DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

 

Filed by the Registrant  ☒                             Filed by a party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

Precigen, 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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Title of each class of securities to which transaction applies:

 

     

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  Fee paid previously with preliminary materials.
  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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Amount Previously Paid:

 

     

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LOGO

PRECIGEN, INC.

20374 Seneca Meadows Parkway

Germantown, Maryland 20876

NOTICE OF 2020 ANNUAL MEETING OF SHAREHOLDERS

To Be Held On June 11, 2020

To Our Shareholders:

You are cordially invited to attend the 2020 Annual Meeting of Shareholders (the “Annual Meeting”) of Precigen, Inc. (“Precigen,” “we,” “us,” “our,” or the “Company”) to be held at 9:00 a.m., Eastern Time, Thursday, June 11, 2020, at the Esperante Conference Center, 222 Lakeview Avenue, West Palm Beach, Florida 33401, for the following purposes:

 

  1.

to elect the ten nominees named in the accompanying Proxy Statement to the Board of Directors, each to serve a one-year term expiring at the earlier of the next Annual Meeting or until his or her successor is duly elected and qualified;

 

  2.

to ratify the appointment by the Audit Committee of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020;

 

  3.

to approve a non-binding advisory resolution approving the compensation of the named executive officers;

 

  4.

to approve an amendment to the Precigen, Inc. Amended and Restated 2013 Omnibus Incentive Plan (the “2013 Plan”) to increase the number of shares of common stock which may be subject to awards thereunder by two million; and

 

  5.

to transact any other business that may properly be brought before the Annual Meeting or any adjournments or postponements thereof.

As of the date of this notice, we have not received notice of any matters, other than those set forth above, that may properly be presented at the Annual Meeting. If any other matters are properly presented for consideration at the meeting, the persons named as proxies on the proxy card, or their duly constituted substitutes, will be deemed authorized to receive notice on behalf of and to vote the shares represented by proxy or otherwise act on those matters in accordance with their business judgment.

The Board of Directors has fixed the close of business on April 24, 2020 as the record date for determining those shareholders entitled to notice of and to vote at the Annual Meeting. As permitted by rules adopted by the Securities and Exchange Commission, we are furnishing our Proxy Statement, Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”), and proxy card over the internet to our shareholders. This means that our shareholders will receive only a notice containing instructions on how to access the proxy materials over the internet. If you would like to receive a paper copy of the proxy materials, the notice contains instructions on how you can request copies of these documents.


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Your vote is very important to us. Please read the Proxy Statement and then, regardless of whether you are able to attend the Annual Meeting, vote your shares as promptly as possible. Please see page 3 for information about voting by internet, telephone, mail, or in person at the Annual Meeting. Please note that in the absence of specific instructions as to how to vote, brokers may not vote your shares on the election of directors, the non-binding proposal to approve the compensation of the named executive officers, or the amendment to the 2013 Plan to increase the number of shares of common stock which may be subject to awards thereunder by two million. You may revoke your proxy and change your vote by entering new instructions on either the telephone or internet voting system before 11:59 p.m. Eastern Daylight Time on June 10, 2020, by submitting a proxy with a later date before the polls close at the Annual Meeting, by delivering a written revocation to our Corporate Secretary such that it is received before the polls close at the Annual Meeting, or by voting your shares in person at the Annual Meeting. Please note that voting in advance in any of the ways described will not prevent you from attending the Annual Meeting should you choose to do so. Even if you cannot, please vote your shares as promptly as possible.

We currently intend to hold our Annual Meeting in person on June 11, 2020. However, we are actively monitoring restrictions that federal, state, and local governments have imposed and may impose in connection with the COVID-19 pandemic. In the event we determine it is not possible or advisable to hold our Annual Meeting in person on June 11, 2020, we will announce the decision to hold the meeting solely by means of remote communication online or to change the date of the Annual Meeting.

By Order of the Board of Directors,

DONALD P. LEHR

Corporate Secretary

Germantown, Maryland

April 29, 2020

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 11, 2020

Our Proxy Statement, including the accompanying notice and form of proxy, and our 2019 Annual Report are available online at https://materials.proxyvote.com/default.aspx?ticker=74017N .


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TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

     1  

CORPORATE GOVERNANCE

     7  

General

     7  

Corporate Governance Guidelines

     7  

Board Standards of Independence

     7  

Board Meetings and Attendance at Annual Meeting of Shareholders

     8  

Board Leadership Structure

     8  

The Board’s Role in Risk Oversight

     9  

Board Committees

     10  

Code of Business Conduct and Ethics

     13  

Political Contributions

     13  

Communications with the Board

     14  

BENEFICIAL OWNERSHIP OF COMMON STOCK

     15  

Delinquent Section 16(a) Reports

     16  

PROPOSAL 1 ELECTION OF DIRECTORS

     17  

Background

     17  

Vote Required and Board Recommendation

     17  

Nominees for Election as Directors

     18  

DIRECTOR COMPENSATION

     25  

Non-Employee Director Compensation

     25  

DIRECTOR COMPENSATION TABLE FOR 2019

     25  

Equity Ownership for Board of Directors

     26  

PROPOSAL 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     27  

Background

     27  

Required Vote and Board Recommendation

     27  

Principal Accountant Fees

     28  

Pre-Approval Policy

     28  

Additional Information Regarding Change of Independent Registered Accounting Firms

     29  

AUDIT COMMITTEE REPORT

     30  

PROPOSAL 3 NON-BINDING PROPOSAL TO APPROVE THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS

     31  

General

     31  

Vote Required and Board Recommendation

     32  

PROPOSAL 4 APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED PRECIGEN, INC. 2013 OMNIBUS INCENTIVE PLAN

     33  

Overview

     33  

Share Increase

     33  

Text of the Amendment

     34  

Summary of the Material Terms of the 2013 Plan

     34  

Types of awards

     36  

Aggregate Grants under the 2013 Plan

     40  

Vote Required and Board Recommendation

     41  

IDENTIFICATION OF EXECUTIVE OFFICERS

     42  

COMPENSATION DISCUSSION AND ANALYSIS

     43  

Executive Summary

     43  

Key Compensation Corporate Governance Practices

     44  

Our Compensation Philosophy

     44  

Principles of Our Compensation Framework

     45  

Developments in Executive Compensation for 2019

     45  

Elements of Our Compensation Program

     46  

Employment Agreement with Dr. Sabzevari

     50  


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The Compensation Review Process

     51  

Establishing Total Direct Remuneration

     52  

Consideration of Say-on-Pay Vote Results

     52  

Other Executive Compensation Practices

     53  

COMPENSATION COMMITTEE REPORT

     54  

Compensation Risk Assessment

     54  

SUMMARY COMPENSATION TABLE

     55  

ALL OTHER COMPENSATION TABLE FOR 2019

     56  

GRANTS OF PLAN-BASED AWARDS FOR 2019

     57  

OUTSTANDING EQUITY AWARDS AT 2019 FISCAL YEAR END

     58  

OPTION EXERCISES AND STOCK AWARDS VESTED FOR 2019

     59  

POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL

     60  

EQUITY COMPENSATION PLAN INFORMATION

     65  

CEO PAY RATIO

     66  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     68  

Policies and Procedures for Related Person Transactions

     74  

CERTAIN MATTERS RELATING TO PROXY MATERIALS AND ANNUAL REPORTS

     76  

Electronic Access of Proxy Materials and Annual Reports

     76  

“Householding” of Proxy Materials and Annual Reports for Record Owners

     76  

Separate Copies for Beneficial Owners

     76  

OTHER MATTERS

     77  


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LOGO

PRECIGEN, INC.

20374 Seneca Meadows Parkway

Germantown, Maryland 20876

 

 

PROXY STATEMENT

2020 Annual Meeting of Shareholders

 

 

This Proxy Statement and the accompanying proxy card are being furnished to you by the Board of Directors (the “Board”) of Precigen, Inc. to solicit your proxy to vote your shares at our Annual Meeting, or at any adjournments or postponements thereof. The Board has designated the Esperante Conference Center, 222 Lakeview Avenue, West Palm Beach, Florida 33401 as the place of the Annual Meeting. The Annual Meeting will be called to order at 9:00 a.m., Eastern Time, on Thursday, June 11, 2020.

We currently intend to hold the Annual Meeting in person. However, we are actively monitoring government restrictions that federal, state, and local governments have imposed and may impose in connection with the COVID-19 pandemic. In the event we determine it is not possible or advisable to hold our Annual Meeting in person, we will announce the decision to hold the meeting solely by means of remote communication online.

On or about April 29, 2020, we are mailing a notice to shareholders containing instructions on how to access the Proxy Statement, including the accompanying notice and form of proxy, and the 2019 Annual Report, and on how to vote. These materials are being made available to you on the internet, however, we will promptly deliver printed versions of these materials to you by mail upon your request.

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

 

1.

Who is asking for my vote and why am I receiving this document?

The Board asks that you vote on the matters listed in the Notice of 2020 Annual Meeting of Shareholders, which are more fully described in this Proxy Statement. We are providing this Proxy Statement and related proxy card to our shareholders in connection with the solicitation by the Board of proxies to be voted at the Annual Meeting. A proxy, if duly executed and not revoked, will be voted and, if it contains any specific instructions, will be voted in accordance with those instructions.

 

2.

Who is entitled to vote?

Only holders of record of outstanding shares of our common stock at the close of business on April 24, 2020, are entitled to notice of and to vote at the Annual Meeting. At the close of business on April 24, 2020, there were 170,656,834 outstanding shares of common stock. Each share of common stock is entitled to one vote on each matter properly brought before the Annual Meeting.

 

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3.

What is a proxy?

A proxy is your legal designation of another person to vote the stock you own. If you designate someone as your proxy or proxy holder in a written document, that document is called a proxy or a proxy card. Dr. Helen Sabzevari, Mr. Rick Sterling, and Mr. Donald Lehr have been designated as proxies or proxy holders for the Annual Meeting. A proxy properly executed and received by our Corporate Secretary prior to the Annual Meeting and not revoked will be voted in accordance with the terms thereof.

 

4.

What is a voting instruction?

A voting instruction is the instruction form you receive from your bank, broker, or its nominee if you hold your shares of common stock in street name. The instruction form instructs you how to direct your bank, broker, or its nominee, as record holder, to vote your shares of common stock.

 

5.

What am I voting on?

Shareholders are being asked to vote on each of the following items of business:

 

   

the election of the ten nominees named in this Proxy Statement to the Board, each to serve a one-year term expiring at the earlier of the next Annual Meeting or until his or her successor is duly elected and qualified;

 

   

the ratification of the appointment by the Audit Committee of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020;

 

   

the approval of a non-binding advisory resolution approving the compensation of the named executive officers; and

 

   

the approval of an amendment to the 2013 Plan to increase the number of shares of common stock which may be subject to awards thereunder by two million.

In addition, any other matters that properly come before the Annual Meeting or any adjournment or postponement thereof will be considered. Management is presently aware of no other business to come before the Annual Meeting.

 

6.

How many votes must be present to hold the Annual Meeting?

A majority of the outstanding shares of common stock entitled to be cast as of the record date must be present in person or represented by proxy at the Annual Meeting. This is referred to as a quorum. Abstentions, withheld votes, and shares of record held by a broker or its nominee (“broker shares”) that are voted on any matter are included in determining the existence of a quorum. Broker shares that are not voted on any matter (“broker non-votes”) will not be included in determining whether a quorum is present.

 

7.

What are the voting requirements to elect directors and approve the other proposals described in the Proxy Statement?

The vote required to elect directors and approve each of the matters scheduled for a vote at the annual meeting is set forth below:

 

Proposal

  

Vote Required

1.  Election of directors

   Majority of votes cast

2.  Ratification of appointment of Deloitte & Touche LLP

   Majority of votes cast

3.  Advisory vote on executive compensation

   Majority of votes cast

4.  Amendment to 2013 Plan to increase the number of shares which may be subject to awards thereunder by two million

   Majority of votes cast

 

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Votes may be cast by proxy or in person. A “majority” of votes cast means that more votes were cast “for” the proposal than “against.” Abstentions and broker non-votes (described under “ How are abstentions and broker non-votes counted? ” on page 5) are not considered as votes cast and will have no effect on the vote outcome for Proposals 1, 2, 3, and 4. As it relates to the election of our directors, our Corporate Governance Guidelines provide that any nominee for director in an uncontested election who receives a greater number of shareholder votes cast “against” his or her election than votes “for” his or her election must, promptly following certification of the shareholder vote, tender his or her resignation to the Board for consideration. For more details regarding the director resignation policy, please see “Election of Directors” on page 17.

 

8.

What are the voting recommendations of the Board?

For the reasons set forth in more detail later in this Proxy Statement, the Board unanimously recommends that you vote :

 

   

FOR the proposed nominees to the Board named in this Proxy Statement;

 

   

FOR the ratification of the appointment of Deloitte & Touche LLP;

 

   

FOR the approval of the non-binding advisory resolution to approve the compensation of our named executive officers; and

 

   

FOR  the approval of an amendment to the 2013 Plan increasing the number of shares of common stock which may be subject to awards thereunder by two million.

 

9.

How do I vote?

Registered shareholders (shareholders who hold common stock in certificated form or book entry form on the records of our transfer agent as opposed to through a bank, broker or other nominee) may vote in person at the Annual Meeting or by proxy. There are three ways for registered shareholders to vote by proxy:

 

   

By Internet : Connect to the internet at www.proxyvote.com and follow the instructions included on the proxy card or voting instruction. Your proxy will be voted according to your instructions. If you vote by internet, you do not need to mail in a proxy card or voting instruction.

 

   

By Telephone : Call 1-800-690-6903 and follow the instructions included on the proxy card or voting instruction. If you vote by telephone, you do not need to mail in a proxy card or voting instruction.

 

   

By Mail : If you received your proxy materials by mail, complete, properly sign, date, and mail the enclosed proxy card or voting instruction.

Registered shareholders are urged to deliver proxies or voting instructions by using the internet, calling the toll-free telephone number, or by completing and mailing the proxy card or voting instruction. The internet and telephone voting procedures are designed to authenticate shareholders’ identities, to allow shareholders to give their proxies or voting instructions, and to confirm that such instructions have been recorded properly. Instructions for voting over the internet or by telephone are included on the enclosed proxy card or voting instruction. If you received your proxy materials via mail, registered shareholders may send their proxies or voting instructions by completing, signing, and dating the enclosed proxy card or voting instruction and returning it as promptly as possible in the enclosed prepaid envelope.

Shareholders who hold common stock through banks, brokers, or other nominees (“street name shareholders”) who wish to vote at the Annual Meeting should receive voting instructions from the institution that holds their shares. Please contact the institution that holds your shares if you have not received voting instructions. Street name shareholders may also be eligible to vote their shares electronically by following the voting instructions provided by the bank, broker, or other nominee that holds the shares, using either the toll-free telephone number or the internet address provided on the voting instruction; or by completing, dating, and signing the voting instruction and returning it promptly in the enclosed prepaid envelope.

 

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The deadline for voting via the internet or telephone is 11:59 p.m., Eastern Time, on June 10, 2020.

 

10.

Can I attend the Annual Meeting?

Yes. The Annual Meeting is open to all holders of our common stock as of the record date, April 24, 2020. You may attend the Annual Meeting and vote in person. However, even if you plan to attend the Annual Meeting, we encourage you to vote your shares by proxy.

All shareholders must present a form of personal photo identification in order to be admitted to the meeting. In addition, if you are a street name shareholder and your shares are held in the name of a broker, bank, or other nominee, please bring with you a proxy, letter, or account statement from your broker, bank, or nominee confirming your ownership of Company common stock so that you can be admitted to the Annual Meeting. Cameras, recording devices, and other electronic devices are not permitted at the Annual Meeting.

 

11.

How will my shares be voted if I sign, date, and submit my proxy or voting instruction, but do not provide complete voting instructions with respect to each proposal?

Shareholders should specify their vote for each matter on the proxy or voting instruction. The proxies solicited by this Proxy Statement vest in the proxy holders voting rights with respect to the election of directors (unless the shareholder marks the proxy to withhold that authority) and on all other matters voted upon at the Annual Meeting.

Unless otherwise directed in the enclosed proxy card, the persons named as proxies therein will vote all properly executed, returned, and not-revoked proxy cards or voting instruction cards: (i) “ FOR ” the election of the ten director nominees listed thereon; (ii) “ FOR ” the proposal to ratify the appointment by the Audit Committee of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020; (iii) “ FOR ” the non-binding proposal to approve the compensation of our named executive officers; and (iv) “ FOR ” the approval of an amendment to the 2013 Plan increasing the number of shares which may be subject to awards thereunder by two million. As to any other business that may properly come before the Annual Meeting, the persons named in the enclosed proxy card or voting instruction will vote the shares of common stock represented by the proxy in the manner as the Board may recommend, or otherwise at the proxy holders’ discretion. The Board does not presently know of any other such business.

 

12.

How will my shares be voted if I do not return my proxy or my voting instruction?

It will depend on how your ownership of shares of common stock is registered. If you own your shares as a record holder, which means that your shares of common stock are registered in your name, if you do not vote in advance of the Annual Meeting by submitting a proxy, your unvoted shares will not be represented at the Annual Meeting and will not count toward the quorum requirement, as explained under “ How many votes must be present to hold the Annual Meeting? ” on page 2, unless you attend the Annual Meeting to vote them in person.

If you are a street name shareholder and your shares are registered in the name of your bank, broker or its nominee, your shares may be voted even if you do not provide your bank, broker, or other nominee with voting instructions. Your bank, broker, or other nominee may vote your shares in its discretion on “routine” matters. However, your bank, broker, or other nominee may not vote your shares on proposals that are not considered routine. When a proposal is not a routine matter and your bank, broker, or other nominee has not received your voting instructions with respect to such proposal, your bank, broker, or other nominee cannot vote your shares on that proposal. When a bank, broker, or other nominee does not cast a vote for a routine or a non-routine matter, it is called a “broker non-vote.”

Therefore, please note that in the absence of your specific instructions as to how to vote, your bank, broker, or other nominee may not vote your shares with respect to the election of directors, the non-binding proposal to

 

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approve the compensation of the named executive officers, and the proposal to approve the amendment to the 2013 Plan. These matters are not considered routine matters. However, the ratification of the appointment by the Audit Committee of Deloitte & Touche LLP is a routine matter for which brokerage firms may vote on behalf of their clients if no voting instructions are provided. Therefore, if you are a street name shareholder whose shares of common stock are held with a bank, broker, or other nominee and you do not return your voting instructions, your bank, broker, or other nominee may vote your shares “ for ” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm. Please return your proxy so your vote can be counted.

 

13.

How are abstentions and broker non-votes counted?

Only votes cast “for” or “against” are included in determining the votes cast with respect to any matter presented for consideration at the Annual Meeting. As described above, when brokers do not have discretion to vote or do not exercise such discretion, the inability or failure to vote is referred to as a “broker non-vote.” Proxies marked as abstaining, and any proxies returned by brokers as “non-votes” on behalf of shares held in street name because beneficial owners’ discretion has been withheld as to one or more matters to be acted upon at the Annual Meeting, will be treated as present for purposes of determining whether a quorum is present at the Annual Meeting. Broker non-votes and abstentions will not be included in the vote total for the proposal to elect the nominees for director and will not affect the outcome of the vote for the proposal. In addition, under Virginia corporate law, abstentions are not counted as votes cast on a proposal. Therefore, abstentions and broker non-votes will not count either in favor of or against (i) the election of directors, (ii) the ratification of the appointment of Deloitte & Touche LLP, or (iii) the non-binding proposal to approve the compensation of the named executive officers, or (iv) the approval of an amendment to the 2013 Plan increasing the number of shares which may be subject to awards thereunder by two million.

 

14.

What if I change my mind after I vote?

Whether you vote by internet, telephone, or by mail, you may later revoke your proxy and change your vote by:

 

   

entering new instructions on either the telephone or Internet voting system before 11:59 p.m. Eastern Daylight Time on Wednesday, June 10, 2020;

 

   

delivering a properly signed proxy with a later date than the previously submitted proxy card before the polls close at the Annual Meeting;

 

   

delivering a written revocation to our Corporate Secretary at 20374 Seneca Meadows Parkway, Germantown, Maryland 20876 such that it is received prior to the polls closing at the Annual Meeting; or

 

   

voting in person at the Annual Meeting.

Attendance at the Annual Meeting alone without voting will not revoke a previously granted proxy. If you are a street name shareholder whose stock is held with a bank, broker, or other nominee, you must follow the instructions found on the voting instruction card provided by the bank, broker, or other nominee, or contact your bank, broker, or other nominee to change or revoke your previously given proxy.

 

15.

Who pays the cost of proxy solicitation?

We will pay all expenses of soliciting proxies, including clerical work, printing, and postage. Our officers and other employees may personally solicit proxies or solicit proxies by internet, telephone, mail, or facsimile, but we will not provide any compensation for such solicitations. We will also reimburse banks, brokers, and other persons holding shares in their names or in the names of nominees for expenses incurred sending material to beneficial owners and obtaining proxies from beneficial owners.

 

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16.

Could other matters be decided in the Annual Meeting?

The Board does not know of any other business that may be brought before the Annual Meeting. However, if any other matters should properly come before the Annual Meeting or at any adjournment or postponement thereof, it is the intention of the persons named in the accompanying proxy to vote on such matters as they, in their discretion, may determine.

 

17.

How do I make a shareholder proposal for the 2021 Annual Meeting of Shareholders?

Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we must receive any proposals from shareholders intended for inclusion in the proxy statement for our 2021 Annual Meeting of Shareholders no later than 120 days before the anniversary date of the distribution of this Proxy Statement (i.e., December 28, 2020), provided, however, that if our 2021 Annual Meeting of Shareholders is held before May 12, 2021 or after July 11, 2021, we will announce a new required receipt date. Shareholders submitting such proposals must be the beneficial owners of shares of the common stock amounting to at least $2,000 in market value, to have held such shares for at least one year prior to the date of submission of the proposal, and to continue to hold the required amount of shares through the date of the 2021 Annual Meeting. Holders of common stock who wish to have proposals submitted for inclusion in the proxy statement for our 2021 Annual Meeting of Shareholders should consult the applicable rules and regulations of the SEC with respect to such proposals, including certain information required to be in the proposal, the permissible number and length of proposals, and other matters governed by such rules and regulations, and should also consult our Amended and Restated Bylaws (the “Bylaws”).

The Bylaws also set forth the procedures a shareholder must follow to nominate directors or to bring other business before shareholder meetings. For a shareholder to nominate a candidate for director or bring other matters from the floor at the 2021 Annual Meeting of Shareholders, we must receive notice of the nomination no earlier than the close of business on February 11, 2021 and no later than the close of business on March 13, 2021. For the nomination of a candidate for director, the notice must describe various matters regarding the nominee, including name, address, occupation, and shares held. For bringing other matters from the floor at the 2021 Annual Meeting of Shareholders, the notice must include a description of the proposed business, the reasons therefor, and other matters specified in our Bylaws. In each case, the notice must be timely given in writing to our Corporate Secretary, whose address is 20374 Seneca Meadows Parkway, Germantown, Maryland 20876.

 

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CORPORATE GOVERNANCE

General

Our business and affairs are managed under the direction of the Board in accordance with the Virginia Stock Corporation Act, our Amended and Restated Articles of Incorporation, and our Bylaws. Our Bylaws provide that the number of directors shall be fixed from time to time by the Board, but shall not be more than ten. The Board is currently comprised of the following individuals: Randal Kirk, Cesar Alvarez, Steven Frank, Vinita Gupta, Fred Hassan, Jeffrey Kindler, Dean Mitchell, Robert Shapiro, and James Turley. Each of our current directors and Dr. Helen Sabzevari, our Chief Executive Officer (“CEO”), are being nominated for election to the Board at the Annual Meeting. For more information regarding the nominees for election to the Board, see “Nominees for Election as Directors” beginning on page 18.

Corporate Governance Guidelines

The Board has adopted corporate governance guidelines (the “Corporate Governance Guidelines”) that set forth the practices of the Board with respect to the qualification, selection and election of directors, director orientation and continuing education, director responsibilities, Board composition and performance, director access to management and independent advisors, director compensation guidelines, management evaluation and succession, policies regarding the Lead Independent Director, meetings of the non-management directors, the policy on communicating with the non-management directors, and various other issues. A copy of our Corporate Governance Guidelines is available on our website at http://investors.precigen.com under the caption “Governance.”

Board Standards of Independence

The Board has set forth our independence standards in our Corporate Governance Guidelines. These standards provide that a majority of the Board must be independent under the independence standards established by the Corporate Governance Guidelines and The Nasdaq Stock Market (“Nasdaq”) as in effect from time to time. For a Board member or candidate for election to the Board to qualify as independent, the Board must determine that the person and his or her immediate family members do not have a material relationship with us (either directly or as a partner, shareholder, or officer of an organization that has a relationship with us) or any of our affiliates. Under the categorical standards adopted by the Board, a member of the Board is not independent if:

 

   

The director is, or has been within the last three years, our employee, or whose family member is, or has been within the last three years, an executive officer of the Company;

 

   

The director has received, or has a family member serving as an executive officer who has received, during any 12-month period within the three years preceding the determination of independence, more than $120,000 in direct compensation from us, other than director and committee fees, compensation made to a family member who is an employee (other than an executive officer) of the Company, and benefits under a tax-qualified retirement plan or non-discretionary compensation;

 

   

(i) The director is a current partner of a firm that is our internal or external auditor; (ii) the director has a family member who is a current partner of such a firm; or (iii) the director, or a family member, was within the last three years a partner or employee of such a firm and personally worked on our audit within that time;

 

   

The director or a family member is, or has been within the last three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that company’s compensation committee; or

 

   

The director is or a family member is, a partner in (excluding limited partners), or a controlling shareholder or executive officer of, any organization to which we made, or from which we received, payments for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $200,000, or 5%, of such other company’s consolidated gross revenues.

 

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With the exception of Mr. Kirk, our Executive Chairman of the Board, and Dr. Sabzevari, our CEO, the Board has affirmatively determined that each Board nominee is independent in accordance with the above standards and applicable Nasdaq guidelines.

In determining that Mr. Alvarez is independent, the Board considered that Mr. Alvarez is the Senior Chairman of Greenberg Traurig, LLP (“Greenberg Traurig”). As discussed under “Certain Relationships and Related Party Transactions,” Greenberg Traurig provides legal services to us from time to time for which it has received, and may continue to receive, customary fees. During 2019, we paid Greenberg Traurig $222,557 for legal services, constituting less than 5% of Greenberg Traurig’s annual gross revenues. As the Senior Chairman, Mr. Alvarez does not participate in the provision of such services and does not materially benefit from the engagement, and his compensation from Greenberg Traurig is not based on such services provided to us. The Board has determined that this relationship is not material and that it does not impair Mr. Alvarez’s independence.

In determining that Mr. Turley is independent, the Board considered that Mr. Turley is the former Chairman and Chief Executive Officer of Ernst & Young LLP. From time to time, Ernst &Young provides valuation and technical accounting services to us, for which it receives customary fees. As Mr. Turley retired from Ernst & Young in June 2013, Mr. Turley does not participate in such services and does not materially benefit from the engagement. The Board has determined that this relationship is not material and that it does not impair Mr. Turley’s independence.

Board Meetings and Attendance at Annual Meeting of Shareholders

There were 18 meetings of the Board held either in person or by teleconference in 2019. Each director attended at least 75% of the combined meetings of the Board and the committees on which he or she served during the year, except for Mr. Frank, who attended 72.2% of such meetings, including all regularly scheduled meetings. Our independent directors met in executive session without management at least quarterly.

Our Corporate Governance Guidelines provide that all directors are strongly encouraged to attend all annual and special meetings of our shareholders. All members of the Board at the time of the 2019 Annual Meeting attended the Annual Meeting.

Board Leadership Structure

As specified in the Corporate Governance Guidelines, the Board does not have a policy on whether the role of the CEO and Executive Chairman should be separate or, if it is to be separate, whether the Chairman should be selected from the non-employee directors or be an employee. Currently, the roles are separate. Mr. Kirk currently serves as Executive Chairman and Dr. Sabzevari serves as CEO. Prior to Dr. Sabzevari assuming the role of CEO in January 2020 and Mr. Kirk becoming Executive Chairman, Mr. Kirk had served as Chairman of the Board since February 2008 and CEO since April 2009. We believe that separating the Executive Chairman and CEO roles at this time allows us to efficiently develop and implement corporate strategy consistent with the Board’s oversight role while also facilitating strong day-to-day executive leadership.

The Board believes that Mr. Kirk is well-situated to continue to serve as Executive Chairman because his unique and extensive experience and deep understanding of our business as well as his broad business experience as CEO of, and significant investor in, multiple successful biotech companies enable him to deliver strategic insight on key issues, to serve as a valuable bridge between the Board and management, and to provide valuable leadership experience. Mr. Kirk’s responsibilities include the following:

 

   

advising and supporting the CEO on long-term strategy and governance matters;

 

   

coordinating with the CEO and helping to lead the Company’s efforts on capital raising transactions and strategic acquisitions and divestitures;

 

   

serving as a liaison between the Board and senior management;

 

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acting as a source of institutional knowledge;

 

   

together with the CEO and Lead Independent Director, and with input from the non-management and independent Board members, preparing the Board’s agenda;

 

   

chairing and guiding discussion at Board meetings; and

 

   

performing such other duties and responsibilities as may be delegated to the Executive Chairman by the Board from time to time.

The Board established the position of Lead Independent Director in the Corporate Governance Guidelines to serve as a principal liaison between the independent directors and the Executive Chairman and the CEO as well as to coordinate the activities of the other independent directors. Mr. Shapiro currently serves as our Lead Independent Director. In his role as Lead Independent Director, Mr. Shapiro is in frequent contact with the Executive Chairman and the CEO and is regularly consulted on material matters. We currently maintain a significant majority of independent directors (Mr. Kirk and Dr. Sabzevari are the only non-independent director nominees). The Lead Independent Director is elected by the independent directors and ensures that the Board operates independently of management, and that directors and shareholders have an independent leadership contact.

The responsibilities of the Lead Independent Director of the Board include the following:

 

   

presiding over meetings of the non-management and independent Board members and, as appropriate, provide prompt feedback to the Executive Chairman;

 

   

together with the CEO and Executive Chairman, and with input from the non-management and independent Board members, preparing the Board’s agenda;

 

   

serving as a point of contact between non-management and independent Board members and the Executive Chairman to report or raise matters;

 

   

calling executive sessions of the Board or of the non-management and independent Board members;

 

   

serving as a “sounding board” and mentor to the CEO;

 

   

taking the lead in assuring that the Board carries out its responsibilities in circumstances where the Executive Chairman is incapacitated or otherwise unable to act;

 

   

consulting with the Chairman of the Compensation Committee to provide performance feedback and compensation information to the CEO and the Executive Chairman; and

 

   

performing such other duties and responsibilities as may be delegated to the Lead Independent Director by the Board from time to time.

As part of the Board’s annual assessment process, the Board evaluates the Board’s leadership structure to ensure that it remains appropriate. The Board recognizes that there may be circumstances in the future that would lead it to again combine the roles of CEO and Chairman of the Board or to have an independent Chairman, but believes that the absence of a policy requiring either the separation or combination of these roles provides the Board with the flexibility to determine the best leadership structure.

The Board’s Role in Risk Oversight

The Board is responsible for our risk oversight, and each committee of the Board is responsible for risk oversight within such committee’s area of responsibility and regularly reports to the Board regarding the same. Management is responsible for our risk management, including providing oversight and monitoring to ensure our policies are carried out and processes are executed in accordance with our performance goals and risk tolerance. On a regular basis, our management team identifies, discusses, and assesses financial risk from current macro-

 

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economic, industry, and company perspectives. Our management team also provides regular reports to the Board and its committees on areas of our material risk, including operational, financial, legal, and regulatory as well as strategic and reputational risks.

The Audit Committee is responsible for discussing with management our major financial risk exposures and the steps and processes management has taken to monitor and control such exposures, including our risk assessment and risk management policies. As part of its regular reporting process, management reports and reviews with the Audit Committee our material risks, including, but not limited to, proposed risk factors and other public disclosures, mitigation strategies, and our internal controls over financial reporting. The Audit Committee also engages in regular periodic discussions with the Chief Financial Officer and other members of management regarding risks as appropriate.

In carrying out its responsibilities, the Compensation Committee considers the impact of executive and employee compensation on our risk profile, as well as human resources risks. The Nominating and Governance Committee’s responsibilities include the consideration of succession planning and corporate governance risks.

Each committee regularly reports to the Board. Moreover, the Board reviews and oversees our various financial policies, financing programs, capital and operating plans, benefit plan management, and certain risk management policies. We believe the current leadership structure of the Board supports the risk oversight functions described above by providing independent leadership at the committee level, with ultimate oversight by the full Board as led by the Executive Chairman and the Lead Independent Director.

Board Committees

The Board maintains three standing committees: the Audit Committee; the Compensation Committee; and the Nominating and Governance Committee. Each of these committees has a separate chairperson and is composed entirely of directors that meet the applicable independence requirements of the SEC and Nasdaq. Each committee operates under a written charter that has been approved by the Board. A current copy of each committee’s charter is available on our website at http://investors.precigen.com under the caption “Governance.” In addition, from time to time, the Board may create ad hoc committees for specific purposes.

Audit Committee

The members of the Audit Committee are Messrs. Kindler, Mitchell, and Shapiro. Mr. Kindler is the chair of the Audit Committee. During 2019, the Audit Committee met 17 times. The Board has determined that each member of the Audit Committee is “independent” within the meaning of the enhanced independence standards for audit committee members in the Exchange Act, and the rules thereunder, as incorporated into the listing standards of Nasdaq, and the independence standards of our Corporate Governance Guidelines as discussed above under “CORPORATE GOVERNANCE — Board Standards of Independence” on page 7. The Board has further determined that Mr. Kindler qualifies as an “audit committee financial expert” within the meaning of SEC regulations and is “financially sophisticated” within the meaning of the Nasdaq rules. The Audit Committee assists the Board in its oversight of our accounting and financial reporting process and the audits of our consolidated financial statements. The Audit Committee’s responsibilities include, among other things, overseeing:

 

   

our accounting and financial reporting processes;

 

   

the integrity of our consolidated financial statements;

 

   

our compliance with laws and regulations;

 

   

our independent registered public accounting firm’s qualifications and independence; and

 

   

the performance of our independent registered public accounting firm.

 

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The Audit Committee appoints, compensates, oversees, and evaluates the performance of our independent registered public accounting firm for each fiscal year and approves the audit and non-audit fees we pay to such firm. The Audit Committee also reviews the scope and the results of the work of the independent registered public accounting firm and reviews the adequacy of internal control over financial reporting. The functions and responsibilities of the Audit Committee are further described in the “Audit Committee Report” on page 30.

Compensation Committee

The members of the Compensation Committee are Messrs. Hassan, Kindler, and Turley. Mr. Turley is the chair of the Compensation Committee. During 2019, the Compensation Committee met nine times. The Compensation Committee’s responsibilities include, among others:

 

   

developing and maintaining an executive compensation policy and monitoring the results of that policy;

 

   

considering the impact of our compensation policy and practices on our risk profile;

 

   

recommending to the Board for approval compensation and benefit plans;

 

   

reviewing and approving annually corporate and personal goals and objectives to serve as the basis for the CEO’s compensation, evaluating the CEO’s performance in light of those goals and objectives and determining the CEO’s compensation based on that evaluation;

 

   

reviewing and recommending annual compensation for the Executive Chairman;

 

   

determining and approving annual compensation for other executive officers;

 

   

approving grants of equity-based incentives to the extent provided under the our equity compensation plans, subject to the Committee’s authority to delegate the power to grant awards to employees or non-executive service providers who are not directors or executive officers;

 

   

reviewing and making recommendations to the Board regarding the compensation of non-employee directors;

 

   

reviewing and discussing with management the “Compensation Discussion and Analysis” to the extent required by SEC rules;

 

   

preparing the Compensation Committee report when required by SEC rules;

 

   

reviewing any executive employment-related agreements, proposed severance or retirement arrangements, or change and control or similar agreements, and any amendments or waivers to any such agreements; and

 

   

reviewing and recommending to the Board for approval our approach with respect to the advisory vote on executive compensation, or say-on-pay, and the frequency of the say-on-pay advisory vote.

While the Compensation Committee charter does not specify qualifications required for members, the members of the Committee have been members of other public company boards of directors, are current or former executive officers of public companies, or have comparable positions. The Board has determined that the members of the Committee are “non-employee directors” (within the meaning of Rule 16b-3 of the Exchange Act) and “independent directors” (as defined under the applicable Nasdaq listing standards and our Corporate Governance Guidelines as discussed above under “Corporate Governance — Board Standards of Independence” on page 7).

The processes and procedures followed by the Compensation Committee in considering and determining executive compensation, including the role of the outside compensation consultant, are described below under “Compensation Discussion and Analysis — The Compensation Review Process” on page 51.

Nominating and Governance Committee

The members of the Nominating and Governance Committee are Mr. Alvarez, Ms. Gupta, and Mr. Shapiro. Mr. Alvarez is the chair of the Nominating and Governance Committee. During 2019, the Nominating and

 

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Governance Committee met three times. The Nominating and Governance Committee’s responsibilities include, among others:

 

   

considering and reviewing periodically the desired composition of the Board, including such factors as diversity of backgrounds and expertise and tenure, and ensuring that the Board is composed so as to satisfy SEC listing requirements and Nasdaq rules, including the independence of directors and the financial and accounting experience of directors;

 

   

establishing and reviewing qualifications and standards for individual directors in the context of the current composition of the Board, the Company’s operating requirements, and the long-term interests of our shareholders, and periodically reviewing these qualifications and standards;

 

   

identifying, nominating, and evaluating candidates for election to the Board;

 

   

making recommendations to the Board regarding the size of the Board, the tenure and classifications of directors, and the composition of the Board’s committees;

 

   

reviewing and evaluating our various governance policies and guidelines, including pertinent environmental, social, and governance matters;

 

   

considering CEO succession planning;

 

   

reviewing committee structure and effectiveness; and

 

   

considering other corporate governance and related matters as requested by the Board.

The Board has determined that all members of the Nominating and Governance Committee are “independent” within the meaning of the listing standards of Nasdaq and the independence standards set by the Board as discussed above in“Corporate Governance — Board Standards of Independence” on page 7.

Director Candidate Recommendations and Nominations by Shareholders . The Nominating and Governance Committee’s charter provides that the Committee will consider director candidate recommendations by shareholders. Shareholder recommendations for candidates to be nominees will be evaluated under the same standards as potential nominees recommended by management or the non-management members of the Board. Shareholders should submit any such director recommendations to the Nominating and Governance Committee through the method described in “Questions and Answers About the Annual Meeting — 17. How do I make a shareholder proposal for the 2021 Annual Meeting of Shareholders? ” on page 6. The Nominating and Governance Committee did not receive any recommendations from any shareholders in connection with the Annual Meeting.

Nominating and Governance Committee Process for Identifying and Evaluating Director Candidates . The Nominating and Governance Committee identifies and evaluates all director candidates in accordance with the director qualification standards described in the Corporate Governance Guidelines. The Committee evaluates a candidate’s qualifications to serve as a member of the Board based on the background, diversity, and expertise in relevant industries of individual Board members as well as the background and expertise of the Board as a whole. Nominees will be required to bring the skills, talents, knowledge, and expertise to ensure that the composition, structure, and operation of the Board serve the best interests of our shareholders. In addition, the Committee will evaluate a candidate’s independence and his or her background and expertise in the context of the Board’s needs.

Our Corporate Governance Guidelines and Nominating and Governance Committee charter provides that we will consider diversity, including diversity of backgrounds, in considering the composition of and evaluating nominees to the Board, and minorities and women currently comprise 40% of our director nominees. However, we have no formal policy regarding Board diversity. Our priority in selection of Board members is identification of members who will further the interests of our shareholders through their established records of professional accomplishment, the ability to contribute positively to the collaborative culture among Board members, knowledge of our business, and understanding of the competitive landscape of the industries in which we

 

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operate. We will consider, in identifying first-time candidates, assessing nominees for director (including incumbent directors), or evaluating individuals recommended by shareholders, the current composition of the Board in light of the diverse communities and geographies we serve and the interplay of the candidate’s or nominee’s diverse individual experience, education, skills, background, and other qualities and attributes with those of the other Board members. The Nominating and Governance Committee and Board monitor the Board’s effectiveness through the Board’s self-evaluation process. As described under “Nominees for Election as Directors” beginning on page 18, the Nominating and Governance Committee and the Board believe that the current composition of the Board reflects a group of highly talented individuals with diverse backgrounds, skills, professional, and industry experience, and other personal qualities and attributes best suited to perform oversight responsibilities for us and our shareholders.

Ad Hoc Committees

In February 2019, we announced that we were evaluating equitization and monetization events for our subsidiaries, as well as considering which of our business units would find higher values independent of our Company. We subsequently announced in April 2019 that we were working to realign our operations in an effort to better deploy resources, realize inherent synergies, and position us for growth with a core focus on healthcare. As we considered potential alternatives for our assets, the Board considered that it was possible that Mr. Kirk or entities affiliated with Mr. Kirk would be interested in transactions with the Company that would constitute related party transactions. In July 2019, the Board created a temporary committee of the Board (the “Special Review Committee”) to review prospective acquisitions by affiliates of Mr. Kirk of Company assets in connection with the realignment. In particular, the Special Review Committee was formed in order to avoid conflicts of interest, to take necessary steps to comply with our policies with respect to transactions with related persons, and to ensure that any related transactions would be in the best interests of our Company and our shareholders. The Board authorized the Special Review Committee to engage counsel and other advisors as it deemed appropriate in carrying out its duties. The Special Review Committee was initially comprised of Mr. Alvarez, Mr. Turley, and Mr. Shapiro. In August 2019, Mr. Alvarez was replaced by Mr. Mitchell. In 2019, the special committee met 23 times, and engaged both financial and legal advisors.

Code of Business Conduct and Ethics

We have adopted a written code of business conduct and ethics (the “Code”) that applies to our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. The Code covers a broad range of professional conduct, including employment policies, conflicts of interest, intellectual property, and the protection of confidential information, as well as adherence to all laws and regulations applicable to the conduct of our business. In 2019, we amended the Code to include additional requirements related to confidentiality and other notification requirements in relation to our policy on conflicts of interest, and to update our gift policy, among other changes.

A copy of the Code is available on our website at http://investors.precigen.com under the caption “Governance.” If we make any substantive amendments to, or grant any waivers from, the Code for any officer or director, we intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K by disclosing the nature of such amendment or waiver on our website or in a Current Report on Form 8-K.

Political Contributions

In general, it is not our practice to make financial or in-kind political contributions with corporate assets, even when permitted by applicable law. We comply with all applicable state and federal laws related to the disclosure of lobbying activities.

 

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Communications with the Board

We have established a policy pursuant to which shareholders wishing to communicate with the Board may do so by writing to the Board, the Executive Chairman, the Lead Independent Director, or the non-employee directors of the Board as a group, at: Precigen, Inc., 20374 Seneca Meadows Parkway, Germantown, Maryland 20876; Attn: Corporate Secretary.

The communication must prominently display the legend “BOARD COMMUNICATION” in order to indicate to the Corporate Secretary that it is a communication for the Board. Upon receiving such a communication, the Corporate Secretary will promptly forward the communication to the relevant individual or group to which it is addressed. The Board has requested that certain items that are unrelated to the Board’s duties and responsibilities be excluded, such as spam, junk mail and mass mailings, resumes, and other forms of job inquiries, surveys, and business solicitations or advertisements.

The Corporate Secretary will not forward any communication determined in his or her good faith belief to be frivolous, unduly hostile, threatening, illegal, or similarly unsuitable. Each communication subject to this policy that was not forwarded because it was determined by the Corporate Secretary to be frivolous is retained for a reasonable period of time in our files and made available at the request of any member of the Board to whom such communication was addressed.

 

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BENEFICIAL OWNERSHIP OF COMMON STOCK

The following table sets forth information regarding beneficial ownership of our share capital as of March 31, 2020 by (i) each of our directors, (ii) each of our named executive officers, (iii) all of our directors and executive officers as a group, and (iv) each person, or group of affiliated persons, known by us to beneficially own more than 5% of our shares of common stock.

The percentage ownership information is based on an aggregate 170,656,834 shares of common stock outstanding as of March 31, 2020.

Except as otherwise noted below, the address for each person or entity listed in the table is c/o Precigen, Inc., 20374 Seneca Meadows Parkway, Germantown, Maryland 20876.

 

Name of Beneficial Owner

   Outstanding Shares
Beneficially Owned(1)
    Right to Acquire
Beneficial
Ownership(2)
     Total Shares
Beneficially Owned
     Percentage of Shares
Beneficially Owned
 

Directors/director nominees

          

Cesar Alvarez

     181,165       235,035        416,200        *  

Steven Frank

     262,595       235,035        497,630        *  

Vinita Gupta

     81,303 (3)      198,020        279,323        *  

Fred Hassan

     85,170       213,200        298,370        *  

Jeffrey Kindler

     143,071       243,946        387,017        *  

Dean Mitchell

     102,473       235,035        337,508        *  

Robert Shapiro

     206,517 (4)      243,946        450,463        *  

James Turley

     89,609       255,826        345,435        *  

Named executive officers

          

Randal Kirk(5)

     82,790,616       —          82,790,616        48.5 %

Donald Lehr

     108,331       599,114        707,445        *  

Nir Nimrodi(6)

     —         —          —          *  

Jeffrey Perez

     95,288       546,483        641,771        *  

Rick Sterling

     157,372       548,222        705,594        *  

Helen Sabzevari

     112,342       575,000        687,342        *  

Robert Walsh, III(7)

     —         —          —          *  

Current  executive  officers and directors as a group (8)

     84,415,852       4,128,862        88,544,714        50.7

Greater than 5% shareholders

          

Ares Trading SA(9)

     20,640,119       9,130,419        29,770,538        16.6

 

*

Represents beneficial ownership of less than 1% of our outstanding shares of common stock

(1)

Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes sole or shared voting or investment power with respect to shares of our common stock. The information set forth in the table above is not necessarily indicative of beneficial ownership for any other purpose, and the inclusion of any shares deemed beneficially owned in this table does not constitute an admission of beneficial ownership of those shares. Except as otherwise noted, to our knowledge, the persons and entities named in the table above have sole voting and investment power with respect to all of the shares of common stock beneficially owned by them, subject to community property laws, where applicable.

(2)

Consists of shares of common stock subject to stock options exercisable as of, or within 60 days of, March 31, 2020 and restricted stock units vesting within 60 days of March 31, 2020. Shares of common stock subject to stock options that are exercisable as of or within 60 days of, March 31, 2020 and restricted stock units vesting within 60 days of March 31, 2020 are deemed to be outstanding and beneficially owned by the person holding the option for the purpose of calculating the percentage ownership of that person, but are not deemed outstanding for the purpose of calculating the percentage ownership of any other person.

(3)

Includes 3,000 shares held in the Sharma-Gupta Marital Property Trust, an affiliate of Vinita Gupta.

 

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(4)

Includes 82,966 shares held in the Robert B. Shapiro Revocable Trust, an affiliate of Robert Shapiro.

(5)

Includes shares held by the following entities over which Mr. Kirk (or an entity over which he exercises exclusive control) exercises exclusive control: 213,805 shares held by ADC 2010, LLC, 367,560 shares held by JPK 2008, LLC, 1,675,873 shares held by JPK 2009, LLC, 1,316,798 shares held by JPK 2012, LLC, 14,140,139 shares held by Kapital Joe, LLC, 182,200 shares held by Kellie L. Banks (2009) Long Term Trust, 1,403 shares held by Lotus Capital (2000) Company Inc., 5,483,957 shares held by Mascara Kaboom, LLC, 366,548 shares held by MGK 2008, LLC, 1,832,054 shares held by MGK 2009, LLC, 1,299,267 shares held by MGK 2011, LLC, 13,340,645 shares held by NRM VI Holdings I, LLC, 243,001 shares held by NRM VII Holdings I, LLC, 10,588,601 shares held by R.J. Kirk Declaration of Trust, 16,406,828 shares held by Sunset 2020 LLC, 1,142,759 shares held by Third Security Incentive 2010 LLC, 19,711 shares held by Third Security Incentive 2006 LLC, 59,133 shares held by Third Security Staff 2006 LLC, 118,266 shares held by Third Security Senior Staff 2006 LLC, 1,356,648 shares held by Third Security Senior Staff 2008 LLC, 58,800 shares held by Third Security Senior Staff LLC, 311,287 shares held by Third Security Staff 2001 LLC, 1,356,648 shares held by Third Security Staff 2010 LLC, 975,084 shares held by Third Security Senior Staff 2015 LLC, 975,084 shares held by Third Security Staff 2015 LLC, 8,325,000 shares held by TSCP V LLC, 337,234 shares held by ZSK 2008 LLC, and 151,802 shares held by ZSK 2009 LLC. Also includes 144,481 shares held by Alana D. Czypinski, Mr. Kirk’s spouse.

(6)

As of April 5, 2019, Mr. Nimrodi departed the Company.

(7)

As of November 6, 2019, Mr. Walsh departed the Company.

(8)

Consists of 13 persons as of March 31, 2020.

(9)

Information is based on the Schedule 13G that was filed with the SEC on January 22, 2020 by Ares Trading SA (“Ares Trading”) and certain other information known to us. Includes 9,130,419 shares of common stock, based on a ten-day trailing volume-weighted average price of $2.7381, underlying a convertible note that is immediately convertible into shares of common stock as of March 31, 2020. Ares Trading is a dominantly controlled subsidiary of Merck Serono S.A., Coinsins, Switzerland, an affiliate of Merck KGaA, Darmstadt, Germany. Merck Serono S.A., Coinsins, Switzerland is a wholly owned indirect subsidiary of Merck KGaA, Darmstadt, Germany. Merck Serono S.A., Coinsins, Switzerland and Merck KGaA, Darmstadt, Germany may be deemed to possess sole voting and dispositive power with respect to the securities held of record by Ares Trading. The address of Ares Trading is Zone Industrielle de l’Outriettaz, 1170 Aubonne, Switzerland.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our executive officers, directors, and persons who beneficially own more than 10% of our equity securities, to file reports of ownership and changes in ownership with the SEC and provide us with copies of such reports. Based solely on a review of the copies of these reports furnished to us, we believe that all such filing requirements applicable to such officers and directors and greater than 10% shareholders were complied with during 2019, with the exception of one late Form 3 filing for Ares Trading S.A.

 

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PROPOSAL 1

ELECTION OF DIRECTORS

Background

Upon the recommendation of the Nominating and Governance Committee, the Board has unanimously nominated our nine incumbent directors, all of whom were elected by our shareholders at our 2019 Annual Meeting of Shareholders, and our CEO, Dr. Sabzevari, for election to the Board at the Annual Meeting and to hold office until their successors have been elected and qualified or until their earlier resignation or removal. Each nominee has consented to being named as such and to serve as a director if elected.

Our Bylaws provide that, in uncontested director elections (i.e., an election where the number of nominees is not greater than the number of directors to be elected), a nominee for director will be elected to the Board if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. However , directors will be elected by a plurality of the votes cast at any meeting of the shareholders for which (i) the Corporate Secretary receives a notice that a shareholder has nominated a person for election to the Board in compliance with the advance notice requirements for shareholder nominees for director set forth in the Bylaws and (ii) such nomination has not been withdrawn by such shareholder on or prior to the 10th day preceding the date we first mail the notice of meeting for such meeting to the shareholders (i.e., if there is a contested director election). If directors are to be elected by a plurality of the votes cast, the shareholders may withhold votes, but will not be permitted to vote against a nominee.

Our Corporate Governance Guidelines provide that any nominee for director in an uncontested election who receives a greater number of shareholder votes cast “against” his or her election than votes “for” his or her election must, promptly following certification of the shareholder vote, tender his or her resignation to the Board for consideration. The Nominating and Governance Committee will then evaluate the best interests of the Company and will recommend to the Board whether to accept or reject the tendered resignation. Following the Board’s receipt of this recommendation and determination as to whether to accept the resignation, we will disclose the Board’s decision and an explanation of how the decision was reached.

There were no nominee recommendations from shareholders or from any group of shareholders submitted in accordance with our Bylaws. Proxies solicited by the Board will be voted in favor of the nominees listed below unless otherwise specified in the proxy. We know of no reason why the nominees would not be available for election or, if elected, would be unable to serve. While we do not anticipate that any of the nominees will be unable to serve, if any should be unable to serve, the proxy holders reserve the right to substitute another person designated by the Board.

Vote Required and Board Recommendation

Each director nominee must receive the affirmative vote of a majority of the votes cast in order to be elected. As this proposal is not considered a “routine item,” your bank, broker, or other nominee cannot vote your shares without receiving your voting instructions. Abstentions and broker non-votes will not count “for” or “against” the election of any nominee.

THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” ALL OF THE PROPOSED DIRECTOR NOMINEES LISTED.

 

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Nominees for Election as Directors

Set forth below is information for each nominee concerning the individual’s age, principal occupation, employment and directorships during the past five years, positions with the Company, the year in which he or she first joined the Board, and his or her term of office as a director. Also set forth below is a brief discussion of the specific experience, qualifications, attributes, or skills that led to the Board’s conclusion that, in light of our business and structure, each nominee should serve as a director.

 

Name, Tenure, and Age

  

Business Experience During Past Five Years and Other Affiliations

Randal Kirk

Executive Chairman of the Board

Director since 2008

Age 66

  

Mr. Kirk has served as Executive Chairman of the Board since January 2020 and previously served as Chairman of the Board from February 2008 until January 2020 and as our CEO from April 2009 until January 2020. Mr. Kirk provides a wealth of strategic, operational, and management experience. Mr. Kirk currently serves as the Senior Managing Director and CEO of Third Security, LLC, an investment management firm founded by Mr. Kirk in March 1999. Additionally, Mr. Kirk founded and became Chairman of the Board of New River Pharmaceuticals Inc. (a biopharmaceutical company previously traded on Nasdaq prior to its acquisition by Shire plc in 2007) in 1996, and was President and CEO between October 2001 and April 2007.

 

Since May 2015, Mr. Kirk has served as a member of the board of directors of the Edward Via College of Osteopathic Medicine. Previously, Mr. Kirk served as a member of the board of directors of Scios, Inc. (previously traded on Nasdaq prior to its acquisition by Johnson & Johnson) between February 2000 and May 2002, as a member of the board of directors of Halozyme Therapeutics, Inc. (Nasdaq: HALO), a clinical stage biotechnology company, from May 2007 to May 2018, as a member of the board of directors of ZIOPHARM Oncology, Inc. (Nasdaq: ZIOP), a biotechnology company, from January 2011 to October 2018, and as a member of the board of directors of Clinical Data, Inc. (previously traded on Nasdaq prior to its acquisition by Forest Laboratories, Inc. in April 2011) from September 2002 to April 2011, and was Chairman of the board of directors from December 2004 to April 2011.

 

Mr. Kirk served on the board of visitors of Radford University from July 2003 to June 2009, was Rector of the board of directors from September 2006 to September 2008 and served on the board of directors of the Radford University Foundation, Inc. from September 1998 to May 2011. He served on the board of visitors of the University of Virginia and Affiliated Schools from July 2009 to October 2012, on the Virginia Advisory Council on Revenue Estimates from July 2006 to October 2012 and on the Governor’s Economic Development and Jobs Creation Commission from April 2010 to October 2012. Mr. Kirk received a B.A. in Business from Radford University and a J.D. from the University of Virginia.

 

We believe that Mr. Kirk’s business experience, including his extensive business experience as CEO of multiple companies, his experience as an investor, his service on committees of academic institutions and other public company boards, combined with his business acumen and judgment, provides the Board with valuable strategic and operational expertise and leadership skills.

 

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Name, Tenure, and Age

  

Business Experience During Past Five Years and Other Affiliations

Cesar Alvarez

Director since 2008

Age 72

  

Mr. Alvarez has served as a Board member since 2008. Mr. Alvarez is the Senior Chairman of the international law firm of Greenberg Traurig, LLP. He previously served as the law firm’s Executive Chairman, and as its Chief Executive Officer from 1997 to 2012. During his tenure as Chief Executive Officer and Executive Chairman, Mr. Alvarez led the firm to become one of the top ten law firms in the United States by leading its growth from 325 lawyers in eight offices to approximately 1,850 attorneys and government professionals in more than 36 locations in the United States, Europe, Asia, and Latin America. Mr. Alvarez also serves as: Chairman of the board of directors of Mednax, Inc. (NYSE: MD), a provider of physician services, including newborn, maternal-fetal, pediatric subspecialties, and anesthesia care; Vice Chairman of the board of directors of Watsco, Inc. (NYSE: WSO), a distributor of air conditioning, heating and refrigeration equipment and related parts and supplies; and The St. Joe Company (NYSE: JOE), a real estate development company. Mr. Alvarez served on the board of directors of Fairholme Funds, Inc., a family of publicly traded focused investment funds from May 2008 to February 2020 and Sears Holding Corporation, a retail company, from January 2013 to May 2017. Mr. Alvarez holds a Bachelor of Science, a Masters of Business Administration, and a Juris Doctor from the University of Florida.

 

We believe Mr. Alvarez’s qualifications to serve on the Board include his experience as Chief Executive Officer, Executive Chairman, and Senior Chairman of one of the nation’s largest law firms with approximately $1.6 billion in revenues with 2,200 law professionals providing services in 41 locations across the country and abroad, as well as his many years of corporate experience, both advising clients in the fields of corporate and securities and serving on the boards of directors of publicly traded and private companies.

 

Name, Tenure, and Age

  

Business Experience During Past Five Years and Other Affiliations

Steven Frank

Director since 2008

Age 60

  

Mr. Frank has served as a Board member since February 2008. Mr. Frank joined J.P. Morgan Securities LLC, an investment bank, in June 2008 and currently serves as Chairman of Global Healthcare Investment Banking. Mr. Frank had previously been the head of Bear Stearns’ Worldwide Health Care Investment Banking group in New York for 16 years and has provided general investment banking services to all types of health care companies. Specifically, Mr. Frank has led or played major roles in hundreds of mergers and acquisitions and financing transactions across the spectrum of deal structures. He has specialized in transactions involving pharmaceutical, medical device, and biotechnology companies. Prior to joining Bear Stearns in 1993, Mr. Frank served for over ten years as an institutional investor, primarily at State Farm Insurance Company, where he focused on a multi-billion dollar life-sciences portfolio. Mr. Frank holds a B.S. from Illinois State University and an M.B.A. from the University of Chicago.

 

We believe Mr. Frank’s extensive knowledge of our industry and of finance and capital structure strengthen the Board’s collective qualifications, skills, and experience.

 

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Name, Tenure, and Age

  

Business Experience During Past Five Years and Other Affiliations

Vinita Gupta

Director since 2017

Age 52

  

Ms. Gupta has served as a Board member since April 2017. Since September 2012, Ms. Gupta has served as the Chief Executive Officer of Lupin Limited (“Lupin”). Lupin, headquartered in Mumbai, India, is an innovation led global pharmaceutical company developing and delivering a wide range of branded and generic formulations, biotechnology products, and APIs. Ms. Gupta has served as a director of Lupin since 2001 and serves on its Risk Management Committee. In addition, Ms. Gupta has served as the Chief Executive Officer and chairperson of Lupin Pharmaceuticals, Inc., the U.S. wholly owned subsidiary of Lupin, since 2003. Ms. Gupta served as director on the board of Lupin’s Japanese subsidiary Kyowa Pharmaceuticals from 2007 until the sale of that business in 2019. Ms. Gupta has held various positions at Lupin since joining the company in 1993.

 

Ms. Gupta was named 2015 Ernst & Young Entrepreneur of the Year and won the 2016 Forbes India Leadership Awards – Entrepreneur of the Year. Ms. Gupta is regularly named in Forbes Asia Top 50 Power Business women listings for Asia Pacific. Ms. Gupta graduated from the University of Mumbai with a degree in pharmacy and received her MBA from the Kellogg School of Management at Northwestern University.

 

We believe Ms. Gupta’s qualifications to serve on the Board include her strong leadership and management experience within the pharmaceutical industry, including serving as the chief executive officer of a global pharmaceutical corporation and her significant knowledge of operations, strategy, government relations, regulatory, finance and investments, and mergers and acquisitions, including the fact that she was not only responsible for setting up Lupin’s business in the U.S and Europe, but was instrumental in formulating and executing strategy that has helped Lupin emerge as a global pharmaceutical corporation.

Name, Tenure, and Age

  

Business Experience During Past Five Years and Other Affiliations

Fred Hassan

Director since 2016

Age 74

  

Mr. Hassan has served as a Board member since June 2016. Mr. Hassan joined Warburg Pincus LLC, a global private equity investment institution, in 2010 and currently serves as Director. Previously, Mr. Hassan served as Chairman and Chief Executive Officer of Schering-Plough from 2003 to 2009. Before assuming these roles, from 2001 to 2003, Mr. Hassan was Chairman and Chief Executive Officer of Pharmacia Corporation, a company formed as a result of the merger of Monsanto Company and Pharmacia & Upjohn, Inc. He joined Pharmacia & Upjohn, Inc. as Chief Executive Officer in 1997. Mr. Hassan previously held leadership positions with Wyeth serving as Executive Vice President, and was a member of the board from 1995 to 1997. Earlier in his career, he spent a significant tenure with Sandoz Pharmaceuticals and headed the company’s U.S. pharmaceuticals business.

 

Since July 2015, Mr. Hassan has served as a director of Amgen, Inc. (Nasdaq: AMGN), a leading biotechnology company. Mr. Hassan served as a director of Time Warner Inc. (now Warner Media, LLC), a global leader in media and entertainment, from October 2009 to June 2018. In

 

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the course of his career, he has held numerous directorships, including those at Avon Products, Inc. from 1999 to 2013, Bausch & Lomb from 2010 until its acquisition by Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (“Valeant”) in 2013, and Valeant from 2013 to 2014. Mr. Hassan has chaired notable pharmaceutical industry organizations including The Pharmaceutical Research and Manufacturers of America (PhRMA) and The International Federation of Pharmaceutical Manufacturers Associations (IFPMA) and is also a member of The Business Council. Mr. Hassan received a B.S. degree in chemical engineering from the Imperial College of Science and Technology at the University of London and an M.B.A. from Harvard Business School.

 

We believe Mr. Hassan’s qualifications to serve on the Board include his strong leadership and management experience within our industry, including significant knowledge of operations, strategy, government relations, regulatory, finance and investments, and mergers and acquisitions.

Name, Tenure, and Age

  

Business Experience During Past Five Years and Other Affiliations

Jeffrey Kindler

Director since 2011

Age 64

  

Mr. Kindler has served as a Board member since November 2011. He is the Chief Executive Officer of Centrexion Corporation, a privately held clinical stage biopharmaceutical company; an Operating Partner at Artis Ventures, a leading venture capital firm; and a managing director at Starboard Capital Partners, a private equity firm. Mr. Kindler was also a Venture Partner at Lux Capital, a leading venture capital firm, from January 2017 to January 2020. Mr. Kindler was Chief Executive Officer and Chairman of the Board of Pfizer, Inc. (NYSE:PFE), a pharmaceutical company, from 2006 until his retirement in December 2010. He joined Pfizer in 2002 as Executive Vice President and General Counsel and assumed positions of increasing responsibility until being named Chief Executive Officer in 2006. Prior to joining Pfizer, he was Chairman of Boston Market Corporation from 2000 to 2001 and President of the Partner Brands group of McDonald’s Corporation during 2001.

 

In addition to serving on Precigen’s Board, Mr. Kindler currently serves on the boards of PPD, Inc. (Nasdaq: PPD), a provider of drug development services, Siga Technologies, Inc. (Nasdaq:SIGA), a developer of novel antiviral therapeutics, vTV Therapeutics (Nasdaq:VTVT), a development-stage biopharmaceutical company, and Perrigo Company (NYSE:PRGO), a healthcare company. Mr. Kindler also serves as a board member for a number of privately held companies and for several civic, charitable, educational and other organizations. He also serves as Chairman of the GLG Institute. Previously, Mr. Kindler served on the board of Chipotle Mexican Grill, Inc. (NYSE:CMG), a chain of Mexican restaurants, from 2012 to 2014. Mr. Kindler received a B.A. from Tufts University and a J.D. from Harvard Law School.

 

We believe Mr. Kindler brings leadership, extensive business, operating, legal and policy, and corporate strategy experience to the Board, along with tremendous knowledge of several of the industries in which we operate as well as the fundamentals of our business.

 

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Name, Tenure, and Age

  

Business Experience During Past Five Years and Other Affiliations

Dean Mitchell

Director since 2009

Age 64

  

Mr. Mitchell has served as a Board member since March 2009. In July 2013, Mr. Mitchell was appointed Executive Chairman and board member of Covis Pharma Holdings S.a.r.l., a private specialty pharmaceutical company based in Luxembourg. Since 2012, he has served as a non-executive board member of ImmunoGen, Inc. (Nasdaq:IMGN), a public oncology company, and since July 2014 he has served as a board member of Theravance Biopharma, Inc. (Nasdaq:TBPH), a public specialty pharmaceutical company. Mr. Mitchell also served as Chairman and board member of PaxVax Inc., a specialty vaccine company, from December 2015 to October 2018 when it was acquired by Emergent BioSolutions Inc.

 

Previously, Mr. Mitchell was President and Chief Executive Officer and a board member of Lux Biosciences, Inc., a privately held ophthalmology company, from July 2010 until June 2013. Prior to that he was President and Chief Executive Officer of Alpharma Inc., a global specialty pharmaceutical company, and also was appointed a member of its board of directors in July 2006. Alpharma Inc. was acquired by King Pharmaceuticals, Inc. in December 2008, and Mr. Mitchell ceased to be an officer and a director of Alpharma Inc. in December 2008. Prior to this, he was President and Chief Executive Officer of Guilford Pharmaceuticals Inc., a public company, from December 2004 until its acquisition by MGI Pharma Inc., a public biopharmaceutical company focused in oncology and acute care, in October 2005, and was a non-executive director of MGI Pharma Inc. until its acquisition by Eisai Co., Ltd. in January 2008. Mr. Mitchell was at Bristol-Myers Squibb, a public company, from 2001 until 2004 in several key leadership roles including President International, President U.S. Primary Care and Vice President, Strategy. He also spent 15 years at Glaxo SmithKline, a public company, and its predecessor companies, most recently as Senior Vice President, Clinical Development and Product Strategy from 1999 to 2001, and prior to that as Vice President and General Manager, Specialty Divisions, Strategic Planning and Business Development, from 1995 to 1999. Mr. Mitchell received an M.B.A. from City University Business School, in London, U.K., and a B.Sc. degree in Biology from Coventry University, U.K.

 

We believe Mr. Mitchell brings to the Board extensive experience in the pharmaceutical industry, specifically in the areas of management, business and corporate development, sales and marketing and clinical development, as well as his significant experience serving on boards of directors of companies in our industry.

Name, Tenure, and Age

  

Business Experience During Past Five Years and Other Affiliations

Helen Sabzevari

Director Nominee

Age 58

   Dr. Sabzevari has served as our President and Chief Executive Officer since January 2020, and as President of PGEN Therapeutics, Inc., our wholly owned subsidiary, since December 2017. Prior to this, Dr. Sabzevari served as Senior Vice President, Health Therapeutics as well as our Head of Research and Development from July 2017 to December 2017. Prior to joining the Company, from 2015 to 2017, Dr. Sabzevari co-founded and served as Chief Scientific Officer of

 

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Compass Therapeutics LLC, a fully integrated drug discovery and development company focused on manipulating the immune system to treat human disease. From 2008 to 2014, Dr. Sabzevari served as Senior Vice President of Immuno-Oncology as well as Global Head of Immunotherapy, Oncology, Global Research and Early Development at EMD Serono (a subsidiary of Merck KGaA, Darmstadt, Germany). From 1998 to 2008, Dr. Sabzevari led the Molecular Immunology Group at the Laboratory of Tumor Immunology and Biology at the US National Cancer Institute, where she was focused on design, development, and delivery of novel vaccines and immunotherapies for a range of human cancers. Dr. Sabzevari received her doctorate degree in cell and molecular immunology and completed her postdoctoral work at the department of immunology at the Scripps Research Institute, working on various immunotherapeutic modalities in the treatment of cancer and autoimmune diseases.

 

We believe Dr. Sabzevari brings to the Board expertise in research and development of immunotherapy-based therapeutics, experience translating novel treatments from pre-clinical stage into the clinic, and extensive leadership experience and knowledge of the industry.

Name, Tenure, and Age

  

Business Experience During Past Five Years and Other Affiliations

Robert Shapiro

Director since 2011

Age 81

  

Mr. Shapiro has served as a Board member since November 2011. Mr. Shapiro is Chairman, Managing Director and Co-Founder of Sandbox Industries, a development firm that creates, launches, and manages new business concepts. Sandbox Industries also manages venture funds, including the BlueCross BlueShield Venture Partners funds and the Cultivan Sandbox Food & Agriculture Venture Funds. Mr. Shapiro has served as Managing Director of Sandbox Industries since its formation in 2004. He was formerly Chairman and Chief Executive Officer of Monsanto Company from 1995 to 2000. Upon the merger of Monsanto Company with Pharmacia & Upjohn, he served as Chairman of the newly formed Pharmacia Corporation. Previously, Mr. Shapiro was President and Chief Operating Officer of Monsanto Company from 1992 to 1995 and President of Monsanto Company’s Agriculture Group from 1990 to 1992, Chairman and Chief Executive Officer of The NutraSweet Company, a subsidiary of Monsanto Company, from 1985 to 1990 and President of the NutraSweet Group of G.D. Searle & Co., or Searle, from 1982 to 1985, where he previously served as Vice President and General Counsel. Before joining Searle, Mr. Shapiro was Vice President and General Counsel of General Instrument Corporation from 1972 to 1979. Prior to this, he practiced law in New York City; served in government as Special Assistant to the General Counsel and later to the Undersecretary of the U.S. Department of Transportation; and served as a professor of law at Northeastern University in Boston and the University of Wisconsin in Madison.

 

Mr. Shapiro has served on the boards of directors of the New York Stock Exchange (later NYSE Euronext), Citigroup Inc., Rockwell International, Silicon Graphics Inc. and Sapphire Energy, Inc. He currently serves as a director of Advanced Animal Diagnostics, Inc., a privately held corporation. Mr. Shapiro has served on the President’s

 

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Advisory Committee on Trade Policy and on the White House Domestic Policy Review of Industrial Innovation. He is a Fellow of the American Academy of Arts and Sciences. Mr. Shapiro is a graduate of Harvard College and holds a J.D. from Columbia University School of Law.

 

We believe Mr. Shapiro brings to the Board particular knowledge and experience in: strategic planning and leadership of complex organizations; accounting, finance and capital structure; legal, regulatory and government affairs; people management; and board practices of other entities, which strengthen the Board’s collective qualifications, skills, and experience.

Name, Tenure, and Age

  

Business Experience During Past Five Years and Other Affiliations

James Turley

Director since 2014

Age 64

  

Mr. Turley has served as a Board member since April 2014. Mr. Turley previously served as the Chairman and Chief Executive Officer of Ernst & Young LLP (“Ernst & Young”) from 2001 until his retirement in June 2013. From 1994 to 2001, Mr. Turley served as Regional Managing Partner of Ernst & Young. Mr. Turley serves on the board of directors of Citigroup Inc. (NYSE:C), a leading global bank, Citibank, N.A., the commercial banking operations of Citigroup Inc., Emerson Electric Co. (NYSE:EMR), a global leader in bringing technology and engineering together to provide innovative solutions for customers in industrial, commercial, and consumer markets around the world, and Northrop Grumman Corporation (NYSE:NOC), a leading global security company providing innovative systems, products and solutions to government and commercial customers worldwide. Mr. Turley is also a board member of the Boy Scouts of America, a board member of Kohler Company (a privately held company), and a board member of the MUNY Theatre of St. Louis and Theatre Forward. Mr. Turley holds an undergraduate degree and a master’s degree in accounting from Rice University.

 

We believe Mr. Turley’s extensive management experience as the former Chairman and Chief Executive Officer of one of the world’s largest accounting firms, his accounting and financial expertise, and his experience in serving on the boards of directors of publicly traded companies make him well-qualified to serve on the Board. Having served as Chair and CEO of Ernst & Young, Mr. Turley developed significant expertise in the areas of compensation, litigation, corporate affairs, and corporate governance. Mr. Turley also possesses extensive knowledge and expertise in the areas of financial reporting, business, and risk management.

 

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DIRECTOR COMPENSATION

Non-Employee Director Compensation

The compensation of our non-employee directors is established by the Compensation Committee and the Board. This compensation is periodically reviewed by the committee based on market practice information provided by our outside compensation consultant, F. Daniel Siciliano, to ensure continued alignment with company goals and shareholder interest. Under our current policy, adopted in December 2017, our non-employee directors receive the compensation set forth in the table below. We also reimburse our non-employee directors for reasonable out-of-pocket expenses incurred in connection with attending Board and committee meetings.

 

Element of Compensation

   Compensation Amount  

Annual Retainer(1)

     $  50,000  

Committee Chair Additional Retainer(1)

     $  12,500  

Committee Member Additional Retainer(1)

     $    6,500  

Annual Equity Awards

    

Options with a value of $125,000

RSUs with a value of $125,000

(2) 

(3) 

Initial Appointment Equity Awards

    

Options with a value of $180,000

RSUs with a value of $180,000

(4) 

(5) 

 

(1)

Non-employee directors have the option to receive shares of common stock, valued at the fair market value at the time of issuance, in lieu of cash retainers. We do not issue, nor do we pay cash for, fractional shares. Annual retainer fees are payable in advance at the first regularly scheduled meeting of the Board for the calendar year.

(2)

All non-employee directors are entitled to an annual grant of options to purchase shares of common stock (with an exercise price equal to the fair market value on the date of grant), which are granted at the first regularly scheduled meeting of the Board for the calendar year and are fully vested at the time of grant.

(3)

All non-employee directors are entitled to an annual grant of restricted stock units (“RSUs”), which are granted at the first regularly scheduled meeting of the Board for the calendar year and vest in full on the one year anniversary of the date of the grant.

(4)

Any newly appointed non-employee director receives, upon appointment, a one-time grant of options to purchase shares of common stock (with an exercise price equal to the fair market value on the date of grant), with one quarter of such options vesting each year on the anniversary of appointment to the Board, subject to continued Board service.

(5)

Any newly appointed non-employee director receives, upon appointment, a one-time grant of RSUs, which vest in full on the one year anniversary of appointment to the Board, subject to continued Board service.

DIRECTOR COMPENSATION TABLE FOR 2019

The following table discloses all compensation provided to the non-employee directors for the most recently completed fiscal year ended December 31, 2019:

 

Name(1)

   Fees Earned or
Paid in Cash(2)
($)
     Stock
Awards(3,5)
($)
     Option
Awards(4,5)
($)
     Total
($)
 

Cesar Alvarez

   $ 62,500      $ 124,997      $ 124,998      $ 312,495  

Steven Frank

   $ 49,998      $ 124,997      $ 124,998      $ 299,993  

Vinita Gupta

   $ 56,500      $ 124,997      $ 124,998      $ 306,495  

Fred Hassan

   $ 56,500      $ 124,997      $ 124,998      $ 306,495  

Jeffrey Kindler

   $ 69,000      $ 124,997      $ 124,998      $ 318,995  

Dean Mitchell

   $ 56,500      $ 124,997      $ 124,998      $ 306,495  

Robert Shapiro

   $ 62,997      $ 124,997      $ 124,998      $ 312,992  

James Turley

   $ 62,496      $ 124,997      $ 124,998      $ 312,491  

 

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(1)

Randal Kirk, our Executive Chairman, is not included in this table. He is an employee of the Company and receives no compensation for his service as a director. The compensation received by Mr. Kirk is shown in the Summary Compensation Table on page 55.

(2)

Our directors may elect to receive any portion of their annual retainer fees in shares of our common stock instead of cash. During 2019, each of our directors elected to receive all annual retainer fees in shares of our common stock, except for Mr. Alvarez and Mr. Kindler.

(3)

Represents the aggregate grant date fair market value of the annual grant of RSUs, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”).

(4)

Represents the aggregate grant date fair market value of the annual grant of stock options, computed in accordance with ASC Topic 718, based on the closing price of our common stock on the date of grant. For a full description of the assumptions we use in computing this amount, see Note 2 to our consolidated financial statements for the year ended December 31, 2019, which is included in our 2019 Annual Report.

(5)

The following table provides information regarding the aggregate outstanding equity awards held by each non-employee director as of December 31, 2019:

 

Name

   RSUs
Outstanding

(#)
     Stock Options
Outstanding
(#)
     Unvested
Stock Options
(#)
 

Cesar Alvarez

     24,703        138,711        —    

Steven Frank

     24,703        138,711        —    

Vinita Gupta

     24,703        111,696        20,000  

Fred Hassan

     24,703        126,916        10,040  

Jeffrey Kindler

     24,703        147,622        —    

Dean Mitchell

     24,703        138,711        —    

Robert Shapiro

     24,703        147,622        —    

James Turley

     24,703        159,502        —    

Equity Ownership for Board of Directors

The Board believes that directors should hold meaningful equity ownership positions in the Company to help align the interests of directors with those of shareholders. Under our stock ownership guidelines for directors, non-employee directors are expected to be beneficial owners of shares of our common stock with a market value equivalent to at least five times the amount of annual cash retainer fees (not including any additional retainer for service as a Committee Chair or Lead Independent Director, and as adjusted from time to time). Non-employee directors have five years to satisfy the ownership requirement, which is measured from the later of June 2018 (when the current requirement was adopted) or the date of appointment for newly appointed non-employee directors. Compliance with the requirement is measured on an annual basis each year using the closing price of our common stock as of December 31st.

For purposes of the equity ownership guidelines described above, a non-employee director’s shareholdings include, in addition to shares held outright, any stock underlying vested but unexercised stock options assuming the stock options have been “net exercised.” Stock underlying equity awards that remain unvested will not count towards the requirement, regardless of whether the award is time- or performance-based.

Until a non-employee director has met our equity ownership guidelines, he or she is expected to hold 100% of any stock acquired through exercise of a stock option or vesting of restricted stock, net of shares sold to cover the cost of acquisition and any tax obligation. In addition, non-employee directors must further hold all net shares for a minimum of one year following exercise, in the case of stock options, or vesting, in the case of other equity awards.

 

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PROPOSAL 2

RATIFICATION OF APPOINTMENT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

Background

After consideration of the firm’s qualifications and past performance, the Board, through the Audit Committee, has appointed Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for the fiscal year ending December 31, 2020.

On September 10, 2019, the Audit Committee dismissed PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm, and on September 13, 2019, Deloitte was engaged as our independent registered public accounting firm for the fiscal year ended December 31, 2019, in each case effective immediately. The Audit Committee has again selected Deloitte as our independent registered accounting firm for the year ending December 31, 2020 and believes that the retention of Deloitte for the 2020 fiscal year is in the best interest of us and our shareholders.

Under the Sarbanes-Oxley Act of 2002 and the rules of the SEC promulgated thereunder, the Audit Committee is solely responsible for the selection, appointment, compensation, and oversight of the work of our independent registered public accounting firm. Although submission of the appointment of an independent registered public accounting firm to shareholders for ratification is not required by law, the Board considers the appointment of our independent registered public accounting firm to be an important matter of shareholder concern and is submitting the appointment of Deloitte for ratification by our shareholders, as a matter of good corporate practice. One or more representatives of Deloitte are expected to be present at the Annual Meeting with the opportunity to make a statement if they so desire and to be available to respond to appropriate questions.

If shareholders do not ratify the selection of Deloitte, the Audit Committee may, but is not required to, reconsider its selection if the shareholders’ action so warrants. Even if the selection is ratified, the Audit Committee, exercising its own discretion, may select different auditors at any time during the year if it determines that such a change would be in our best interests and in the best interests of our shareholders.

Required Vote and Board Recommendation

The affirmative vote of a majority of the votes cast on the matter is required for the approval of this item. As this proposal is considered a “routine item,” your bank, broker, or other nominee may vote your shares “for” the proposal without receiving your voting instructions. Abstentions and broker non-votes will not count either in favor of or against the proposal.

THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP.

 

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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Principal Accountant Fees

The following table summarizes the aggregate fees billed by Deloitte for the fiscal year ended December 31, 2019 and, for comparison purposes, the aggregate fees billed by PwC for the fiscal year ended December 31, 2018:

 

     Fiscal Year Ended
December 31,
 
     2019      2018  

Audit Fees

   $ 1,491,200      $ 3,023,864  

Audit-Related Fees

     —          —    

Tax Fees

     —          149,100  

All Other Fees

     —          —    
  

 

 

    

 

 

 

Total Fees

   $ 1,491,200      $ 3,172,964  
  

 

 

    

 

 

 

Audit Fees . Audit fees include professional services rendered by our independent auditors for the audit of our annual financial statements, including the reviews of the financial statements included in our quarterly reports on Form 10-Q. This category also includes fees for assistance with complex accounting transactions, fees for audits provided in connection with subsidiaries and statutory filings or services that generally only the principal auditor can reasonably provide to a client, and consents and assistance with and review of documents filed with the SEC. In 2018, audit fees included fees for audits of certain subsidiaries, including statutory filings and also fees to support our convertible debt financing in July 2018.

Audit-Related Fees . Audit-related fees consist of amounts for assurance and related services for expanded audit procedures and reporting consultations for recent accounting pronouncements to be adopted.

Tax Fees . Tax fees include original and amended tax returns, studies supporting tax return amounts as may be required by Internal Revenue Service regulations, claims for refunds, assistance with tax audits and other work directly affecting or supporting the payment of taxes, planning, research, and advice supporting our efforts to maximize the tax efficiency of our operations. Tax fees in 2019 were billed by PwC and are therefore not shown in the table.

All Other Fees . All other fees are fees for products or services other than those in the above three categories. In fiscal years 2019 and 2018, our independent auditors did not provide any services other than those described above.

Pre-Approval Policy

The Audit Committee has adopted a written policy for the provision of audit services and permitted non-audit services by our independent registered public accounting firm. Our Chief Financial Officer has primary responsibility to the Audit Committee for administration and enforcement of this policy and for reporting non-compliance. Under the policy, the Audit Committee receives a presentation of an annual plan for audit services and for any proposed audit-related, tax, or other non-audit services to be performed by the independent registered public accounting firm, but management may, from time to time, seek approval of certain additional audit or non-audit services not provided for in the budget. Rule 2-01 of Regulation S-X provides an exception to the requirement for pre-approval of non-audit services for de minimis amounts under certain circumstances. Our policy does not include the de minimis exception, and during fiscal years 2019 and 2018, no non-audit services were performed pursuant to the de minimis exception.

 

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Additional Information Regarding Change of Independent Registered Accounting Firms

The audit reports of PwC on our financial statements as of and for the years ended December 31, 2018 and 2017 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles, except that the report on our consolidated financial statements as of and for the year ended December 31, 2018 included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.

During the fiscal years ended December 31, 2018 and 2017 and the subsequent interim period through September 10, 2019, there were no “disagreements,” as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions, between us and PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of PwC, would have caused PwC to make reference in connection with their opinion to the subject matter of the disagreement.

During the fiscal years ended December 31, 2018 and 2017 and the subsequent interim period through September 10, 2019, there were no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K, except that during the second quarter of 2018, we identified a material weakness in our internal control over financial reporting in connection with our adoption of Accounting Standards Codification Topic 606,  Revenue from Contracts with Customers . This control deficiency resulted in the misstatement of accumulated deficit, deferred revenue, and collaboration and licensing revenues, and restatement of our consolidated financial statements for the quarter ended March 31, 2018. We concluded that the material weakness had been remediated as of December 31, 2018. The Committee discussed the material weakness with PwC, and we authorized PwC to respond fully to the inquiries of Deloitte concerning the material weakness.

During the fiscal years ended December 31, 2018 and 2017 and the subsequent interim period through September 13, 2019, we did not, nor did anyone on our behalf, consult Deloitte with respect to: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report was provided to us nor oral advice was provided to us that Deloitte concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).

 

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AUDIT COMMITTEE REPORT

In accordance with the Audit Committee Charter, the Audit Committee assists the Board in fulfilling its responsibility for oversight of the integrity of our accounting, auditing, and financial reporting practices. During the fiscal year ended December 31, 2019, the Audit Committee met 17 times. The Audit Committee reviewed and discussed the interim financial information contained in our Quarterly Reports on Form 10-Q with our Chief Financial Officer, our Chief Legal Officer, and the independent registered public accounting firm prior to public release.

In discharging its oversight responsibility as to the audit process, the Audit Committee has received the written disclosures and the letter from Deloitte required under the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) regarding Deloitte’s communications with the Audit Committee concerning independence, and has discussed with our independent registered public accounting firm its independence. The Audit Committee also discussed with management the quality and adequacy of our internal controls. The Audit Committee reviewed with Deloitte their audit plans, audit scope, and identification of audit risks.

The Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management or our independent registered public accounting firm. The Audit Committee oversees our financial reporting process on behalf of the Board. Our management has primary responsibility for the financial statements and reporting process, including our internal control over financial reporting. Deloitte is responsible for performing an integrated audit of our financial statements and internal control over financial reporting in accordance with the auditing standards of the PCAOB.

The Audit Committee reviewed and discussed with Deloitte the matters required to be discussed by the applicable requirements of the PCAOB and the SEC, and, with and without management present, discussed and reviewed the results of Deloitte’s audit of the financial statements. The Audit Committee also considered, as it determined appropriate, tax matters, and other areas of financial reporting and the audit process over which the Audit Committee has oversight.

The Audit Committee reviewed and discussed our audited financial statements as of and for the fiscal year ended December 31, 2019 with management and Deloitte. Management has the responsibility for the preparation of our financial statements and Deloitte has the responsibility for the audit of those statements.

Based on the above-mentioned review and discussions with management and Deloitte, the Audit Committee recommended to the Board that our audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, for filing with the SEC.

In connection with the evaluation, appointment, and retention of the independent auditors, the Audit Committee annually reviews the qualifications, performance, and independence of the independent auditor, and lead engagement partner, and assures the regular rotation of the lead engagement partner as required. In doing so, the Audit Committee considers a number of factors including, but not limited to: quality of services provided; technical expertise and knowledge of the industry; effective communication; and objectivity. The Audit Committee also considers whether the non-audit services provided by Deloitte are compatible with maintaining Deloitte’s independence. The Audit Committee reappointed Deloitte, subject to shareholder ratification, as our independent registered public accounting firm for the fiscal year ending December 31, 2020.

THE AUDIT COMMITTEE

Jeffrey Kindler, Chair

Dean Mitchell

Robert Shapiro

 

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PROPOSAL 3

NON-BINDING PROPOSAL TO APPROVE THE COMPENSATION OF THE

NAMED EXECUTIVE OFFICERS

General

The Board has determined to provide our shareholders the opportunity to vote each year to approve, on an advisory basis, the compensation of our named executive officers, as disclosed in this Proxy Statement. The compensation of our named executive officers is described in the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative on pages 43 to 53 of this Proxy Statement.

The Compensation Committee designs our executive compensation program to attract, motivate, and retain executive officers who are critical to our success. Under these programs, our named executive officers are rewarded for the achievement of our near-term and longer-term financial and strategic goals and for driving corporate financial performance and stability. The programs contain elements of cash and equity-based compensation and are designed to align the interests of our executives with those of our shareholders.

Our compensation program reflects competition and reasonable practices in the marketplace. The mix of compensation components is competitive with that of other companies of similar size and operational characteristics, links compensation to individual and corporate performance and encourages stock ownership by senior management. Based on its review of the total compensation of our named executive officers for 2019, the Compensation Committee believes that the total compensation for each of the named executive officers is reasonable and effectively achieves the objective of aligning compensation with the achievement of our financial goals and creation of shareholder value without encouraging our named executive officers to take unnecessary or excessive risks.

The Compensation Discussion and Analysis section of this Proxy Statement and the accompanying tables and narrative provide a comprehensive review of our named executive officer compensation objectives, program, and rationale. We urge you to read this disclosure before voting on this proposal.

Pursuant to Section 14A of the Exchange Act, the Board is requesting shareholders approve an advisory vote on the following resolution:

“RESOLVED, that our shareholders approve, on a non-binding advisory basis, the compensation of the named executive officers as disclosed in the Proxy Statement for the 2020 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table, the other related tables and the accompanying narrative.”

As an advisory vote, your vote on this proposal will be non-binding on the Board. However, the Board values the opinions that our shareholders express in their votes and will consider the outcome of the vote when making future executive compensation decisions as it deems appropriate.

We seek shareholder approval of our executive compensation on an annual basis. The next opportunity for our shareholders to approve on a non-binding basis the compensation of our named executive officers will be at our 2021 Annual Meeting.

 

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Vote Required and Board Recommendation

The affirmative vote of a majority of the votes cast on the matter is required for the approval of this item. As this proposal is not considered a “routine item,” your bank, broker, or other nominee cannot vote your shares without receiving your voting instructions. Abstentions and broker non-votes will not count either in favor of or against the proposal.

THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE NON-BINDING ADVISORY PROPOSAL APPROVING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.

 

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PROPOSAL 4

APPROVAL OF AN AMENDMENT TO THE

PRECIGEN, INC. AMENDED AND RESTATED 2013 OMNIBUS INCENTIVE PLAN

Overview

The Board requests that shareholders approve the proposed amendment (the “Amendment”) to the 2013 Plan to increase the number of shares of common stock which may be subject to awards under the 2013 Plan by 2,000,000 shares. Other than the increase in the number of shares which may be subject to awards under the 2013 Plan that is reflected in the proposed Amendment, there are no other changes proposed to the 2013 Plan.

The 2013 Plan became effective upon the closing of our initial public offering in August 2013 and was approved by our shareholders at our 2014 Annual Meeting. Our shareholders have authorized additional shares for issuance pursuant to the 2013 Plan at each of our Annual Meetings since 2015.

Share Increase

The 2013 Plan has served as an important part of our overall compensation program since it became effective. The 2013 Plan enables us to grant equity-based compensation awards designed to provide an additional incentive for our officers, employees, and non-employee directors and other service providers who are critical to the achievement of our long-term financial and strategic goals. We believe that the Amendment, which amends the 2013 Plan to increase by 2,000,000 the number of shares of common stock which may be subject to awards thereunder, supports our ability to attract, motivate, and retain the most competent and skilled officers, employees, non-employee directors, and other service providers, which is a significant factor for our long-term success. Awards made under the 2013 Plan, including annual cash incentive awards and long-term incentive equity grants, are designed to align the individual interests of our officers, employees, non-employee directors, and other service providers with the interests of our shareholders and reward them for the creation of long-term shareholder value.

We believe that the number of shares currently available for issuance under the 2013 Plan may not be sufficient in view of our compensation structure and strategy and that the availability of the additional shares sought in this proposal will help us to continue to have a sufficient number of shares of common stock available for awards under the 2013 Plan. As a result, the Compensation Committee and the Board have approved the Amendment, subject to the approval of our shareholders at the Annual Meeting.

As of March 31, 2020, there were options to purchase an aggregate of 12,052,124 shares of common stock outstanding under the 2013 Plan at a weighted-average exercise price of $18.53 per share and a weighted-average remaining term of 6.94 years, 2,891,634 RSUs outstanding under the 2013 Plan, and 3,301,269 shares of common stock reserved for future issuance under the 2013 Plan, which is our only plan under which equity awards can currently be made to officers and employees. As of March 31, 2020, all of our 616 employees were eligible to receive awards under the 2013 Plan, including five executive officers. As of March 31, 2020, eight non-employee directors and all of our consultants were also eligible to receive awards under the 2013 Plan, although we currently only make awards to non-employee directors and consultants under the 2019 Incentive Plan for Non-Employee Service Providers (the “2019 Plan”) and not the 2013 Plan. The granting of awards under the 2013 Plan is discretionary, and we cannot now determine the number or type of awards to be granted in the future to any particular person or group. As of March 31, 2020, the fair market value of our common stock was $3.40, which was the closing price of our common stock on that date on the Nasdaq Global Select Market.

In making the recommendation to increase the 2013 Plan’s share reserve by an additional 2,000,000 shares, we considered a number of factors, including:

Importance of Long-Term Equity Incentives . Long-term equity incentives are an important component of our executive compensation program, motivating officers and employees, non-employee directors, and other service

 

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providers to make decisions that focus on creating long-term value for shareholders, aligning their interests with the interests of shareholders, and serving as an effective recruitment and retention tool.

Historical Burn Rate . We are committed to managing the use of our equity incentives prudently to balance the benefits equity compensation brings to our compensation program with the dilution it causes our shareholders. As part of our analysis when considering the proposed share increase, we considered the 2013 Plan’s “burn rate,” or the number of shares subject to equity awards granted since our initial public offering in August 2013, divided by the weighted average number of shares outstanding for that period. We also considered that during the period from the beginning of 2019 through the end of the first quarter of 2020 we made equity grants from the 2013 Plan in connection with the following: leadership appointments to advance our efforts, including the appointment of our CEO; the compensation of employees who we believe are critical to furthering our business strategy; equity grants in lieu of cash compensation; incentivizing our key officers and employees; our former Services Agreement entered into and effective as of November 1, 2015, between us and Third Security that expired on January 1, 2020; and our former Restricted Stock Unit Agreement with Mr. Kirk that expired on March 31, 2020 (the “RSU Agreement”). We believe these new hires and compensation decisions are critical to the development and strength of our senior management team to attract the experience and talent necessary to further implement our strategy.

Shareholder Value Transfer Test . When evaluating the appropriate number of shares to increase the share reserve under the 2013 Plan, we reviewed the shareholder value transfer of the proposed increase, calculated as the value of available shares and plan awards as a percentage of our market capitalization, and determined that the addition of 2,000,000 shares to the 2013 Plan share reserve was reasonable and consistent with industry guidelines.

Expected Duration . We expect that the shares available for issuance pursuant to future awards, including the additional shares if this proposal is approved by our shareholders, will be sufficient for currently anticipated awards under the 2013 Plan for the foreseeable future. Expectations regarding future share usage could be impacted by a number of factors such as hiring and promotion activity at the executive level; the rate at which shares are returned to the 2013 Plan reserve upon awards’ expiration, forfeiture, or cash settlement; the future performance of our stock price; consequences of acquisitions or dispositions; and other factors. While we believe that the assumptions we used are reasonable, future share usage may differ from current expectations. If, however, the shareholders do not approve the Amendment to increase the number of shares reserved for issuance under the 2013 Plan, there may not be a sufficient number of shares of our common stock available to achieve our recruiting and retention objectives.

Text of the Amendment

The first paragraph of Section 6.02 of the 2013 Plan would be revised as follows:

“6.02 Aggregate Limit

The maximum aggregate number (the “Maximum Aggregate Number”) of shares of Common Stock which may be subject to Awards under this Plan is 25,000,000 27,000,000 shares of Common Stock.”

Summary of the Material Terms of the 2013 Plan

A summary of the material terms of the 2013 Plan is set forth below. This summary does not purport to be a complete description of all provisions of the 2013 Plan and is qualified in its entirety by reference to the 2013 Plan, a copy of which is attached as an appendix to this Proxy Statement and incorporated by reference into this proposal.

Purpose . We established the 2013 Plan to attract, retain, and motivate our employees, officers, and non-employee directors, to promote the success of our business by linking the personal interests of our employees, officers, consultants, advisors, and non-employee directors to those of our shareholders and to encourage stock ownership on the part of management. The 2013 Plan is intended to permit the grant of stock options (both incentive stock

 

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options, or “ISOs”, and non-qualified stock options, or “NQSOs,” and, collectively, “Options”), SARs, restricted stock awards, or Restricted Stock Awards, RSUs, incentive awards, or Incentive Awards, other stock-based awards, or Stock Based Awards, and dividend equivalents, or Dividend Equivalents.

Administration . The 2013 Plan is administered by the Compensation Committee, which has the authority to grant awards to such persons and upon such terms and conditions (not inconsistent with the provisions of the 2013 Plan) as it may consider appropriate. The Committee may act through subcommittees or, with respect to awards granted to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act, who are not members of the Board or the board of directors of our Affiliates (as defined by the 2013 Plan) and who are not a covered employee subject to the $1 million deduction limit under Section 162(m) of the Code, delegate to one or more officers all or part of its duties with respect to such awards. The Committee may, at its discretion, accelerate the time at which any award may be exercised, become transferable or nonforfeitable, or become earned and settled including without limitation (i) in the event of the participant’s death, disability, retirement, or involuntary termination of employment or service (including a voluntary termination of employment or service for good reason) or (ii) in connection with a Change in Control (as defined in the 2013 Plan).

Authorized Shares . Under the 2013 Plan, we may issue a maximum aggregate of 25,000,000 shares of common stock (27,000,000 shares of common stock if the shareholders approve the Amendment to the 2013 Plan), all of which may be issued pursuant to Options, SARs, Restricted Stock Awards, RSUs, Incentive Awards, Stock-Based Awards, or Dividend Equivalents. Each share issued in connection with an award will reduce the number of shares available for awards under the 2013 Plan by one, and each share covered under the exercised portion of a SAR will reduce the number of shares available for awards under the 2013 Plan by one, even though the share is not actually issued upon settlement of the SAR. Shares relating to awards that are terminated by expiration, forfeiture, cancellation or otherwise without issuance of shares of common stock, settled in cash in lieu of shares, or exchanged prior to the issuance of shares for awards not involving shares, will again be available for issuance under the 2013 Plan. Shares not issued as a result of net settlement of an award, tendered or withheld to pay the exercise price, purchase price or withholding taxes of an award or shares purchased on the open market with the proceeds of the exercise price of an award will be deemed delivered under the 2013 Plan and will not again be available for issuance under the 2013 Plan.

Written Agreements . All awards granted under the 2013 Plan will be governed by separate written agreements between the participants and us. The written agreements will specify the terms of the particular awards.

Transferability . Generally, an award is non-transferable except by will or the laws of descent and distribution, and during the lifetime of the participant to whom the award is granted, the award may only be exercised by, or payable to, the participant. However, the Compensation Committee may provide that awards, other than ISOs or a Corresponding SAR that is related to an ISO, may be gifted by a participant to immediate family members or trust or other entities on behalf of the Participant and/or family members. Any such transfer will be permitted only if (i) the participant does not receive any consideration for the transfer and (ii) the Committee expressly approves the transfer. The holder of the transferred award will be bound by the same terms and conditions that governed the award during the period that it was held by the participant, except that such transferee may only transfer the award by will or the laws of descent and distribution.

Maximum Award Period . No award shall be exercisable or become vested or payable more than ten years after the date of grant. An ISO granted to a Ten Percent Shareholder (as defined in the 2013 Plan) or a corresponding SAR that relates to such an ISO may not be exercisable more than five years after the date of grant.

Compliance with Applicable Law . No award shall be exercisable, vested, or payable except in compliance with all applicable federal and state laws and regulations (including, without limitation, tax and securities laws), any listing agreement with any stock exchange to which we are a party, and the rules of all domestic stock exchanges on which our shares may be listed.

 

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Payment . The exercise or purchase price of an award, and any taxes required to be withheld with respect to an award, may be paid in cash or, if the written agreement so provides, the Compensation Committee may allow a participant to pay all or part of the exercise or purchase price, and any required withholding taxes, by tendering shares of common stock the participant already owns, through a broker-assisted cashless exercise, by means of “net exercise” procedure whereby shares of common stock shall be withheld from delivery, or any other specified medium of payment or combination thereof.

Shareholder Rights . No participant shall have any rights as our shareholder as a result of issuance of an award until the award is settled by the issuance of common stock (other than a Restricted Stock Award or RSUs for which certain shareholder rights may be granted).

Forfeiture Provisions . Awards do not confer upon any individual any right to continue in our employ or service or in the employ or service of our affiliated entities. All rights to any award that a participant has will be immediately forfeited if the participant is discharged from employment or service.

Types of awards

Options . Both ISOs and NQSOs may be granted under the 2013 Plan. The Compensation Committee determines the eligible individuals to whom grants of Options will be made, the number of shares subject to each option, the exercise price per share, the time or times at which the option may be exercised, whether any performance or other conditions must be satisfied before a participant may exercise an option, the method of payment by the participant, the method of delivery of shares to a participant, whether the Option is an ISO or a NQSO, and all other terms and conditions of the award. However, the exercise price of an Option may not be less than the fair market value of a share of common stock on the date the Option is granted. No participant may be granted ISOs that are first exercisable in any calendar year for shares of common stock having an aggregate fair value (determined on the date of grant) that exceeds $100,000. With respect to an ISO granted to a participant who is a Ten Percent Shareholder (as defined in the 2013 Plan), the exercise price per share may not be less than 110% of the fair market value of the common stock on the date the Option is granted. At the Committee’s discretion, an Option may be granted with or without a Corresponding SAR (as defined below).

SARs . A SAR entitles the participant to receive, upon exercise, the excess of the fair market value on that date of each share of common stock subject to the exercised portion of the SAR over the fair market value of each such share on the date of the grant of the SAR. A SAR can be granted alone or in tandem with an Option. A SAR granted in tandem with an Option is called a Corresponding SAR and entitles the participant to exercise the Option or the SAR, at which time the other tandem award expires with respect to the number of shares being exercised. The Compensation Committee is authorized to determine the eligible individuals to whom grants of SARs will be made, the number of shares of common stock covered by the grant, the time or times at which a SAR may be exercised, and all other terms and conditions of the SAR. However, no participant may be granted Corresponding SARs that are related to ISOs which are first exercisable in any calendar year for shares of common stock having an aggregate fair market value (determined on the date of grant) that exceeds $100,000.

Restricted Stock Awards and RSUs . A Restricted Stock Award is the grant or sale of shares of common stock, which may be subject to forfeiture for a period of time or subject to certain conditions. An RSU entitles the participant to receive, upon vesting, shares of our common stock. We will deliver to the participant one share of common stock for each RSU that becomes earned and payable. With regard to Restricted Stock Awards, the Compensation Committee is authorized to determine the eligible individuals to whom grants will be made, the number of shares subject to such grants, the purchase price, if any, to be paid for each share subject to the award of restricted stock, the time or times at which the restrictions will terminate, and all other terms and conditions of the restricted stock. With regards to RSUs, the Committee is authorized to determine the eligible individuals to whom grants will be made, the number of shares subject to such grants and the vesting conditions entitling a participant to settlement of the RSUs.

 

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Incentive Awards . An Incentive Award entitles the participant to receive cash or common stock when certain conditions are met. The Compensation Committee has the authority to determine the eligible individuals to whom grants will be made and all other terms and conditions of the Incentive Award.

Stock-Based Awards . Stock-Based Awards may be denominated or payable in, valued by reference to or otherwise based on shares of common stock, including awards convertible or exchangeable into shares of common stock (or the cash value thereof) and common stock purchase rights and awards valued by reference to the fair market value of the common stock. The Compensation Committee has the authority to determine the eligible individuals to whom grants will be made and all other terms and conditions of Stock-Based Awards. However, the purchase price for the common stock under any Stock-Based Award in the nature of a purchase right may not be less than the fair market value of a share of common stock as of the date the award is granted. Cash awards, as an element of or supplement to any other award under the 2013 Plan, may also be granted.

The Compensation Committee is also authorized under the 2013 Plan to grant shares of common stock as a bonus, or to grant shares of common stock or other awards in lieu of any of our obligations or of our affiliates to pay cash or to deliver other property under the 2013 Plan or under any other of our plans or compensatory arrangements or any of our affiliates.

Dividend Equivalents . The Compensation Committee may also grant Dividend Equivalents under the 2013 Plan. A Dividend Equivalent is an award that entitles the participant to receive cash, shares of common stock, other awards, or other property equal in value to all or a specified portion of dividends paid with respect to shares of our common stock. The Committee is authorized to determine the eligible individuals to whom grants will be made and all other terms and conditions of the Dividend Equivalents. However, no Dividend Equivalents may be awarded in connection with an Option, SAR, or Stock-Based Award in the nature of purchase rights.

Material Terms of the Performance-Based Compensation

Awards that are paid to our current or former named executive officers may be subject to the tax deduction limitations of Section 162(m) of the Code.

Eligibility . Any of our employees or service providers, employees or service providers of our Affiliates (as defined in the 2013 Plan), and nonemployee members of the Board or of any board of directors of our Affiliates is eligible to receive an award under the 2013 Plan.

Award Limits . In any calendar year, no participant may be granted Options, SARs or other stock-based awards in the nature of purchase rights that relate to more than 5,000,000 shares of common stock. For these purposes, an Option and its corresponding SAR will be counted as a single award. For any award stated with reference to a specific dollar limit, the maximum amount payable with respect to any 12-month performance period to any one participant is $5,000,000 (pro-rated up or down for performance periods greater or less than 12 months). Award limits that are expressed as a number of shares are subject to the adjustment provisions of the 2013 Plan as described below.

Performance Criteria . The Compensation Committee has the discretion to establish objectively determinable performance conditions for when qualified performance-based awards will become vested, exercisable, and payable. Objectively determinable performance conditions generally are performance conditions (a) that are established in writing (i) at the time of the grant or (ii) no later than the earlier of (x) 90 days after the beginning of the period of service to which they relate and (y) before the lapse of 25% of the period of service to which they relate; (b) that are uncertain of achievement at the time they are established and (c) the achievement of which is determinable by a third party with knowledge of the relevant facts. These performance conditions may be based on one or any combination of metrics related to our financial, market or business performance. The form of the performance conditions also may be measured on a company, affiliate, division, business unit, or geographic basis, individually, alternatively or in any combination, subset or component thereof. Performance goals may

 

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reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure of the selected performance conditions. Profits, earnings, and revenues used for any performance condition measurement may exclude any extraordinary or nonrecurring items. The performance conditions may, but need not, be based upon an increase or positive result under the aforementioned business criteria and could include, for example and not by way of limitation, maintaining the status quo or limiting the economic losses (measured, in each case, by reference to the specific business criteria). An award that is intended to become exercisable, vested or payable on the achievement of performance conditions means that the award will not become exercisable, vested or payable solely on mere continued employment or service. However, such an award, in addition to performance conditions, may be subject to continued employment or service by the participant. The performance conditions upon which qualified performance-based compensation may be based include any or any combination of the following: (a) revenue, (b) earnings before interest, taxes, depreciation and amortization, or EBITDA, (c) cash earnings (earnings before amortization of intangibles), (d) operating income, (e) pre-or after-tax income, (f) earnings per share, (g) net cash flow, (h) net cash flow per share, (i) net earnings, (j) return on equity, (k) return on total capital, (l) return on sales, (m) return on net assets employed, (n) return on assets or net assets, (o) share price performance, (p) total shareholder return, (q) improvement in or attainment of expense levels, (r) improvement in or attainment of working capital levels, (s) net sales, (t) revenue growth or product revenue growth, (u) operating income (before or after taxes), (v) pre-or after-tax income (before or after allocation of corporate overhead and bonus), (w) earnings per share; (x) return on equity, (y) appreciation in and/or maintenance of the price of the shares of our common stock, (z) market share, (aa) gross profits, (bb) comparisons with various stock market indices; (cc) reductions in cost, (dd) cash flow or cash flow per share (before or after dividends), (ee) return on capital (including return on total capital or return on invested capital), (ff) cash flow return on investments; (gg) improvement in or attainment of expense levels or working capital levels, and/or (hh) shareholder equity.

The Compensation Committee has the discretion to select one or more periods of time over which the attainment of one or more of the foregoing performance conditions will be measured for the purpose of determining when an award will become vested, exercisable, or payable. The Committee has the authority to adjust goals and awards in the manner set forth in the 2013 Plan.

Change in Control . In the event of a “Change in Control” (as defined in the 2013 Plan) and, with respect to awards that are subject to Section 409A of the Internal Revenue Code of 1986, as amended, or the Code, and such awards, 409A Awards, only to the extent permitted by Section 409A of the Code, the Compensation Committee in its discretion may, on a participant-by-participant basis (a) accelerate the vesting of all unvested and unexercised Options, SARs or Stock-Based Awards in the nature of purchase rights and/or terminate such awards, without any payment therefore, immediately prior to the date of any such transaction after giving the participant at least seven days written notice of such actions; (b) fully vest and/or accelerate settlement of any awards; (c) terminate any outstanding Options, SARs or Stock-Based Awards in the nature of purchase rights after giving the participant notice and a chance to exercise such awards (to the extent then exercisable or exercisable upon the change in control); (d) cancel any portion of an outstanding award that remains unexercised or is subject to restriction or forfeiture in exchange for a cash payment to the participant of the value of the award; or (e) require that the award be assumed by the successor corporation or replaced with interests of an equal value in the successor corporation.

Amendment and Termination . The 2013 Plan expires ten years after its original effective date, unless terminated earlier by the Board. Any award that is outstanding as of the date the 2013 Plan expires will continue in force according to the terms set out in the award agreement. The Board may terminate, amend, or modify the 2013 Plan at any time. However, shareholder approval may be required for certain types of amendments under applicable law or regulatory authority. Except as may be provided in an award agreement or the 2013 Plan, no amendment to the 2013 Plan may adversely affect the terms and conditions of any existing award in any material way without the participant’s consent.

An amendment will be contingent on approval of our shareholders, to the extent required by law, by the rules of any stock exchange on which our securities are then traded or if the amendment would (i) increase the benefits

 

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accruing to participants under the 2013 Plan, including without limitation, any amendment to the 2013 Plan or any agreement to permit a re-pricing or decrease in the exercise price of any outstanding awards, (ii) increase the aggregate number of shares of common stock that may be issued under the 2013 Plan, or (iii) modify the eligibility requirements for participation in the 2013 Plan.

Material U.S. Federal Income Tax Consequences of Awards under the 2013 Plan

The following discussion summarizes the principal federal income tax consequences associated with awards under the 2013 Plan. The discussion is based on laws, regulations, rulings, and court decisions currently in effect, all of which are subject to change.

ISOs . A participant will not recognize taxable income on the grant or exercise of an ISO (although the excess of the fair market value of the common stock over the exercise price will be included for alternative minimum tax purposes in the year of exercise). A participant will recognize taxable income when he or she disposes of the shares of common stock acquired under the ISO. If the disposition occurs more than two years after the grant of the ISO and more than one year after its exercise, the participant will recognize long-term capital gain (or loss) to the extent the amount realized from the disposition exceeds (or is less than) the participant’s tax basis in the shares of common stock. A participant’s tax basis in the shares of common stock acquired under an ISO generally will be the amount the participant paid for the stock. If common stock acquired under an ISO is disposed of before the expiration of the ISO holding period described above, the participant will recognize as ordinary income in the year of the disposition the excess of the fair market value of the common stock on the date of exercise of the ISO over the exercise price. Any additional gain will be treated as long-term or short-term capital gain, depending on the length of time the participant held the shares. Special rules apply if a participant pays the exercise price by delivery of common stock. We will not be entitled to a federal income tax deduction with respect to the grant or exercise of an ISO. However, in the event a participant disposes of common stock acquired under an ISO before the expiration of the ISO holding period described above, we generally will be entitled to a federal income tax deduction equal to the amount of ordinary income the participant recognizes on the disqualifying disposition, subject to the deduction conditions and limits applicable under Section 162(m) of the Code.

NQSOs . A participant will not recognize any taxable income on the grant of a NQSO. On the exercise of a NQSO, the participant will recognize as ordinary income the excess of the fair market value of the common stock acquired over the exercise price. A participant’s tax basis in the common stock then is the amount paid for the shares of common stock plus any amounts included in income on exercise of the NQSO. Special rules apply if a participant pays the exercise price by delivery of common stock. The exercise of a NQSO generally will entitle us to claim a federal income tax deduction equal to the amount of ordinary income the participant recognizes on exercise of the NQSO, subject to the deduction conditions and limits applicable under Section 162(m) of the Code.

SARs . A participant will not recognize any taxable income at the time SARs are granted. The participant at the time of receipt will recognize as ordinary income the amount of cash and the fair market value of the common stock that he or she receives on exercise of the SAR. We generally will be entitled to a federal income tax deduction equal to the amount of ordinary income the participant recognizes on exercise of the SAR, subject to the deduction conditions and limits applicable under Section 162(m) of the Code.

Restricted Stock Awards and RSUs . With regard to Restricted Stock Awards, a participant will recognize ordinary income on account of a Restricted Stock Award on the first day that the shares are either transferable or no longer subject to a substantial risk of forfeiture. The ordinary income recognized will equal the excess of the fair market value of the common stock on such date over the price, if any, paid for the stock. However, even if the shares under a Restricted Stock Award are both nontransferable and subject to a substantial risk of forfeiture, the participant may make a special “83(b) election” to recognize income, and have his or her tax consequences determined, as of the date of grant of the Restricted Stock Award. The participant’s tax basis in the shares

 

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received under the Restricted Stock Award will equal the income recognized plus the price, if any, paid for the Restricted Stock Award. We generally will be entitled to a federal income tax deduction equal to the ordinary income the participant recognizes with respect to the Restricted Stock Award. With regard to RSUs, a participant will not recognize any taxable income at the time RSUs are granted. When the terms and conditions to which the RSUs are subject have been satisfied and the RSUs are settled, the participant will recognize as ordinary income the fair market value of the common stock he or she receives on settlement of the RSUs. We generally will be entitled to a federal income tax deduction equal to the ordinary income the participant recognizes on settlement of the RSUs, subject to the deduction conditions and limits applicable under Section 162(m) of the Code.

Incentive Awards . A participant will not recognize any taxable income at the time an Incentive Award is granted. When the terms and conditions to which an Incentive Award is subject have been satisfied and the award is paid, the participant will recognize as ordinary income the amount of cash and the fair market value of the common stock he or she receives on settlement of the Incentive Award. We generally will be entitled to a federal income tax deduction equal to the amount of ordinary income the participant recognizes on settlement of the Incentive Award, subject to the deduction conditions and limits applicable under Section 162(m) of the Code.

Stock-Based Awards . A participant will recognize ordinary income on receipt of cash or shares of common stock paid with respect to a Stock-Based Award. We generally will be entitled to a federal tax deduction equal to the amount of ordinary income the participant recognizes subject to the deduction conditions and limits applicable under Section 162(m) of the Code.

Dividend Equivalents . A participant will recognize as ordinary income the amount of cash and the fair market value of any common stock he or she receives on payment of the Dividend Equivalents. To the extent the Dividend Equivalents are paid in the form of other awards, the participant will recognize income as otherwise described herein. We generally will be entitled to a federal tax deduction equal to the amount of ordinary income the participant recognizes subject to the deduction conditions and limits applicable under Section 162(m) of the Code.

Limitation on Deductions. Section 162(m) of the Internal Revenue Code denies a federal income tax deduction for certain compensation in excess of $1.0 million per year paid by a publicly held corporation to each of its “covered employees.” A publicly held corporation’s covered employees include its chief executive officer, its chief financial officer and the three other most highly compensated executive officers. To retain highly skilled executives and remain competitive with other employers, the Compensation Committee may authorize compensation that would not be deductible under Section 162(m) of the Code or otherwise if it determines that such compensation is in the best interests of us and our shareholders. Compensation to certain employees resulting from vesting of awards in connection with a change in control or termination following a change in control also may be non-deductible under Internal Revenue Code Section 280G.

Other Tax Rules . The 2013 Plan is designed to enable the Compensation Committee to structure awards that will not be subject to Section 409A of the Code, which imposes certain restrictions and requirements on nonqualified deferred compensation. However, the Committee may grant awards that are subject to Section 409A of the Code. In that case, the terms of such 409A Award will be (a) subject to the deferral election requirements of Section 409A of the Code; and (b) may only be paid upon a separation from service, a set time, death, disability, a change in control, or an unforeseeable emergency, each within the meaning of Section 409A of the Code. The Committee shall not have the authority to accelerate or defer a 409A Award other than as permitted by Section 409A of the Code. Moreover, any payment on a separation from service of a “Specified Employee” (as defined in the 2013 Plan) will not be made until six months following the participant’s separation from service (or upon the participant’s death, if earlier) as required by Section 409A of the Code.

Aggregate Grants under the 2013 Plan

The following table provides information with respect to the aggregate number of options and RSUs granted under the 2013 Plan to our (i) named executive officers, (ii) our current executive officers as a group, (iii) our

 

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current non-employee directors, and (iv) all employees as a group except current officers, from inception of the 2013 Plan through March 31, 2020. It is not possible to determine the number of options or RSUs that will be granted in the future to participants under the 2013 Plan.

 

Name and Position

   Options
Awarded
     RSUs
Awarded
 

Helen Sabzevari, President and Chief Executive Officer

     4,650,000        1,280,865  

Randal Kirk, Executive Chairman and former Chief Executive Officer

     —          1,000,999  

Rick Sterling, Chief Financial Officer

     432,841        435,957  

Donald Lehr, Chief Legal Officer

     432,855        435,957  

Jeffrey Perez, Senior Vice President, Intellectual Property Affairs

     432,834        435,957  

Robert Walsh, III, former Senior Vice President, Energy & Fine Chemicals Platforms

     328,926        185,957  

Nir Nimrodi, former Chief Business Officer

     1,039,277        128,595  

Current executive officers as a group

     5,948,530        3,589,735  

Cesar Alvarez, Director

     117,932        32,614  

Steven Frank, Director

     117,932        32,614  

Vinita Gupta, Director

     111,696        32,614  

Fred Hassan, Director

     126,916        32,614  

Jeffrey Kindler, Director

     117,932        32,614  

Dean Mitchell, Director

     117,932        32,614  

Robert Shapiro, Director

     117,932        32,614  

James Turley, Director

     159,502        32,614  

All employees as a group except current officers

     21,461,697        2,925,794  

Vote Required and Board Recommendation

The affirmative vote of a majority of the votes cast on the matter is required for the approval of this item. As this proposal is not considered a “routine item,” your bank, broker, or other nominee cannot vote your shares without receiving your voting instructions. Abstentions and broker non-votes will have no effect on the vote.

THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO THE 2013 PLAN.

 

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IDENTIFICATION OF EXECUTIVE OFFICERS

Set forth below is information regarding the position, age, and business experience of each of our executive officers.

Helen Sabzevari, Ph.D., age 58, Chief Executive Officer. For more information about Dr. Sabzevari, please see her biography under “Nominees for Election as Directors” on page 18.

Randal Kirk, age 66, Executive Chairman and Chairman of the Board. For more information about Mr. Kirk, please see his biography under “Nominees for Election as Directors” on page 18.

Rick Sterling, age 56, Chief Financial Officer. Mr. Sterling has served as our Chief Financial Officer since 2007. Prior to joining us, he was with KPMG where he worked in the audit practice for over 17 years, with a client base primarily in the healthcare, technology, and manufacturing industries. Mr. Sterling is currently a member of the board of directors of AquaBounty Technologies Inc., a public biotechnology company (Nasdaq: AQB) that was our majority-owned subsidiary until October 2019. Mr. Sterling’s experience includes serving clients in both the private and public sector, including significant experience with SEC filings and Sarbanes-Oxley compliance. He received a B.S. in Accounting and Finance from Virginia Tech and is a licensed Certified Public Accountant.

Donald Lehr, age 45, Chief Legal Officer. Mr. Lehr has served as our Chief Legal Officer since 2011. From 2009 to 2011 he served as our Associate General Counsel. Mr. Lehr has broad experience in the areas of corporate, securities, and general business law. Prior to joining us, he practiced law with the law firm of Hogan Lovells US LLP (formerly Hogan & Hartson, LLP) in Baltimore, Maryland from 2002 to 2009. While at Hogan Lovells, his practice included the representation of privately and publicly held corporations across many industries, including biotechnology, pharmaceuticals, health care, software, technology, and manufacturing. Prior to his time at Hogan Lovells, Mr. Lehr served as a judicial clerk for the Honorable Irma S. Raker of the Court of Appeals of Maryland. Mr. Lehr received a B.A. from Swarthmore College and received a J.D. from the University of Maryland School of Law.

Jeffrey Perez, age 48, Senior Vice President, Intellectual Property Affairs. Mr. Perez has served as our Senior Vice President, Intellectual Property Affairs since August 2014. Mr. Perez is currently a member of the board of directors of AquaBounty Technologies Inc., a public biotechnology company (Nasdaq: AQB) that was our majority-owned subsidiary until October 2019. Before joining Precigen, Mr. Perez was Managing Director and Associate General Counsel and Intellectual Property at Third Security, LLC, where he evaluated potential investments of Third Security’s managed investment funds. Additionally, Mr. Perez worked with Third Security portfolio companies in evaluating and developing their intellectual property strategies and general corporate activities. Prior to joining Third Security, Mr. Perez practiced intellectual property law with the law firm of Hunton & Williams LLP in Washington D.C. Mr. Perez’s previous work involved client consultation, litigation, agreement work, opinion drafting, and patent procurement. Mr. Perez received a B.S. from Cornell University and his J.D. from George Mason University School of Law.

 

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COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Committee oversees our executive compensation programs. In this role, the Committee reviews and approves all compensation decisions relating to our named executive officers. To assist with its duties, the Committee has engaged F. Daniel Siciliano as its outside compensation consultant to provide competitive compensation data and assist with the analysis and implementation of various aspects of our executive compensation decisions. Mr. Siciliano coordinates the procurement of data through third party data providers and synthesizes that data and related information in order to provide advice that the Committee considers in making its executive compensation decisions.

This section discusses the principles underlying our executive compensation programs, policies, and decisions and explains the process the Compensation Committee uses to determine compensation and benefits for our named executive officers. It also provides qualitative information regarding the manner and context in which compensation is earned by and awarded to our named executive officers and is intended to place in perspective the data presented in the tables and narrative that follow.

The discussion and analysis of our compensation program for our named executive officers should be read in conjunction with the tables and text elsewhere in this Proxy Statement that describe the compensation awarded to, earned by or paid to our named executive officers.

The individuals who served as our CEO and Chief Financial Officer during 2019, as well as the other individuals included in the Summary Compensation Table, are referred to throughout this Proxy Statement as the “named executive officers” and, to the extent they remain employed by us, together with the other executives of management, as the “executive officers.”

Our named executive officers for 2019 are:

 

Name

  

Position

Helen Sabzevari, Ph.D.

  

President and Chief Executive Officer

Randal Kirk

  

Executive Chairman and Former Chief Executive Officer

Rick Sterling

  

Chief Financial Officer

Donald Lehr

  

Chief Legal Officer

Jeffrey Perez

  

Senior Vice President, Intellectual Property Affairs

Robert Walsh, III

  

Former Senior Vice President, Energy & Fine Chemicals Platforms

Nir Nimrodi

  

Former Chief Business Officer

Executive Summary

Our goal for our executive compensation is to provide a comprehensive package that is sufficient to attract, motivate, and retain executives of outstanding ability, performance, and potential. The Compensation Committee seeks to establish and maintain an appropriate relationship between executive compensation and the creation of shareholder value. The Committee believes that the most effective compensation program is one that provides competitive base pay, rewards the achievement of established annual and long-term goals and objectives, and provides incentives for retention.

The Compensation Committee assists the Board in fulfilling its oversight responsibilities with respect to the compensation of our executive officers. The Committee is responsible for:

 

   

establishing and administering the base salaries and annual incentive awards of our executive officers, and

 

   

administering and making recommendations and awards under our equity incentive plans.

The Compensation Committee monitors the compensation paid to our executive officers to ensure it is fair, reasonable, and competitive and is substantially tied to our performance. The Committee evaluates, both

 

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subjectively and objectively, our financial performance, competitive position, future potential, and the individual and group performance of the members of executive management. In such evaluation, the Committee reviews data prepared by management and employs the business experience of the individual members of the Committee. The Committee also utilizes the assistance of Mr. Siciliano as its outside compensation consultant.

As we entered 2019, our Compensation Committee recognized the evolving nature of our business strategy and that there was uncertainty as to whether or what specific transactions would occur over the course of the year. The strategic efforts in 2019 ultimately led to a refocusing of our Company on healthcare and the divestiture of a number of our non-healthcare businesses and assets. For 2019, after taking into account the overall position of the Company and with a focus on retention and cash preservation, the Compensation Committee retained the existing base salaries for our executive officers, made annual incentive awards in the form of equity rather than using cash, and approved continuing employment agreements with executive officers that provide for severance upon certain terminations.

Key Compensation Corporate Governance Practices

The Compensation Committee and the Board regularly review evolving practices in executive compensation and corporate governance. We have adopted certain policies and practices that we believe are consistent with industry best practices, as tailored to our specific business model and strategic direction. We have also strived to adopt policies that will foster our growth and the continual realization of value to our shareholders by encouraging appropriate risk taking and entrepreneurship in support of our unique and dynamic business model. The Committee and the Board also actively scrutinize the anticipated effect of compensation practices on our ultimate goals.

What We Do:

 

   

We ensure independence in establishing our executive compensation program.

 

   

We use what we believe to be an appropriate mix of short-term and long-term compensation.

 

   

We conduct an annual review and assessment of potential and existing risks arising from our compensation programs and policies.

 

   

We engage an outside compensation consultant to advise on executive compensation matters.

 

   

We assess risks relating to our executive compensation program.

 

   

We use equity awards that vest over time and deliver greater value as our stock price increases.

What We Do Not Do:

×    We do not allow hedging of Company stock.

×    We do not provide excessive perquisites.

×    We do not provide for tax gross-ups, except for de minimis amounts related to short-term disability insurance premiums.

×    We do not allow repricing of stock options without shareholder approval.

×    We do not offer guaranteed bonuses.

Our Compensation Philosophy

Our compensation philosophy is guided by the principle of pay-for-performance. Our compensation programs are designed to support our business goals by rewarding achievement of short-term and progress towards long-term

 

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objectives in a manner that links compensation of our executive officers with the value created for our shareholders. While aligning our executive officers’ compensation with our short-term and long-term business goals, we aim to provide the incentives needed to attract, motivate, reward, and retain our management talent, which is crucial to our long-term success.

Principles of Our Compensation Framework

Our executive compensation program is designed to attract, retain, motivate, and reward talented individuals who will execute our business plan so that we can succeed in the competitive and highly volatile business environment in which we operate. The Compensation Committee believes that the compensation program for our executive officers should reward the achievement of our short-term and long-term objectives and that compensation should be related to the value created for our shareholders. Furthermore, the compensation program should reflect competition and best practices in the marketplace. The following objectives serve as the Committee’s guiding principles for all compensation decisions:

 

   

Our executive compensation and benefits should attract, motivate, reward, and retain the management talent necessary to achieve our business objectives at compensation levels that are fair, equitable, and competitive with those of comparable companies.

 

   

Compensation should be set based on the leadership of each executive officer, which reflects skill sets, experience, and achievement, to create a competitive framework for talent acquisition and retention.

 

   

Compensation should be linked to individual and corporate performance by aligning our executive compensation program to company-wide performance, which is assessed in terms of financial and non-financial performance and creation of long-term value for our shareholders.

 

   

There should be an appropriate mix and weighting among base salary, annual incentive awards and long-term equity incentive awards such that an adequate amount of each executive officer’s total compensation is performance-based or “at risk.” Further, as an executive’s responsibilities increase, the portion of “at-risk” compensation for the executive should also increase as a percentage of total compensation.

In addition, the Compensation Committee believes that the various elements of our compensation program effectively align compensation with performance measures that are directly related to our financial goals and creation of shareholder value without encouraging executives to take unnecessary and excessive risks.

Developments in Executive Compensation for 2019

We review our executive compensation practices annually to ensure that our plans and practices are supportive of our goals, remain competitive, and are in keeping with the best interests of our shareholders and our unique business model and operating environment. In January 2019, the Compensation Committee determined to continue with the use of RSUs as part of the mix of equity grants made to our executive officers, a practice that we started in January 2018, after a review of trending practices among similarly situated companies and deliberation about our competitiveness in recruitment and retention.

As we entered 2019, our Compensation Committee recognized the evolving nature of our business strategy and that there was uncertainty as to whether or what specific transactions would occur over the course of the year. In February 2019, we announced that we were evaluating equitization and monetization events for our subsidiaries, as well as considering which business units would find higher values independent of our Company. Recognizing how annual incentive goals can drive behavior, the Committee did not want to create annual incentive goals that would provide incentives to our executive officers to pursue specific transactions as opposed to considering each transaction on its own merit and how it would impact the long-term health of the Company. Accordingly, the Committee initially deferred setting performance objectives for our annual incentives. As the year progressed, the Committee reassessed this decision on multiple occasions. The Committee eventually concluded, after consultation with Mr. Siciliano, that in light of the strategic planning underway, that it would not set performance

 

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objectives or establish a bonus pool for the purposes of 2019 annual incentive compensation, and that it would consider executive performance assessments for annual incentive compensation purposes in the first quarter of 2020. In reaching this conclusion, the Committee also considered that a number of transactions under consideration by the Company involved Mr. Kirk, and the Committee did not want to establish performance objectives that may be viewed as providing an incentive to other executive officers to pursue those specific transactions.

The strategic efforts in 2019 ultimately led to a refocusing of our Company on healthcare, the divestiture of a number of our non-healthcare businesses and assets, and the change of our name. As discussed in greater detail below, after conducting executive performance assessments in the first quarter of 2020, and with a focus on retention and cash preservation, the Compensation Committee made additional grants of equity to our continuing executive officers, other than Mr. Kirk, in recognition of 2019 performance.

We announced in April 2019 that we were working to realign our operations in an effort to better deploy resources, realize inherent synergies, and position us for growth with a core focus on healthcare. In connection with these efforts, Mr. Kirk, who at the time was our Chairman and Chief Executive Officer, recommended to our Compensation Committee that we enter into continuing employment agreements with our executive officers, other than himself. After consideration of Mr. Kirk’s recommendation and the Company’s public announcement and ongoing business activities, the Committee approved continuing employment agreements with each named executive officer, other than Mr. Kirk and Mr. Nimrodi. The agreements, entered into in April 2019, provide for severance rights upon the termination of such executive officer “without cause” or resignation by such executive officer for “good reason.” Given the focus in 2019 on assessing our overall business and the greater uncertainty caused by the decision in April 2019 to pursue and announce a realignment, the Committee concluded that it was appropriate to provide our executive officers with a level of certainty and to provide them greater comfort in making decisions for the Company. Specifically, the Committee adopted these agreements to help ensure that our executives would perform their duties and responsibilities and advise the Board about potential opportunities with the best interests of the Company and shareholders guiding their decisions and without being unduly influenced by the distracting uncertainty and risk associated with realignment considerations, such as fear of the economic consequences of losing their employment with the Company. See “Potential Payments Upon Termination or Change in Control” on page 60. See the discussion below under “2019 Long-Term Incentive Equity Awards” on page 49 for discussion of an additional grant of equity awards to our executive officers in April 2019.

Elements of Our Compensation Program

The Compensation Committee has a mix of compensation components that it utilizes, with the intent to make each component of total direct compensation competitive while also linking compensation to individual and corporate performance and encouraging stock ownership by our executive officers. The table below describes each compensatory element in our program and briefly explains how it promotes our objectives. We believe the combination of these elements provides an appropriate balance of rewards, incentives, and benefits to our executives and enables us to meet our desired compensation objectives, strengthen our ability to attract and retain highly qualified individuals, and to appropriately link pay to performance.

 

Element

of Compensation

  

Description

  

How this Element Promotes

Our Objectives

Annual Compensation

     

Base Salary

   Fixed annual compensation that is certain in payment and provides continuous income.    Aids in both recruitment and retention; designed to be competitive in the marketplace.

 

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Element

of Compensation

  

Description

  

How this Element Promotes

Our Objectives

Annual Incentive Awards

   Performance-based compensation for achieving goals and objectives.    Motivates and rewards achievement of annual corporate objectives by providing at-risk comprehensive pay opportunities linked to performance.

Long-term Compensation

     
Equity Incentive Awards    Grants of options and/or RSUs that are part of our long-term incentive program; time-based vesting, generally over four years.    Promotes retention, increases long-term equity ownership, and aligns executive and long-term shareholder interests by linking a portion of their compensation to changes in company stock price. RSUs additionally provide officers with awards that have immediate value.
Other Compensation      

Post-Termination

Payments and Benefits

   Payments and benefits upon termination of an executive’s employment in specified circumstances, such as termination other than for cause, resignation for good reason, retirement, death, disability, or a change in control, as described in greater detail beginning on page 60.    Provides assurance of financial security, which is desirable in lateral recruiting and executive retention and permits objective evaluation by executives of potential changes to our strategy and structure.
Other Benefits    Executives participate in employee benefit plans generally available to our employees.    Fair and competitive programs to provide for the health and well-being of executives and their families.

We do not provide our executives with any meaningful perquisites that are not provided to employees generally. We also do not have any deferred compensation programs or retirement programs other than our 401(k) Plan that is generally available to all employees. We enroll all eligible employees, other than our Executive Chairman, in the same health, dental, and life and disability insurance programs.

Base Salary

General . Base salary levels for our executive officers with the exception of our CEO and Executive Chairman are recommended to the Compensation Committee by our CEO and are subject to approval by the Committee and the Board. In setting the base salary level for each executive officer (other than our CEO and Executive Chairman), the Committee generally considers the executive officer’s experience level, demonstrated capabilities, time and placement in position, our geographic region, individual performance, and potential future contributions to our Company. In addition, the Committee may consider executive compensation data for the industry as a whole, including data from similarly situated companies. Base salaries are reviewed annually by the Committee. When making decisions to adjust executive salaries, the Committee will also consider our overall financial performance in addition to the factors identified above. No particular weight is assigned to any one factor. Taking into account the overall position of the Company, the Committee determined not to make any changes to base salary for our named executive officers in 2019.

 

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Compensatory Arrangements for our Executive Chairman and Former CEO . The base salary for our former CEO, Mr. Kirk, was defined pursuant to the terms of the RSU Agreement between the Company and Mr. Kirk. On October 30, 2015, the Compensation Committee and the independent members of the Board approved the RSU Agreement as a compensation arrangement for Mr. Kirk. Previously, Mr. Kirk did not receive compensation for his services as our CEO other than through his participation in our Annual Incentive Plan, as defined below, which became effective January 1, 2015. Under the arrangement, Mr. Kirk received as compensation a payment of $200,000 per month, which payment was made in fully vested shares of our common stock that are subject to a three-year lockup on resale from the date of issuance. Beginning in April 2019, the number of RSUs underlying each award was based on the volume weighted average price of the common stock over the 30 day period ending on the last day of the month, as opposed to previously being based on the closing price on the last calendar day of the month. The RSU Agreement became effective in November 2015 and had an initial term of 12 months. The independent members of the Board, with the recommendation of the Committee, subsequently approved extensions of the RSU Agreement, with the final term lasting through March 31, 2020. All such extensions had been on substantially similar terms as the original RSU Agreement, with the exception of the stock calculation as noted above.

Mr. Kirk is also entitled to participate in executive incentive compensation plans adopted by the Board or the Compensation Committee from time to time, including the Annual Incentive Plan described below.

Annual Incentive Awards

General . Our Annual Incentive Plan is administered by the Compensation Committee, which has sole authority to formulate adjustments and make interpretations under the Annual Incentive Plan as it deems appropriate. Eligibility is determined by the Committee each calendar year within a select group of management or our key employees or any of our subsidiaries. For each incentive period, the Committee establishes the terms of the bonus awards under the Annual Incentive Plan, including the eligible employees, the corporate performance objectives by which the aggregate incentive pool will be determined and the individual performance levels that must be achieved for payment of each incentive award to an individual participant. The Committee is also empowered to determine whether any awards will be paid in cash, equity securities, or a combination thereof. We maintain a strong link between performance and pay through emphasis on incentives and use of financial, operational and leadership measures, which we believe are key drivers of long-term value creation for shareholders. These criteria are used together with non-financial metrics that the Committee believes are leading indicators of the creation of long-term shareholder value. While these criteria serve as guidelines, the Committee has great discretion to determine the annual incentive awards to each participant.

For 2019, as discussed in greater detail above, the Compensation Committee determined not to utilize our formal Annual Incentive Plan given the strategic planning that was ongoing throughout the year. For 2020, the Committee is considering the appropriate structure for incentive compensation in light of the changes to our business and management, as well as global conditions as a result of the COVID-19 pandemic.

Discretionary Committee Action Relative to 2019 Performance . In March 2020, the Compensation Committee evaluated overall executive performance in a manner consistent with its customary review under the Annual Incentive Plan. In addition to the successful realignment activities that were finalized in the beginning of 2020, the Committee noted Dr. Sabzevari’s exceptional leadership and performance running our subsidiary PGEN Therapeutics, Inc. and the decision of our Board to promote her to the position of CEO of our Company. The Committee also considered that cash is an important resource to the Company, and that there were significant benefits to the Company in terms of cash preservation to using equity for annual award purposes. The Committee made one-time grants to each executive officer, other than Mr. Kirk, in the form of RSUs. Dr. Sabzevari was granted an award of 500,000 RSUs vesting on May 14, 2020, and each of the other current executive officers receiving awards was granted an award of 250,000 RSUs, with 175,000 RSUs vesting on May 15, 2020, and the remaining 75,000 RSUs vesting in three equal installments on June 15, 2020, September 15, 2020, and December 15, 2020.

 

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Long-Term Equity Incentive Awards

General . Our primary objectives in granting long-term equity incentive awards are to encourage significant ownership of our common stock by management and to provide long-term financial incentives linked directly to our long-term performance. The Compensation Committee believes that significant ownership of our common stock by senior management helps to align the interests of management and the shareholders.

Our long-term equity incentive awards have historically been in the form of time-vested stock options, generally vesting over four years. However, in a change prompted by (i) a desire to further align long-term compensation with company performance and (ii) an effort to strategically respond to the evolving recruitment and retention strategies of current or future competitors for our desired pool of executive talent, the Compensation Committee determined that, beginning in fiscal year 2018, it was appropriate to incorporate RSUs into the mix of long-term equity incentive awards contemplated as part of its long-term compensation strategy. The inclusion of RSUs is reflected in the 2019 long-term equity grants to executives, and is expected to continue to be a component of our long-term equity incentive compensation strategy.

Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, or any formal equity ownership guidelines applicable to them, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture, and help to align the ownership interests of our executives and our shareholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention by incentivizing our executive officers to remain in our employment during the vesting period. Further, the levels at which they are granted, we believe, are competitive and appropriate for a company such as ours that is in a stage of anticipated growth with anticipated potential upside in stock performance over the long term. The size of the awards has historically taken into account a number of factors, including company performance as defined by the achievement of strategic objectives, individual performance, stock price performance, salary level, and tenure. The Compensation Committee believes that broad and significant employee ownership of our common stock effectively motivates the building of shareholder wealth.

With the exception of significant promotions and new hires, equity grants, when awarded, have generally been awarded toward the beginning of the fiscal year. The Compensation Committee selects this timing because it enables us to consider our prior year performance and the participants’ and our expectations for the next performance period.

2019 Long-Term Incentive Equity Awards . In January 2019, the Compensation Committee considered long-term equity incentive awards for 2019 in connection with its review of 2018 executive compensation and in light of certain retention and recruitment concerns. The Committee approved a grant of RSUs with a grant date fair value of $450,000 to each of the named executive officers, except for Mr. Kirk and Dr. Sabzevari, as indicated in the Grants of Plan-Based Awards table on page 57. At the time of the grants to these executive officers, the Committee was considering alternative long-term incentive awards for Dr. Sabzevari that were focused more specifically on the performance of PGEN Therapeutics, Inc. After further consideration, later in January 2019, the Committee determined that Dr. Sabzevari’s 2019 long-term equity incentive award for 2019 should be in the same form as the RSUs for the other executive officers and approved an award of RSUs to Dr. Sabzevari, which also had a grant date fair value of $450,000. The grants to the executive officers reflected the recommendations of the outside compensation consultant as appropriate to incentivize and retain the recipients. All of these 2019 equity awards were granted under the 2013 Plan, and each award vests in 25% increments over a four-year period beginning one year from the date of grant.

Additional 2019 Equity Awards

As discussed above under “Developments in Executive Compensation for 2019”, in April 2019 we announced that we were working to realign our operations in an effort to better deploy resources, realize inherent synergies,

 

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and position the company for growth with a core focus on healthcare. In connection with these efforts, in addition to the salary continuation agreements described above, the Compensation Committee approved a grant to each of our NEOs, other than Mr. Kirk and Mr. Nimrodi, of RSUs with a grant date fair value of $300,000. These awards were granted under the 2013 Plan, and each award vests in 25% increments on a quarterly basis beginning on June 30, 2019. After consultation with Mr. Kirk and Mr. Siciliano, the Committee’s compensation consultant, the Committee concluded that it was appropriate to grant these awards to provide an additional incentive for our executives to remain with the Company during a period of greater uncertainty and risk associated with the ongoing realignment. In making these awards, the Committee considered a comparative executive compensation review performed with the assistance of Mr. Siciliano in December 2018 that reflected that, at the time, our executives had limited in-the-money equity awards. In addition, the Committee considered that because the awards to our named executive officers that had already been made in 2019 vested over a longer period of time, the retention benefit in the near term was less substantial and that continuity of leadership would be needed throughout 2019 as the Company undertook its realignment efforts.

Equity Awards for 2018 Performance

In January 2019, the Compensation approved grants of RSUs to our named executive officers for 2018 performance as part of our annual incentive program. Each named executive officer received a grant of RSUs with a grant date fair value of $100,000 that was immediately vested and a grant of RSUs with a grant date fair value of $100,000 that vested ratably over four years. These awards are reported in the Summary Compensation Table for 2019 because they are equity awards, notwithstanding that the grants were made in respect of 2018 performance. A further discussion of these awards is included in the Compensation Discussion and Analysis contained in the proxy statement for our 2019 Annual Meeting of Shareholders.

Other Benefits

The Compensation Committee believes employee benefits are an essential component of our competitive total compensation package. These benefits are designed to attract and retain our employees. The executive officers may participate in, and we make contributions on their behalf to, the same benefit plans that are provided to all of our eligible employees, which include medical, health and dental insurance, long-term disability insurance, accidental death and disability insurance, and our 401(k) Plan. As part of the 401(k) Plan, we generally match 100% of the first 3% of compensation contributed by the employee into the 401(k) Plan subject to the Internal Revenue Code and our 401(k) Plan limits. We have disclosed all company matches for our named executive officers in the column labeled “All Other Compensation,” in the Summary Compensation Table on page 55, and separately disclosed each amount in the All Other Compensation Table for 2019 on page 56.

Employment Agreement with Dr. Sabzevari

In connection with her appointment to the position of President and CEO in January 2020, we entered into an employment agreement with Dr. Sabzevari (the “Employment Agreement”). The term under the Employment Agreement commenced on January 1, 2020 and continues until terminated in accordance with the Employment Agreement.

Dr. Sabzevari’s initial annual base salary under the Employment Agreement is $1,000,000. On January 5, 2020 (the “Grant Date”), pursuant to the terms of the Employment Agreement, Dr. Sabzevari received a grant of (i) restricted stock units equal to 500,000 shares of Precigen common stock, which will vest on the first anniversary of the Grant Date (the “RSU Grant”), (ii) incentive stock options to purchase up to 1,500,000 shares of our common stock with an exercise price of $5.95 (the “FMV”), 50% of which will vest on the first anniversary of the Grant Date and the remaining 50% of which will vest in equal installments on each of the next three anniversaries of the Grant Date (together with the RSU Grant, the “Initial Equity Grants”), (iii) incentive stock options to purchase up to 1,500,000 shares of Precigen common stock with an exercise price of twice the FMV, and (iv) incentive stock options to purchase up to 1,500,000 shares of Precigen common stock with an

 

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exercise price of three times the FMV (together with (iii), the “Performance Equity Grants”). Each of the Performance Equity Grants will vest in four equal annual installments on each of the first four anniversaries of the Grant Date.

The Employment Agreement also provides for eligibility for an annual bonus beginning in 2020 of between 75% and 150% of Dr. Sabzevari’s annual base salary, contingent upon continuous employment by us and Dr. Sabzevari’s performance during the bonus period and through the date on which the bonus is paid, as determined in the sole discretion of the Board. Pursuant to the Employment Agreement, Dr. Sabzevari will be entitled to participate in all employee benefit plans that are generally made available to senior Precigen exempt executives.

Severance provisions in Dr. Sabzevari’s employment agreement are further discussed above in the section “Potential Payments Upon Termination or a Change in Control” beginning on page 60.

The Compensation Review Process

Process for Approval of Compensation Measures . Management makes a recommendation to the Compensation Committee and the Board regarding key financial goals, operational goals, and performance measures that will guide us for the relevant fiscal year. Specific metrics are recommended by the Committee and approved by the Board and become the compensation measures for the executive officers. As discussed above, for 2019, the Committee ultimately did not follow this process in 2019 for purposes of setting 2019 annual incentive performance objectives.

Role of the Compensation Committee and Management . Governance of our compensation program is the responsibility of the Compensation Committee, which consists solely of independent directors. At the direction of the Committee, our CEO prepares compensation recommendations regarding the compensation of each of our executive officers, other than for the CEO, and presents those recommendations to the Committee for approval. The Committee evaluates the overall performance of the executive officers based on our achievement of corporate performance objectives and goals and individual performance. The Committee then reviews and takes into account all elements of executive compensation in setting policies and determining compensation amounts.

Role of Compensation Consultant . As discussed above, the Compensation Committee is authorized to retain experts, consultants, and other advisors to aid in the discharge of its duties. In 2019, the Committee retained F. Daniel Siciliano as its outside compensation consultant. Mr. Siciliano is the co-founder of Stanford’s Arthur and Toni Rembe Rock Center for Corporate Governance, a Fellow, and the immediate past Faculty Director and Professor of the Practice at Stanford Law School. Mr. Siciliano is a noted authority on matters related to executive compensation and corporate governance. Mr. Siciliano was retained to (i) review our historical compensation practices, (ii) advise the Committee on compensation standards and trends, (iii) assist in the implementation of compensation policies and programs, and (iv) review recommendations from management on compensation matters. All work completed by Mr. Siciliano is subject to the approval of the Committee. Mr. Siciliano’s role includes providing independent advice and counsel to the Committee. The Committee does not delegate authority to its outside advisor or to other parties.

In retaining Mr. Siciliano, the Compensation Committee separately considered the six factors set forth in Section 10C-1(b)(4)(i) through (vi) of the Exchange Act and, based on such consideration, determined that the engagement of Mr. Siciliano did not raise any conflicts of interest.

No Formal Peer Group Analysis . We believe we have structured a fair and competitive compensation package for our executive officers. The Board and the Compensation Committee believe that, due to the unique and rapidly evolving nature of our business, there historically has neither been a robust nor stable cohort of peer companies available to use as a formal peer group for our Company. For this reason, we did not undertake a formal peer group analysis of executive compensation or target compensation to specific benchmarks against any

 

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peer group companies. However, the Committee does regularly monitor certain compensation practices at a variety of similarly situated or similarly structured companies, which often vary, and does discuss compensation data for companies with which it believes we compete for executive talent. The Committee also uses information gathered from other sources, including from members of the Committee, human resources staff, and our outside compensation consultant in assessing and making compensation decisions.

Establishing Total Direct Remuneration

Total direct remuneration is the sum of base salary, annual incentive awards, long-term equity incentive awards, and other benefits. A major portion of each executive officer’s remuneration is established by performance-based incentives, which require achievement of performance objectives and goals as a condition to earning annual incentive awards, and long-term equity incentive awards, the value of which depends on our stock price upon vesting or exercise. The at-risk portion of total direct remuneration provides increased pay for higher levels of corporate and/or business sector performance.

In setting each executive officer’s total direct remuneration opportunity, the Compensation Committee takes into account factors such as the responsibilities, experience, performance, contributions, and service of the executive. We do not set total direct remuneration or the component parts at levels to achieve a mathematically precise market position. In determining executive compensation, the Committee reviews all components of each executive officer’s total compensation, including retirement benefits and the costs of any perquisites received, to ensure such compensation meets the goals of the program. As a part of this review, the Committee considers corporate performance and the recommendations of senior management. The Committee also takes into consideration individual and overall company operating performance to ensure executive compensation reflects past performance as well as future potential and, we believe, adequately differentiates among employees, based on the scope and complexity of the employee’s job position, individual performance and experience and our ability to pay. The Committee reviews annually each executive officer’s performance prior to considering changes in compensation. The individual performance of each executive officer is evaluated in light of our overall performance and non-financial goals and strategic objectives approved by the Committee and the Board. The Committee and the Board believe that the competitive environment, including for executive talent, is dynamic and evolving. For this reason, while the Committee believes the total compensation for each of the executive officers is reasonable and appropriate, the Committee continues to actively consider methods to further improve the effectiveness of ourapproach to executive compensation.

Consideration of Say-on-Pay Vote Results

The Board has determined to provide our shareholders the opportunity to vote each year to approve, on an advisory basis, the compensation of our named executive officers as disclosed in our Proxy Statement (“say-on-pay”). As an advisory vote, the vote on executive compensation is non-binding on the Board and should not be construed as (i) overruling a decision by the Board, (ii) creating or implying any change to our fiduciary duties, or (iii) creating or implying any additional fiduciary duties for the Board. Although the vote is non-binding, the Board and the Compensation Committee value the opinions of our shareholders, and consider our shareholders’ views when making executive compensation decisions, as they deem appropriate.

At our 2019 Annual Meeting of Shareholders, we held a non-binding shareholder say-on-pay vote. Our shareholders approved our 2019 executive compensation proposal, with 94.7% of the shares that were cast on the proposal voted in favor of the say-on-pay resolution. We did not make any significant changes in our policies or programs in response to this vote. However, we will continue to consider the outcome of the say-on-pay vote for future compensation decisions for our executive officers.

 

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Other Executive Compensation Practices

Anti-Hedging Policy

To ensure alignment of the interests of our shareholders, directors and executive officers, our Insider Trading Policy does not permit directors, officers, or employees to engage in short-term or speculative transactions involving our securities, including short sales, publicly traded options, or hedging of our securities.

Compensation Recovery Policies

It is the Board’s policy that in the event the Board determines that a significant restatement or correction of our financial results or other metrics is required for the prior fiscal year for which audited financial statements have been completed, and, had the results or metrics been properly calculated initially, our officers would have received less compensation, the Board has the authority to obtain reimbursement of any portion of any performance based compensation paid or awarded, whether cash or equity based, to the officers and to other employees responsible for accounting errors resulting in the restatement or correction that is greater than would have been paid or awarded calculated based upon the restated or corrected financial results or metrics. Further, it is the policy of the Board to seek recoupment in all instances where Section 304 of the Sarbanes-Oxley Act of 2002 requires us to seek recoupment.

United States Federal Income Tax Limits on Deductibility

Prior to the enactment of the Tax Act, which was signed into law on December 22, 2017, a public corporation’s covered employees included its CEO and three other most highly compensated executive officers (other than the chief financial officer), and certain “qualified performance-based compensation” was excluded from the $1 million deduction limit. The Tax Act made certain changes to Section 162(m), effective for taxable years beginning after December 31, 2017, including, among others, expanding the definition of “covered employee” to include the chief financial officer and repealing the qualified performance-based compensation exception, subject to a transition rule for remuneration provided pursuant to a written binding contract in effect on November 2, 2017, and which was not modified in any material respect on or after that date. Our policy is to qualify compensation paid to our executive officers for deductibility for federal income tax purposes to the extent feasible. However, to retain highly skilled executives and remain competitive with other employers, the Compensation Committee may authorize compensation that would not be deductible under Section 162(m) of the Code or otherwise if it determines that such compensation is in the best interests of us and our shareholders.

 

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COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Compensation Committee recommended to the Board that it be included in this Proxy Statement.

THE COMPENSATION COMMITTEE

James S. Turley, Chair

Fred Hassan

Jeffrey B. Kindler

Compensation Risk Assessment

As part of its oversight of our executive compensation program, the Compensation Committee considers the impact of our executive compensation program, and the incentives created by the compensation awards that it administers, on our risk profile. In addition, the Committee reviews our compensation policies and procedures, including the incentives that they create and factors that may reduce the likelihood of excessive risk-taking, to determine whether they present a significant risk to us. The Committee concluded that our compensation programs are designed with the appropriate balance of risk and reward in relation to our overall business strategy and that the balance of compensation elements discourages excessive risk taking. The Committee, therefore, determined that the risks arising from our compensation policies and practices for employees are not reasonably likely to have a material adverse effect on us. The Committee will continue to consider compensation risk implications while deliberating the design of our executive compensation programs. In its discussions, the Committee considered the attributes of our programs, including:

 

   

appropriate pay philosophy in light of our business model;

 

   

balance with respect to the mix of cash and equity compensation, and measures of performance against both annual and multi-year standards;

 

   

long-term incentives linked to stock price performance;

 

   

long-term incentives generally have multi-year vesting to ensure a long-term focus and appropriate balance against short-term goals;

 

   

independent Compensation Committee oversight, with Committee discretion to reduce incentives based on subjective evaluation of individual performance; and

 

   

anti-hedging policies.

 

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SUMMARY COMPENSATION TABLE

The following table sets forth the compensation paid to or accrued by our named executive officers during the fiscal years ended December 31, 2019, 2018 and 2017.

 

Name and Principal Position

   Year     Salary
($)
     Bonus
($)
     Stock
Awards(1)
($)
     Option
Awards(2)
($)
     All Other
Compensation(3)
($)
     Total
($)
 

Helen Sabzevari(4)

     2019     $ 500,000      $ —        $ 950,017      $ —        $ 15,090      $ 1,465,107  

Chief Executive Officer

     2018     $ 500,000      $ 100,000      $ 2,108,179      $ —        $ 14,625      $ 2,722,804  

Randal Kirk

     2019     $ —        $ —        $ 2,067,617      $ —        $ —        $ 2,067,617  

Executive Chairman and

Former Chief

Executive Officer

     2018     $ —        $ 100,000    $ 1,956,450      $ —        $ —        $ 2,056,450  
     2017     $ —        $ —        $ 1,907,879      $ —        $ —        $ 1,907,879  
                   

Rick Sterling

     2019     $ 515,000      $ —        $ 950,006      $ —        $ 31,840      $ 1,496,846  

Chief Financial Officer

     2018     $ 466,250      $ 100,000    $ 526,179    $ —        $ 31,220      $ 1,123,649  
     2017     $ 442,509      $ —        $ —        $ 2,702,880    $ 31,261      $ 3,176,650  

Donald Lehr

     2019     $ 575,000      $ —        $ 950,006      $ —        $ 31,733      $ 1,556,739  

Chief Legal Officer

     2018     $ 575,000      $ 100,000    $ 526,179    $ —        $ 31,234      $ 1,232,413  
     2017     $ 564,593      $ —        $ —        $ 2,702,880      $ 31,352      $ 3,298,825  

Jeffrey Perez

     2019     $ 500,000      $ —        $ 950,006      $ —        $ 30,492      $ 1,480,498  

Senior Vice President,

IP Affairs

     2018     $ 500,000      $ 100,000      $ 526,719      $ —        $ 29,887      $ 1,156,066  
     2017     $ 491,676      $ —        $ —        $ 2,702,880      $ 30,010      $ 3,224,566  

Robert Walsh, III

     2019 (5)    $ 424,358      $ —        $ 950,006      $ —        $ 788,704      $ 2,163,068  

Former Senior Vice

President, Energy & Fine

Chemicals Platforms

     2018     $ 412,000      $ 100,000      $ 526,179      $ —        $ 24.256      $ 1,062,435  
     2017     $ 411,009      $ —        $ —        $ 2,702,880      $ 24,263      $ 3,138,152  
                   

Nir Nimrodi

     2019 (6)    $ 136,591      $ —        $ 650,003      $ —      $ 825,621      $ 1,621,215  

Former Chief Business

Officer

     2018     $ 515,000      $ 100,000    $ 526,179    $ —      $ 21,636      $ 1,162,815  
     2017     $ 513,759      $ —      $ —      $ —      $ 30,010      $ 543,770  

 

(1)

Represents the grant date fair value computed by us for financial reporting purposes, computed in accordance with ASC Topic 718. In November 2015, Mr. Kirk began receiving $200,000 per month payable in fully vested shares of our common stock, which are subject to a three year lock-up on resale. For the years ended December 31, 2019, 2018, and 2017, Mr. Kirk received 401,120; 187,749; and 129,977 shares of common stock, respectively, pursuant to the RSU Agreement. The three year lock-up on resale results in a discount to the monthly value for financial reporting purposes. This column does not include for 2019 the grant date fair value of RSUs granted as part of the incentive award for performance in 2019 because the awards were granted in 2020. However, it does include for 2019 the grant date fair value of RSUs granted as part of the inventive award for performance in 2018.

(2)

Represents the grant date fair value computed by us for financial reporting purposes, computed in accordance with ASC Topic 718. For a full description of the assumptions we use in computing these amounts, see Note 2 to our consolidated financial statements for the year ended December 31, 2019, which is included in our 2019 Annual Report. The actual value a named executive officer may receive depends on market prices and there can be no assurance that the amounts reflected in the Option Awards column will actually be realized. No gain to a named executive officer is possible without an appreciation in stock value after the date of grant.

(3)

The amounts in this column are further detailed in the “All Other Compensation Table for 2019” on page 56.

(4)

Compensation information is provided only for 2019 and 2018 because, as Dr. Sabzevari was not a named executive officer until 2018, information for 2017 is not required to be disclosed.

(5)

As of November 6, 2019, Mr. Walsh departed the Company.

(6)

As of April 5, 2019, Mr. Nimrodi departed the Company.

 

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ALL OTHER COMPENSATION TABLE FOR 2019

The table below reflects the types and dollar amounts of perquisites, additional compensation, and other personal benefits provided to the named executive officers during 2019. For purposes of computing the dollar amounts of the items listed below, we used the actual out-of-pocket costs to us of providing the perquisite or other personal benefit to the named executive officer. The named executive officers paid any taxes associated with these benefits without reimbursement from us.

 

Name

   Company-
Paid
Welfare and
Life Benefits
Premiums
($)
     401(k) Plan
Company
Contributions ($)
     Total ($)  

Helen Sabzevari

     6,690        8,400        15,090  

Randal Kirk

     —          —          —    

Rick Sterling

     23,440        8,400        31,840  

Donald Lehr

     23,333        8,400        31,733  

Jeffrey Perez

     22,092        8,400        30,492  

Robert Walsh, III(1)

     14,978        8,400        788,704  

Nir Nimrodi(2)

     7,338        —          825,621  

 

(1)

Includes a cash severance payment of $90,005 to Mr. Walsh in connection with the termination of his employment, $13,788 of accrued vacation paid out upon termination, $1,538 for reimbursement of COBRA premiums, and $659,995 that represents the incremental fair value of equity awards modified in connection with his termination, computed in accordance with ASC Topic 718.

(2)

Includes a cash severance payment of $237,692 to Mr. Nimrodi in connection with the termination of his employment, $48,478 of accrued vacation paid out upon termination, $16,293 for reimbursement of COBRA premiums, and $515,820 that represents the incremental fair value of equity awards modified in connection with his termination, computed in accordance with ASC Topic 718.

 

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GRANTS OF PLAN-BASED AWARDS FOR 2019

The following table presents information regarding grants of plan-based awards to the named executive officers during the fiscal year ended December 31, 2019.

 

Name

   Grant Date      All Other Stock
Awards:
Number of Shares of
Stock or Units (#)
    Grant Date Fair
Value of Stock and
Option Awards (1)
 

Helen Sabzevari

     1/4/2019        13,774 (2)    $ 99,999  
     1/4/2019        13,775 (2)    $ 100,007  
     1/25/2019        56,891     $ 450,008  
     4/9/2019        57,362     $ 300,003  

Randal Kirk

     1/4/2019        13,774 (2)    $ 99,999  
     1/4/2019        13,775 (2)    $ 100,007  

Rick Sterling

     1/4/2019        13,774 (2)    $ 99,999  
     1/4/2019        13,775 (2)      100,007  
     1/4/2019        61,983     $ 449,997  
     4/9/2019        57,362     $ 300,003  

Donald Lehr

     1/4/2019        13,774 (2)    $ 99,999  
     1/4/2019        13,775 (2)      100,007  
     1/4/2019        61,983     $ 499,997  
     4/9/2019        57,362     $ 300,003  

Jeffrey Perez

     1/4/2019        13,774 (2)    $ 99,999  
     1/4/2019        13,775 (2)      100,007  
     1/4/2019        61,983     $ 449,997  
     4/9/2019        57,362     $ 300,003  

Robert Walsh, III

     1/4/2019        13,774 (2)    $ 99,999  
     1/4/2019        13,775 (2)      100,007  
     1/4/2019        61,983     $ 449,997  
     4/9/2019        57,362     $ 300,003  

Nir Nimrodi

     1/4/2019        13,774 (2)    $ 99,999  
     1/4/2019        13,775 (2)      100,007  
     1/4/2019        61,983     $ 449,997  

 

(1)

Represents the grant date fair value of the equity awards determined in accordance with ASC Topic 718.

(2)

Award was granted for performance in 2018.

 

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OUTSTANDING EQUITY AWARDS AT 2019 FISCAL YEAR END

The following table sets forth specified information concerning unexercised stock options and unvested RSUs held by each of the named executive officers as of December 31, 2019.

 

       Option Awards                           Stock Awards         

Name

   Grant
Date
     Number of
Securities

Underlying
Unexercised
Options:

Exercisable
     Number of
Securities
Underlying
Unexercised
Options:
Unexercisable(1)
     Option
Exercise
Price
($)
     Option
Expiration
Date
     Number of
Shares or
Units of
Stock Not
Vested

(#)(1)
     Market
Value of
Shares or
Units of
Stock Not
Vested

($)
 

Helen Sabzevari

     7/17/2017        75,000        75,000        22.83        7/17/2027        —          —    
     1/2/2018        —          —          —          —          29,297        160,548  
     3/28/2018        —          —          —          —          50,000        274,000  
     1/4/2019        —          —          —          —          13,775        75,487  
     1/25/2019        —          —          —          —          56,891        311,763  
     4/9/2019        —          —          —          —          14,340        78,583  

Randal Kirk

     1/4/2019      —          —          —          —          13,775        75,487

Rick Sterling

     3/20/2014        204,472        —          29.56        3/20/2024        —          —    
     2/2/2017        112,500        112,500        20.94        2/2/2027        —          —    
     1/2/2018        —          —          —          —          29,297        160,548  
     1/4/2019        —          —          —          —          13,775        75,487  
     1/4/2019        —          —          —          —          61,983        339,667  
     4/9/2019        —          —          —          —          14,340        78,583  

Donald Lehr

     7/1/2011        47,509        —          6.85        7/1/2021        —          —    
     3/20/2014        207,855        —          29.56        3/20/2024        —          —    
     2/2/2017        112,500        112,500        20.94        2/2/2027        —          —    
     1/2/2018        —          —          —          —          29,297        160,548  
     1/4/2019        —          —          —          —          13,775        75,487  
     1/4/2019        —          —          —          —          61,983        339,667  
     4/9/2019        —          —          —          —          14,340        78,583  

Jeffrey Perez

     8/25/2014        202,733        —          19.52        8/25/2024        —          —    
     2/2/2017        112,500        112,500        20.94        2/02/2027        —          —    
     1/2/2018        —          —          —          —          29,297        160,548  
     1/4/2019        —          —          —          —          13,775        75,487  
     1/4/2019        —          —          —          —          61,983        339,667  
     4/9/2019        —          —          —          —          14,340        78,583  

Robert Walsh, III

     —          —          —          —          —          —          —    

Nir Nimrodi

     —          —          —          —          —          —          —    

 

(1)

Each award vests in four equal annual installments beginning on the anniversary of the grant date.

 

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STOCK AWARDS VESTED FOR 2019

The following table sets forth specified information concerning stock vesting for each of the named executive officers during the fiscal year ended December 31, 2019.

 

     Stock Awards  

Name

   Number of Shares
Acquired on Vesting
(#)
     Value Realized
on Vest

($)(1)
 

Helen Sabzevari

     9,766      $ 69,827  
     13,774      $ 99,999  
     14,341      $ 109,852  
     25,000      $ 189,500  
     14,341      $ 82,031  
     14,340      $ 78,583  

Randal Kirk(2)

     26,109      $ 199,995  
     13,774      $ 99,999  
     25,094      $ 199,999  
     38,022      $ 199,996  
     43,887      $ 190,031  
     44,283      $ 214,330  
     28,467      $ 218,057  
     25,758      $ 205,806  
     30,088      $ 175,714  
     33,373      $ 190,894  
     36,069      $ 183,231  
     35,536      $ 197,936  
     34,434      $ 188,698  

Rick Sterling

     9,766      $ 69,827  
     13,774      $ 99,999  
     14,341      $ 109,852  
     14,341      $ 82,031  
     14,340      $ 78,583  

Donald Lehr

     9,766      $ 69,827  
     13,774      $ 99,999  
     14,341      $ 109,852  
     14,341      $ 82,031  
     14,340      $ 78,583  

Jeffrey Perez

     9,766      $ 69,827  
     13,774      $ 99,999  
     14,341      $ 109,852  
     14,341      $ 82,031  
     14,340      $ 78,583  

Robert Walsh, III

     9,766      $ 69,827  
     13,774      $ 99,999  
     14,341      $ 109,852  
     14,341      $ 82,031  
     110,367      $ 659,995  

Nir Nimrodi

     9,766      $ 69,827  
     13,774      $ 99,999  
     105,055      $ 515,820  

 

(1)

The amounts in the “Value Realized on Vesting” column are calculated based on the closing market price per share of our common stock on the date of vesting. This calculation differs from the grant date fair value of the equity awards determined in accordance with ASC Topic 718.

(2)

During 2019, Mr. Kirk received a total of 401,120 fully vested shares of common stock pursuant to his RSU Agreement.

 

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POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL

Continuing Employment Agreements with Named Executive Officers

In April 2019, the Company entered into into continuing employment agreements with each named executive officer other than Mr. Kirk and Mr. Nimrodi that provide for certain severance rights upon termination “without Cause” or resignation by the executive officer for “Good Reason.” Pursuant to the terms of these agreements, each executive officer will be entitled to receive (i) payment equivalent to 18 months of his or her base pay, less applicable withholding amounts, and (ii) the executive officer’s expected cost of COBRA premiums for continued medical coverage for up to 18 months (collectively, the “Termination Payments”). As a condition to receiving these severance benefits, the executive officer will be required to execute and deliver a release of claims within 60 days of the termination date.

“Cause” under the continuing employment agreements means: (i) material failure to observe and comply with any of our material written policies to our satisfaction; (ii) continued failure to substantially perform material duties; (iii) uncured willful failure to carry out, or comply with, in any material respect, any lawful and reasonable written directive; (iv) commission of any act or omission that results in, or that may reasonably be expected to result in, a conviction, plea of no contest or imposition of unadjudicated probation for any felony or any crime involving moral turpitude; (v) the employee’s incarceration; (vi) commission of any act of dishonesty, illegal conduct, fraud, embezzlement, misappropriation, material misconduct, or breach of fiduciary duty either against us or our affiliates or that is reasonably expected to be materially injurious to us or our affiliates; or (vii) uncured material or willful breach of any agreement with us.

“Good Reason” under the continuing employment agreements means (i) a material diminution in the employee’s authority, duties or responsibilities; (ii) a material reduction in the employee’s base salary (other than a general reduction in compensation applying to other similarly-situated employees); or (iii) the relocation of the primary office from which the employee is required to work to a location more than 50 miles from the current office location where the employee primarily works, which relocation increases the employee’s one-way commute. No event or condition will constitute Good Reason unless the employee provides us with written notice of the event or condition alleged to be Good Reason within 30 days after its occurrence, we fail to cure such event or condition within 30 days following our receipt of the notice, and the employee terminates employment within 30 days after the end of the cure period.

Employment Agreement with Dr. Sabzevari

Pursuant to Dr. Sabzevari’s Employment Agreement, in the event Dr. Sabzevari’s employment is terminated by Precigen without Cause or by Dr. Sabzevari for Good Reason, Dr. Sabzevari will be eligible to receive (i) an amount equal to 18 months of her then-current base annual salary (or, in the event of a material reduction of Dr. Sabzevari’s base salary giving rise to Good Reason, her pre-reduction base salary), (ii) a portion of her target bonus based on the pro-rata portion of the year elapsed prior to the date of her termination plus any annual bonus for the calendar year prior to the date of her termination of employment that would have been earned but for Executive’s termination date occurring prior to the date of payment of such bonus, (iii) full acceleration of any unvested portion of the Initial Equity Grants, (iv) full acceleration of any unvested portion of the Performance Equity Grants, in the event of termination within 12 months of a Change in Control, as defined our Amended and Restated 2013 Omnibus Incentive Plan, and (v) if elected, payment or reimbursement for COBRA healthcare continuation coverage for up to 18 months following the termination date (the “Severance Benefits”). The Severance Benefits are contingent upon the execution of a general release of claims.

Regardless of the reason of termination, under the Employment Agreement Dr. Sabzevari will be entitled to receive (i) any earned, but unpaid, base salary through the date of termination, (ii) a cash payout of accrued but unused vacation, and (iii) any amounts owed for reimbursement of expenses pursuant to applicable Precigen reimbursement policies.

 

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“Cause” under Dr. Sabzevari’s Employment Agreement has generally the same meaning as “Cause” in the continuing employment agreement, except that a continued failure to substantially perform material duties does not constitute cause under the Employment Agreement and that only material acts of dishonesty, illegal conduct, fraud, embezzlement, misappropriation, material misconduct, or breach of fiduciary duty constitute Cause under Dr. Sabzevari’s Employment Agreement, as opposed to any such act as under the continuing employment agreements.

“Good Reason” under the Employment Agreement has generally the same meaning as “Good Reason” in the continuing employment agreements, except that a reduction in base salary of more than 5%, other than a general reduction for similarly situated employees not to exceed 10%, constitutes “Good Reason” under the Employment Agreement and any material reduction in base salary other than a general reduction for similarly situated employees constitutes Good Reason under the continuing employment agreements. In addition, whereas we have a 30-day cure period under the continuing employment agreements, we have a 60-day cure period under Dr.  Sabzevari’s Employment Agreement.

Separation Agreements with Former Executive Officers

Mr. Nimrodi, our former Chief Business Officer and Mr. Walsh, our former Senior Vice President, Energy & Fine Chemicals Platforms departed the Company on April 5, 2019 and November 6, 2019, respectively. In connection with their departures, Mr. Nimrodi and Mr. Walsh each entered into a Separation Agreement and General Release that provided for, among other things, (i) a single lump sum severance payment in the amount set forth in the table above, (ii) reimbursement for an amount equal to the executive’s cost of COBRA continuing coverage from his departure date through the earlier of securing alternate full-time employment or 18 months from the departure date, and (iii) the acceleration of certain equity awards as discussed above. In connection with his termination, Mr. Walsh would have been eligible to receive the Termination Payments. However, we determined that it was in our best interests to pay a significant portion of Mr. Walsh’s Termination Payments in accelerated equity awards, and we therefore entered into the Separation Agreement and General Release and paid the amounts due thereunder in lieu of the amounts that would have been due under Mr. Walsh’s continuing employment agreement. This determination was made in consultation with the Compensation Committee.

Equity Award Provisions

To ensure that we will have the continued dedicated service of certain executives, including some of our named executive officers, notwithstanding the possibility, threat, or occurrence of a change in control, our stock option and RSU award agreements with our named executive officers contain change in control provisions. Specifically, these agreements provide that in the event a Change in Control (as defined below) occurs and no provision is made for the continuance, assumption or substitution of the option award by the Company or its successor in connection with a Change in Control, then the award will vest in full, to the extent not already vested, on the earlier of the control change date or the date the award is to be terminated in connection with the Change in Control, provided the executive has remained continuously employed by the Company or any affiliate from the grant date until such time.

The Compensation Committee believes that the change in control provisions in our 2013 Plan and our stock option awards serve the best interests of our Company and our shareholders by ensuring that if a change in control is ever under consideration, our executives are able to perform their duties and responsibilities and advise the Board about the potential transaction in the best interests of shareholders, without being unduly influenced by the distracting uncertainty and risk associated with a change in control, such as fear of the economic consequences of losing their equity awards as a result of a change in control.

A “Change in Control” is defined in the 2013 Plan to mean generally the occurrence of any of the following events:

(a) the accumulation in any number of related or unrelated transactions by any person of beneficial ownership (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the

 

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combined voting power of our voting stock; provided that for purposes of this subsection (a), a Change in Control will not be deemed to have occurred if the accumulation of more than 50% of the voting power of our voting stock results from any acquisition of voting stock (i) directly from the Company that is approved by the Incumbent Board (as defined in the 2013 Plan), (ii) by the Company, (iii) by any employee benefit plan (or related trust) sponsored or maintained by us or any affiliate, or (iv) by any person pursuant to a merger, consolidation, reorganization or other transaction (a “Business Combination”) that would not cause a Change in Control under subsections (b), (c) or (d) below;

(b) consummation of a Business Combination, unless, immediately following that Business Combination, (i) all or substantially all of the persons who were the beneficial owners of our voting stock immediately prior to that Business Combination beneficially own, directly or indirectly, more than 50% of the then outstanding shares of common stock and more than 50% of the combined voting power of the then outstanding voting stock entitled to vote generally in the election of directors of the entity resulting from that Business Combination (including, without limitation, an entity that as a result of that Business Combination owns the Company or all or substantially all of our assets either directly or through one or more subsidiaries) in substantially the same proportions relative to each other as their ownership, immediately prior to that Business Combination, of our voting stock:

(c) a sale or other disposition of all or substantially all of our assets, except pursuant to a Business Combination that would not cause a Change in Control under subsections (b) above or (d) below;

(d) approval by the shareholders of a complete liquidation or dissolution of the Company, except pursuant to a Business Combination that would not cause a Change in Control under subsections (b) and (c) above;

(e) the acquisition by any person, directly or indirectly, of the power to direct or cause the direction of our management and policies (i) through the ownership of securities which provide the holder with such power, excluding voting rights attendant with such securities, or (ii) by contract; provided that a Change in Control will not be deemed to have occurred if such power was acquired (x) directly from the Company in a transaction approved by the Incumbent Board, (y) by an employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliate or (z) by any person pursuant to a Business Combination that would not cause a Change in Control under subsections (b), (c) or (d) above; or

(f) During any period of two consecutive years, the Incumbent Board ceases to constitute a majority of the Board.

Notwithstanding the foregoing, a “Change in Control” does not include any accumulation of beneficial ownership or any Business Combination pursuant to which more than 50% of the beneficial ownership of the combined voting power of our voting stock is owned by (i) Randal J. Kirk, his spouse, his descendants and the spouses of his descendants, (ii) trusts and other entities established generally for the benefit of Randal J. Kirk, his spouse, his descendants and the spouses of his descendants, (iii) NRM VI Holdings I, LLC, NRM VII Holdings I, LLC, Third Security Staff 2001 LLC and any related funds, investors or entities, and/or (iv) any entities established by any of the foregoing.

In addition, our stock option and RSU award agreements with our named executive officers provide for the full vesting of the awards in the event of termination by reason of the named executive officer’s death or disability.

Potential Payments

The following table shows the potential payments upon termination without cause or for good reason by the executive officer, a change in control of the Company, incapacity or death for the named executive officers based

 

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on agreements and plans in effect as of December 31, 2019. The amounts in this table are calculated assuming the triggering event occurred on December 31, 2019 and all executives were paid in a lump sum payment.

 

          Termination
Without Cause or
for Good Reason
($)
    Change in
Control(1) ($)
     Incapacity(2)
($)
     Death(3)
($)
 

Helen Sabzevari

   Accelerated Equity      —         900,380      900,380      900,380
   Severance Payment      750,000       —          —          —    
   Benefit Plans      9,706 (4)     —          360,000      1,545,000  
     

 

 

   

 

 

    

 

 

    

 

 

 
   Total      759,706       900,380      1,260,380      2,445,380

Randal Kirk

   Accelerated Equity      —         —          —          —    
   Benefit Plans      —         —          —          —    
     

 

 

   

 

 

    

 

 

    

 

 

 
   Total      —         —          —          —    

Rick Sterling

   Accelerated Equity      —         654,285        654,285        654,285  
   Severance Payment      772,500       —          —          —    
   Benefit Plans      41,012 (4)      —          360,000        1,545,000  
     

 

 

   

 

 

    

 

 

    

 

 

 
   Total      813,512       654,285        1,014,285        2,199,285  

Donald Lehr

   Accelerated Equity      —         654,285        654,285        654,285  
   Severance Payment      862,500       —          —          —    
   Benefit Plans      40,819 (4)      —          360,000        1,545,000  
     

 

 

   

 

 

    

 

 

    

 

 

 
   Total      903,319       654,285        1,014,28        2,199,285  

Jeffrey Perez

   Accelerated Equity      —         654,285        654,285        654,285  
   Severance Payment      750,000       —          —          —    
   Benefit Plans      36,492 (4)      —          360,000        1,545,000  
     

 

 

   

 

 

    

 

 

    

 

 

 
   Total      786,492       654,285        1,014,28        2,199,285  

Robert Walsh, III

   Accelerated Equity      659,995     —          —          —    
   Severance Payment      90,005       —          —          —    
   Benefit Plans      1,538       —          —          —    
     

 

 

   

 

 

    

 

 

    

 

 

 
   Total      751,538       —          —          —    

Nir Nimrodi

   Accelerated Equity      515,820     —          —          —    
   Severance Payment      237,692       —          —          —    
   Benefit Plans      16,293       —          —          —    
     

 

 

   

 

 

    

 

 

    

 

 

 
   Total      769,805       —          —          —    

 

(1)

In the event of a change in control, as described above, unvested stock options and RSUs vest immediately unless provision is made for the continuance, assumption, or substitution of the option award by the Company or its successor. For purposes of this table, we assume that no such provision has been made. This column reflects the value of the accelerated vesting, which is calculated (i) for stock options by multiplying the number of shares subject to accelerated vesting under outstanding stock options by the difference between $5.48 (which was the closing market price per share of our common stock on December 31, 2019, the last trading day of fiscal 2019) and the per share exercise price of the applicable accelerated stock option and (ii) for RSUs by multiplying the number of shares subject to accelerated vesting under outstanding RSUs by $5.48. Currently all unvested stock options for our named executive officers have an exercise price greater than $5.48 and therefore no payments would be deemed to be made upon the acceleration of stock options.

(2)

Includes benefits payable under long-term disability insurance. Long-term disability benefits are payable beginning on the 90th day of disability up to 42 months of disability dependent on age at disability. These benefits equal 60% of base salary, capped at $8,000 per month. The values in the table above assume benefit payments for the maximum months paid dependent on the age of each executive as of December 31, 2019.

 

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(3)

Includes benefits payable to the executive’s heirs pursuant to life insurance, which is generally two times base salary with a cap of $545,000, with certain exceptions to the cap, and accidental death and disability insurance, which is two times base salary with a cap of $1 million. The insurance benefit payments will be made in one lump sum payment within one year following the accident involving the executive.

(4)

Includes the full premium cost of COBRA health care continuation coverage payable for 18 months following the executive’s termination, assuming that the executive does not become eligible to receive health care coverage from a subsequent employer or otherwise becomes ineligible for COBRA health care continuation coverage during this period.

 

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EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth certain information as of December 31, 2019 with respect to securities authorized for issuance under our existing equity compensation plans, consisting of our 2008 Equity Incentive Plan (the “2008 Plan”), the 2013 Plan, and the 2019 Plan. Each of these equity compensation plans was adopted with the approval of our shareholders.

 

Plan Category

   Number of Securities to
be Issued upon Exercise
of Outstanding Options,
Warrants and Rights
    Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
     Number of Securities Remaining
Available for Future Issuance
Under Equity Compensation
Plans (Excluding Securities
Reflected in column (a))
 
     (a)     (b)      (c)  

Equity compensation plans approved by shareholders

     10,804,264 (1)    $ 21.94        13,078,813 (2) 

Equity compensation plans not approved by shareholders

     —         —          —    
  

 

 

      

 

 

 

Total

     10,804,264       —          13,078,813  

 

(1)

Includes 9,022,282 outstanding stock options and 1,781,982 outstanding RSUs.

(2)

On and after the effective date of the 2013 Plan, no new awards may be granted under the 2008 Plan. Our 2013 Plan, in addition to being available for future issuance upon exercise of stock options and vesting of RSUs that have been or may be granted after December 31, 2019, and our 2019 Plan, each provide for the issuance of SARS, restricted stock awards, other stock-based awards, incentive awards, and dividend equivalents.

 

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CEO PAY RATIO

As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Item 402(u) of Regulation S-K (“Item 402(u)”), we are providing the following information about the relationship between the annual total compensation of our employees and the annual total compensation of Randal Kirk, our CEO during 2019. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u). Because Item 402(u) affords a large degree of flexibility in calculating the CEO pay ratio by allowing the use of reasonable estimates, assumptions and methodologies, the pay ratio disclosed by us below may not be comparable to pay ratio disclosures presented by other companies.

For 2019, our last completed fiscal year:

 

   

as reported in the Summary Compensation Table, the annual total compensation of our CEO was $2,067,617; and

 

   

the annual total compensation of our median employee (other than our CEO) was $64,718.

 

Based on this information, for 2019, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 32 to 1.

In accordance with Item 402(u), we elected to use the same median employee identified in 2017 in our 2018 and 2019 pay ratio calculations, respectively, as we believe that there was no change in our employee population or employee compensation arrangements that we believe would result in a significant change to our pay ratio disclosure for 2019. However, our pay ratio may fluctuate from year-to-year due to changes in the median employee’s or our CEO’s compensation. We believe putting into context how our median employee was identified highlights why that employee’s compensation and the resulting pay ratio, and year-over-year changes thereto, should not be compared on an “apples-to-apples” basis.

As disclosed in our 2019 and 2018 proxy statements, to identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of the median employee, the methodology and the material assumptions, adjustments, and estimates used were as follows:

Determination Date. We selected December 31, 2017 as the date from which to determine our total employee population and gather pay data.

Employee Population. As of December 31, 2017, according to internal payroll records, our total employee population, excluding our CEO, consisted of approximately 1,006 individuals working at our Company or within our consolidated subsidiaries on either a full-time or part-time basis. Out of these approximate 1,006 individuals, 77% are located in North America, 14% are located in Europe and 8% are located in South America. As permitted by Item 402(u), we chose to exclude from the employee population one individual located in Argentina and six individuals located within the Cayman Islands, which represent all of our employees in those jurisdictions, given the small number of employees in each jurisdiction and the challenges associated with data gathering and assessment of the compensation elements. As a result, our employee population for purposes of our pay ratio calculation consisted of 999 individuals.

Methodology . To identify the median employee, a listing was prepared of our employee population as of December 31, 2017. We did not annualize the compensation of any permanent employees, employed either part-time or full-time, who were employed by us for less than the full fiscal year. We then compared the actual cash compensation received during 2017 for those employees, consisting of base salary amounts and annual incentive awards as reflected by internal payroll records. We identified our median employee using this compensation measure, which was consistently applied to all of our employees across the employee population. Using this methodology, we determined that the median employee was a full-time, salaried employee located in the United States.

 

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Annual Total Compensation. With respect to the annual total compensation of the median employee, we identified and calculated the elements of such employee’s compensation for 2019 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. This calculation is the same calculation used for our named executive officers as set forth in the Summary Compensation Table earlier in this Proxy Statement. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of the Summary Compensation Table on page 55.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following is a description of transactions since January 1, 2019 to which we have been a party, in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or beneficial owners of more than 5% of our voting securities, or affiliates or immediate family members of any of our directors, executive officers or beneficial owners of more than 5% of our voting securities, had or will have a direct or indirect material interest.

We have historically been owned, funded, and managed by Randal Kirk, our Executive Chairman and former CEO, and affiliates of Mr. Kirk, for the purpose of developing our synthetic biotechnology business. As a result, we have engaged in a variety of financial and operational transactions with Mr. Kirk and these affiliates. In accordance with the requirements of the SEC, we describe below all such transactions in which we have engaged since January 1, 2019.

We believe that each of these transactions was on terms no less favorable to us than terms we could have obtained from unaffiliated third parties. Moreover, all of these transactions have been approved by a majority of the independent and disinterested members of the Board. It is our intention to ensure that all future transactions, if any, between us and our officers, directors, principal shareholders and their affiliates or family members, are approved by the Audit Committee or a majority of the independent and disinterested members of the Board, and are on terms no less favorable to us than those that we could obtain from unaffiliated third parties.

Greenberg Traurig LLP

Mr. Alvarez, a member of the Board, is the Senior Chairman of the international law firm Greenberg Traurig. Greenberg Traurig provides legal services to us from time to time, for which it has received and may continue to receive customary fees. Greenberg Traurig received an aggregate of $222,557 in fees in connection with 2019 legal services. As the Senior Chairman, Mr. Alvarez does not participate in such services and does not materially benefit from the engagement. As such, and in consideration of the fact that the amount received by Greenberg Traurig does not exceed 5% of Greenberg’s Traurig’s consolidated gross revenues for 2019, the Board has determined that this relationship is not material and that it does not impair Mr. Alvarez’s independence.

Transactions with Third Security, LLC and Affiliates

TS Biotechnology Transaction

On January 1, 2020, we entered into a Stock and Asset Purchase Agreement (the “Stock and Asset Purchase Agreement”) with TS Biotechnology Holdings, LLC (“TS Biotechnology”), a Virginia limited liability company managed by Third Security, LLC (“Third Security”), pursuant to which we agreed to sell, on the terms and subject to the conditions specified therein, the majority of our bioengineering assets to TS Biotechnology (the “TS Biotechnology Transaction”). The assets included in the TS Biotechnology Transaction included all of the equity interests that we held in (i) Blue Marble AgBio LLC, a Delaware limited liability company, (ii) ILH Holdings, Inc., a Delaware corporation, (iii) Intrexon Produce Holdings, Inc., a Delaware corporation, (iv) Intrexon UK Holdings Inc., a Delaware corporation, (v) Oragenics, Inc., a Florida corporation, and (vi) SH Parent, Inc., a Delaware corporation, as well as our former domain name, dna.com, for an aggregate purchase price of $53 million and certain contingent payment rights. On January 31, 2020, the sale was completed. The Stock and Asset Purchase Agreement was approved by the independent members of the Board after a unanimous recommendation of the independent special committee of the Board, following a process to consider strategic alternatives for the Corporation’s assets, and with the advice of independent financial and legal advisors.

Also on January 1, 2020, we entered into a subscription agreement (the “Subscription Agreement”) with TS Biotechnology, pursuant to which, upon the terms and subject to the conditions set forth therein, TS Biotechnology purchased 5,972,696 shares of our common stock for $35 million. The closing under the Subscription Agreement was completed on February 3, 2020.

 

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Mr. Kirk and shareholders affiliated with him, as of March 31, 2020, beneficially own approximately 48.5% of our voting stock. Mr. Kirk currently serves as the Senior Managing Director and Chief Executive Officer of Third Security and owns 100% of the equity interests in Third Security. Third Security is the manager to certain funds that own shares of our common stock and therefore may be deemed to have beneficial ownership in us of approximately 32.5%.

Services Agreement

On October 30, 2015, the independent members of the Board approved a Services Agreement (the “Services Agreement”), to be entered into and effective as of November 1, 2015, between us and Third Security. The Services Agreement was unanimously approved by the Audit Committee and the independent members of the Board in accordance with our policy on related person transactions.

Pursuant to the terms of the Services Agreement, Third Security provided us with services necessary or appropriate to support us and Mr. Kirk in his role as CEO. Third Security provided a wide variety of resources to us at the direction of Mr. Kirk, including the efforts of professionals with significant experience in areas such as accounting, corporate finance, research and analysis, law, tax, due diligence support, complex transaction structuring and support, mergers and acquisitions, and strategic relationship development and opportunity sourcing. Third Security also provided executive assistant, administrative, and other support services for Mr. Kirk in his role as CEO. Additionally, Third Security provided such other general support services to us as directed by Mr. Kirk in such role. In exchange for the foregoing services, Third Security was entitled to a fee of $800,000 per month to be paid in the form of fully vested shares of our common stock. The shares of common stock were valued based on the volume weighted average of our common stock over the 30 day period ending on the 15th day of the calendar month during which the applicable services were provided.

The payments made by us under the Services Agreement constituted, in the aggregate, awards under the 2013 Plan, and, following its approval in June 2019, under the 2019 Plan, and were subject to the terms of the 2013 Plan and 2019 Plan, respectively. The Services Agreement had an initial term of one year, and could be extended only by agreement of the parties. An extension of the agreement required, on behalf of us, unanimous approval of the independent members of the Board. The independent members of the Board, with the recommendation of the Audit Committee, approved subsequent extensions of the Services Agreement through January 1, 2020. On January 2, 2020, we announced that the Services Agreement was allowed to expire on January 1, 2020.

For the year ended December 31, 2019, we issued 1,606,062 shares, with a value of $8.2 million, to Third Security as payment for services provided pursuant to the Services Agreement.

Genopaver

Effective March 2013, we entered into an exclusive channel collaboration (“ECC”) with Genopaver LLC (“Genopaver”), a limited liability company formed for the purpose of entering into the ECC and developing and commercializing products identified through the ECC. Genopaver is an affiliate of Third Security. Upon execution of the ECC, we received a technology access fee of $3 million as upfront consideration. We were reimbursed for research and development services as provided for in the ECC and were entitled to a royalty on the gross profits of product sales from a product developed from the ECC. We are no longer party to the Genopaver ECC, having sold our interests in the ECC to TS Biotechnology in January 2020 as part of the TS Biotechnology Transaction.

Persea Bio

Effective December 2014, we entered into an ECC with Persea Bio, LLC (“Persea Bio”), a limited liability company formed for the purpose of entering into the ECC and developing and commercializing products identified through the ECC. Persea Bio is an affiliate of Third Security. Upon effectiveness of the ECC, we

 

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received a technology access fee of $5 million as upfront consideration. We were reimbursed for research and development services as provided for in the ECC and were entitled to a royalty on the gross profits of product sales from a product developed from the ECC. We are no longer party to the Persea Bio ECC, having sold our interests in the ECC to TS Biotechnology in January 2020 as part of the TS Biotechnology Transaction.

Harvest Intrexon Enterprise Fund I LP

In September 2018, we, through our wholly owned subsidiary ActoBio, issued $30 million of convertible promissory notes to Harvest Intrexon Enterprise Fund I LP (“Harvest”), an investment fund in which affiliates of Mr. Kirk have an approximate 20% ownership interest, in order to acquire Harvest’s ownership in CRS Bio, Inc., Genten Therapeutics, Inc., and Relieve Genetics, Inc. (collectively the “Harvest entities”). The notes have a maturity date of September 6, 2020, accrue interest at 3.0% compounded annually, are convertible into shares of ActoBio common stock at any time by the holder, and are automatically convertible into shares of ActoBio common stock upon the closing of certain financing events as defined in the note. If the notes have not been converted to ActoBio common stock by the maturity date, ActoBio can pay the principal and accrued interest in cash or with shares of our common stock at its election. We also received $15.5 million cash in the transaction from the acquisition of the Harvest entities. Following the transaction, we own 100% of the equity interests of the Harvest entities, including the rights that had been previously licensed to the Harvest entities by us.

Transactions with ECC Parties, Joint Ventures and Majority-Owned Subsidiaries

Oragenics

Pursuant to an ECC and a stock issuance agreement, each dated in June 2012, we granted to Oragenics, Inc. (“Oragenics”) an exclusive license to use our proprietary technologies and other intellectual property to develop and commercialize lantibiotics for the treatment of infectious diseases in humans and companion animals. In conjunction with our first ECC with Oragenics, we were entitled to, at our election, purchase up to 30% of securities offerings that may be conducted by Oragenics in the future, subject to certain conditions and limitations. We purchased 110,000 shares of Oragenics’ common stock pursuant to this right. In November 2017, we amended this first ECC agreement with Oragenics, and as a result, were entitled to up to $35 million of potential one-time payments for certain regulatory milestones. We also received reimbursement for services provided under the agreement and a percentage of profits derived from the sale of products developed from the ECC.

In June 2015, we entered into an ECC with Oragenics through which we granted to Oragenics an exclusive license to use our proprietary technologies and other intellectual property to pursue development of biotherapeutics for use in certain treatments of oral mucositis and other diseases and conditions of the oral cavity, throat, and esophagus. In consideration for this license, we received a $5 million convertible promissory note. In December 2015, Oragenics converted this promissory note into 338,100 shares of Oragenics’ common stock. In conjunction with this ECC, we agreed to purchase additional shares of Oragenics’ common stock in a qualified financing, as defined in the agreement, during the 16 months following the effective date of this ECC in an amount up to the lesser of (i) the amount that is the proportion of such financing equal to our pro rata equity holdings in Oragenics as of the effective date and (ii) $10 million subject to certain conditions. In June 2016, we purchased 226,142 shares of common stock pursuant to this commitment. Following an amendment in November 2017, we were entitled to up to $37.5 million of potential one-time payments for (i) research and development services provided pursuant to this agreement and during the ECC and (ii) manufacturing services for our materials provided to Oragenics during the ECC.

Prior to 2015, pursuant to stock purchase agreements, an affiliate of Mr. Kirk, NRM VII Holdings, I, LLC, purchased shares of Oragenics’ common stock.

In November 2017, concurrent with Oragenics closing a preferred stock private placement, we exchanged a promissory note, including accrued interest, purchased from Oragenics in May 2017 and receivables due from

 

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Oragenics totaling $3.4 million for Oragenics Series C preferred stock (“Series C Preferred Stock”). The Series C Preferred Stock is non-voting and non-convertible and is redeemable in whole or part at any time by Oragenics in cash. The Series C Preferred Stock accrued an annual 12% dividend payable in additional Series C Preferred Stock through May 10, 2019, and after such date, the annual dividend increased to 20%. As of December 31, 2019, based on the most recent financial information available on Oragenics, we concluded that there was no value to our investment in Oragenics preferred stock.

In January 2020, we sold all of our equity interests in Oragenics and our interests in the 2012 Oragenics ECC to TS Biotechnology as part of the TS Biotechnology Transaction.

Fibrocell Science

Pursuant to an ECC (the “2012 Fibrocell ECC”), a stock issuance agreement and a registration rights agreement, each dated in October 2012, we granted to Fibrocell Science, Inc. (“Fibrocell”) an exclusive license to our technology platform to develop and commercialize genetically modified and non-genetically modified autologous fibroblasts and autologous dermal cells in the United States. Upon execution of the ECC, we received a technology access fee of 87,835 shares of Fibrocell’s common stock valued at $7.6 million as upfront consideration. We received reimbursement payments for (1) research and development services provided pursuant to the agreement and (2) manufacturing services for our materials provided to Fibrocell during the agreement. On a quarterly basis, Fibrocell paid us royalties of 7% of net sales up to $25 million and 14% of net sales above $25 million on each product developed from the ECC, as defined in the agreement. If Fibrocell used our technology platform to improve the production of a current or new Fibrocell product not developed from the 2012 Fibrocell ECC, Fibrocell was required to pay us quarterly royalties equal to 33% of the cost of goods sold savings generated by the improvement, as defined in the agreement.

Effective June 2013, we entered into an amendment to the 2012 Fibrocell ECC. The amendment expanded the 2012 Fibrocell ECC to include potential treatments based on engineered autologous fibroblast cells for the localized treatment of autoimmune and inflammatory disorders including morphea (localized scleroderma), cutaneous eosinophilias and moderate to severe psoriasis.

In July 2015, we and certain affiliates of Mr. Kirk acquired an aggregate amount of 65,066 shares of Fibrocell common stock at a price of $87.00 per share.

In December 2015, we entered into our second ECC with Fibrocell (the “2015 Fibrocell ECC”) through which we granted to Fibrocell an exclusive license to use our proprietary technologies and other intellectual property to develop and commercialize genetically modified fibroblasts to treat chronic inflammatory and degenerative diseases of the joint, including arthritis and related conditions. We received a technology access fee of $10 million under the 2015 Fibrocell ECC. In Febraury 2020, we mutually agreed with Fibrocell to terminate the 2015 Fibrocell ECC.

In September 2016, we and certain affiliates of Mr. Kirk invested the aggregate amount of $6.8 million in convertible debt securities. Such securities are convertible into common shares of Fibrocell at $17.04375 per share. Additionally, in conjunction with the purchase of the convertible debt of Fibrocell, we and certain affiliates of Mr. Kirk received warrants to purchase 450,835 shares of Fibrocell common stock.

In March 2017, we and certain affiliates of Mr. Kirk acquired an aggregate amount of 3,016 shares of Series A convertible preferred stock of Fibrocell for an aggregate amount of $3.0 million. Such preferred stock was convertible into common shares of Fibrocell at a price of $11.6369 per share. Additionally, in conjunction with the purchase of the preferred stock of Fibrocell, we and certain affiliates of Mr. Kirk received warrants to purchase 259,176 shares of Fibrocell common stock.

In April 2019, Fibrocell entered into a collaboration agreement with a Castle Creek Pharmaceuticals, LLC to develop and commercialize a product in the field of the 2012 Fibrocell ECC. Pursuant to the terms of the 2012

 

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Fibrocell ECC, we were entitled to 50% of sublicensing fees. In December 2019, Fibrocell was acquired by Castle Creek Pharmaceutical Holdings, Inc. (“Castle Creek”).

An affiliate of Mr. Kirk, Third Security, held two seats on Fibrocell’s board of directors from October 2012 until Fibrocell’s acquisition in December 2019. Pursuant to securities purchase agreements and through open market purchases, affiliates of Mr. Kirk acquired shares of Fibrocell common stock, including the shares acquired in July 2015. As of immediately prior to Fibrocell’s acquisition by Castle Creek, Mr. Kirk, together with his affiliates (excluding us), beneficially owned 1,226,766 shares, or 12.6%, of Fibrocell’s outstanding common stock.

In connection with Castle Creek’s acquisition of Fibrocell, we received $1.3 million in December 2019 for our shares of Fibrocell common stock and $3.3 million in January 2020 for our Fibrocell convertible debt and Series A convertible preferred stock.

In March 2020, Precigen and Fibrocell terminated the 2012 Fibrocell ECC by mutual agreement. Fibrocell retains surviving licenses under the 2012 Fibrocell ECC to continue to develop and commercialize two specific drug product candidates subject to Fibrocell’s continued development and commercialization of those candidates and to continued payment to us of revenue sharing payments as set forth in the 2012 Fibrocell ECC.

Intrexon Energy Partners

In March 2014, we and certain investors (the “IEP Investors”), including an affiliate of Mr. Kirk, NRM VII Holdings I, LLC, entered into a Limited Liability Company Agreement which governs the affairs and conduct of business of Intrexon Energy Partners, LLC (“Intrexon Energy Partners”), a joint venture formed to optimize and scale-up our methane bioconversion platform technology for the production of certain fuels and lubricants. We also entered into an ECC with Intrexon Energy Partners providing exclusive rights to our technology for the use in bioconversion, as a result of which we received a technology access fee of $25 million while retaining a 50% membership interest in Intrexon Energy Partners. The IEP Investors made initial capital contributions, totaling $25 million in the aggregate, in exchange for pro rata membership interests in Intrexon Energy Partners totaling 50%. We committed to make capital contributions of up to $25 million, and the IEP Investors, as a group and pro rata in accordance with their respective membership interests in Intrexon Energy Partners, have committed to make additional capital contributions of up to $25 million, at the request of the Intrexon Energy Partners Board, and subject to certain limitations. Intrexon Energy Partners is governed by the Intrexon Energy Partners Board, which has five members. Two members of the Intrexon Energy Partners Board are designated by us and three members are designated by a majority of the IEP Investors. We and the IEP Investors have the right, but not the obligation, to make additional capital contributions above these limits when and if solicited by the Intrexon Energy Partners Board.

Any investor who purchased at least $10.0 million of our common stock in the private placement related to Intrexon Energy Partners will have the right to require us to register such shares of our common stock on a registration statement on Form S-3, if available for use.

AquaBounty

Beginning in November 2012, we acquired shares of common stock in AquaBounty Technologies, Inc. (“AquaBounty”). In connection with these transactions, we obtained a majority stake in AquaBounty and a contractual right to control AquaBounty’s board of directors. In January 2017, we invested an additional $25 million in AquaBounty through an equity purchase and subsequently, we distributed 1,776,557 of our AquaBounty shares to our shareholders. Affiliates of Mr. Kirk received 930,530 shares of AquaBounty common stock as a result of the special stock dividend.

Through April 8, 2019, we consolidated our ownership of AquaBounty. On April 9, 2019, AquaBounty completed an underwritten public offering in which we did not participate. This offering resulted in us no longer having the contractual right to control AquaBounty’s board of directors, and accordingly, we deconsolidated AquaBounty.

 

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In October 2019, the independent members of the Board, with the recommendation of the Audit Committee and an independent special committee of the Board, unanimously approved our sale of our common shares held in AquaBounty to an affiliate of Third Security for $21.6 million. We no longer own any interest in AquaBounty.

Thrive Agrobiotics, Inc.

In September 2015, we entered into an ECC with Thrive Agrobiotics Inc. (“Thrive Agrobiotics”), an affiliate of Harvest. Thrive Agrobiotics was formed for the purpose of entering into the ECC and developing and commercializing products to improve the overall growth and feed efficiency of piglets. Upon execution of the ECC, we received a technology access fee in the form of equity in Thrive Agrobiotics valued, at the time, at approximately $1.667 million. We are reimbursed for research and development services provided pursuant to the ECC. We may also receive additional payments if certain development and commercialization milestones are achieved and will receive royalty payments based on a percentage of quarterly gross profits of product sales developed under the ECC. As of March 31, 2020, we own 25% of Thrive Agrobiotics’ common stock.

Intrexon Energy Partners II

In December 2015, we and certain investors (the “IEP II Investors”), including Harvest, entered into a Limited Liability Company Agreement which governs the affairs and conduct of business of Intrexon Energy Partners II, LLC (“Intrexon Energy Partners II”), a joint venture formed to utilize our natural gas bioconversion platform for the production of 1,4-butanediol, an industrial chemical intermediate used to manufacture spandex, polyurethane, plastics, and polyester. We also entered into an ECC with Intrexon Energy Partners II providing exclusive rights to our technology for the use in the field, as a result of which we received a technology access fee of $18 million while retaining a 50% membership interest in Intrexon Energy Partners II. The IEP II Investors made initial capital contributions, totaling $18 million in the aggregate, in exchange for pro rata membership interests in Intrexon Energy Partners II totaling 50%. In December 2015, the owners of Intrexon Energy Partners II made a capital contribution of $4 million, half of which was paid by us. We committed to make capital contributions of up to $10 million, and the IEP II Investors, as a group and pro rata in accordance with their respective membership interests in Intrexon Energy Partners, have committed to make additional capital contributions of up to $10 million, at the request of the Intrexon Energy Partners II board of managers, or the Intrexon Energy Partners II Board, and subject to certain limitations. Intrexon Energy Partners II is governed by the Intrexon Energy Partners II Board, which has five members. One member of the Intrexon Energy Partners II Board is designated by us and four members of the Intrexon Energy Partners II Board are designated by a majority of the IEP II Investors. We and the IEP Investors II have the right, but not the obligation, to make additional capital contributions above these limits when and if solicited by the Intrexon Energy Partners II Board.

Exotech Bio, Inc.

In March 2016, we entered into an ECC with Exotech Bio, Inc. (“Exotech Bio”), an affiliate of Harvest. Exotech Bio was formed for the purpose of entering into the ECC and developing and commercializing products using exosomes carrying a RNA payload designed to kill, suppress, or render immune-visible a cancer cell. Upon execution of the ECC, we received a technology access fee in the form of equity in Exotech Bio valued, at the time, at $5 million. In June 2018, we and Exotech Bio amended the ECC, which resulted in the expansion of the defined field of use and an increase of our ownership in Exotech Bio to 49%. The amendment also eliminated potential future milestone payments and royalties for which we were previously entitled. We will be reimbursed for research and development services provided pursuant to the ECC. As of March 31, 2020, we own 49% of Exotech Bio’s common stock.

AD Skincare, Inc.

In June 2016, we entered into an ECC with AD Skincare, Inc. (“AD Skincare”), an affiliate of Harvest. AD Skincare was formed for the purpose of entering into the ECC and developing an advanced topical delivery

 

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system to improve the efficacy of biologically active ingredients aimed at improving signs of aging human skin. Upon execution of the ECC, we received a technology access fee in the form of equity in AD Skincare valued at $4.3 million as upfront consideration. We are also entitled to up to $2 million of potential payments for substantive and non-substantive development milestones for each product developed under the ECC, as well as up to $17 million in one-time commercial milestones. We receive reimbursement payments for research and development services provided pursuant to the ECC. As of March 31, 2020, we own 25% of AD Skincare’s common stock.

Policies and Procedures for Related Person Transactions

The Board has adopted a written related policy with respect to related person transactions. This policy governs the review, approval or ratification of covered related person transactions. The Audit Committee of the Board manages this policy.

For purposes of this policy, a “related person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we (or any of our subsidiaries) were, are or will be a participant, and the amount involved exceeds $120,000 and in which any related person had, has or will have a direct or indirect interest. For purposes of determining whether a transaction is a related person transaction, the Audit Committee relies upon Item 404 of Regulation S-K, promulgated under the Exchange Act.

The policy generally provides that we may enter into a related person transaction only if:

 

   

the Audit Committee pre-approves such transaction in accordance with the guidelines set forth in the policy;

 

   

the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party and the Audit Committee (or the chairperson of the Audit Committee) approves or ratifies such transaction in accordance with the guidelines set forth in the policy;

 

   

the transaction is approved by the disinterested members of the Board; or

 

   

the transaction involves compensation approved by the Compensation Committee.

In the event a related person transaction is not pre-approved by the Audit Committee and our management determines to recommend such related person transaction to the Audit Committee, such transaction must be reviewed by the Audit Committee. After review, the Audit Committee will approve or disapprove such transaction. When our Chief Legal Officer, in consultation with our CEO or our Chief Financial Officer, determines that it is not practicable or desirable for us to wait until the next Audit Committee meeting, the chairperson of the Audit Committee possesses delegated authority to act on behalf of the Audit Committee. The Audit Committee (or the chairperson of the Audit Committee) may approve only those related person transactions that are in, or not inconsistent with, our best interests and the best interests of our shareholders, as the Audit Committee (or the chairperson of the Audit Committee) determines in good faith.

The Audit Committee has determined that certain types of related person transactions are deemed to be pre-approved by the Audit Committee. Our related person transaction policy provides that the following transactions, even if the amount exceeds $120,000 in the aggregate, are considered to be pre-approved by the Audit Committee:

 

   

any employment of certain named executive officers that would be publicly disclosed;

 

   

director compensation that would be publicly disclosed;

 

   

transactions with other companies where the related person’s only relationship is as a director or owner of less than 10% of said company (other than a general partnership), if the aggregate amount involved does not exceed the greater of $200,000 or 5% of that company’s consolidated gross revenues;

 

   

transactions where all shareholders receive proportional benefits;

 

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transactions involving competitive bids;

 

   

transactions with a related person involving the rendering of services at rates or charges fixed in conformity with law or governmental authority; and

 

   

transactions with a related person involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture or similar services.

In addition, the Audit Committee will review the policy at least annually and recommend amendments to the policy to the Board from time to time.

The policy provides that all related person transactions will be disclosed to the Audit Committee, and all material related person transactions will be disclosed to the Board. Additionally, all related person transactions requiring public disclosure will be properly disclosed, as applicable, on our various public filings.

The Audit Committee will review all relevant information available to it about the related person transaction. The policy provides that the Committee may approve or ratify the related person transaction only if the Committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, our best interests. The policy provides that the Committee may, in its sole discretion, impose such conditions as it deems appropriate on us or the related person in connection with approval of the related person transaction.

 

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CERTAIN MATTERS RELATING TO PROXY MATERIALS AND ANNUAL REPORTS

Electronic Access of Proxy Materials and Annual Reports

Our Proxy Statement, including the accompanying notice and form of proxy, and 2019 Annual Report are available at https://materials.proxyvote.com/default.aspx?ticker=74017N . A free paper copy of any of these documents may be requested by contacting the Corporate Secretary in writing at Precigen, Inc., 20374 Seneca Meadows Parkway, Germantown, Maryland 20876.

“Householding” of Proxy Materials and Annual Reports for Record Owners

The SEC rules permit us, with your permission, to deliver a single proxy statement and annual report to any household at which two or more shareholders of record reside at the same address. Each shareholder will continue to receive a separate proxy card. This procedure, known as “householding,” reduces the volume of duplicate information you receive and reduces our expenses. Shareholders of record voting by mail can choose this option by marking the appropriate box on the proxy card included with this Proxy Statement. Shareholders of record voting via telephone or over the internet can choose this option by following the instructions provided by telephone or over the internet, as applicable. Once given, a shareholder’s consent will remain in effect until he or she revokes it by notifying our Corporate Secretary as described above. If you revoke your consent, we will begin sending you individual copies of future mailings of these documents within 30 days after we receive your revocation notice. Shareholders of record who elect to participate in householding may also request a separate copy of future proxy statements and annual reports by writing to the Corporate Secretary at Precigen, Inc., 20374 Seneca Meadows Parkway, Germantown, Maryland 20876.

Separate Copies for Beneficial Owners

Institutions that hold shares in street name for two or more beneficial owners with the same address are permitted to deliver a single proxy statement and annual report to that address. Any such beneficial owner can request a separate copy of this Proxy Statement or the 2019 Annual Report by contacting our Corporate Secretary as described below. Beneficial owners with the same address who receive more than one Proxy Statement and 2019 Annual Report may request delivery of a single Proxy Statement and 2019 Annual Report by contacting the Corporate Secretary in writing at Precigen, Inc., 20374 Seneca Meadows Parkway, Germantown, Maryland 20876.

 

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OTHER MATTERS

The Board is not aware of any other matters to be presented for action at the Annual Meeting other than as set forth in this Proxy Statement. However, if other matters properly come before the Annual Meeting, or any adjournment or postponement thereof, the person or persons voting the proxies will vote them in accordance with their best judgment.

By Order of the Board of Directors

DONALD P. LEHR

Chief Legal Officer and Corporate Secretary

Germantown, Maryland

April 29, 2020

 

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APPENDIX A

PRECIGEN, INC.

AMENDED AND RESTATED 2013 OMNIBUS INCENTIVE PLAN

(conformed copy including amendments through April 1, 2020)

TABLE OF CONTENTS

 

          Page  

ARTICLE I DEFINITIONS

     1  
        1.01    409A Award      1  
        1.02    Affiliate      1  
        1.03    Agreement      1  
        1.04    Award      1  
        1.05    Board      1  
        1.06    Cash Award      1  
        1.07    Cause      1  
        1.08    Change in Control      2  
        1.09    Code      3  
        1.10    Committee      3  
        1.11    Common Stock      3  
        1.12    Company      3  
        1.13    Control Change Date      3  
        1.14    Corresponding SAR      4  
        1.15    Disability      4  
        1.16    Dividend Equivalent      4  
        1.17    Exchange Act      4  
        1.18    Fair Market Value      4  
        1.19    Full Value Award      4  
        1.20    Incentive Award      4  
        1.21    Incumbent Board      5  
        1.22    Initial Value      5  
        1.23    Named Executive Officer      5  
        1.24    Non-409A Award      5  
        1.25    Option      5  
        1.26    Other Stock-Based Award      5  
        1.27    Participant      5  
        1.28    Plan      5  
        1.29    Person      6  
        1.30    Prior Incentive Plan      6  
        1.31    Restricted Stock Award      6  
        1.32    Restricted Stock Unit      6  
        1.33    Retirement      6  
        1.34    SAR      6  
        1.35    Ten Percent Shareholder      6  
        1.36    Termination Date      6  

 

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          Page  
ARTICLE II PURPOSES      7  
ARTICLE III TYPES OF AWARDS      7  
ARTICLE IV ADMINISTRATION      7  
        4.01    General Administration      7  
        4.02    Delegation of Authority      7  
        4.03    Indemnification of Committee      8  
ARTICLE V ELIGIBILITY      8  
ARTICLE VI COMMON STOCK SUBJECT TO PLAN      9  
        6.01    Common Stock Issued      9  
        6.02    Aggregate Limit      9  
        6.03    Individual Limit      9  
        6.04    Share Counting      10  
ARTICLE VII OPTIONS      11  
        7.01    Grant      11  
        7.02    Option Price      11  
        7.03    Maximum Term of Option      11  
        7.04    Exercise      11  
        7.05    Payment      11  
        7.06    Stockholder Rights      12  
        7.07    Disposition of Shares      12  
        7.08    No Liability of Company      12  
ARTICLE VIII SARS      12  
        8.01    Grant      12  
        8.02    Maximum Term of SAR      12  
        8.03    Exercise      12  
        8.04    Settlement      13  
        8.05    Stockholder Rights      13  
ARTICLE IX RESTRICTED STOCK AWARDS      13  
        9.01    Award      13  
        9.02    Payment      13  
        9.03    Vesting      13  
        9.04    Maximum Restriction Period      14  
        9.05    Stockholder Rights      14  
ARTICLE X RESTRICTED STOCK UNITS      14  
        10.01    Grant      14  
        10.02    Earning the Award      15  
        10.03    Maximum Restricted Stock Unit Award Period      15  
        10.04    Payment      15  
        10.05    Stockholder Rights      15  
ARTICLE XI INCENTIVE AWARDS      16  
        11.01    Grant      16  

 

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          Page  
        11.02    Earning the Award      16  
        11.03    Maximum Incentive Award Period      16  
        11.04    Payment      16  
        11.05    Stockholder Rights      16  
ARTICLE XII OTHER STOCK-BASED AWARDS      17  
        12.01    Other Stock-Based Awards      17  
        12.02    Bonus Stock and Awards in Lieu of Other Obligations      17  
ARTICLE XIII DIVIDEND EQUIVALENTS AND CASH AWARDS      17  
        13.01    Dividend Equivalents      17  
        13.02    Cash Awards      17  
ARTICLE XIV TERMS APPLICABLE TO ALL AWARDS      18  
        14.01    Written Agreement      18  
        14.02    Nontransferability      18  
        14.03    Transferable Awards      18  
        14.04    Participant Status      19  
        14.05    Change in Control      19  
        14.06    Stand-Alone, Additional, Tandem and Substitute Awards      20  
        14.07    Form and Timing of Payment; Deferrals      20  
        14.08    Time and Method of Exercise      21  
        14.09    Effect of Termination Date on Options, SARs and Other Stock-Based Awards in the Nature of Purchase Rights      22  
        14.10    Non U. S. Participants      23  
ARTICLE XV QUALIFIED PERFORMANCE-BASED COMPENSATION      23  
        15.01    Performance Conditions      23  
        15.02    Establishing the Amount of the Award      24  
        15.03    Earning the Award      24  
        15.04    Performance Awards      25  
ARTICLE XVI ADJUSTMENT UPON CHANGE IN COMMON STOCK      25  
        16.01    General Adjustments      25  
        16.02    No Adjustments      25  
        16.03    Substitute Awards      25  
        16.04    Limitation on Adjustments      26  
ARTICLE XVII COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES      26  
        17.01    Compliance      26  
        17.02    Postponement of Exercise or Payment      26  
        17.03    Forfeiture or Reimbursement      27  
ARTICLE XVIII LIMITATION ON BENEFITS      27  
ARTICLE XIX GENERAL PROVISIONS      28  
        19.01    Effect on Employment and Service      28  
        19.02    Unfunded Plan      28  
        19.03    Rules of Construction      28  

 

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          Page  
        19.04    Tax Withholding and Reporting      28  
        19.05    Code Section 83(b) Election      29  
        19.06    Reservation of Shares      29  
        19.07    Governing Law      29  
        19.08    Other Actions      29  
        19.09    Repurchase of Common Stock      29  
        19.10    Other Conditions      29  
        19.11    Forfeiture Provisions      30  
        19.12    Legends; Payment of Expenses      30  
        19.13    Repricing of Awards      30  
        19.14    Right of Setoff      31  
        19.15    Fractional Shares      31  
ARTICLE XX CLAIMS PROCEDURES      31  
        20.01    Initial Claim      31  
        20.02    Appeal of Claim      31  
        20.03    Time to File Suit      31  
ARTICLE XXI AMENDMENT      32  
        21.01    Amendment of Plan      32  
        21.02    Amendment of Awards      32  
ARTICLE XXII SECTION 409A PROVISION      32  
        22.01    Intent of Awards      32  
        22.02    409A Awards      32  
        22.03    Election Requirements      33  
        22.04    Time of Payment      33  
        22.05    Acceleration or Deferral      34  
        22.06    Distribution Requirements      34  
        22.07    Key Employee Rule      34  
        22.08    Distributions Upon Vesting      34  
        22.09    Scope and Application of this Provision      34  
ARTICLE XXIII EFFECTIVE DATE OF PLAN      34  
ARTICLE XXIV DURATION OF PLAN      35  

 

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ARTICLE I

DEFINITIONS

 

1.01

409A Award

409A Award means an Award that is intended to be subject to Section 409A of the Code.

 

1.02

Affiliate

Affiliate, as it relates to any limitations or requirements with respect to incentive stock options, means any “subsidiary” or “parent” corporation (as such terms are defined in Code Section 424) of the Company. Affiliate otherwise means any entity that is part of a controlled group of corporations or is under common control with the Company within the meaning of Code Sections 1563(a), 414(b) or 414(c), except that, in making any such determination, fifty percent (50%) shall be substituted for eighty percent (80%) under such Code Sections and the related regulations.

 

1.03

Agreement

Agreement means a written or electronic agreement (including any amendment or supplement thereto) between the Company and a Participant specifying the terms and conditions of an Award granted to such Participant.

 

1.04

Award

Award means an Option, SAR, Restricted Stock Award, Restricted Stock Unit, Incentive Award, Other Stock-Based Award, Dividend Equivalent or Cash Award granted under this Plan.

 

1.05

Board

Board means the Board of Directors of the Company.

 

1.06

Cash Award

Cash Award means an Award stated with reference to a specified dollar amount which, subject to such terms and conditions as may be prescribed by the Committee, entitles the Participant to receive cash from the Company or an Affiliate.

 

1.07

Cause

Cause means “Cause” as such term is defined in any employment or service agreement between the Company or any Affiliate and the Participant except as otherwise determined by the Committee and set forth in the applicable Agreement. If no such employment or service agreement exists or if such employment or service agreement does not contain any such definition, except as otherwise determined by the Committee and set forth in the applicable Agreement, “Cause” means (i) the Participant’s willful and continued failure to comply with the lawful directives of the Board or any supervisory personnel of the Participant; (ii) any criminal act or act of dishonesty or willful misconduct by the Participant that has a material adverse effect on the property, operations, business or reputation of the Company or any Affiliate (willful for purposes of this definition, shall mean done, or omitted to be done, by the Participant in bad faith and without reasonable belief that the Participant’s action or omission was in the best interest of the Company or any Affiliate); (iii) the material breach by the Participant of the terms of any confidentiality, non-competition, non-solicitation or other agreement that the Participant has with the Company or any Affiliate or of any duty the Participant owes the Company or any Affiliate, (iv) acts by the Participant of willful malfeasance or gross negligence in a matter of material importance to the Company or

 

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any Affiliate, (v) any act of fraud, embezzlement, theft, misappropriation or misuse by the Participant of the funds or property of the Company or any Affiliate, (vi) any falsification by the Participant of any record or report in connection with the Participant’s duties and obligations to the Company or any Affiliate, (vii) the Participant’s sexual harassment of any other employees of the Company or any Affiliate, (viii) the breach by the Participant of any fiduciary duty against the Company or any Affiliate, (ix) the Participant being indicted for a felony that has a material adverse effect on the property, operations, business or reputation of the Company or any Affiliate or being convicted of any other felony or plea of guilty or nolo contendre to any other felony or (x) any other action that may damage the image of the Company’s or an Affiliate’s business or their or its standing in the industry, including but not limited to the possession, use or sale of illegal drugs, the abuse of alcohol or prescribed medication, or any other act or omission which the Company or an Affiliate considers to be a violation of Federal, state or local law or regulations other than a simple traffic violation . For purposes of the Plan, other than where the definition of Cause is determined under any employment or service agreement between the Company or any Affiliate and the Participant, in which case such employment or service agreement shall control, in no event shall any termination of employment or service be deemed for Cause unless the Company’s Chief Executive Officer concludes that the situation warrants a determination that the Participant’s employment or service terminated for Cause; in the case of the Chief Executive Officer or any member of the Board, any determination that the Chief Executive Officer’s employment or the Board member’s service terminated for Cause shall be made by the Board acting without the Chief Executive Officer or the Board member, as applicable.

 

1.08

Change in Control

Change in Control means the occurrence of any of the following events except as otherwise determined by the Committee and set forth in the applicable Agreement:

(a) The accumulation in any number of related or unrelated transactions by any Person of beneficial ownership (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of the combined voting power of the Company’s voting stock; provided that for purposes of this subsection (a), a Change in Control will not be deemed to have occurred if the accumulation of more than fifty percent (50%)  of the voting power of the Company’s voting stock results from any acquisition of voting stock (i)  directly from the Company that is approved by the Incumbent Board, (ii)  by the Company, (iii)  by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate, or (iv) by any Person pursuant to a merger, consolidation, reorganization or other transaction (a “Business Combination”) that would not cause a Change in Control under subsections (b), (c)  or (d)  below; or

(b) Consummation of a Business Combination, unless, immediately following that Business Combination, (i) all or substantially all of the Persons who were the beneficial owners of the voting stock of the Company immediately prior to that Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the then outstanding shares of common stock and more than fifty percent (50%)  of the combined voting power of the then outstanding voting stock entitled to vote generally in the election of directors of the entity resulting from that Business Combination (including, without limitation, an entity that as a result of that Business Combination owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions relative to each other as their ownership, immediately prior to that Business Combination, of the voting stock of the Company, or

(c) A sale or other disposition of all or substantially all of the assets of the Company, except pursuant to a Business Combination that would not cause a Change in Control under subsections (b) above or (d)  below; or

(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Combination that would not cause a Change in Control under subsections (b) and (c) above; or

(e) The acquisition by any Person, directly or indirectly, of the power to direct or cause the direction of the management and policies of the Company (i) through the ownership of securities which provide the holder with

 

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such power, excluding voting rights attendant with such securities, or (ii)  by contract; provided that a Change in Control will not be deemed to have occurred if such power was acquired (x)  directly from the Company in a transaction approved by the Incumbent Board, (y)  by an employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate or (z)  by any person pursuant to a Business Combination that would not cause a Change in Control under subsections (b), (c)  or (d) above; or

(f) During any period of two consecutive years, the Incumbent Board ceases to constitute a majority of the Board.

Notwithstanding the foregoing, a Change in Control shall not include any accumulation of beneficial ownership or any Business Combination pursuant to which more than fifty percent (50%) of the beneficial ownership of the combined voting power of the Company’s voting stock is owned by (i) Randal J. Kirk, his spouse, his descendants and the spouses of his descendants, (ii) trusts and other entities established generally for the benefit of Randal J. Kirk, his spouse, his descendants and the spouses of his descendants, (iii) NEWVA Capital Partners, LP, New River Management IV, LP., New River Management V, LP, Kirkfield, L.L.C., RJK, L.L.C., Third Security Staff 2001 LLC and any related funds, investors or entities, and/or (iv) any entities established by any of the foregoing.

Notwithstanding the foregoing, a Change in Control shall only be deemed to have occurred with respect to a Participant in connection with the time or form of payment of the Participant’s 409A Award (or as otherwise required for the 409A Award to be in compliance with Section 409A of the Code) if the Change in Control otherwise constitutes a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A of the Code (otherwise, with respect to vesting of the 409A Award and any other terms of the 409A Award that do not require a Change in Control to comply with its meaning under Section 409A of the Code for the 409A Award to be in compliance with Section 409A of the Code, Change in Control shall have the same meaning as described above).

 

1.09

Code

Code means the Internal Revenue Code of 1986 and any amendments thereto.

 

1.10

Committee

Committee means the Compensation Committee of the Board or such other Committee as the Board may appoint from time to time to administer the Plan, or the Board itself if no Compensation Committee or other appointed Committee exists. If such Compensation Committee or other Committee exists, if and to the extent deemed necessary by the Board, such Committee shall consist of two or more directors, all of whom are (i) “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act, (ii) “outside directors” within the meaning of Code Section 162(m) and (iii) independent directors under the rules of the principal stock exchange on which the Company’s securities are then traded.

 

1.11

Common Stock

Common Stock means the common stock of the Company, no par value per share, or such other class or kind of shares or other securities resulting from the application of Article XVI, as applicable.

 

1.12

Company

Company means Precigen, Inc., a Virginia corporation, and any successor thereto.

 

1.13

Control Change Date

Control Change Date means the date on which a Change in Control occurs. If a Change in Control occurs on account of a series of transactions, the “Control Change Date” is the date of the last of such transactions.

 

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1.14

Corresponding SAR

Corresponding SAR means a SAR that is granted in relation to a particular Option and that can be exercised only upon the surrender to the Company, unexercised, of that portion of the Option to which the SAR relates.

 

1.15

Disability

Disability means, for purposes of an incentive stock option, a physical, mental or other impairment within the meaning of Section 22(e)(3) of the Code and, for all other purposes, any physical or mental condition that would qualify the Participant for a disability under any long-term disability plan maintained by the Company or any Affiliate that is applicable to such Participant, except as otherwise determined by the Committee and set forth in the applicable Agreement. Notwithstanding the foregoing, however, to the extent necessary for any 409A Award to be in compliance with Section 409A of the Code, Disability, with respect to the time or form of payment of a Participant’s 409A Award (or as otherwise required for the 409A Award to be in compliance with Section 409A of the Code), means the Participant is Disabled within the meaning of Section 409A of the Code.

 

1.16

Dividend Equivalent

Dividend Equivalent means the right, granted under the Plan, to receive cash, shares of Common Stock, other Awards or other property equal in value to all or a specified portion of dividends paid with respect to a specified number of shares of Common Stock.

 

1.17

Exchange Act

Exchange Act means the Securities Exchange Act of 1934, as amended.

 

1.18

Fair Market Value

Fair Market Value of a share of Common Stock means, on any given date, the fair market value of a share of Common Stock as the Committee, in its discretion, shall determine; provided, however, that the Committee shall determine Fair Market Value without regard to any restriction other than a restriction which, by its terms, will never lapse and, if the shares of Common Stock are traded on any national stock exchange or quotation system, the Fair Market Value of a share of Common Stock shall be the closing price of a share of Common Stock as reported on such stock exchange or quotation system on such date, or if the shares of Common Stock are not traded on such stock exchange or quotation system on such date, then on the next preceding day that the shares of Common Stock were traded on such stock exchange or quotation system, all as reported by such source as the Committee shall select. The Fair Market Value that the Committee determines shall be final, binding and conclusive on the Company, any Affiliate and each Participant. Fair Market Value relating to the exercise price, Initial Value, or purchase price of any Non-409A Award that is an Option, SAR or Other Stock-Based Award in the nature of purchase rights shall conform to the requirements for exempt stock rights under Section 409A of the Code.

 

1.19

Full Value Award

Full Value Award means an Award other than an Option, SAR or Other Stock-Based Award in the nature of purchase rights.

 

1.20

Incentive Award

Incentive Award means an Award stated with reference to a specified dollar amount or number of shares of Common Stock which, subject to such terms and conditions as may be prescribed by the Committee, entitles the Participant to receive shares of Common Stock, cash or a combination thereof from the Company or an Affiliate.

 

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1.21

Incumbent Board

Incumbent Board means a Board of Directors at least a majority of whom consist of individuals who either are (a) members of the Company’s Board at the beginning of any period of two consecutive years or (b) members who become members of the Company’s Board subsequent to such time whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds (2/3) of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which that person is named as a nominee for director, without objection to that nomination), but excluding, for that purpose, any individual whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors.

 

1.22

Initial Value

Initial Value means, with respect to a Corresponding SAR, the Option price per share of the related Option and, with respect to a SAR granted independently of an Option, the amount determined by the Committee on the date of grant which shall not be less than the Fair Market Value of one share of Common Stock on the date of grant, subject to Sections 14.06 and 16.03 with respect to substitute Awards