UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities
Exchange Act of 1934
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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MEDGENICS, INC.
(Name of Registrant
as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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MEDGENICS, INC.
435 Devon Park Drive, Building
700
Wayne, Pennsylvania 19087
___________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 8, 2014
___________________
TO THE STOCKHOLDERS:
Notice is hereby given
that the 2014 annual meeting of stockholders of Medgenics, Inc. will be held on Tuesday, April 8, 2014 at 10:00 a.m. local
time at the offices of Duane Morris LLP located at 1540 Broadway, New York, New York 10036, United States for the following purposes
as more fully described in the accompanying proxy statement:
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1.
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To elect nine (9) persons to serve on our Board of Directors until the next annual meeting of stockholders
and until their respective successors are duly elected and qualified;
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2.
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To approve the cancellation of the admission of our shares of common stock to trading on the London
Stock Exchange’s Alternative Investment Market (“AIM”);
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3.
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To approve an amendment to the Medgenics, Inc. Stock Incentive Plan to increase the number of shares
reserved for issuance thereunder;
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4.
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To ratify the appointment of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global,
as our independent registered public accounting firm for the fiscal year ending December 31, 2014; and
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5.
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To transact such other proper business as may come before the meeting and any adjournment or postponement
of the meeting.
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Stockholders of record
at the close of business on February 25, 2014 are entitled to notice of, and to vote at, the annual meeting and any adjournment
or postponement thereof. For ten days prior to the meeting, a complete list of stockholders entitled to vote at the meeting will
be available for examination by any stockholder, for any purpose relating to the meeting, during ordinary business hours at our
principal executive offices at 435 Devon Park Drive, Building 700, Wayne, Pennsylvania, United States.
Phyllis K. Bellin
Corporate Secretary
Wayne, Pennsylvania
March 11, 2014
IMPORTANT:
Please vote your shares to assure that your shares are represented at the meeting. You may vote in any of the ways described on
the proxy card included in the accompanying materials. If you attend the meeting, you may choose to vote in person even if you
have previously sent in your proxy card.
Important notice regarding the availability
of proxy materials for the
Annual Meeting of Stockholders to
be held on April 8, 2014
Our Proxy Statement and Annual Report
to Stockholders are available at
http://www.medgenics.com
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
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1
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PROPOSAL 1: ELECTION OF DIRECTORS
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5
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Introduction
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Vote Required
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Recommendation
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Information Regarding the Nominees and Executive Officers
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Director Independence
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Board Leadership Structure and Role in Risk Oversight
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Board Committees
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Meetings and Attendance
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Code of Business Conduct and Ethics
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Stockholder Communications
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EXECUTIVE COMPENSATION
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Compensation Discussion & Analysis
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Compensation Committee Report
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Compensation Committee Interlocks and Insider Participation
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Summary Compensation Table
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2013 Grants of Plan-Based Awards Table
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Employment and Other Agreements with Named Executive Officers
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Outstanding Equity Awards at 2013 Fiscal Year-End
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2013 Option Exercises and Stock Vested
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Potential Payments Upon Termination or Change of Control
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2013 Director Compensation
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Indemnification of Officers and Directors
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Equity Compensation Plan Information
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PRINCIPAL STOCKHOLDERS
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Section 16(a) Beneficial Ownership Reporting Compliance
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Certain Relationships and Related Transactions
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PROPOSAL 2: APPROVAL OF THE CANCELLATION OF ADMISSION OF OUR
COMMON STOCK TO TRADING ON THE AIM MARKET
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Reasons for the Cancellation of Admission to AIM
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Effects of the Cancellation of Admission to AIM
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Vote Required
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Recommendation
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PROPOSAL 3: APPROVAL OF AN AMENDMENT TO OUR STOCK INCENTIVE PLAN
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Summary of the Stock Incentive Plan
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U.S. Federal Income Tax Considerations
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Vote Required
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Recommendation
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PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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Fees
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Audit Committee Pre-Approval Policies and Procedures
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Vote Required
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Recommendation
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AUDIT COMMITTEE REPORT
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OTHER MATTERS BEFORE THE ANNUAL MEETING
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APPENDIX A: Second Amendment of the Medgenics, Inc. Stock Incentive Plan
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MEDGENICS, INC.
435 Devon Park Drive, Building
700
Wayne, Pennsylvania 19087
____________
PROXY STATEMENT
____________
This proxy statement
and the enclosed proxy card are being mailed to stockholders on or about March 11, 2014 and are furnished in connection with
the solicitation of proxies by the Board of Directors of Medgenics, Inc. for use at the annual meeting of stockholders of Medgenics
to be held on Tuesday, April 8, 2014 at 10:00 a.m.
local time at the offices of Duane Morris LLP located at 1540 Broadway,
New York, New York 10036, United States, and at any adjournments or postponements thereof. The proxy statement and our Annual
Report on Form 10-K for the fiscal year ended December 31, 2013 are also available on the Internet at
http://www.medgenics.com
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL
MEETING
Who is entitled to vote at the meeting?
If our records show that
you were a holder of our common stock at the close of business on February 25, 2014, which is referred to in this proxy statement
as the “record date,” you are entitled to receive notice of the meeting and to vote the shares of common stock that
you held on the record date even if you sell such shares after the record date. Each outstanding share of common stock entitles
its holder to cast one vote for each matter to be voted upon. Stockholders do not have the right to cumulate votes in the election
of directors. Unexercised warrants and options do not entitle their holders to vote at the meeting.
What is the purpose of the meeting?
At the annual meeting,
you will be asked:
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to vote upon the election of nine directors (Proposal 1);
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to approve the cancellation of the admission of our shares of common stock to trading on the London
Stock Exchange’s Alternative Investment Market (“AIM”) (Proposal 2);
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to approve an amendment to our Stock Incentive Plan increasing the number of shares of our common
stock available under the plan by 2,000,000 shares (Proposal 3);
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to ratify the appointment of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global,
as our independent registered public accounting firm for the fiscal year ending December 31, 2014 (Proposal 4); and
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to transact such other proper business as may come before the meeting and any adjournments or postponements
thereof.
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What constitutes a quorum?
The presence, in person
or by proxy, of holders of record of at least one-third of the votes represented by our issued and outstanding stock entitled to
vote at this meeting is necessary to constitute a quorum for the transaction of business at the meeting. As of the record date,
there were 18,714,675 shares of common stock outstanding and entitled to vote at the meeting. Each outstanding share of common
stock entitles its holder to cast one vote for each matter to be voted upon.
What vote is needed to approve each
proposal?
Assuming a quorum is present,
directors will be elected by a plurality of all of the votes cast at the meeting. Furthermore, assuming a quorum is present, the
affirmative vote of at least 75% of the votes cast at the meeting is required to approve the cancellation of the admission of our
shares of common stock to trading on AIM. Additionally, assuming a quorum is present, the approval of the amendment to our Stock
Incentive Plan and the ratification of the appointment of our independent registered public accounting firm requires the approval
of a majority of the votes cast at the meeting. Any other matters properly presented at the meeting for stockholder approval will
require the approval of a majority of the votes cast at the meeting, unless more than a majority of the votes cast is required
to approve such other matters under Delaware law. We will treat abstentions as shares that are present and entitled to vote for
purposes of determining the presence or absence of a quorum. Abstentions do not constitute a vote “for” or “against”
and will not be counted as “votes cast.” Therefore, abstentions will have no effect on any of the proposals, assuming
a quorum is present. Broker “non-votes,” or proxies from brokers or nominees indicating that such broker or nominee
has not received instructions from the beneficial owner or other entity entitled to vote such shares on a particular matter with
respect to which such broker or nominee does not have discretionary voting power, such as the election of directors, the approval
of the cancellation of the admission of our shares of common stock to trading on AIM and the approval of the amendment to our Stock
Incentive Plan (as discussed further below), will be treated in the same manner as abstentions for purposes of the annual meeting.
None of the proposals, if approved, entitles stockholders to appraisal rights under Delaware law or our charter.
Can I revoke my vote after I submit
my proxy card?
If you cast a vote by
proxy, you may revoke it by:
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filing a written notice revoking the proxy with our Corporate Secretary at our address;
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properly signing and forwarding to us at our address a proxy with a later date; or
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appearing in person and voting by ballot at the meeting.
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If you wish to revoke
your proxy by filing a written notice with our Corporate Secretary, we must receive your written notice no later than 72 hours
before the beginning of the annual meeting. If you attend the meeting, you may vote in person whether or not you have previously
given a proxy, but your presence (without further action) at the meeting will not constitute revocation of a previously given proxy.
If you hold your shares through a bank, broker or other nominee holder, only they can revoke your proxy on your behalf.
How do I vote?
Voting in Person at
the Meeting.
If you are a registered stockholder and attend the annual meeting, you may vote in person at the meeting. If your
shares of common stock are held in “street” name or by a nominee and you wish to vote in person at the meeting, you
will need to obtain a “legal proxy” or letter of representation from the broker, bank or other nominee that holds your
shares of common stock of record.
Voting by Proxy for
Shares Registered Directly in the Name of the Stockholder.
If you hold your shares of common stock in your own name as a holder
of record with our transfer agent, you may instruct the proxy holders named in the enclosed proxy card how to vote your shares
of common stock in one of the following ways:
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By Mail.
If you would like to authorize a proxy to vote your shares by mail, please mark, sign
and date your proxy card and return it promptly in the postage-paid envelope provided.
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By Internet.
You may also have the option to authorize a proxy to vote your shares by the Internet.
If this option is available to you, the website for Internet proxy authorization will be printed on your proxy card. Internet proxy
authorization is available 24 hours each day until 12:00 a.m., Eastern Time, on April 8, 2014. You will be given the
opportunity to confirm that your instructions have been properly recorded.
IF YOU AUTHORIZE A PROXY VIA THE INTERNET, YOU DO
NOT NEED TO RETURN YOUR PROXY CARD.
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Voting by Proxy for
Shares Registered in “Street” or Nominee Name.
If your shares of common stock are held in “street”
name or by a nominee, you must follow the voting instructions provided to you by your broker, bank or other nominee holder in order
to have your shares of common stock voted on all items. Only your broker, bank or other nominee holder can vote your shares. Without
your instructions, your broker is permitted to use its own discretion and vote your shares on certain routine matters (such as
the ratification of our independent registered public accounting firm), but is not permitted to use discretion and vote your shares
on non-routine matters (such as the election of directors, the approval of the cancellation of the admission of our shares of common
stock to trading on AIM and the approval of the amendment to the Stock Incentive Plan).
Voting by Proxy for
Shares Represented by Depository Interests.
If you hold interests in shares of common stock through depository interests in
CREST outside of the United States, you may instruct Capita IRG Trustees Limited how to vote your interests in one of the following
ways:
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By Mail.
If you would like to authorize Capita IRG Trustees Limited to vote your interests
by mail, please mark, sign and date the enclosed form of direction and return it promptly in the postage-paid envelope provided.
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Electronic Voting.
Depository interests may also be voted through the CREST Proxy Voting Service
in accordance with the procedures set out in the CREST manual.
IF YOU AUTHORIZE A PROXY VIA THE CREST PROXY VOTING SERVICE,
YOU DO NOT NEED TO RETURN YOUR FORM OF DIRECTION.
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Please see the enclosed
proxy card or form of direction for further instructions on how to submit your vote.
How is my vote counted?
If you properly execute
a proxy in the accompanying form, and we receive it prior to voting at the meeting, or if you authorize your proxy to vote your
shares electronically through the Internet, the shares of stock that the proxy represents will be voted in the manner specified
on the proxy. If no specification is made, the common stock will be voted “for” the election of the nominees for directors
listed in Proposal 1, “for” the approval of the cancellation of the admission of our shares of common stock to trading
on AIM described in Proposal 2, “for” the approval of the amendment to our Stock Incentive Plan described in Proposal
3, “for” ratification of our Audit Committee’s selection of Kost Forer Gabbay & Kasierer as our independent
registered public accounting firm for the fiscal year ending December 31, 2014 (Proposal 4), and as recommended by our Board
of Directors with regard to all other matters in its discretion.
What happens if additional matters are
presented at the annual meeting?
Other than the four items
of business described in this proxy statement, we are not aware of any other business to be acted upon at the annual meeting. If
you grant a proxy, the persons named as proxy holders, or any of them, will have the discretion to vote your shares on any additional
matters properly presented for a vote at the meeting. If for any reason any of the nominees proposed in this proxy statement to
serve on our Board of Directors is unable to serve or for good cause will not serve, the persons named as proxy holders will vote
your proxy for such other candidate or candidates as may be nominated by our Board of Directors.
How are proxies solicited and who
paid for this proxy solicitation?
Solicitation
of proxies will be primarily by mail. However, our directors and employees may also solicit proxies by email or telephone or in
person, without additional compensation. All of the expenses of preparing, assembling, printing and mailing the materials used
in the solicitation of proxies will be paid by us. Arrangements may be made with brokering houses and other custodians, nominees
and fiduciaries to forward soliciting materials, at our expense, to the beneficial owners of shares held of record by such persons.
What are the requirements for presenting
stockholder proposals and director nominations?
Any
stockholder proposal to be considered for inclusion in our proxy statement and form of proxy for the annual meeting of stockholders
to be held in 2015 must be received by our Corporate Secretary at our principal executive offices at Medgenics, Inc., 435 Devon
Park Drive, Building 700, Wayne, Pennsylvania 19087, by November 11, 2014, unless the date of our 2015 annual meeting is more
than 30 days before or after the one-year anniversary date of our 2014 annual meeting. In addition, our bylaws provide that in
order for director nominations or stockholder proposals to be properly brought before the meeting, the stockholder must have delivered
timely notice to our Corporate Secretary at our principal executive offices at the address listed above. To be timely, notice
satisfying the requirements of our bylaws must be delivered not earlier than 150 days nor later than 120 days prior to the first
anniversary of the date of mailing of the notice for the preceding year’s annual meeting (or in the event that the date
of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year’s
annual meeting, the notice must be delivered no earlier than 150 days prior to the date of such annual meeting nor after the later
of 120 days prior to such annual meeting or 10 days following the date such meeting is first publicly announced). Accordingly,
unless the date of our 2015 annual meeting is more than 30 days before or after the one-year anniversary date of our 2014 annual
meeting, we must receive notice of any proposals for consideration at the 2015 annual meeting of stockholders no earlier than
October 12, 2014 and no later than November 11, 2014.
If
the date of our 2015 annual meeting is more than 30 days before or after the one-year anniversary date of our 2014 annual meeting,
we will disclose the new deadlines under Item 5 of our earliest possible Quarterly Report on Form 10-Q or, if impracticable, by
any means reasonably calculated to inform stockholders.
Please note that proposals
must comply with all of the requirements of Rule 14a-8 under the Securities Exchange Act of 1934, if applicable, and any applicable
requirements of our bylaws and Delaware law. For additional information on how stockholders can recommend candidates to our Board
of Directors, see “Board Committees – Nominating and Corporate Governance Committee – Process for Recommending
Candidates to our Board of Directors” below.
What other information should I review
before voting?
For your review, our
Annual Report on Form 10-K for the fiscal year ended December 31, 2013, which includes financial statements for the fiscal year
ended December 31, 2013, is being mailed to you concurrently with the mailing of this proxy statement. Our Annual Report
on Form 10-K for the fiscal year ended December 31, 2013, however, is not part of the proxy solicitation material. You may also
obtain, free of charge, a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 on our website at
http://www.medgenics.com
. The information found on, or accessible through, our
website is not incorporated into, and does not form a part of, this proxy statement or any other report or document we file with
or furnish to the Securities and Exchange Commission, which we sometimes refer to as the SEC.
PROPOSAL 1: ELECTION OF DIRECTORS
Introduction
Our Board of Directors
currently consists of ten directors. Each of our current directors, other than Andrew L. Pearlman, Ph.D., is a nominee in the current
election. Dr. Pearlman will retire from the Board at the meeting following the expiration of his current term. We do not plan to
fill the vacancy created by Dr. Pearlman’s retirement and have decreased the size of our Board of Directors to nine effective
as of the expiration of Dr. Pearlman’s current term at the 2014 annual meeting.
If elected, the nine nominees
for election as directors at the annual meeting will serve until the next annual meeting of stockholders and until their respective
successors are duly elected and qualified. Following the recommendation of the Nominating and Corporate Governance Committee, our
Board of Directors has nominated these nine nominees for re-election at the annual meeting. In making its recommendations, the
Nominating and Corporate Governance Committee considered a number of factors, including its criteria for Board membership, which
included the minimum qualifications that must be possessed by a director candidate in order to be nominated for a position on our
Board. Our Board of Directors anticipates that, if elected, the nominees will serve as directors. However, if any person nominated
by our Board of Directors is unable to serve or for good cause will not serve, the proxies will be voted for the election of such
other person as our Board of Directors may recommend.
Vote Required
Assuming a quorum is present,
directors will be elected by a plurality of the votes cast at the annual meeting. Votes may be cast for or withheld from each nominee.
Votes cast for the nominees will count as “yes” votes; votes that are withheld from the nominees will not be voted
with respect to the director or directors indicated, but they will be counted when determining whether there is a quorum present.
In the absence of your voting instructions, your broker may not vote your shares in its discretion with respect to the election
of directors.
Recommendation
THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE
FOR
EACH OF THE NOMINEES LISTED IN THIS PROPOSAL 1. PROPERLY AUTHORIZED PROXIES SOLICITED
BY THE BOARD WILL BE VOTED FOR EACH OF THE NOMINEES UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN.
Information Regarding the Nominees
and Executive Officers
The following biographical
descriptions set forth certain information with respect to the nominees for election as directors at the annual meeting, all of
whom currently serve as our directors, and the executive officers who are not directors, based on information furnished to us by
each nominee and executive officer as of February 2014. Each executive officer is elected annually by our Board of Directors at
the first meeting after each annual meeting of stockholders and holds office until his or her successor is duly elected and qualified
or until his or her earlier death, resignation or removal.
Sol J. Barer, Ph.D., Chairman
of the Board of Directors
Dr. Barer, 66, has been
our Chairman of the Board since July 2012. He spent most of his professional career with Celgene Corporation, one of the largest,
global biopharmaceutical companies. He was Chairman of Celgene from January 2011 until June 2011, Executive Chairman from June
2010 until January 2011 and Chairman and Chief Executive Officer from May 2006 until June 2010. Previously, he was appointed President
in 1993 and Chief Operating Officer in 1994 before assuming the CEO position. He also served as Senior Vice President, Science
and Technology, and Vice President/General Manager, Chiral Products, from October 1990 to October 1993, and Vice President, Technology,
from September 1987 to October 1990.
Dr. Barer serves as Chairman
of the Board of InspireMD, Inc. (NYSE MKT: NSPR), a medical device company focusing on the development and commercialization of
a proprietary stent system technology, and RestorGenex Corporation (formerly known as Stratus Media Group, Inc. (OTCQB: SMDI)),
which has announced its plan to create a cosmeceutical and pharmaceutical company in the field of dermatology and restorative medicine.
He also serves as Chairman of the Board of several private companies including Centrexion Corporation, Cerecor, Inc., ContraFect
Corporation and Edge Therapeutics, Inc. He also is on the Board of Directors of Aegerion Pharmaceuticals, Inc. (NASDAQ: AEGR),
a biopharmaceutical company dedicated to the development and commercialization of innovative therapies for patients with rare diseases,
and Amicus Therapeutics, Inc. (NASDAQ: FOLD), a biopharmaceutical company developing therapies for rare and orphan diseases.
In 2011, Dr. Barer was
Chairman of the University of Medicine and Dentistry of New Jersey Governor’s Advisory Committee which recommended sweeping
changes in the structure of New Jersey’s medical schools and public research universities. He previously served as a Commissioner
of the New Jersey Commission on Science and Technology and was a member of the Board of Trustees of Rutgers - The State University
of New Jersey (until 2013). He also served two terms as Chair of the Board of Trustees of BioNJ (2010-2012), the New Jersey biotechnology
organization. Dr. Barer received a Ph.D. in organic chemistry from Rutgers University.
We believe that Dr. Barer’s
significant executive experience at Celgene Corporation and his leadership roles in other organizations, together with his vast
medical background, makes him particularly well-suited to be our Chairman of the Board.
Eugene A. Bauer, M.D., Director
Dr. Bauer, 71, has been
a member of our Board since March 2001. He served as Chairman of the Board from July 2005 through June 2012 and as Executive Chairman
of the Board from October 2010 through June 2012. He is a Lucy Becker Emeritus Professor in the School of Medicine at Stanford
University. Dr. Bauer served as dean of the Stanford University School of Medicine from 1995 – 2001 and as chair of the Department
of Dermatology at the Stanford University School of Medicine from 1988 – 1995. He currently serves as a director of privately
held Dr. Tattoff, Inc. He was a co-founder and emeritus member of the Board of Directors of Connetics Corporation, a publicly traded,
dermatology-focused therapeutics company which was acquired by Steifel Laboratories and sold to GlaxoSmithKline, Inc. He also served
as a director of Protalex, Inc., Vyteris, Inc., Peplin Biotech, Ltd., PetDRx, Inc. and Modigene Inc. (now PROLOR Biotech). Dr.
Bauer was a U.S. National Institute of Health (NIH)-funded investigator for 25 years and has served on review groups for the NIH.
Dr. Bauer has been elected to several societies including the Institute of Medicine of the National Academy of Sciences. He received
an M.D. from Northwestern University.
We believe that Dr. Bauer’s
extensive experience managing biopharmaceutical and life science companies, together with his vast medical background, makes him
particularly well-suited to be a member of the Board.
Isaac Blech, Director
Mr. Blech, 64, was appointed
to our Board in June 2011. Prior to his election as a director, he had served as a member of our Strategic Advisory Board since
February 2011. Mr. Blech is a renowned biotechnology entrepreneur and investor, who, over the past 32 years, has founded and served
on the boards of companies which have produced major advances in a broad array of diseases, including the diagnosis of chlamydia,
herpes, syphilis and HIV, and the treatment of cystic fibrosis, sexual dysfunction, multiple myeloma and brain cancer. The companies
he established include Celgene Corporation, ICOS Corporation, Nova Pharmaceutical Corporation, Pathogenesis Corporation and Genetics
Systems Corporation. Mr. Blech is a major shareholder and Director of ContraFect Corporation, a major shareholder and Vice Chairman
of Cerecor, Inc., a major shareholder and Vice Chairman of Edge Therapeutics and a major shareholder and Vice Chairman of Centrexion
Corporation. He is also a major shareholder and Vice Chairman of RestorGenex Corporation (formerly known as Stratus Media Group,
Inc. (OTCQB: SMDI)), a major shareholder and Vice Chairman of The SpendSmart Payments Company (OTCQB: SSPC) (formerly known as
BillMyParents, Inc.) and a major shareholder and Vice Chairman of Premier Alliance Group, Inc. (OTCQB: PIMO).
We believe that Mr. Blech’s
broad experience as a founder, director and major investor in numerous biotechnology companies, combined with his past experience
as a member of our Strategic Advisory Board, highly qualifies him as a member of our Board.
Alastair Clemow, Ph.D., Director
Dr. Clemow, 62, was appointed
to our Board in August 2010. Dr. Clemow serves as President and Chief Executive Officer of Regentis Biomaterials, a private company
developing an innovative material for cartilage repair. Previously he held the position of President and Chief Executive Officer
in a number of companies that he helped found including Nexgen Spine, which developed an artificial spinal disc and which was acquired
by K2M in 2011, Gelifex Inc., which developed an innovative spinal nucleus replacement implant and which was acquired by Synthes
Spine in 2004, and Minimally Invasive Surgical Technologies, which developed a novel series of implants for minimally invasive
total knee replacement and which was acquired by MAKO in 2005. From 2000 to 2004, Dr. Clemow served as Principal of Tanton Technologies,
an organization that provided strategic and technical assessment of new medical device opportunities for large, mid-cap and early
stage development companies. Prior to that, Dr. Clemow served in numerous positions with Johnson & Johnson from 1981 to 2000,
including Vice President of Worldwide Business Development for Ethicon Endo-Surgery Inc., Vice President of New Business Development
for Johnson & Johnson Professional Inc. and Director of Research and Development of Johnson & Johnson Orthopedics. In those
capacities, Dr. Clemow was responsible for acquiring or developing what today represents billions of dollars of Johnson & Johnson
revenue. Dr. Clemow serves or has served on the boards of numerous private and public companies, including BioMedical Enterprises,
Inc. (since 2003), Kinetic Muscles Inc. (from 2007 to 2012), Vyteris Inc. (from 2011 to 2012), Regentis Ltd. (since 2011), HydroCision,
Inc. (from 2005 to 2010), Echo Healthcare Inc. (from 2006 to 2009), Modigene Inc. (now PROLOR Biotech) (from 2006 to 2009) and
Encore Medical (from 2002 to 2007). Dr. Clemow is the holder of 12 U.S. patents and holds an M.B.A. in Finance from Columbia University
and a Ph.D. in Metallurgy from University of Surrey, Guildford, United Kingdom.
With over 30 years of
senior management experience within healthcare companies, including Johnson & Johnson, as well as a member of the boards of
numerous public and private companies, we believe that Dr. Clemow is a valuable asset to our Board.
Michael F. Cola, Director,
President and Chief Executive Officer
Mr. Cola, 54, was appointed
our President and Chief Executive Officer, and to serve on our Board, in September 2013. Prior to joining our company, Mr. Cola
served as President of Specialty Pharmaceuticals at Shire plc, a global specialty pharmaceutical company, from 2007 until April
2012. He joined Shire in 2005 as EVP of Global Therapeutic Business Units and Portfolio Management. Prior to joining Shire, he
was with Safeguard Scientifics, Inc., a growth capital provider to life sciences and technology companies, where he served as President
of the Life Sciences Group. While at Safeguard, Mr. Cola served as Chairman and CEO of Clarient, Inc., a cancer diagnostics company
subsequently acquired by GE Healthcare, and as Chairman of Laureate Pharma, Inc., a full-service contract manufacturing organization
serving research-based biologics companies. Prior to Safeguard Scientifics, Mr. Cola held senior positions in product development
and commercialization at AstraMerck, a top 20 U.S. pharmaceutical company, and at AstraZeneca, a global biopharmaceutical company.
Mr. Cola received a B.A. in biology and physics from Ursinus College and an M.S. in biomedical science from Drexel University.
He serves on the Board of Directors of Vanda Pharmaceuticals Inc. (NASDAQ: VNDA), NuPathe Inc. (NASDAQ: PATH) and Pennsylvania
BIO, the statewide association representing the bioscience community. He also currently serves as Chairman of the Board of Governors
of the Boys & Girls Clubs of Philadelphia.
We believe that Mr. Cola’s
extensive experience in the pharmaceutical and life sciences industry, and his role as the President and Chief Executive Officer
of our company, makes him particularly well-suited to be a member of the Board.
Wilbur H. (Bill) Gantz, Director
Mr. Gantz, 76, joined
our Board in October 2013. Mr. Gantz has been the President of PathoCapital, an investor in healthcare companies, since March 2009.
He previously served as Executive Chairman and Chief Executive Officer of Ovation Pharmaceuticals, Inc., which was sold to Lundbeck,
AG in 2009, and as Chairman, Chief Executive Officer and President of PathoGenesis Corporation, a biopharmaceutical company that
was sold to Chiron, Inc. in 2000. Prior to founding PathoGenesis, from 1987 to 1992 he served as President of Baxter International,
Inc., a manufacturer and marketer of healthcare products. He joined Baxter in 1966 and held various management positions, including
Vice President, Europe and President, International Division, prior to being named Executive Vice President and Chief Operating
Officer in 1980. During the past five years, Mr. Gantz served on the board of directors of W.W. Grainger, Inc. He is a trustee
of The Field Museum of Natural History. Mr. Gantz holds a BA degree from Princeton University, where he graduated cum laude, and
an MBA from Harvard Business School.
We believe that Mr. Gantz’s
extensive experience managing biopharmaceutical and healthcare companies makes him particularly well-suited to be a member of the
Board.
Joseph J. Grano, Jr., Director
Mr. Grano, 66, has been
a member of our Board since March 2013. Since 2004, he has served as Chairman and CEO of Centurion Holdings LLC, a provider of
advisory services to public and private clients on business strategy and capital markets access. From 2001 to 2004, he was Chairman
and CEO of UBS Financial Services Inc. (formerly UBS PaineWebber), where he was instrumental in helping to bring about the merger
of PaineWebber with UBS in 2000. Prior to joining PaineWebber, he held various senior management positions at Merrill Lynch including
Director of National Sales. Mr. Grano also serves as Chairman of the Board of Premier Alliance Group, Inc. (OTCQB: PIMO), a provider
of advisory, consulting, and resource services to owner-managed businesses and multi-national corporations in the United States.
Mr. Grano is the former Chairman of the Board of Governors of the National Association of Securities Dealers (NASD) (predecessor
to the Financial Industry Regulatory Authority (FINRA)), and a former member of the NASD’s Executive Committee. He was appointed
by President George W. Bush in 2002 to serve as the Chairman of the Homeland Security Advisory Council, a position he held until
August 2005. Mr. Grano was a captain in the U.S. Special Forces (Green Berets), and is a member of the Council for the United States
and Italy, a member of the City University of New York's Business Leadership Council and a former member of the National Board
of D.A.R.E. He holds honorary Doctor of Laws degrees from Pepperdine University and Babson College, as well as an honorary Doctor
of Human Letters degree from Queens College. He previously served on the Board of Directors of the YMCA of Greater New York and
of Lenox Hills Hospital in New York City.
We believe that Mr. Grano’s
extensive financial services experience, which is important for a growing company raising funds, highly qualifies him as a member
of our Board.
Joel S. Kanter, Director
Mr. Kanter, 57, has been
a member of our Board since August 2000. Since 1986 he has served as president of Windy City, Inc., a privately held investment
company specializing in early stage venture capital. Mr. Kanter serves on the Board of Directors of several public companies, including
Magna-Lab Inc. (OTCQB: MAGAA), formerly involved in the development of a cardiac MRI device; WaferGen Bio-systems, Inc. (OTCQB:
WGBS), which develops, manufactures and sells systems for gene expression and genotyping; and Dr. Tattoff, Inc., which is seeking
to become the first national chain of clinics run by dermatologists to offer professionally supervised laser tattoo removal. Mr.
Kanter is also on the board of a number of private concerns involved in the medical and pharmaceutical arenas, providing business
expertise to seed stage companies and projects, including 20/20 GeneSystems, Inc., which is developing early detection diagnostic
systems that are designed to detect lung and kidney cancer at much earlier stages than are presently possible, and First Wave Technologies,
Inc., which provides human and financial capital to seed stage companies and projects that begin by selecting university-developed
intellectual property in the health care sector. He is a trustee and past president of the board of trustees of The Langley School
in McLean, Virginia, and a trustee of Union Institute & University. Mr. Kanter is also the current board chair of the Black
Student Fund and a vice-chair of the Kennedy Center’s National Committee on the Performing Arts. Mr. Kanter received a B.A.
in Political Science and a B.S. in Psychology from Tulane University.
Mr. Kanter has been involved
with our company since its inception and has broad experience with other companies in the life sciences and biotechnology industries
as an investor and director. We believe this highly qualifies him as a member of our Board.
Stephen D. McMurray, M.D.,
Director
Dr. McMurray, 66, was
appointed to our Board in December 2005. Dr. McMurray is Vice President, Clinical Integrated Care Management Services for Village
Health, a subsidiary of Davita Inc. Dr. McMurray was one of the founders of Renal Care Group, Inc., a company that provided chronic
dialysis services. He served on the Board of Renal Care Group until its $3.5 billion acquisition by Fresenius in March 2006. He
is a past member of the Renal Physicians Association Board and has authored a myriad of articles on renal-related topics published
in professional medical journals. Dr. McMurray is active in developing processes to improve patient care and outcomes. Dr. McMurray
served as the medical director of the Fresenius Medical Care Health Plan from May 2006 to July 2010 and as Medical Director of
Integrated Care for Fresenius Medical Care – North America from March 2006 to July 2010. Dr. McMurray received an M.D. from
Indiana University Medical School in 1972, followed by medicine residency and nephrology fellowship at Indiana University Medical
Center.
We believe that Dr. McMurray’s
business experience and expertise as a medical doctor focusing on the improvement of patient care, with particular emphasis in
the renal treatment arena, adds significant value to our Board.
Executive Officers
who are not Directors
John H. Leaman, M.D., Chief
Financial Officer
Dr. Leaman, 41, joined
our company in September 2013. Prior to that, Dr. Leaman served as VP of Commercial Assessment at Shire plc, a global specialty
pharmaceutical company, with responsibility for the strategic assessment of licensing and M&A opportunities, including Shire’s
acquisition of SARcode Bioscience Inc. Prior to joining Shire in 2011, from 2007 to 2011, Dr. Leaman was a Principal at Devon Park
Bioventures, a venture capital fund targeting investments in therapeutics companies, where he oversaw the fund’s investment
and corporate board duties in life science investments including Proteon Therapeutics, Inc., Inotek Pharmaceuticals Corp., ZS Pharma,
Inc. and MicuRx Pharmaceuticals, Inc. Prior to that, he was an Associate Principal at McKinsey & Company, where he provided
consulting services to senior management of several top 20 pharmaceutical companies including M&A and corporate finance, payer/reimbursement
strategies and strategic product development. Dr. Leaman received an M.D. and an M.B.A. from the University of Pennsylvania’s
School of Medicine and Wharton School, respectively. He received a degree in Psychology, Philosophy and Physiology at Oriel College,
University of Oxford, while completing a Rhodes scholarship. Dr. Leaman received a B.S. in biology from Elizabethtown College.
Garry A. Neil, M.D., Global
Head of Research and Development
Dr. Neil, 60, joined our
company in September 2013. Prior to that, Dr. Neil was a Partner at Apple Tree Partners, a life sciences private equity fund. Prior
to joining Apple Tree Partners in 2012, he was Corporate VP of Science & Technology at Johnson & Johnson, and Group President
at Johnson & Johnson Pharmaceutical Research and Development. Prior to joining Johnson & Johnson in 2002, he held senior
positions at AstraZeneca, EMD Pharmaceuticals and Merck KGaA. Under his leadership a number of important new medicines for the
treatment of cancer, anemia, infections, central nervous system and psychiatric disorders, pain, and genitourinary and gastrointestinal
diseases gained initial or expanded approvals. Dr. Neil holds a B.S. from the University of Saskatchewan and an M.D. from the University
of Saskatchewan College of Medicine. He completed postdoctoral clinical training in internal medicine and gastroenterology at the
University of Toronto. Dr. Neil also completed a postdoctoral research fellowship at the Research Institute of Scripps Clinic.
He serves on the Boards of the Reagan Udall Foundation and the Foundation for the U.S. National Institutes of Health (NIH), and
is a member of the Science Management Review Board of the NIH. He is a past Chairman of the Pharmaceutical Research and Manufacturers
Association (PhRMA) Science and Regulatory Executive Committee and the PhRMA Foundation Board.
Phyllis K. Bellin, Vice President
– Administration, Corporate Secretary and Treasurer
Ms. Bellin,
64, joined our company in November 2005. Since December 2011, she has served as our Vice President – Administration, Corporate
Secretary and Treasurer. Prior to that, she served as our Director of Finance and Administration, Treasurer and Corporate Secretary.
She received an MBA in Finance and Accounting from Columbia University. Since 1980, Ms. Bellin has managed finance and administration
for several early stage high-tech ventures in Israel. Most recently, prior to joining our company, she was a founder and vice president
of Gintec Active Safety Limited and was responsible for finance and administration of its subsidiaries including RoadEye Limited.
Ms. Bellin serves on the Board of Directors of the Misgav Economic Corporation and has served on the board of a number of private
companies in Israel and the Netherlands.
Director Independence
Our Board of Directors
has determined that each of our current directors, with the exception of Dr. Bauer, Mr. Cola and Dr. Pearlman, qualifies as “independent”
under the listing standards of the NYSE MKT, federal securities laws and SEC rules with respect to members of boards of directors
and members of all board committees on which such director serves. The Board determined that Dr. Bauer is not independent because
he receives compensation as a consultant to our company; Mr. Cola is not independent because he serves as an executive officer
of our company; and Dr. Pearlman is not independent because he was employed by our company during the past three years, serving
as our President and Chief Executive Officer until September 2013.
Board Leadership Structure
and Role in Risk Oversight
In accordance with our
bylaws, our Board of Directors elects our President (who is our Chief Executive Officer) and may elect a Chairman of the Board,
who serves as our Chief Executive Officer if there is no President. Each of these positions may be held by the same or separate
persons. Our Board has not adopted a policy as to whether the role of the President and Chairman of the Board should be separate.
However, these positions are currently held by separate persons. We believe that separating these positions better allows our President
to focus on our day-to-day business, while allowing the Chairman to lead our Board in providing advice to and oversight of management
and to establish the agenda and preside at meetings of our stockholders and Board of Directors. We also believe that having Board
leadership independent of management helps ensure critical and independent thinking with respect to our strategy and performance.
Our Chief Executive Officer is a member of our Board of Directors, which helps to ensure that management’s insight is directly
available to the directors in their deliberations.
Currently, our Chairman
of the Board is Dr. Barer and our Chief Executive Officer is Mr. Cola. As discussed above, our Board of Directors has determined
that Dr. Barer qualifies as “independent” under the listing standards of the NYSE MKT.
Our Board of Directors
has an active role in overseeing management of our risks. The Board regularly reviews information regarding our credit, liquidity
and operations, as well as the risks associated with each. The Audit Committee assists our Board in fulfilling its oversight responsibilities
with respect to risk management. Pursuant to its charter, the Audit Committee of our Board of Directors is responsible for discussing
guidelines and policies governing the process by which our senior management assesses and manages our exposure to risk, as well
as our major financial risk exposures and the steps management has taken to monitor and control these exposures. The Audit Committee
also evaluates the policies implemented by management to assure the adequacy of internal controls and the financial reporting process,
including security surrounding assets and computerized information systems, and to monitor compliance with laws and regulations
and our code of business conduct and ethics. It is also the responsibility of the Audit Committee to investigate employee misconduct
or fraud.
Board Committees
Our Board of Directors
currently has three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance
Committee. The composition and responsibilities of each committee are described below. Members will serve on these committees until
their resignation or until otherwise determined by our Board of Directors. From time to time, our Board may form additional committees
to address specific issues or tasks.
Audit Committee
The Audit Committee has
primary responsibility for monitoring the quality of internal financial controls and ensuring that our financial performance is
properly measured and reported on. It receives and reviews reports from management and auditors relating to the quarterly and annual
accounts and the accounting and internal control systems in use throughout our company.
The Audit Committee also
consults with our management and our independent registered public accounting firm prior to the presentation of financial statements
to stockholders and, as appropriate, initiates inquiries into aspects of our financial affairs. The Audit Committee is responsible
for establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls
or auditing matters, and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting
or auditing matters. The Audit Committee meets not less than quarterly and has unrestricted access to our auditors.
Members of the Audit Committee
are Mr. Kanter (as Chairman), Dr. Clemow and Mr. Gantz, each of whom satisfies the independence requirements of NYSE MKT and SEC
rules and regulations. Mr. Kanter qualifies as an “audit committee financial expert” as that term is defined in the
rules and regulations of the SEC. The designation of Mr. Kanter as an “audit committee financial expert” does not impose
on him any duties, obligations or liability that are greater than those that are generally imposed on him as a member of the Audit
Committee and our Board of Directors, and his designation as an “audit committee financial expert” pursuant to this
SEC requirement does not affect the duties, obligations or liability of any other member of the Audit Committee or Board of Directors.
The Audit Committee met
seven times in the fiscal year ended December 31, 2013. The Audit Committee is governed by a charter, which is available on our
website at
http://www.medgenics.com
.
Compensation Committee
The Compensation Committee
is responsible for setting our overall compensation policy, and reviews and determines the compensation paid to our executive officers
and directors. The Compensation Committee annually reviews and approves our goals and objectives relevant to the compensation of
our Chief Executive Officer and evaluates the performance of our Chief Executive Officer in light of those goals and objectives.
The Compensation Committee also periodically reviews and has the authority to determine and approve, or review and recommend to
our Board for approval if the Compensation Committee so elects, all other senior executive officer compensation. The Compensation
Committee also makes recommendations to our Board on proposals for the granting of stock options and other equity incentives pursuant
to any stock option plan or equity incentive plan in operation from time to time. Our Chief Executive Officer makes recommendations
to the Compensation Committee as to option grants for our other executive officers and assists the Compensation Committee in determining
if annual bonus goals have been met. The Compensation Committee meets at least three times each fiscal year and at such other times
as the Chairman of the Compensation Committee requires.
The Compensation Committee
may form and delegate authority and responsibilities to any subcommittee or any member of the Compensation Committee for any purpose
that the Compensation Committee deems appropriate. The Compensation Committee has the authority to retain outside professionals,
consultants or advisors as it determines appropriate to assist in the performance of its functions, including sole authority to
retain and terminate any compensation consultant used to assist the Compensation Committee in the evaluation of compensation for
our executive officers and directors, and to approve the outside consultant’s or advisor’s fees and other retention
terms. The Compensation Committee has full authority to commission any reports or surveys that it deems necessary to help it fulfill
its obligations.
Members of the Compensation
Committee are Dr. Clemow (as Chairman), Mr. Blech and Mr. Grano, each of whom satisfies the independence requirements of the NYSE
MKT. Each member of the Compensation Committee is a non-employee director, as defined pursuant to Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended, and an outside director, as defined pursuant to Section 162(m) of the Internal
Revenue Code of 1986, as amended.
The Compensation Committee
met ten times in the fiscal year ended December 31, 2013. The Compensation Committee is governed by a charter, which is available
on our website at
http://www.medgenics.com
.
Nominating and Corporate
Governance Committee
The Nominating and Corporate
Governance Committee is responsible for leading the process for considering future appointments to our Board and makes recommendations
to our Board of candidates for appointment and annual election. The Nominating and Corporate Governance Committee meets at least
once during each fiscal year and at such other times as the Chairman of the Nominating and Corporate Governance Committee requires.
Members of the Nominating
and Corporate Governance Committee are Mr. Grano (as Chairman), Mr. Blech, Dr. Clemow, Mr. Gantz, Mr. Kanter and Dr. McMurray,
each of whom satisfies the independence requirements of the NYSE MKT.
The Nominating and Corporate
Governance Committee met four times in the fiscal year ended December 31, 2013. The Nominating and Corporate Governance Committee
is governed by a charter, which is available on our website at
http://www.medgenics.com
.
The charter sets forth the criteria for selecting potential Board members, which include, among other things, the possession of
experience, knowledge, skills, expertise, mature judgment, acumen, character, integrity and diversity so as to enhance our Board’s
ability to manage and direct the affairs and business of our company, including, when applicable, to enhance the ability of committees
of our Board to fulfill their duties and/or to satisfy any independence requirements imposed by law, regulation or the listing
standards of the NYSE MKT. Although diversity may be a consideration in the Nominating and Corporate Governance Committee’s
process, the Nominating and Corporate Governance Committee does not have a formal policy with regard to the consideration of diversity
in identifying director nominees. In identifying suitable candidates, the Nominating and Corporate Governance Committee may use
open advertising or the services of external advisers to facilitate the search. Each of the candidates for director named in this
proxy statement has been recommended by the Nominating and Corporate Governance Committee and approved by our Board of Directors
for inclusion on the enclosed proxy card.
Process for Recommending
Candidates to our Board of Directors
The charter of our Nominating
and Corporate Governance Committee also provides for the consideration of candidates for election to our Board of Directors recommended
by stockholders. Our Nominating and Corporate Governance Committee will evaluate a director candidate recommended by stockholders
in the same manner as it evaluates director candidates recommended otherwise. Stockholder recommendations for candidates to our
Board of Directors must be directed in writing to our Corporate Secretary, Medgenics, Inc., 435 Devon Park Drive, Building 700,
Wayne,
Pennsylvania 19087, an
d must include the candidate’s name, home and business contact
information, detailed biographical data, relevant qualifications, a signed letter from the candidate confirming willingness to
serve and information regarding any relationships between the candidate and our company, and evidence of the recommending stockholder’s
ownership of our stock. Such recommendations must also include a statement from the recommending stockholder in support of the
candidate, particularly within the context of the criteria for selecting potential Board members described above. This information
should be submitted in the time frame described under “Questions and Answers About the Annual Meeting – What are the
requirements for presenting stockholder proposals and director nominations?” above.
Meetings and Attendance
Our Board of Directors
met eight times in the fiscal year ended December 31, 2013. Each director attended at least 75% of the aggregate number of board
and applicable committee meetings in 2013 during their respective periods of service.
We encourage but do not
require board members to attend our annual meetings of stockholders. Seven of our eight directors then in office were in attendance
at our annual meeting of stockholders in 2013.
Code of Business Conduct
and Ethics
We have adopted a Code
of Business Conduct and Ethics, which is applicable to our directors, officers and employees, including our principal executive
officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The
Code of Business Conduct and Ethics is available on our website at
http://www.medgenics.com
.
We intend to disclose on our website any amendment to, or waiver from, the Code of Business Conduct and Ethics that are required
to be disclosed by the rules of the SEC or the NYSE MKT.
Stockholder Communications
Stockholders
who wish to communicate with our Board of Directors, committee chairmen, any other individual director or the non-management or
independent directors as a group are welcome to do so in writing, addressed to the director(s) or the entire Board of Directors,
in care of our Corporate Secretary, Medgenics, Inc., 435 Devon Park Drive, Building 700, Wayne, Pennsylvania 19087. Anyone wishing
to contact our Audit Committee may do so in writing, addressed to the attention of the Chairman of the Audit Committee, Medgenics,
Inc., 435 Devon Park Drive, Building 700, Wayne, Pennsylvania 19087. To make confidential submissions to either of the above,
please indicate “confidential” on any
correspondence.
EXECUTIVE COMPENSATION
Compensation Discussion &
Analysis
Executive Compensation Objectives
and Philosophy
This section explains
the policies and decisions that shape our executive compensation program, including its specific objectives and elements, as it
relates to our “named executive officers,” or “NEOs,” whose compensation information is presented in the
tables following this discussion. The Compensation Committee believes that our executive compensation program is appropriately
designed to incentivize our NEOs to work for our long-term prosperity through pay-for-performance incentives, is reasonable in
comparison with the levels of compensation provided by comparable companies, discourages our NEOs from assuming excessive risks,
and reflects a reasonable cost. We believe our NEOs are critical to the achievement of our corporate goals, through which we can
drive stockholder value.
Our executive compensation
program and our corresponding NEO compensation packages are designed around the following objectives:
|
·
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Attract, motivate, and retain talented and dedicated individuals to contribute to our growth and success
by providing competitive compensation opportunities consistent with industry practices where we compete for talent;
|
|
·
|
Align our NEOs’ compensation opportunities with long-term stockholder value creation; and
|
|
·
|
Maintain a reasonable and responsible cost structure.
|
Elements of Compensation
The Compensation Committee
regularly reviews our allocation of compensation elements to ensure alignment with strategic and operating goals and competitive
market practices. The Compensation Committee does not apply a specific formula to determine the allocation between cash and non-cash
forms of compensation. Certain compensation elements, such as base salaries, benefits, and perquisites, are intended primarily
to attract, hire, and retain well-qualified executives. Other compensation elements, such as long-term incentive opportunities,
are designed to reward successful long-term performance and execution of our business strategy, and to strongly align our NEOs’
interests with those of stockholders.
Our NEO compensation program
generally is comprised of the following elements:
|
·
|
Long-term equity compensation; and
|
|
·
|
Benefits and perquisites.
|
Base Salary
. Base
salaries generally are initially negotiated and set forth in employment agreements with our NEOs and generally may not be reduced
without the respective NEO’s consent. Thereafter, the Compensation Committee reviews the salaries of our NEOs periodically
in consultation with its outside compensation consultant. In determining base salaries, the Compensation Committee members take
into consideration their understanding of the compensation practices of comparable companies (based on size and stage of development),
independent third party market data such as compensation surveys, individual experience and performance adjusted to reflect individual
roles, and contribution to our clinical, regulatory, commercial, and operational performance. None of the foregoing factors has
a dominant weight in determining the base salaries of our NEOs, and the Compensation Committee considers the factors as a whole
when considering such compensation. In addition, the Compensation Committee uses comparative data regarding compensation paid by
comparable companies in order to obtain a general understanding of current trends in compensation practices and ranges of amounts
being awarded by other public companies (rather than as part of a formula).
We believe that a competitive
base salary is a necessary element of any compensation program that is designed to attract and retain talented and experienced
executives. We also believe that attractive base salaries can motivate and reward executives for their overall performance.
Annual Bonuses
.
Our NEOs are eligible to receive annual bonuses based upon performance. Each NEO’s employment agreement generally provides
a target level of annual bonus reflected as a percentage of annual base salary. The amount of annual bonus actually paid to our
NEOs for a given year is based on various factors, including, among others, the achievement of various operating milestones based
on scientific and business goals and our financial and operational performance. Certain annual bonuses for our NEOs are also determined,
in part, based on certain individual goals for our NEOs, which are specific to the individual’s responsibilities and position
within our company. Ultimately, the Compensation Committee has discretion to modify any annual bonus payouts (upwards or downwards)
as appropriate to ensure program objectives are met, taking into consideration a variety of company-specific or market factors.
We believe that annual
bonuses payable based on the achievement of short-term corporate goals incentivize our NEOs to create stockholder value and attain
short-term performance objectives.
Long-Term Equity Compensation
.
In order to provide a significant retention incentive and to ensure a strong link to the long-term interests of our stockholders,
we provide a portion of our total compensation in the form of equity compensation—primarily, stock options. Our NEOs are
eligible to receive awards at the discretion of the Compensation Committee. Equity awards are primarily granted under our Stock
Incentive Plan, which we initially adopted in March 2006 and, with stockholder approval, subsequently amended in 2007, 2010, 2012,
and 2013. The Stock Incentive Plan is administered by the Compensation Committee. In 2013, we also granted equity awards outside
of the Stock Incentive Plan to Mr. Cola, Dr. Leaman, and Dr. Neil as inducements to entering into employment with us as permitted
by the rules of the NYSE MKT.
The Compensation Committee
believes that granting stock options provides our NEOs with a strong economic interest in maximizing stock price appreciation over
the long term. The Compensation Committee also believes that granting stock options can be useful in retaining and recruiting the
key talent necessary to ensure our continued success. The exercise price of stock options is based on the value of a share of our
common stock on the date of grant. The options, therefore, do not have any value to the NEO unless the market price of our common
stock rises, which aligns the interests of our NEOs with those of our stockholders. Through these option grants, we seek to emphasize
the importance of improving the performance of our stock price, increasing stockholder value over the long term.
Stock option grants are
generally made at the commencement of employment and following a significant change in job responsibilities or to meet other special
retention or performance objectives. The Compensation Committee reviews and approves stock option and other awards to NEOs based
upon a review of competitive compensation data, its assessment of individual performance, a review of each NEO’s existing
long-term incentives, and retention considerations. The timing of grant dates is not based on any favorable or unfavorable non-public
information anticipated to be disclosed at a later date. All stock option awards are granted with an exercise price not less than
the closing sale price of our common stock on the NYSE MKT on the date of grant. The Compensation Committee is currently considering
the annual grant of stock options as part of our company’s overall compensation program, but it has not made any final determinations
on this matter.
Benefits and Perquisites
.
Benefits are provided to our U.S.-based NEOs pursuant to the terms of their respective employment agreements and currently include
paid time-off and holidays and monthly payments to cover the cost of COBRA continuation coverage while our company does not have
in place a medical and dental insurance program for U.S. employees.
As an additional benefit
to each of our Israel-based NEOs, we generally contribute to certain funds amounts equaling a total of approximately 15% of their
gross salaries for certain severance and pension plans and other savings plans for the benefit of these NEOs. In addition, in accordance
with customary practice in Israel, our Israel-based NEOs’ agreements require us to contribute towards their professional
studies, and to provide annual recreational allowances, a company car, and a company phone.
We do not believe that
the benefits and perquisites described above deviate materially from the customary practice for compensation of NEOs at comparable
companies. These benefits represent a relatively small portion of our NEOs’ total compensation.
Compensation Setting Process
Overview
Generally, the Compensation
Committee reviews and, as appropriate, approves compensation arrangements for our NEOs from time to time but not less than once
per year. When creating an NEO’s overall compensation package, the Compensation Committee considers the different elements
of our compensation in light of the role the NEO will play in achieving our near term and longer term goals, as well as the compensation
packages provided to similarly situated executives at companies we consider to be comparable to us. As described above, our NEOs’
compensation elements are base salary, annual bonus, long-term equity compensation, and benefits and perquisites. We do not predetermine
an allocation of the overall compensation to be represented by the various compensation elements.
The Compensation
Committee’s intention is that the incentives provided by the annual bonus and the equity compensation elements constitute
a substantial portion of our NEOs’ total compensation, such that a significant portion of potential compensation is at risk
in any given year. The Compensation Committee believes that having a significant portion of our NEOs’ compensation packages
at risk will contribute to cultivating a culture in which our NEOs aggressively pursue our corporate performance and strategic
goals as they know that their take home pay, to a large extent, depends upon our performance and, to some extent, their contribution
to our performance. Additionally, the incorporation of significant equity incentives is designed to mitigate the risk that our
NEOs will pursue short-term outcomes at the expense of long-term stockholder value. Performance-based annual bonuses may be made
based on the achievement of short-term corporate goals designed to incentivize the executives to create stockholder value and attain
short-term performance objectives.
We believe
that the combined mix of the pay elements described above allows us to provide a competitive, cost-effective total compensation
package to our NEOs, largely based on achievement of value-driving milestones. More specifically, the Compensation Committee believes
this structure ties an appropriate amount of our NEOs’ potential compensation to performance.
Role of Our Chief Executive
Officer
Our Chief Executive
Officer has no role in setting his compensation. However, our Chief Executive Officer recommends to the Compensation Committee
for its approval proposed corporate performance and strategic goals and their relative weighting for the upcoming fiscal year,
in addition to providing input on the level of attainment of the prior year’s goals for purposes of determining awards under
the annual bonus plan and Stock Incentive Plan for all of our NEOs, including our Chief Executive Officer. Finally, our Chief Executive
Officer regularly provides input to the Compensation Committee during the course of the year regarding the performance and compensation
of our other NEOs.
Role of Compensation Consultants
The Compensation
Committee has the authority under its charter to engage the services of outside advisors, experts, and others to assist it in carrying
out its delegated duties.
In 2012, the Compensation
Committee engaged WNB Consulting LLC to update previously prepared analyses of Board and executive officer compensation at our
company and to review a proposed equity compensation package for Dr. Barer as the Chairman of the Board.
For executive officer
compensation, WNB Consulting was asked to complete a competitive review with a focus as best as possible on public companies in
our industry and of comparable size, and to deliver a report to the Compensation Committee including information on the amount
of base compensation, annual bonus payments and the value of equity grants for our executive officers. WNB Consulting was also
asked to present recommendations to the Compensation Committee based on its findings. WNB Consulting subsequently met with the
Compensation Committee to present these reports and discuss its findings and recommendations. Each of these reports, findings,
and recommendations were considered by the Compensation Committee at its December 2012 meeting in connection with the consideration
of annual salary adjustments and equity compensation for our executive officers for 2013.
In 2013, the Compensation
Committee again engaged WNB Consulting LLC to update previously prepared analyses of Board compensation at our company and to provide
a competitive analysis of the compensation packages for each of our NEOs hired in 2013—Mr. Cola as our President and Chief
Executive Officer; Dr. Leaman as our Chief Financial Officer; and Dr. Neil as our Global Head of Research and Development. WNB
Consulting was asked to complete a competitive analysis of the compensation packages for Mr. Cola and Drs. Leaman and Neil in light
of the Board’s determination in 2013 that, in order to grow our company significantly, it was in our best interest to conduct
a thorough executive search and to take aggressive measures to attract “best in class” candidates for these positions.
WNB Consulting was asked to deliver a report to the Compensation Committee including its findings. WNB Consulting subsequently
met with the Chairman of the Compensation Committee to discuss its findings. These findings were considered by the Compensation
Committee at its September 2013 meeting.
The Compensation Committee
conducted a conflict of interest assessment by using the factors applicable to compensation consultants under SEC rules and did
not believe that the retention of WNB Consulting to advise it on the compensation matters described above created a conflict of
interest.
Compensation Benchmarking
In any year
the Compensation Committee may benchmark the compensation for our NEOs with that of executives with similar positions in our industry,
adjusting for known or perceived differences between our NEOs’ experience and levels of responsibility with the job descriptions
reflected for the generalized survey data, but did not do so for 2013.
Evaluations
The Compensation
Committee evaluates the performance of our NEOs in light of established performance goals and objectives at least once per year.
Based upon these evaluations, the Compensation Committee determines the annual compensation for our NEOs, including any increase
to base salary, annual cash bonus, and equity compensation. In its evaluation of our NEOs, the Compensation Committee considers,
among other things, the following:
|
·
|
Overall management of our company;
|
|
·
|
Progress achieved by our research and development efforts;
|
|
·
|
The maintenance of successful relationships with our Board and stockholders and with employees;
|
|
·
|
Our financial performance with respect to the preparation of and compliance with our budget, including
capital reserves;
|
|
·
|
Success in securing additional grants and funding from third-party sources; and
|
2013 Executive Compensation
Summary
Our Board determined
in 2013 that, in order to grow our company significantly, it was in our best interest to conduct a thorough executive search and
to take aggressive measures to attract “best in class” candidates for the positions of Chief Executive Officer, Chief
Financial Officer, and company-wide Head of Research & Development. The primary focus of the executive search process was retention
of candidates with: (i) significant and meaningful experience, including with companies having substantial revenue; (ii) proven
strategic planning abilities and skills; (iii) long-range vision; (iv) supreme organizational skill sets; and (v) the
ability to work together as a cohesive team to realize upon our company’s vision. Additionally, the executive search process
was designed to secure a complete management team, including a Chief Executive Officer, Chief Financial Officer, and company-wide
head of Research & Development.
After a thorough
executive search process, our Board determined that Mr. Cola and Drs. Leaman and Neil were the best candidates, as a
whole management team bringing to the table a combined more than 50 years of experience in the biotech and pharmaceutical industries,
a stellar reputation for insightful and focused strategic planning, and a proven track record for growing business at premier companies.
In September
2013, we entered into employment agreements with Mr. Cola and Drs. Leaman and Neil. These agreements became effective
upon each individual’s commencement of employment with us—Mr. Cola as our President and Chief Executive Officer;
Dr. Leaman as our Chief Financial Officer; and Dr. Neil as our Global Head of Research and Development.
The terms of
the employment agreements with Mr. Cola and Drs. Leaman and Neil are described in greater detail below under the heading
“Employment and Other Agreements with Named Executive Officers.”
In connection
with the hiring of our new management team, Dr. Pearlman’s employment with us terminated as of September 13, 2013. He continues
to serve on our Board through the date of the 2014 annual meeting and as a consultant to our company until March 13, 2014. A description
of Dr. Pearlman’s consulting services agreement with us can be found below under the heading “Employment and Other
Agreements with Named Executive Officers.” In addition, the employment of Mr. Dellio and Dr. Garovoy with us terminated as
of December 31, 2013.
2013 Base Salaries
As noted above,
base salaries generally are initially negotiated and set forth in employment agreements with our NEOs. Thereafter, the Compensation
Committee reviews the salaries of our NEOs periodically. Salaries were increased for certain of our NEOs in 2012 pursuant to amendments
of their respective employment agreements (as reflected in the Summary Compensation Table below). For 2013, the Compensation Committee’s
aim, in line with our company’s general compensation philosophy, was to set compensation levels that are competitive while
maintaining a reasonable cost structure. As a result, no material changes were made to the base salaries of our continuing NEOs
for 2013.
2013 Annual Bonuses
Our NEOs are
eligible to receive annual bonuses based upon performance. Each officer’s employment agreement generally provides a target
or maximum bonus amount, which is generally reflected as a percentage of annual base salary, and the Compensation Committee, in
consultation with senior management, determines whether the specific NEO is entitled to all or a portion of the target or maximum
bonus, based upon the achievement of various performance factors. For 2013, target annual bonus levels were 70% of annual base
salary for Mr. Cola, 50% of annual base salary for Dr. Leaman and 60% of annual base salary for Dr. Neil (in each case prorated
based upon the number of days employed with our company in 2013). Maximum annual bonuses for our other NEOs were as follows: Dr. Pearlman—67.5%
of annual base salary; Ms. Bellin—$30,000; Dr. Garovoy—5% of annual base salary; and Mr. Dellio—30%
of annual base salary.
For our NEOs
hired in 2013—Mr. Cola and Drs. Leaman and Neil—no specific performance factors were established for their 2013 annual
bonuses, but the Compensation Committee determined to pay each of them the target bonus established in their respective employment
agreements based on their successful integration into our company and the repositioning of our company’s strategy (in each
case prorated based upon the number of days employed with our company in 2013). Each of Mr. Cola and Drs. Leaman and Neil may elect
to receive their 2013 bonuses in the form of stock options (in lieu of cash) which would be issued when we are permitted to issue
options under the AIM Rules for Companies.
Our other NEOs
were eligible to receive annual bonuses for 2013 based upon the level of achievement of the following corporate and individual
performance factors that were communicated to the executives in early 2013:
Dr. Pearlman
Performance Factor
|
|
Weighting of Performance Factor*
|
|
|
|
|
|
Successful completion of equity offering
|
|
|
20
|
%
|
|
|
|
|
|
Progress achieved by R&D efforts with respect to EPODURE
|
|
|
21
|
%
|
|
|
|
|
|
Progress achieved by R&D efforts with respect to INFRADURE
|
|
|
37
|
%
|
|
|
|
|
|
Progress achieved by R&D efforts with respect to HEMODURE
|
|
|
4
|
%
|
|
|
|
|
|
Progress with respect to expansion of targeted indications
|
|
|
18
|
%
|
|
|
|
|
|
Progress with respect to partnering and business development efforts
|
|
|
20
|
%
|
|
|
|
|
|
Significant improvement in Biopump and procedures
|
|
|
15
|
%
|
*The maximum annual bonus
that Dr. Pearlman could have received for 2013 was 135% of 50% of his annual base salary.
Ms. Bellin
Performance Factor
|
|
Weighting of Performance Factor
|
|
|
|
|
|
Successful completion of equity offering
|
|
|
35
|
%
|
|
|
|
|
|
Progress with respect to business development
|
|
|
15
|
%
|
|
|
|
|
|
Progress with respect to organizational development and HR
|
|
|
15
|
%
|
|
|
|
|
|
Progress with respect to SEC compliance and financial reporting, investor relations, and systems management
|
35
|
%
|
Dr. Garovoy
Performance Factor
|
|
Weighting of Performance Factor
|
|
|
|
|
|
Progress achieved with respect to U.S. End Stage Renal Disease study
|
|
|
60
|
%
|
|
|
|
|
|
Management of Clinical Department budgets
|
|
|
10
|
%
|
|
|
|
|
|
Progress achieved by R&D efforts with respect to INFRADURE
|
|
|
10
|
%
|
|
|
|
|
|
Development of Clinical Department Standard Operating Procedures
|
|
|
5
|
%
|
|
|
|
|
|
Support of M&A activities
|
|
|
15
|
%
|
Mr. Dellio
Performance Factor
|
|
Weighting of Performance Factor*
|
|
|
|
|
|
Progress achieved by R&D efforts with respect to EPODURE
|
|
|
N/A
|
|
|
|
|
|
|
Support of product development activities
|
|
|
N/A
|
|
|
|
|
|
|
Progress with respect to R&D management below VP level
|
|
|
N/A
|
|
|
|
|
|
|
Support of M&A and other business activities
|
|
|
N/A
|
|
*There was
no specific weighting associated with the performance factors applicable to Mr. Dellio.
Our company’s
senior management, including Mr. Cola and Drs. Leaman and Neil, determined the level of achievement of each of the foregoing performance
factors for each of Ms. Bellin, Dr. Garovoy and Mr. Dellio, and recommended bonus amounts to the Compensation Committee based upon
such level of achievement and the maximum bonus set forth in the respective NEO’s employment agreement. Senior management’s
recommendations with respect to 2013 annual bonuses were reviewed and ultimately approved by the Compensation Committee. Although
the above performance factors were considered by senior management and the Compensation Committee when determining the annual bonuses
for 2013 for Ms. Bellin, Dr. Garovoy, and Mr. Dellio, they were not dispositive. The Compensation Committee retains discretion
to set the awards at what they believe are the appropriate levels to ensure objectives are met, taking into consideration a variety
of company-specific and market factors. The final annual bonus amounts for 2013 are included in the Summary Compensation Table.
In connection
with his resignation as our President and Chief Executive Officer, we entered into a separation agreement with Dr. Pearlman on
September 13, 2013. Under the separation agreement, Dr. Pearlman was entitled to a separation payment of $465,805, but he was not
specifically entitled to any performance-based annual bonus for 2013 based upon the level of achievement of the performance factors
applicable to him as described above.
2013 Equity Compensation
Stock option
grants are generally made at the commencement of employment and following a significant change in job responsibilities or to meet
other special retention or performance objectives. The Compensation Committee reviews and approves stock option and other equity
awards to NEOs based upon a review of competitive compensation data, its assessment of individual performance, a review of each
NEO’s existing long-term incentives, and retention considerations. In 2013, we granted stock options to Mr. Cola, Dr. Leaman
and Dr. Neil as inducements to entering into employment with us and to Ms. Bellin in recognition of her performance consistent
with our retention objectives.
Our Other Compensation Policies
Employment Agreements
Each of our
NEOs is party to an employment agreement with our company covering a variety of important issues concerning the NEO’s employment,
including the service that will be expected of the NEO, the compensation the NEO will be paid, how long and under what circumstances
the NEO will remain employed, and the financial details relating to any decision that either our company or the NEO may make to
terminate the NEO’s employment with our company. All of our employment agreements also contain significant restrictive covenants
that are intended to protect our intellectual property.
We provide
all of our NEOs with severance arrangements in their employment agreements. We believe that severance packages are a common characteristic
of compensation for executive officers in our industry. They are intended to provide our NEOs with a sense of security in making
the commitment to dedicate their professional careers to our success. Due to our size relative to other public companies and our
operating history, we believe that severance arrangements are necessary to help us attract and retain skilled and qualified executive
officers to continue to grow our company.
Our employment
agreements are described in greater detail below under the heading “Employment and Other Agreements with Named Executive
Officers.”
Section 162(m) Policy
Section 162(m)
of the Internal Revenue Code limits the amount that a public company may deduct from federal income taxes for remuneration paid
to its chief executive officer and the three other most highly paid executive officers (other than the chief financial officer)
to $1 million per year per covered executive officer. Section 162(m) provides an exception from this deduction limitation for certain
forms of “performance-based compensation,” including the gain recognized by executive officers upon the exercise of
certain compensatory stock options and other compensation based on performance criteria that are approved in advance by stockholders.
We are mindful of the benefit to our company and our stockholders of the full deductibility of compensation. However, we believe
that there may be times when we need to retain flexibility in compensating our executive officers in a manner that we believe will
best promote our corporate objectives even though the compensation may not be fully deductible under Section 162(m). Therefore,
we have not adopted a policy that requires that all compensation be deductible.
Accounting Considerations
The accounting
impact of our equity compensation program is one of many factors that the Compensation Committee may consider in determining the
size and structure of our program.
Common Stock Ownership Requirements
While we have
not adopted a formal written policy on common stock ownership requirements, part of our compensation philosophy involves facilitating
common stock ownership by our NEOs through the grant of equity awards because we believe that it helps to align their financial
interests with those of our stockholders.
Timing of Awards
The Compensation
Committee has the authority to grant equity awards under our Stock Incentive Plan. The Compensation Committee strives to ensure
that any award is made in such a manner to avoid even the appearance of manipulation because of its award date. It is our policy
not to purposely accelerate or delay the public release of material information in consideration of a pending equity grant to allow
the grantee to benefit from a more favorable stock price.
Compensation Recovery Policy
We do not have
a policy to attempt to recover incentive compensation payments paid to our executive officers if the performance objectives that
led to the determination of such payments were to be restated, or found not to have been met to the extent the Compensation Committee
originally believed. However, as a public company subject to the provisions of Section 304 of the Sarbanes-Oxley Act of 2002, if
we are required as a result of misconduct to restate our financial results due to our material noncompliance with any financial
reporting requirements under the federal securities laws, our Chief Executive Officer and Chief Financial Officer may be legally
required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive. In addition, we will
comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and will adopt a compensation recovery
policy once the SEC adopts final regulations on the subject.
Prior Year’s Say-on-Pay
Vote
Our stockholders
overwhelmingly approved our executive compensation program at our 2013 annual meeting. Besides this approval, we received no specific
feedback from our stockholders concerning our executive compensation program during the past year. Greater than 98% of shares present
and eligible to vote approved the nonbinding advisory resolution on executive compensation at our 2013 annual meeting. The Compensation
Committee considered this approval a reflection of our stockholders’ favorable view of our compensation program. The Compensation
Committee did not specifically rely on the results of the vote in making any compensation-related decisions during 2013.
Compensation Committee Report
The information contained
in this report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall
such information be incorporated by reference into any previous or future filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 except to the extent that we incorporate it by specific reference.
The Compensation Committee
has reviewed and discussed with management the Compensation Discussion and Analysis included above in this proxy statement. Based
on this review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in this proxy statement and, through incorporation by reference from this proxy statement, our company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
Submitted
by the Compensation Committee:
Alastair Clemow,
Chairman
Isaac Blech
Joseph J. Grano,
Jr.
Compensation Committee Interlocks
and Insider Participation
As of the date of this
proxy statement, Dr. Clemow, Mr. Blech and Mr. Grano serve as the members of the Compensation Committee. During 2013, Mr. Kanter
and Dr. McMurray also served on the Compensation Committee. None of the persons who served as members of the Compensation Committee
during 2013 was or is an officer or employee of our company, and no executive officer of our company served or serves on the compensation
committee or board of any company that employed or employs any person who served as a member of the Compensation Committee or the
Board of Directors in 2013.
Summary Compensation Table
The following Summary
Compensation Table summarizes the compensation information for the years ended December 31, 2013, 2012 and 2011 for each of our
current and former executive officers listed in the table, to whom we collectively refer as our “named executive officers.”
The 2013 Grants of Plan-Based Awards Table following the Summary Compensation Table provides additional information regarding compensation
granted to these officers in 2013.
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
(1)
($)
|
|
|
Option
Awards
(2)
($)
|
|
|
All
Other Compensation
(3)
($)
|
|
|
Total
($)
|
|
Michael F. Cola
President and
Chief Executive
Officer
(4)
|
|
2013
|
|
|
132,981
|
|
|
|
93,087
|
|
|
|
3,423,000
|
|
|
|
6,048
|
(5)
|
|
|
3,655,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John H. Leaman
Chief Financial
Officer
(6)
|
|
2013
|
|
|
110,817
|
|
|
|
105,409
|
(7)
|
|
|
1,825,600
|
|
|
|
6,048
|
(8)
|
|
|
2,047,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garry A. Neil
Global Head
of Research and
Development
(9)
|
|
2013
|
|
|
121,160
|
|
|
|
72,696
|
|
|
|
2,053,800
|
|
|
|
1,258
|
(10)
|
|
|
2,248,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew L. Pearlman
Former President
and Chief
|
|
2013
|
|
|
228,373
|
|
|
|
—
|
|
|
|
120,428
|
(12)
|
|
|
699,879
|
(13)
|
|
|
1,048,680
|
|
Executive Officer (Former
|
|
2012
|
|
|
325,000
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
56,818
|
(14)
|
|
|
431,818
|
|
Principal Executive Officer)
(11)
|
|
2011
|
|
|
264,559
|
|
|
|
102,500
|
|
|
|
127,760
|
|
|
|
47,002
|
(15)
|
|
|
541,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phyllis K. Bellin
Vice President
–
Administration,
Corporate
Secretary and
Treasurer
(Former Principal
Financial
Officer)
(16)
|
|
2013
|
|
|
145,000
|
|
|
|
30,000
|
|
|
|
103,825
|
|
|
|
40,651
|
(17)
|
|
|
319,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marvin
R. Garovoy
Former Chief
Medical
|
|
2013
|
|
|
301,538
|
(19)
|
|
|
9,800
|
|
|
|
2,694
|
(20)
|
|
|
140,000
|
(21)
|
|
|
454,032
|
|
Officer
(18)
|
|
2012
|
|
|
134,165
|
|
|
|
3,000
|
|
|
|
165,120
|
|
|
|
148,800
|
(22)
|
|
|
451,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clarence L. Dellio
|
|
2013
|
|
|
258,462
|
(24)
|
|
|
50,400
|
|
|
|
55,607
|
(25)
|
|
|
120,000
|
(26)
|
|
|
484,469
|
|
Former Chief Operating
|
|
2012
|
|
|
230,000
|
|
|
|
48,300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
278,300
|
|
Officer
(23)
|
|
2011
|
|
|
100,000
|
|
|
|
24,450
|
|
|
|
101,840
|
|
|
|
—
|
|
|
|
226,290
|
|
|
(
1
)
|
Annual bonuses reported for 2013 have been approved but not yet paid. Mr. Cola and Drs.
Leaman and Neil may elect to receive their annual bonuses for 2013 in the form of stock options (in lieu of cash) which would
be
issued
when we are permitted to issue options under the AIM Rules for Companies.
|
|
(
2
)
|
Except as otherwise noted in the footnotes below, amounts
included in this column reflect the aggregate grant date fair value of awards granted in the specified year computed in accordance
with FASB ASC Topic 718. For a discussion of the assumptions made in the valuation of the awards reported in this column, please
refer to Note 2(i) to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December
31, 2013.
|
|
(
3
)
|
Under Israeli law, companies are liable for mandatory
severance payments of 8.33% of each monthly salary paid to Israeli employees. Our Israeli subsidiary, Medgenics Medical (Israel)
Limited (“MMI”), makes monthly payments of such amount into severance funds. This column includes payments of these
amounts and other Israeli social benefits with respect to Dr. Pearlman and Ms. Bellin. These amounts were paid in New Israeli
Shekels (NIS) and are reported in this column in U.S. dollars based upon an average exchange rate between the NIS and U.S. dollar
of 3.716 for 2013, 3.856 for 2012 and 3.578 for 2011. None of our other named executive officers are or were Israeli employees.
|
|
(
4
)
|
Mr. Cola was appointed as our President and Chief Executive
Officer on September 13, 2013. Mr. Cola does not receive any additional compensation for his service as a director.
|
|
(5)
|
Represents reimbursement of the cost of COBRA continuation
coverage.
|
|
(
6
)
|
Dr. Leaman was appointed as our Chief Financial Officer
on September 13, 2013.
|
|
(7)
|
Includes a signing bonus of $50,000.
|
|
(
8)
|
Represents reimbursement of the cost of COBRA continuation
coverage.
|
|
(
9
)
|
Dr. Neil was appointed as our Global Head of Research
and Development on September 13, 2013.
|
|
(
10
)
|
Represents reimbursement of the cost of COBRA continuation
coverage.
|
|
(
11
)
|
Dr. Pearlman resigned as our President and Chief Executive
Officer on September 13, 2013. He continues to serve as a member of our Board through the date of the 2014 annual meeting. He
did not receive any additional compensation for his service as a director in 2013.
|
|
(
12
)
|
Represents the incremental fair value, computed in accordance
with FASB ASC Topic 718, of the acceleration of the vesting of all of Dr. Pearlman’s unvested stock options as of September
13, 2013 in accordance with his separation agreement.
|
|
(13)
|
Represents $11,195 for managers’ insurance, $82,730
payment into severance fund, $5,598 for disability insurance, $2,854 for the advanced study fund, $705 for Israeli recreation
pay, $28,000 in consulting fees and $568,797 in payments made or due to Dr. Pearlman in accordance with his separation agreement.
|
|
(14)
|
Represents $16,287 for managers’ insurance, $28,070
payment into severance fund, $8,143 for disability insurance, $3,679 for the advanced study fund and $639 for Israeli recreation
pay.
|
|
(
15
)
|
Represents $13,379 for managers’ insurance, $22,290
payment into severance fund, $6,635 for disability insurance, $3,948 for the advanced study fund and $750 for Israeli recreation
pay.
|
|
(16)
|
Ms. Bellin served as our principal financial officer
until the appointment of Dr. Leaman on September 13, 2013. She continues in her role as our Vice President – Administration,
Corporate Secretary and Treasurer.
|
|
(17)
|
Represents $7,065 for managers’ insurance, $11,733
payment into severance fund, $1,627 for disability insurance, $3,805 for the advanced study fund, $705 for Israeli recreation
pay and $15,716 for car allowance.
|
|
(18)
|
Dr. Garovoy was appointed as our Chief Medical Officer
effective as of July 8, 2012 and his employment with us terminated effective as of December 31, 2013.
|
|
(19)
|
Includes $21,538 in pay for accrued and unused vacation.
|
|
(20)
|
Represents the incremental fair value, computed in accordance
with FASB ASC Topic 718, of the acceleration of the vesting of all of Dr. Garovoy’s unvested stock options as of December
31, 2013 in accordance with his separation agreement.
|
|
(21)
|
Represents payments made or due to Dr. Garovoy in accordance
with his separation agreement.
|
|
(22)
|
Represents consulting fees for services provided prior
to his employment with our company.
|
|
(23)
|
Mr. Dellio was appointed as our Chief Operating Officer
effective as of July 1, 2011 and his employment with us terminated effective as of December 31, 2013.
|
|
(24)
|
Includes $18,462 in pay for accrued and unused vacation.
|
|
(25)
|
Represents the incremental fair value, computed in accordance
with FASB ASC Topic 718, of the acceleration of the vesting of all of Mr. Dellio’s unvested stock options as of December
31, 2013 in accordance with his separation agreement.
|
|
(26)
|
Represents payments made or due to Mr. Dellio in accordance
with his separation agreement.
|
2013 Grants of Plan-Based
Awards Table
Name
|
|
Grant
Date
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(1)
(#)
|
|
|
Exercise or Base Price of Option Awards
($/Sh)
|
|
|
Grant Date Fair Value of Stock and Option Awards
(2)
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Cola
|
|
|
9/13/2013
|
|
|
|
1,500,000
|
|
|
$
|
4.22
|
|
|
$
|
3,423,000
|
|
John H. Leaman
|
|
|
9/13/2013
|
|
|
|
800,000
|
|
|
|
4.22
|
|
|
|
1,825,600
|
|
Garry A. Neil
|
|
|
9/13/2013
|
|
|
|
900,000
|
|
|
|
4.22
|
|
|
|
2,053,800
|
|
Andrew L. Pearlman
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
120,428
|
|
Phyllis K. Bellin
|
|
|
9/20/2013
|
|
|
|
25,000
|
|
|
|
7.02
|
|
|
|
103,825
|
|
Marvin R. Garovoy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,694
|
|
Clarence L. Dellio
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55,607
|
|
|
(1)
|
The options granted to Mr. Cola and Drs. Leaman and Neil
will vest with respect to one-third of such shares on the first anniversary of the grant date and the balance will vest in equal
increments on a monthly basis over two years thereafter, subject to such officer’s continuous service through each vesting
date. The options were granted outside of the Stock Incentive Plan as an inducement material to entering into employment with
us. The options granted to Ms. Bellin will vest in four equal annual installments beginning on the first anniversary of the grant
date, and were granted under the Stock Incentive Plan.
|
|
(2)
|
Amounts reported for Mr. Cola, Dr. Leaman, Dr. Neil and
Ms. Bellin reflect the aggregate grant date fair value of each award as determined under FASB ASC Topic 718. Amounts reported
for Dr. Pearlman, Dr. Garovoy and Mr. Dellio represent the incremental fair value, computed in accordance with FASB ASC Topic
718, of the acceleration of the vesting of unvested stock options in accordance with such officer’s separation agreement.
|
Employment and Other Agreements with Named
Executive Officers
Michael F. Cola
On September 13, 2013,
we entered into an employment agreement with Mr. Cola to serve as our President and Chief Executive Officer. The agreement has
a term of three years, subject to automatic extension for successive one-year periods unless either party provides 90 days’
advance written notice of such party’s desire not to renew. The agreement provides for an initial base salary at an annual
rate of $450,000, subject to review by our Board for possible increase, but not decrease, beginning in fiscal year 2015. Mr. Cola
is also eligible to receive performance-based annual bonuses for each fiscal year ending during the employment period, with any
applicable performance metrics and goals to be established by our Board after consultation with Mr. Cola. His initial target bonus
is 70% of annual base salary but may be greater or less based upon actual performance and the determination of our Board. Mr. Cola’s
annual bonus for fiscal year 2013 was prorated based on the number of days employed during the year. He is also entitled to participate
in all incentive and benefit plans in effect from time to time with respect to our senior executives in the United States.
John H. Leaman
On September 13, 2013,
we entered into an employment agreement with Dr. Leaman to serve as our Chief Financial Officer. The agreement is substantially
similar to the employment agreement entered into with Mr. Cola, except that Dr. Leaman’s employment agreement provides for
an initial base salary at an annual rate of $375,000, a signing bonus of $50,000 and an initial target bonus of 50% of annual base
salary.
Garry A. Neil
On September 13, 2013,
we entered into an employment agreement with Dr. Neil to serve as our Global Head of Research and Development. The agreement is
substantially similar to the employment agreement entered into with Mr. Cola, except that Dr. Neil’s employment agreement
provides for an initial base salary at an annual rate of $410,000 and an initial target bonus of 60% of annual base salary.
Andrew L. Pearlman
In connection with his resignation as our
President and Chief Executive Officer and the termination of his employment agreement, we entered into a separation agreement with
Dr. Pearlman on September 13, 2013. Under the separation agreement, Dr. Pearlman was entitled to a lump sum payment of $102,992
(representing three months’ salary and other benefits payable to him consistent with certain notice provisions of his employment
agreement) and a separation payment of $465,805. In addition, all unvested stock options held by Dr. Pearlman vested as of his
separation date, and all options vested as of the separation date will be exercisable through the one-year anniversary of his separation
date. We agreed to reimburse Dr. Pearlman for the cost of reasonable office space for a period of 12 months (or, if earlier, his
acceptance of other employment). Dr. Pearlman was not entitled to receive fees as a director for fiscal year 2013, but he will
be entitled to such fees for periods after December 31, 2013 for his service on the Board.
Also on September 13, 2013, we entered into
a consulting services agreement with Dr. Pearlman. The agreement has a term of six months and expires on March 13, 2014. Pursuant
to the consulting services agreement, Dr. Pearlman agreed to provide consulting services, including financial, strategic, business
development, investor relations and clinical and regulatory consulting services, to us and our affiliates, as and when requested
by us. The agreement provided for a monthly consulting fee of $8,000 and the reimbursement of reasonable expenses.
Our employment agreement
with Dr. Pearlman, which was terminated as of September 13, 2013, provided for an initial monthly gross salary of NIS equal to
$250,000 per year ($20,833 per month) calculated at the representative rate of the U.S. dollar published by the Bank of Israel
and known at the time of payment. Dr. Pearlman was eligible for adjustments in salary and additional benefits, including bonuses,
in our Board’s discretion. In December 2011, the Compensation Committee approved an increase in Dr. Pearlman’s salary
to $325,000 per year, effective as of October 20, 2011. Dr. Pearlman was eligible to receive an annual cash bonus in the sole discretion
of our Board of up to 50% of salary per year based upon the achievement of individual goals and corporate milestones to be agreed
between Dr. Pearlman and our Board. Dr. Pearlman was entitled to participate in or receive benefits under our social insurance
and benefits plans, including but not limited to managers’ insurance (“bituach minahlim”), disability insurance
and an advanced study fund (“keren hishtalmut”). These are customary benefits provided to all employees based in Israel
(other than those in very junior positions). A management insurance fund is a combination of severance savings (in accordance with
Israeli law), defined contribution tax-qualified pension savings and disability insurance premiums. An advanced study fund is a
savings fund of pre-tax contributions to be used after a specified period of time for educational or other permitted purposes.
We paid certain percentages of Dr. Pearlman’s salary towards these insurance and benefits plans, including 5% to managers’
insurance, up to 2.5% percent to disability insurance, 8.33% to severance compensation and 7.5% to the advanced study fund.
Phyllis K. Bellin
We entered into an employment agreement
with Ms. Bellin on July 1, 2007, which was amended effective January 1, 2012. The amended agreement provides for a monthly gross
salary of $145,000 per year ($12,083 per month), with a discretionary bonus and additional benefits subject to review by our Chief
Executive Officer on an annual basis. Ms. Bellin is eligible to receive an annual cash bonus in the sole discretion of our Board
of up to $30,000 per year based upon corporate and personal performance criteria as established by our Chief Executive Officer
and our Board.
Ms. Bellin is entitled to participate in
or receive benefits under our social insurance and benefits plans, including (“bituach minahlim”), disability insurance
and an advanced study fund (“keren hishtalmut”). We pay certain percentages of Ms. Bellin’s salary towards these
insurance and benefits plans, including 5% to managers’ insurance, up to 2.5% percent to disability insurance, 8.33% to severance
compensation and 7.5% to the advanced study fund. Ms. Bellin is entitled to the use of a company car.
Marvin R. Garovoy
We entered into an employment
agreement with Dr. Garovoy on July 8, 2012, which was terminated effective December 31, 2013. Dr. Garovoy’s employment agreement
provided for an initial annual gross salary of $280,000, subject to annual review by the Compensation Committee. Dr. Garovoy was
eligible to receive an annual cash bonus with respect to each fiscal year during the term of the agreement in an amount up to 5%
of his salary on an annualized basis, as determined by the Compensation Committee in its sole discretion, based upon objective
and subjective corporate and personal performance criteria as established by our Chairman of the Board and the Compensation Committee.
He was also entitled to 20 days of paid time off per calendar year.
On December 3, 2013 (but
made effective as of November 27, 2013), we entered into a separation agreement with Dr. Garovoy. The separation agreement confirmed
our obligation to pay all wages and benefits owing through the termination date (December 31, 2013) and to continue to pay his
salary for six months following the termination date, as provided in his employment agreement in the event of a termination without
cause. In addition, all unvested stock options held by Dr. Garovoy vested as of December 31, 2013, and all options vested as of
that date will be exercisable through December 31, 2014.
Clarence L. Dellio
We entered into an employment
agreement with Mr. Dellio effective as of July 1, 2011, which was terminated effective December 31, 2013. Under his employment
agreement, as amended, Mr. Dellio was expected to work on average approximately 80% of an average work week of an executive in
a similar position with a public company of similar size and nature as us, with a gross salary of $20,000 per month. Mr. Dellio
was eligible to receive an annual cash bonus with respect to each fiscal year during the term of the agreement in an amount up
to 30% of his salary on an annualized basis, as determined by the Compensation Committee in its sole discretion, based upon objective
and subjective corporate and personal performance criteria as established by our Chairman of the Board and the Compensation Committee.
He was also entitled to 20 days of paid time off per calendar year.
On November 27, 2013,
we entered into a separation agreement with Mr. Dellio. The separation agreement confirmed our obligation to pay all wages and
benefits owing through the termination date (December 31, 2013) and to continue to pay his salary for six months following the
termination date, as provided in his employment agreement in the event of a termination without cause. In addition, all unvested
stock options held by Mr. Dellio vested as of December 31, 2013, and all options vested as of that date will be exercisable through
December 31, 2014.
Outstanding Equity Awards at 2013 Fiscal
Year-End
The following table sets
forth certain information, on an award-by-award basis, concerning outstanding unexercised options or warrants to purchase common
stock for each named executive officer as of December 31, 2013. None of our named executive officers held any unvested shares of
common stock as of December 31, 2013.
|
|
|
|
|
|
|
Option Awards
|
Name
|
|
Type of Award
|
|
|
Grant
Date
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
Michael F. Cola
|
|
|
Options
|
|
|
9/13/2013
|
|
|
—
|
|
|
|
1,500,000
|
(1)
|
|
$
|
4.22
|
|
|
9/13/2023
|
John H. Leaman
|
|
|
Options
|
|
|
9/13/2013
|
|
|
—
|
|
|
|
800,000
|
(2)
|
|
|
4.22
|
|
|
9/13/2023
|
Garry A. Neil
|
|
|
Options
|
|
|
9/13/2013
|
|
|
—
|
|
|
|
900,000
|
(3)
|
|
|
4.22
|
|
|
9/13/2023
|
Andrew L. Pearlman
|
|
|
Options
|
|
|
12/9/2011
|
|
|
80,000
|
(4)
|
|
|
—
|
|
|
|
3.14
|
|
|
9/13/2014
|
|
|
|
Options
|
|
|
3/30/2006
|
|
|
182,806
|
(5)
|
|
|
—
|
|
|
|
2.49
|
|
|
9/13/2014
|
|
|
|
Warrants
|
|
|
3/31/2006
|
|
|
882,240
|
|
|
|
—
|
|
|
|
2.49
|
|
|
3/31/2016
|
Phyllis K. Bellin
|
|
|
Options
|
|
|
9/20/2013
|
|
|
—
|
|
|
|
25,000
|
(6)
|
|
|
7.02
|
|
|
9/20/2023
|
|
|
|
Options
|
|
|
12/9/2011
|
|
|
55,000
|
|
|
|
20,000
|
(7)
|
|
|
3.14
|
|
|
12/9/2021
|
Marvin R. Garovoy
|
|
|
Options
|
|
|
7/8/2012
|
|
|
20,000
|
(8)
|
|
|
—
|
|
|
|
14.50
|
|
|
12/31/2014
|
Clarence L. Dellio
|
|
|
Options
|
|
|
7/1/2011
|
|
|
32,200
|
(9)
|
|
|
—
|
|
|
|
3.64
|
|
|
12/31/2014
|
|
(
1
)
|
These options will vest with respect to one-third of
such shares on the first anniversary of the grant date and the balance will vest in equal increments on a monthly basis over two
years thereafter, subject to Mr. Cola’s continuous service through each vesting date.
|
|
(2)
|
These options will vest with respect to one-third of
such shares on the first anniversary of the grant date and the balance will vest in equal increments on a monthly basis over two
years thereafter, subject to Dr. Leaman’s continuous service through each vesting date.
|
|
(3)
|
These options will vest with respect to one-third of
such shares on the first anniversary of the grant date and the balance will vest in equal increments on a monthly basis over two
years thereafter, subject to Dr. Neil’s continuous service through each vesting date.
|
|
(4)
|
These options became fully vested on September 13, 2013
in accordance with the terms of Dr. Pearlman’s separation agreement. Subsequent to December 31, 2013 (through February 25,
2014), Dr. Pearlman exercised 45,368 of these options.
|
|
(5)
|
Subsequent to December 31, 2013 (through February 25,
2014), Dr. Pearlman exercised 90,800 of these options.
|
|
(6)
|
These options will vest in four equal annual installments
beginning on the first anniversary of the grant date, subject to Ms. Bellin’s continuous service through each vesting date.
|
|
(7)
|
These options will vest with respect to one-half of such
shares on each of December 9, 2014 and December 9, 2015, subject to Ms. Bellin’s continuous service through each vesting
date.
|
|
(8)
|
These options became fully vested on December 31, 2013
in accordance with the terms of Dr. Garovoy’s separation agreement.
|
|
(9)
|
These options became fully vested on December 31, 2013
in accordance with the terms of Mr. Dellio’s separation agreement. Subsequent to December 31, 2013 (through February 25,
2014), Mr. Dellio exercised 8,200 of these options.
|
2013 Option Exercises and Stock Vested
The following table sets
forth certain information regarding the exercise of options by our named executive officers during the year ended December 31,
2013. No stock awards held by any of our named executive officers vested during the year ended December 31, 2013.
|
|
Option Awards
|
|
Name
|
|
Number of Shares Acquired on Exercise
(#)
|
|
|
Value Realized on Exercise
(1)
($)
|
|
Michael F. Cola
|
|
|
—
|
|
|
|
—
|
|
John H. Leaman
|
|
|
—
|
|
|
|
—
|
|
Garry A. Neil
|
|
|
—
|
|
|
|
—
|
|
Andrew L. Pearlman
|
|
|
—
|
|
|
|
—
|
|
Phyllis K. Bellin
|
|
|
—
|
|
|
|
—
|
|
Marvin R. Garovoy
|
|
|
—
|
|
|
|
—
|
|
Clarence L. Dellio
|
|
|
3,500
|
|
|
$
|
4,935
|
|
|
(1)
|
Computed by determining the market value per share of
the shares acquired based on the difference between the closing market price of our common stock as reported by the NYSE MKT on
the date of exercise and the exercise price of the options.
|
Potential Payments Upon Termination or
Change of Control
The employment agreements
that we entered into with our named executive officers provide for certain payments in connection with a termination of employment.
Under our employment agreements
with Mr. Cola, Dr. Leaman and Dr. Neil, we may terminate such officer’s employment immediately upon written notice in the
event of death or disability, in which case he or his estate will be entitled to all wages and benefits earned through the effective
date of termination, a pro-rated bonus for the year in which the termination date occurs, a lump sum payment equal to 100% of his
annual base salary plus target bonus for the year in which the termination date occurs, continuing coverage under medical and dental
plans for a period of up to 12 months after the termination date and immediate vesting of unvested stock options scheduled to vest
within 12 months after the termination date (which options would remain exercisable through the earlier of the 24-month anniversary
of the termination date or the original expiration date). If such officer terminates his employment for good reason (as defined
in the agreement) or we terminate his employment without cause (as defined in the agreement), he will be entitled to all wages
and benefits earned through the effective date of termination, a pro-rated bonus for the year in which the termination date occurs,
a lump sum payment equal to 150% of his annual base salary plus 150% of his target bonus for the year in which the termination
date occurs, continuing coverage under medical and dental plans for a period of up to 18 months after the termination date and
immediate vesting of all unvested stock options (which options would remain exercisable through the earlier of the 24-month anniversary
of the termination date or the original expiration date). If we terminate such officer’s employment for cause, he will only
be entitled to wages and benefits earned through the effective date of termination, and all unvested stock options will expire
and vested stock options will terminate and no longer be exercisable. Each such officer may terminate his employment voluntarily
without good reason by giving at least 60 days’ prior written notice, in which case he will only be entitled to wages and
benefits earned through the effective date of termination, and all unvested stock options will expire and vested stock options
will remain exercisable for a period of 90 days after the termination date. Each such officer has agreed not to compete and not
to solicit our employees, consultants, customers or suppliers during the period of his employment and for a period of 12 months
following the termination of his employment.
The options granted to
Mr. Cola, Dr. Leaman and Dr. Neil upon entering into employment with us in September 2013 will become fully exercisable in the
event of a change of control that occurs on or before such officer’s termination of service.
Under our employment agreement
with Ms. Bellin, either party may terminate the agreement without cause upon three months’ prior written notice to the other
party. In the event we terminate the agreement, we may determine that Ms. Bellin’s employment cease immediately or at any
time prior to the expiration of the notice period, and in such an event we will pay her an amount equal to the salary which would
have been paid during the remainder of the notice period. If we terminate Ms. Bellin’s agreement for any reason other than
her death or disability or for cause, we must continue to pay her an amount equal to her monthly salary, including insurance and
social benefits, for a period of six months plus an additional month for each 12 months of employment after November 1, 2006. These
severance amounts are in addition to severance fund payments mandated by Israeli law described above in the narrative accompanying
the Summary Compensation Table. Ms. Bellin has agreed to a one-year post-termination covenant not to compete.
Under our employment agreements
with Dr. Garovoy and Mr. Dellio, either party could terminate the employment agreement for any reason upon at least 30 days’
advance written notice to the other party. We could terminate such officer’s employment immediately upon written notice for
cause or upon his death or disability, in which case he or his estate would have been paid all wages and benefits through the effective
date of termination. If we terminated such officer’s employment without cause, we agreed to continue to pay his salary for
a period of six months after the effective date of termination as severance. We exercised our right to voluntarily terminate the
employment agreements of Dr. Garovoy and Mr. Dellio without cause effective December 31, 2013. Each such officer has agreed not
to solicit our employees, consultants, customers or suppliers during the period of his employment and for a period of 12 months
following the termination of his employment, as well as to continue to comply with provisions of his employment agreement regarding
confidentiality and proprietary information and the disclosure and assignment of inventions. In consideration for each officer’s
execution of a general release and waiver, we agreed to accelerate the vesting of such officer’s outstanding unvested stock
options and to extend the expiration date of those options to December 31, 2014.
In connection with his
resignation as our President and Chief Executive Officer in September 2013, we entered into a separation agreement with Dr. Pearlman,
which is described above under “Employment and Other Agreements with Named Executive Officers.”
Stock Incentive Plan
Except for the options
granted to Mr. Cola, Dr. Leaman and Dr. Neil as an inducement material to entering into employment with us in September 2013, all
of the options held by our named executive officers as of December 31, 2013 were granted under our Stock Incentive Plan, which
we initially adopted in March 2006 and, with stockholder approval, subsequently amended in 2007, 2010, 2012 and 2013. The Stock
Incentive Plan is administered by the Compensation Committee. Subject to the provisions of the Stock Incentive Plan, the Compensation
Committee has full authority and discretion to take any actions it deems necessary or advisable for the administration of the Stock
Incentive Plan.
Our Stock Incentive Plan
provides that, unless otherwise stated in an award agreement, in the event of a change of control, all outstanding unvested options
will be immediately and fully vested and exercisable, and all restrictions applicable to outstanding restricted stock awards will
terminate fully, except under certain circumstances in which the relevant participant is associated with the party/ies gaining
control of us.
An option holder will
have the right to exercise any options held by him or her following the termination of his or her service during the option term,
to the extent that the option was exercisable and vested at the date of termination of service:
|
·
|
if the termination of service was due to any reason other than death or disability — for the
shorter of 90 days from the date of termination of service and the unexpired term of the option; or
|
|
·
|
if the termination of service was due to death or disability of the option holder — for the
shorter of one year from the date of termination of service and the unexpired term of the option.
|
The Compensation Committee
may, in its sole discretion, extend these periods. Unless otherwise determined by the Compensation Committee, to the extent that
the right to exercise the option has not vested at the date of termination of service, the option will terminate when the option
holder’s service terminates. Similarly, unvested awards of restricted stock will be forfeited and returned to us in the event
of a termination of service occurring prior to the expiration of the vesting period for the award unless otherwise determined by
the Compensation Committee.
For the purposes of the
Stock Incentive Plan, termination of service means the termination of a person’s status as our employee or director or (where
the person is not an employee or director of our company) the termination of the person’s business relationship with us.
Termination and Change of Control Payments
The following table includes
estimated payments owed and benefits required to be provided to our named executive officers (other than Dr. Pearlman) under the
employment agreements, option agreements and Stock Incentive Plan described above, exclusive of benefits available on a non-discriminatory
basis generally, in each case assuming that the triggering event described in the table occurred on December 31, 2013. The amounts
provided to Dr. Pearlman in connection with his resignation as our President and Chief Executive Officer in September 2013 are
included in the Summary Compensation Table above.
Name
|
|
Triggering Event
|
|
Cash
Severance
(
1
)
($)
|
|
|
Accelerated Vesting of Stock and Option Awards
(
2
)
($)
|
|
|
Continuation of Medical and Dental Benefits
(3)
($)
|
|
|
Total
($)
|
|
Michael F. Cola
|
|
Termination due to death or disability
|
|
|
765,000
|
|
|
|
1,106,250
|
|
|
|
24,191
|
|
|
|
1,895,441
|
|
|
|
Termination for good reason or without cause
|
|
|
1,147,500
|
|
|
|
2,655,000
|
|
|
|
36,286
|
|
|
|
3,838,786
|
|
|
|
Termination for cause
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Change of control
|
|
|
—
|
|
|
|
2,655,000
|
|
|
|
—
|
|
|
|
2,655,000
|
|
John H. Leaman
|
|
Termination due to death or disability
|
|
|
562,500
|
|
|
|
590,000
|
|
|
|
24,191
|
|
|
|
1,176,691
|
|
|
|
Termination for good reason or without cause
|
|
|
843,750
|
|
|
|
1,416,000
|
|
|
|
36,286
|
|
|
|
2,296,036
|
|
|
|
Termination for cause
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Change of control
|
|
|
—
|
|
|
|
1,416,000
|
|
|
|
—
|
|
|
|
1,416,000
|
|
Garry A. Neil
|
|
Termination due to death or disability
|
|
|
656,000
|
|
|
|
663,750
|
|
|
|
5,033
|
|
|
|
1,324,783
|
|
|
|
Termination for good reason or without cause
|
|
|
984,000
|
|
|
|
1,593,000
|
|
|
|
7,549
|
|
|
|
2,584,549
|
|
|
|
Termination for cause
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Change of control
|
|
|
—
|
|
|
|
1,593,000
|
|
|
|
—
|
|
|
|
1,593,000
|
|
Phyllis K. Bellin
|
|
Termination due to death or disability
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Termination without cause
|
|
|
253,106
|
(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
253,106
|
|
|
|
Termination for cause
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Change of control
|
|
|
—
|
|
|
|
57,000
|
|
|
|
—
|
|
|
|
57,000
|
|
Marvin R. Garovoy
(
5
)
|
|
Termination due to death or disability
|
|
|
21,538
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,538
|
|
|
|
Termination without cause
|
|
|
161,538
|
|
|
|
—
|
|
|
|
—
|
|
|
|
161,538
|
|
|
|
Termination for cause
|
|
|
21,538
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,538
|
|
|
|
Change of control
|
|
|
—
|
|
|
|
-0-
|
|
|
|
—
|
|
|
|
-0-
|
|
Clarence L. Dellio
(6)
|
|
Termination due to death or disability
|
|
|
18,462
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,462
|
|
|
|
Termination without cause
|
|
|
138,462
|
|
|
|
—
|
|
|
|
—
|
|
|
|
138,462
|
|
|
|
Termination for cause
|
|
|
18,462
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,462
|
|
|
|
Change of control
|
|
|
—
|
|
|
|
75,670
|
|
|
|
—
|
|
|
|
75,670
|
|
|
(1)
|
Includes accrued and unused vacation pay for Dr. Garovoy
($21,538) and Mr. Dellio ($18,462).
|
|
(
2
)
|
Per SEC rules, the value shown for each named executive
officer is the aggregate spread between the closing market price of our common stock on the NYSE MKT of $5.99 per share on December
31, 2013 and the exercise price of the accelerated options, if less than $5.99. No value is assigned to accelerated options with
exercise prices equal to or greater than $5.99 per share.
|
|
(3)
|
Represents the estimated cost of providing or paying
for continuing medical and dental coverage for 12 months following termination due to death or disability, or 18 months following
termination for good reason or without cause.
|
|
(
4
)
|
In addition to the severance payable under her employment
agreement, Ms. Bellin is also entitled to receive the cumulative amount we have previously paid into her severance fund in accordance
with Israeli law, which equaled $117,359 as of December 31, 2013.
|
|
(
5
)
|
We voluntarily terminated the employment of Dr. Garovoy
without cause effective December 31, 2013. In addition to the cash severance amounts payable to Dr. Garovoy in the event of a
termination without cause reflected in the table above, we agreed to accelerate the vesting of his outstanding unvested stock
options and to extend the expiration date of those options to December 31, 2014. Because the exercise price per share of the accelerated
options was greater than $5.99 per share (the closing market price of our common stock on the NYSE MKT on December 31, 2013),
no value was assigned to the acceleration of those options.
|
|
(
6
)
|
We voluntarily terminated the employment of Mr. Dellio
without cause effective December 31, 2013. In addition to the cash severance amounts payable to Mr. Dellio in the event of a termination
without cause reflected in the table above, we agreed to accelerate the vesting of his outstanding unvested stock options and
to extend the expiration date of those options to December 31, 2014. The value assigned to the acceleration of Mr. Dellio’s
options (calculated as described in footnote (1) to this table) was $75,670.
|
2013 Director Compensation
In 2013, our directors
were compensated in accordance with a comprehensive compensation policy for directors recommended by the Compensation Committee,
in consultation with its outside compensation consultant, and adopted by our Board in October 2012. Under this policy, annual compensation
received by non-executive directors for fiscal 2013 was as follows:
Annual retainer
|
|
|
$15,000
|
|
Annual committee chair retainer
|
|
|
$5,000
|
|
Meeting fees
|
|
|
$1,500 – $2,500 per meeting
|
(1)
|
Annual restricted stock grant
|
|
|
7,000 shares
|
(2)
|
Annual option grant
|
|
|
15,000 shares
|
(3)
|
|
(1)
|
Varies based on location and type of meeting.
|
|
(
2
)
|
These grants of restricted stock vested in equal installments
on January 3, 2013 and January 2, 2014.
|
|
(
3
)
|
These options have a 10-year term, vest in equal installments
over three years and have an exercise price equal to the closing price on the date of issuance (January 2, 2013).
|
The following table provides
director compensation information for the year ended December 31, 2013 for our directors who served as such at any time during
that year (other than Mr. Cola and Dr. Pearlman, whose compensation is fully reflected in the Summary Compensation Table above).
Name
|
|
Fees Earned or
Paid in Cash
($)
|
|
|
Stock
Awards(*)
($)
(
1
)
|
|
|
Option
Awards(*)
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Sol J. Barer
|
|
|
27,000
|
|
|
|
52,500
|
|
|
|
934,735
|
(2)
|
|
|
—
|
|
|
|
1,014,235
|
|
Eugene A. Bauer
|
|
|
—
|
|
|
|
—
|
|
|
|
188,750
|
(3)
|
|
|
90,000
|
(4)
|
|
|
278,750
|
|
Isaac Blech
|
|
|
26,000
|
|
|
|
52,500
|
|
|
|
255,485
|
(5)
|
|
|
—
|
|
|
|
333,985
|
|
Alastair Clemow
|
|
|
33,000
|
|
|
|
52,500
|
|
|
|
255,485
|
(6)
|
|
|
—
|
|
|
|
340,985
|
|
Wilbur H. Gantz
(
7
)
|
|
|
3,125
|
|
|
|
—
|
|
|
|
734,100
|
(8)
|
|
|
—
|
|
|
|
737,225
|
|
Joseph
J. Grano, Jr.
(9
)
|
|
|
20,375
|
|
|
|
—
|
|
|
|
774,900
|
(10)
|
|
|
—
|
|
|
|
795,275
|
|
Joel S. Kanter
|
|
|
33,000
|
|
|
|
52,500
|
|
|
|
255,485
|
(11)
|
|
|
—
|
|
|
|
340,985
|
|
Stephen D. McMurray
|
|
|
25,500
|
|
|
|
52,500
|
|
|
|
255,485
|
(12)
|
|
|
—
|
|
|
|
333,485
|
|
|
*
|
Amounts included in this column reflect the aggregate grant date fair value of awards granted in 2013
computed in accordance with FASB ASC Topic 718. For a discussion of the assumptions made in the valuation of the awards reported
in this column, please refer to Note 2(i) to the consolidated financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 2013.
|
|
(1)
|
Amounts reported in this column represent the grant date
fair value of 7,000 shares of restricted stock granted to the specified directors on January 2, 2013 under our Stock Incentive
Plan, 3,500 of which vested on January 3, 2013 and 3,500 of which vested on January 2, 2014. As of December 31, 2013, each of
Dr. Barer, Mr. Blech, Dr. Clemow, Mr. Kanter and Dr. McMurray held 3,500 shares of restricted stock, and Dr. Bauer held 28,571
shares of restricted stock.
|
|
(2)
|
Represents the grant date fair value of (i) options to
purchase 15,000 shares of common stock granted on January 2, 2013 under our Stock Incentive Plan at an exercise price of $7.25
per share ($66,735), and (ii) options to purchase 400,000 shares of common stock granted on September 13, 2013 under our Stock
Incentive Plan at an exercise price of $5.22 per share ($868,000). Such options have a 10-year term and vest in equal installments
on the first three anniversaries of the grant date. As of December 31, 2013, Dr. Barer or affiliated trusts held options to purchase
an aggregate of 1,315,000 shares of common stock.
|
|
(
3
)
|
Represents the grant date fair value of options to purchase
50,000 shares of common stock granted on November 11, 2013 under our Stock Incentive Plan at an exercise price of $6.70 per share.
Such options have a 10-year term and vest in equal installments on the first three anniversaries of the grant date. As of December 31,
2013, Dr. Bauer held options to purchase an aggregate of 78,571 shares of common stock.
|
|
(
4
)
|
Represents annual consulting fee pursuant to Dr. Bauer’s
consulting agreement. See “Consulting Agreement with Dr. Eugene Bauer” below.
|
|
(
5
)
|
Represents the grant date fair value of (i) options to
purchase 15,000 shares of common stock granted on January 2, 2013 under our Stock Incentive Plan at an exercise price of $7.25
per share ($66,735), and (ii) options to purchase 50,000 shares of common stock granted on November 11, 2013 under our Stock Incentive
Plan at an exercise price of $6.70 per share ($188,750). Such options have a 10-year term and vest in equal installments on the
first three anniversaries of the grant date. As of December 31, 2013, Mr. Blech held options to purchase an aggregate of 99,068
shares of common stock.
|
|
(
6
)
|
Represents the grant date fair value of (i) options to
purchase 15,000 shares of common stock granted on January 2, 2013 under our Stock Incentive Plan at an exercise price of $7.25
per share ($66,735), and (ii) options to purchase 50,000 shares of common stock granted on November 11, 2013 under our Stock Incentive
Plan at an exercise price of $6.70 per share ($188,750). Such options have a 10-year term and vest in equal installments on the
first three anniversaries of the grant date. As of December 31, 2013, Dr. Clemow held options to purchase an aggregate of 105,714
shares of common stock.
|
|
(
7
)
|
Mr. Gantz was elected as a director effective October
16, 2013.
|
|
(
8
)
|
Represents the grant date fair value of options to purchase
300,000 shares of common stock granted effective October 16, 2013 under our Stock Incentive Plan at an exercise price of $6.29
per share. These options were granted in connection with Mr. Gantz’s election as a director, have a 5-year term and vested
with respect to 100,000 shares on the grant date and will vest with respect to the remaining 200,000 shares in equal installments
on each of the first and second anniversaries of the grant date. As of December 31, 2013, Mr. Gantz held no other option awards.
|
|
(
9
)
|
Mr. Grano was elected as a director effective March 15,
2013.
|
|
(
10
)
|
Represents the grant date fair value of options to purchase
300,000 shares of common stock granted effective March 15, 2013 under our Stock Incentive Plan at an exercise price of $4.99 per
share. These options were granted in connection with Mr. Grano’s election as a director, have a 5-year term and vested with
respect to 100,000 shares on the grant date and will vest with respect to the remaining 200,000 shares in equal installments on
each of the first and second anniversaries of the grant date. As of December 31, 2013, Mr. Grano held no other option awards.
|
|
(
11
)
|
Represents the grant date fair value of (i) options to
purchase 15,000 shares of common stock granted on January 2, 2013 under our Stock Incentive Plan at an exercise price of $7.25
per share ($66,735), and (ii) options to purchase 50,000 shares of common stock granted on November 11, 2013 under our Stock Incentive
Plan at an exercise price of $6.70 per share ($188,750). Such options have a 10-year term and vest in equal installments on the
first three anniversaries of the grant date. As of December 31, 2013, Mr. Kanter held options to purchase an aggregate of 117,142
shares of common stock.
|
|
(
12
)
|
Represents the grant date fair value of (i) options to
purchase 15,000 shares of common stock granted on January 2, 2013 under our Stock Incentive Plan at an exercise price of $7.25
per share ($66,735), and (ii) options to purchase 50,000 shares of common stock granted on November 11, 2013 under our Stock Incentive
Plan at an exercise price of $6.70 per share ($188,750). Such options have a 10-year term and vest in equal installments on the
first three anniversaries of the grant date. As of December 31, 2013, Dr. McMurray or affiliated trusts held options to purchase
an aggregate of 121,428 shares of common stock.
|
Consulting Agreement with
Dr. Eugene Bauer
We entered into a consulting
agreement in October 2010 with Dr. Bauer under which he provides financial, strategic, business development, investor relations
and clinical and regulatory consulting services to us. The consulting agreement currently provides for an annual consulting fee
of $90,000. In addition, we issued to him 57,142 shares of restricted common stock in October 2010. The restrictions on such common
stock lapsed with respect to 25% of the shares in each of October 2012 and October 2013, and will lapse with respect to the remaining
50% in October 2014. We do not provide any bonus, profit sharing, insurance, health or similar benefits to Dr. Bauer, although
we have agreed to reimburse his reasonable business expenses.
Indemnification of Officers
and Directors
Our amended and restated
certificate of incorporation limits the personal liability of directors for breach of fiduciary duty to the maximum extent permitted
by the General Corporation Law of the State of Delaware, which we refer to as the DGCL. Our amended and restated certificate of
incorporation provides that no director will have personal liability to us or to our stockholders for monetary damages for breach
of fiduciary duty or other duty as a director. However, these provisions do not eliminate or limit the liability of any of our
directors for any of the following:
|
·
|
Any transaction from which the director derived an improper personal benefit;
|
|
·
|
Acts of omissions not in good faith or which involve intentional misconduct or a knowing violation
of law; or
|
|
·
|
Voting or assenting to unlawful payments of dividends or other distributions.
|
Any amendment to or repeal
of these provisions will not eliminate or reduce the effect of these provisions in respect to any act or failure to act, or any
cause of action, suit or claim that would accrue or arise prior to any amendment or repeal or adoption of an inconsistent provision.
If the DGCL is amended to provide for further limitations on the personal liability of directors of corporations, then the personal
liability of our directors will be further limited in accordance with the DGCL.
In addition, our amended
and restated certificate of incorporation provides that we must indemnify our directors and officers and we must advance expenses,
including attorneys’ fees, to our directors and officers in connection with legal proceedings, subject to very limited exceptions.
We maintain directors
and officers liability insurance coverage for the benefit of our directors and officers. Such insurance is generally designed to
respond to claims against company officers and directors alleging breach of duty. Subject to their terms, conditions, and exclusions,
these policies respond to civil and criminal matters, including securities-related matters. Our company’s program structure
consists of “standard” coverage, as well as “A-side difference in conditions” coverage. Standard coverage
includes coverage for non-indemnifiable claims against individuals (“A-side claims”), indemnifiable claims against
individuals (“B-side claims”), and securities claims (including securities claims against the corporate entity) (“C-side
claims”). The separate A-side difference in conditions coverage responds only for non-indemnifiable claims. Subject to its
terms, conditions, and exclusions, the A-side coverage responds when the underlying standard coverage fails to respond in certain
situations. We believe our coverage is consistent with industry standards.
Equity Compensation Plan
Information
The following table provides
information as of December 31, 2013 regarding the common stock that may be issued as stock grants or upon exercise of options,
warrants and rights under all of our equity compensation plans, including individual compensation arrangements.
Plan Category
|
|
Number of Shares to Be
Issued Upon Exercise of
Outstanding Options and Warrants
(
1
)
|
|
|
Weighted Average
Exercise Price of
Outstanding Options and Warrants
|
|
|
Number of Shares
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
3,451,239
|
(2)
|
|
$
|
4.58
|
|
|
|
1,094,145
|
|
Equity compensation plans not approved by security holders
|
|
|
4,494,478
|
(3)
|
|
|
5.75
|
|
|
|
—
|
|
Total
|
|
|
7,945,717
|
|
|
$
|
5.24
|
|
|
|
1,094,145
|
|
|
(1)
|
The number of shares is subject to adjustment in the
event of stock splits and other similar events.
|
|
(
2
)
|
Consists of (i) 2,546,049 options awarded under the Stock
Incentive Plan, and (ii) 905,190 warrants issued in 2006 in connection with a recapitalization of our company, all of which are
currently exercisable, have an exercise price of $2.49 per share and will expire on March 31, 2016.
|
|
(i)
|
An inducement award of 900,000 options granted outside of the Stock Incentive Plan to Dr. Barer in
June 2012 having an exercise price of $10.80 per share and expiring on June 29, 2017. 600,000 of these options were exercisable
as of December 31, 2013 and the remaining 300,000 options will vest on June 30, 2014;
|
|
(ii)
|
Inducement awards granted in September 2013 outside of the Stock Incentive Plan to Mr. Cola (1,500,000
options), Dr. Leaman (800,000 options) and Dr. Neil (900,000 options), each as further described in the Outstanding Equity Awards
at 2013 Fiscal Year-End table above; and
|
|
(iii)
|
Warrants to purchase an aggregate of 394,478 shares of common stock issued as compensation to consultants,
as further described in Note 7 to the consolidated financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2013.
|
PRINCIPAL STOCKHOLDERS
The following table sets
forth certain information regarding the beneficial ownership of our common stock as of February 25, 2014 by the following:
|
·
|
Each of our directors and named executive officers;
|
|
·
|
All of our directors and currently-serving executive officers as a group; and
|
|
·
|
Each person or group of affiliated persons, known to us to beneficially own
5% or more of our outstanding common stock.
|
Beneficial ownership is
determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. Unless otherwise
indicated, the stockholders listed in the table have sole voting and investment power with respect to the shares indicated.
For purposes of the table
below, we treat shares of common stock subject to options or warrants that are currently exercisable or exercisable within 60 days
after February 25, 2014 to be outstanding and to be beneficially owned by the person holding the options or warrants for the purpose
of computing the percentage ownership of the person, but we do not treat the shares as outstanding for the purpose of computing
the percentage ownership of any other stockholder.
Except
as otherwise set forth below, the address of each of the persons or entities listed in the table is c/o Medgenics, Inc., 435 Devon
Park Drive, Building 700, Wayne, Pennsylvania 19087.
|
|
Shares Beneficially Owned
|
|
Name
|
|
Number
|
|
|
Percentage**
|
|
|
|
|
|
|
|
|
Named Executive Officers and Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sol
J. Barer
(1)
|
|
|
724,000
|
|
|
|
3.7
|
%
|
Eugene
A. Bauer
(2)
|
|
|
224,445
|
|
|
|
1.2
|
%
|
Phyllis
K. Bellin
(3)
|
|
|
65,664
|
|
|
|
*
|
|
Isaac
Blech
(4)
|
|
|
2,930,896
|
|
|
|
14.7
|
%
|
Alastair
Clemow
(5)
|
|
|
66,214
|
|
|
|
*
|
|
Michael F. Cola
|
|
|
—
|
|
|
|
—
|
|
Clarence
L. Dellio
(6)
|
|
|
26,500
|
|
|
|
*
|
|
Wilbur H. Gantz
(
7
)
|
|
|
107,000
|
|
|
|
*
|
|
Marvin
R. Garovoy
(8)
|
|
|
20,000
|
|
|
|
*
|
|
Joseph
J. Grano, Jr.
(9)
|
|
|
207,000
|
|
|
|
1.1
|
%
|
Joel
S. Kanter
(10)
|
|
|
292,856
|
|
|
|
1.6
|
%
|
John H. Leaman
|
|
|
—
|
|
|
|
—
|
|
Stephen
D. McMurray
(11)
|
|
|
150,907
|
|
|
|
*
|
|
Garry A. Neil
|
|
|
—
|
|
|
|
—
|
|
Andrew
L. Pearlman
(12)
|
|
|
1,087,175
|
|
|
|
5.5
|
%
|
All directors and currently-serving executive officers as a group (13 persons)
(
13
)
|
|
|
5,856,157
|
|
|
|
26.4
|
%
|
|
|
Shares Beneficially Owned
|
|
Name
|
|
Number
|
|
|
Percentage**
|
|
|
|
|
|
|
|
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
ACNYC LLC
(
14
)
Andrew Cader
70 Meeting House Road
Mount Kisco, New York 10549
|
|
|
1,626,864
|
|
|
|
8.4
|
%
|
|
*
|
Represents less than 1%.
|
|
**
|
Percentages calculated in accordance with SEC rules and based upon 18,714,675 shares of common stock
outstanding as of February 25, 2014.
|
|
(i)
|
115,500 shares of common stock, 3,500 shares of restricted
stock which will vest on January 2, 2015 and 5,000 options having an exercise price of $7.25 per share expiring on January 2,
2023 held directly by Dr. Barer;
|
|
(ii)
|
300,000 options having an exercise price of $10.80 per share expiring on June 29, 2017 held by the
Sol J. Barer 2013 Grantor Retained Annuity Trust III, of which Dr. Barer is the sole trustee and annuitant; and
|
|
(iii)
|
300,000 options having an exercise price of $10.80 per share expiring on June 29, 2017 held by the
Meryl Barer 2013 Grantor Retained Annuity Trust III, of which Meryl Barer, Dr. Barer’s wife, is the sole trustee and annuitant.
|
|
(
2
)
|
Includes 28,571 shares of restricted stock which will
vest on October 18, 2014 and 28,571 options having an exercise price of $8.19 per share expiring on September 14, 2020.
|
|
(
3
)
|
Includes 55,000 options having an exercise price of $3.14
per share expiring on December 9, 2021.
|
|
(i)
|
17,500 shares of common stock, 3,500 shares of restricted stock which will vest on January 2, 2015,
19,068 options having an exercise price of $6.65 per share expiring on December 10, 2020, 10,000 options having an exercise price
of $2.66 per share expiring on January 3, 2022 and 5,000 options having an exercise price of $7.25 per share expiring on January
2, 2023 held directly by Mr. Blech;
|
|
(ii)
|
400,000 shares of common stock and warrants to purchase 400,000 shares having an exercise price of
$6.00 per share expiring on April 12, 2016 held by Liberty Charitable Remainder Trust FBO Isaac Blech UAD 1/9/87 (the “Liberty
Trust”);
|
|
(iii)
|
400,000 shares of common stock and warrants to purchase 400,000 shares having an exercise price of
$6.00 per share expiring on April 12, 2016 held by West Charitable Remainder Unitrust (the “West Trust”); and
|
|
(iv)
|
845,471 shares of common stock, warrants to purchase 230,357 shares having an exercise price of $4.54
per share expiring on September 22, 2015 and 200,000 warrants having an exercise price of $6.00 per share expiring on April 12,
2016 held by River Charitable Remainder Unitrust f/b/o Isaac Blech (the “River Trust”).
|
Mr. Blech is the sole trustee of
each of the Liberty Trust, the West Trust and the River Trust (collectively, the “Trusts”), and, as such, has sole
voting and dispositive power over the securities held by the Trusts. Mr. Blech disclaims beneficial ownership of the securities
held by the Trusts. The address of the Trusts is 75 Rockefeller Plaza, 29
th
Floor, New York, New York 10019.
|
(
5
)
|
Includes 3,500 shares of restricted stock which will
vest on January 2, 2015, 12,857 options having an exercise price of $8.19 per share expiring on September 13, 2020, 12,857 options
having an exercise price of $6.55 per share expiring on January 11, 2021, 10,000 options having an exercise price of $2.66 per
share expiring on January 3, 2022 and 5,000 options having an exercise price of $7.25 per share expiring on January 2, 2023.
|
|
(
6
)
|
Includes 24,000 options having an exercise price of $3.64
per share expiring on December 31, 2014.
|
|
(7)
|
Includes 3,500 shares of restricted stock which will
vest on January 2, 2015 and 100,000 options having an exercise price of $6.29 per share expiring on October 16, 2018.
|
|
(8)
|
Consists of 20,000 options having an exercise price of
$14.50 per share expiring on December 31, 2014.
|
|
(9)
|
Includes 3,500 shares of restricted stock which will
vest on January 2, 2015 and 200,000 options having an exercise price of $4.99 per share expiring on March 15, 2018.
|
|
(i)
|
116,304 shares of common stock, 3,500 shares of restricted stock which will vest on January 2, 2015,
28,571 options having an exercise price of $8.19 per share expiring on September 14, 2020, 8,571 options having an exercise price
of $6.55 per share expiring on January 11, 2021, 10,000 options having an exercise price of $2.66 per share expiring on January 3,
2022 and 5,000 options having an exercise price of $7.25 per share expiring on January 2, 2023 held directly by Mr. Kanter;
|
|
(ii)
|
Securities held by the Kanter Family Foundation (“KFF”), an Illinois not-for-profit corporation
of which Mr. Kanter is the President and is a Director and over which he exercises sole voting and investment control, but he disclaims
any and all beneficial ownership of securities owned by such entity. Securities beneficially owned by KFF consist of 106,889 shares
of common stock, warrants to purchase 10,714 shares having an exercise price of $4.54 per share expiring on September 22, 2015
and warrants to purchase 1,932 shares having an exercise price of $4.99 per share expiring on April 12, 2016; and
|
|
(iii)
|
1,375 shares of common stock held by Windy City, Inc., a closely-held corporation of which Mr. Kanter
is the President and is a Director and over which he exercises sole voting and investment control, but he disclaims any and all
beneficial ownership of securities owned by such entity.
|
|
(i)
|
90,335 shares of common stock and 3,500 shares of restricted stock which will vest on January 2, 2015
held directly by Dr. McMurray; and
|
|
(ii)
|
Warrants to purchase 644 shares having an exercise price of $4.99 per share expiring on April 12,
2016, 28,571 options having an exercise price of $8.19 per share expiring on September 14, 2020, 12,857 options having an exercise
price of $6.55 per share expiring on January 11, 2021, 10,000 options having an exercise price of $2.66 per share expiring
on January 3, 2022 and 5,000 options having an exercise price of $7.25 per share expiring on January 2, 2023 held by the Stephen
and Barbara McMurray Family Trust U/A/D April 4, 2013, of which Dr. McMurray and his wife are the trustees and beneficiaries.
|
|
(i)
|
37,062 shares of common stock, 3,500 shares of restricted stock which will vest on January 2, 2015,
45,800 options having an exercise price of $3.14 per share expiring on September 13, 2014, 92,006 options having an exercise price
of $2.49 per share expiring on September 13, 2014 and warrants to purchase 705,190 shares having an exercise price of $2.49 per
share expiring on March 31, 2016 held directly by Dr. Pearlman;
|
|
(ii)
|
94 shares of common stock held by Dr. Pearlman’s wife;
|
|
(iii)
|
Warrants to purchase 150,000 shares having an exercise price of $2.49 per share expiring on March
31, 2016 held by the Pearlman Family Trust U/A/D February 14, 2011, Andrew Pearlman and Debbie Pearlman, as Trustees, for the benefit
of Dr. Pearlman’s children;
|
|
(iv)
|
Warrants to purchase 27,050 shares having an exercise price of $2.49 per share expiring on March 31,
2016 held by the Pearlman Friends and Family Trust U/A/D February 14, 2011, Andrew Pearlman and Debbie Pearlman, as Trustees, for
the benefit of Dr. Pearlman’s family and friends; and
|
|
(v)
|
1,719 shares of common stock and warrants to purchase 35,922 shares having an exercise price of $0.0002
per share expiring on March 31, 2016 held by ADP Holdings LLC, an entity controlled by Dr. Pearlman.
|
|
(
13
)
|
Footnotes (1) through (5), (7), and (9) through (12)
are incorporated herein.
|
|
(
14
)
|
Information based on a Schedule 13G (Amendment No. 3)
filed with the SEC on February 14, 2014 by ACNYC LLC and Andrew Cader. As reported in the Schedule 13G, ACNYC LLC and Mr. Cader
share voting and dispositive power over 902,782 shares of common stock plus warrants to purchase up to 724,081.57 additional shares
of common stock.
|
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities Exchange
Act of 1934, as amended, or the Exchange Act, requires our officers and directors, and persons who own more than 10% of a registered
class of our equity securities, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Officers,
directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Forms 3, 4 and
5 they file. Based solely on a review of the copies of such forms in our possession and on written representations from reporting
persons, we believe that during 2013 all of our officers and directors filed the required reports on a timely basis under Section 16(a)
except as set forth below.
Forms 4 reporting the grant of restricted
stock and options on January 2, 2013 to each of Dr. Barer, Mr. Blech, Dr. Clemow, Mr. Kanter and Dr. McMurray were filed late on
January 10, 2013.
A Form 4 reporting the gift of options by
Dr. Barer to a grantor retained annuity trust of which Dr. Barer’s wife is the sole trustee and annuitant on August 9, 2012
was filed late on October 1, 2013.
Certain Relationships
and Related Transactions
Review and approval of
related party transactions has been delegated by the Board of Directors to the Audit Committee. The Audit Committee reviews and
approves all transactions that are required to be reported pursuant to Item 404(a) of Regulation S-K. Currently, we are not a party
to any transaction that would require disclosure pursuant to Item 404(a) of Regulation S-K.
PROPOSAL 2: APPROVAL OF THE CANCELLATION
OF ADMISSION OF OUR
COMMON STOCK TO TRADING ON THE AIM MARKET
Our common stock has been listed on the
London Stock Exchange’s Alternative Investment Market, or AIM, since December 2007. At the time, we could not satisfy many
of the listing requirements of the larger U.S. or foreign exchanges and automated dealer quotation systems. Unlike certain other
U.S. and foreign exchanges, the AIM Rules for Companies do not require companies to maintain a minimum number of publicly traded
shares outstanding at any given time, nor do they require companies to maintain a minimum market capitalization. We sought admission
to the public market during the early stages of our development by listing shares of our common stock on AIM.
In April 2011, we completed the initial
public offering of our common stock in the United States. At that time, our common stock also became listed on the NYSE MKT (previously
known as the NYSE Amex).
Our Board of Directors unanimously considers
the cancellation of admission of our common stock to trading on AIM to be in the best interests of our company and its stockholders
as a whole, and we seek your approval for this action. The rationale behind the proposed cancellation of admission of our common
stock to trading on AIM is described below.
Reasons for the Cancellation
of Admission to AIM
Our Board of Directors has identified the
following reasons for the proposed cancellation, which it considers to be in the long-term best interests of our company:
The high costs of maintaining our AIM
listing
. We estimate that the annual costs of maintaining a listing on AIM exceed $250,000, and these costs are in addition
to the similarly high costs of U.S. securities regulatory and other requirements for maintaining a listing in the United States.
Trading on AIM has been limited.
The
trading of our common stock on AIM has been very limited. A diminishing percentage of the total number of shares of our outstanding
common stock is listed on AIM, decreasing from 24% at the end of 2012 to 17% as of February 21, 2014. In addition, based upon information
available to us, the trading volume of shares of our common stock on AIM averaged less than 1,400 shares per day in 2013, compared
to approximately 65,700 shares per day on the NYSE MKT. We believe that these numbers indicate that an effective market has not
been created on AIM for the trading of our common stock.
The need to maintain appropriate liquidity
of our common stock
. With the listing of our common stock on the NYSE MKT, our Board of Directors is concerned that there may
not be enough liquidity for our shares to support trading on two exchanges. The Board of Directors believes it is in the best interests
of our company and its stockholders to consolidate the trading of our common stock onto one exchange.
The operational and legal difficulties
of being subject to two different regulatory regimes in two different countries, in order to maintain listings on both AIM and
the NYSE MKT
. We currently are required to comply with the regulatory, reporting and corporate governance requirements of two
exchanges, whose requirements are sometimes different and/or inconsistent. In addition, our auditors are required to review our
financial statements from the perspective of both the SEC and AIM, and we must make filings both with the SEC and on AIM relating
to financial statements and other matters. The Board of Directors believes that it is in the best interests of our company and
its stockholders to remove the requirement of compliance with two different regulatory regimes, and that compliance with the requirements
of the SEC and the NYSE MKT would continue to provide our stockholders with appropriate protections with respect to regulatory,
reporting and corporate governance matters.
The management time taken up with our
AIM listing
. We currently have a very small management team, and this small team is managing multiple programs both in the
United States and outside the United States for the development and regulatory approval of our Biopump Platform Technology. The
ongoing regulatory requirements associated with our securities listings in two countries are diverting management time and attention
which could more usefully be deployed on our operations.
Access to capital.
We believe that
accessing additional capital will likely be more efficient on a U.S. exchange, or through private offerings, than on AIM.
Effects of the Cancellation
of Admission to AIM
If the proposal for cancellation of our
admission to AIM is approved by our stockholders, the last day of trading of our common stock on AIM is expected to be April 15,
2014, with the cancellation of admission to trading on AIM becoming effective from 7:00 a.m. (London time) on April 16, 2014. Following
the cancellation, there will be no market facility in the United Kingdom for dealing in our common stock or depository interests
derived from our common stock. Stockholders and current holders of depository interests wishing to publicly trade their shares
will need to do so through the NYSE MKT.
Following the cancellation of our admission
to AIM, we would continue to be subject to the SEC’s reporting obligations, and we intend to maintain the listing of our
common stock on the NYSE MKT. We intend to continue to keep stockholders informed of our financial and operational performance
through our required filings with the SEC, as well as updates in press releases and on our website at
http://www.medgenics.com
.
Following the cancellation of our
admission to AIM, all shares of our common stock that are entered on the register maintained by Capita Registrars in Jersey
will be placed on our U.S. share register. In addition, the CREST depository interest facility will be terminated following
cancellation of our admission to trading on AIM; the shares held in such facility will be withdrawn, re-materialised and
placed on the Jersey register, following which they will be transferred to our U.S. share register; and the ISIN for the
securities previously held in the CREST system will be disabled and expire. Either Capita Registrars or Corporate Stock
Transfer, our U.S. transfer agent and registrar, will send out transmittal letters to all stockholders whose shares were
previously entered on the share register maintained by Capita Registrars and all holders of depository interests in CREST
providing them with further information regarding the transfer of their shares to our U.S. share register. Any questions
regarding the handing in of stock certificates or how to electronically deposit shares can be directed to our U.S. transfer
agent and registrar, Corporate Stock Transfer, at +1 (303) 282-4800. Corporate Stock Transfer, or a brokerage firm of your
choosing, will be able to further provide you with instructions regarding the process of trading your shares in the United
States.
Vote Required
The AIM Rules for Companies
provide that the affirmative vote at a general meeting of the company of at least 75% of the votes cast will be required for approval
of the cancellation. Accordingly, assuming a quorum is present, the approval of the cancellation of the admission of our common
stock to trading on AIM requires the affirmative vote of at least 75% of the votes cast, in person or by proxy, at the annual meeting.
Abstentions will have no effect on this proposal, but will be counted when determining whether there is a quorum present.
In
the absence of your voting instructions, your broker may not vote your shares in its discretion with respect to the approval of
the cancellation of the admission of our common stock to trading on AIM.
Recommendation
THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE
FOR
THIS PROPOSAL. PROPERLY AUTHORIZED PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THIS
PROPOSAL UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN.
PROPOSAL 3: APPROVAL OF AN AMENDMENT
TO OUR STOCK INCENTIVE PLAN
Our Stock Incentive Plan was initially adopted
in March 2006 and, with stockholder approval, subsequently amended in 2007, 2010, 2012 and 2013. Following the most recent amendment,
up to 4,178,571 shares of our common stock (subject to adjustment in the event of further stock splits and other similar events)
are currently authorized to be issued pursuant to options and other equity awards granted under the Stock Incentive Plan, 3,464,401
shares of which have been issued or have been allocated to be issued as of February 25, 2014 and 714,170 shares remain available
for future issuance as of February 25, 2014.
Our ability to grant equity awards is a
necessary and powerful tool for recruitment and retention of valuable employees. We have strived to use our equity plan resources
effectively and maintain an appropriate balance between stockholder interests and the ability to attract, retain and reward employees,
officers, directors, advisors and consultants who are vital to our long-term success. However, we believe there are insufficient
shares remaining under our Stock Incentive Plan to meet our current and projected needs, absent the expiration or cancellation
of currently outstanding equity awards. Accordingly, on February 11, 2014, our Board of Directors unanimously approved an amendment
to our Stock Incentive Plan, subject to stockholder approval, under which the maximum number of shares of common stock authorized
to be issued under the Stock Incentive Plan is increased by 2,000,000 shares, from 4,178,571 shares to 6,178,571 shares. We are
requesting stockholder approval of the amendment to the Stock Incentive Plan with an increased aggregate share limit so that we
can continue to utilize the Stock Incentive Plan as an effective tool to attract, retain and motivate high-quality employees, officers,
directors, advisors and consultants, especially in light of the increased growth of our business activities. Our Compensation Committee
sought advice from Radford, its outside consultant, regarding the appropriate size of our equity plan and determined that the increase
described in this proposal was within the industry standards and consistent with other companies comparable to us in terms of stage
of development. Our Board believes the ability to grant stock options and other equity awards provides us with a powerful and necessary
mechanism to attract and retain directors, officers and other valuable employees, especially in light of our limited cash resources.
The full text of the proposed
amendment to the Stock Incentive Plan is set forth in Appendix A to this proxy statement.
Summary of the Stock Incentive
Plan
We initially adopted the
Stock Incentive Plan in March 2006 and, with stockholder approval, subsequently amended it in 2007, 2010, 2012 and 2013. The following
is a summary of its principal terms, subject to stockholder approval of the proposed amendment:
Purpose
The purpose of the Stock
Incentive Plan is to provide us with the means to offer incentives to our employees, directors and consultants in order to attract,
retain and motivate them by allowing them to share in the benefits of future growth in our value through the acquisition of common
stock. These incentives may constitute incentive stock options (each an “ISO”), nonqualified stock options (each an
“NSO”), stock appreciation rights (each an “SAR”), restricted share awards, share unit awards or other
forms of share-based incentives. Awards under the Stock Incentive Plan are intended to be exempt from the securities qualification
requirements of U.S. securities laws.
Administration
The Stock Incentive Plan
is administered by the Compensation Committee of the Board (the “Committee”). Subject to the provisions of the Stock
Incentive Plan, the Committee has full authority and discretion to take any actions it deems necessary or advisable for the administration
of the Stock Incentive Plan.
Eligibility
Only employees of our
company selected for the receipt of awards under the Stock Incentive Plan are eligible for the grant of ISOs. Only employees, directors
and consultants to our company selected for the receipt of awards under the Stock Incentive Plan are eligible for the grant of
NSOs or the award or sale of common stock.
Common stock available
under the Stock Incentive Plan
The maximum aggregate
number of shares of our common stock reserved and available for issuance under the Stock Incentive Plan is currently 4,178,571
shares (which number includes shares previously issued under the Stock Incentive Plan or issuable pursuant to awards previously
granted under the Stock Incentive Plan). The proposed amendment to the Stock Incentive Plan, if approved by our stockholders, will
increase the number of shares of common stock reserved and available for issuance under the Stock Incentive Plan by 2,000,000 shares
to an aggregate of 6,178,571 shares (all of which may be issued as ISOs). For so long as our common stock is admitted to trading
on AIM or the Official List, we may not issue awards under the Stock Incentive Plan for a number of shares that (excluding all
options granted prior to December 4, 2007, the date of our admission trading on AIM) in aggregate exceeds 12% of the number of
shares outstanding on the relevant date of grant. To the extent that any shares covered by an award under the Stock Incentive Plan
are not delivered for any reason, including because the award is forfeited, cancelled or settled in cash, or shares are withheld
to satisfy tax withholding requirements, the shares will not be deemed to have been issued for purposes of determining the maximum
number of shares available for issuance under the Stock Incentive Plan. For SARs that are settled in shares, only the actual shares
delivered will be counted for purposes of these limitations. If any option granted under the Stock Incentive Plan is exercised
by tendering shares, only the number of shares issued net of the shares tendered will be counted for purposes of these limitations.
If the withholding tax liabilities arising from an award under the Stock Incentive Plan are satisfied by the tendering of shares
of our common stock to us or by the withholding of shares by us, such shares will not be deemed to have been issued for purposes
of determining the maximum number of shares available for issuance under the Stock Incentive Plan.
The following additional
limits apply to awards under the Stock Incentive Plan:
(a) the maximum number
of shares that may be covered by options or SARs that are intended to be “performance-based compensation” under Section
162(m) of the Internal Revenue Code of 1986 (the “Code”) that are granted to any one participant during any calendar
year is 300,000 shares;
(b) the maximum number
of shares that may be covered by stock awards that are intended to be “performance-based compensation” under Code Section
162(m) that are granted to any one participant during any calendar year is 300,000 shares; and
(c) the maximum amount
of cash-settled stock awards that are intended to be “performance-based compensation” under Code Section 162(m) payable
to any one participant with respect to any calendar year is $300,000.
No awards may be granted
under the Stock Incentive Plan after March 5, 2022, or after termination of the Stock Incentive Plan by action of our Board of
Directors, whichever occurs sooner.
Award agreements and restrictions
on transferability
Each award or sale of
shares of our common stock under the Stock Incentive Plan must be evidenced by an award agreement between us and the recipient,
though signature by the recipient may not always be required. Except as may be expressly stated in an award agreement, the rights
awarded under the Stock Incentive Plan are non-transferable other than by will or the intestacy laws applying to the estate of
a deceased award holder.
Stock options
Award agreements
The award agreement must
specify the number of shares of our common stock that are subject to the option and whether the option is intended to be an ISO
or an NSO.
Conditions
An award agreement may
contain conditions or restrictions as determined by the Committee at the time of grant.
Exercise price
The exercise price per
share of an option may not be less than the fair market value of a share on the grant date of the option. If the option holder
holds more than 10% of the combined voting power of all classes of our shares at the date of grant (a “materially interested
participant”), the exercise price per share of an ISO must be at least 110% of fair market value. Subject to the foregoing,
the exercise price under any option is determined by the Committee.
Term
The term of an option
may in no event exceed 10 years from the date of grant. The term of an ISO granted to a materially interested participant may not
exceed five years from the date of grant. Subject to the foregoing, the Committee in its sole discretion determines the term of
options.
Rights of exercise on
termination of service
The option holder will
have the right to exercise any options held by him or her following the termination of his or her service during the option term,
to the extent that the option was exercisable and vested at the date of termination of service:
(a) if the termination
of service was due to any reason other than death or disability – for the shorter of 90 days from the date of termination
of service and the unexpired term of the option;
(b) if the termination
of service was due to death or disability of the option holder – for the shorter of one year from the date of termination
of service and the unexpired term of the option;
unless the Committee, in its sole
discretion, extends such periods.
To the extent that the
right to exercise the option has not vested at the date of termination of service, the option will terminate when the option holder’s
service terminates.
For the purposes of the
Stock Incentive Plan, termination of service means the termination of a person’s status as an employee or director of our
company or (where the person is not an employee or director of our company) the termination of the person’s business relationship
with us.
Rights in respect of common
stock
An option holder or a
transferee of an option will have no rights as a stockholder with respect to any common stock covered by the option until such
person becomes the holder of record of such shares of common stock.
Exercise
Options are to be exercised
under the procedures established or approved by the Committee from time to time. The exercise price payable on exercise of an option
is to be paid in full in cash or by such other means as the Committee may permit, including by personal, certified or cashiers’
check, in shares of our common stock (valued at fair market value as of the day of exercise) either via attestation or actual delivery,
by net exercise, by other property deemed acceptable by the Committee or by irrevocably authorizing a third party to sell shares
of our common stock and remit a sufficient portion of the proceeds to our company to satisfy the exercise price (sometimes referred
to as a “cashless exercise”) or in any combination of the foregoing methods deemed acceptable by the Committee. In
a net exercise, the person exercising the option does not pay any cash and the net number of shares received will be equal in value
to the number of shares as to which the option is being exercised, multiplied by a fraction, the numerator of which is the fair
market value less the exercise price, and the denominator of which is fair market value. The value attributable to common stock
transferred to us in such fashion is determined by reference to the fair market value of a share of common stock at the date of
exercise of the option.
Early exercise
The Committee may permit,
at its sole discretion, the exercise of any option prior to the time when the option would otherwise have become exercisable under
the relative award agreement.
Further, an award agreement
may provide for the option holder to exercise the option, in whole or in part, prior to the date when the option becomes fully
vested. This may either be stipulated at the time of grant or as subsequently amended. In the event of any early exercise of an
option, we will have the right to repurchase the common stock that had been so acquired by the option holder on terms specified
by the Committee. Further, in such circumstances, the Committee will determine the time and/or event that shall cause such repurchase
right to terminate and the common stock to vest fully in the option holder.
Stock appreciation rights
The Stock Incentive Plan
also allows the Committee to grant SARs to eligible participants in the Stock Incentive Plan. SARs may be granted either independently
or in tandem with or by reference to options granted prior to or simultaneously with the grant of SARs to the same participant.
Where granted in tandem or by reference to a related option, the participant may elect to either exercise the option or the SARs
(but not both). Upon exercise of an SAR, the participant is entitled to receive an amount equal to the excess (if any) of the fair
market value of a share of common stock on the date of exercise over the amount of the exercise price for such SAR stipulated in
the award agreement. The exercise price of an SAR may not be less than the fair market value of a share on the grant date of the
SAR.
Any payment which may
become due from us following exercise of an SAR may be paid (at the election of the Committee) to the participant either in cash
and/or through the issuance of shares of common stock. Where any shares are to be issued in satisfaction of the payment due to
the participant, the number of shares of common stock will be determined by dividing the amount of the payment entitlement by the
fair market value of a share of common stock on the exercise date.
The provisions as to the
ability to impose conditions to exercise on grant, the duration of the SARs, the exercise procedures (including upon termination
of service) and the procedure for early exercise that apply to options granted under the Stock Incentive Plan generally apply in
the same fashion to SARs.
Restricted stock awards
The Committee may grant
to any person eligible under the Stock Incentive Plan an award of a number of shares of our common stock, subject to terms, conditions
and restrictions as determined by the Committee. Until lapse or release of all forfeiture restrictions applicable to a restricted
stock award, either the stock certificates representing the same may be retained by or on behalf of us or, if the certificate for
the same bears a restrictive legend, can be held by the participant.
The recipient of a restricted
stock award will have all the rights associated with ownership of a share of our common stock, including the right to receive dividends
and to vote, except that any common stock or other securities distributed as a dividend or otherwise as a right associated with
ownership of common stock which are subject to a restriction which has not yet lapsed, will be subject to the same restrictions
as such restricted common stock.
Common stock which is
subject to a restricted stock award may not be assigned, transferred or otherwise dealt with prior to the lapse of the restrictions
applicable to such shares.
Upon expiration or termination
of the forfeiture restrictions and the release or satisfaction of any other conditions applying to the restricted stock award,
the restricted status of the shares of common stock will cease and the shares of common stock will be delivered to the relevant
restricted stock award holder free of the restrictions imposed under the restricted stock awards. All rights of a restricted stock
award holder will cease and terminate in the event of a termination of service occurring prior to the expiration of the forfeiture
period applicable to the award and satisfaction of all other applicable conditions.
The forfeiture period
and/or any conditions set out in the restricted stock award may be waived by the Committee in its absolute discretion.
Change of control
Unless provided otherwise
in an award agreement, as of a change of control of Medgenics, all outstanding options and SARs under the Stock Incentive Plan
will immediately vest and become exercisable and all outstanding restricted shares under the Stock Incentive Plan will immediately
vest. The change of control provisions contained in the Stock Incentive Plan generally do not apply if the relevant participant
is associated with the party/ies gaining control of us, to the extent prescribed by the Stock Incentive Plan.
Other share-based awards
Other share-based awards,
consisting of share purchase rights, restricted stock unit awards, awards of common stock or awards valued in whole or in part
by reference to or otherwise based on our common stock, may be granted either alone or in addition to or in conjunction with other
awards under the Stock Incentive Plan. The terms of any such award will be determined in the sole discretion of the Committee.
Unless otherwise determined
in the relative award agreement, such other share-based awards will be subject to the following:
(a) no sale, assignment,
transfer, pledging or other dealing with the relevant common stock may be undertaken until the applicable restriction, performance
condition or other deferral period has lapsed; and
(b) the recipient of
the award will be entitled to receive interest, dividends or dividend equivalents with respect to the underlying shares of common
stock or other securities covered by the award.
If the vesting of the
award is conditional upon achievement of certain performance measurements and a change of control occurs in relation to us then:
(i) if the actual
level of performance, determined by reference to the performance measurement specified in the award agreement, is less than 50%
at the time of the change of control, then the award will become vested and exercisable in respect of a proportion of the award
where the numerator is equal to the percentage of attainment and the denominator is 50%; and
(ii) if the
actual level of performance, determined by reference to the performance measurement specified in the award agreement, is at least
50% at the time of the change of control, then such award will become fully vested and exercisable.
Adjustments to reflect
capital changes
The number and kind of
shares subject to outstanding awards, the exercise price for such shares and the number and kind of shares available for awards
to be granted under the Stock Incentive Plan will automatically be adjusted to reflect any share dividend, sub-division, consolidation,
exchange of shares, merger or other change in capitalization with a similar substantive effect upon the Stock Incentive Plan or
the awards granted under the Stock Incentive Plan. The Committee will have the power and sole discretion to determine the amount
of the adjustment to be made in each case. If we enter into a merger, outstanding awards will be subject to the terms of the merger
agreement or applicable reorganization arrangements and may give rise to the substitution of new awards for awards received under
the Stock Incentive Plan, acceleration of vesting or expiration or settlement in cash or cash equivalents.
Amendment and termination
of the Stock Incentive Plan
Amendment
The Committee may amend
the Stock Incentive Plan at any time and for any reason, except that no amendment may, without the consent of the participant,
materially adversely affect the rights of a participant under an award. Moreover, in general, no amendment of the Stock Incentive
Plan may (a) materially increase the benefits accruing to participants, (b) materially increase the aggregate number of securities
that may be issued, or (c) materially modify the requirements for participation, unless such amendment is approved by a majority
of votes cast by the stockholders of our company in accordance with applicable stock exchange rules. Notwithstanding the foregoing,
the Committee may amend the Stock Incentive Plan as deemed necessary or advisable for the purpose of conforming the Plan or an
award to any applicable law. Further, if any award under the Stock Incentive Plan would be considered “deferred compensation”
under Code Section 409A, the Committee may unilaterally amend the Stock Incentive Plan or the applicable award agreement, without
the consent of the participant, to avoid the application of, or to maintain compliance with, Code Section 409A.
Termination
The Committee may terminate
the Stock Incentive Plan at any time and for any reason, except that no such termination may, without the consent of the participant,
materially adversely affect the rights of a participant under an award.
No repricing
In general, no adjustment
or reduction of the exercise price of any outstanding option or SAR in the event of a decline in our common stock price is permitted
without approval by the stockholders of our company.
Clawback policy
All awards, amounts and
benefits received under the Stock Incentive Plan will be subject to potential cancellation, recoupment, rescission, payback or
other action in accordance with the terms of any applicable company clawback policy or any applicable law.
$1 million limit
Code Section 162(m)
A U.S. income tax deduction
for our company generally will be unavailable for annual compensation in excess of $1 million paid to a “covered employee”
(our Chief Executive Officer and three other most highly compensated executive officers other than the Chief Financial Officer).
However, amounts that constitute “performance-based compensation” under Code Section 162(m) are not counted toward
the $1 million limit. It is expected that, generally, options and SARs granted under the Stock Incentive Plan will satisfy the
requirements for “performance-based compensation.” The Committee may designate whether any stock awards granted to
any participant are intended to be “performance-based compensation.” Any such awards designated as intended to be “performance-based
compensation” will be conditioned on the achievement of one or more performance measures, to the extent required by Code
Section 162(m).
Performance measures
The performance measures
that may be used for awards designated as intended to be “performance-based compensation” will be based on any one
or more of the following performance measures as selected by the Committee: earnings (
e.g.
, earnings before interest and
taxes, earnings before interest, taxes, depreciation and amortization or earnings per share); financial return ratios (
e.g.
,
return on investment, return on invested capital, return on equity or return on assets); expense ratio; efficiency ratio; increase
in revenue; operating or net cash flows; cash flow return on investment; total stockholder return; market share; net operating
income, operating income or net income; debt load reduction; expense management; economic value added; stock price; book value;
overhead; assets; asset quality level; charge offs; regulatory compliance; improvement of financial rating; achievement of balance
sheet or income statement objectives; improvements in capital structure; profitability; profit margins; budget comparisons or strategic
business objectives, consisting of one or more objectives based on meeting specific cost targets, business expansion goals or goals
relating to acquisitions or divestitures. Performance measures may be based on the performance of our company as a whole or of
any one or more affiliates, business units of the company or an affiliate or a specific, or group of, product lines, and may be
measured relative to a peer group, an index or a business plan. The terms of any award may provide that partial achievement of
performance criteria may result in partial payment or vesting of the award. Additionally, in establishing the performance measures,
the Committee may provide for the inclusion or exclusion of certain items.
U.S. Federal Income Tax Considerations
The following is a summary
of the current U.S. federal income tax consequences that may arise in conjunction with participation in the Stock Incentive Plan.
The following summary does not constitute tax advice and does not address possible state, local or foreign tax consequences.
Nonqualified stock options
The grant of a nonqualified
stock option generally will not result in taxable income to the participant. Except as described below, the participant generally
will realize ordinary income at the time of exercise in an amount equal to the excess of the fair market value of the shares acquired
over the exercise price for those shares and we generally will be entitled to a corresponding deduction. Gains or losses realized
by the participant upon disposition of such shares generally will be treated as capital gains and losses, with the basis in such
shares equal to the fair market value of the shares at the time of exercise.
Incentive stock options
The grant of an ISO generally
will not result in taxable income to the participant. The exercise of an ISO generally will not result in taxable income to the
participant, provided that the participant was, without a break in service, an employee of our company or a subsidiary during the
period beginning on the date of the grant of the option and ending on the date three months prior to the date of exercise (one
year prior to the date of exercise if the participant is disabled, as that term is defined in the Code).
The excess of the fair
market value of the shares at the time of exercise of an ISO over the exercise price generally will be an adjustment that is included
in the calculation of the participant’s alternative minimum taxable income for the tax year in which the ISO is exercised.
For purposes of determining the participant’s alternative minimum tax liability for the year of disposition of the shares
acquired pursuant to the ISO exercise, the participant generally will have a basis in those shares equal to the fair market value
of the shares at the time of exercise.
If the participant does
not sell or otherwise dispose of the shares within two years from the date of the grant of the ISO or within one year after the
transfer of such stock to the participant, then, upon disposition of such shares, any amount realized in excess of the exercise
price generally will be taxed to the participant as capital gain. A capital loss generally will be recognized to the extent that
the amount realized is less than the exercise price.
If the foregoing holding
period requirements are not met, the participant generally will realize ordinary income at the time of the disposition of the shares,
in an amount equal to the lesser of (a) the excess of the fair market value of the shares on the date of exercise over the exercise
price, or (b) the excess, if any, of the amount realized upon disposition of the shares over the exercise price, and we generally
will be entitled to a corresponding deduction. If the amount realized exceeds the value of the shares on the date of exercise,
any additional amount generally will be capital gain. If the amount realized is less than the exercise price, the participant generally
will recognize no income, and a capital loss will be recognized equal to the excess of the exercise price over the amount realized
upon the disposition of the shares.
Stock appreciation rights
The grant of an SAR generally
will not result in taxable income to the participant. Upon exercise of an SAR, the fair market value of shares received generally
will be taxable to the participant as ordinary income and we will be entitled to a corresponding deduction. Gains and losses realized
by the participant upon disposition of any such shares generally will be treated as capital gains and losses, with the basis in
such shares equal to the fair market value of the shares at the time of exercise.
Stock awards
A participant who has
been granted a stock award, such as a restricted stock or other share-based award, generally will not realize taxable income at
the time of grant, provided that the stock subject to the award is not delivered at the time of grant, or if the stock is delivered,
it is subject to restrictions that constitute a “substantial risk of forfeiture” for U.S. income tax purposes. Upon
the later of delivery or vesting of shares subject to an award, the holder generally will realize ordinary income in an amount
equal to the then fair market value of those shares and we will be entitled to a corresponding deduction. Gains or losses realized
by the participant upon disposition of such shares generally will be treated as capital gains and losses, with the basis in such
shares equal to the fair market value of the shares at the time of delivery or vesting. Dividends paid to the holder during the
restriction period, if so provided, generally will also be compensation income to the participant and we will be entitled to a
corresponding deduction.
Withholding of taxes
We are entitled to withhold
the amount of any withholding or other tax required by law to be withheld or paid by us in relation to the amount payable and/or
shares issuable to an award holder and we may defer payment of cash or issuance of shares upon exercise or vesting of an award
unless indemnified to our satisfaction against any liability for any taxes. Subject to approval by the Committee, any withholding
obligations may be satisfied (a) through cash payment by the participant; (b) through the surrender of shares of our common stock
that the participant already owns or (c) through the surrender of shares of our common stock to which the participant is otherwise
entitled under the Stock Incentive Plan. The shares withheld from awards may only be used to satisfy our minimum statutory withholding
obligation.
Change of control
Any acceleration of the
vesting or payment of awards under the Stock Incentive Plan in the event of a change of control of our company may cause part or
all of the consideration involved to be treated as an “excess parachute payment” under the Code, which may subject
the participant to a 20% excise tax and preclude deduction by us.
Tax Advice
The preceding discussion
is based on U.S. federal tax laws and regulations presently in effect, which are subject to change, and the discussion does not
purport to be a complete description of the U.S. federal income tax aspects of the Stock Incentive Plan. A participant may also
be subject to state, local and foreign taxes in connection with the grant of awards under the Stock Incentive Plan. We strongly
encourage participants to consult with their individual tax advisors to determine the applicability of the tax rules to the awards
granted to them in their personal circumstances.
Vote Required
Assuming a quorum is present,
the approval of the proposed amendment to the Stock Incentive Plan requires the approval of a majority of the votes cast at the
annual meeting. Abstentions will have no effect on this proposal, but will be counted when determining whether there is a quorum
present.
In the absence of your voting instructions, your broker may not vote your shares in its discretion with respect to
the approval of the amendment.
Recommendation
THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE
FOR
THIS PROPOSAL. PROPERLY AUTHORIZED PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THIS
PROPOSAL UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN.
PROPOSAL 4: RATIFICATION OF APPOINTMENT
OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee of
our Board of Directors has selected and appointed Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, as our
independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31, 2014.
Kost Forer Gabbay & Kasierer audited our consolidated financial statements as of and for the years ended December 31, 2013
and 2012. Although ratification by stockholders is not required by law or by our bylaws, the Audit Committee believes that submission
of its selection to stockholders is a matter of good corporate governance. Even if the appointment is ratified, the Audit Committee,
in its discretion, may select a different independent registered public accounting firm at any time if the Audit Committee believes
that such a change would be in the best interests of our company and our stockholders. If our stockholders do not ratify the appointment
of Kost Forer Gabbay & Kasierer, the Audit Committee will take that fact into consideration, together with such other factors
it deems relevant, in determining its next selection of independent auditors.
Representatives of Kost
Forer Gabbay & Kasierer are not expected to be present at the annual meeting; however, they are expected to be available by
telephone to respond to appropriate questions.
Fees
The following table sets
forth the aggregate fees billed to us by our principal accountant, Kost Forer Gabbay & Kasierer, for professional services
rendered on behalf of our company and its subsidiary for fiscal years 2013 and 2012, as well as all out-of-pocket costs incurred
in connection with these services (amounts in thousands).
|
|
2013
|
|
|
2012
|
|
Audit Fees
|
|
$
|
192,000
|
|
|
$
|
164,000
|
|
Audit-Related Fees
|
|
|
39,000
|
|
|
|
47,000
|
|
Tax Fees
|
|
|
37,000
|
|
|
|
37,000
|
|
All Other Fees
|
|
|
14,000
|
|
|
|
6,000
|
|
Total
|
|
$
|
282,000
|
|
|
$
|
254,000
|
|
Audit Fees
. Audit
Fees relate to professional services rendered in connection with the audit of our annual financial statements, the review of the
semi-annual financial statements included in our regulatory filings on AIM, and audit services provided in connection with other
statutory and regulatory filings.
Audit-Related Fees.
Audit-Related Fees include amounts for assurance and related services.
Tax Fees
. Tax Fees
include professional services related to tax compliance, tax advice and tax planning, including, but not limited to, the preparation
of federal and state tax returns.
All Other Fees.
All
Other Fees include professional services related to non-audit related services, primarily relating to Section 404 of the Sarbanes-Oxley
Act implementation guidance.
Audit Committee Pre-Approval Policies
and Procedures
Our Audit Committee Charter
requires that the Audit Committee pre-approve all audit and non-audit services provided to us by the independent auditors. All
of the fiscal year 2012 and 2013 audit and non-audit services were pre-approved by the Audit Committee of our Board of Directors.
Vote Required
Assuming a quorum is present,
the ratification of the appointment of Kost Forer Gabbay & Kasierer as our independent registered public accounting firm requires
the approval of a majority of the votes cast at the annual meeting. Abstentions will have no effect on this proposal, but will
be counted when determining whether there is a quorum present. In the absence of your voting instructions, your bank, broker or
other nominee may vote your shares in its discretion with respect to this proposal.
Recommendation
THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE
FOR
THIS PROPOSAL. PROPERLY AUTHORIZED PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THIS
PROPOSAL UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN.
AUDIT COMMITTEE REPORT
The information contained
in this report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall
such information be incorporated by reference into any previous or future filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 except to the extent that we incorporate it by specific reference.
The undersigned members
of the Audit Committee of the Board of Directors of Medgenics, Inc. submit this report in connection with the committee’s
review of the financial reports for the fiscal year ended December 31, 2013 as follows:
|
1.
|
The Audit Committee has reviewed and discussed with management the audited financial statements for
Medgenics, Inc. for the fiscal year ended December 31, 2013.
|
|
2.
|
The Audit Committee has discussed with representatives of Kost Forer Gabbay & Kasierer, a member
of Ernst & Young Global, our independent registered public accounting firm, the matters required to be discussed by the statement
on Auditing Standards No. 61, as amended (AICPA,
Professional Standards
, Vol. 1. AU section 380), as adopted by the Public
Company Accounting Oversight Board in Rule 3200T.
|
|
3.
|
The Audit Committee has received the written disclosures and the letter from the independent accountant
required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s
communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent
accountant’s independence.
|
Based on the review and
discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements
for the fiscal year ended December 31, 2013 be included in Medgenics, Inc.’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2013 for filing with the SEC.
Submitted
by the Audit Committee:
Joel S. Kanter,
Chairman
Alastair Clemow
Wilbur H.
Gantz
OTHER MATTERS BEFORE THE ANNUAL MEETING
The Board of Directors
does not know of any other matters that may come before the annual meeting. However, if any other matters are properly presented
to the annual meeting, it is the intention of the persons named in the accompanying proxy to vote, or otherwise act, in accordance
with their judgment on such matters.
THE BOARD OF DIRECTORS
ENCOURAGES STOCKHOLDERS TO ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING
AND YOUR COOPERATION WILL BE APPRECIATED. STOCKHOLDERS OF RECORD WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH
THEY HAVE SENT IN THEIR PROXIES.
By Order of the Board of
Directors,
Michael F. Cola
Chief Executive Officer and President
Wayne, Pennsylvania
March 11, 2014
APPENDIX A
SECOND
Amendment
of
the
Medgenics,
inc.
Stock
incentive plan
(as
amended and restated effective march 5, 2012)
Whereas
,
Medgenics, Inc. (the “Company”) maintains the Medgenics, Inc. Stock Incentive Plan (As Amended and Restated Effective
March 5, 2012) (the “Incentive Plan”);
Whereas
,
pursuant to and subject to Section 9.14 of the Incentive Plan, the Board of Directors (the “Board”) of the Company
may amend the Incentive Plan at any time;
whereas,
pursuant to the First Amendment of the Medgenics, Inc. Stock Incentive Plan (As Amended and Restated Effective March 5,
2012), effective as of April 30, 2013, following requisite approval of the Company’s stockholders, the maximum number of
shares of the Company’s common stock authorized to be issued under the Incentive Plan was increased by 1,700,000, from 2,478,571
to 4,178,571;
Whereas
,
the Board has determined that it is in the best interests of the Company to amend the Incentive Plan to increase the maximum number
of shares of the Company’s common stock authorized to be issued under the Incentive Plan by 2,000,000, from 4,178,571 to
6,178,571; and
Whereas
,
pursuant to Section 9.14 of the Incentive Plan, an amendment that materially increases the aggregate number of shares that
may be issued under the Incentive Plan generally must be approved by a majority of votes cast by the stockholders of the Company
in accordance with applicable stock exchange rules.
Now,
therefore
, effective as of the date of approval by a majority of votes cast by the stockholders of the Company in accordance
with applicable stock exchange rules, the Incentive Plan is hereby amended in the following particulars:
|
1.
|
The first sentence of Section 4.01 is deleted in its entirety and replaced with the following:
|
“
4.01
Number
of Shares
.
The maximum number of shares authorized to be issued under the Incentive Plan shall be 6,178,571 shares
of the Company’s Common Stock (all of which may be granted as Incentive Stock Options);
provided
,
however
,
that for so long as the Company’s Common Stock is admitted for trading on the Official List of the United Kingdom Listing
Authority or on AIM, the market operated by London Stock Exchange plc, on the date of grant of any Award hereunder (the ‘Relevant
Grant Date’), the aggregate number of shares in respect of which Awards granted on or after December 4, 2007 and which remain
outstanding and unexercised shall not exceed 12% of the number of shares of the Company’s Common Stock issued and outstanding
on the Relevant Grant Date.
”
|
2.
|
In all other respects the Incentive Plan shall remain unchanged and in full force and effect.
|
[Form of Proxy for U.S. Stockholders]
MEDGENICS, INC.
435 Devon Park Drive, Building 700
Wayne, Pennsylvania 19087
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF MEDGENICS, INC.
The undersigned hereby appoints Michael
F. Cola and Sol J. Barer, and each of them individually, the attorney, agent and proxy of the undersigned, with full power of substitution,
to vote all the shares of Medgenics, Inc. (the “Company”) which the undersigned is entitled to vote at the Annual Meeting
of Stockholders to be held on Tuesday, April 8, 2014 at 10:00 a.m. local time at the offices of Duane Morris LLP, 1540 Broadway,
New York, New York 10036, and at any adjournments or postponements thereof, hereby revoking any proxy or proxies heretofore given
and ratifying and confirming all that said proxies may do or cause to be done by virtue thereof with respect to the following matters.
The Board of Directors recommends a vote
FOR
all the nominees listed and
FOR
Proposals 2, 3 and 4.
1. Election of Directors:
|
For
|
Withhold
|
|
|
For
|
Withhold
|
|
|
|
|
|
|
|
|
|
01-
Sol J. Barer
|
¨
|
¨
|
|
02- Eugene A. Bauer
|
¨
|
¨
|
|
|
|
|
|
|
|
|
|
03- Isaac Blech
|
¨
|
¨
|
|
04- Alastair Clemow
|
¨
|
¨
|
|
|
|
|
|
|
|
|
|
05- Michael F. Cola
|
¨
|
¨
|
|
06- Wilbur H. (Bill) Gantz
|
¨
|
¨
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|
|
|
|
|
|
|
|
|
07- Joseph J. Grano, Jr.
|
¨
|
¨
|
|
08- Joel S. Kanter
|
¨
|
¨
|
|
|
|
|
|
|
|
|
|
09- Stephen D. McMurray
|
¨
|
¨
|
|
|
|
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|
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2.
|
To approve the cancellation of the admission of the Company’s shares of common stock to trading on the London Stock Exchange’s
Alternative Investment Market (“AIM”)
|
For
¨
|
Against
¨
|
Abstain
¨
|
|
3.
|
To approve the amendment to the Medgenics, Inc. Stock Incentive Plan
|
For
¨
|
Against
¨
|
Abstain
¨
|
|
4.
|
To ratify the appointment of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, as the Company’s
independent registered public accounting firm for the fiscal year ending December 31, 2014
|
For
¨
|
Against
¨
|
Abstain
¨
|
|
5.
|
In their discretion, as to such other proper business as may come before the meeting and any adjournments or postponements
thereof.
|
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO SPECIFICATION
IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
The undersigned acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement dated March 11, 2014, and the 2013 Annual Report to Stockholders.
Dated: ________________________, 2014
Signature
Signature if held jointly
Please date this Proxy and sign it exactly as your
name or names appear hereon. When shares are held by more than one person, all should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title as such. If shares are held by a corporation or partnership, please
sign in full corporate or partnership name by an authorized officer.
Please mark, sign, date and return this Proxy promptly using
the enclosed envelope.
If your address is incorrectly shown, please print changes.
[Form of Proxy for U.K. Stockholders]
Notes
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1.
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation,
please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign
in partnership name by authorized person.
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2.
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To be valid, this form must be either posted to or delivered by hand to Capita Registrars, PXS, 34 Beckenham Road, Beckenham,
Kent BR3 4TU to arrive not less than forty-eight hours before the time of the Annual Meeting of Stockholders.
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3.
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The ‘Abstain’ option is provided to enable you to abstain on the resolution. However, it should be noted that
an ‘Abstention’ is not a vote in law and will not be counted in the calculation of the proportion of the votes ‘For’
or ‘Against’ the resolution.
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4.
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Pursuant to Delaware law and the Company’s Amended and Restated Bylaws, only stockholders of record as of the close
of business on February 25, 2014 are entitled to notice of, and to vote at, the Annual Meeting of Stockholders or any adjournment
thereof. A stockholder must have his/her name entered on the register of stockholders of the Company by 6.00 pm (UK time) on February
25, 2014 in order to be deemed a stockholder of record. Changes to entries on the register of stockholders after this time shall
be disregarded in determining the rights of any person to attend or vote at the meeting.
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5.
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Please contact Capita Registrars helpline on 0871 664 0300 or, if telephoning from outside the UK, on +44 20 8639 3399 between
8.30 a.m. and 5.30 p.m. Calls to Capita Registrars’ 0871 664 0321 number are charged at 10p per minute (including VAT) plus
any of your service provider’s network extras. Calls to Capita Registrars’ +44 20 8639 3399 number from outside the
UK are charged at applicable international rates. Different charges may apply to calls made from mobile telephones and calls may
be recorded and monitored randomly for security and training purposes. Capita Registrars cannot provide advice on the merits of
the proposed resolutions nor give any financial, legal or tax advice.
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Please date, sign and mail your proxy
card in the envelope provided as soon as possible.
MEDGENICS,
INC.
PROXY FOR THE ANNUAL
MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 8, 2014
THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s)
of Medgenics, Inc., a Delaware corporation (the “Company”), hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and Proxy Statement dated March 11, 2014 and the 2013 Annual Report to Stockholders, and hereby appoints Michael
F. Cola, the Company’s President and Chief Executive Officer, and Sol J. Barer, the Company’s Chairman of the Board,
or either of them acting singly in the absence of the other, with full power of substitution, as attorneys-in-fact and proxies
for, and in the name and place of, the undersigned, and hereby authorizes each of them to represent and to vote all of the shares
which the undersigned is entitled to vote at the Annual Meeting of Stockholders of the Company to be held on April 8, 2014, at
10:00 a.m., local time, and at any adjournments thereof, upon the matters as set forth in the Notice of Annual Meeting of Stockholders
and Proxy Statement, receipt of which is hereby acknowledged.
THIS PROXY, WHEN PROPERLY
EXECUTED AND RETURNED IN A TIMELY MANNER, WILL BE VOTED AT THE ANNUAL MEETING AND AT ANY ADJOURNMENTS THEREOF IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO SPECIFICATION IS MADE, THE PROXY WILL BE VOTED FOR ELECTION OF ALL OF THE NOMINEES
LISTED IN PROPOSAL 1, FOR APPROVAL OF PROPOSALS 2, 3 AND 4 AS DESCRIBED IN THE PROXY STATEMENT AND IN ACCORDANCE WITH THE JUDGMENT
OF THE PERSONS NAMED AS PROXIES HEREIN ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” ALL THE NOMINEES LISTED IN PROPOSAL 1 AND “FOR” PROPOSALS 2,
3 AND 4 AS DESCRIBED IN THE PROXY STATEMENT.
PLEASE MARK, SIGN, DATE
AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(continued, and to be
signed and dated, on reverse side)
ATTENDANCE CARD
MEDGENICS, INC. - ANNUAL
MEETING OF STOCKHOLDERS
You may submit your proxy electronically
using the Share Portal service at www.capitashareportal.com.
If not already registered for the Share Portal, you will need your
Investor Code below.
We strongly advise that you read the notes
on the reverse before completing the proxy card.
To be held at the offices of Duane Morris
LLP located at 1540 Broadway, New York, New York, United States
If you wish to attend this meeting in your capacity as a holder
of Common Stock, please sign this card and on arrival hand it to the Company’s registrars. This will facilitate entry to
the meeting.
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