Louis and a bachelor’s
degree in business administration from the University of Hartford. Mr. Myles became a CPA in 1996.
Robert P. Lanza, M.D.
has been our
Chief Scientific Officer since October 2007. Dr. Lanza has over 20 years of research and industrial experience in the
areas of tissue engineering and transplantation medicine. Prior to his promotion to Chief Scientific Officer, Dr. Lanza served
as the Company’s VP of Research & Scientific Development. Before joining us in 1999, from 1990 to 1998, Dr. Lanza
was Director of Transplantation Biology at BioHybrid Technologies, Inc., where he oversaw that company’s xenotransplantation
and bioartificial pancreas programs. He has edited or authored sixteen books, including Principles of Tissue Engineering (4
th
ed. co-edited with R. Langer and J. Vacante), Yearbook of Cell and Tissue Transplantation, One World The Health &
Survival of the Human Species in the Twenty-First Century, and Xeno: The Promise of Transplanting Animal Organs into Humans (co-authored
with D.K.C. Cooper). Dr. Lanza received his B.A. and M.D. Degrees from the University of Pennsylvania, where he was both a
University Scholar and Benjamin Franklin Scholar.
Eddy Anglade
joined ACT in January
2014, as the company’s Executive Vice President of Clinical Development. Dr. Anglade co-founded Lux Pharmaceuticals in 2006,
serving as its Chief Medical Officer, where he guided the development of orphan designated and fast-track products as well as early
phase development of a novel therapeutic agent for dry eye disease until July 2013. Previously he was Vice President of Clinical
Development at Enzon Pharmaceuticals, where he oversaw all clinical development activities and was a member of the research and
development leadership team, and designed the industry's first multi-center, randomized, placebo-controlled and blinded study of
an agent for the prevention of rejection in lung transplantation. He has also served as a medical director for Hoffman-La Roche
Inc. where he developed and implemented clinical strategies for their CellCept® and Cytovene® drugs and served as the medical
monitor for Zenapax® in cardiac transplantation. Dr. Anglade holds an M.D. from Yale University. He completed his residency
in ophthalmology at Massachusetts Eye and Ear Infirmary/Harvard Medical School, and received additional training in ocular immunology
at the National Eye Institute/National Institutes of Health.
Michael Heffernan
has served as
a director since April 2012 and became Chairman of the Board of Directors effective October 2013. He has 26 years of experience
in the pharmaceutical and related healthcare industries. He is currently Co-Founder, President, CEO of Collegium Pharmaceutical.
Collegium is specialty pharmaceutical company focused on the development of pharmaceutical products for the treatment of chronic
pain. He was also previously the founder, President and CEO of Onset Therapeutics, a dermatology focused company that develops
and commercializes products for the treatment of skin related illnesses and was responsible for the spin-off of this business to
create PreCision Dermatology. Michael held prior positions as Co-Founder, President and CEO of Clinical Studies Ltd., a pharmaceutical
contract research organization that he successfully sold. He also served as President and CEO of PhyMatrix, a public $400 million
integrated healthcare services company where he was hired to restructure the company. Michael started his career at Eli Lilly and
Company and served in numerous sales and marketing roles. He has also been a member of the Board of Directors, Advisor and
Angel Investor in a number of healthcare companies. He is currently a member of the Board of Directors of Cornerstone
Therapeutics (NASDAQ:CRTX), a specialty pharmaceutical company and PreCision Dermatology. Michael earned his B.S. Degree in Pharmacy
from the University of Connecticut and is a Registered Pharmacist. Mr. Heffernan’s pharmaceutical industry and business management
knowledge and experience qualify him to serve as a director of the Company.
Alan C. Shapiro, Ph.D.
has served
as director since 2005. He adds more than 30 years’ experience in corporate and international financial management to
the Company. Dr. Shapiro is currently the Ivadelle and Theodore Johnson Professor of Banking and Finance Emeritus at the Marshall
School of Business, University of Southern California, where he previously served as the Chairman of the Department of Finance
and Business Economics, Marshall School of Business. Prior to joining the University of Southern California, Dr. Shapiro taught
as an Assistant Professor at the University of Pennsylvania, Wharton School of Business, and has been a visiting professor at Yale
University, UCLA, the Stockholm School of Economics, University of British Columbia, and the U.S. Naval Academy. Dr. Shapiro
has published over 50 articles in such academic and professional journals as the Journal of Finance, Harvard Business Review, and
the Journal of Business, among many others. He frequently serves as an expert witness in cases involving valuation, economic damages,
international finance, takeovers, and transfer financing through Trident Consulting Group LLC. He received his B.A. in Mathematics
from Rice University, and a Ph.D. in Economics from Carnegie Mellon University. Dr. Shapiro is a trustee of Pacific Corporate
Group’s Private Equity Fund. Dr. Shapiro’s board experience on multiple public company boards, his recognized expertise
as a highly sought after financial advisor and his career as a professor and Chair in the field of Finance and Administration qualifies
him as a valued member of our board of directors.
Robert S. Langer, Sc.D.
has served
as a director since October 2011. Since 2005, he has been an Institute Professor (there are 11 Institute Professors at MIT; being
an Institute Professor is the highest honor that can be awarded to a faculty member). Dr. Langer has written approximately 1,230
articles and has over 1030 issued or pending patents. His many awards include the National Medal of Science, National Medal of
Technology and Innovation, Charles Stark Draper Prize (considered the engineering Nobel Prize), Albany Medical Center Prize (largest
US medical prize), Breakthrough Prize in Life Sciences, Wolf Prize in Chemistry and the Lemelson-MIT prize, for being “one
of history’s most prolific inventors in medicine.” Langer is one of the very few individuals ever elected to the Institute
of Medicine, the National Academy of Engineering, and the National Academy of Sciences. Dr. Langer previously served on the board
of directors of Fibrocell Science, Inc. and currently serves on the Board of Directors of Bind Therapeutics. Dr. Langer’s
medical and scientific knowledge and experience qualify him to serve as a director of the Company.
Zohar Loshitzer
has served as a
director since November 2011. He is currently the CEO of Presbia, Inc. Previously, Mr. Loshitzer served as a principal in Los Angeles-based
private equity firm Orchard Capital and as the president, CEO and founder of Universal Telecom Services (UTS), which provides high-quality,
competitively priced voice and data telecommunications solutions to emerging markets. Mr. Loshitzer oversaw the company’s
operations and its critical relationships with key foreign entities, mainly in the Indochina region. He is one of the founders
of J2 Global Communications (NASDAQ: JCOM), and a co-founder and former managing director of Life Alert Emergency Response, Inc.
He currently serves as a managing director of Orchard Telecom, Inc., and currently serves as a board member of Environmental Solutions
Worldwide Inc. (ESW). ESW is a publicly traded company (OTCBB: ESWW) and manufactures and markets a diverse line of proprietary
catalytic emission conversion, control and support products and technologies for the International Transportation, Construction
and Utility markets. He has previously served as a board member to MAI Systems Corporation, an AMEX-listed company. Earlier in
his career, Mr. Loshitzer worked in the aerospace industry at the R&D lab of Precision Instruments, a division of IAI (Israel
Aircraft Industries).Mr. Loshitzer focuses on helping grow companies from startups to global enterprises. Under his leadership,
company infrastructures have been dramatically scaled and offerings broadened while maintaining a strong culture of innovation.
Mr. Loshitzer holds a degree in Electrical & Electronic Engineering from Ort Syngalowski College in Israel. Mr. Loshitzer’s
finance and business management knowledge and experience qualifies him to serve as a director of the Company.
Gregory D. Perry
has served
as a director since December 2011. He is currently the Chief Financial and Business Officer of Eleven Biotherapeutics Inc. Prior
to joining Eleven Biotherapeutics, Mr. Perry served as Interim Chief Financial Officer of InVivo Therapeutics (NVIV) and prior
to InVivo, Mr. Perry was Executive Vice President and Chief Financial Officer of Immunogen, Inc. (IMGN) from 2009 to 2013, where
he led the company's strategic transition from a platform technology company to a product development company. Prior to Immunogen,
Mr. Perry served as Chief Financial Officer (CFO) of Elixir Pharmaceuticals. He served as CFO of Domantis, Ltd. until its acquisition
by GlaxoSmithKline in 2006, and as CFO of Transkaryotic Therapies, Inc. (TKT) until its acquisition by Shire plc in 2005. Before
joining Transkaryotic Therapies in 2003, Mr. Perry served in financial management positions of increasing responsibility at PerkinElmer,
Inc., Honeywell and GE's European medical systems business unit. Mr. Perry holds a Bachelor of Arts degree in Economics and in
Political Science from Amherst College. Mr. Perry’s pharmaceutical industry knowledge and experience qualifies him to serve
as a director of the Company.
Board of Directors Meetings and Attendance
The Board of Directors has responsibility
for establishing broad corporate policies and reviewing our overall performance rather than day-to-day operations. The primary
responsibility of our Board of Directors is to oversee the management of our company and, in doing so, serve the best interests
of the company and our stockholders. The Board of Directors selects, evaluates and provides for the succession of executive officers
and, subject to stockholder election, directors. It reviews and approves corporate objectives and strategies, and evaluates significant
policies and proposed major commitments of corporate resources. Our Board of Directors also participates in decisions that have
a potential major economic impact on our company. Management keeps the directors informed of company activity through regular communication,
including written reports and presentations at Board of Directors and committee meetings.
We have no formal policy regarding director
attendance at the annual meeting of stockholders. The Board of Directors held thirteen meetings in 2013, four in person and nine
via telephone. All board members were present at the in person meetings and two directors missed three of the meetings held by
telephone.
Board Committees
Our Board of Directors has established
an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The members of each committee
are appointed by our Board of Directors, upon recommendation of the Nominating Committee, and serve one-year terms. Each of these
committees operates under a charter that has been approved by the Board of Directors. The charter for each committee is available
on our website. The Audit Committee met four times during 2013. The Compensation Committee met ten times during 2013. The Nominating
Committee did not meet during 2013.
Audit Committee
The Audit Committee’s responsibilities
include:
|
·
|
Monitoring the integrity of the Company’s
financial reporting process and systems of internal controls regarding finance, accounting and legal compliance.
|
|
·
|
Monitoring the independence and performance
of the Company’s internal and independent auditors.
|
|
·
|
Monitoring compliance by the Company with
legal and regulatory requirements.
|
|
·
|
Facilitating open communication among
the Company’s independent auditors, internal auditors, employees, management, and the Board.
|
Mr. Perry, Dr. Shapiro, and Mr.
Loshitzer serve on our Audit Committee. On November 4, 2013, Mr. Perry was elected to serve as chair of the Audit
Committee; prior to that date in 2013, Dr. Shapiro had served as chair. The Board of Directors has determined that Mr.
Perry qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K and
is independent according to the requirements of Rule 5605(a)(2) of the Nasdaq Marketplace Rules and Rule 10A-3 under
the Securities Exchange Act of 1934, as amended.
Compensation Committee
The Compensation Committee’s responsibilities
include:
|
·
|
Reviewing and approving or recommending
approval to the board of directors, of the compensation of our executive officers,
|
|
·
|
Overseeing the evaluation of the performance
of our senior executives,
|
|
·
|
Reviewing and making recommendations to
the Board of Directors regarding incentive compensation and equity-based plans,
|
|
·
|
Administering our stock incentive plans,
and
|
|
·
|
Reviewing and making recommendations to
the Board of Directors regarding director compensation.
|
The members of the Compensation Committee
are Dr. Shapiro, Mr. Perry, Mr. Loshitzer, and Mr. Heffernan. Dr. Shapiro serves as chair of the Compensation Committee.
Nominating Committee
The
Nominating Committee’s responsibilities include:
|
·
|
Identifying individuals qualified to become
board members;
|
|
·
|
Recommending to the Board the persons
to be nominated for election as directors and to each of the board’s committees;
|
|
·
|
Reviewing and making recommendations to
the Board with respect to senior management succession planning; and
|
|
·
|
Overseeing an annual evaluation of the
Board.
|
The members of the Nominating Committee
are Dr. Shapiro, Mr. Loshitzer, Mr. Heffernan, Mr. Perry, and Dr. Langer. On November 4, 2013, Mr. Loshitzer was elected
to serve as chair of the Nominating Committee.
Director Candidates
The process followed by the Nominating
Committee to identify and evaluate director candidates includes requests to board members and others for recommendations, meetings
from time to time to evaluate biographical information and background material relating to potential candidates and interviews
of selected candidates by members of the Nominating Committee and the Board.
In considering whether to recommend any
particular candidate for inclusion in the Board’s slate of recommended director nominees, the Nominating Committee applies
certain criteria, including:
|
·
|
The candidate’s honesty, integrity
and commitment to high ethical standards,
|
|
·
|
Demonstrated financial and business expertise
and experience,
|
|
·
|
Understanding of our company, its business
and its industry,
|
|
·
|
Actual or potential conflicts of interest,
and
|
|
·
|
The ability to act in the interests of
all stockholders.
|
The Nominating Committee does not assign
specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. We believe
that the backgrounds and qualifications of our directors, considered as a group, should provide a significant breadth of experience,
knowledge and abilities that will allow our Board to fulfill its responsibilities.
The Nominating Committee will consider
director candidates recommended by stockholders or groups of stockholders who have owned more than 5% of our common stock for at
least a year as of the date the recommendation is made. Stockholders may recommend individuals to the Nominating Committee for
consideration as potential director candidates by submitting their names, together with appropriate biographical information and
background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially
owned more than 5% of our common stock for at least a year as of the date such recommendation is made, to the Nominating Committee,
c/o Corporate Secretary, Advanced Cell Technology, Inc., 33 Locke Drive, Marlborough, Massachusetts 01752. Assuming that appropriate
biographical and background material have been provided on a timely basis, the Committee will evaluate stockholder-recommended
candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates
submitted by others.
Communicating with the Directors
The Board will give appropriate attention
to written communications that are submitted by stockholders, and will respond if and as appropriate. The chair of the Audit Committee
is primarily responsible for monitoring communications from stockholders and for providing copies or summaries to the other directors
as he considers appropriate.
Communications are forwarded to all directors
if they relate to important substantive matters and include suggestions or comments that the chair of the Audit Committee considers
to be important for the directors to know. In general, communications relating to corporate governance and corporate strategy are
more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as
to which we tend to receive repetitive or duplicative communications.
Stockholders who wish to send communications
on any topic to the Board should address such communications to the Board of Directors, c/o Corporate Secretary, Advanced Cell
Technology, Inc., 33 Locke Drive, Marlborough, Massachusetts, 01752. You should indicate on your correspondence that you are
an Advanced Cell Technology, Inc. stockholder.
Anyone may express concerns regarding questionable
accounting or auditing matters or complaints regarding accounting, internal accounting controls or auditing matters to the Audit
Committee by calling (508) 756-1212. Messages to the Audit Committee will be received by the chair of the Audit Committee
and our Corporate Secretary. You may report your concern anonymously or confidentially.
Board Leadership Structure and Role
in Risk Oversight
Although we have not adopted a formal policy
on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined
that it is in the best interests of the Company and its stockholders to combine these roles. However, as of October 1, 2013,
we determined that the roles should be separated and Mr. Heffernan became the Chairman of the Board of Directors and Mr. Rabin
became Chief Executive Officer and a member of the Board of Directors. Subsequently, on January 21, 2014, the Board and Mr. Rabin
mutually agreed that he would cease serving in his roles as Chief Executive Officer and as a director of the Company, effective
immediately. Effective January 21, 2014, the Board appointed Mr. Myles, our Chief Financial Officer and Executive Vice President
of Corporate Development, to the additional role of Interim President.
Our Audit Committee is primarily responsible
for overseeing our risk management processes on behalf of our board of directors. The Audit Committee receives and reviews periodic
reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment
of risks. In addition, the Audit Committee reports regularly to the full Board of Directors, which also considers our risk profile.
The Audit Committee and the full Board of Directors focus on the most significant risks facing our company and our company’s
general risk management strategy, and also ensure that risks undertaken by our Company are consistent with the Board’s appetite
for risk. While the Board oversees our company’s risk management, management is responsible for day-to-day risk management
processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company
and that our Board leadership structure supports this approach.
Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s
directors, executive officers and persons who own more than 10% of the Company’s stock (collectively, “Reporting Persons”)
to file with the SEC initial reports of ownership and changes in ownership of the Company’s common stock. Reporting Persons
are required by SEC regulations to furnish the Company with copies of all Section 16(a) reports they file. Based solely on
a review of the reports furnished to us, or written representations from reporting persons that all reportable transaction were
reported, we believe that during the fiscal year ended December 31, 2013, our officers, directors and greater than ten percent
stockholders timely filed all reports they were required to file under Section 16(a), other than as disclosed below:
|
·
|
The Company was tardy in filing Form 4s with respect to two transactions
on behalf of Gregory D. Perry, a director.
|
|
·
|
The Company was tardy in filing Form 4s with respect to two transactions
on behalf of Zohar Loshitzer, a director.
|
|
·
|
The Company was tardy in filing Form 4s with respect to two transactions
on behalf of Michael Heffernan, a director.
|
|
·
|
The Company was tardy in filing Form 4s with respect to two transactions
on behalf of Dr. Alan Shapiro, a director.
|
|
·
|
The Company was tardy in filing Form 4s with respect to two transactions
on behalf of Dr. Robert Langer, a director.
|
|
·
|
The Company was tardy in filing a Form 3 on behalf of Edward Myles,
Interim President, Chief Financial Officer and Executive VP of Corporate Development.
|
|
·
|
Gary Rabin, a director and Chief Executive Officer, filed a Form 4
late with respect to one transaction executed in January 2013.
|
Compensation Committee Interlocks
and Insider Participation
During 2013, Dr. Shapiro, Mr. Perry, Mr.
Loshitzer and Mr. Heffernan served on the Compensation Committee. None of the members of the Compensation Committee has had a relationship
with the Company or any subsidiary other than as a director or stockholder. No executive officer of the Company served or serves
on the compensation committee or board of any company that employed or employs any member of Company’s Compensation Committee
or Board of Directors.
Code of Ethics
We have adopted a code of business conduct
and ethics that applies to our directors, officers (including our principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions) as well as our employees. A copy of our code of business
conduct and ethics is available on our website at
www.advancedcell.com
under “Investors—Corporate
Governance.” We intend to post on our website all disclosures that are required by applicable law, the rules of the Securities
and Exchange Commission or OTCBB listing standards concerning any amendment to, or waiver from, our code of business conduct and
ethics.
Item
11. Executive Compensation.
Compensation Discussion and Analysis
This section describes the compensation
program for the following executive officers, each of which are considered our “Named Executive Officers” for 2013
under applicable SEC rules: Gary Rabin (Chief Executive Officer through January 21, 2014), Robert P. Lanza, M.D. (Chief Scientific
Officer) and Edward Myles (Interim President, Chief Financial Officer and Executive Vice President of Corporate Development). In
particular, this section focuses on our 2013 compensation program and related compensation decisions.
The Board of Directors has established
a Compensation Committee, comprised of independent non-employee directors, which approves all compensation and awards to executive
management. The members of the Compensation Committee have extensive executive level experience in other companies and bring a
perspective of reasonableness to compensation matters with our Company. In addition, the Compensation Committee compares executive
compensation practices of similar companies at similar stages of development.
The objectives of our compensation program are as
follows:
|
·
|
attract and retain individuals with superior ability and managerial
experience;
|
|
·
|
align executive officers' incentives with our corporate strategies,
business objectives and the long-term interests of our stockholders; and
|
|
·
|
increase the incentive to achieve key strategic performance measures
by linking incentive award opportunities to the achievement of performance objectives and by providing a portion of total compensation
for executive officers in the form of ownership in the company.
|
Executive compensation is paid or granted
pursuant to each Named Executive Officer’s compensation agreement. Compensation adjustments are made occasionally based on
changes in a Named Executive Officer’s level of responsibility or on changed local and specific executive employment market
conditions. Based on these factors, the Compensation Committee approved the execution of employment agreements with the Company’s
two remaining executive officers.
Compensation
Consultant
In July 2013, the Compensation Committee
retained Radford (an Aon Hewitt company), as an independent compensation consultant to provide executive compensation advice. Radford
reports directly to the Compensation Committee.
Radford was hired to perform the following
services:
|
-
|
Assist in developing a peer group to be used to assess executive compensation;
|
|
-
|
Assess the executive compensation program and develop recommendations covering salary, incentives and equity compensation;
|
|
-
|
Review peer group short-term incentive design practices and assist in developing structure of short-term incentive program for the Compensation Committee.
|
Radford prepared analyses for the Compensation
Committee based on its review of market data it believed to be relevant, including compensation levels at, and financial performance
of, the peer group of companies identified below. Radford also met with the Compensation Committee and with management to solicit
input on job scope, performance, retention issues and other factors it views as relevant. Radford then prepared a report and presented
it to the Compensation Committee with recommendations as to the compensation of the named executive officers.
Based on its analysis of peer group compensation
and practices, Radford recommended, and the Compensation Committee approved, that 2013 base salaries of Mr. Rabin and Dr.
Lanza increase by 5% from 2012, which represented the required increase per their respective employment agreements, which were
in place at that time.
Radford does not provide any executive
compensation consulting services other than those requested by the Compensation Committee and which are related to Radford‘s
engagement by the Compensation Committee. Radford does not perform any services directly for management or any other services for
the Company and receives no compensation from the Company other than for its work in advising the Compensation Committee.
Given the foregoing, along with (i) the
absence of any business or personal relationship between Radford and any member of the Compensation Committee or any of our executive
officers, (ii) the fact that Radford does not trade in Company stock, (iii) the fact that Radford has an independence policy that
is reviewed annually by its governing body, and (iv) the fact that Radford proactively notifies the Compensation Committee of any
potential or perceived conflicts of interest, the Compensation Committee has concluded that Radford’s work does not raise
any conflict of interest.
Peer
Group
In August 2013, Radford recommended (and
the Compensation Committee approved) using the following publicly-traded, U.S.-based companies in the stem cell/biotechnology sector
for purposes of assessing the compensation of the Named Executive Officers. The following companies were selected primarily
because they generally had fewer than 100 employees and because their market capitalization was less than $300 million. Additionally,
with respect to assessing the compensation for the Chief Scientific Officer, Radford supplemented the below peer group information
with data from Radford’s 2013 Global Life Sciences Survey utilizing publicly traded pre-commercial biotechnology companies
with under 100 employees.
•
|
Aastrom Biosciences
|
|
•
|
GTx
|
|
|
•
|
Amicus Therapeutics
|
|
•
|
International Stem Cell
|
|
|
•
|
A.P. Pharma
|
|
•
|
Newlink Genetics
|
|
|
•
|
Athersys
|
|
•
|
OncoGenex Pharmaceuticals
|
|
|
•
|
BiotimeMarket
|
|
•
|
Osiris Therapeutics
|
|
|
•
|
Celldex Therapeutics
|
|
•
|
Repligen
|
|
|
•
|
Celsion
|
|
•
|
StemCells
|
|
|
•
|
Geron
|
|
•
|
Sunesis Pharmaceuticals
|
|
|
Executive Compensation Components
Our
executive compensation consists of base salary, cash incentive bonuses, equity incentive compensation and broad-based benefits
programs. Each of the elements of executive compensation is discussed in more detail below. We have not adopted any formal guidelines
for allocating total compensation between long-term and short-term compensation, cash compensation and non-cash compensation, or
among different forms of non-cash compensation. The compensation committee considers a number of factors in setting compensation
for its executive officers, including Company performance, as well as the executive's performance, experience, responsibilities
and the compensation of executive officers in similar positions at comparable companies.
Base Salary
Base
salary represents the fixed portion of an executive officer's compensation and is intended to provide compensation for day-to-day
performance. The compensation committee believes that a competitive base salary is a necessary element of any compensation program
that is designed to attract and retain talented and experienced executives. Base salaries for our named executive officers are
intended to be competitive with those received by other individuals in similar positions at the companies with which we compete
for talent. Base salaries are originally established at the time the executive is hired based on individual experience, skills
and expected contributions, our compensation committee's understanding of what executives in similar positions at other peer companies
were being paid at such time and are also the result of negotiations with certain executives during the hiring process. The base
salaries of our named executive officers are reviewed annually and may be adjusted to reflect market conditions and our executives'
performance during the prior year as well as the financial position of the company, or if there is a change in the scope of the
officer's responsibilities. We believe that a competitive base salary is a necessary element of any compensation program that is
designed to attract and retain talented and experienced executives. We also believe that attractive base salaries can motivate
and reward executives for their overall performance.
As
of December 31, 2013, the base salaries for our named executive officers were as follows:
Named Executive Officer
|
|
Base
Salary
|
|
Gary Rabin
|
|
$
|
551,250
|
|
Robert Lanza, M.D.
|
|
$
|
485,100
|
|
Edward Myles
|
|
$
|
330,000
|
|
2013 Cash Bonus
Incentive
After considering Radford’s report
and recommendations, and based on discussions with both Radford and Mr. Rabin, the Compensation Committee established a 2013 cash
bonus incentive arrangement for the Named Executive Officers. The target bonus opportunity was 60% of annual base salary
for Mr. Rabin, 40% of annual base salary for Dr. Lanza and 35% of annual base salary for Mr. Myles. The actual amount
of any bonus that was earned could be more or less than the target amount based on the Compensation Committee’s determination
as to the degree of achievement of the specified performance goals.
The 2013 bonus arrangement utilized a performance
matrix for the Named Executive Officers. The performance matrix included a number of detailed objectives which were categorized
across all components of the Company. The major initiatives which make up the performance matrix are listed below:
|
·
|
Upgrading the Company’s management
team and facilities, including completing key hires (CFO and EVP Clinical)
|
|
·
|
Advancing research and development activities
in key development programs, such as Retinal Pigment Epithelium (RPE) programs, platelets and Mesenchymal Stem Cell Programs.
|
|
·
|
Advance RPE commercial formulation and
process, complete cGMP process for platelets and MSC’s
|
|
·
|
Complete phase 1 and modified clinical protocols and other major clinical
development milestones
|
|
·
|
Intellectual property position improvements,
including establishing positions in new clinical, and pre-clinical programs
|
|
·
|
Secure non-dilutive funding and identify
key partnership opportunities
|
|
·
|
General corporate development, including
the resolution of outstanding legal issues, examination of potential listing on a national securities exchange and improvement
of the internal accounting and budgeting function
|
The progress against each of these major
initiatives was evaluated and graded by the Compensation Committee in early 2014. This evaluation process included discussions
with Management.
The Compensation Committee believed that
the above objectives were appropriate uses of company resources in that, at the time of their development, it was believed that
achievement of these objectives were viewed to be value creating for the company. Furthermore, the Compensation Committee believes
the objectives were sufficiently challenging and difficult to achieve, so as to drive management to optimize its efforts to achieve
these objectives.
In February 2014, the Compensation Committee
unanimously concluded that on an overall basis the target corporate performance objectives were achieved to a level of 52.1% and
that Dr. Lanza and Mr. Myles would therefore each receive a cash bonus in an amount equal to 52.1% of their respective target bonus
amounts for fiscal 2013. The Compensation Committee further determined that based on individual qualitative performance criteria,
Mr. Myles’ bonus would be increased to 100% of his target bonus for fiscal 2013.
Equity Incentive Compensation
Equity
incentive grants to our named executive officers are made at the discretion of the compensation committee under the terms of our
Stock Option Plans. The compensation committee believes that equity incentives subject to vesting over time or upon achievement
of performance objectives, can be an effective vehicle for the long-term element of compensation, as these awards align individual
and team performance with the achievement of our strategic and financial goals over time, and with stockholders' interests. The
Compensation Committee approves all option grants.
In 2013, the compensation committee made stock option grants to Dr. Lanza and Mr. Myles subject to time-based vesting, which are described in the Grants of
Plan-Based Awards table below. Stock options, which have exercise prices equal to at least fair market value of our common stock
on the date of grant, reward executive officers only if the stock price increases from the date of grant.
Employee
Benefits
In
addition to the primary elements of compensation described above, the named executive officers also participate in broad-based
employee benefits programs available to all of our employees, including health insurance, life and disability insurance, dental
insurance and our 401(k) plan.
Compensation Committee
Report*
The
Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K of the Securities Act with management. Based upon that review and analysis, the Compensation Committee recommended to the Board
of Directors that the “Compensation Discussion and Analysis” section be included in this annual report on Form 10-K.
Submitted by the Compensation
Committee:
Alan C. Shapiro
Gregory D. Perry
Zohar Loshitzer
Michael Heffernan
________________________
* The material in this report is not “soliciting
material,” is not deemed filed with the SEC and is not to be incorporated by reference into any of our filings under the
Securities Act or the Exchange Act whether made before or after the date of this annual report on Form 10-K and irrespective of
any general incorporation language therein.
Risk Management Considerations
In response to the ongoing global economic
recession, in 2013 the compensation committee considered the incentives under our executive compensation program and whether they
introduced or encouraged excessive risk taking or other behaviors by our executives that could have a negative impact on our business.
The compensation committee determined that our executive compensation program provides an appropriate balance of incentives and
that it does not encourage our executives to take excessive risks or otherwise create risks that are reasonably likely to have
a material adverse effect on us.
Summary Compensation Table
The following table summarizes the compensation
paid to our Named Executive Officers for the fiscal year ending December 31, 2013, 2012, and 2011.
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($) (1)
|
|
Option
Awards
($) (1)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
All
Other Compensation
($)
|
|
Total
($)
|
Gary Rabin
(2)
|
|
|
2013
|
|
|
|
551,250
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
-
|
|
|
|
–
|
|
|
|
551,250
|
|
Chief Executive
|
|
|
2012
|
|
|
|
525,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
315,000
|
|
|
|
–
|
|
|
|
840,000
|
|
Officer and Member of the Board of Directors
|
|
|
2011
|
|
|
|
490,000
|
|
|
|
649,359
|
|
|
|
2,550,000
|
|
|
|
3,457,543
|
|
|
|
–
|
|
|
|
–
|
|
|
|
7,146,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert P. Lanza, M.D.,
|
|
|
2013
|
|
|
|
485,100
|
|
|
|
101,095
|
|
|
|
79,714
|
|
|
|
69,860
|
|
|
|
-
|
|
|
|
–
|
|
|
|
735,769
|
|
Chief Scientific
|
|
|
2012
|
|
|
|
462,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
138,600
|
|
|
|
–
|
|
|
|
600,600
|
|
Officer
|
|
|
2011
|
|
|
|
407,500
|
|
|
|
255,000
|
|
|
|
1,703,931
|
|
|
|
2,502,971
|
|
|
|
–
|
|
|
|
–
|
|
|
|
4,869,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward Myles (3)
|
|
|
2013
|
|
|
|
175,154
|
|
|
|
135,500
|
|
|
|
–
|
|
|
|
1,046,834
|
|
|
|
-
|
|
|
|
–
|
|
|
|
1,357,488
|
|
Interim President, Chief Financial Officer and
Executive Vice President of Corporate Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents
the total grant date fair value, as determined under FASB ASC Topic 718, Stock Compensation, of all shares
and stock options granted to the Named Executive Officers during fiscal 2013. Please see the assumptions relating to the
valuation of our stock and stock option awards which are contained in Note 15 to the audited financial statements included in
this Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
|
(2)
|
On January 21, 2014, the Board and Mr. Rabin mutually agreed that he would cease serving in his roles as Chief Executive Officer and as a director of the Company, effective immediately. In addition to serving as Chief Executive Officer during fiscal year 2013, Mr. Rabin served as Principal Financial Officer through May 2013 and as Chairman of our Board of Directors through September 2013.
|
(3)
|
Mr. Myles joined
the Company on June 12, 2013; his 2013 annual base salary is $330,000. The bonus amount for Mr. Myles includes a sign-on
bonus of $20,000, which was paid within 10 days of his execution of his employment agreement.
|
Employment Agreements
Employment Agreement with Gary Rabin
Effective July 1, 2011, the Company entered
into an amended and restated employment agreement with Gary H. Rabin (the “Rabin Agreement”). Pursuant to the Rabin
Agreement, the parties agreed as follows:
|
·
|
Mr. Rabin would serve as the Company’s
chief executive officer and chief financial officer for a term commencing on July 1, 2011 until December 31, 2013 (subject to earlier
termination as provided therein).
|
|
·
|
The Company would pay Mr. Rabin a base
salary of $500,000 per year, through December 31, 2011, which amount shall increase at the end of each full year of the Rabin Agreement,
by an amount determined by the board, but by not less than 5% per year.
|
|
·
|
The Company agreed to pay Mr. Rabin a
retention bonus of $41,667 within 10 days of execution of the Rabin Agreement. The retention bonus was paid on August 5, 2011.
|
|
·
|
The Company would pay Mr. Rabin a performance
bonus in amount (not less than $100,000 per year) to be determined by the Compensation Committee of the Board of Directors.
|
|
·
|
The Company agreed to issue to Mr. Rabin,
upon execution of the Rabin Agreement, (i) 10,000,000 shares of restricted common stock, (ii) an option to purchase 10,000,000
shares of common stock with an exercise price equal to fair market value on the date of grant, (iii) an option to purchase 5,000,000
shares of common stock with an exercise price of $0.30, and (iv) an option to purchase 5,000,000 shares of common stock with an
exercise price of $0.45. The options will vest, and the shares will no longer be subject to the Company’s right to repurchase
for aggregate consideration of $1.00, in equal installments on the last day of each calendar quarter commencing on July 1, 2011
and ending on December 31, 2013.
|
If Mr. Rabin’s employment under the
Rabin Agreement were to be terminated by the Company without cause (as defined therein), or if Mr. Rabin resigns for good reason
(as defined therein), the Company would pay Mr. Rabin (in addition to unpaid base salary, performance bonus and incentive bonus
to the date of termination), a lump sum equal to the aggregate installments of base salary in effect on the date of termination
and otherwise payable in respect of the period commencing on the date immediately subsequent to the date of termination and ending
on the earlier to occur of the first anniversary of such date and December 31, 2013; provided, that, Mr. Rabin execute a standard
general release within 60 days of termination.
On January 21, 2014, the Board and Mr.
Rabin mutually agreed that he would cease serving in his roles as Chief Executive Officer and as a director of the Company, effective
immediately.
Employment Agreement with Robert Lanza
and Related Renewal
Effective July 1, 2011, the Company entered into an amended
and restated employment agreement with Robert Lanza (the “Lanza Agreement”). The term of the employment agreement ran
through September 31, 2013, at which time the term could be extended or renewed by mutual agreement of the parties in a writing
signed by the Company and Dr. Lanza.
Pursuant to the Lanza
Agreement, the parties agreed as follows:
|
·
|
Dr. Lanza will continue serve as the Company’s
chief scientific officer for a term commencing on July 1, 2011 until September 30, 2013 (subject to earlier termination as provided
therein, and extension by mutual written agreement).
|
|
·
|
The Company will pay Dr. Lanza a base
salary of $440,000 per year, which amount shall increase at the end of each year of the Lanza Agreement, by an amount determined
by the Board, but by not less than 5% per year. The Company may also pay Dr. Lanza annual bonuses in the Company’s sole discretion.
|
|
·
|
The Company agreed to issue to Dr. Lanza,
upon execution of the Lanza Agreement, (i) 15,000,000 shares of restricted common stock (of which 6,000,000 shares will vest on
the date of grant, with the balance of 9,000,000 shares vesting in equal installments on the last day of each month commencing
on January 31, 2012 and ending on September 30, 2013), (ii) an option to purchase 15,000,000 shares of common stock with an exercise
price equal to the closing price on the date of execution (of which 6,000,000 options will vest on the date of grant, with the
balance of 9,000,000 options vesting in equal installments on the last day of each month commencing on January 31, 2012 and ending
on September 30, 2013).
|
|
·
|
If Dr. Lanza’s employment under
the Lanza Agreement were to be terminated by the Company without Cause (as defined in the Lanza Agreement), or if Dr. Lanza resigns
for Good Reason (as defined in the Lanza Agreement the Company will pay Dr. Lanza severance equal to one year base salary.
|
Cause is defined in the Lanza Agreement
as A) Dr. Lanza being convicted of or pleading guilty (or no contest) to a felony or fraud, or Dr. Lanza’s violation of any
criminal or civil law relating to, or that materially impacts, Dr. Lanza’s performance of his duties, (B) Dr. Lanza’s
debarment, if caused by his own actions, by the United States Food and Drug Administration from working in or providing services
to any pharmaceutical or biotechnology company; (C) Dr. Lanza’s material breach of the Lanza Agreement or the material failure
of Dr. Lanza to properly perform Dr. Lanza’s job responsibilities, but only if Dr. Lanza did not correct (if reasonably capable
of correction) such breach or failure within 30 days of written notification to Dr. Lanza by the Company of such breach or failure;
or (D) commission of any act of gross fraud or misconduct with respect to the Company.
Good Reason is defined in the Lanza Agreement
as A) the termination of Dr. Lanza’s employment by Dr. Lanza because of a material diminution in the duties of Dr. Lanza
at the direction of the Company after written notice from Dr. Lanza to the Company of the specific duties and material changes
in Dr. Lanza’s duties to which he objects, the reasons for his objections, and his intent to terminate his employment because
of such material changes, said written notice to be served on the Company by Dr. Lanza within ninety (90) days of Dr. Lanza’s
knowledge of such alleged material changes, and the Company’s failure to modify within thirty (30) days of the written notice
the duties to Dr. Lanza conform to those duties currently in existence for the previous 90 days; (B) the termination of Dr. Lanza’s
employment by Dr. Lanza because of a material breach of the Lanza Agreement by the Company after written notice from Dr. Lanza
to the Company of the specific material breach asserted by Dr. Lanza, said written notice to be served on the Company by Dr. Lanza
within ninety (90) days of Dr. Lanza’s knowledge of such alleged material breach, and the Company’s failure to cure
such breach within thirty (30) days of the written notice; or (C) the termination of Dr. Lanza’s employment by Dr. Lanza
because of the relocation by Company by more than fifty (50) miles of Dr. Lanza’s place of employment without his consent,
provided that Dr. Lanza provides written notice to Company of the intention to terminate employment as the result of such relocation
within thirty (30) days following the date on which Dr. Lanza is given notice of the proposed relocation and the Company fails
to remedy the situation within thirty (30) days of the written notice from Dr. Lanza (it being understood that Dr. Lanza will not
be required to relocate temporarily in order to exercise this right). The sale of the Company or any other change in control of
the Company shall not, in and of itself, constitute a material diminution in duties of the Dr. Lanza under (A) above.
Change in Control under the Lanza Agreement
has the same meaning as a Change in Control under the 2005 Stock Incentive Plan, as may be amended, which is defined as (1) a sale
of all or substantially all of the Company’s assets, or (2) any merger, consolidation or other business combination transaction
of the Company with or into another corporation, entity or person, other than a transaction in which the holders of at least a
majority of the shares of voting capital stock of the Company outstanding immediately prior to such transaction continue to hold
(either by such shares remaining outstanding or by their being converted into shares of voting capital stock of the surviving entity)
a majority of the total voting power represented by the shares of voting capital stock of the Company (or the surviving entity)
outstanding immediately after such transaction, or (3) the direct or indirect acquisition (including by way of a tender or exchange
offer) by any person, or persons acting as a group, of beneficial ownership or a right to acquire beneficial ownership of shares
representing a majority of the voting power of the then outstanding shares of capital stock of the Company.
On November 8, 2013, with an effective date of October 1, 2013,
the parties mutually agreed to renew the term of the employment agreement until December 31, 2013 with the following supplemental
terms:
Pursuant to Section 4.4 of the Lanza
Agreement, Dr. Lanza may receive additional future grants of options to acquire stock during the term if determined by the Chief
Executive Officer and approved by the Board, each in their respective sole and absolute discretion. In accordance with this provision,
the Company shall grant to Dr. Lanza:
(a) 1,285,714 shares
of restricted common stock of Company under the Company's 2005 Stock Incentive Plan, subject to the terms and conditions of the
Company’s standard award documentation. Such shares will be subject to vesting in three equal installments. The first installment
shall vest on the Renewal Date, the second installment shall vest on November 30, 2013 and the third installment shall vest on
December 31, 2013, provided that Dr. Lanza remains employed by the Company on each vesting date. In the event that any of such
shares fail to vest, upon the termination of Dr. Lanza’s employment the unvested shares will be forfeited to the Company
without payment of any consideration for same to Dr. Lanza; and
(b) Options to purchase
1,285,714 shares of common stock of the Company with an exercise price equal to the per-share price of the Company’s common
stock as of the close of trading on the Renewal Date, subject to the terms and conditions of Company’s standard award documentation.
Such options will be subject to vesting in three equal installments. The first installment shall vest on the Renewal Date, the
second installment shall vest on November 30, 2013 and the third installment shall vest on December 31, 2013, provided that Dr.
Lanza remains employed by Company on each vesting date.
Pursuant to Section 4.2 of the Lanza
Agreement, the Company may, in its sole discretion, award bonuses during the term based upon the Dr. Lanza’s performance
as determined unilaterally by the Company. Any such bonuses will be paid by Company no later than 75 days after the end of Company’s
fiscal year with respect to which such bonus was determined. For fiscal year 2013, the Company targeted the bonus of up to 40%
of Dr. Lanza annual salary rate.
Employment Agreement with Edward Myles
Effective May 20, 2013, the Company entered
into an executive employment agreement with Edward Myles. Pursuant to the Myles Agreement, the parties agreed as follows:
|
·
|
Mr. Myles will serve as the Company’s
chief financial officer and executive vice president of corporate development for a term commencing on June 12, 2013 and ending
on December 31, 2015 (subject to earlier termination as provided therein, and extension by mutual written agreement).
|
|
·
|
The Company will pay Mr. Myles a base
salary of $330,000 per year, which amount shall increase at the end of each year of the Myles Agreement, by an amount determined
by the board, but by not less than 3% per year. The Company also paid a $20,000 signing bonus and will pay annual bonuses at Company’s
sole discretion, with an annual target bonus set at 35% of base salary.
|
|
·
|
The Company agreed to issue to Mr. Myles,
upon execution of the Myles Agreement, (i) an option to purchase 14,000,000 shares of common stock with an exercise price equal
to the closing price per share of common stock on the grant date as determined pursuant to the Stock Option Plan. Vesting of the
stock options shall occur as follows: 4,666,667 of the shares vest on December 31, 2013, and 2,333,333 vest on each of June 30,
2014, December 31, 2014 and June 30, 2015 and 2,333,334 shall vest on December 31, 2015.
|
|
·
|
If Mr. Myles employment under the Myles
Agreement were to be terminated by the Company without Cause (as defined in the Myles Agreement), or if Mr. Myles resigns for Good
Reason (as defined in the Myles Agreement the Company will pay Mr. Myles severance equal to one year base salary and a lump-sum
payment equal to 35% of the base salary in effect on the date of termination.
|
Cause is defined in the Myles Agreement
as the following:
(i) material
act or acts of fraud or dishonesty undertaken by Mr. Myles during the course of his employment;
(ii) misconduct
by Mr. Myles that is willful or deliberate on Mr. Myles part and that, in either event, is materially injurious to Company, monetarily
or otherwise;
(iii) the
indictment, formal charge, conviction of Mr. Myles of, or Mr. Myles entering of a plea of nolo contendere to, a misdemeanor involving
fraud, theft, dishonesty or moral turpitude or a felony, or Executive’s debarment by the U.S. Food and Drug Administration
from working in or providing services to any pharmaceutical or biotechnology company;
(iv) a material
breach of any terms and conditions of this Agreement by Mr. Myles and such breach has not been cured by Mr. Myles within thirty
(30) days after written notice thereof to Mr. Myles from Company;
(v) Mr.
Myles material failure to perform his duties or follow the lawful directions of the Board and such failure has not been cured
by Mr. Myles within thirty (30) days after written notice thereof to Mr. Myles from Company; or
(vi) a
material breach of any of the Company’s written policies that have been provided to Mr. Myles and such breach has not been
cured by Mr. Myles within thirty (30) days after written notice thereof to Mr. Myles from Company.
In the event of termination for Cause, without
limiting any of the Company’s rights or remedies in law and/or equity, Mr. Myles will only be entitled to receive within
sixty (60) days after the date of the termination of Mr. Myles employment, the amount of the Accrued Obligations. Mr. Myles will
not be entitled to any other salary, benefits, bonuses or other compensation after such date.
Good Reason is defined in the Myles Agreement
as the following:
(i)
|
|
Any material diminution in Mr. Myles’ Base Salary (unless such diminution is
consistent with the same percentage level of Base Salary reduction applicable to other senior executives);
|
(ii)
|
|
A material diminution in Mr. Myles authority, duties, or responsibilities;
|
(iii)
|
|
A material change in the geographic location at which Mr. Myles must perform his services
to the Company (i.e., such geographic location is beyond a fifty (50) mile radius from the geographic location at which Mr. Myles
performs his services to the Company as of the Commencement Date);
|
(iv)
|
|
A material breach by the Company of this Agreement; or
|
(v)
|
|
in the event of a Change in Control, in addition to clauses (i) – (iv) above:
a. A material diminution in Mr. Myles authority, duties, or responsibilities; or
b. A
material change to the reporting structure set forth in the agreement.
|
Mr. Myles shall provide Company written
notice of any claimed event of Good Reason within thirty (30) days of the date such Good Reason event set forth above first occurred
without Mr. Myles consent. Mr. Myles termination for Good Reason will only be effective if Company does not cure or attempt to
cure such claimed event of Good Reason within thirty (30) days of receipt of written notice from Mr. Myles (such notice shall describe
in detail the basis and underlying facts supporting Mr. Myles belief that a Good Reason event has occurred). Company shall notify
Mr. Myles in writing of the timely cure of any claimed event of Good Reason and the manner in which such cure was effected, and
upon receipt of written notice from Mr. Myles of his concurrence that a cure has been effectuated, any notice delivered by Mr.
Myles based on such claimed Good Reason shall be deemed withdrawn and shall not be effective to terminate this Agreement.
Change in Control has the same definition under the Myles Agreement as it has under the Lanza Agreement.
2005 Stock Incentive Plan
The Company maintains the stockholder approved
2005 Stock Incentive Plan pursuant to which equity-based compensation awards can be awarded to the Named Executive Officers and
other service providers. Unless terminated earlier, the 2005 Stock Incentive Plan will terminate in January 2015. The 2005 Stock
Incentive Plan is currently administered by the compensation committee of our Board of Directors. Any of our employees, directors,
non-employee directors and consultants, as determined by the compensation committee, may be selected to participate in the 2005
Stock Incentive Plan. We may award these individuals with one or more of the stock options, stock purchase rights, restricted shares
and/or other equity based awards.
The maximum aggregate number of common
shares under the 2005 Stock Incentive Plan that may be awarded is 9,000,000, plus an annual increase on the first day of each of
the Company's fiscal years beginning in 2006 equal to 5% of the common shares outstanding on the last day of the immediately preceding
fiscal year. The shares may be authorized, but unissued, or reacquired Common Stock. If an award should expire or become unexerciseable
for any reason without having been exercised in full, or is surrendered pursuant to an option exchange program, the unpurchased
shares that were subject thereto shall, unless the 2005 Stock Incentive Plan shall have been terminated, become available for future
grant under the 2005 Stock Incentive Plan. In addition, any shares which are retained by the Company upon exercise of an award
in order to satisfy the exercise or purchase price for such award or any withholding taxes due with respect to such exercise or
purchase shall be treated as not issued and shall continue to be available under the 2005 Stock Incentive Plan. Shares issued under
the 2005 Stock Incentive Plan and later repurchased by the Company pursuant to any repurchase right which the Company may have
shall be available for future grant under the 2005 Stock Incentive Plan. The maximum number of shares that may be subject to stock
options and stock purchase rights granted to any one employee under the 2005 Stock Incentive Plan for any fiscal year of the Company
shall be 1,500,000. As of December 31, 2013, 299,777,464 shares remained available for issuance under the 2005 Stock Incentive
Plan and there were 117,137,450 shares subject to outstanding stock options and unvested shares granted under the 2005 Stock Incentive
Plan.
Grants of Plan-Based
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other
|
|
option
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock
|
|
awards:
|
|
|
|
date fair
|
|
|
|
|
Estimated future payouts
|
|
Estimated future
|
|
awards
|
|
Number
|
|
Exercise
|
|
value of
|
|
|
|
|
under non-
|
|
payouts under
|
|
Number
|
|
of
|
|
or base
|
|
stock and
|
|
|
|
|
equity
|
|
equity
|
|
of shares
|
|
securities
|
|
price of
|
|
option
|
|
|
Date
|
|
incentive plan awards
|
|
incentive plan awards
|
|
of stock
|
|
underlying
|
|
option
|
|
Grant
|
Name and
|
|
of
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
or units
|
|
options
|
|
awards
|
|
awards
|
Principal Position
|
|
Grant
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
|
|
|
|
($/Sh)
|
|
($)(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary Rabin
(1)(2)(3)
|
|
|
|
100,000
(2)
|
|
330,750
|
|
413,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer and Member of Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
|
|
–
|
|
1,000,000
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert P. Lanza, M.D.
(1)
|
|
|
|
72,765
|
|
194,040
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Scientific Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Award
|
|
11/8/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,285,714
|
|
0.0620
|
|
69,860
|
Restricted Stock Award
|
|
11/8/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,285,714
|
|
|
|
|
|
79,714
|
|
|
|
|
57,750
|
|
115,500
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward Myles
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interim President, Chief Financial Officer and Executive Vice President of Corporate Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Award
|
|
6/27/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000,000
|
|
0.0778
|
|
1,046,834
|
|
(1)
|
Each Named Executive Officer was eligible to earn a fiscal 2013 performance-based bonus pursuant to his employment agreement as discussed above under “Employment Agreements.” The 2013 bonus program is described above under “2013 Cash Bonus Incentive” and the amounts paid are also shown above in the Summary Compensation Table. The targets were based on a percentage of annual base salary and this was 60% for Mr. Rabin, 40% of salary for Dr. Lanza and 35% for Mr. Myles. The actual bonus could be more or less than the target based on a threshold achievement level of at least 50%. For Mr. Rabin the maximum bonus could not exceed 125% of the target.
|
|
(2)
|
In accordance with Mr. Rabin’s employment agreement, he is normally entitled to no less than $100,000 per year for any performance-based bonus, however he did not renew his agreement which expired December 31, 2013 and left the Company in January 2014.
|
|
(3)
|
Pursuant to Mr. Rabin’s employment agreement, Mr. Rabin was also eligible to earn a fiscal 2013 incentive-based bonus based on the trading price of the Company’s common stock as discussed above under “Employment Agreements.” The maximum amount Mr. Rabin was eligible to receive was $1,000,000.
|
|
(4)
|
Represents the total grant date for value, as determined under FASB ASC 718, Stock
Compensation. Please see the assumptions relating to the valuation of our stock and stock option awards, which are contained
in Note 15 to the audited financial statements included in this Annual Report on Form 10-K for the fiscal year ended December
31, 2013.
|
Outstanding Equity Awards at December
31, 2013
The following table shows the number of shares of common stock
covered by stock options and also unvested stock held by the Named Executive Officers as of December 31, 2013.
|
|
Number of Securities Underlying Unexercised Options Exercisable
|
|
Number of Securities Underlying Unexercised Options Unexercisable
|
|
Option Exercise Price
|
|
Option Expiration Date
|
|
Number of shares or units of stock that have not vested
|
|
Market value of shares or units of stock that have not vested
|
Name
|
|
|
|
|
|
($)
|
|
($)
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary Rabin
|
|
5,000,000
|
(1)
|
|
|
0.140
|
|
12/29/2020
|
|
|
|
|
Chief Executive
|
|
10,000,000
|
(2)
|
|
|
0.185
|
|
7/1/2021
|
|
|
|
|
Officer and Member of
|
|
5,000,000
|
(2)
|
|
|
0.30
|
|
7/1/2021
|
|
|
|
|
Board of Directors
|
|
5,000,000
|
(2)
|
|
|
0.45
|
|
7/1/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert P. Lanza, M.D.,
|
|
500,000
|
(3)
|
|
|
0.85
|
|
1/31/2015
|
|
|
|
|
Chief
|
|
250,000
|
(4)
|
|
|
2.20
|
|
9/15/2015
|
|
|
|
|
Scientific
|
|
4,000,000
|
(5)
|
|
|
0.21
|
|
2/7/2018
|
|
|
|
|
Officer
|
|
5,350,000
|
(6)
|
|
|
0.098
|
|
11/13/2019
|
|
|
|
|
|
|
1,783,333
|
(7)
|
|
|
0.195
|
|
1/10/2021
|
|
|
|
|
|
|
15,000,000
|
(8)
|
|
|
0.157
|
|
8/8/2021
|
|
|
|
|
|
|
1,285,714
|
(9)
|
|
|
0.062
|
|
11/7/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward Myles
|
|
4,666,667
|
(10)
|
9,333,333
|
|
0.0778
|
|
6/26/2023
|
|
9,333,333
|
|
0
|
Interim President,
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Financial,
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer and
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice
|
|
|
|
|
|
|
|
|
|
|
|
|
President of
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These options held by Mr. Rabin vested
in full as of July 1, 2011.
|
|
(2)
|
These options held by Mr. Rabin vested in equal installments on the last day of each calendar quarter commencing on July 1, 2011 and ending December 31, 2013.
|
|
(3)
|
These options held by Dr. Lanza vested in full as of January 31, 2009.
|
|
(4)
|
These options held by Dr. Lanza vested in full as of December 31, 2006.
|
|
(5)
|
These options held by Dr. Lanza vested in full as of February 7, 2010.
|
|
(6)
|
These options held by Dr. Lanza vested in full as of November 13, 2010.
|
|
(7)
|
These options held by Dr. Lanza originally vested evenly over three years but vesting was accelerated when Dr. Lanza signed a new employment agreement in 2011. Under the new vesting schedule, the options became fully vested on March 31, 2012.
|
|
(8)
|
These options held by Dr. Lanza vested as follows: 6,000,000 vested immediately on grant with the remaining 9,000,000 vesting in 21 equal installments on the last day of each month beginning on January 31, 2012 and ending on September 30, 2013.
|
|
(9)
|
These options held by Dr. Lanza vested as follows: 428,572 on November 8, 2013 and November 30, 2013 and 428,571 on December 31, 2013.
|
(10)
|
These options held by Mr. Myles vest 4,666,667 on December 31, 2013, 2,333,333 on June 30, 2014, December 31, 2014 and June 30, 2015 and 2,333,334 on December 31, 2015.
|
Option exercises and stock vested—fiscal year 2013
With respect to the Named Executive Officers during the fiscal
year ended December 31, 2013, there were no exercises of stock options and the table below indicates the fair value of the restricted
stock at the vesting dates during the period:
|
|
Stock Awards
|
|
|
|
|
Number of
|
|
Value realized
|
|
|
shares acquired
|
|
on vesting
|
Name
|
|
on vesting
|
|
($)
|
Gary Rabin
|
|
|
4,000,000
|
|
|
$
|
281,200
|
|
Robert Lanza
|
|
|
5,142,858
|
|
|
$
|
361,757
|
|
Pension Benefits
We do not have any plan which provides
for payments or other benefits at, following, or in connection with retirement.
Non-qualified Deferred Compensation
We do not have any defined contribution
or other plan which provides for the deferral of compensation on a basis that is not tax-qualified.
Payments made upon involuntary termination
by the Company without cause or for good reason by executive, or company change in control transaction
This section provides estimates for compensation
payable to each Named Executive Officer under hypothetical termination of employment and change in control scenarios under our
compensatory arrangements with the Named Executive Officers (other than nondiscriminatory arrangements generally available to salaried
employees). The amounts shown below are estimates and assume the hypothetical involuntary termination or change in control occurred
on December 31, 2013, the last day of fiscal 2013, applying the provisions of the employment agreements that were in effect as
of such date. Due to the number of factors and assumptions that can affect the nature and amount of any benefits provided upon
the events discussed below, any amounts paid or distributed upon an actual event may differ.
Pursuant to the terms of the Rabin Agreement,
if Mr. Rabin had been terminated without Cause or had resigned for Good Reason on December 31, 2013, subject to Mr. Rabin executing
a general release of claims against the Company, Mr. Rabin would have been entitled to: (i) within 60 days of December 31, 2013,
a lump sum payment of $551,250 (equal to his annual base salary then in effect), and (ii) reimbursement to Mr. Rabin on a month-to-month
basis of an amount equivalent to Mr. Rabin’s and Mr. Rabin’s spouse and dependent’s COBRA payments for up to
18 months following the date of termination if Mr. Rabin were to properly elective COBRA coverage, or for the maximum COBRA term
allowable by then applicable law for coverage of Mr. Rabin, and his spouse and dependents, for an estimated $28,000 in reimbursements
over 18 months, and (iii) full vesting of the stock options and restricted stock incentive awards granted under the Rabin Agreement.
The accelerated vesting of stock options and restricted stock would have had no impact at December 31, 2013 as all of Mr. Rabin’s
stock options and restricted stock were fully vested at that date.
Pursuant to the terms
of the Lanza Agreement, if Dr. Lanza had been terminated without Cause or had resigned for Good Reason on December 31, 2013, Dr.
Lanza would have been entitled to total payments of $485,100 (equal to his annual base salary then in effect), payable in regular
semi-monthly installments during the twelve (12) months immediately following the termination of Dr. Lanza’s employment with
the Company. If a change in control had occurred on December 31, 2013, then all stock options previously issued to Dr. Lanza would
have been fully vested (and all restrictions associated with restricted stock to be issued to Dr. Lanza under the Lanza Agreement
would have been lifted) if Dr. Lanza was not retained by the acquiring or surviving company. The accelerated vesting of stock options
and restricted stock would have had no impact at December 31, 2013 as all of Dr. Lanza’s stock options and restricted stock
were fully vested at that date.
Pursuant
to the terms of the Myles Agreement, if Mr. Myles had been terminated without Cause or had resigned for Good Reason on December
31, 2013, Mr. Myles would have been entitled to : (i) within 60 days of December 31, 2013, a lump sum payment of $330,000 (equal
to his annual base salary then in effect), and (ii) within 60 days of December 31, 2013, a lump sum payment of $115,500 (equal
to 35% of annual base salary then in effect) (iii) reimbursement to Mr. Myles on a month-to-month basis of an amount equivalent
to Mr. Myles and Mr. Myles’ spouse and dependent’s COBRA payments for up to 12 months following the date of termination
if Mr. Myles were to properly elective COBRA coverage, or for the maximum COBRA term allowable by then applicable law for coverage
of Mr. Myles, and his spouse and dependents, for an estimated $19,000 in reimbursements over 12 months, and (iii) full vesting
of the stock options awards granted under the Myles Agreement. If a change in control had occurred on December 31, 2013, then
all stock options previously issued to Mr. Myles would have become fully vested. At December 31, 2013 the accelerated vesting
would not have added value as the stock option grant price was above the reported stock price.
DIRECTOR COMPENSATION – FISCAL
YEAR 2013
Director Compensation Arrangements
Non-employee members of the Company’s
Board of Directors receive: (1) an initial grant of 100,000 vested common shares, (2) an annual grant of 500,000 shares
of common stock (with 125,000 vested shares issued quarterly), (3) an annual grant on the first business day of each fiscal
year of a vested 10 year term nonstatutory stock option covering 500,000 shares with an exercise price equal to the fair market
value of a common share on the date of grant, (4) an annual retainer of $40,000 (payable quarterly) and (5) a cash payment
for attendance at each board meeting in the amount of $2,000 for in-person meetings and $1,000 for telephonic meetings and $500
for monthly update telephone meetings. The non-employee Chairman of the Board of Directors receives (i) an annual grant of 1,000,000
shares of common stock (with 250,000 vested shares issued quarterly), (ii) an annual grant on the first business day of each fiscal
year of a vested 10 year term nonstatutory stock option covering 1,000,000 shares with an exercise price equal to the fair market
value of a common share on the date of grant, (4) an annual retainer of $80,000 (payable quarterly). Payment for attendance at
board meetings is the same for the Chairman as other members of the Board of Directors.
With respect to service
on the Company’s Audit Committee, Compensation Committee or the Nominating and Corporate Governance Committee, the Chair
receives a payment of $1,500 per meeting and the other members receive $1,000 per meeting. Each director is entitled to receive
payment of their fees in the form of shares of the Company’s Common Stock valued at 150% of their fees. Directors who are
also one of our employees, such as Mr. Rabin, do not and will not receive any compensation for their services as our directors
while they are also serving as an employee. Directors have been and will continue to be reimbursed for travel and other expenses
directly related to activities as directors. The foregoing compensation structure for the non-employee directors was established
and approved by the Compensation Committee and unanimously ratified by the full Board of Directors in October 2012.
The table below shows compensation paid to our non-employee
directors in 2013.
|
|
Fees Earned
|
|
Stock
|
|
Option
|
|
|
|
|
or Paid in Cash
|
|
Awards
|
|
Awards
|
|
Total
|
Name
|
|
|
($)
|
|
|
|
($)(1)
|
|
|
|
($)(1)
|
|
|
|
($)
|
|
Alan C. Shapiro, Ph.D. (2)
|
|
|
–
|
|
|
|
161,900
|
|
|
|
26,858
|
|
|
|
188,758
|
|
Robert Langer, SC.D. (3)
|
|
|
141,500
|
|
|
|
35,150
|
|
|
|
26,858
|
|
|
|
203,508
|
|
Zohar Loshitzer (4)
|
|
|
72,500
|
|
|
|
35,150
|
|
|
|
26,858
|
|
|
|
134,508
|
|
Gregory D. Perry (5)
|
|
|
76,000
|
|
|
|
35,150
|
|
|
|
26,858
|
|
|
|
138,008
|
|
Michael Heffernan (6)
|
|
|
122,000
|
|
|
|
42,863
|
|
|
|
26,858
|
|
|
|
191,721
|
|
|
(1)
|
Represents
the total grant date fair value, as determined under FASB ASC Topic 718, Stock Compensation, of all shares and stock options granted
to the directors during fiscal 2013. Assumptions used to calculate the fair market value of a common share for these awards are
included in Note 15, to our audited financial statements.
|
|
(2)
|
Dr.
Shapiro received 2,328,910 shares at a share price of $0.0695. Dr. Shapiro received 500,000 options on January 2, 2013 that vested
immediately, with an exercise price and share price at date of grant of $0.0579.
|
|
(3)
|
Dr.
Langer received 500,000 shares at a share price of $0.0703. Dr. Langer received 500,000 options on January 2, 2013 that vested
immediately, with an exercise price and share price at date of grant of $0.0579.
|
|
(4)
|
Mr.
Loshitzer received 500,000 shares at a share price of $0.0703. Mr. Loshitzer received 500,000 options on January 2, 2013 that
vested immediately, with an exercise price and share price at date of grant of $0.0579.
|
|
(5)
|
Mr.
Perry received 500,000 shares at a share price of $0.0703. Mr. Perry received 500,000 options on January 2, 2013 that vested immediately,
with an exercise price and share price at date of grant of $0.0579.
|
|
(6)
|
Mr.
Heffernan received 625,000 shares at a price of $0.0686. Mr. Heffernan also received 500,000 options on January 2, 2013 that vested
immediately, with an exercise price and a share price at date of grant $0.0579.
|
The table below shows the number of
stock options held by each non-employee director as of January 31, 2014:
|
|
|
|
Stock
|
Name
|
|
|
|
Options
|
Alan C. Shapiro, Ph.D.
|
|
|
|
2,100,000
|
Robert Langer, SC.D.
|
|
|
|
3,625,000
|
Zohar Loshitzer
|
|
|
|
1,583,333
|
Gregory D. Perry
|
|
|
|
1,541,667
|
Michael Heffernan
|
|
|
|
1,987,022
|