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PART
III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Board
of Directors
Set
forth below are the names, ages, tenure, and certain biographical information of each of the members of our Board of Directors (our “Board”)
as of April 17, 2023.
Name |
|
Age |
|
Director
Since |
Alfred D. Kingsley |
|
80 |
|
July 2009 |
Dipti Amin |
|
59 |
|
April 2021 |
Deborah Andrews |
|
65 |
|
April 2014 |
Don M. Bailey |
|
77 |
|
March 2020 |
Neal C. Bradsher, CFA |
|
57 |
|
July 2009 |
Brian M. Culley |
|
51 |
|
September 2018 |
Anula Jayasuriya |
|
66 |
|
May 2021 |
Michael H. Mulroy |
|
57 |
|
October 2014 |
Angus C. Russell |
|
67 |
|
December 2014 |
Alfred
D. Kingsley. Mr. Kingsley has been Chairman of the Board since July 2009. Mr. Kingsley has been general partner of Greenway Partners,
L.P., a private investment firm, and President of Greenbelt Corp., a business consulting firm, since 1993. Greenbelt served as our financial
advisor from 1998 until 2009. Mr. Kingsley also serves as a director of OncoCyte Corporation (OCX), a clinical-stage diagnostics company
focused on novel, non-invasive blood-based tests for the early detection of cancer. From January 2017 to October 2018, Mr. Kingsley served
as Executive Chairman of AgeX Therapeutics, Inc. (AGE), a biotechnology company focused on the development and commercialization of novel
therapeutics targeting human aging. Mr. Kingsley also served as a director of Asterias Biotherapeutics, Inc. (AST) from 2012 until our
acquisition of Asterias in March 2019. Mr. Kingsley was Senior Vice-President of Icahn and Company and its affiliated entities for more
than 25 years. Mr. Kingsley holds a B.S. degree in economics from the Wharton School of the University of Pennsylvania and a J.D. degree
and LLM in taxation from New York University Law School. Mr. Kingsley’s long career in corporate finance and mergers and acquisitions
includes substantial experience in helping companies to improve their management and corporate governance, and to restructure their operations.
Mr. Kingsley developed an intimate knowledge of our business in his role as our financial advisor before he joined our Board. Mr. Kingsley
has been instrumental in structuring our equity and debt financings, and in the transition of our business focus into the field of stem
cell technology, and the business acquisitions that have helped us expand the scope of our business.
Dipti
Amin, MBBS, FFPM, MRCGP, DCPSA, DCH, DRCOG, DGM. Dr. Amin currently serves as a non-executive director of the University of Hertfordshire,
a position she has held since September 2018, and as a non-executive director of Buckinghamshire NHS Trust, a position she has held since
June 2015. Dr. Amin previously served as a non-executive director of Cambridge Innovation Capital from November 2017 to March 2020, and
as a director of Maaya Associates Ltd. from August 2017 through the end of 2021. From June 1995 to December 2016, Dr. Amin served at
Quintiles Transnational Corporation, a provider of biopharmaceutical development and commercial outsourcing services, in various senior
roles within all phases of drug development and most recently as Senior Vice President and Chief Compliance Officer from April 2010 to
December 2016. Dr. Amin received her medical degree from Guys and St. Thomas’s Hospitals Medical School of the University of London,
her MRCGP from the Royal College of General Practitioners, her FFPM from the Faculty of Pharmaceutical Medicine of the Royal College
of Physicians London, her DRCOG form the Royal College of Obstetricians and Gynecologists, her DGM and DCH from the Royal College of
Physicians, London and her DCPSA from the Society of Apothecaries of London. Dr. Amin brings to
our Board broad experience in clinical pharmacology, ethical issues in clinical research, drug development, ethics and compliance
programs as well as leadership and management experience of large, multi-functional, multi-geography, global groups.
Deborah
Andrews. Ms. Andrews served as Chief Financial Officer of STAAR Surgical Company (STAA), a leader in the development, manufacture,
and marketing of minimally invasive ophthalmic products employing proprietary technologies, from September 2017 until June 2020, after
serving as Vice President, Chief Accounting Officer since 2013. Ms. Andrews also served as STAAR Surgical’s Vice President, Chief
Financial Officer from 2005 to 2013, as its Global Controller from 2001 to 2005, and as its Vice President, International Finance from
1999 to 2001. Ms. Andrews previously worked as a senior accountant for a major public accounting firm. Ms. Andrews holds a B.S. degree
in accounting from California State University at San Bernardino. Ms. Andrews brings to our Board significant experience in finance,
financial reporting, accounting, information systems and security, and auditing, and in management as a senior financial and accounting
executive of a public medical device company during a period of significant growth.
Don
M. Bailey. Mr. Bailey previously served as a director and Chairman of Asterias Biotherapeutics, Inc. (AST) from February 2016
until our acquisition of Asterias in March 2019. Mr. Bailey served as President and Chief Executive Officer of Questcor Pharmaceuticals,
Inc. (QCOR), a biopharmaceutical company focused on the treatment of patients with serious, difficult-to-treat autoimmune and inflammatory
disorders, from 2007 until Questcor was acquired by Mallinckrodt plc (MNK) in 2014. He was also a director of Mallinckrodt plc from August
2014 to March 2016, and during this time he was the Chairman of its portfolio committee. He initially joined the Questcor board of directors
in 2006 as an independent director and Chairman of its audit committee. From August 2016 to November 2017, Mr. Bailey served as a director
of OncoCyte Corporation (OCX). From June 2015 until its acquisition by Acorda Therapeutics, Inc. (ACOR) in May 2016, Mr. Bailey was also
an independent director and chairman of the audit committee of Biotie Therapeutics Corp. (BITI), a clinical-stage pharmaceutical company
headquartered in Turku, Finland. Mr. Bailey was an independent director and the non-executive chairman of the board of directors of STAAR
Surgical Company (STAA), a leader in the development, manufacture, and marketing of minimally invasive ophthalmic products employing
proprietary technologies, from 2005 until 2014. Mr. Bailey served on its audit committee and was chair of its nominating and corporate
governance committee. Mr. Bailey was the chairman of the board of directors of Comarco, Inc. (CMRO), a defense services company transformed
into a wireless communication products company, from 1998 until 2007, where he served as Chief Executive Officer from 1991 until 2000.
Mr. Bailey holds a B.S. degree in mechanical engineering from the Drexel Institute of Technology, an M.S. degree in operations research
from the University of Southern California and an M.B.A. from Pepperdine University. Mr. Bailey has also served as a board member on
several non-profit and academic enterprises. Mr. Bailey is a founding board member of the University of California Irvine’s (UCI)
Applied Innovation Institute. Mr. Bailey brings to our Board significant knowledge of the pharmaceuticals industry and extensive experience
as an executive and board member of publicly traded pharmaceutical companies.
Neal
C. Bradsher, CFA. Mr. Bradsher has been President of Broadwood Capital, Inc., a private investment firm, since 2002. Mr. Bradsher
holds a B.A. degree in economics from Yale College and is a Chartered Financial Analyst. Mr. Bradsher was a director of Questcor Pharmaceuticals,
Inc. (QCOR), from 2004 until Questcor was acquired by Mallinckrodt plc (MNK) in 2014. Mr. Bradsher brings to our Board a wealth of experience
in finance, management and corporate governance attained through his investments in other companies, including companies in the pharmaceutical,
biotechnology, medical device, medical diagnostics, health care services and health care information systems sectors. He has worked with
several health care companies to improve their management and governance. Entities that Mr. Bradsher controls have invested in most of
Lineage’s financing transactions over the last several years. Broadwood Capital, Inc. is the general partner of Broadwood Partners,
L.P., currently our largest shareholder.
Brian
M. Culley. Mr. Culley joined Lineage as Chief Executive Officer in September 2018 and served as Interim Chief Financial Officer
from January 20, 2021 to June 21, 2021 and from July 8, 2022 to November 14, 2022. Prior to joining Lineage, Mr. Culley served from August
2017 to September 2018 as interim Chief Executive Officer at Artemis Therapeutics, Inc. (ATMS). Mr. Culley previously served as Chief
Executive Officer of Mast Therapeutics, Inc. (MSTX), from 2010, and was also a member of its board of directors from 2011, until Mast’s
merger with Savara, Inc. (SVRA) in April 2017. Mr. Culley served from 2007 to 2010 as Mast’s Chief Business Officer and Senior
Vice President, from 2006 to 2007 as Mast’s Senior Vice President, Business Development, and from 2004 to 2006 as Mast’s
Vice President, Business Development. From 2002 until 2004, Mr. Culley was Director of Business Development and Marketing for Immusol,
Inc. From 1999 until 2000, he worked at the University of California, San Diego (UCSD) Department of Technology Transfer & Intellectual
Property Services and from 1996 to 1999 he conducted drug development research for Neurocrine Biosciences, Inc. (NBIX). Mr. Culley served
on the Board of Orphagen Pharmaceuticals, Inc. from May 2017 until December 2022. Mr. Culley has more than 30 years of business and scientific
experience in the life sciences industry. He received a B.S. in biology from Boston College, a masters in biochemistry and molecular
biology from the University of California, Santa Barbara, and an M.B.A. from The Johnson School of Business at Cornell University. Mr.
Culley brings to our Board significant knowledge of the biotechnology industry and extensive experience as an executive and board member
of publicly traded pharmaceutical companies.
Anula
Jayasuriya, M.D., Ph.D., M.B.A. Dr. Jayasuriya is the Founder and Managing Director of EXXclaim Capital, an early-stage venture
fund focused on catalyzing innovation, entrepreneurship and investment in Women’s Health she founded in 2013. In 2006, she co-founded
the Evolvence India Life Science Fund, managing the fund until July of 2017. From 2001 to 2002, Dr. Jayasuriya was a partner with Skyline
Ventures in Palo Alto, and prior to that with the German/US venture capital firm TVM, in San Francisco. Her prior positions include VP,
Business Development at Genomics Collaborative, Inc., from 1999 to 2000, and VP, Global Drug Development at Hoffman-La Roche from 1994
to 1998. Dr. Jayasuriya serves as a director of Jaguar Health, Inc. Dr. Jayasuriya received a B.A. from Harvard University summa cum
laude, a M. Phil. in pharmacology from the University of Cambridge, an M.D. and Ph.D. (in Microbiology and Molecular Genetics) from Harvard
Medical School and an M.B.A. with distinction from Harvard Business School. Dr. Jayasuriya brings to our Board business, scientific,
and medical experience earned throughout her career as a pharmaceutical company executive, private equity executive, and venture capitalist,
providing her with a broad experience base spanning clinical, executive, entrepreneurial, and financial roles.
Michael
H. Mulroy. Mr. Mulroy served as the Chief Executive Officer and a member of the board of directors of Asterias Biotherapeutics,
Inc. (AST) from June 2017 until our acquisition of Asterias in March 2019. In April 2020, Mr. Mulroy joined Magtrol Inc., a leading manufacturer
of motor test equipment and hysteresis brakes and clutches, on a part time basis, where he also serves on its board of directors. Prior
to joining Asterias, Mr. Mulroy served as a Senior Advisor to CamberView Partners, LLC (now part of PJT Partners Inc.), which assists
companies in connection with investor engagement and complex corporate governance issues. Prior to its sale in 2014, Mr. Mulroy served
as Executive Vice President, Strategic Affairs and General Counsel and Corporate Secretary of Questcor Pharmaceuticals, Inc. (QCOR).
Mr. Mulroy joined Questcor in 2011 as Chief Financial Officer, General Counsel and Corporate Secretary. From January 2017 to July 2019,
Mr. Mulroy served as a member of the board of directors of AgeX Therapeutics, Inc. (AGE), a biotechnology company focused on the development
and commercialization of novel therapeutics targeting human aging. Mr. Mulroy earned his J.D. degree from the University of California,
Los Angeles and his B.A. degree in economics from the University of Chicago. Mr. Mulroy brings to our Board his experience as the Chief
Executive Officer of a publicly traded biotechnology company and member of a senior management team of a larger biopharmaceutical company
that experienced a period of rapid growth. Mr. Mulroy also brings to our Board his experience in corporate finance and investor relations.
Angus
C. Russell. Mr. Russell served as the Chief Executive Officer of Shire plc (SHPG), a biopharmaceutical company, from June 2008
to April 2013. Mr. Russell served as the Chief Financial Officer of Shire from 1999 to 2008 and also served as its Principal Accounting
Officer and Executive Vice President of Global Finance. Prior to joining Shire, Mr. Russell served at ICI, Zeneca, and AstraZeneca for
19 years, most recently as Vice President of Corporate Finance at AstraZeneca plc (AZN). Mr. Russell also serves as Chairman of the Board
of Directors of Revance Therapeutics, Inc. (RVNC). Mr. Russell previously served as a director of Shire plc, Questcor Pharmaceuticals,
Inc. (QCOR) until it was acquired by Mallinckrodt plc (MNK) in 2014, InterMune, Inc. (ITMN) prior to its acquisition by Roche Holdings,
Inc. (RHHBY) in 2014, Mallinckrodt plc (MNK) until June of 2022 and Therapeutics MD, Inc. (TXMD) until December 2022. Mr. Russell holds
an honorary Doctor of Business Administration from Coventry University, U.K. Mr. Russell brings to our Board numerous years of experience
as a Chief Executive Officer of an international publicly traded specialty biopharmaceutical company and his substantial experience in
information systems and security and as an officer and director in the specialty pharmaceutical industry.
Board
Committees
The
table below sets forth the composition of the committees of our Board as of April 17, 2023.
|
|
Audit |
|
Compensation |
|
Nominating
& Corporate Governance |
|
Financial
Strategy |
Alfred D. Kingsley |
|
|
|
|
|
Member |
|
Chair |
Dipti Amin |
|
|
|
Member |
|
|
|
|
Deborah Andrews |
|
Chair |
|
Member |
|
|
|
|
Don M. Bailey |
|
|
|
|
|
Member |
|
|
Neal C. Bradsher, CFA |
|
|
|
|
|
Chair |
|
Member |
Brian M. Culley |
|
|
|
|
|
|
|
Member |
Anula Jayasuriya |
|
|
|
|
|
Member |
|
|
Michael H. Mulroy |
|
Member |
|
Chair |
|
|
|
Member |
Angus C. Russell |
|
Member |
|
Member |
|
|
|
|
Executive
Officers
Set
forth below are the names, ages, offices held, tenure and certain biographical information of each of our executive officers as of April
17, 2023.
Name |
|
Age |
|
Office(s) |
|
Officer
Since |
Brian M. Culley |
|
51 |
|
Chief Executive Officer
and Director |
|
September 2018 |
Jill A. Howe |
|
47 |
|
Chief Financial Officer |
|
November 2022 |
George A. Samuel III |
|
42 |
|
General Counsel and Corporate
Secretary |
|
September 2021 |
Gary S. Hogge, D.V.M.,
Ph.D. |
|
55 |
|
Senior Vice President of
Clinical & Medical Affairs |
|
March 2019 |
Mr.
Culley’s biographical information is included above with those of the other members of our Board.
Jill
A. Howe. Ms. Howe joined Lineage as Chief Financial Officer on November 14, 2022. Before joining Lineage, Ms. Howe most recently
served as the Chief Financial Officer of DTx Pharma, Inc., a biotechnology company, a position she held from June 2021 through July 2022.
Prior to joining DTx Pharma, from January 2018 to June 2021, Ms. Howe served as Vice President of Finance and Treasurer for Gossamer
Bio, Inc. (Nasdaq: GOSS), a clinical-stage biopharmaceutical company. Prior to Gossamer Bio, she served as Controller & Director
of Finance of Amplyx Pharmaceuticals, Inc., a biopharmaceutical company, from March 2016 to December 2017. She previously held positions,
including as Controller and Director of Finance, at Receptos, Inc., a biotechnology company, and at Somaxon Pharmaceuticals, Inc., a
specialty pharmaceutical company. Since November 2021, Ms. Howe has served on the board of directors of, and as the chair of the audit
committee and as a member of the nominating committee of, Biora Therapeutics, Inc. (Nasdaq: BIOR), and since October 2021, has served
on the board of directors of Codagenix Inc. Ms. Howe earned a B.S. in Accountancy from San Diego State University.
George
A. Samuel III. Mr. Samuel joined Lineage as General Counsel and Corporate Secretary on September 1, 2021. Prior to joining Lineage,
Mr. Samuel most recently served as Director, Senior Counsel for Lytx, Inc., where he managed the commercial legal operations for an international
video telematics SaaS company, a position he held from January 2020 to August 2021. From February 2019 to December 2019, Mr. Samuel practiced
corporate law at VLP Law Group LLC. From August 2016 to February 2019, Mr. Samuel served as VP, General Counsel and Corporate Secretary
for Cardiff Oncology, Inc. (formerly known as Trovagene, Inc.), a clinical-stage biotechnology company focused on developing treatments
in oncology. While at Cardiff Oncology, he advised on strategic, business development and operational decisions; oversaw capital raising
efforts, regulatory compliance as well as SEC reporting; and managed intellectual property, including technology transfer and licensing.
Mr. Samuel has also practiced corporate law at Cooley LLP, DLA Piper LLP, and Winston & Strawn LLP, where he served as outside counsel
to public and private companies in a variety of commercial transactions. Mr. Samuel received a J.D. from Columbia University School of
Law, and a B.A. in Philosophy from Tufts University and is a member of the State Bar of California and New York.
Gary
Hogge, D.V.M., Ph.D. Dr. Hogge joined Lineage as Senior Vice President of Clinical and Medical Affairs in February 2018. Dr.
Hogge has more than 20 years of experience developing and supporting the commercialization of a number of products over a broad range
of therapeutic areas. Dr. Hogge has held a variety of roles of increasing responsibility across multiple therapeutic areas in both clinical
development and medical affairs. Previously Dr. Hogge was the Vice President of Medical Affairs at Questcor Pharmaceuticals, Inc. (QCOR)
and before that held multiple leadership roles in both clinical development and medical affairs at Elan Pharmaceuticals including various
responsibilities in the global clinical development of Tysabri® (natalizumab) in Crohn’s disease and multiple sclerosis, and
for building and leading the medical affairs function. He served as medical director following the approval and launch of Tysabri. Prior
to those accomplishments, he worked in clinical development for Ceplene® (histamine dihydrochloride) at Maxim Pharmaceuticals and
in the immunology research and development group at Pfizer. Dr. Hogge obtained his B.S. degree and D.V.M. from Colorado State University,
his M.S. and Ph.D. from the University of Wisconsin-Madison and was a visiting scientist at the Queensland Institute of Medical Research
(QIMR) in Brisbane, Australia.
Family
Relationships; Arrangements; Legal Proceedings
There
are no family relationships among any of our directors and executive officers. There are no arrangements or understandings with another
person under which our directors and officers was or is to be selected as a director or executive officer. Additionally, none of our
directors or executive officers is involved in any legal proceeding that requires disclosure under Item 401(f) of Regulation S-K.
Code
of Ethics
We
adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that applies to our principal executive officer, principal
financial officer, principal accounting officer or controller, other executive officers, and directors. The purpose of the Code of Ethics
is to promote: (1) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal
and professional relationships; (2) full, fair, accurate, timely, and understandable disclosure in reports and documents that we file
with or submit to the SEC and in our other public communications; (3) compliance with applicable governmental rules and regulations;
(4) prompt internal reporting of violations of the Code of Ethics to an appropriate person or persons identified in the Code of Ethics;
and (5) accountability for adherence to the Code of Ethics. A copy of the Code of Ethics is posted on our website at https://investor.lineagecell.com/corporate-governance/highlights.
We intend to disclose any future amendments to certain provisions of the Code of Ethics, and any waivers of those provisions granted
to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar
functions, by posting the information on our website within four business days following the date of the amendment or waiver.
Audit
Committee and Audit Committee Financial Expert
The
Audit Committee of our Board is established in accordance with Section 3(a)(58)(A) of the Exchange Act. Our Board has determined that
each of Ms. Andrews and Messrs. Mulroy and Russell meet the criteria of an “audit committee financial expert” within the
meaning of the SEC’s regulations. Ms. Andrews’ expertise is based on her experience as the former Chief Financial Officer
of STAAR Surgical Company, and in other financial roles with that company, including as its Chief Accounting Officer, as well as her
experience as a senior accountant for a major accounting firm. Mr. Mulroy’s expertise is based on his experience as the former
Chief Executive Officer of Asterias Biotherapeutics, Inc. Mr. Russell’s expertise is based on his experience as the former Chief
Executive Officer and Chief Financial Officer of Shire plc.
Changes
in Stockholder Nomination Procedures
There
have been no material changes to the procedures by which stockholders may recommend nominees to our Board since such procedures were
last described in our proxy statement filed with the SEC on April 29, 2022 other than the additional requirements under the SEC’s
Universal Proxy Rules, including the requirement that shareholders submit notice of director nominations to us that includes the information
required by Rule 14a-19(b) under the Exchange Act.
ITEM 11. EXECUTIVE COMPENSATION
Overview
We
are a “smaller reporting company” under Item 10 of Regulation S-K promulgated under the Exchange Act and the following compensation
disclosure is intended to comply with the requirements applicable to smaller reporting companies. Although the rules allow us to provide
less detail about our executive compensation program, our Compensation Committee is committed to providing the information necessary
to help our shareholders understand its executive compensation-related decisions. Accordingly, this section includes supplemental narratives
that describe our executive compensation practices.
Our
Compensation Committee oversees our compensation and employee benefit plans and practices, including executive compensation arrangements
and incentive plans and awards of stock options and other equity-based awards under the Lineage Cell Therapeutics, Inc. 2021 Equity Incentive
Plan (the “2021 Plan”). Our Compensation Committee determines, or recommends to our Board for its determination, the terms
and amount of executive compensation and grants of equity-based awards to executives, employees, consultants, and independent contractors.
The Chief Executive Officer may make recommendations to our Compensation Committee concerning executive compensation and performance,
but our Compensation Committee makes its own determination or recommendation to our Board with respect to the amount and components of
compensation, including salary, bonus, target bonus percentages, and equity awards to executive officers, generally considering factors
such as company performance, individual performance, and compensation paid by peer group companies.
Our
executive compensation programs are designed to:
|
● |
attract,
motivate, and retain highly qualified executives; |
|
|
|
|
● |
align
management and shareholder interests by tying a substantial percentage of executives’ compensation to financial performance
of Lineage and its subsidiaries through the grant of equity awards; |
|
|
|
|
● |
reward
superior performance by basing decisions regarding cash incentive compensation on the overall performance of executives; and |
|
|
|
|
● |
compensate
executives at levels competitive with peer companies. |
With
respect to compensation matters for 2022, our Compensation Committee engaged Anderson Pay Advisors, LLC (“Anderson”) to provide
compensation consulting services and advice to our Compensation Committee, which included market survey information and competitive market
trends in employee, executive, and director compensation programs. Anderson also made recommendations to our Compensation Committee with
respect to pay mix components such as salary, bonus, and equity awards, and the target market pay percentiles in which executive compensation
should fall so we can be competitive in executive hiring and retention.
In
reviewing each executive’s overall compensation, our Compensation Committee considers an aggregate view of base salary and bonus
opportunities, equity incentive grants, and the dollar value of benefits and perquisites. These factors are balanced against our financial
position and capital resources. In making 2022 compensation decisions, our Compensation Committee reviewed market data for each named
executive officer’s position, from the following peer group companies:
Aeglea
Biotherapeutics, Inc. |
Chimerix,
Inc. |
Leap
Therapeutics, Inc. |
Alaunos
Therapeutics, Inc. |
Fate
Therapeutics, Inc. |
Magenta
Therapeutics, Inc. |
AlloVir,
Inc. |
Forma
Therapeutics Holdings, Inc. |
MeiraGTx
Holdings plc |
Apellis
Pharmaceuticals, Inc. |
Geron
Corporation |
Nkarta,
Inc. |
Atara
Biotherapeutics, Inc. |
Gritstone
bio, Inc. |
Poseida
Therapeutics, Inc. |
Athersys,
Inc. |
Harpoon
Therapeutics, Inc. |
Rubius
Therapeutics, Inc. |
BioAtla,
Inc. |
Infinity
Pharmaceuticals, Inc. |
Synlogic,
Inc. |
Celldex
Therapeutics, Inc. |
IVERIC
bio, Inc. |
|
Celularity
Inc. |
Jounce
Therapeutics, Inc. |
|
The
peer group was recommended by Anderson and consisted of companies operating in the biopharmaceutical/biotech industry, generally with
fewer than 150 employees, market capitalization between $150 million and $750 million, and a lead development program in Phase 2. Some
companies in the peer group were outside of one or more of these parameters but were included because their business areas of focus were
similar to ours.
Summary
Compensation Table
The
table below sets forth the compensation earned or paid to our executive officers identified below, who under SEC rules are considered
our named executive officers, for 2022. Under SEC rules, the following individuals are considered a company’s named executive officers:
(1) all individuals serving as the company’s principal executive officer or acting in a similar capacity during the last completed
fiscal year, regardless of compensation level, which for us was Mr. Culley; (2) the company’s two most highly compensated executive
officers other than its principal executive officer who were serving as executive officers at the end of the last completed fiscal year,
which for us were Ms. Howe and Mr. Samuel; and (3) up to two additional individuals for whom disclosure would have been provided pursuant
to the preceding clause (2) but for the fact that the individual was not serving as an executive officer of the company at the end of
the last completed fiscal year, which for us was Mr. Cook.
2022 Summary Compensation Table |
Name and Principal Position(1) | |
Fiscal Year | | |
Salary ($) | | |
Bonus ($)(2) | | |
Option Awards ($)(3) | | |
Stock Awards ($)(4) | | |
Non-Equity Incentive Plan Compensation ($)(5) | | |
All Other Compensation ($)(6) | | |
Total ($) | |
Brian M. Culley | |
| 2022 | | |
$ | 609,000 | | |
$ | — | | |
$ | 1,159,875 | | |
$ | 268,503 | | |
$ | 319,900 | | |
$ | 15,250 | | |
$ | 2,372,528 | |
Chief Executive Officer | |
| 2021 | | |
$ | 580,000 | | |
$ | — | | |
$ | 1,840,975 | | |
$ | - | | |
$ | 319,000 | | |
$ | 14,500 | | |
$ | 2,754,475 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Jill A. Howe | |
| 2022 | | |
$ | 55,019 | | |
$ | 50,000 | | |
$ | 934,900 | | |
$ | - | | |
$ | 20,500 | | |
$ | — | | |
$ | 1,060,419 | |
Chief Financial Officer | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
George A. Samuel III | |
| 2022 | | |
$ | 394,800 | | |
$ | — | | |
$ | 603,135 | | |
$ | 39,057 | | |
$ | 150,900 | | |
$ | 15,250 | | |
$ | 1,203,142 | |
General Counsel and Corporate Secretary | |
| 2021 | | |
$ | 125,333 | | |
$ | — | | |
$ | 1,154,743 | | |
$ | — | | |
$ | 50,300 | | |
$ | — | | |
$ | 1,330,376 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Kevin L. Cook | |
| 2022 | | |
$ | 222,316 | | |
$ | — | | |
$ | 603,135 | | |
$ | 22,320 | | |
$ | — | | |
$ | 372,673 | | |
$ | 1,220,444 | |
Former Chief Financial Officer | |
| 2021 | | |
$ | 214,773 | | |
$ | 15,000 | | |
$ | 1,316,550 | | |
$ | - | | |
$ | 86,200 | | |
$ | 27,686 | | |
$ | 1,660,209 | |
(1) |
Ms. Howe commenced
employment with us November 14, 2022. Mr. Cook resigned on July 8, 2022. The amounts reported in the table for each named executive
officer represent the portion of earned compensation during the period of time such officer was in service with us. |
(2) |
The amounts in this column
represent signing bonuses earned in connection with the applicable individual’s commencement of employment with us. |
(3) |
The amounts in this column
represent the grant date fair value of stock options granted to the applicable individual during the applicable year. The grant date
fair value and incremental fair value of the stock options were determined in accordance with ASC Topic 718, Compensation –
Stock Compensation (ASC Topic 718). See Note 12, Stock-Based Awards to our consolidated financial statements included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2022 for details as to the assumptions used to determine grant date fair
value of the awards. |
(4) |
The amounts in the column
represent the fair value of the restricted stock units (“RSUs”) granted during 2022. A portion of these awards contained
a performance vesting condition which is only included in the grant date fair value under ASC Topic 718 if the criteria is determined
to be probable. The fair market value of the stock awards assuming all performance vesting conditions were deemed probable would
have been: (a) Brian Culley $442,610; (b) Kevin Cook $41,666; and (c) George Samuel $72,912. |
(5) |
The amounts in this column
for 2022 represent cash paid to the applicable individual earned in 2022 and paid in 2023 under our annual performance-based incentive
plan discussed under the heading “Elements of Compensation—Annual Performance Bonuses.” |
(6) |
The amounts in this column
for 2022 represent: (a) for Mr. Culley and Mr. Samuel, 401(k) plan company-matching contributions of $15,250; and (b) for Mr. Cook,
a severance payment of $318,975, 401(k) plan company-matching contributions of $12,247, payout of accrued paid time off at termination
of employment of $22,631, and Consolidated Omnibus Budget Reconciliation Act (“COBRA”) group health insurance premiums
of $18,820. |
Narrative
to Summary Compensation Table
Employment
Agreements and Termination of Employment & Change in Control Arrangements
Mr.
Culley, Ms. Howe and Mr. Samuel
In
September 2022, we entered into amended and restated employment agreements with each of Messrs. Culley and Samuel, and in October 2022,
we entered into an employment agreement with Ms. Howe. Such agreements were approved by our Board, upon the recommendation of its Compensation
Committee,.
The
terms of the employment agreements for each executive are substantially the same other than with respect to annual salary amount, annual
bonus target percentage, and potential benefits in connection with termination of employment.
The
following is a brief description of certain terms of the employment agreements.
|
● |
Each executive receives
an annual salary (which for 2022 was $609,000 for Mr. Culley, $415,000 for Ms. Howe, and $394,800 for Mr. Samuel). The annual salary
may be increased from time to time by our Board or its Compensation Committee in their sole discretion. |
|
|
|
|
● |
Each executive is eligible
for an annual bonus targeted at a percentage of their then annual salary (which for 2022 was 55% for Mr. Culley and 40% for each
of Ms. Howe and Mr. Samuel). The annual bonus target percentage may be increased from time to time by our Board or its Compensation
Committee in their sole discretion. The amount of an executive’s annual bonus, if any, is subject to the approval of our Board
or its Compensation Committee in their sole discretion. Under the terms of her agreement, for 2022, the amount of Ms. Howe’s
annual bonus was prorated based on the number of days she was employed with us during 2022. |
|
|
|
|
● |
Each executive may be eligible
to participate in certain retirement, pension, life, health, accident and disability insurance, equity incentive plan or other similar
employee benefit plans we may adopt for our executive officers or other employees. |
|
|
|
|
● |
Each executive receives
paid time off and will be reimbursed for reasonably incurred travel and business expenses, in each case, in accordance with our company
policies. |
|
|
|
|
● |
Each executive’s
employment is “at will” and may be terminated at any time by the executive or us with or without cause. |
|
|
|
|
● |
The following summarizes
the payments and other benefits to which each executive may be entitled if their employment is terminated for the reason specified. |
Reason
for Termination |
|
Accrued
Benefits |
|
Cash
Payments(1) |
|
Other Benefits |
|
|
|
|
|
|
|
●
|
By
us for cause (as defined in the agreement) |
|
We
must pay the executive:
|
|
None. |
|
None. |
|
|
|
|
|
|
|
|
● |
By the executive without good reason
(as defined in the agreement) |
|
● |
all accrued but unpaid salary earned
prior to or as of the date of termination; and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
● |
Executive’s death or disability (as defined in
the agreement) |
|
● |
all accrued and unused paid time off earned prior to
or as of the date of termination. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
● |
By us without cause |
|
Same as above. |
|
We must pay the executive: |
|
We must pay 100% of the premium of any
health insurance benefits under a company employee health insurance plan subject to COBRA for a specified number of months.(2) |
|
|
|
|
|
|
|
|
● |
By the executive with good reason |
|
|
|
|
● |
an amount equal to a specified number of months(2)
of their then-current base salary, payable in installments; and |
|
|
|
|
|
|
|
● |
a certain percentage(3) of their target
bonus for the year in which employment was terminated payable in a lump sum. |
|
|
|
|
|
|
|
|
|
|
|
|
● |
By us without cause or by the executive with good reason
within three months before or one-year after a change of control |
|
Same as above. |
|
Same as above except both payments are
payable in a lump sum and both the number of months of base salary(4) and the percentage(5) of the target bonus
increases. |
|
Same
as above except the number of months are 18 for Mr. Culley and 12 for each of Ms. Howe and Mr. Samuel.
Accelerated
vesting of all then unexpired, unvested equity awards granted to the executive (with such acceleration occurring on the later of
the change of control or the termination of employment) other than any awards that include both a performance-based vesting condition
and a time-based vesting condition or that vest solely upon the achievement of a performance-based vesting condition (unless such
performance-based vesting condition has been satisfied as of the date of termination). |
(1)
Payment and benefits are conditioned on the executive executing and delivering a release of claims in our favor.
(2)
12 months for Mr. Culley and 9 months for each of Ms. Howe and Mr. Samuel.
(3)
100% for Mr. Culley and a pro rata portion for each of Ms. Howe and Mr. Samuel.
(4)
18 months for Mr. Culley and 12 months for each of Ms. Howe and Mr. Samuel.
(5)
150% for Mr. Culley and 100% for each of Ms. Howe and Mr. Samuel.
In
addition, under Ms. Howe’s employment agreement, she was granted a stock option to purchase 1,000,000 common shares with an exercise
price equal to the closing price of our common shares on the grant date and that vests as to 25% of the shares subject to the option
on the first anniversary of her start date with us, and the remainder of the shares will vest in a series of 36 successive substantially
equal monthly installments thereafter, in each case, subject to her continued service with Lineage.
All
payments made and benefits to each executive under their employment agreement are intended to comply with Section 409A of the Internal
Revenue Code of 1986, and, to the extent practicable, the employment agreements will be interpreted and administered in a manner so that
any amount or benefit payable thereunder will be paid or provided in a manner that is either exempt from or compliant with the requirements
of Section 409A and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder.
Former
Chief Financial Officer
On
July 5, 2022, Mr. Cook notified us that he would be resigning as Chief Financial Officer of Lineage effective July 8, 2022. Mr. Cook’s
resignation was not the result of any disagreement with us or our Board or any matter relating to our operations, policies, or practices.
In connection with his resignation, we entered into a separation agreement with Mr. Cook pursuant to which, among other things, in exchange
for full release of claims in our favor, we agreed to pay Mr. Cook $318,975, which is equal to 9 months’ of Mr. Cook’s
base salary in effect immediately prior to his resignation, and to pay, for a period of up to 9 months, any health insurance benefits
he was receiving at the time of his termination of employment under our employee health insurance plan subject to COBRA.
In
connection with his appointment as Chief Financial Officer in June 2021, we and Mr. Cook entered into an employment agreement pursuant
to which Mr. Cook was paid an annual base salary of $405,000 and was eligible for an annual bonus targeted at 40% of his annual salary,
as may be approved by our Board or its Compensation Committee in its discretion, based on the achievement of predetermined company and/or
individual objectives set by our Board or its Compensation Committee, from time to time. In connection with his appointment as our Chief
Financial Officer, Mr. Cook received an option to purchase 750,000 of our common shares, 25% of the shares underlying the option vested
on the first anniversary of his start date with us and the remainder was scheduled to vest in 36 equal monthly installments thereafter,
subject to his continued employment with us on each such date and the terms and provisions of our 2012 Equity Incentive Plan, pursuant
to which such stock option was granted. Mr. Cook was also entitled to the standard benefits available to our employees generally, including
health insurance.
Elements
of Compensation
Base
Salary
Our
Compensation Committee or Board reviews the base salaries of our executive officers, including our named executive officers, from time
to time and makes adjustments as it determines to be reasonable and necessary to reflect the scope of an executive officer’s performance,
contributions, responsibilities, experience, prior salary level, position (in the case of a promotion), and market conditions.
Annual
Performance Bonuses
On
September 20, 2022, our Board, upon the recommendation of its Compensation Committee, adopted an Executive Performance Incentive Bonus
Plan (the “Performance-Based Incentive Plan”). The Compensation Committee is the administrator of the Performance-Based Incentive
Plan. Under the terms of the Performance-Based Incentive Plan, for each participant, the Compensation Committee will generally establish
(1) a target bonus amount (which it may adjust from time to time), (2) company performance goals and/or individual performance goals
(together, “Performance Goals”), (3) the time period over which the achievement of Performance Goals will be assessed, which
is generally our fiscal year (a “Performance Period”), and (4) the formula(s) for determining the bonuses payable under the
Performance-Based Incentive Plan. Performance Goals may be given such weight as determined by the Compensation Committee and may differ
among participants. The Compensation Committee, in its discretion, will determine the bonus amounts payable under the Performance-Based
Incentive Plan. The actual bonuses, if any, awarded each year may vary from target, depending on individual performance and the achievement
of corporate objectives and may also vary based on other factors at the discretion of our Compensation Committee.
Each
of our named executive officers was a participant in, and eligible to receive a bonus under, the Performance-Based Incentive Plan for
2022, other than Mr. Cook who resigned in July 2022. For each of our named executive officers who were participants in the Performance-Based
Incentive Plan for 2022, their bonus amount was determined by multiplying (a) their target annual bonus amount (which was a percentage
of their 2022 annual salary—55% for Mr. Culley and 40% for each of Ms. Howe and Mr. Samuel) by (2) our overall level of achievement
of the Performance Goals for 2022, as determined by our Board and Compensation Committee.
In
March 2023, our Board and Compensation Committee assessed our performance against each of the Performance Goals for 2022, and determined
that overall achievement level was 95.5%, as illustrated in the table below. The table below also describes the Performance Goals for
2022, their respective weightings for purposes of determining the level of achievement, and the achievement level of each Performance
Goal as determined by our Board and Compensation Committee.
|
Goal | |
Weighting | | |
Achievement
Level | | |
Weighting x
Achievement
Level | |
(1) |
OpRegen® Program Progress | |
| 20 | % | |
| 100 | % | |
| 20 | % |
(2) |
OPC1 Program Progress | |
| 10 | % | |
| 85 | % | |
| 8.5 | % |
(3) |
VAC2 Program Progress | |
| 10 | % | |
| 100 | % | |
| 10 | % |
(4) |
Auditory Neuron Program Progress | |
| 5 | % | |
| 100 | % | |
| 5 | % |
(5) |
General Corporate Improvements | |
| 5 | % | |
| 100 | % | |
| 5 | % |
(6) |
Shareholder Value (absolute and relative to benchmarks) | |
| 21 | % | |
| 75 | % | |
| 16 | % |
(7) |
Partnership/Business Development Activity | |
| 13 | % | |
| 85 | % | |
| 11 | % |
(8) |
Financial Management (quality of spending and capital raising activity) | |
| 8 | % | |
| 150 | % | |
| 12 | % |
(9) |
Investor Engagement (quality/size of new investors, analysts) | |
| 8 | % | |
| 100 | % | |
| 8 | % |
|
Total | |
| 100.0 | % | |
| | | |
| 95.5 | % |
In
their assessment of our performance against each of the Performance Goals for 2022, and in making their determination as to the achievement
level of such Performance Goals, our Board and Compensation Committee considered that we:
(1) |
continued to support our
partners, Roche and Genentech, in connection with our exclusive worldwide collaboration and license agreement for the development
and commercialization of OpRegen for the treatment of ocular disorders, including advanced dry age-related macular degeneration with
geographic atrophy, including in connection with Roche’s initiation of a Phase 2a clinical study for OpRegen; |
(2) |
submitted regenerative
medicine advanced therapy (RMAT) materials to support our OPC1 program in spinal cord injury; |
(3) |
submitted pre-Investigational
New Drug (IND) application briefing package to the U.S. Food and Drug Authority to support our VAC2 program in oncology; |
(4) |
made process development
improvements and completed other activities in support of planned preclinical testing; |
(5) |
established a new U.S.
research and development facility and expanded our current good manufacturing practices (GMP) manufacturing facility in Israel; |
(6) |
efficiently managed our
budget to strengthen our balance sheet; and |
(7) |
outperformed our peers
and the broad indices in total shareholder return during the year ended December 31, 2022 and received expanded analyst coverage. |
Accordingly,
our Board and Compensation Committee approved cash performance bonuses for each of Mr. Culley, Ms. Howe and Mr. Samuel in the amounts
reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table, above. As described under
“Narrative to Summary Compensation Table—Employment Agreements and Termination of Employment & Change in Control Arrangements,”
above, Ms. Howe’s annual performance bonus was pro-rated because she commenced employment with us in November 2022.
Other
Benefits
We
maintain a 401(k) defined contribution employee retirement plan for all of our employees. Employee contributions are voluntary and are
determined on an individual basis, limited to the maximum amounts allowable under U.S. federal tax regulations. We provide a safe harbor
contribution of up to 5.0% of the employee’s compensation, not to exceed eligible limits, and subject to employee participation.
We
do not have any annuity, pension or deferred compensation plan or other arrangements for our executive officers or any employees.
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth information concerning equity awards held by our named executive officers that were outstanding as of December
31, 2022:
| |
| |
Option Awards | | |
Stock Awards | |
Name | |
Grant Date | |
Number of securities underlying unexercised options exercisable(#) | | |
Number of securities underlying unexercised options unexercisable (#)(1) | | |
Option exercise price ($) | | |
Option expiration date | | |
Number of shares or units of stock that have not vested(#) | | |
Market value of shares of units of stock that have not vested($)(2) | |
Brian M. Culley | |
9/17/2018 | |
| 1,854,000 | | |
| - | | |
| 1.87 | | |
| 9/17/2028 | | |
| — | | |
| — | |
| |
3/17/2020 | |
| 547,893 | | |
| 385,407 | (3) | |
| 0.69 | | |
| 3/17/2030 | | |
| — | | |
| — | |
| |
3/15/2021 | |
| 509,731 | | |
| 655,369 | | |
| 2.43 | | |
| 3/15/2031 | | |
| — | | |
| — | |
| |
2/11/2022 | |
| — | | |
| — | | |
| — | | |
| — | | |
| 249,993 | (4) | |
| 156,689 | |
| |
3/10/2022 | |
| — | | |
| 1,250,000 | | |
| 1.40 | | |
| 3/10/2032 | | |
| 300,000 | (5) | |
| 16,497 | |
George A. Samuel | |
9/1/2021 | |
| 217,187 | | |
| 477,813 | | |
| 2.55 | | |
| 9/1/2031 | | |
| — | | |
| — | |
| |
2/11/2022 | |
| — | | |
| — | | |
| — | | |
| — | | |
| 48,608 | (4) | |
| 30,464 | |
| |
3/10/2022 | |
| — | | |
| 650,000 | | |
| 1.40 | | |
| 3/10/2032 | | |
| — | | |
| — | |
Jill A. Howe | |
11/14/2022 | |
| — | | |
| 1,000,000 | | |
| 1.36 | | |
| 11/14/2032 | | |
| — | | |
| — | |
(1) |
The shares
subject to options vest as to 25% of the shares subject to the option on the first anniversary of the grant date, and the balance
vest in equal monthly installments over the three years thereafter, subject to the executive’s continued service with Lineage. |
(2) |
Market value of stock awards
calculated as of December 31, 2022, which were calculated in accordance with ASC Topic 718. For stock awards which contained a performance
vesting condition there is no market value unless the performance criteria is determined to be probable. For stocks awards which
contain a market condition the value of these awards was determined using a Monte Carlo simulation. See footnotes (4) and (5) below
for additional information. |
(3) |
This option was granted
on March 17, 2020 under the Lineage Cell Therapeutics, Inc. 2012 Equity Incentive Plan (the “2012 Plan”). When the 2012
Plan was approved, it provided that no participant may be granted options and stock appreciation rights with respect to more than
1,000,000 shares in the aggregate per year. However, in accordance with the terms of the 2012 Plan, this per-participant limit was
automatically increased to 1,236,000 shares as a result of our sale of shares of AgeX Therapeutics, Inc. to Juvenescence Limited
in August 2018. Accordingly, this option did not exceed the per-participant limit in the 2012 Plan. |
(4) |
Represents RSUs granted
on February 11, 2022 to certain employees, including our named executive officers, to further align their interests with the achievement
of certain development milestones. For each RSU, half of the common shares subject to the RSU will vest in four equal annual installments
beginning on the first anniversary of the grant date, subject to the employee’s continued service with Lineage, and the other
half will vest in connection with the achievement of certain development milestones. |
(5) |
Represents RSUs granted
on March 10, 2022, 100,000 of which would have vested on or prior to March 9, 2023, and 100,000 will vest on or prior to each of
the second and third anniversaries of such date, in each case upon the achievement of certain per share performance targets, calculated
based on the trailing 20-day volume weighted average price of our common shares as of the date of determination. If such per share
performance targets are not achieved by the applicable vesting date, then such RSUs will be forfeited. The 100,000 RSUs that would
have vested on or prior to March 9, 2023 were forfeited. |
Consideration
of Shareholder Advisory Vote on Executive Compensation
The
results of the advisory vote of our shareholders on the compensation of our named executive officers (commonly called the “say-on-pay”
vote) at our 2022 annual meeting of shareholders showed that approximately 98% of the votes cast “FOR” or “AGAINST”
on the “say-on-pay” vote approved the compensation of our named executive officers during 2022. Our Compensation Committee
carefully evaluated and considered the results of this advisory vote and concluded that our shareholders generally supported our executive
compensation program and we did not make significant changes to our executive compensation program for 2022. Our Compensation
Committee expects to continue to consider the outcome of our “say-on-pay” votes and our shareholders’ views when making
future compensation decisions for our named executive officers.
Director
Compensation
We
compensate our
non-employee directors for their service on our Board and on its committees as described
below. In addition, all non-employee directors are entitled to reimbursements for their out-of-pocket expenses incurred in attending
our Board and committee meetings.
Annual
Cash Fees
Each
of our non-employee directors receives cash fees for service on our Board and on its committee on which the director serves. The fees
are paid in four equal quarterly installments,
pro-rated based on each director’s service on our Board or applicable committee during the applicable quarter, other than the fees
paid to the chair of the Financial Strategy Committee, which is paid monthly in arrears. Our Compensation Committee and our Board assess
our non-employee director compensation at least annually and consider market data provided by Anderson, the independent consultant to
our Compensation Committee, in making non-employee director compensation decisions. The adjustments to our non-employee director compensation
during 2022 and 2023 were approved by our Board, upon the recommendation of the Compensation Committee, which was based on, and consistent
with, Anderson’s recommendation. The table below shows the average annual cash fees for 2022 and the current cash fees, which became
effective as of April 1, 2023.
| |
Annual Fees ($) | |
| |
2022(1) | | |
2023(2) | |
Chair of the Board | |
| 85,000 | | |
| 100,000 | |
Director other than Chair | |
| 45,000 | | |
| 50,000 | |
Audit Committee Chair | |
| 20,000 | | |
| 20,000 | |
Audit Committee Member other than Chair | |
| 10,000 | | |
| 10,000 | |
Compensation Committee Chair | |
| 15,000 | | |
| 15,000 | |
Compensation Committee Member other than Chair | |
| 7,500 | | |
| 7,500 | |
Nominating and Corporate Governance Committee Chair | |
| 13,500 | | |
| 15,000 | |
Nominating and Corporate Governance Committee Member other than Chair | |
| 6,750 | | |
| 7,500 | |
Financial Strategy Committee Chair | |
| 137,500 | | |
| 60,000 | |
Financial Strategy Committee Member other than Chair | |
| 0 | | |
| 7,500 | |
(1) Effective July 1, 2022, the cash fees: (a) for the Chair of the Board increased from $75,000 to $95,000; (b) for directors other than the Chair of the Board increased from $40,000 to $50,000; (c) for the Chair of the Nominating and Corporate Governance Committee increased from $12,000 to $15,000; (c) for members of the Nominating and Corporate Governance Committee other than the Chair increased from $6,000 to $7,500; and (d) for the Chair of the Finance Strategy Committee decreased from $160,000 to $115,000. |
|
(2) Effective April 1, 2023, the cash fees: (a) for the Chair of the Board increased from $95,000 to $100,000; (b) for the Chair of the Finance Strategy Committee decreased from $115,000 to $60,000; and (c) for members of the Finance Strategy Committee other than the Chair increased from $0 to $7,500. |
Equity
Awards
In
addition to cash
fees, we also grant all non-employee directors an annual stock option to purchase common shares. During 2022, the annual stock option
grant was for 50,000 common shares. All grants are made under the Lineage Cell Therapeutics, Inc. 2021 Equity Incentive Plan. The options
vest and become exercisable one year after the grant date.
2022
Non-Employee Director Compensation
The
following table summarizes certain information concerning the compensation during our fiscal year ended December 31, 2022 to each person
who served as a non-employee director during the year and who was not our employee on the date the compensation was earned.
2022 Director Compensation Table |
Name | |
Fees Earned or Paid in Cash | | |
Option Award(1) | | |
Total | |
Deborah Andrews | |
$ | 75,500 | | |
$ | 78,500 | | |
$ | 154,000 | |
Dipti Amin | |
$ | 48,750 | | |
$ | 78,500 | | |
$ | 127,250 | |
Don M. Bailey | |
$ | 54,750 | | |
$ | 78,500 | | |
$ | 133,250 | |
Neal C. Bradsher | |
$ | 55,500 | | |
$ | 78,500 | | |
$ | 134,000 | |
Alfred D. Kingsley | |
$ | 226,250 | | |
$ | 78,500 | | |
$ | 304,750 | |
Anula Jayasuriya | |
$ | 48,750 | | |
$ | 78,500 | | |
$ | 127,250 | |
Michael H. Mulroy | |
$ | 73,000 | | |
$ | 78,500 | | |
$ | 151,500 | |
Angus C. Russell | |
$ | 62,500 | | |
$ | 78,500 | | |
$ | 141,000 | |
|
(1) |
The dollar amounts in this
column represent the aggregate fair market value of such awards determined based on the price of our common shares on the grant date
in accordance with ASC Topic 718, Compensation-Stock Compensation (ASC Topic 718). See Note 12 Stock-Based Awards to our consolidated
financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for details as to the
assumptions used to determine the fair value of the awards. As of December 31, 2022, the aggregate number of common shares subject
to stock options outstanding for Mses. Andrews, Amin and Jayasuriya and Messrs. Bailey, Bradsher, Kingsley, Mulroy, and Russell was
229,440, 190,000, 190,000, 240,000, 229,440, 356,520, 229,440 and 229,440, respectively. |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
table below sets forth certain information, as of April 17, 2023, regarding the beneficial ownership of our common shares for: (1) each
person known by us to be the beneficial owner of more than 5% of our common shares (“5% Shareholders”); (2) each of our directors;
(3) each of our named executive officers; and (4) all of our current directors and executive officers as a group.
We
have determined beneficial ownership in accordance with applicable SEC rules, and the information reflected in the table below is not
necessarily indicative of beneficial ownership for any other purpose. Under applicable SEC rules, beneficial ownership includes any common
shares as to which a person has sole or shared voting power or investment power and any common shares that the person has the right to
acquire within 60 days after the date set forth in the paragraph above through the exercise of any option, warrant or right or through
the conversion of any convertible security. Unless otherwise indicated in the footnotes to the table below and subject to community property
laws where applicable, we believe, based on the information furnished to us and on SEC filings, that each of the persons named in table
below has sole voting and investment power with respect to the shares indicated as beneficially owned.
The
information set forth in the tables below is based on 170,173,789 common shares issued and outstanding on April 17, 2023. In computing
the number of common shares beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all
common shares subject to options, warrants, rights or other convertible securities held by that person that are currently exercisable
or will be exercisable within 60 days after such date. We did not deem these shares outstanding, however, for the purpose of computing
the percentage ownership of any other person. Except as otherwise noted, the address for each person listed in the table below is c/o
Lineage Cell Therapeutics, Inc., 2173 Salk Avenue, Suite 200, Carlsbad, CA 92008.
Name and Address of Beneficial Owner | |
Number of Shares Beneficially Owned | | |
Percentage of Shares Beneficially Owned | |
5% Shareholders | |
| | | |
| | |
Broadwood Partners, L.P.(1) | |
| 35,202,553 | | |
| 20.7 | % |
Named Executive Officers and Directors | |
| | | |
| | |
Neal C. Bradsher(1) | |
| 35,202,553 | | |
| 20.7 | % |
Alfred D. Kingsley(2) | |
| 7,155,762 | | |
| 4.2 | % |
Brian M. Culley(3) | |
| 3,702,754 | | |
| 2.1 | % |
Michael H. Mulroy(4) | |
| 437,995 | | |
| * | |
Angus C. Russell(5) | |
| 266,940 | | |
| * | |
Don M. Bailey(6) | |
| 252,647 | | |
| * | |
Deborah Andrews(7) | |
| 195,018 | | |
| * | |
Dipti Amin(8) | |
| 147,500 | | |
| * | |
Anula Jayasuriya(9) | |
| 112,500 | | |
| * | |
George A. Samuel(10) | |
| 510,785 | | |
| * | |
Jill A. Howe | |
| - | | |
| * | |
Kevin L. Cook | |
| - | | |
| * | |
All executive officers and directors as a group (12 persons)(11) | |
| 48,569,118 | | |
| 28.5 | % |
*
Less than 1%
(1) |
Includes: (i) 34,935,485
shares owned by Broadwood Partners, L.P.; (ii) 87,628 shares owned by Neal C. Bradsher; and (iii) 179,440 shares that may be acquired
by Mr. Bradsher upon the exercise of options that are presently exercisable or may become exercisable within 60 days of April 17,
2023. Broadwood Capital, Inc. is the general partner of Broadwood Partners, L.P., and Mr. Bradsher is the President of Broadwood
Capital, Inc. Mr. Bradsher and Broadwood Capital, Inc. may be deemed to beneficially own the shares that Broadwood Partners, L.P.
owns. Mr. Bradsher disclaims beneficial ownership of the shares held by Broadwood Partners, L.P. except to the extent of his pecuniary
interest therein. The Address of the foregoing entities and Mr. Bradsher is c/o Broadwood Capital, Inc., 142 West 57th Street,
11th Floor, New York, New York 10019. |
(2) |
Includes: (i) 1,043,346
shares owned by Greenbelt Corporation; (ii) 375,351 shares owned by Greenway Partners, L.P.; (iii) 5,430,545 shares owned solely
by Alfred D. Kingsley; and (iv) 306,520 shares that may be acquired by Mr. Kingsley upon the exercise of options that are presently
exercisable or may become exercisable within 60 days of April 17, 2023. Mr. Kingsley controls Greenbelt Corp. and Greenway Partners,
L.P. and may be deemed to beneficially own the shares that Greenbelt Corp. and Greenway Partners, L.P. own. |
(3) |
Includes: (i) 126,399 shares
held directly by Mr. Culley; and (ii) 3,576,355 shares that may be acquired upon the exercise of options that are presently exercisable
or that may become exercisable within 60 days of April 17, 2023. |
(4) |
Includes: (i) 258,555 shares
held directly by Mr. Mulroy; and (ii) 179,440 shares that may be acquired upon the exercise of options that are presently exercisable
or that may become exercisable within 60 days of April 17, 2023. |
(5) |
Includes: (i) 87,500 shares
held directly by Mr. Russell; and (ii) 179,440 shares that may be acquired upon the exercise of options that are presently exercisable
or that may become exercisable within 60 days of April 17, 2023. |
(6) |
Includes: (i) 62,647 shares
held directly by Mr. Bailey; (ii) 190,000 shares that may be acquired upon the exercise of options that are presently exercisable
or that may become exercisable within 60 days of April 17, 2023. |
(7) |
Includes: (i) 15,578 shares
held directly by Ms. Andrews; and (ii) 179,440 shares that may be acquired upon the exercise of options that are presently exercisable
or that may become exercisable within 60 days of April 17, 2023. |
(8) |
Includes: (i) 35,000 shares
held directly by Ms. Amin; and (ii) 112,500 shares that may be acquired upon the exercise of options that are presently exercisable
or that may become exercisable within 60 days of April 17, 2023. |
(9) |
Includes no shares held
directly by Ms. Jayasuriya; and 112,500 shares that may be acquired upon the exercise of options that are presently exercisable or
that may become exercisable within 60 days of April 17, 2023. |
(10) |
Includes no shares held
directly by Mr. Samuel; and 510,785 shares that may be acquired upon the exercise of options that are presently exercisable or that
may become exercisable within 60 days of April 17, 2023. |
(11) |
Includes: (i) 42,469,342
shares held by our executive officers and directors; and (ii) 6,099,776 shares that may be acquired upon the exercise of options
held by our executive officers and directors that are presently exercisable or that may become exercisable within 60 days of April
17, 2023. |
Equity
Compensation Plan Information
The
following table shows certain information concerning the options outstanding and available for issuance under all of our compensation
plans and agreements as of December 31, 2022:
Plan
Category |
|
Number
of Shares
to
be Issued Upon
Exercise
of
Outstanding
Options
and
Vesting
of
Restricted
Stock
Units,
and Rights |
|
|
Weighted
Average
Exercise
Price of
the
Outstanding
Options,
and Rights |
|
|
Number
of Shares
Remaining
Available
for
Future
Issuance
under
Equity Compensation
Plans |
|
Equity compensation
plans approved by shareholders(1) |
|
|
17,258,202 |
|
|
$ |
1.66 |
|
|
|
10,847,914 |
|
Equity
compensation plans not approved by shareholders(2) |
|
|
1,854,000 |
|
|
$ |
1.87 |
|
|
|
— |
|
Total |
|
|
19,112,202 |
|
|
$ |
1.68 |
|
|
|
10,847,914 |
|
|
(1) |
Consists of our 2021 Equity
Incentive Plan and 2012 Equity Incentive Plan. |
|
(2) |
Consists of an option grant
approved by the independent members of our Board and made in reliance upon the exception for inducement grants to new employees under
the NYSE American Company Guide. |
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related
Person Transactions
Since
January 1, 2021, there has not been, nor is there currently proposed, any transaction in which we were or are to be a participant and
the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal
years and in which any of our directors or executive officers, any nominee for director, any beneficial owner of more than 5% of any
class of our voting securities or any of their respective affiliates or immediate family members, had, or will have, a direct or indirect
material interest, except as described below.
In
November 2018, we, Asterias Biotherapeutics, Inc. (“Asterias”), and Patrick Merger Sub, Inc., a wholly owned subsidiary of
ours, entered into an Agreement and Plan of Merger pursuant to which we agreed to acquire all of the outstanding common stock of Asterias
in a stock-for-stock transaction (the “Asterias Merger”). The Asterias Merger closed in March 2019.
In
October 2019, a putative class action lawsuit was filed challenging the Asterias Merger. The lawsuit (captioned Ross v. Lineage Cell
Therapeutics, Inc., et al., C.A. No. 2019-0822) was filed in Delaware Chancery Court and named, among other defendants, us, Michael
H. Mulroy, Alfred D. Kingsley, Richard T. LeBuhn and Aditya Mohanty. Messrs. Mulroy and Kingsley are members of the our Board and were
former members of the Asterias board of directors. Messrs. LeBuhn and Mohanty were also former members of the Asterias board of directors,
and Mr. Mohanty was a former member of our Board and our former chief executive officer. The lawsuit was brought by a purported stockholder
of Asterias, on behalf of a putative class of Asterias stockholders, and asserted breach of fiduciary duty and aiding and abetting claims
under Delaware law. In April 2022, the parties reached an agreement in principle to settle the lawsuit and, in October 2022, the plaintiff,
on behalf of himself and all others similarly situated, us and Messrs. Mulroy, Kingsley, LeBuhn and Mohanty entered into a Stipulation
and Agreement of Compromise and Settlement (the “Settlement Agreement”). The effectiveness of the Settlement Agreement was
subject to court approval, which, was obtained in February 2023. Pursuant to the terms of the Settlement Agreement, we and certain insurers
of the defendants paid $10.65 million (the “Settlement Amount”) into a fund created for the benefit of the purported class
and in consideration for the full and final release, settlement and discharge of all claims. Approximately $7.12 million of the Settlement
Amount was funded by certain insurers and approximately $3.53 million was paid by us in cash. We and all defendants have denied, and
continue to deny, the claims alleged in the lawsuit and the settlement does not reflect or constitute any admission, concession, presumption,
proof, evidence or finding of any liability, fault, wrongdoing or injury or damages, or of any wrongful conduct, acts or omissions on
the part any defendant.
In
connection with the putative shareholder class action lawsuits filed challenging the Asterias Merger, including the lawsuit described
in the paragraph above, we agreed to pay for the legal defense of Neal Bradsher, a member of our Board, and Broadwood Partners, L.P.
(“Broadwood”), one of our shareholders, and Broadwood Capital, Inc., which manages Broadwood, all of which were named in
the lawsuits. During the year ending December 31, 2022 and 2021, we incurred a total of approximately $27,000 and $353,000, respectively,
in legal expenses on behalf of such parties. During 2022, we received approximately $118,000 from our D&O insurance carrier as reimbursement
for a portion of the legal expenses we incurred on behalf of Broadwood.
As
of April 17, 2023: (a) Mr. Kingsley is a director of OncoCyte and may be deemed to beneficially own less than one percent of the outstanding
common stock of OncoCyte, and (b) Broadwood may be deemed to be the beneficial owner of 19.99% of the outstanding common stock of OncoCyte.
Mr. Bradsher, one of our directors, may be deemed to beneficially own the shares owned by Broadwood. The fact that certain of our directors
may be deemed to beneficially own shares of OncoCyte common stock should not be considered to mean that they constitute or are acting
in concert as a “group” with respect to those shares or that they otherwise share power or authority to vote or dispose of
the shares that each of them own. All of our decisions regarding transactions in shares of OncoCyte are made by an independent committee
of our Board in which Messrs. Kingsley and Bradsher do not participate.
Related
Person Transaction Policy
We
have adopted a related person transaction policy that applies to transactions exceeding $120,000 in which any of our officers, directors,
5% Shareholders, or any member of their immediate family, has a direct or indirect material interest, determined in accordance with the
policy (a “Related Person Transaction”). A Related Person Transaction must be reported to our Chief Financial Officer and
General Counsel or outside legal counsel and will be subject to review and approval by our Audit Committee prior to effectiveness or
consummation, to the extent practical. In addition, any Related Person Transaction that is ongoing in nature will be reviewed by our
Audit Committee annually to ensure that the transaction has been conducted in accordance with any previous approval and that all required
disclosures regarding the transaction are made.
As
appropriate for the circumstances, our Audit Committee will review and consider:
|
● |
the
interest of the officer, director, beneficial owner of more than 5% of our common shares, or any member of their immediate family
(“Related Person”) in the Related Person Transaction; |
|
|
|
|
● |
the
approximate dollar value of the amount involved in the Related Person Transaction; |
|
● |
the
approximate dollar value of the amount of the Related Person’s interest in the transaction without regard to the amount of
any profit or loss; |
|
|
|
|
● |
whether
the transaction was undertaken in the ordinary course of our business; |
|
|
|
|
● |
whether
the transaction with the Related Person is proposed to be, or was, entered into on terms no less favorable to us than terms that
could have been reached with an unrelated third party; |
|
|
|
|
● |
the
purpose of, and the potential benefits of the transaction to us; and |
|
● |
any
other information regarding the Related Person Transaction or the Related Person in the context of the proposed transaction that
would be material to investors in light of the circumstances of the particular transaction. |
Our
Audit Committee will review all relevant information available to it about a Related Person Transaction. Our Audit Committee may approve
or ratify the Related Person Transaction only if our Audit Committee determines that, under all of the circumstances, the transaction
is in, or is not in conflict with, our best interests. Our Audit Committee may, in its sole discretion, impose such conditions as it
deems appropriate on us or the Related Person in connection with approval of the Related Person Transaction. In addition, our Audit Committee
has authority to, in its sole discretion, review and approve transactions, arrangements and relationships in which we are a participant,
any of our officers, directors, 5% Shareholders, or any member of their immediate family, has a direct or indirect material interest,
and the amount involved is $120,000 or less.
A
copy of our Related Person Transaction Policy can be found on our website at https://investor.lineagecell.com/corporate-governance/highlights.
Director
Independence
Our
Board has determined that Ms. Andrews, Dr. Amin, Mr. Bailey, Mr. Bradsher, Dr. Jayasuriya, Mr. Kingsley, Mr. Mulroy, and Mr. Russell
qualify as “independent” directors under Section 803(A) of the NYSE American Company Guide, that the members of our Audit
Committee meet the additional independence standards under Section 803(B)(2) of the NYSE American Company Guide and Section 10A-3 under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that the members of our Compensation Committee
meet the additional independence standards under Section 805(c)(1) of the NYSE American Company Guide. In making its independence determinations,
our Board considered (i) the transactions, relationships and arrangements described above under “Certain Relationships and Related
Transactions,” (ii) the compensation described above under “Board of Directors - Non-Employee Director Compensation,”
(iii) with respect to Mr. Kingsley and Mr. Mulroy, current or historic service as a director or an executive officer of a company with
which we have or have had a material relationship, specifically, OncoCyte Corporation, a former subsidiary, AgeX Therapeutics, Inc.,
a former subsidiary, or Asterias Biotherapeutics, Inc., a company we acquired in March 2019, and (iv) with respect to Mr. Bradsher, his
relationship with our largest shareholder, which beneficially owns more than 20% of our common shares.
Mr.
Culley does not qualify as an “independent” director under Section 803(A) of the NYSE American Company Guide because he is
our Chief Executive Officer.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The
following table shows the audit fees billed or expected to be billed by WithumSmith+Brown, PC (“Withum”), our principal accountant,
for the audit of our annual consolidated financial statements for our last two fiscal years. Other than audit fees, no other fees were
billed or are expected to be billed by Withum for either of our last two fiscal years.
| |
2021 | | |
2022 | |
Audit Fees | |
$ | 457,046 | | |
$ | 549,049 | |
Total Fees | |
$ | 457,046 | | |
$ | 549,049 | |
Pre-Approval
of Audit and Permissible Non-Audit Services
Our
Audit Committee requires pre-approval of all audit and non-audit services. Other than de minimis services incidental to audit services,
non-audit services are generally limited to tax services, such as advice and planning, and financial due diligence services. All fees
for non-audit services must be approved by the Audit Committee, except to the extent otherwise permitted by applicable SEC regulations.
Our Audit Committee may delegate to one or more designated members of our Audit Committee the authority to grant pre-approvals, provided
such approvals are presented to our Audit Committee at a subsequent meeting.