UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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o | Preliminary Proxy Statement |
o | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
x | Definitive Proxy Statement |
o | Definitive Additional Materials |
o | Soliciting Material Pursuant to §240.14a-12 |
PROLOR BIOTECH, 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):
x | No fee required. |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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o | Fee paid previously with preliminary materials: |
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PROLOR BIOTECH, INC.
7 Golda Meir Street
Weizmann Science Park
Nes-Ziona, Israel 74140
April 25, 2013
Dear Fellow Stockholder,
On behalf of the board of directors and management of PROLOR Biotech, Inc., we cordially invite you to attend the 2013 Annual Meeting of Stockholders of PROLOR Biotech, Inc., to be held at 12:00 p.m., local time, on June 4, 2013, at 520 Madison Avenue, 9th Floor, New York, NY.
The attached Notice of Annual Meeting and Proxy Statement describe the business we expect to conduct at the Annual Meeting and provide important information about us that you should consider when deciding how to vote your shares. At the Annual Meeting, you will have an opportunity to meet management and ask questions.
We encourage you to attend the Annual Meeting. Whether or not you plan to attend in person, it is important that your shares be represented and voted at the Annual Meeting. You may vote your shares over the Internet, or, if you received a paper copy of the proxy card by mail, please mark, sign, date and promptly return the card in the self-addressed stamped envelope provided. Instructions regarding the methods of voting are contained in the proxy card. Voting over the Internet or by mailing a proxy card will not limit your right to attend the Annual Meeting and vote your shares in person. If you decide to attend the meeting and vote in person, your previously-delivered proxy may be revoked at your request.
We appreciate your support, and look forward to seeing you at the Annual Meeting.
Sincerely
Abraham Havron, Ph.D.
Chief Executive Officer
PROLOR BIOTECH, INC.
7 Golda Meir Street
Weizmann Science Park
Nes-Ziona, Israel 74140
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NOTICE OF 2013 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 4, 2013
To the stockholders of PROLOR Biotech, Inc.:
The Annual Meeting of Stockholders of PROLOR Biotech, Inc., a Nevada corporation, will be held on Tuesday, June 4, 2013, at 12:00 p.m., local time, at 520 Madison Avenue, 9th Floor, New York, NY, for the following purposes:
1. | to elect eight members of the board of directors to serve until the 2014 Annual Meeting of Stockholders or until their respective successors are duly elected and qualified; |
2. | to approve an amendment to our 2007 Equity Incentive Plan that would (i) increase the number of shares of common stock covered by the plan from 6,000,000 to 10,000,000, (ii) limit the number of stock options and/or stock appreciation rights that may be granted to any one person in a given year and (iii) provide that we may grant awards of common stock under the plan that are not subject to restrictions on transferability, risk of forfeiture or other restrictions; |
3. | to ratify the appointment of Yarel + Partners CPA as our independent registered certified public accounting firm for the 2013 fiscal year; and |
4. | to consider and act upon such other business as may properly come before the Annual Meeting. |
The board of directors is not aware of any other business to come before the meeting. You may vote at the meeting and any postponements or adjournments of the meeting if you were the record owner of our common stock at the close of business on April 12, 2013. In the event there are an insufficient number of votes for a quorum at the time of the Annual Meeting, the meeting may be adjourned or postponed in order to permit further solicitation of proxies.
By order of the Board of Directors
Abraham Havron
Chief Executive Officer
Nes Ziona, Israel
April 25, 2013
Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to Be Held on June 4, 2013.
The proxy statement and annual report to stockholders are available at:
http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=26055
IMPORTANT: PLEASE VOTE YOUR SHARES OVER THE INTERNET, OR, IF YOU RECEIVED A PAPER COPY OF THE PROXY CARD BY MAIL, PLEASE SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD IN THE ENVELOPE PROVIDED, SO THAT YOUR SHARES WILL BE REPRESENTED WHETHER OR NOT YOU ARE ABLE TO ATTEND THE MEETING. THE PROMPT RETURN OF PROXIES WILL SAVE US THE EXPENSE OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING.
PROLOR BIOTECH, INC.
PROXY STATEMENT
FOR THE 2013 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
TUESDAY, JUNE 4, 2013
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This proxy statement is furnished in connection with the solicitation by the board of directors of PROLOR Biotech, Inc., a Nevada corporation, of proxies to be voted at the 2013 Annual Meeting of Stockholders. This meeting is to be held at 520 Madison Avenue, 9th Floor, New York, NY on Tuesday, June 4, 2013 at 12:00 p.m., local time, or at any postponements or adjournments of the meeting. This proxy statement, along with the accompanying Notice of 2013 Annual Meeting of Stockholders, summarizes the purposes of the meeting and provides information that you should consider when deciding how to vote your shares.
This proxy statement was first mailed to stockholders on or about April 25, 2013. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, which includes our audited financial statements for the fiscal year ended December 31, 2012, which was filed with the Securities and Exchange Commission, which we refer to as the SEC, and which provides additional information about us, is being distributed to all stockholders entitled to vote along with these proxy materials.You can also find a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 on the internet at http://www.prolor-biotech.com.Additional paper copies of the Annual Report on Form 10-K for the fiscal year ended December 31, 2012 are available directly from our corporate offices upon request. Our Internet website and the information contained therein, other than material expressly referred to in this Proxy Statement, or connected thereto, are not incorporated into this Proxy Statement.
The following is information regarding the meeting and the voting process is presented in a question and answer format.
Why am I receiving this proxy statement and proxy card?
You are receiving a proxy statement and proxy card from us because on April 12, 2013, the record date for the Annual Meeting, you owned shares of our common stock. This proxy statement describes the matters that will be presented for consideration by the stockholders at the Annual Meeting. It also gives you information concerning these matters to assist you in making an informed decision.
When you sign the form of proxy (or vote using the Internet), you appoint the proxy holder(s) as your representative(s) at the meeting. The proxy holder(s) will vote your shares as you have instructed in the proxy form (or through the Internet), ensuring that your shares will be voted even if you do not attend the meeting. Even if you plan to attend the meeting, you should complete, sign and return your proxy form (or vote using the Internet) in advance of the meeting just in case your plans change.
If you have signed and returned the proxy form (or submitted your vote through the Internet) and an issue comes up for a vote at the meeting that is not identified on the form, the proxy holder(s) will vote
your shares, pursuant to your proxy, in accordance with his or her best judgment.
Who can vote?
You can vote if you were a record holder of our common stock at the close of business on April 12, 2013.
How many votes do we need to hold the Annual Meeting?
To hold the Annual Meeting and conduct business, we must have a quorum present, which means that we must have a majority of the shares that were outstanding and entitled to vote as of the record date present in person or by proxy at the meeting. On April 12, 2013, the record date, there were outstanding 63,680,118 shares of our common stock. A majority of these shares, or at least 31,840,060 shares, must be represented in person or by proxy at the meeting.
Shares are counted as present at the meeting if such shares are either:
• | represented by a person present at the meeting; or |
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• | represented by a properly submitted signed proxy form or other proxy. |
If a majority of shares is not present at the meeting, the meeting will be adjourned until a quorum is obtained.
How many votes do I have?
As a holder of our common stock you have one vote for each share of common stock that you own.
How do I vote if I am the registered holder of my shares?
You may vote on the Internet, by mail or in person at the meeting. Whether or not you plan to attend the Annual Meeting, we strongly encourage you to vote on the Internet or by mailing in your proxy.
If your shares are registered directly in your name through our stock transfer agent, American Stock Transfer & Trust Company, LLC, or if you have stock certificates in your name, you may vote by completing, dating, signing and returning the enclosed proxy card in the enclosed postage prepaid envelope or you may vote on the Internet.
Voting by proxy will not affect your right to attend the Annual Meeting and to vote in person. Stockholders attending the meeting may, on request, vote their own shares even though they have previously sent in a proxy, and we will distribute written ballots at the meeting for this purpose.
Even if you plan to attend the meeting, you should complete, sign and return your proxy card in advance of the meeting (or vote using the Internet), just in case your plans change.
How do I vote if I hold shares in the name of a broker?
If your shares are held in the name of a bank, broker or other nominee, which is commonly referred to as shares held in “street name”, you must provide your bank, broker or other nominee with instructions on how to vote your shares. If you received this proxy statement from your broker, bank or other nominee, that nominee should have given you instructions for directing how your broker should vote your shares. It will then be the nominee’s responsibility to vote your shares for you in the manner you direct.
Under the applicable rules of national securities exchanges, brokers may generally vote on routine matters, but they may not vote on non-routine matters, unless they have received voting instructions from the person for whom they are holding shares. Because all proposals in this Proxy Statement, except
Proposal No. 3, are considered “non-routine” matters under applicable rules,we urge you to give voting instructions to your broker, otherwise, your shares will not be voted on Proposals 1 or 2.
What if my shares are held in “street name” with my broker, and I want to attend the Annual Meeting and vote in person?
If your shares are held in “street name”, you will need to obtain a legal proxy from that person or entity in order to vote in person at the meeting. You should contact the broker or other nominee who holds your shares to obtain a broker’s proxy card that you can bring with you to the meeting. You will not be able to vote at the meeting unless you have a proxy card from your broker.
What if I sign a card but do not specify any voting instructions?
Your proxy will be voted in accordance with your instructions. If you sign the proxy card but do not specify how you want your shares voted, they will be voted as recommended by our board of directors, “FOR” the election of the nominees for director named in this proxy statement, “FOR” the amendment to our 2007 Equity Incentive Plan, “FOR” the ratification of our accountants; and “FOR” or “AGAINST” such other business as may properly be brought before the Annual Meeting, and at any adjournments or postponements of the Annual Meeting, in the discretion of the proxy holders named in the proxy card.
What does it mean if I receive more than one proxy card?
It means that you have multiple holdings reflected in our stock transfer records and/or in accounts with stockbrokers or other nominees. Please sign and returnALL proxy cards to ensure that all your shares are voted.
What matters will be voted on at the meeting?
You are being asked to vote on the following matters:
1. | the election of eight directors; |
2. | approval an amendment to our 2007 Equity Incentive Plan that would (i) increase the number of shares of common stock covered by the plan from 6,000,000 to 10,000,000, (ii) limit the number of stock options and/or stock appreciation rights that may be granted to any one person in a given year and (iii) provide that we may grant awards of common stock under the plan that are not subject to restrictions on transferability, risk of forfeiture or other restrictions; |
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3. | the ratification of the appointment of Yarel + Partners as our independent registered certified public accounting firm for the 2013 fiscal year; and |
4. | such other business as may properly come before the Annual Meeting. |
These matters are more fully described in this proxy statement. At the time this proxy statement is being mailed, we are not aware of any other business to be presented at the Annual Meeting.
How are abstentions treated?
Pursuant to Nevada law, abstentions are counted as present for purposes of determining the presence of a quorum; however, except for Proposal 2 (amendment to our 2007 Equity Incentive Plan), abstentions will not be counted as votes cast “for” or “against” any other proposal and will have no effect on the voting results for any other proposal. Pursuant to the NYSE MKT’s shareholder approval policy, approval of Proposal 2 requires the affirmative vote of a majority of the votes cast at the Annual Meeting; therefore, abstentions will have the same effect as votes against Proposal 2.
What are broker “non-votes” and how are they treated?
As described above under “How do I vote if I hold shares in the name of a broker?”, under the rules of the NYSE MKT, on which our common stock is listed, if a broker, bank or other institution that holds shares in street name for a customer does not receive voting instructions from that customer, the broker may vote only on certain “routine” matters, including Proposal No. 3 (the ratification of the appointment of Yarel + Partners as our independent registered public accounting firm). For “non-routine” matters, which include all other proposals described in this proxy statement, a broker may not vote on such matters unless it receives voting instructions from the customer for whom it holds shares. A broker “non-vote” occurs when a broker does not receive such voting instructions from its customer on “non-routine” matters. Broker non-votes are counted for purposes of determining the presence of a quorum; however, they will not be counted as votes cast “for” or “against” any proposal and will have no effect on the voting results for any proposal.
Because the election of directors and the amendment to our 2007 Equity Incentive Plan are considered “non-routine” matters under NYSE MKT rules, we urge you to give voting instructions to your broker.
If any “routine” matters (in addition to Proposal No. 3) are properly brought before the Annual Meeting, then brokers holding shares in street name may vote those shares in their discretion for any such routine matters.
How many votes are needed for each proposal?
Assuming a quorum is present at the Annual Meeting:
(i) nominees for directors are elected by a plurality of the votes cast, and the eight individuals receiving the highest number of votes cast “for” their election will be elected; and
(ii) each other Proposal described in this proxy statement and any other proposal that may properly be brought before the meeting must each receive more votes cast in favor of the action than the number of votes cast against the action,except that, pursuant to the NYSE MKT’s shareholder approval policy, approval of Proposal 2 (amendment to our 2007 Equity Incentive Plan) requires the affirmative vote of a majority of the votes cast at the Annual Meeting, which means that abstentions will have the same effect as votes against Proposal 2.
What happens if any nominee that is up for election to the board is unable to stand for election?
If any of the director nominees named in this proxy statement is unable to stand for election, our board of directors may, by resolution, provide for a lesser number of directors or designate a substitute nominee. In the latter case, shares represented by proxies may be voted for a substitute nominee. Proxies cannot be voted for more than eight nominees. The board has no reason to believe any nominee named in this proxy statement will be unable to stand for election.
What options do I have in voting on each of the proposals?
In the election of directors, you may vote “for all nominees”, “withhold authority for all to vote for all nominees” or “for all except” (and, in the case of “for all except” indicate the director(s) for whom you wish to withhold your vote). You may vote “for,” “against” or “abstain” on all other proposals described in this proxy statement.
How does the board recommend that I vote at the meeting?
Our board of directors recommends that you vote as follows:
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• | “FOR” the re-election of eight director nominees named in “Proposal 1: Election of Directors” contained in this proxy statement; |
• | “FOR” approval of the amendment to our 2007 Equity Incentive Plan, as described in “Proposal 2: Amendment to 2007 Equity Incentive Plan” contained in this proxy statement; and |
• | “FOR” the ratification of Yarel + Partners as our independent registered certified public accounting firm for the 2013 fiscal year, as described in “Proposal 3: Ratification of Independent Registered Public Accounting Firm” contained in this proxy statement. |
If any other matter is properly presented at the meeting or any postponements or adjournments thereof, the proxy card provides that your shares will be voted by the proxy holder(s) listed on the proxy card in accordance with his, her or their best judgment. At the time this proxy statement was printed, we knew of no additional matters to be acted on at the Annual Meeting, other than those contained in this proxy statement.
How are my votes cast when I sign and return a proxy card?
When you vote on the Internet or sign the proxy card and return it to the company, you appoint Shai Novik and Steven D. Rubin as your representatives at the meeting. Either Mr. Novik or Mr. Rubin will vote your shares at the meeting as you have instructed them on the Internet or the proxy card. Either of these individuals may appoint a substitute to act for him at the meeting.
What if I do not vote for some of the matters listed on my proxy card?
If you return your proxy card but do not indicate how you wish to vote on any matter, your shares will be voted in accordance with the recommendations of the board of directors as described above.
Will my shares be voted if I do not return my proxy card and do not attend the Annual Meeting?
If your shares are registered in your name or if you have stock certificates, they will not be voted if you do not vote on the Internet or return your proxy card by mail or vote at the meeting. Your shares will also not be able to be counted to determine if a quorum is present. This is why we encourage you to complete
and return your proxy card (or vote using the Internet) in advance of the Annual Meeting.
If your shares are held in street name, and you do not provide voting instructions to the bank, broker or other nominee as described above, your nominee has discretionary authority to vote your un-voted shares on any of the routine matters presented at the meeting, such as the ratification of independent auditors. However, nominees generally may not vote on any non-routine matter, such as the election of directors, unless they have received voting instructions from the person for whom they are holding shares. If your broker does not receive instructions from you on how to vote on the election of directors, your broker will return the proxy card to us, indicating that he or she does not have the authority to vote on that proposal (resulting in a broker “non-vote”). Nominees may also choose not to exercise their discretionary authority if you do not instruct them how to vote. We encourage you to provide voting instructions to your broker or other nominee, to ensure that your shares will be voted at the meeting in the manner you desire.
Can I revoke my proxy?
If you return your proxy card, you may revoke it at any time before it is voted at the meeting. If you submit your proxy using the Internet, you may revoke it online at any time before it is voted at the meeting. There will be no double-counting of votes, so only your latest-dated vote will count. You can revoke your proxy in any one of the following ways:
• | sending a new proxy card bearing a later date, which will automatically revoke an earlier instruction; |
• | following the online instructions for revoking your proxy using the Internet; |
• | notifying our President, Shai Novik, in writing at 7 Golda Meir Street, Nes Ziona, Israel 47140 before the Annual Meeting that you have revoked your proxy; or |
• | attending the meeting in person and voting in person. Attending the meeting in person will not by itself revoke a previously-delivered proxy unless you specifically request at the meeting that you want to revoke your previously-delivered proxy. |
How are votes counted?
Voting results will be tabulated by our transfer agent and certified by our inspector of election. A
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representative of the company will serve as inspector of election. The votes are confidential, and only our transfer agent, the inspector of election and our employees that have been assigned the responsibility for overseeing the legal aspects of the Annual Meeting will have access to your proxy card.
What are the costs of soliciting these proxies?
We will pay all of the costs of soliciting these proxies. Our directors and employees may solicit proxies in person or by telephone, fax or email. We will not pay these directors and employees any additional compensation for these services. We will ask banks, brokers and other nominees to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their out-of-pocket expenses.
What happens if the meeting is postponed or adjourned?
Your proxy will still be valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is voted.
Do I need to bring anything to the meeting?
If you are a stockholder eligible to vote at the meeting and you would like to attend the meeting and vote in person, you must bring a valid, government-issued photo identification, such as a driver’s license or passport, to verify your identity. If you held shares of our common stock in street name as of the record date, then, in addition to a valid, government-issued photo identification, you must also bring a copy of your brokerage (or similar) statement, evidencing your ownership of our common stock as of the record date.
Where do I find the voting results of the meeting?
We will announce voting results at the meeting. The voting results will also be disclosed in our Current Report on Form 8-K that we will file no later than the fourth business day after the later of the Annual Meeting or any adjournment or postponement thereof.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of our common stock as of the record date by:
• | each stockholder who is known by us to beneficially own more than 5% of our outstanding shares of common stock; |
• | each of our current directors and nominees for director; |
• | each of our named executive officers; and |
• | all of our directors and named executive officers as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC. Except as indicated by footnote and subject to community property laws where applicable, to our knowledge the persons named in the table below have sole voting and investment power with respect to all shares of our common stock that are shown as beneficially owned by them. In computing the number of shares of common stock by a person and the percentage ownership of that person, any such shares subject to options and warrants held by that person that are exercisable as of the record date or that will become exercisable within 60 days thereafter are deemed outstanding for purposes of that person’s percentage ownership but not deemed outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated, the mailing address of each individual is c/o PROLOR Biotech, Inc., 7 Golda Meir Street, Weizmann Science Park, Nes-Ziona, Israel 74140. The following information is based upon information provided to us or filed with the SEC by the stockholders.
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Name of Beneficial Owner | Number of Shares | Percentage of Class** | ||||||
Common Stock: | ||||||||
Phillip Frost, M.D. Chairman of the Board | 12,587,621 | (1) | 19.8 | % | ||||
Shai Novik, M.B.A. President and Director | 2,010,741 | (2) | 3.1 | % | ||||
Fuad Fares, D.Sc. Chief Scientific Officer (Prolor Biotech Ltd.) and Director | 1,164,905 | 1.8 | % | |||||
Jane H. Hsiao, Ph.D., M.B.A. Director | 2,288,189 | (3) | 3.6 | % | ||||
Abraham Havron, Ph.D. Chief Executive Officer and Director | 1,971,977 | (4) | 3.0 | % | ||||
Marian Gorecki, Ph.D. Director | 80,000 | (5) | * | |||||
Eyal Fima, M.B.A. Chief Operating Officer, Prolor Biotech Ltd. | 426,460 | (6) | * | |||||
Steven D. Rubin Director | 124,753 | (7) | * | |||||
Adam K. Stern Director | 285,000 | (8) | * | |||||
Steve Schaeffer Chief Financial Officer | — | * | ||||||
Directors and Executive Officers as a group (10 Persons) | 20,939,646 | 32.9 | % |
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* | Less than 1% |
** | Percentages calculated in accordance with SEC rules and based upon 63,680,118 shares of common stock outstanding as of the record date. |
(1) | Includes 9,641,749 shares of common stock held by Frost Gamma Investments Trust. Dr. Phillip Frost is the trustee, and Frost Gamma Limited Partnership is the sole and exclusive beneficiary of Frost Gamma Investments Trust. Dr. Frost is one of two limited partners of Frost Gamma Limited Partnership. The general partner of Frost Gamma Limited Partnership is Frost Gamma, Inc. and the sole shareholder of Frost Gamma, Inc. is Frost-Nevada Corporation. Dr. Frost is also the sole shareholder of Frost-Nevada Corporation. The amount reported also includes (i) 2,865,872 shares of common stock held by the Phillip and Patricia Frost Philanthropic Foundation, Inc. (“PPFPF”), a Florida not-for-profit corporation, and (ii) options to acquire 80,000 shares of common stock that are held directly by Dr. Frost. The address of Frost Gamma Investments Trust, PPFPF and Dr. Frost is 4400 Biscayne Boulevard, Suite 1500, Miami, Florida 33137. |
(2) | Includes options to acquire 1,910,741 shares of common stock. |
(3) | Includes (i) 368,523 shares of common stock that are held by Hsu Gamma Investment, L.P. (“Hsu Gamma”), of which Dr. Hsiao is the general partner and (ii) options to acquire 45,000 shares of common stock. Dr. Hsiao’s address is c/o The Frost Group, 4400 Biscayne Boulevard, Suite 1500, Miami, Florida 33137. Dr. Hsiao disclaims beneficial ownership of all securities held by Hsu Gamma, except to the extent of her pecuniary interest therein. |
(4) | Includes options to acquire 1,626,334 shares of common stock. |
(5) | Includes options to acquire 80,000 shares of common stock. |
(6) | Includes options to acquire 376,460 shares of common stock. |
(7) | Includes (i) 74,753 shares of common stock and (ii) options to acquire 50,000 shares of common stock. Mr. Rubin’s address is c/o The Frost Group, 4400 Biscayne Boulevard, Suite 1500, Miami, Florida 33137. |
(8) | Includes options to acquire 10,000 shares of common stock. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, requires that our directors, executive officers and holders of 10% or more of our common stock file reports of ownership and changes in ownership with the SEC. Such persons are also required to furnish us with copies of all Section 16(a) forms they file. Based solely on our examination of the copies of Forms 3, 4 and 5 provided to us and the written representations of our directors, officers and 10% stockholders, we believe that during the year ended December 31, 2012, directors, executive officers and owners of more than 10% of our common stock timely complied with all applicable filing requirements, except that a Form 4 for Adam K. Stern, a director, reporting a grant of options to purchase 10,000 shares of common stock, was not timely filed.
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Performance Graph
The performance graph below compares the cumulative total returns for our common stock with the cumulative total return (including reinvestment of dividends) of the NYSE MKT Composite Index and the RDG MicroCap Biotechnology Index for the periods indicated.
The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among PROLOR Biotech, Inc., the NYSE MKT Composite Index,
and the RDG MicroCap Biotechnology Index
* | $100 invested on 12/31/07 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. |
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PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, you will be asked to elect eight directors for a one-year term expiring at the next Annual Meeting. If elected, each director will hold office until his or her successor has been duly elected and qualified or until the director’s earlier resignation or removal.
Upon the recommendation of a majority of our independent directors, our board of directors has nominated eight persons for election at this Annual Meeting. We have no knowledge that any of the nominees will refuse or be unable to serve as directors, but if any of the nominees becomes unavailable for election, the holders of proxies reserve the right to substitute another person of their choice as a nominee when voting at the meeting, or the size of the board of directors will be fixed at a lower number.
The directors are elected by a plurality of the votes cast by the stockholders present or represented by proxy and entitled to vote at the Annual Meeting.
The board of directors unanimously recommends that you vote your shares “FOR” each of the nominees for director.
Nominees for Election to the Board of Directors
The names of the nominees for election to our board of directors and certain information about these nominees are set forth below.
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Name | Age | Position | ||
Phillip Frost, M.D. | 76 | Chairman of the Board | ||
Fuad Fares, D.Sc. | 57 | Chief Scientific Officer (Prolor Biotech Ltd.) Director | ||
Marian Gorecki, Ph.D. | 72 | Director | ||
Abraham (Avri) Havron, Ph.D. | 65 | Chief Executive Officer Director | ||
Jane H. Hsiao, Ph.D., M.B.A. | 65 | Director | ||
Shai Novik, M.B.A. | 47 | President Director | ||
Steven D. Rubin | 52 | Director | ||
Adam K. Stern | 48 | Director |
Phillip Frost, M.D.,Chairman of the Board. Dr. Frost was appointed as one of our directors in May 2007, and in March 2008 was appointed as the Chairman of the Board. Dr. Frost is the Chief Executive Officer and Chairman of OPKO Health, Inc. (NYSE MKT: OPK), a specialty healthcare company focused on the development of novel agents for ophthalmic disease and innovative diagnostic imaging systems. Dr. Frost was named the Chairman of the Board of Teva Pharmaceutical Industries, Limited, or Teva, (NASDAQ: TEVA) in March 2010 and had previously been Vice Chairman since January 2006 when Teva acquired IVAX Corporation, referred to as IVAX. Dr. Frost had served as Chairman of the Board of Directors and Chief Executive Officer of IVAX Corporation since 1987. He was Chairman of the Department of Dermatology at Mt. Sinai Medical Center of Greater Miami, Miami Beach, Florida from 1972 to 1986. Dr. Frost was Chairman of the Board of Directors of Key Pharmaceuticals, Inc. from 1972 until the acquisition of Key Pharmaceuticals by Schering Plough Corporation in 1986. In July 2006, Dr. Frost was named Chairman of the Board of Ladenburg Thalmann Financial Services Inc. (NYSE MKT: LTS), an investment banking, asset management and securities brokerage firm providing services through its principal operating subsidiary, Ladenburg Thalmann & Co. Inc., and has been a director of Ladenburg Thalmann since March 2005. Dr. Frost also serves as a director of Castle Brands, a developer and marketer of premium brand spirits (NYSE MKT: ROX). He also serves as Chairman of Temple Emanu-El, as a member of the Florida Council of 100 and as a trustee for each of the University of Miami, the Scripps Research Institute, the Miami Jewish Home for the Aged, and the Mount Sinai Medical Center. Dr. Frost previously served as a director for Northrop Grumman Corp., Ideation Acquisition Corp., Continucare Corporation (now Metropolitan Health Network), citizen regent of the board of regents of the Smithsonian Institute and as governor and co-vice-chairman of the American Stock Exchange (now NYSE MKT).
Dr. Frost’s considerable experience managing and chairing pharmaceutical and biotechnology companies is particularly valuable to Prolor.
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Fuad Fares, D.Sc.,Chief Scientific Officer (Prolor Biotech Ltd.), Director. Dr. Fares has served as one of our directors since May 2007. Since 2002, Dr. Fares has served as the Chief Scientific Officer of our wholly owned subsidiary, Prolor Biotech Ltd., an Israeli corporation formerly known as Modigenetech Ltd., which we refer to as Prolor Ltd., and, since 2005, Dr Fares has served as a director of our wholly owned subsidiary, ModigeneTech Inc., a Delaware corporation, which we refer to as Modigene Delaware. Dr. Fares has been the head of the Molecular Biology Division, Biochemical Research Unit, Department of Biochemistry and Molecular Genetics at the Carmel Medical Center in Haifa, Israel, and has been the Managing Director of Galili Herbal since 1999. While doing postdoctoral work at Washington University (St. Louis, Missouri), Dr. Fares worked with Professor Irving Boime to develop our platform technology. Dr. Fares was elected a research member at the Rappaport Institute for Research in Medical Sciences (Technion-Israel Institute of Technology, Bruce Rappaport Faculty of Medicine, 1995-1997). He is the recipient of several awards including the prestigious Lindner Prize of the Israel Endocrine Society (2004) and the Shawers Prize of the Israel Endocrine Society (1997). Dr. Fares is the author of over forty scientific articles and chapters in scientific textbooks.He is a member of two Israeli organizations: the Israel Endocrine Society and the Israeli Society for Biochemistry and Molecular Biology. In the United States, Dr. Fares is a member of the Clinical Ligand Assay Society (CLAS), and the New York Academy of Sciences. He received a D.Sc. in pharmacology from the Technion-Israel Institute of Technology (Haifa, Israel).
Dr. Fares has significant experience in developing biotechnology companies.
Marian Gorecki, Ph.D., Director. Dr. Gorecki has served as one of our directors since March 2008. Dr. Gorecki has been a director of Mediwound Ltd., a biotechnology company developing products in the fields of burn and wound management, since 2007, and from 2001 through 2006 he served as the CEO of Mediwound. He co-founded and served as the general manager and a board member of Bio Technology General, later renamed Savient Pharmaceuticals Inc. (NASDAQ: SVNT). Dr. Gorecki led the development and commercialization of seven biotechnology drugs, including: bovine growth hormone, human growth hormone, HEP-B vaccine, insulin, Puricase (currently in Phase III clinical trials), hyaluronic-acid based devices for orthopedic and ophthalmic application, Debrase (currently in Phase III clinical trials). Dr. Gorecki currently serves as chairman of Thrombotech Ltd., a biotechnology company developing a peptide used with current standard stroke treatments. Dr. Gorecki is the inventor of 21 issued patents and is the author of 73 peer-reviewed scientific articles. Dr. Gorecki earned his Ph.D. in biochemistry and molecular biology from the Weizmann Institute of Science, and served as a research fellow at the Massachusetts Institute of Technology (MIT).
Dr. Gorecki has substantial experience in the management of research and development operations for biotechnology companies.
Abraham (Avri) Havron, Ph.D.,Chief Executive Officer, Director. Dr. Havron has served as our Chief Executive Officer and as a director of Modigene Delaware and Prolor Ltd. since 2005, and became one of our directors in 2007. Dr. Havron is a 25-year veteran of the biotechnology industry and was a member of the founding team and Director of Research and Development of Interpharm Laboratories (a subsidiary of Serono) from 1980 to 1987, which developed the multiple sclerosis drug Rebif, with current sales of more than $1 billion annually. Dr. Havron served as Vice-President Manufacturing and Process-Development of BioTechnology General Ltd., Rehovot, Israel (a subsidiary of Savient Pharmaceuticals) from 1987 to 1999; and Vice President and Chief Technology Officer of Clal Biotechnology Industries Ltd. from 1999 to 2003. Dr. Havron’s managerial responsibilities included the co-development of several therapeutic proteins and other bio-pharmaceuticals currently in the market, including recombinant hGH (BioTropin), recombinant Hepatitis B Vaccine (Bio-Hep-B), recombinant Beta Interferon (Rebif), recombinant human Insulin and hyaluronic acid for ophthalmic and orthopedic applications. Dr. Havron earned his Ph.D. in Bio-Organic Chemistry, from the Weizmann Institute of Science, and served as a Research Fellow in the Harvard Medical School, Department of Radiology.
Dr. Havron has significant expertise in the product and clinical development of biotechnology products.
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Shai Novik, M.B.A.,President, Director. Mr. Novik has served as the President and a director of Modigene Delaware since its inception, and became our President and one of our directors in May 2007. From 2003 to 2005, Mr. Novik was the Managing Director of A.S. Novik, a private investment firm, and from 2000 to 2002 he was Managing Director of A-Online Capital, an investment firm. Mr. Novik previously served as Chief Operating Officer and Head of Strategic Planning of THCG, a technology and life sciences investment company, from 1998 to 2000. THCG was a portfolio company of Greenwich Street Partners, a large U.S.-based private equity fund. THCG’s portfolio included several life sciences and medical device companies. Prior to his position at THCG, Mr. Novik served as Chief Operating Officer and Chairman of Strategy Committee of RogersCasey, an investment advisory company serving Fortune 500 companies such as DuPont, Kodak, General Electric and others, from 1994 to 1998. Mr. Novik is the co-founder and Chairman of the Board of Stentomics Inc., a private drug-eluting stent technology company developing next-generation, polymer-free drug-eluting stent solutions. Mr. Novik also serves on the boards of the privately-held companies Ucansi Inc., a company developing non-invasive vision correction products, and Odysseus Ventures Ltd., a managing partner of a small venture fund. Mr. Novik served for seven years in the Israeli Defense Forces, and received his M.B.A., with Distinction, from Cornell University.
Mr. Novik’s substantial experience in life sciences investments and business management provide him with key skills necessary to help guide our corporate development and market strategy.
Jane H. Hsiao, Ph.D., M.B.A.,Director. Dr. Hsiao has served as one of our directors since May 2007. Dr. Hsiao served as the Vice Chairman-Technical Affairs of IVAX Corporation from 1995 to January 2006 when Teva acquired IVAX. Dr. Hsiao has served as IVAX’s Chief Technical Officer since 1996, and as Chairman, Chief Executive Officer and President of IVAX Animal Health, IVAX’s veterinary products subsidiary, since 1998. From 1992 until 1995, Dr. Hsiao served as IVAX’s Chief Regulatory Officer and Assistant to the Chairman. Dr. Hsiao served as Chairman and President of DVM Pharmaceuticals from 1998 through 2006. Dr. Hsiao is the Vice Chairman and Chief Technical Officer of OPKO Health, Inc. (NYSE MKT: OPK), a biotech pharmaceutical company; Interim Chief Executive Officer and Chairman of the Board of Non-Invasive Monitoring Systems, Inc., a medical device company; Chairman of the Board of SafeStitch Medical, Inc., a medical device company; a director of Sorrento Therapeutics, Inc. (OTCBB: SRNE), a development stage biopharmaceutical company; and a director of Neovasc, Inc., a medical device company. Dr. Hsiao received a Ph.D. in Pharmaceutical Chemistry from the University of Illinois, Chicago.
Dr. Hsiao is highly experienced in managing the operations of pharmaceutical and biotechnology companies.
Steven D. Rubin, Director. Mr. Rubin has served as one of our directors since February 2008. He has served as Executive Vice President — Administration and as a director of OPKO Health Inc. since 2007. He also serves as a director of SafeStitch Medical Inc., a medical device company, Kidville, Inc., an operator of upscale learning and play facilities for children, Neovasc, Inc., a medical device company, Tiger X Medical, Inc., a producer and distributor of orthopedic and spinal medical devices, Castle Brands, Inc., a developer and marketer of premium brand spirits, Non-Invasive Monitoring Systems, Inc., a medical device company, and Tiger Media, Inc., a multi-platform media company. Previously, Mr. Rubin served as the Senior Vice President, General Counsel and Secretary of IVAX Corporation from August 2001 until September 2006. Mr. Rubin holds a B.A. from Tulane University and a J.D. degree from the University of Florida, Gainesville.
Mr. Rubin’s legal background with, and experience investing in, pharmaceutical and biotechnology companies is particularly relevant to Prolor’s business and operational development.
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Adam K. Stern, Director. Adam K. Stern has served as one of our directors since November 2012, and he previously served as one of our directors from May 2007 to June 2011. Mr. Stern is Head of Private Equity Banking at Aegis Capital and CEO of SternAegis Ventures. Formerly the Senior Managing Director of Spencer Trask Ventures, Mr. Stern has over 25 years of venture capital and investment banking experience focusing primarily on the life science and technology sectors of the capital markets. Mr. Stern has completed over 100 transactions throughout his career, including private placements, public offerings and mergers and acquisitions, valued in excess of several billion dollars. Mr. Stern currently is a director of InVivo Therapeutics Holdings Corp. (OTC: NVIV) Organovo Holdings, Inc. (OTC: ONVO) and LabStyle Innovations Corp (OTC: DRIO). Mr. Stern has been a keynote speaker and conference panelist nationally on topics ranging from Venture Capital to Alternative Public Offerings. Prior to being Head of Private Equity Banking at Aegis Capital and CEO of SternAegis Ventures, Mr. Stern was the Senior Managing Director at Spencer Trask Ventures from 1997 to 2012 and was at Josephthal & Co., from 1989 to 1997 as Senior Vice President and Managing Director of Private Equity Marketing. Mr. Stern has been a FINRA licensed securities broker since 1987 and a General Securities Principal since 1991.
Mr. Stern has substantial experience in the financial services industry and has significant contacts in the financial services community.
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CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
General
The size of our board of directors is set at nine. We have eight directors currently serving, with one vacancy
Generally, the board oversees our business and monitors the performance of our management. In accordance with our corporate governance procedures, the board does not involve itself in our day-to-day operations, which are monitored by our executive officers and management. Our directors fulfill their duties and responsibilities through regular board meetings and committee membership, as discussed below.
Independent Directors
We evaluate the independence of directors and the composition of the committees of the board of directors in accordance with the rules of the NYSE MKT, on which our common stock is listed for trading. Our board utilizes the definition of “independence”, including for Audit Committee purposes, as that term is defined by applicable NYSE MKT rules. Our board of directors, together with guidance from our Governance Committee, analyzes whether a director is independent by evaluating, among other factors, the following:
• | whether the director has any material relationship that may impair his or her independent judgment; |
• | whether the director is a current employee of our company or our subsidiaries or was an employee of our company or our subsidiaries within the three years preceding the determination date; |
• | whether the director accepted or has an immediate family member who accepted any compensation from our company or our subsidiaries within the three years preceding the determination of independence, other than (a) compensation for board or board committee service, (b) compensation paid to an immediate family member who is an employee (other than an executive officer) of the company, (c) compensation received for former service as an interim executive officer (provided the interim employment did not last longer than one year), or (d) benefits under a tax-qualified retirement plan, or non-discretionary compensation; |
• | whether the director is, or has an immediate family member who is, a partner in, or a controlling stockholder or an executive officer of, any organization to which we made, or from which we received, payments exceeding certain amounts in any of our most recent three fiscal years; |
• | whether the director is, or has an immediate family member who is, employed as an executive officer of another entity where at any time during the most recent three fiscal years any of our executive officers serve on the compensation committee of such other entity; and |
• | whether the director is, or has an immediate family member who is, a current partner of our outside auditor, or was a partner or employee of our outside auditor who worked on our audit at any time during any of the past three years. |
The above list is not exhaustive, and our board and our Governance Committee considers other factors when determining whether a director is independent.
Our board is composed of Dr. Phillip Frost, Dr. Fuad Fares, Marian Gorecki, Ph.D., Abram Havron, Ph.D., Shai Novik, M.B.A., Steven D. Rubin, Jane H. Hsiao, Ph.D., M.B.A. and Adam K. Stern. Based on the independence standards discussed above, our board has affirmatively determined that Messrs. Rubin and Stern and Drs. Frost, Hsiao and Gorecki are independent. Additionally, the board has affirmatively determined that Drs. Gorecki and Hsiao and Mr. Rubin, who currently comprise our Audit Committee, are independent for Audit Committee purposes based on the more stringent independence standards imposed by applicable NYSE MKT and SEC rules.
Dr. Havron, Mr. Novik and Dr. Fares are not independent because each serves as an executive officer.
Board Leadership Structure
We separate the roles of Chairman of the board of directors and Chief Executive Officer, which we believe is appropriate given the differences between the two roles. Both Dr. Havron, as Chief Executive Officer, and Shai Novik, as President, set the strategic direction for the company and provide day-to-day
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leadership. As Chairman of the board of directors, Dr. Frost provides guidance to the Chief Executive Officer and President and oversees the agenda for board meetings in collaboration with the other board members.
Board’s Role in Risk Oversight
The board of directors oversees our exposure to risk through its interaction with management and receipt from management of periodic reports outlining matters related to financial, operational, regulatory, legal and strategic risks. As set forth in the Audit Committee’s charter, the board of directors has delegated to the Audit Committee the responsibility to oversee, discuss and evaluate our policies and guidelines with respect to risk assessment and risk management, including internal control over financial reporting. As appropriate, the Audit Committee provides reports to and receives direction from the full board of directors regarding our risk management policies and guidelines, as well as the Audit Committee’s risk oversight activities.
Board and Committee Meeting Attendance
The board of directors held five regular meetings during 2012. All of our directors attended at least 75% of these meetings and of the meetings of the committees on which they served. While we have no formal policy regarding attendance by our directors at our annual meetings of stockholders, we encourage attendance and expect that most of our directors will attend these meetings. Three of our directors attended last year’s annual meeting.
Code of Ethics
The board of directors believes that it is important to encourage the highest level of corporate ethics and responsibility. Among other things, the board has adopted a written code of ethics, which applies to all of our directors, officers and employees, as well as a procedure by which employees can anonymously report any problems they may detect with respect to our financial reporting. We believe that our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in our public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. The code of ethics, as well as other information pertaining to our committees, corporate governance and reporting with the SEC, can be found on our website athttp://www.proler-biotech.com.
Committees
Our board of directors has established three standing committees: an Audit Committee; a Compensation Committee; and a Governance Committee. Information about the composition and function of each such committee is set forth below.
Audit Committee
We have a standing Audit Committee composed of three members of the Board of Directors. We require that all Audit Committee members be able to read and understand financial statements, including the Company’s balance sheet, income statement and cash flow statements, and that at least one member, through appropriate education and/or experience, satisfies the definition of “audit committee financial expert” as defined by the rules and regulations of the SEC. Drs. Gorecki and Hsiao and Mr. Rubin comprise our Audit Committee. Our board of directors has determined that Mr. Rubin qualifies as an “audit committee financial expert” under the applicable rules of the SEC. In making this determination, our board of directors determined that he has accounting and related financial management expertise within the meaning of the aforementioned rules. Our board has additionally determined that all members of the Audit Committee are independent for Audit Committee purposes under the more stringent independence standards required by NYSE MKT rules and the rules and regulations of the SEC.
Our Audit Committee assists the board in carrying out its oversight responsibilities for our financial reporting process, audit process and internal controls. The primary functions of the Audit Committee are to: (a) oversee the company’s accounting and financial report processes and the audits of the company’s financial statements; (b) assist the board in fulfilling its oversight of the integrity of the financial statements of the company and other published financial information, our compliance with legal and regulatory requirements, the independent auditor’s qualification and independence, and the performance of our internal audit function and independent auditors; and (c) review and oversee related-party transactions. In performing these functions,
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our Audit Committee strives to maintain free and open communication among our directors, independent auditor and financial management. The Audit Committee’s duties, responsibilities and functions are further described in its charter, which is available on our website athttp://www.prolor-biotch.com.
The Audit Committee met four times in 2012.
Compensation Committee
We require that our Compensation Committee consist of at least two members of the board of directors, each of whom must be independent as defined by applicable NYSE MKT rules, an “outside” director pursuant to Section 162(m) of the Internal Revenue Code and a “non-employee” director under Section 16 of the Exchange Act. The Compensation Committee is currently composed of Mr. Rubin (Chairman), Dr. Gorecki and Mr. Stern.
Our Compensation Committee reviews and approves the compensation of executive officers and key employees and administers our equity incentive plans. The committee evaluates each executive’s performance as compared with our performance as a whole and his or her personal performance in relation to key performance factors which include:
• | key annual business results, including both financial and non-financial factors compared to plan; |
• | corporate strategy and development for the mid to long term; |
• | personal effectiveness, values, intensity and communication; and |
• | responsibilities and contribution to the execution of our strategies. |
The Compensation Committee also discusses our stock price and stockholder returns for the fiscal year in comparison to the average comparable public biotechnology company, as well as historical compensation levels of our Chief Executive Officer and other executive officers and comparable compensation levels of such officers at companies comparable to us. With respect to director compensation, the committee reviews and discusses market standards for comparable companies and defines such compensation.
The committee’s duties, responsibilities and functions are further described in its charter, which is available on our website athttp://www.prolor-biotech.com.
Upon a determination of the full Compensation Committee, matters may be delegated to a subcommittee for evaluation and recommendation back to the full Committee. The Compensation Committee may also delegate to one or more of our executive officers the authority to make grants of equity-based compensation to eligible individuals who are not executive officers. In no event will the Compensation Committee delegate to a subcommittee or any other person any power or authority required by any law, regulation or listing standard to be exercised solely by the Compensation Committee. With respect to our 2007 Equity Incentive Plan, the Compensation Committee has delegated to Dr. Havron, our CEO, and Mr. Novik, our President, the Compensation Committee’s authority to grant a limited number of option and common stock awards under such plan to our non-executive employees and consultants.
The Compensation Committee held one meeting in 2012.
Compensation Committee Interlocks and Insider Participation
In 2012, none of our executive officers or directors was a member of the board of directors of any other company where the relationship would be considered a committee interlock under SEC rules.
Governance Committee
Our Governance Committee is composed of two independent members of the board of directors and currently consists of Dr. Frost and Dr. Gorecki.
The primary functions of the Governance Committee are to: (a) identify qualified individuals to serve as directors of the company; (b) determine membership on the board committees; (c) monitor the composition of the board; and (d) develop and establish corporate governance policies and procedures for the company. The Governance Committee’s duties, responsibilities and functions are further described in its charter, which is available on our website athttp://www.prolor-biotech.com.
The Governance Committee did not meet in 2012.
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Director Nominations and Qualifications
In making its nominations for persons to be elected to the board of directors and included in our proxy statement, the Governance Committee and the independent directors of our full board of directors are required to develop and establish qualification criteria for membership on the board, and are required to interview individuals qualified to become members of the board of directors in accordance with the criteria established by them. As part of this process, our independent directors will consider individuals recommended by the stockholders of the company, if any, and there are no differences in the manner in which our independent directors evaluate nominees for director based on whether the nominee is recommended by a security holder. Although our independent directors do not have a formal policy with regard to the consideration of diversity in identifying director nominees, their review process is designed so that the board of directors includes members with diverse backgrounds, skills and experience, and represents appropriate financial, technological and other expertise relevant to our business. While our Governance Committee does not have any specific minimum qualifications for director candidates, in recommending candidates for the board of directors, our Governance Committee believes that, at a minimum, directors should possess certain qualities, including the highest personal and professional ethics and integrity, a sufficient educational and professional background, demonstrated leadership skills, sound judgment, an ability to communicate effectively with management, and an ability to meet the standards and duties set forth in our code of ethics. The Governance Committee also evaluates potential nominees to determine if they have any conflicts of interest that may interfere with their ability to serve as effective board members and to ensure the nominees’ independence so that at least half of the directors on the board will be deemed independent in accordance with our corporate governance standards and applicable rules of the NYSE MKT. Currently, there are no fees paid to any third party to identify or assist in identifying or evaluating nominees.
All of the nominees for election as directors for the Annual Meeting currently serve on our board of directors and are standing for re-election. We received no stockholder nominations for directors.
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DIRECTOR COMPENSATION
We currently pay no cash compensation to our directors in respect of their service on the board. All of our directors are entitled to reimbursement of expenses incurred in connection with their service. Other than Mr. Stern, to whom we awarded options to purchase 10,000 shares of common stock upon his appointment as a director in November 2012, we did not award options or pay any other compensation to our director, Fuad Fares, Chief Scientific Officer of our subsidiary, Prolor Ltd., or our non-employee directors for services as directors rendered in 2012.
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Director | Fees Earned or Paid in Cash ($) | Option Awards ($)(1) | All Other Compensation ($) | Total ($) | ||||||||||||
Phillip Frost | $ | — | $ | — | $ | — | $ | — | ||||||||
Marian Gorecki | $ | — | $ | — | $ | — | $ | — | ||||||||
Jane Hsiao | $ | — | $ | — | $ | — | $ | — | ||||||||
Steven Rubin | $ | — | $ | — | $ | — | $ | — | ||||||||
Fuad Fares, D.Sc. | $ | — | $ | — | $ | — | $ | — | ||||||||
Adam K. Stern | $ | — | $ | 32,010 | $ | — | $ | 32,010 |
(1) | Amount represents the aggregate grant date fair value of option awards granted during the fiscal year ended December 31, 2012. This option award is not subject to performance conditions. For additional information regarding assumptions underlying the valuation of equity awards and the calculation method, please refer to Note 8(g) to our consolidated financial statements, which are contained in our Annual Report on Form 10-K for the year ended December 31, 2012. As of December 31, 2012, the aggregate number of outstanding stock option awards (both exercisable and unexercisable) for the persons named in the table above were as follows: |
![]() | ![]() | |||
Name | Aggregate Number of Options Awards | |||
Phillip Frost | 80,000 | |||
Marian Gorecki | 80,000 | |||
Jane Hsiao | 45,000 | |||
Steven Rubin | 50,000 | |||
Fuad Fares, D.Sc. | — | |||
Adam K. Stern | 10,000 |
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EXECUTIVE OFFICERS
Our current executive officers, their ages and positions are as follows:
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Name | Age | Position | ||
Abraham (Avri) Havron, Ph.D. | 65 | Chief Executive Officer Director | ||
Shai Novik, M.B.A. | 47 | President Director | ||
Steve Schaeffer | 63 | Chief Financial Officer | ||
Fuad Fares, D.Sc. | 57 | Chief Scientific Officer, Prolor Biotech Ltd. Director | ||
Eyal Fima, M.B.A. | 49 | Chief Operating Officer, Prolor Biotech Ltd. |
Biographical information for Dr. Havron, Mr. Novik and Dr. Fares can be found in the section entitled “Proposal 1 — Election of directors” beginning on page 9.
Eyal Fima, M.B.A.,Chief Operating Officer (Prolor Biotech Ltd.). Dr. Fima has served as Vice President of Product Development of our wholly owned subsidiary, Prolor Biotech Ltd. (f/k/a ModigeneTech) since November 2005. Formerly, Dr. Fima was the Co-Founder & CEO of NatSpears Ltd. — a biotechnology company focused on targeted cancer therapeutics via protein fusion, for treatment of prostate and pancreatic cancer from 2002 to 2005. Dr. Fima was a research fellow at the Immunology Department of Ben-Gurion University in Israel from 2001 to 2002, where he researched the involvement of PKC eta (signal transduction) in breast cancer. Dr. Fima is the former National and Olympic coach of the Israeli Taekwondo team, leading the team to medals in world championships of 1998 and 2000, and in European championships in 1997, 1998 and 1999. Dr. Fima received his Ph.D. on the development of immunotherapeutic protocols and cytokines regulation from Ben-Gurion University’s Medical School in Israel, and an M.B.A. from Ben-Gurion University’s Business School in Israel.
Steve Schaeffer,Chief Financial Officer. Mr. Schaeffer has served as our Chief Financial Officer since March 2009. Mr. Schaeffer has more than 30 years of accounting and tax experience. His specialty is corporate tax, including reorganizations, acquisitions and dispositions. In 1993, he co-founded Cohen & Schaeffer, P.C., a full service CPA firm. Prior to founding Cohen & Schaeffer, Mr. Schaeffer was a tax partner at BDO Seidman and a principal at Laventhol & Horwath heading up the mergers and acquisitions department. Before entering public accounting, he worked for ten years at the Internal Revenue Service. In addition, he taught graduate level tax courses and presented seminars in corporate tax.
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COMPENSATION DISCUSSION AND ANALYSIS
What is Our Philosophy Regarding Executive Pay?
We compensate our executive management team members through a combination of cash salary, bonuses and equity compensation. Our compensation plans are designed to attract and retain talented, qualified executives to lead our organization, and align executive management incentives with the long-term interests of our stockholders. When we set compensation amounts and select compensation components for our executive management, we strive to reward the achievement of both short-term and long-term results that will promote earnings growth and stock appreciation. Overall, our compensation philosophy is intended to provide fair base pay levels with meaningful upside for strong performance.
How Do We Determine Our Compensation Levels?
The Compensation Committee of our Board of Directors is responsible for assessing management’s recommendations on compensation and approving pay levels for executive management. We target our compensation levels with the following goals in mind: (a) fair base pay and benefits; (b) short-term and long-term incentives that reward performance and share value appreciation; and (c) appropriate levels of security and benefits that are needed to attract and retain talented and qualified executives.
Our Chief Executive Officer (“CEO”), President and the Compensation Committee periodically review individual pay levels of members of executive management. In accordance with applicable NYSE MKT rules, our CEO is not present during voting or deliberations by the Compensation Committee regarding the CEO’s compensation. As a general matter, we do not compare ourselves against any particular peer group. Compensation levels are determined based upon our philosophy, recruiting needs, growth expectations and performance.
Our CEO recommends pay levels for executive management members (other than himself) to our Compensation Committee. The Compensation Committee reviews those recommendations and then determines the compensation levels for all members of executive management.
What Components of Compensation Do We Use?
The three primary components of compensation for our organization are salary, bonuses and equity incentives (stock options). Each is described in more detail below.
Salary
Salaries are initially negotiated and generally set forth in employment or consulting agreements with our executives. Thereafter, our Compensation Committee reviews the salaries of our executive management annually. Salaries are established by (a) reviewing the performance of the executive, (b) adjusting (upwards or downward) to reflect individual qualifications, job uniqueness and performance and (c) engaging in discussions between the CEO and the Compensation Committee in order to make revisions as needed.
Bonuses
Our Chief Executive Officer and President, as well as the Chief Operating Officer of our research and development subsidiary, Prolor Biotech Ltd., are eligible to receive cash bonuses based upon performance. Each executive’s employment or consulting agreement, as applicable, provides a specific target annual cash bonus. All bonuses are determined by the Compensation Committee as of the close of each fiscal year and are paid shortly thereafter. The Compensation Committee is provided with an annual reconciliation review of milestones and determines whether the specific executive is entitled to all or a portion of his target annual bonus.
Equity Compensation
We believe that equity ownership by executive management is important in order to align our long-term rewards program with the interests of our stockholders. Additionally, long-term awards are needed to attract and retain talented and success-driven employees.
Executive management equity awards are typically granted once a year, other than those granted upon execution of employment agreements, and the exercise prices of all options are set at the closing prices of our common stock on the NYSE MKT on the respective dates of grant.
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Option grants to new executives generally vest over a period of three to four years, and no options vest before the one-year anniversary of the option grant. Generally, options vest using a straight-line method during the applicable period.
Benefits and Perks
In keeping with our philosophy that senior executive compensation should correlate with corporate performance, the Compensation Committee prefers to compensate our named executive officers in cash and equity rather than with benefits and perquisites. However, we provide a limited number of standard benefits and perquisites to our named executive officers in order for us to be successful in attracting and retaining executives in a competitive marketplace. The total amount of benefits and perquisites provided to the named executive officers during 2012 was only a small percentage of each executive officer’s total compensation. These amounts are included in the second to last column of the 2012 Summary Compensation Table at page 21 under “All Other Compensation” and related footnotes.
Employment Agreements
We generally negotiate employment or consulting agreements with our named executive officers. The purpose of these arrangements is to secure qualified executives for leadership positions in our organization, as well as to protect our intellectual property by virtue of restrictive covenants contained in the agreements. We currently have employment or consulting agreements with our CEO and President.
Termination of Employment and Change in Control Agreements
Our employment agreements provide for the payment of certain compensation and benefits in the event of the termination of an executive’s employment. The amount payable varies depending upon the reason for such termination. The Compensation Committee has reviewed the material terms of these termination provisions and believes they are reasonable and appropriate. Please see the information set forth below under the heading, “Agreements with Named Executive Officers and Potential Payments Upon Termination or Change of Control”.
Stock Ownership Guidelines and Requirements
We do not maintain any stock ownership guidelines or requirements for our named executive officers, but our Compensation Committee periodically monitors such ownership.
Consideration of Our Most Recent Stockholder Advisory Vote on Executive Compensation
At our 2011 Annual Meeting, our stockholders cast an advisory vote on executive compensation, referred to as a “say-on-pay proposal”, as required by Section 14A of the Exchange Act. At the 2011 Annual Meeting, our stockholders overwhelmingly approved the say-on-pay proposal, and we have considered such approval an endorsement of our executive compensation philosophy and programs; therefore, our executive compensation philosophy and programs have remained substantially unchanged since 2011. The next say-on-pay proposal will be included in our proxy statement for our 2014 Annual Meeting.
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2012 Summary Compensation Table
The following table summarizes the compensation information for the years ended December 31, 2012, 2011 and 2010 for our chief executive officer, chief financial officer and our other three most highly compensated executive officers as of the end of 2012. We refer to these persons as our named executive officers elsewhere in this Proxy Statement. All currency amounts are expressed in U.S. dollars. Pursuant to the terms of our agreements with each of the non-U.S. persons names in the table below, all cash payments are made in Israeli shekels (IS) translated at an exchange rate of 3.86 IS per U.S. dollar.
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Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | ||||||||||||||||||
Dr. Abraham Havron Chief Executive Officer | 2012 | $ | 270,000 | $ | 60,000 | $ | — | $ | 15,034 | $ | 345,034 | |||||||||||||
2011 | 270,000 | 60,000 | — | 14,385 | 344,385 | |||||||||||||||||||
2010 | 250,000 | 60,000 | 1,168,800 | 14,385 | 1,493,185 | |||||||||||||||||||
Shai Novik President | 2012 | $ | 290,000 | $ | 85,000 | $ | 0 | $ | 15,034 | $ | 390,034 | |||||||||||||
2011 | 290,000 | 85,000 | 0 | 14,385 | 389,385 | |||||||||||||||||||
2010 | 270,000 | 85,000 | 1,168,800 | 11,359 | 1,535,185 | |||||||||||||||||||
Dr. Eyal Fima Chief Operating, Officer (PROLOR Biotech Ltd.) | 2012 | $ | 145,000 | $ | 50,000 | $ | — | $ | 10,145 | $ | 205,145 | |||||||||||||
2011 | 145,000 | 50,000 | — | 10,354 | 205,354 | |||||||||||||||||||
2010 | 125,000 | 50,000 | 584,400 | 10,354 | 769,754 | |||||||||||||||||||
Steve Schaeffer Chief Financial Officer | 2012 | $ | 48,000 | — | — | — | $ | 48,000 | ||||||||||||||||
2011 | 48,000 | — | — | — | 48,000 | |||||||||||||||||||
2010 | 48,000 | — | — | — | 48,000 |
(1) | Amounts represent the aggregate grant date fair value of option awards granted during the fiscal years ended December 31, 2012, 2011 and 2010. These option awards are not subject to performance conditions. For additional information regarding assumptions underlying the valuation of equity awards and the calculation method, please refer to Note 8(g) to our consolidated financial statements, which are contained in our Annual Report on Form 10-K for the year ended December 31, 2012. |
(2) | Except for Steve Schaeffer, who does not have a company car, all amounts represent the aggregate incremental cost to the company of each officer’s company car, including $15,034 in tax reimbursements for 2012 for each of Dr. Havron and Mr. Novik in accordance with their respective consulting and employment agreements. |
Agreements with Named Executive Officers and Potential Payments Upon Termination or Change of Control
Consulting Agreement with Dr. Abraham (Avri) Havron. Dr. Havron is party to a consulting agreement with us, as amended, pursuant to which Dr. Havron serves as our Chief Executive Officer on a part-time basis. For the year ended December 31, 2012, Dr. Havron’s annual compensation under this agreement was $270,000. Dr. Havron was additionally eligible to receive an annual cash bonus in an amount of up to $60,000, and he is entitled to the use of a company car, for which we have agreed to “gross up” Dr. Havron’s consulting fee with respect to any additional tax liability resulting from his use of the company car. For 2013, the Compensation Committee increased Dr. Havron’s annual base salary and potential cash bonus to $302,500 and $70,000, respectively. Either party may terminate the agreement on 30 days’ prior notice; however, if we terminate the agreement for any reason other than Dr. Havron’s material breach, then we must pay to Dr. Havron a lump sum severance payment of $40,000. For one year following any termination of the agreement, Dr. Havron may not solicit the employment of any of our employees. The consulting agreement’s initial one-year term ended December 31, 2007 and has been renewed in accordance with its terms for successive one year periods by mutual agreement of the parties. In accordance with the consulting agreement, we pay Dr. Havron in Israeli shekels (IS) at an exchange rate of 3.86 IS per U.S. dollar.
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Employment Agreement with Shai Novik. Mr. Novik is party to an employment agreement with us, as amended, pursuant to which, for the year ended December 31, 2012, we paid Mr. Novik a salary of $290,000. Mr. Novik was additionally eligible to receive a cash bonus in an amount of up to $85,000, and he is entitled to the use of a company car, for which we have agreed to “gross up” Mr. Novik’s salary with respect to any additional tax liability resulting from the use of the company car. He is additionally entitled to such other benefits as are provided generally to our executive officers. For 2013, the Compensation Committee increased Mr. Novik’s annual base salary and potential cash bonus to $322,500 and $95,000, respectively. The agreement’s initial two-year term expired December 14, 2007, which term has been automatically extended for successive one-year terms on each one-year anniversary. Either party may elect not to renew the agreement upon written notice to the other party no fewer than 60 days prior to the end of the then-current term of such an election. The employment agreement includes a covenant limiting Mr. Novik’s ability to compete with us during his employment and for a period of one year following the termination of his employment, and the agreement additionally includes a nonsolicitation provision that applies during the same period. In accordance with the agreement, we pay Mr. Novik in Israeli shekels (IS) at an exchange rate of 3.86 IS per U.S. dollar.
If Mr. Novik voluntarily terminates his employment (other than in connection with a change of control and certain other reasons), Mr. Novik will be entitled to payment of only his base salary through the date of termination and will not be entitled to any performance bonus for that year. However, if Mr. Novik terminates the agreement as the result of a material breach by us, or if the term expires and is not renewed by us, he will be entitled to payment of his base salary over a 12-month period following the termination plus the value of any accrued benefits. If we terminate Mr. Novik other than for cause (as defined in the agreement), Mr. Novik will be entitled to receive an amount equal to his then-current base salary over the 12-month period following termination plus the value of accrued benefits and a pro-rata portion of the current year’s performance bonus. If Mr. Novik is terminated for cause, he will be entitled to receive only amounts due and owing to him at the time of such termination.
If, following a change in control (as defined in the agreement), either (a) Mr. Novik terminates his employment for good reason (as defined in the agreement) or (b) we or our successor terminate Mr. Novik’s employment within 12 months of such change in control, then Mr. Novik will be entitled to receive a lump-sum payment equal to the lesser of (i) his base salary for 12 months and (ii) his base salary for the remainder of the term plus the value of accrued benefits and a pro-rata portion of the current year’s performance bonus. In addition, all unvested stock options would immediately vest and become exercisable. This amount is subject to reduction so that the total amount of payments or benefits provided to Mr. Novik under his employment agreement or any benefit plans or agreements will not constitute an “excess parachute payment” under the Internal Revenue Code.
Consulting Agreement with Dr. Fares. Dr. Fuad Fares is one of our directors as well as Chief Scientific Officer of our wholly owned subsidiary, Prolor Biotech Ltd. (f/k/a Modigenetech), referred to as Prolor Ltd. Dr. Fares entered into a consulting agreement with Prolor Ltd. on January 1, 2007, pursuant to which he serves as Chief Scientific Officer of Prolor Ltd. on a part-time basis, at a monthly compensation rate of $3,000 (plus any applicable V.A.T.). In addition, Dr. Fares is entitled to payments ranging from $7,000 to $37,500 upon successful achievement of certain milestones related to our development of a new biotechnology platform. Dr. Fares may receive up to an aggregate of $102,000 if all milestones are achieved, out of which Dr. Fares received $64,500. The initial 24 month term of the consulting agreement expired on December 31, 2008 and has been extended for subsequent 12-month periods upon mutual agreement of the parties. Either party may terminate the agreement on 30 days’ prior notice; however, if we terminate the agreement for any reason other than Dr. Fares’ material breach of the agreement, then we must pay to Dr. Fares a severance payment equal to $18,000. For one year following any termination of the agreement, Dr. Fares may not solicit the employment of any of our employees. All payments under the consulting agreement are made in Israeli shekels (IS) translated at an exchange rate of 3.86 IS per U.S. dollar.
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Outstanding Equity Awards as of December 31, 2012
The following table summarizes the equity awards made to our named executive officers that were outstanding at December 31, 2012.
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Option Awards | ||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||||
Dr. Abraham Havron | 31,286 | (1) | 0.88 | 12/14/2015 | ||||||||||||
145,048 | (2) | 0.88 | 12/14/2016 | |||||||||||||
200,000 | (3) | 2.00 | 5/9/2017 | |||||||||||||
900,000 | (4) | 0.90 | 3/1/2018 | |||||||||||||
100,000 | (5) | 0.65 | 2/2/2019 | |||||||||||||
150,000 | (6) | 50,000 | (6) | 2.40 | 1/10/2020 | |||||||||||
100,000 | (7) | 100,000 | (7) | 6.47 | 12/31/2020 | |||||||||||
Shai Novik | 170,645 | (8) | 0.88 | 12/14/2015 | ||||||||||||
145,048 | (9) | 0.88 | 12/14/2015 | |||||||||||||
145,048 | (10) | 0.88 | 12/14/2016 | |||||||||||||
200,000 | (11) | 2.00 | 5/9/2017 | |||||||||||||
900,000 | (12) | 0.90 | 3/1/2018 | |||||||||||||
100,000 | (13) | 0.65 | 2/2/2019 | |||||||||||||
150,000 | (14) | 50,000 | (14) | 2.40 | 1/10/2020 | |||||||||||
100,000 | (15) | 100,000 | (15) | 6.47 | 12/31/2020 | |||||||||||
Dr. Eyal Fima | 14,221 | (16) | 0.88 | 12/14/2015 | ||||||||||||
137,239 | (17) | 0.90 | 3/1/2018 | |||||||||||||
50,000 | (18) | 0.65 | 2/2/2019 | |||||||||||||
75,000 | (19) | 25,000 | (19) | 2.40 | 1/10/2020 | |||||||||||
50,000 | (20) | 50,000 | (20) | 6.47 | 12/31/2020 | |||||||||||
Steve Schaeffer | — | — | — | — |
(1) | Option to purchase 31,286 shares of our common stock at an exercise price of $0.88 per share. Option was granted in exchange for an employee stock option to acquire 31,286 shares of Modigene Delaware common stock at an exercise price of $1.50 per share granted on December 14, 2005, which option was vested in full at the time of our acquisition of the business of Modigene Delaware and expires 10 years after the date of grant. |
(2) | Option to purchase 145,048 shares of our common stock at an exercise price of $0.88 per share. Option was granted in exchange for an employee stock option to acquire 85,000 shares of Modigene Delaware common stock at an exercise price of $1.50 per share granted on December 14, 2006, which option was vested in full at the time of our acquisition of the business of Modigene Delaware and expires 10 years after the date of grant. |
(3) | Option to purchase 200,000 shares of our common stock at an exercise price of $2.00 per share granted on May 9, 2007, which vested in three equal installments on the first, second and third anniversaries of the date of grant and expires 10 years from the date of grant. |
(4) | Option to purchase 900,000 shares of our common stock at an exercise price of $0.90 per share granted on March 1, 2008, which vested in four equal installments on the first, second, third and fourth anniversaries of the date of grant and expires 10 years from the date of grant. |
(5) | Option to purchase 100,000 shares of our common stock at an exercise price of $0.65 per share granted on February 3, 2009, which vested in four equal installments on the first, second, third and fourth anniversaries of the date of grant and expires 10 years from the date of grant. |
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(6) | Option to purchase 200,000 shares of our common stock at an exercise price of $2.40 per share granted on January 11, 2010, which vests in four equal installments on the first, second, third and fourth anniversaries of the date of grant and expires 10 years from the date of grant. |
(7) | Option to purchase 200,000 shares of our common stock at an exercise price of $6.47 per share granted on December 31, 2010, which vests in four equal installments on the first, second, third and fourth anniversaries of the date of grant and expires 10 years from the date of grant. |
(8) | Option to purchase 170,645 shares of our common stock at an exercise price of $0.88 per share. Option was granted in exchange for an employee stock option to acquire 100,000 shares of Modigene Delaware common stock at an exercise price of $1.50 per share granted on December 14, 2005, which option was vested in full at the time of the merger and expires 10 years after the date of grant. |
(9) | Option to purchase 145,048 shares of our common stock at an exercise price of $0.88 per share. Option was granted in exchange for an employee stock option to acquire 85,000 shares of Modigene Delaware common stock at an exercise price of $1.50 per share granted on December 14, 2005, which option was vested in full at the time of our acquisition of the business of Modigene Delaware and expires 10 years after the date of grant. |
(10) | Option to purchase 145,048 shares of our common stock at an exercise price of $0.88 per share. Option was granted in exchange for an employee stock option to acquire 85,000 shares of Modigene Delaware common stock at an exercise price of $1.50 per share granted on December 14, 2006, which option was vested in full at the time of our acquisition of the business of Modigene Delaware and expires 10 years after the date of grant. |
(11) | Option to purchase 200,000 shares of our common stock at an exercise price of $2.00 per share granted on May 9, 2007, which vested in three equal installments on the first, second and third anniversaries of the date of grant and expires 10 years from the date of grant. |
(12) | Option to purchase 900,000 shares of our common stock at an exercise price of $0.90 per share granted on March 1, 2009, which vested in four equal installments on the first, second, third and fourth anniversaries of the date of grant and expires 10 years from the date of grant. |
(13) | Option to purchase 100,000 shares of our common stock at an exercise price of $0.65 per share granted on February 3, 2008, which vested in four equal installments on the first, second, third and fourth anniversaries of the date of grant and expires 10 years from the date of grant. |
(14) | Option to purchase 200,000 shares of our common stock at an exercise price of $2.40 per share granted on January 11, 2010, which vests in four equal installments on the first, second, third and fourth anniversaries of the date of grant and expires 10 years from the date of grant |
(15) | Option to purchase 200,000 shares of our common stock at an exercise price of $6.47 per share granted on December 31, 2010, which vests in four equal installments on the first, second, third and fourth anniversaries of the date of grant and expires 10 years from the date of grant |
(16) | Option to purchase 14,221 shares of our common stock at an exercise price of $0.88 per share. Option was granted in exchange for an employee stock option of Modigene Delaware common stock at an exercise price of $1.50 per share granted on December 14, 2005, which option was vested in full at the time of our acquisition of the business of Modigene Delaware and expires 10 years after the date of grant. |
(17) | Option to purchase 137,239 shares of our common stock at an exercise price of $0.90 per share granted on March 1, 2008, which vested in four equal installments on the first, second, third and fourth anniversaries of the date of grant and expires 10 years from the date of grant. |
(18) | Option to purchase 50,000 shares of our common stock at an exercise price of $0.65 per share granted on February 3, 2009, which vests in four equal installments on the first, second, third and fourth anniversaries of the date of grant and expires 10 years from the date of grant. |
(19) | Option to purchase 100,000 shares of our common stock at an exercise price of $2.40 per share granted on January 11, 2010, which vests in four equal installments on the first, second, third and fourth anniversaries of the date of grant and expires 10 years from the date of grant. |
(20) | Option to purchase 100,000 shares of our common stock at an exercise price of $6.47 per share granted on December 31, 2010, which vests in four equal installments on the first, second, third and fourth anniversaries of the date of grant and expires 10 years from the date of grant. |
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Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information as of December 31, 2012 about securities authorized for issuance under our 2005 Stock Incentive Plan and our 2007 Equity Incentive Plan, which have been approved by our stockholders, and certain other compensation arrangements that were not subject to stockholder approval.
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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 security holders | 5,514,038 | $ | 2.24 | 1,383,181 | ||||||||
Equity compensation plans not approved by security holders | 320,606 | $ | 0.88 | — | ||||||||
Total | 5,834,644 | $ | 2.17 | 1,383,181 |
The securities listed above as issuable under equity compensation plans not approved by security holders consist of warrants to purchase an aggregate of 320,606 shares of our common stock at an exercise price of $0.88, which were issued by us in exchange for warrants originally granted by our subsidiary, Modigene Delaware, as compensation for broker/dealer services in connection with a private placement conducted by Modigene Delaware in December 2005.
Compensation Committee Report on Executive Compensation
The following report of the Compensation Committee shall not be deemed “soliciting material” or “filed” with the SEC, nor shall such information be incorporated by reference into any document we file with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that such report is specifically stated to be incorporated by reference into such document.
In fulfilling our role, we met and held discussions with Prolor’s management and reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement on Schedule 14A. Based on the review and discussions with management and our business judgment, we recommended to the board of directors that the Compensation Discussion and Analysis be included in this Proxy Statement on Schedule 14A for filing with the Securities and Exchange Commission.
Submitted by the Compensation Committee of the Board of Directors.
Steven Rubin, Chairman
Marian Gorecki
Adam K. Stern
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Review and approval of related party transactions has been delegated by the board of directors to the Audit Committee. The Audit Committee reviews and approves all transactions that are required to be reported pursuant to Item 404(a) of Regulation S-K. Generally, the Audit Committee requires that (i) all related party transactions must be fair and reasonable to the Company at the time they are authorized by the Audit Committee, and (ii) all related party transactions must be authorized, approved or ratified by the affirmative vote of a majority of the members of the Audit Committee who have no interest, either directly or indirectly, in any such related party transaction.
Currently, we are not a party to any transaction that would require disclosure pursuant to Item 404(a) of Regulation S-K.
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AUDIT COMMITTEE REPORT
The information contained in this report shall not be deemed “soliciting material” or “filed” with the SEC, nor shall such information be incorporated by reference into any document we file with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that such report is specifically stated to be incorporated by reference into such document.
The Audit Committee has reviewed and discussed our audited financial statements for the fiscal year ended December 31, 2012 with management and Yarel + Partners, our independent registered public accounting firm. The committee has discussed with Yarel + Partners the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA,Professional Standards,Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T, and has received the written disclosures and the letter from Yarel + Partners required by the applicable requirements of the Public Company Accounting Oversight Board regarding Yarel + Partners’ communications with the Audit Committee concerning independence, and has discussed with Yarel + Partners their independence. Based on the foregoing review and discussions with management and Yarel + Partners, the Audit Committee recommended to the board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 for filing with the SEC.
Respectfully submitted, by the members of the Audit Committee of the board of directors
Steven Rubin, Chairman
Marian Gorecki
Dr. Jane Hsiao
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INDEPENDENT AUDITORS
Our independent auditor for the year ended December 31, 2012 was the firm of Yarel + Partners, and, subject to stockholder ratification, the Audit Committee reappointed Yarel + Partners as our independent registered certified public accounting firm for the fiscal year ending December 31, 2013.
We expect that representatives from Yarel + Partners will be present at the Annual Meeting, and they will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from stockholders.
Accountant Fees
The following table sets forth fees billed to us by Yarel + Partners for the fiscal years ended December 31, 2012 and 2011 for: (a) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (b) services that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as “audit fees;” (c) services rendered in connection with tax compliance, tax advice and tax planning; and (d) all other fees for services rendered.
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Year Ended December 31, | ||||||||
2012 | 2011 | |||||||
Audit Fees | $ | 82,000 | $ | 82,000 | ||||
Audit Related Fees | $ | — | $ | — | ||||
Tax Fees | $ | 2,700 | $ | 2,700 | ||||
All Other Fees(1) | $ | 2,700 | $ | 2,700 |
(1) | Fees paid for review of the reconciliation of budgeted as compared to spent expense items as approved by the Israeli Office of the Chief Scientist. |
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The Audit Committee is solely responsible for the pre-approval of all audit and non-audit services to be provided by the independent accountants. The Audit Committee approved all of the fees paid to Yarel + Partners for the years ended December 31, 2011 and 2012.
The Audit Committee, after consideration of the matter, does not believe that any of the services rendered to us by Yarel + Partners were incompatible with maintaining Yarel + Partners’ independence as our principal independent registered public accountant.
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PROPOSAL 2
AMENDMENT TO THE 2007 EQUITY INCENTIVE PLAN
Since 2007, the Company has maintained the Modigene Inc. 2007 Equity Incentive Plan, which we refer to as the “2007 Plan”. Our board of directors, referred to as the “Board”, approved and adopted the 2007 Plan, and our stockholders subsequently approved the 2007 Plan in February 2007. In February 2008, the Compensation Committee, under the authority granted to them to administer the 2007 Plan, adopted an administrative amendment to the 2007 Plan in order to clarify the scope of the Compensation Committee’s ability, as administrator of the 2007 Plan, to amend the terms of written stock option agreements previously granted to participants in the 2007 Plan.
As is more fully described below, under the 2007 Plan, employees, outside directors, consultants and advisors of the Company or an affiliate of the Company are eligible to receive awards of nonqualified stock options, incentive stock options, restricted stock awards, and stock appreciation rights. Currently, a total of 6,000,000 shares of our common stock are reserved for issuance under the 2007 Plan. Shares allocable to awards granted under the 2007 Plan that expire, are forfeited, are cancelled without the delivery of the shares, or otherwise terminate unexercised, may again be available for awards under the 2007 Plan. Additionally, the number of shares available for issuance under the 2007 Plan is not reduced by the number of shares surrendered by a participant actually or by attestation or retained by the Company in payment of applicable withholding taxes, or surrendered by a participant upon exercise of an option or in payment of applicable withholding taxes. Shares issued under the 2007 Plan through the settlement, assumption, or substitution of outstanding awards or obligations to grant future awards as a condition of the Company or an affiliate of the Company acquiring another entity will also not reduce the maximum number of shares available for delivery under the 2007 Plan.
As of April 12, 2013, awards covering an aggregate of 5,490,741 shares of common stock were outstanding under the 2007 Plan, which, together with previously granted and exercised option awards, net of forfeitures, left 250,681 shares of our common stock available for issuance under the 2007 Plan.
The Board has approved, subject to stockholder approval, a third amendment to the 2007 Plan, which we refer to as the “Amendment”, which, if approved by our stockholders, would (i) increase the aggregate number of shares of common stock available for awards under the 2007 Plan from 6,000,000 to 10,000,000, (ii) limit the maximum number of shares of common stock with respect to which stock options and/or stock appreciation rights may be granted to any employee during any calendar year to 2,000,000, and (iii) provide that we may grant shares of common stock under the 2007 Plan that are not subject to restrictions on transferability, risk of forfeiture or other restrictions.
The Board believes that the 2007 Plan is, and will continue to be, an important part of our overall compensation program, and the 2007 Plan, amended, is necessary to support our ongoing efforts to develop and retain leaders of the highest quality in our industry. The Board believes that the adoption of the Amendment to the 2007 Plan would, among other things, enhance our long-term stockholder value by offering additional opportunities to our employees, outside directors, consultants and advisors to acquire a proprietary interest in the Company and link their interests and efforts to the long-term interests of our stockholders.
The Board believes that it is both necessary and appropriate to further increase the maximum number of shares issuable under the 2007 Plan in order to enable us to continue offering meaningful, equity-based incentives to our employees, outside directors, consultants and advisors of the Company. Furthermore, by specifying the maximum number of shares of common stock with respect to which stock options and/or stock appreciation rights that may be granted to any employee during any calendar year under the 2007 Plan, the Board intends that grants of stock options and stock appreciation rights may qualify as “performance-based compensation” that are not subject to the deduction limitations under Section 162(m) of the Internal Revenue Code of 1986, as amended, referred to as the “Code”. Additionally, by amending the 2007 Plan to permit grants of common stock that are not subject to restrictions on transferability, risk of forfeiture or other restrictions, the Compensation Committee of the Board will have greater flexibility in administering the 2007 Plan.
The board of directors unanimously recommends that you vote your shares “FOR” the Amendment to the 2007 Plan.
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Set forth below is a summary of certain important features of the 2007 Plan, as amended, which summary is qualified in its entirety by reference to the full text of the 2007 Plan, as amended, which was filed with the SEC on March 26, 2008 as Exhibit 10.12 to our Annual Report on Form 10-KSB. The text of the Amendment is set forth inAnnex A to this proxy statement.
NEW PLAN BENEFITS
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2007 Equity Incentive Plan (as amended) | ||||
Name and Position | Number of Units(1) | |||
Abraham Havron, Ph.D., Chief Executive Officer | 80,000 | |||
Shai Novik, President | 80,000 | |||
Dr. Eyal Fima, Chief Operating Officer (PROLOR Biotech Ltd.) | 66,000 | |||
Steve Schaeffer, Chief Financial Officer | — | |||
Executive Group | 226,000 | |||
Non-Executive Director Group | 976,000 | (2) | ||
Non-Executive Officer Employee Group | 40,000 |
(1) | On February 4, 2013, the Compensation Committee approved, subject to stockholder approval of the Amendment, the grant of option awards described in the table above. All awards would vest in equal monthly installments over 12 months, and the exercise price per share of common stock underlying the options would be $4.74, which was the closing price of our common stock as reported by the NYSE MKT on the date of grant. All options expire ten years following the date of grant. |
(2) | Includes 542,000 options granted to Dr. Frost, 310,000 options granted to Mr. Rubin, 44,000 options granted to Dr. Gorecki, 40,000 options granted to Mr. Stern and 40,000 options granted to Dr. Hsiao, in each case subject to stockholder approval of the Amendment. |
Administration
The compensation committee of the Board, referred to as the “Committee”, or the Board in the absence of such a committee, administers the 2007 Plan. Subject to the terms of the 2007 Plan, the Committee has complete authority and discretion to determine the terms of awards under the 2007 Plan.
Grants
The 2007 Plan authorizes the grant to 2007 Plan participants of nonqualified stock options, incentive stock options, restricted stock awards, and stock appreciation rights, as described below:
• | Options granted under the 2007 Plan entitle the grantee, upon exercise, to purchase a specified number of shares from us at a specified exercise price per share. The exercise price for shares of common stock covered by an option cannot be less than the fair market value of the common stock on the date of grant unless agreed to otherwise at the time of the grant. The maximum aggregate number of shares with respect to which incentive stock options may be issued under the 2007 Plan to any participant in any calendar year is 200,000. The maximum aggregate number of shares with respect to which nonqualified stock options may be issued under the 2007 Plan to any participant in any calendar year is 2,000,000. |
• | Restricted stock awards may be awarded on terms and conditions, if any, established by the Committee, including the period of time, before which all restrictions lapse and the participant will have full ownership of the common stock. For purposes of the 2007 Plan, restricted stock awards may include grants of common stock that are not subject to restrictions on transferability, risk of forfeiture or other restrictions. |
• | Concurrently with the award of any option to purchase one or more shares of common stock, the Committee may, in its sole discretion, award to the optionee with respect to each share of common stock covered by an option a related Stock Appreciation Right, referred to as an “SAR”. SARs entitle the participant to receive a distribution in an amount not to exceed the number of shares of common stock subject to the portion of the SAR exercised multiplied by the difference between the market price of a share of common stock on the date of exercise of the SAR and the market price of |
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a share of common stock on the date of grant of the SAR. The maximum aggregate number of shares with respect to which SARs may be issued under the 2007 Plan to any participant in any calendar year is 2,000,000. |
Change in Capital Structure
In the event of a stock dividend, stock split, or combination of shares, share exchange, share distribution, recapitalization or merger in which the Company is the surviving corporation, a spin-off or split-off of a subsidiary or affiliate, or other change in the Company’s capital stock (including, but not limited to, the creation or issuance to stockholders generally of rights, options, or warrants for the purchase of common stock or preferred stock of the Company), the aggregate number and kind of shares of stock or securities of the Company to be subject to the 2007 Plan and to awards then outstanding or to be granted, the maximum number of shares or securities which may be delivered under the 2007 Plan, the per share exercise price of options, the terms of awards, and other relevant provisions will be proportionately and appropriately adjusted by the Committee in its discretion, and the determination of the Committee will be binding on all persons. If the adjustment would produce fractional shares with respect to any unexercised option, the Committee may adjust appropriately and in a nondiscriminatory manner the number of shares covered by the option so as to eliminate the fractional shares.
Change in Control
Subject to the terms of any employment agreement between a participant and the Company or an affiliate of the Company, the Committee may provide in an award agreement for, or in the event of a “change in control” (as defined in the 2007 Plan) may take such actions as it deems appropriate to provide for, any one or more of the following:
• | The acceleration of the exercisability and vesting in connection with a change in control of any or all outstanding options and SARs and shares acquired upon the exercise thereof upon such conditions, including termination of the participant’s service prior to, upon, or following such change in control, and to such extent as the Committee will determine. |
• | In the event of a change in control, the surviving, continuing, successor, or purchasing entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of any participant, either assume or continue the Company’s rights and obligations under any or all outstanding options and SARs or substitute for any or all outstanding options and SARs substantially equivalent options and stock appreciation rights (as the case may be) for the Acquiror’s stock. Any options or SARs which are neither assumed or continued by the Acquiror in connection with the change in control nor exercised as of the time of consummation of the change in control will terminate and cease to be outstanding effective as of the time of consummation of the change in control. |
• | The Committee may, in its sole discretion and without the consent of any participant, determine that, upon the occurrence of a change in control, each or any option or SAR outstanding immediately prior to the change in control will be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Committee) of common stock subject to such canceled option or SAR in (A) cash, (B) stock of the Company or of a corporation or other business entity a party to the change in control, or (C) other property which, in any such case, will be in an amount having a fair market value equal to the excess of the fair market value of the consideration to be paid per share of common stock in the change in control over the exercise price per share under such option or SAR (the “Spread”). In the event such determination is made by the Committee, the Spread (reduced by applicable withholding taxes, if any) will be paid to participants in respect of the vested portion (and unvested portion, if so determined by the Committee) of their canceled options and SARs as soon as practicable following the date of the change in control. |
• | The Committee may provide for the acceleration of the vesting of the shares subject to a restricted stock award upon such conditions, including termination of the participant’s services to the Company prior to, upon, or following such change in control, and to such extent as the Committee will determine. |
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Duration, Amendment, and Termination
Our Board has the power to amend or terminate the 2007 Plan without stockholder approval or ratification at any time or from time to time, except that no change may be made that increases the total number of shares of common stock reserved for issuance pursuant to awards or that reduces the minimum exercise price for options or exchange of options for other incentive awards, unless that change is authorized by our stockholders within one year. Unless sooner terminated, the 2007 Plan will terminate at the close of business on February 26, 2017.
Federal Income Tax Consequences of Awards
The 2007 Plan is not qualified under the provisions of section 401(a) of the Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974.
Nonqualified Stock Options
An optionee generally is not taxable upon the grant of a nonqualified stock option granted under the 2007 Plan. On exercise of a nonqualified stock option granted under the 2007 Plan, an optionee will recognize ordinary income equal to the excess, if any, of the fair market value on the date of exercise of the shares acquired on exercise of the option over the exercise price. If the optionee is an employee of the Company or an affiliate of the Company, that income will be subject to the withholding of Federal income tax. The optionee’s tax basis in those shares will be equal to their fair market value on the date of exercise of the option, and his or her holding period for those shares will begin on that date.
If an optionee pays for shares on exercise of an option by delivering shares, the optionee will not recognize gain or loss on the shares delivered, even if their fair market value at the time of exercise differs from the optionee’s tax basis in them. The optionee, however, otherwise will be taxed on the exercise of the option in the manner described above as if he or she had paid the exercise price in cash. If a separate identifiable stock certificate or other indicia of ownership is issued for that number of shares equal to the number of shares delivered on exercise of the option, the optionee’s tax basis in the shares represented by that certificate or other indicia of ownership will be equal to his or her tax basis in the shares delivered, and his or her holding period for those shares will include his or her holding period for the shares delivered. The optionee’s tax basis and holding period for the additional shares received on exercise of the option will be the same as if the optionee had exercised the option solely in exchange for cash.
The Company generally will be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income taxable to the optionee, provided that amount constitutes an ordinary and necessary business expense for the Company and is reasonable in amount, and either the employee includes that amount in income or the Company timely satisfies its reporting requirements with respect to that amount.
Incentive Stock Options
Under the Code, an optionee generally is not subject to tax upon the grant or exercise of an incentive stock option, referred to as an “ISO”. In addition, if the optionee holds a share received on exercise of an ISO for at least two years from the date the option was granted and at least one year from the date the option was exercised, which we refer to as the Required Holding Period, the difference, if any, between the amount realized on a sale or other taxable disposition of that share and the holder’s tax basis in that share will be long-term capital gain or loss.
If an optionee disposes of a share acquired on exercise of an ISO before the end of the Required Holding Period, which we refer to as a Disqualifying Disposition, the optionee generally will recognize ordinary income in the year of the Disqualifying Disposition equal to the excess, if any, of the fair market value of the share on the date the ISO was exercised over the exercise price. If, however, the Disqualifying Disposition is a sale or exchange on which a loss, if realized, would be recognized for Federal income tax purposes, and if the sales proceeds are less than the fair market value of the share on the date of exercise of the option, the amount of ordinary income recognized by the optionee will not exceed the gain, if any, realized on the sale. If the amount realized on a Disqualifying Disposition exceeds the fair market value of the share on the date of exercise of the option, that excess will be short-term or long-term capital gain, depending on whether the holding period for the share exceeds one year.
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An optionee who exercises an ISO by delivering shares acquired previously pursuant to the exercise of an ISO before the expiration of the Required Holding Period for those shares is treated as making a Disqualifying Disposition of those shares. This rule prevents “pyramiding” or the exercise of an ISO (that is, exercising an ISO for one share and using that share, and others so acquired, to exercise successive ISOs) without the imposition of current income tax.
For purposes of the alternative minimum tax, the amount by which the fair market value of a share acquired on exercise of an ISO exceeds the exercise price of that option generally will be an adjustment included in the optionee’s alternative minimum taxable income for the year in which the option is exercised. If, however, there is a Disqualifying Disposition of the share in the year in which the option is exercised, there will be no adjustment with respect to that share. If there is a Disqualifying Disposition in a later year, no income with respect to the Disqualifying Disposition is included in the optionee’s alternative minimum taxable income for that year. In computing alternative minimum taxable income, the tax basis of a share acquired on exercise of an ISO is increased by the amount of the adjustment taken into account with respect to that share for alternative minimum tax purposes in the year the option is exercised.
The Company is not allowed an income tax deduction with respect to the grant or exercise of an ISO or the disposition of a share acquired on exercise of an ISO after the Required Holding Period. However, if there is a Disqualifying Disposition of a share, the Company generally is allowed a deduction in an amount equal to the ordinary income includible in income by the optionee, provided that amount constitutes an ordinary and necessary business expense for the Company and is reasonable in amount, and either the employee includes that amount in income or the Company timely satisfies its reporting requirements with respect to that amount.
Stock Awards
Generally, the recipient of a stock award will recognize ordinary compensation income at the time the shares are received equal to the excess, if any, of the fair market value of the shares received over any amount paid by the recipient in exchange for the shares. If, however, the shares are not vested when they are received under the 2007 Plan (for example, if the recipient is required to work for a period of time in order to have the right to sell the shares), the recipient generally will not recognize income until the shares become vested, at which time the recipient will recognize ordinary compensation income equal to the excess, if any, of the fair market value of the shares on the date they become vested over any amount paid by the recipient in exchange for the shares. A recipient may, however, file an election with the Internal Revenue Service, within 30 days of his or her receipt of the award, to recognize ordinary compensation income, as of the date the recipient receives the award, equal to the excess, if any, of the fair market value of the shares on the date the award is granted over any amount paid by the recipient in exchange for the shares.
The recipient’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired as awards will be the amount paid for the shares plus any ordinary income recognized either when the shares are received or when the shares become vested. Upon the disposition of any shares received as a stock award under the 2007 Plan, the difference between the sales price and the recipient’s basis in the shares will be treated as a capital gain or loss and generally will be characterized as long-term capital gain or loss if the shares have been held for more the one year from the date as of which he or she would be required to recognize any compensation income.
The Company generally will be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income taxable to the recipient, provided that amount constitutes an ordinary and necessary business expense for the Company, is reasonable in amount, and is not precluded by the deduction limitations imposed by Section 162(m) of the Code, and either the recipient includes that amount in income or the Company timely satisfies its reporting requirements with respect to that amount.
Stock Appreciation Rights
The Company may grant stock appreciation rights in tandem with options, which we refer to as Tandem Stock Appreciation Rights, under the 2007 Plan. Generally, the recipient of a Tandem Stock Appreciation Right will not recognize any taxable income at the time the Tandem Stock Appreciation Right is granted.
With respect to Tandem Stock Appreciation Rights, if the recipient elects to surrender the underlying option in exchange for cash or shares equal to the appreciation inherent in the underlying option, the cash will
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be taxable as ordinary compensation income to the recipient at the time that the cash is received. If the recipient receives the appreciation inherent in the Tandem Stock Appreciation Rights in shares, the recipient will recognize ordinary compensation income equal to the excess of the fair market value of the shares on the day they are received over any amounts paid by the recipient for the shares. If the recipient elects to exercise the underlying option, the holder will be taxed at the time of exercise as if he or she had exercised a stock option, as discussed above.
In general, there will be no Federal income tax deduction allowed to the Company upon the grant or termination of Tandem Stock Appreciation Rights. Upon the exercise of a Tandem Stock Appreciation Right, however, the Company generally will be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income that the employee is required to recognize as a result of the exercise, provided that the deduction is not otherwise disallowed under the Code.
Importance of Consulting Tax Adviser
The information set forth above is a summary only and does not purport to be complete. In addition, the information is based upon current Federal income tax rules and therefore is subject to change when those rules change. Moreover, because the tax consequences to any recipient may depend on his or her particular situation, each recipient should consult his or her tax adviser as to the Federal, state, local, foreign and other tax consequences of the grant or exercise of an award or the disposition of shares acquired as a result of an award.
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PROPOSAL 3
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has selected and appointed the firm of Yarel + Partners to act as our independent registered certified public accounting firm for the 2013 fiscal year. Yarel + Partners was our independent auditor for the fiscal year ended December 31, 2012. Although stockholder ratification is not required by our bylaws or otherwise, we believe that submitting the appointment to our stockholders is a matter of good corporate practice. If the appointment is not ratified, the Audit Committee will re-evaluate its appointment, taking into consideration our stockholders’ vote. However, the Audit Committee is solely responsible for the appointment and termination of our auditors and may do so at any time in its discretion. Even if the appointment is ratified, our Audit Committee may engage a different independent auditor at any time during the year if it determines that such a change would be in the best interests of the company and our stockholders.
The board of directors unanimously recommends that you vote your shares “FOR” ratification of the appointment of Yarel + Partners as our registered certified public accounting firm for the 2013 fiscal year.
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OTHER INFORMATION
Stockholder Communications with the Board; Nomination and Proposal Procedures
Stockholder Communications with Directors. Stockholders who wish to communicate with the board of directors may do so by mailing any such communications to Shai Novik, President, PROLOR Biotech, Inc., 7 Golda Meir Street, Weizmann Science Park, Nes-Ziona, Israel 74140. Your letter should clearly indicate that you are one of our stockholders. All communications will be distributed to the board of directors, as appropriate, depending on the facts and circumstances outlined in the communications received. For example, requests to consider a candidate for nomination to our board of directors will be forwarded to our Governance Committee.
Nominations of Directors. In order for a stockholder nominee to be considered by our Governance Committee to be a nominee for director and included in our proxy statement, the nominating stockholder must request that the Governance Committee considers such proposed candidate. Director candidates can be submitted by contacting our President as discussed above. Our Governance Committee, or any of our independent directors, may request any information that any of them may reasonably require, including any information with respect to such candidate’s qualifications, in order to make a determination as to whether to nominate the person for director. Although our Governance Committee will consider candidates proposed by our stockholders, they have no obligation to recommend any candidate for nomination to our board. Our bylaws do not impose any additional requirements in connection with stockholder nominations of directors.
Other Stockholder Proposals. For a stockholder proposal to be considered for inclusion in our proxy statement and form of proxy relating to our 2014 Annual Meeting, the proposing stockholder must file a written notice of the proposal with our President, at the above address, which must be received by us no later than December 26, 2013, and must otherwise comply in all respects with the applicable rules and regulations set forth by the SEC relating to the inclusion of stockholder proposals. Stockholder proposals must include, with respect to each matter the stockholder proposes to bring before the Annual Meeting: (a) a brief description of the business desired to be brought before the Annual Meeting, and the reasons for conducting such business at the Annual Meeting; (b) the name and record address of the stockholder proposing the business; (c) the number of shares of our common stock that the stockholder owns; and (d) any material interest of the stockholder in such business.
Any proposal submitted with respect to our 2014 Annual Meeting that is submitted outside the requirements of Rule 14a-8 under the Exchange Act will be considered timely if we receive written notice of that proposal not fewer than 45 days prior to the first anniversary of the date on which we first mailed this proxy statement. However, if the date of our 2014 Annual Meeting is changed by more than 30 days from the date of our 2013 Annual Meeting, then the notice and proposal will be considered untimely if it is not received at least a reasonable number of days prior to the date on which we mail the proxy statement in respect of such meeting.
Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies. We expect that brokers with account holders who are our stockholders will be householding our proxy materials. A single proxy statement may be delivered to multiple stockholders sharing an address unless contrary instructions are received from the affected stockholders. If you receive a notice from a broker that it will be householding communications to your address, the householding will continue until you are notified otherwise, or until you notify your broker or us that you no longer wish to participate in householding. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report in the future, you may (a) notify your broker, or (b) direct your request to Shai Novik at 7 Golda Meir Street, Weizmann Science Park, Nes-Ziona, Israel 74140. Upon a written or oral request, we will promptly deliver a separate copy of the annual report and proxy statement to a stockholder at a shared address to which a single copy of the documents was previously delivered.
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Stockholders who receive multiple copies of the proxy statement and annual report at the address and would like to request householding of their communications should contact their broker.
Expenses of Solicitation
We will bear the cost of this proxy solicitation. Solicitation will be made primarily through the use of the mail, but our officers, directors or employees may solicit proxies personally or by telephone or telegraph without additional remuneration for such activity. In addition, we will reimburse brokerage houses and other custodians, nominees or fiduciaries for their reasonable expenses in forwarding proxy materials to the beneficial owner of such shares.
Other Business
As of the date of this proxy statement, we do not know of any other matters to be brought before the Annual Meeting. However, if any other matters should properly come before the meeting, it is the intention of the persons named in the enclosed proxy to vote thereon in accordance with their best judgment.
The prompt return of your proxy is appreciated and will be helpful in obtaining the necessary vote. Therefore, whether or not you expect to attend the Annual Meeting, please sign the proxy and return it in the enclosed envelope.
By order of the board of directors
Abraham Havron
Chief Executive Officer
Nes Ziona, Israel
April 25, 2013
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Annex A
THIRD AMENDMENT
TO THE
MODIGENE INC.
2007 EQUITY INCENTIVE PLAN
(this “Third Amendment”)
WHEREAS, PROLOR Biotech, Inc., a Nevada corporation (f/k/a Modigene Inc. the “Company”), sponsors and maintains the 2007 Equity Incentive Plan (as amended, the “Plan”);
WHEREAS, the Board of Directors of the Company (the “Board”) has approved this Third Amendment to the Plan, subject to approval by the Company’s stockholders, to (i) increase the aggregate number of shares of the Company’s common stock, par value $0.00001 per share (“Common Stock”), reserved for issuance under the Plan from 6,000,000 to 10,000,000, (ii) limit to 2,000,000 the maximum number of shares of Common Stock with respect to which stock options and/or stock appreciation rights may be granted to any employee during any calendar year and (iii) provide that shares of Common Stock may be granted under the Plan that are not subject to restrictions on transferability, risk of forfeiture or other restrictions; and
WHEREAS, the Board has authorized and directed the undersigned officer to execute this Third Amendment.
NOW, THEREFORE, BE IT RESOLVEDthat, effective as of the date set forth below, the Plan be, and it hereby is, amended as follows:
1. | The first sentence of Section 3 of the Plan is hereby deleted in its entirety and replaced with the following: |
“Subject to Section 14 of the Plan, there shall be reserved for issuance under the Plan an aggregate of 10,000,000 shares of Company Stock, which may be authorized but unissued shares, or shares held in the Company’s treasury, or shares purchased from stockholders expressly for use under the Plan.”
2. | The following sentence is hereby added to the end of Section 5(c)(iii) of the Plan: |
“The maximum aggregate number of shares with respect to which Nonqualified Stock Options may be issued under the Plan to any Participant in any calendar year shall be 2,000,000.”
3. | Section 8 of the Plan is hereby amended by inserting a new subsection (f), which read in its entirety as follows: |
“(f) The maximum aggregate number of shares with respect to which a Stock Appreciation Right may be granted under the Plan to any Participant in any calendar year shall be 2,000,000.”
4. | Section 9(a) of the Plan is hereby deleted in its entirety and replaced with the following: |
“The Committee may make grants of Restricted Stock to a Participant. The Committee shall establish as to each award of Restricted Stock the terms and conditions, if any, to which the Restricted Stock is subject, including the period of time before which all restrictions shall lapse and the Participant shall have full ownership of the Company Stock, or may establish as to each award of Restricted Stock that the Restricted Stock shall not be subject to any terms and conditions and/or that the Participant shall have full ownership of the Company Stock as of the Date of Grant. For purposes of this Plan, a grant of Restricted Stock may consist of a grant of Company Stock that is not subject to restrictions on transferability, risk of forfeiture or other restrictions. The Committee in its discretion may award Restricted Stock without cash consideration. All Restricted Stock Awards shall be evidenced by a Restricted Stock Agreement setting forth all the relevant terms of the Award.”
5. | Except as explicitly amended as set forth in this Third Amendment, the Plan shall remain unmodified and in full force and effect. |
IN WITNESS WHEREOF, this Amendment has been executed this [ ] day of [ ], 2013.
MODIGENE INC.
By:
Shai Novik, President
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