SQNM Sequenom, Inc.

PROPOSAL 3

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board of Directors has selected Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014 and has further directed that management submit the selection of our independent registered public accounting firm for ratification by the stockholders at the annual meeting. Ernst & Young LLP has audited our financial statements since 1997. Representatives of Ernst & Young LLP are expected to be present at the annual meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Neither our Bylaws nor our other governing documents or law require stockholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm. However, our Audit Committee is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders 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 registered public accounting firm at any time during the year if they determine that such a change would be in our best interests or in the best interests of our stockholders.

The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting will be required to ratify the selection of Ernst & Young LLP. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this matter has been approved.

All fees described above were approved by the Audit Committee.

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Pre-Approval Policies and Procedures

The Audit Committee pre-approves all audit and non-audit services rendered by our independent registered public accounting firm. The Audit Committee generally pre-approves specified services up to specified amounts. Under its charter, the Audit Committee may delegate the pre-approval of services to one or more of its members. Any such pre-approval must be reported to the full Audit Committee at its next meeting.

The Audit Committee has determined that the rendering of the audit and other services by Ernst & Young LLP is compatible with maintaining the principal accountant’s independence.

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SECURITY OWNERSHIP OF

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 12, 2014 by: (i) each director and nominee for director; (ii) each of the named executive officers listed in the Summary Compensation Table; (iii) all of our executive officers and directors as a group; and (iv) each person, or group of affiliated persons, known by us to beneficially own more than five percent of our common stock.

Beneficial ownership has been determined in accordance with Rule 13d-3 under the 1934 Act. Under this rule, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). Shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant) within 60 days of the date of the information provided. In computing the percentage ownership of any person, the number of shares is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of such acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the person’s actual voting power at any particular date.

Except as otherwise noted below, the address for each person or entity listed in the table is c/o Sequenom, Inc., 3595 John Hopkins Court, San Diego, California 92121.

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the 1934 Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership within 10 days after he or she becomes a beneficial owner, director or officer and reports of changes in ownership of our common stock and other equity securities within two business days after the transaction is executed. Our officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2013, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with.

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EXECUTIVE COMPENSATION

The following discussion covers the compensation arrangements for certain of our current executive officers who have been named in the Summary Compensation Table included in this proxy statement (the “NEOs”), and includes a general discussion and analysis of our executive compensation program as well as a series of tables containing specific compensation information.

Related to our executive succession planning beginning toward the end of 2012 and through 2014, a number of personnel adjustments were made in early 2014 affecting our NEOs. Our current Chief Executive Officer, Harry F. Hixson, Ph.D. announced his retirement as an officer and employee effective June 10, 2014. In March of 2014, our Board of Directors appointed William Welch, our current President and Chief Operating Officer as his successor. Our current Chief Financial Officer, Paul V. Maier will also retire as an officer and employee effective June 10, 2014, and Carolyn D. Beaver, our current Vice President and Chief Accounting Officer, has been appointed as Mr. Maier’s successor. At the end of 2013, two of our executive officers, Ronald M. Lindsay, Ph.D., then our Executive Vice President, Strategic Planning, and Charles R. Cantor, Ph.D., our Chief Scientific Officer, retired from service, and Dirk van den Boom, Ph.D., our current Executive Vice President, Research and Development and Chief Scientific Officer, was appointed by our Board of Directors as their successor, and effective June 10, 2014 will be our Chief Scientific & Strategy Officer. In addition to being board members since 2003, Dr. Hixson and Dr. Lindsay joined us as employees in 2009. Dr. Cantor is also a past board member of many years and joined us in 1998.

The NEOs for 2013, who consisted of our principal executive officer Dr. Hixson, principal financial officer Mr. Maier, the three other most highly compensated executive officers (Drs. Lindsay, Bombard, and Cantor), as well as Dr. Hixson’s, Dr. Lindsay’s, and Dr. Cantor’s successors in 2014 (Mr. Welch and Dr. van den Boom) as of December 31, 2013, were:

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C OMPENSATION D ISCUSSION A ND A NALYSIS

Executive Summary

Business Overview

Sequenom, Inc. is a life sciences company providing innovative genetic analysis solutions to improve healthcare. We operate our business through two operating segments:

2013 was a year of significant achievement for our Company:

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Our management team oversaw these accomplishments while continuing to successfully manage our Sequenom Laboratories diagnostics business and our distinctly different, yet compatible, Sequenom Bioscience genetic analysis business. The diagnostics business requires unique expertise to provide a test result with clinical utility to medical doctors, including deep knowledge of the laboratory business, regulatory environment and the ever changing health care reimbursement arena and competitive landscape. Our management team also continued to enhance its specific expertise in the translational and basic research space, agricultural genomics and pharmaceutical and biotech spaces.

Our NEOs bring a depth and breadth of experience from successful organizations across the biotechnology world, having introduced disruptive diagnostics and drugs to world markets. Other members of our management team represent deep scientific understanding about next generation sequencing and other technologies or have experience growing successful commercial organizations.

As we have grown to learn and appreciate, potential employees with the skills and expertise necessary to succeed in our research and commercial environments carefully consider the caliber of a company’s management team when making employment decisions. Numerous employees have told us that the caliber, experience, and success of our leadership team were key factors in their decision to bring their talents to Sequenom. Thus, we believe that to attract, motivate, and retain employees with the unique skills and abilities necessary to succeed throughout our organization, as well as to lead the Company, we need high performing and insightful executives with proven business, scientific, practical, and technical expertise. Accordingly, we have focused on developing competitive and appropriate compensation programs at every level of the Company, which has contributed to a successful year.

Commitment to Pay for Performance

Our executive compensation is weighted toward at-risk, performance-based compensation designed to align the interests of our executives with those of our stockholders. Specifically, annual cash bonuses for our executives are contingent on the achievement of multiple corporate performance goals and individual performance. As further described under “Annual Cash Bonus”, the Compensation Committee determined that the pre-determined corporate financial and operational goals for 2013 were satisfied at an aggregate performance level of approximately 74%, which was less than the minimum 80% threshold required for triggering a payout, and therefore no bonuses were paid for 2013 performance.

As described above, 2013 was a successful year with many significant achievements; however, we did not achieve the level of performance to earn bonus compensation for 2013. That is in large part related to missing the goal for revenue from the Sequenom Laboratories (diagnostics) business due to reimbursement delays and challenges, including the Centers for Medicare and Medicaid Services, or CMS, implementing new codes beginning January 1, 2013 that did not include a specific billing code relevant to most of Sequenom Laboratories’ laboratory developed tests, or LDTs.

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This coding change adopted by CMS and most third party payors resulted in delayed payments and, in some cases, reduced payments from payors for services performed in 2013. Additionally, following the coding change, many state Medicaid programs have not included an appropriate test code in their fee schedule and, in some cases, are considering whether molecular diagnostic tests such as ours should be a covered benefit. These headwinds caused challenges in obtaining payment from third-party payors, which resulted in lower revenues than our 2013 budget, in part because we were unable to begin to transition to accrual accounting for third party payors due to the lack of sufficient consistent payment history. We expect to begin to transition to accrual accounting on a payor-specific basis when we can reliably estimate the amount that would be ultimately collected for our tests. Sequenom Laboratories continues to obtain contracts with additional payors and continues to work with other third-party payors, including state Medicaid programs, to adopt positive coverage policies for its tests.

Commitment to Responsible Executive Compensation Philosophy and Practices

The Compensation Committee believes that our executive compensation program is appropriately designed and reasonable in that it both encourages our NEOs to work for our long-term prosperity and reflects a pay-for-performance philosophy, without encouraging our employees to assume excessive risks. Below we summarize certain executive compensation practices, both the responsible practices we have implemented and the practices we have not implemented because we do not believe they would serve our stockholders’ long-term interests.

What We Do:

What We Don’t Do:

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Stockholder Advisory Vote on Executive Compensation

At our 2013 Annual Meeting of Stockholders, approximately 76% of the shares that were voted were cast in favor of our advisory vote on NEO compensation. The 2013 vote outcome represented a significant improvement compared to the 2012 vote, when approximately 48% of the shares that were voted were cast in favor of our NEO compensation. The 2013 vote was recognized by the Company, the Board of Directors and the Compensation Committee as favorable but with room to continue to improve. The Compensation Committee directed our senior management team to continue to engage and gather feedback from our major stockholders regarding our executive compensation programs to better understand our stockholders’ views on executive compensation, be responsive to our stockholders’ views and meaningfully address any concerns they had. Our outreach efforts during 2013 included the following:

As part of its ongoing evaluation of all elements of our executive compensation program, and in consideration of positive stockholder feedback that we received following our 2013 Annual Meeting, our Compensation Committee did not make any changes to our executive compensation program following the 2013 Annual Meeting of Stockholders; however the Compensation Committee ensured that we continue to adopt and maintain the following approaches, policies and guidelines set forth below that were implemented by us following our 2012 Annual Meeting of Stockholders in response to stockholder feedback:

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Significant At-Risk Compensation

Our executive compensation is weighted toward at-risk, performance-based compensation designed to align the interests of our executives with those of our stockholders. A significant portion of the NEOs’ compensation is at risk and dependent upon the Company’s performance and/or an increase in the market price of the Company’s common stock. Specifically, annual cash bonuses for our executives are contingent on the achievement of multiple corporate performance goals and individual performance, and Dr. Hixson’s performance-based options vest only if certain stock price appreciation goals are met. In addition, the time-based options granted to our executives have value only if and to the extent that the market price of the Company’s common stock appreciates and is greater than the exercise price of the option at the time of exercise. There is risk that the actual economic value of these options could be as little as zero if our stock price were less than the exercise price of such stock options. Consistent with the Compensation Committee’s pay-for-performance philosophy, for 2013 no bonuses were paid to the NEOs, and almost all of their outstanding stock option grants have exercise prices that are higher than the recent market price of our common stock.

As shown in the above charts, for 2013, approximately 71% of our Chief Executive Officer’s target total direct compensation was at risk, with approximately 49% of his target total direct compensation delivered in the form of equity-based awards. In addition, an average of 53% of our other NEOs’ target total direct compensation was at risk, with approximately 34% of our other NEOs’ target total direct compensation delivered in the form of equity-based awards, the actual economic value of which will depend directly on the performance of our stock price over the period during which the awards vest and, with respect to stock options, could be as little as zero if our stock price were less than the exercise price of such stock options. It is worth noting that because Mr. Welch and Dr. van den Boom were granted equity awards in December of 2012 at the time of their promotions, and were not granted equity awards during 2013, the “at-risk pay” in the “2013 Other NEO Pay Mix” chart is much lower than would have been the case if their equity awards had been made in 2013.

Comparing Reported Compensation with Realizable Compensation

We grant long-term incentives in the form of options to purchase shares of the Company’s common stock to align the interests of our executives with those of our stockholders and promote long-term decision-making. The value, if any, that may be realized from these options is directly tied to our stock price performance over a multi-year period, during which an NEO must continue to provide effective and satisfactory services to us for his options to vest. Similarly, we also grant long-term incentives in the form of restricted stock unit awards that are either performance or time-based and the value that may be realized from these depends on successful performance and/or stock price performance over a multi-year period during which an NEO must continue to provide effective and satisfactory services to us for his restricted stock units to vest.

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The following chart illustrates the difference between the total direct compensation reported in the 2013 Summary Compensation Table for our Chief Executive Officer for each of the three years covered in the table and compensation actually realizable by him from his base salary, annual cash bonuses, stock options and restricted stock awards granted during each of these three years. We believe this supplemental information is important because the vast majority of his reported compensation is an incentive for future performance, which will provide an economic benefit to him only if the market price for the Company’s common stock is greater than the exercise price of the options at the time of exercise and, with respect to 50% of the shares subject to his 2012 stock option and 100% of the shares subject to his 2013 stock option, if the Company meets or exceeds the applicable stock price appreciation target. Similarly, performance-based restricted stock awards only provide an economic benefit if the applicable performance goal is achieved. As can be seen, the economic value actually realizable from the equity awards granted to our Chief Executive Officer during 2013, 2012, and 2011 differs significantly from the amounts required to be reported in the 2013 Summary Compensation Table for these equity awards. This reflects the consequence of our effective pay-for-performance program.

CEO Total Reported Compensation ⁽¹⁾

Versus Total Realizable Compensation ⁽²⁾

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Executive Compensation Philosophy

The Compensation Committee has established and regularly reviews our executive compensation philosophy. The Compensation Committee has designed our executive compensation program to help us achieve our goals and objectives, including:

To accomplish these goals and objectives, we have created an executive compensation program with three primary elements: base salary, annual cash bonus opportunities and long term incentive compensation in the form of equity awards. We also provide a change in control severance benefit plan that provides specified payments and benefits in the event of certain terminations of employment in connection with a change in control of the Company.

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A detailed discussion and analysis of these compensation elements is provided below.

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Compensation Committee’s Role in the Executive Compensation Process

The Compensation Committee is currently comprised of three independent directors: Mr. Slacik (chair), Dr. Buechler and Dr. Lerner. Mr. Slacik replaced Mr. Pendarvis as chair in March 2014 in connection with Board of Director committee membership rotations approved by our Board of Directors in March 2014. The Compensation Committee has responsibilities delegated to it by our Board of Directors as set forth in its charter, which may be found in the Corporate Governance section under “Invest” on our website at www.sequenom.com . Among its responsibilities, the Compensation Committee provides guidance with respect to the purpose and principles behind the Company’s compensation decisions and overall compensation philosophy and objectives, oversees our compensation policies, plans, and programs, and reviews and, except for Chief Executive Officer compensation, determines executive officer compensation.

In the case of our Chief Executive Officer, the Compensation Committee provides a compensation recommendation to the independent non-employee members of our Board of Directors during executive session and those members of our Board of Directors determine our Chief Executive Officer’s compensation. When the Compensation Committee and the independent members of our Board of Directors evaluate and determine compensation for our Chief Executive Officer, the Compensation Committee and the independent members of our Board of Directors meet in executive session without our Chief Executive Officer present.

The Compensation Committee met 8 times during 2013. During these meetings the Compensation Committee explored various alternatives to portions of the executive compensation program in addition to its regular duties of monitoring and approving compensation levels, approving the terms of compensation arrangements for new executives, and reviewing corporate goals as they relate to executive compensation. In addition to these meetings, throughout 2013 our Chief Executive Officer, former Vice President of Human Resources, and Compensation Committee members were involved in numerous discussions regarding compensation matters. The Compensation Committee also reviews its charter each year and this review was conducted by the Compensation Committee in March and December 2013.

The Compensation Committee maintains a calendar to make sure that selected matters (such as compensation strategy, base salary, bonus program, and equity awards) are reviewed on an annual basis. With respect to the annual bonus program, our Board of Directors, with input from our executive officers, defines measurable performance goals and determines the importance of each goal for the Company each year. The Compensation Committee establishes incentive compensation parameters that reward performance goal achievement. The Compensation Committee also takes into account the advisory vote of the Company’s stockholders on the compensation of the Company’s NEOs for the previous year.

Role of our Compensation Consultants

For 2013, the Compensation Committee relied upon information provided by outside compensation consultant Compensia, to assist the Compensation Committee with its compensation determinations for our executive officers and other employees. For 2013, Compensia provided analysis of whether the Company’s existing compensation strategy and practices were consistent with our compensation objectives and assisted the Compensation Committee in adjusting our compensation program for executive officers as appropriate in order to better achieve our objectives. As part of their duties, Compensia provided the following services:

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Compensia provided compensation data for non-executive employees including salary and equity structure and bonus level recommendations. Compensia was engaged at the direction of the Compensation Committee and the Company paid the cost for Compensia’s services. Compensia did not provide any other services to the Company in 2013.

Competitive Positioning

For purposes of evaluating 2013 compensation for each of our executives and making 2013 compensation decisions, Compensia provided data from a custom Radford Life Sciences Industry Survey comprised of companies in the life sciences industry, in premium cost-of-living markets similar to San Diego, and with 400-800 employees, and also the Radford General Life Sciences Industry Survey for companies in the life sciences industry with 150-500 employees, which we collectively refer to as the survey data. Compensia also provided publicly available information for our 2013 peer group.

For 2013, eleven peers were dropped and ten new peers were added, compared to the 2012 peer group. Our Compensation Committee made these changes to our 2013 peer group as part of our continued efforts to keep aligned with best practice and robust corporate governance. Our Compensation Committee decided to remove (i) three members from the 2012 peer group that had been acquired, (ii) four members from the 2012 peer group that had market capitalization and/or annual revenue significantly greater than our own, and (iii) four members from the 2012 peer group that had market capitalization and/or annual revenue significantly lower than our own. Our final 2013 peer group was comprised of six existing peers from the 2012 group and ten new additions which were more in line with our market capitalization and annual revenue multiples. Our 2013 peer group consisted of companies with between $27 million and $140 million in annual revenues, and market capitalizations of between $89 million and $1.3 billion. At the time of the study, we had approximately 382 employees, revenues of approximately $72 million and a market capitalization of approximately $513 million.

The peer group included the following companies:

The 2013 peer group was used as a reference for purposes of evaluating our base salary, annual bonus, and equity awards against the competitive marketplace. Compensia reported the survey data and 2013 peer group data and benchmarking results to the Compensation Committee, our Chief Executive Officer, and our Vice President of Human Resources.

Compensation Elements

Base Salary

When reviewing and analyzing the amount of each major component of compensation for our NEOs, the Compensation Committee reviews each component at the 25 ^th , 50 ^th , and 75 ^th percentiles of the level of pay for executives with similar duties based on the survey data and the 2013 peer group data, and generally targets the 50 ^th percentile for setting our executive base pay. This target level has been selected by the Compensation Committee as a reference point in determining whether the total compensation opportunity is likely to provide sufficient motivation and retention as well as whether it properly reflects the NEO’s role and scope of responsibilities relative to our peer group. However, the Compensation Committee does not set compensation components to meet specific benchmarks, but rather its philosophy allows flexibility as may be needed to recruit or retain certain key executives, to reward exceptional performance or in unique circumstances.

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Each year, the Compensation Committee reviews the annual base salaries for each of our executive officers, considering whether existing base salary levels continue to be at or close to the 50 ^th percentile for the Company’s peer group companies. In addition to considering the peer group and survey data, the Compensation Committee considers other factors, including our Chief Executive Officer’s recommendations for the other NEOs, the salary level negotiated by an executive in his existing employment agreement, broader economic conditions, the financial health of the Company, the competition for a particular skill set in the market and whether the Compensation Committee and Chief Executive Officer are generally satisfied with an executive’s past performance and expected future contributions.

After considering Compensia’s competitive analysis, our Chief Executive Officer presented the Compensation Committee with proposals for an annual base pay increase for our executive officers employed as of January 1, 2013. Factors included in our Chief Executive Officer’s proposals to the Compensation Committee were the current executive salaries compared against the 50 ^th percentile data, general industry information which established an average merit increase per year of approximately 3%, and specific employee performance, progress against goal achievement, and contribution to overall corporate performance and goal achievement.

In January 2013, the Compensation Committee (and for Dr. Hixson and Dr. Lindsay, the independent non-employee members of the Board of Directors) approved increases to our senior management’s salaries effective as of January 1, 2013. In consideration of the factors described above, the base pay approved by the Compensation Committee for the majority of the NEOs was targeted generally at the 50 ^th percentile, although two executives (Mr. Welch and Dr. van den Boom) had base pay targeted at a higher percentile in order to segue into the increases that would eventually be needed to facilitate our management succession planning and also to reward exceptional performance. The changes in base pay were as follows:

Annual Cash Bonus

In January and February 2013, our Board of Directors, in conjunction with its work with our executive officers to establish our annual operating plan for the year, approved metrics for 2013 under our bonus program

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for our employees, including the NEOs. Initially, our Chief Executive Officer and Chief Financial Officer identified proposed corporate goals for the year that would support our annual operating plan, proposed relative weighting of these goals and proposed achievement and payout levels for each goal, and presented such goals, weightings, achievement levels, and payout levels within the framework of the annual bonus program to the Compensation Committee and full Board of Directors for consideration and approval. The bonus program and the specific goals and weightings under the program are a key element of the Compensation Committee’s pay-for-performance philosophy, and consistent with this philosophy for 2013, the Chief Executive Officer and other NEOs did not receive a bonus.

Target Bonus Levels . Under the bonus program, the target annual bonus of each NEO for 2013 was expressed as a percentage of base salary. In establishing these target annual bonus levels, the Compensation Committee considered competitive market data provided by Compensia (with reference to the 25 ^th , 50 ^th , and 75 ^th percentiles of the competitive market), the recommendations of our Chief Executive Officer with respect to each individual (except with respect to his own target annual bonus), the executive’s experience, authority and responsibility, and the value of the executive to the Company as a whole and to our key business initiatives. In the case of our Chief Executive Officer, his target annual bonus was established by our Board of Directors, based on its consideration of these same factors.

Each NEO’s target bonus for 2013 was at or below the 50 ^th percentile range, except for Mr. Welch and Dr. van den Boom who had target bonuses at approximately the 75 ^th percentile. The Compensation Committee determined it was appropriate to target approximately the 75 ^th percentile for Mr. Welch and Dr. van den Boom in recognition of their promotions, and to help align their compensation with our management succession plan, and for purposes of retention and to incentivize them with respect to future performance.

The target annual bonus levels of the NEOs for 2013, stated as a percentage of base salary, were as follows:

Bonus Calculations and Performance Measures . Bonus payouts were not made for 2013. Under the bonus program, if bonus payouts for 2013 had been made, they would have been based on both corporate and individual performance, as follows:

((2013 Actual Salary x Bonus Target Percentage) x Corporate Performance) = Target Amount

Target Amount x Individual Performance = 2013 Individual Bonus Payout

The Board of Directors determines our actual performance for the year as measured against several pre-established corporate financial and operational goals. For any bonus payout to be made, the Company must achieve at least 80% of the target level for the pre-established corporate goals in the aggregate. Assuming that this condition is satisfied, the Compensation Committee determines whether our executive officers each individually performed satisfactorily to earn a bonus payment for the year. The individual performance multiplier can range from 0 to 1.3.

The Board of Directors, including the members of the Compensation Committee, established the corporate financial and operational goals, along with the target levels and relative weightings for 2013, as shown in the table below. The Board of Directors continues to believe that compensation should be tied to financial and operational goals that drive value and contribute to the long-term prosperity of the Company.

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Bonus Program Decisions for 2013 . In January 2014, the Compensation Committee determined that the corporate financial and operational goals for 2013 were satisfied at an aggregate performance level of approximately 74%, less than the minimum 80% threshold required for triggering a payout, as follows:

Because the Company did not achieve at least 80% of the target level for the pre-established corporate goals in the aggregate, the Compensation Committee did not consider the individual performance of each executive officer, and the full Board of Directors did not consider the individual performance of the CEO, for purposes of making its bonus decisions, as would have been done if the minimum threshold had been met.

Equity Awards

Stock Options.  Stock options provide a return to our NEOs only if the market price of our common stock appreciates over the stock option term and only if the NEO remains with us through each applicable vesting date. We do not re-price past stock option grants that may have an exercise price that exceeds the market price. Annual equity awards were granted in February 2013 and all of the stock options granted had exercise prices equal to the fair market value of our common stock as of the date of grant. In addition to vesting over four years subject to our Chief Executive Officer’s continued service to the Company, all of the shares subject to the option granted to our Chief Executive officer in 2013 only become exercisable if the price of our common stock appreciates such that the closing sales price as quoted on any established stock exchange or market is a minimum of a 25% premium (equal to $5.20 per share) to the exercise price ($4.16 per share) of the stock option for at least 30 consecutive days. To date, this stock appreciation trigger for exercisability has not been met. Options granted to our other NEOs generally vest on a monthly basis over four years subject to each individual’s continued service to the Company.

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Restricted Stock Unit Awards.  In connection with the annual equity awards granted in 2013, the Compensation Committee also granted restricted stock unit awards to our NEOs. The Compensation Committee believes that restricted stock unit awards serve as a long-term retention tool for our NEOs and are less dilutive than stock options since a lesser number of shares provide the same value as a greater number of stock options. The Compensation Committee also believes that restricted stock unit awards motivate our NEOs to increase the value of our common stock. The restricted stock unit awards vest in equal annual increments over four years.

2013 Equity Awards . As with cash incentive opportunities, in determining the equity opportunity for each of our executive officers, the Compensation Committee believes that the incentive opportunity should make up a larger portion of each executive officer’s target total compensation as the executive’s level of responsibility increases. Therefore, the equity awards for our Chief Executive Officer are generally a greater percentage of total compensation than are the equity awards granted to our other executive officers.

The values of prior outstanding equity awards were a factor in determining current year equity awards. Equity awards are determined by reference to the industry data as described above, the value of the particular executive officer to our Company as a whole and to our Company’s key business initiatives, and the individual’s performance and contribution to Company goals. The Compensation Committee desired to have a competitive and efficient plan and began by considering the 50th percentile of equity awards granted to executives with similar duties based on the survey data and the 2013 peer group data and made adjustments for individual performance considerations. This target level is a reference point in determining whether the equity award is likely to provide for sufficient retention and alignment of the interests of management with those of our stockholders with the goal of creating long term growth and value for the Company.

In February 2013, the Compensation Committee (and the independent members of our Board of Directors with respect to Dr. Hixson and Dr. Lindsay) granted options to purchase shares of our common stock and restricted stock unit awards to our senior management pursuant to our 2006 Plan.

The NEOs received option awards in 2013 covering the number of shares set forth below:

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The NEOs received restricted stock unit awards in 2013 for the number of shares set forth below:

In connection with their promotions in December 2012, at that time the Compensation Committee granted Mr. Welch and Dr. van den Boom options to purchase shares of our common stock and restricted stock unit awards; they were not granted any equity awards in 2013.

The Company’s general policy is to make annual equity awards at the first Compensation Committee or full Board of Directors meeting each year, we do not time the granting of stock option or other equity awards with any favorable or unfavorable news relating to the Company, and all equity awards are granted at fair market value and in the case of options, with an exercise price at fair market value. During 2013, we were consistent with this approach. Proximity of any awards to an earnings announcement, market event or other event related to us is purely coincidental.

Compensation Policies

Stock Ownership Guidelines . We adopted stock ownership guidelines (the “Ownership Guidelines”) in 2012 that we continue to maintain that require our Chief Executive Officer and non-employee members of our Board of Directors to maintain a certain level of ownership of our common stock. The Ownership Guidelines provide that each individual must own the number of shares of Company’s common stock in an amount equal to at least three times the amount of such person’s annual cash retainer or base salary, as applicable, which amount shall be determined by multiplying the number of shares owned (and certain shares subject to vested restricted stock unit awards where issuance of shares is deferred and a portion of vested but unexercised shares underlying options for which the market price exceeds the exercise price) by such covered person and by the closing price of such shares on the date on which such evaluation is made. Each person will have a period of 5 years to comply with the ownership requirements starting from the later of the adoption of the Ownership Guidelines or the date such individual becomes covered by the Ownership Guidelines.

Anti-Hedging and Anti-Pledging Policies . We also maintain an insider trading policy that, in addition to prohibiting trading during closed window periods, prohibits such individuals from short selling our stock and using hedging instruments or borrowing against or pledging our stock. Additionally, our Code of Business Conduct and Ethics prohibits employees from engaging in any transaction in which an employee would derive an economic benefit as a result of a decline in our stock price.

Compensation Recovery Policy. We also maintain a policy for recoupment of incentive compensation, or a clawback policy. The clawback policy applies to any of our current and former executive officers who, at the relevant time, were designated by the Board as an officer for purposes of Section 16 of the 1934 Act (each, a “covered person”). Under the clawback policy, if we are required to prepare an accounting restatement for any fiscal quarter or year commencing after the adoption of the clawback policy and the Board determines that misconduct contributed to the noncompliance that resulted in the requirement to restate our financial statements, then the Board may recoup certain incentive compensation paid to the covered persons. Specifically, the Board may require a covered person to repay some or all of (i) any bonus compensation received that was calculated based on the financial statements that were subsequently restated, (ii) up to the full amount of any equity incentive grant received that was determined based on the financial statements that were subsequently restated

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and (iii) some or all of any gains realized on the exercise of stock options or on the open-market sale of vested shares during certain periods. The Board may seek recoupment from each applicable covered person from prior incentive compensation payments, future payments of incentive compensation, cancellation of outstanding equity awards, future equity awards and direct repayment.

Other Compensation

All of our executive officers receive life and disability insurance benefits and either health insurance benefits under the programs that are available to all employees or cash payments in lieu of participating in those programs. During 2013, Mr. Maier received cash payments of $100 per month in lieu of receiving a health insurance benefit, a benefit choice available to all full-time U.S. employees. The Company provides for a 401(k) plan but currently does not provide a “match” for employee contributions.

Change in Control Severance Benefit Plan

In 2007, the Compensation Committee approved a Change in Control Severance Benefit Plan (the “Change in Control Plan”) which provides three tiers of severance payments and benefits for designated senior executives in the event that their employment is terminated under certain circumstances in connection with a change in control of the Company. Each of the NEOs is currently a participant in the Change in Control Plan.

We believe that the payments and benefits available under the Change in Control Plan are an important component of our overall executive compensation program because these payments and benefits help us retain executive talent and, in the event of a potential change of control, allow the executives to focus on the potential transaction without concern for their personal near-term financial future and to preserve employee morale and productivity and encourage retention in the face of the disruptive impact of an actual or rumored change in control of the Company. The Change in Control Plan also allows us to provide a standard set of payments and benefits to new and existing executives and avoids negotiation of individual arrangements with executive officers. In addition, the program is intended to align the interests of our executive officers with those of our stockholders by enabling our executive officers to consider corporate transactions that are in the best interests of the stockholders and other constituents of the Company without undue concern over whether the transactions may jeopardize their own employment.

The payments and benefits available under the Change in Control Plan are subject to a “double trigger”; that is, they are payable only in the event that an executive officer loses his or her employment in connection with a change in control of Company. This is consistent with the purpose of the program, which is to provide employees with a guaranteed level of financial protection only upon loss of employment. The Change in Control Plan provides that following a covered termination, participants continue to receive, for a specified period based on the participant’s assigned category of benefit or tier, salary continuation benefits, bonus payments, vesting acceleration for equity awards and health insurance and other benefits.

Each participant is assigned by the Compensation Committee to one of three tiers, based upon several factors including the participant’s title, role, and responsibility. The tier selection for each participant is determined by the full Board of Directors for the Chief Executive Officer and the Compensation Committee for executive officers. The Compensation Committee established three tiers in recognition of the different levels of involvement individual executives may have in potential corporate transactions. The estimated potential payments and benefits available under the Change in Control Plan are described in the “Post-Employment Payments” section below.

Policy Regarding Tax Deductibility of Executive Compensation

Section 162(m) of the Code generally provides that public corporations may not deduct remuneration in excess of $1 million paid to their chief executive officer and three other most highly-compensated executive officers (other than its chief financial officer) in any in a calendar year. Remuneration that qualified as “performance based” compensation within the meaning of the Code does not count toward the $1 million limit.

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While the Compensation Committee is mindful of the benefit of full deductibility of compensation, the Compensation Committee believes that it should not be constrained by the requirements of Section 162(m) of the Code where those requirements would impair flexibility in compensating our NEOs in a manner that can best promote our corporate objectives. Therefore, the Compensation Committee has not adopted a policy regarding the limitation of executive pay to amounts that would be deductible under Section 162(m) of the Code. The Compensation Committee intends to continue to compensate our executive officers in a manner consistent with the best interests of the Company and our stockholders and retains the discretion to pay compensation that potentially may not be fully deductible to reward performance and/or enhance retention.

Non-Qualified Deferred Compensation Plan

In 2007, our Compensation Committee approved a deferred compensation plan that allows eligible executives, including our NEOs, to defer receipt of their salary and/or annual performance bonuses into bookkeeping accounts until withdrawal at a future time selected by the participant with the associated tax consequences also being deferred until the time of withdrawal (“Deferred Compensation Plan”). During 2013, none of our NEOs elected to contribute any of their 2013 compensation into the Deferred Compensation Plan. While the Deferred Compensation Plan still holds past deferred amounts contributed by Dr. Cantor, the Deferred Compensation Plan is no longer actively utilized or promoted and none of the other NEOs have ever participated in the Deferred Compensation Plan.

The Deferred Compensation Plan is an additional component of our executive compensation program and provides additional tax and financial planning flexibility for eligible executive officers at low incremental cost to the Company. The Deferred Compensation Plan permits deferral of compensation into bookkeeping accounts that permit the participants to select from a range of phantom investment alternatives that mirror the gains and losses of several different investment alternatives, including our common stock. Under the terms of the Deferred Compensation Plan, participants are permitted to defer up to 100% of their annual salary and/or bonus until a specified date, termination of service or a specified year following termination of service, as elected by the participant at the time of deferral. Additionally, under the terms of the Deferred Compensation Plan, participants are permitted to defer restricted stock unit awards granted under our equity incentive plan. We are not required to make any contributions to the Deferred Compensation Plan, and for 2013 we did not make any contributions to the Deferred Compensation Plan. We fund the expenses for administering the Deferred Compensation Plan. Participants have our unsecured contractual commitment to pay the amount due under the Deferred Compensation Plan, which remains subject to the claims of our general creditors.

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E MPLOYMENT A GREEMENTS

We have entered into employment agreements with Dr. Hixson, Mr. Welch, Dr. van den Boom and Dr. Cantor, and in connection with their hiring, extended employment offer letters to Mr. Maier, Dr. Lindsay, and Dr. Bombard. These arrangements set forth the terms of employment for each of these individuals, including their initial base salary, target annual bonus, equity award recommendation, and participation in our health and welfare benefit plans. In addition, these arrangements stipulate that each individual is eligible for certain payments and benefits under our Change in Control Severance Benefit Plan. These post-employment compensation arrangements are discussed in more detail in the “Potential Payments Upon Termination or Change in Control” section below.

The material terms and conditions of the employment arrangements of the NEOs are as follows.

Dr. Hixson

On March 13, 2010, we entered into an employment agreement with Dr. Hixson that formalized his employment as our Chief Executive Officer on an “at-will” basis commencing September 28, 2009. This agreement set forth the initial terms and conditions of his employment, including base salary, target annual bonus, standard employee health and welfare benefit plan participation, and a recommendation for an additional stock option grant. These compensation arrangements were subject to future adjustment in the discretion of the Compensation Committee based on an evaluation of corporate and individual performance, as well as other significant factors, including the competitive market environment and our incentive and retention objectives. This employment agreement was subject to reaffirmation of the standard proprietary information and invention agreement that he had previously executed an agreement to abide by non-competition and non-solicitation covenants.

This agreement also set forth his eligibility for certain payments and benefits in the event of a termination of employment, including a termination of employment in connection with a change in control of the Company, as a Tier I participant in our Change in Control Severance Benefit Plan.

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Mr. Welch and Dr. van den Boom

On January 29, 2014, we entered into employment agreements with Mr. Welch and with Dr. van den Boom that formalized their employment with us on an “at-will” basis as our President and Chief Operating Officer (Mr. Welch), and Executive Vice President, Research and Development and Chief Scientific Officer (Dr. van den Boom). The agreements each have a term of three years and set forth the initial terms and conditions of their employment, including base salary, target annual bonus, and standard employee health and welfare benefit plan participation. These compensation arrangements are subject to future adjustment in the discretion of the Board of Directors based on an evaluation of individual performance and any company policies regarding adjustments in officer compensation established from time to time by the Board of Directors. Mr. Welch and Dr. van den Boom are each entitled to certain payments in the event of the termination of their employment with us; these payments are discussed in more detail in the “Post-Employment Payments” section below. The employment agreements do not apply to any termination of Mr. Welch’s or Dr. van den Boom’s employment in connection with a change in control of the company, as provided for under our Change in Control Severance Benefit Plan. Mr. Welch and Dr. van den Boom previously executed our standard proprietary information and invention agreement.

Mr. Maier and Drs. Lindsay and Bombard

In connection with their initial employment with us, we have entered into employment offer letters with each of Mr. Maier and Drs. Lindsay and Bombard. Each of these offer letters provides for “at-will” employment and sets forth the initial terms and conditions of employment of each individual, including his base salary, target annual bonus, standard employee health and welfare benefit plan participation, and a recommendation for an equity award. These compensation arrangements were subject to future adjustment in the discretion of the Compensation Committee based on an evaluation of corporate and individual performance, as well as other significant factors, including the competitive market environment and our incentive and retention objectives. In addition, these offer letters provided that each individual would be eligible for certain payments and benefits in the event of a termination of employment, including a termination of employment in connection with a change in control of the Company, under our Change in Control Severance Benefit Plan. Further, these employment offers were subject to execution of our standard proprietary information and invention agreement.

Dr. Cantor

Dr. Cantor’s employment agreement, as amended in 2005, provides for employment on an at-will basis. Dr. Cantor is entitled to certain payments in the event of the termination of his employment with us; these payments are discussed in more detail in the “Post-Employment Payments” section below.

P OST -E MPLOYMENT P AYMENTS

Payments Not Related to a Change in Control

Dr. Hixson. Under Dr. Hixson’s employment agreement, if Dr. Hixson is terminated either by us or by him upon giving four weeks advanced notice, he is eligible to receive continued Company paid health insurance premiums for 90 days from the termination date and a pro-rated portion of any target bonus determined to be appropriate after completion of the entire target bonus year. In March 2014, in connection with Dr. Hixson’s planned retirement on June 10, 2014, the Board of Directors approved Dr. Hixson’s eligibility to receive Company paid health insurance premiums for an additional twenty-one months following the 90 day period provided for under his employment agreement.

Mr. Welch and Dr. van den Boom. Under their employment agreements entered into in January 2014, if Mr. Welch’s or Dr. van den Boom’s employment is terminated either by us without “cause” or by Mr. Welch or Dr. van den Boom for “good reason” (each as defined in their employment agreements), then each is eligible under his respective employment agreement to receive: twelve months of then-current base salary at the time of termination and a pro-rated (to the date of termination) portion of his target bonus level, both payable within 60

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days of termination; continued health benefits for one year following the date of termination or until an earlier date that Mr. Welch or Dr. van den Boom obtains new employment that provides at least substantially the same benefits; accelerated vesting of all stock options and other equity awards issued by us for a period of 12 months following the date of termination; and an exercise period to exercise any outstanding vested stock option grants until the earlier of 12 months following employment termination or the expiration of the term of the stock option grant.

Dr. Cantor. Dr. Cantor’s employment agreement provides that if his employment is terminated by us without cause (as defined in the agreement) then Dr. Cantor is entitled to receive continuation of his base salary then in effect, and reimbursement of health insurance premiums, until the earlier of the expiration of six months following the date of his termination or his commencement of employment with another employer. Under the agreement, Dr. Cantor will be available to provide consulting services for us for up to ten hours per month during the period he is receiving severance benefits from us without the payment of additional compensation.

Except as set forth above, none of our NEOs are eligible to receive any payments or benefits upon a termination of employment that is not related to a change in control of the Company. In addition, except as set forth above, none of our NEOs are eligible to receive any payments or benefits if their employment is terminated for cause or as the result of retirement, death or disability.

Payments Related to a Change in Control

We currently provide post-employment payments and benefits to our NEOs in certain limited circumstances pursuant to our Change in Control Plan. Our Change in Control Plan provides payments and benefits to designated executive officers following a termination of employment in connection with a change in control of the Company. None of our NEOs are eligible to receive additional payments or benefits under their employment or letter agreements.

Our Change in Control Plan provides that following a covered termination of employment (as defined in the Change in Control Plan as a termination of employment by the Company without cause or a voluntary resignation of employment for good reason, either of which occurring within the one-month period preceding the date of a change in control or the 11-month period following a change in control), participants continue to receive, for a specified period based on each participant’s assigned category of benefit or tier, salary continuation benefits, bonus payments, vesting acceleration of outstanding equity awards and health insurance and other benefits. Each participant is assigned by the Compensation Committee to one of three tiers.

We are not obligated under our Change in Control Plan or pursuant to any employment agreement to provide any tax gross-up payments intended to offset the cost of excise taxes that may be imposed if any payment provided to an NEO is considered a “parachute payment” for purposes of Sections 280G and 4999 of the Code. Under the Change in Control Plan, the total of any payments that would be considered “parachute payments” for purposes of Sections 280G and 4999 of the Code and subject to excise tax under Section 4999 of the Code are limited to the amount that would result in no excise tax being imposed (or, if greater, an amount in which the participant receives a net after-tax payment if the excise tax is assessed), a provision known as a “best-after-tax” arrangement.

Tier I . Dr. Hixson has been assigned to Tier I and in March 2014, Mr. Welch and Dr. van den Boom were changed from Tier II to Tier I participants. Participants who have been assigned to Tier I are eligible to receive salary continuation payments in an amount equal to the participant’s base salary payable for 24 months following termination of employment, subject to a reduction during the last six months of such period for any salary the participant receives from other full-time employment during the 24 months following termination of employment. Tier I participants are also eligible to receive a single lump-sum payment equal to 1.5 times their target bonus amount, and all unvested equity awards held by them will vest immediately upon termination of employment. We will also pay premiums for continuation of health plan coverage for 18 months following termination of employment.

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Tier II . Mr. Maier, Dr. Lindsay, Dr. Bombard, and Dr. Cantor have been assigned to Tier II. Participants who have been assigned to Tier II are eligible to receive salary continuation payments in an amount equal to the participant’s base salary payable for 12 months following termination of employment. Tier II participants are eligible to receive a single lump-sum payment equal to such participant’s target bonus amount and all of the participant’s equity awards that use time-based vesting will immediately vest as to all remaining vesting installments upon termination of employment. We will also pay premiums for continuation of health plan coverage for 12 months following termination of employment.

Tier III . Participants who have been assigned to Tier III are eligible to receive salary continuation payments in an amount equal to the participant’s base salary payable for 12 months following termination of employment. Tier III participants are eligible to have all equity awards that use time-based vesting immediately vest as to the next 24 months of vesting installments upon termination of employment. We will also pay premiums for continuation of health plan coverage for 12 months following termination of employment.

Potential Post-Employment Payments and Benefits

The following table below sets forth the potential payments and benefits that would be received by the NEOs upon a termination of employment, including a termination of employment in connection with a change in control of the Company, assuming that the termination of employment occurred on December 31, 2013.

The value of the equity awards reported below represents the intrinsic value of the outstanding and unvested equity awards as of December 31, 2013 that would become vested as a result of such triggering event. The market value of the Company’s common stock used for such calculations was the closing price of the common stock on December 31, 2013 of $2.34 per share

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