UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Oragenics, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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4902 Eisenhower Blvd., Suite 125
Tampa, Florida 33634
July 15, 2016
Dear Fellow Shareholders:
You are cordially invited to attend the annual meeting of shareholders of Oragenics, Inc., which will be held on Thursday August 25, 2016, beginning at 9:00 a.m., Eastern Time. The meeting will be held at the Westin Tampa Bay, 7627 W. Courtney Campbell Causeway, Tampa, FL 33607. The purpose of the meeting is to consider and vote upon the proposals explained in the accompanying notice of annual meeting of shareholders and the proxy statement.
A formal notice describing the business to come before the meeting, a proxy statement and a proxy card are enclosed. We have also enclosed our 2015 Annual Report on Form 10-K for your review, which contains detailed information concerning our financial performance and activities during 2015.
It is important that your shares be represented at the annual meeting. Whether or not you plan to attend the annual meeting in person, please vote your shares by completing, signing and dating the enclosed proxy card, and returning it in the enclosed, postage-paid envelope. If you later decide to attend the annual meeting and vote in person, or if you wish to revoke your proxy for any reason before the vote at the annual meeting, you may do so and your proxy will have no further effect.
Sincerely,
/s/Alan Joslyn
Alan Joslyn
Chief Executive Officer and President
Enclosures
ORAGENICS, INC.
4902 Eisenhower Blvd., Suite 125
Tampa, Florida 33634
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 25, 2016
Notice is hereby given to the shareholders of Oragenics, Inc., a Florida Corporation (the Company) that the 2015 Annual Meeting of Shareholders of the Company (including any postponements or adjournments thereof, the Annual Meeting) will be held at the Westin Tampa Bay, 7627 W. Courtney Campbell Causeway, Tampa, FL 33607 on Thursday August 25, 2016, at 9:00 a.m., local time, for the following purposes:
(i) | To re-elect five (5) Directors of the Company to serve until the next annual meeting of shareholders; |
(ii) | To conduct a non-binding advisory vote on executive compensation; |
(iii) | To ratify the selection of Mayer Hoffman McCann P.C. as the Companys independent auditors for the year ending December 31, 2016; and |
(iv) | To transact such other business as may properly come before the Annual Meeting. |
All shareholders are cordially invited to attend the Annual Meeting. Information relating to the Annual Meeting and matters to be considered and voted upon at the Annual Meeting are set forth in the attached Proxy Statement.
Only those shareholders of record at the close of business on July 7, 2016, are entitled to notice of and to vote at the Annual Meeting. A complete list of shareholders entitled to vote at the Annual Meeting will be available for examination by any shareholder at the Annual Meeting and for a period of ten days prior thereto at the executive offices of the Company in Tampa, Florida.
BY ORDER OF THE BOARD OF DIRECTORS, | ||||||
/s/Michael Sullivan | ||||||
Tampa, Florida | MICHAEL SULLIVAN | |||||
July 15, 2016 | Secretary |
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE VOTE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED BUSINESS REPLY ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING YOU MAY, IF YOU WISH, WITHDRAW YOUR PROXY APPOINTMENT AND VOTE IN PERSON.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDERS MEETING TO BE HELD ON AUGUST 25, 2016.
This Proxy Statement and our 2015 Annual Report on Form 10-K and 10-K/A for the year ended December 31, 2015, which were filed on March 30, 2016 and April 27, 2016, respectively, with the Securities and Exchange Commission, except for exhibits, are available at: http://ir.oragenics.com/annual-reports
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ORAGENICS, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 25, 2016
This Proxy Statement is furnished to shareholders, of Oragenics, Inc., a Florida corporation (the Company), in connection with the solicitation of proxies by the Companys Board of Directors from shareholders for use at the 2016 Annual Meeting of Shareholders to be held at 9:00 a.m. local time at the Westin Tampa Bay, 7627 W. Courtney Campbell Causeway, Tampa, FL 33607 on Thursday, August 25, 2016 (including any postponements or adjournments thereof, the Annual Meeting).
The Annual Meeting will be held for the following purposes:
(i) | To re-elect five (5) Directors of the Company to serve until the next annual meeting of shareholders; |
(ii) | To conduct a non-binding advisory vote on executive compensation; |
(iii) | To ratify the selection of Mayer Hoffman McCann P.C. as the Companys independent auditors for the year ending December 31, 2016; and |
(iv) | To transact such other business as may properly come before the Annual Meeting. |
This Proxy Statement and the accompanying Proxy are first being mailed to shareholders of the Company on or about July 7, 2016.
Record Date and Voting Securities
Only shareholders of record of the Company at the close of business on Thursday July 7, 2016 (the Record Date) will be entitled to notice of, and to vote at, the Annual Meeting. On the Record Date, there were 49,114,219 shares of common stock issued and outstanding (Common Stock) and no shares of our preferred stock were outstanding. Each share of Common Stock is entitled to one vote for each share of Common Stock held.
Notwithstanding the Record Date specified above, the Companys stock transfer books will not be closed and shares may be transferred subsequent to the Record Date. However, all votes must be cast in the names of shareholders of record on the Record Date.
The holders of record of a majority of the votes of Common Stock entitled to be voted at the Annual Meeting, present in person or by proxy, are required to establish a quorum for the Annual Meeting and for voting on each matter. A broker non-vote is when a brokerage firm or bank holding shares of record for their customers in street name does not receive specific instructions from their customers, as the beneficial owners, and the brokerage firm or bank advises that it lacks discretionary voting authority on a particular proposal and has not received instructions from the beneficial owner.
PROPOSAL I: Election of Directors. The election of five Directors by the holders of Common Stock will require a plurality of the votes cast by the shares of Common Stock represented and entitled to vote in the election at the Annual Meeting. With respect to the election of Directors, shareholders may (i) vote for each of the nominees, (ii) withhold authority for each of such nominees, or (iii) withhold authority for specific nominees but vote for the other nominees. Because the Directors are elected by a plurality of the votes cast by the shares represented and entitled to vote and are running unopposed, any nominee can be elected upon any affirmative vote regardless of whether such nominee receives more than 50% of the shareholder vote. Votes that are withheld or a broker non-vote will have no effect on the outcome of the election of Directors.
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PROPOSAL II: To conduct an advisory vote on executive compensation.
PROPOSAL III: Ratification of the selection of Mayer Hoffman McCann P.C. as the Companys independent auditors for the year ending December 31, 2016 will require the affirmative vote of a majority of the shares of common stock present or represented at the meeting and entitled to vote on the proposal. Abstentions will not be counted in the ratification of the selection of independent auditors and will have no effect on the outcome of the selection of the independent auditors. The ratification of accountants is a routine proposal on which a broker or other nominee is generally empowered to vote in the absence of voting instructions from the beneficial owner, so broker non-votes are unlikely to result from this proposal.
Recommendation of the Board of Directors
The Board unanimously recommends that you vote your shares:
| FOR the nominees listed in Proposal I below; |
| FOR the approval, on an advisory basis, of the compensation of our named executive officers as disclosed in this Proxy Statement, |
| FOR the ratification of the selection of Mayer Hoffman McCann P.C. as the Companys independent auditors for the year ending December 31, 2016. |
All shares entitled to vote and represented by properly executed proxies received prior to the Annual Meeting, and not revoked, will be voted at the annual meeting in accordance with the instructions indicated. If you submit a proxy and do not make voting selections, the shares represented by that proxy will be voted as recommended by the Board. If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the annual meeting to another time or place (including, without limitation, for the purpose of soliciting additional proxies), the persons named as proxies and acting thereunder will have discretion to vote on those matters in accordance with their best judgment. To the extent permitted by Rule 14a-4(c) of the Securities and Exchange Commission, the persons named as proxies on the proxy cards will have discretionary authority to vote in their judgment on any proposals properly presented by shareholders for consideration at the Annual Meeting that were not submitted to the Company within a reasonable time prior to the mailing of these proxy materials. At the time this proxy statement was mailed, we were unaware of any matters proposed to be acted on at the Annual Meeting other than those discussed in this proxy statement.
Shareholders of record If your shares are registered directly in your name with Oragenics transfer agent, Continental Stock Transfer & Trust Company, you are considered, with respect to those shares, the shareholder of record, and the proxy materials and Annual Report have been sent directly to you. As a shareholder of record, you may instruct the proxy holders how to vote your shares by completing, signing, dating and returning the proxy card in the postage pre-paid envelope provided. Proxy cards submitted by mail must be received by the time of the Annual Meeting in order for your shares to be voted. If you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by our Board.
If you attend the Annual Meeting, you may also submit your vote in person, and any previous votes that you submitted, will be superseded by the vote that you cast at the Annual Meeting. If you plan to attend the annual meeting, please bring proof of identification for entrance to the annual meeting.
Beneficial owners Many Oragenics shareholders hold their shares through a broker, trustee or other nominee, rather than directly in their own name. If your shares are held in a brokerage account or by a bank or another nominee, you are considered the beneficial owner of shares held in street name, and the Annual Meeting proxy materials have been forwarded to you by your broker, trustee or nominee who is considered, with respect to those shares, the shareholder of record. As a beneficial owner, you have the right to direct your broker, trustee or other nominee on how to vote your shares, and you will receive instructions from them that you must follow in order to have your shares voted. The instructions from your broker, bank or other nominee will indicate if Internet and telephone voting are available, and if they are available, will provide details regarding Internet and telephone voting.
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Because a beneficial owner is not the shareholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a legal proxy from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting.
Changing Vote; Revocability of Proxies
Subject to any rules your broker, trustee or nominee may have, you may change your proxy instructions at any time before your proxy is voted at the Annual Meeting.
Shareholders of record If you are a shareholder of record, you may change your vote (1) by delivering to us (Attention: Corporate Secretary, 4902 Eisenhower Blvd., Suite 125, Tampa, Florida 33634), prior to your shares being voted at the Annual Meeting, a later dated written notice of revocation or a duly executed proxy card, or (2) by attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not, by itself, revoke a proxy). A shareholder of record that has voted on the Internet or by telephone may also change his or her vote by subsequently making a timely and valid later Internet or telephone vote.
Beneficial owners If you are a beneficial owner of shares held in street name, you may change your vote (1) by submitting new voting instructions to your broker, trustee or nominee, or (2) if you have obtained a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares, by attending the Annual Meeting and voting in person.
Effect of Not Casting Your Vote
Shareholders of record If you are a shareholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the Annual Meeting.
Beneficial owners If you hold your shares in street name it is critical that you cast your vote if you want it to count in the election of directors (Proposal I) and to conduct an advisory vote on executive compensation (Proposal II) since those are considered non-routine proposals under applicable NYSE MKT rules. Under the rules of the NYSE MKT LLC, if you do not instruct your broker, bank or other nominee in a timely fashion how to vote your shares (so-called broker non-votes) the broker or nominee can vote your shares as it sees fit only on matters that are determined to be routine, and not on any other proposal. The proposal for the ratification of the auditors (Proposal III) are considered routine proposals under NYSE MKT rules and your nominee can vote on such proposals even if it does not receive voting instructions from you. However, your nominee cannot vote on Proposal I or Proposal II without your voting instructions. Please be sure to give specific voting instructions so that your vote can be counted.
We will bear the entire cost of proxy solicitation, including preparation, assembly, printing and mailing of the Proxy Materials, the Notice, and any additional materials furnished to shareholders. Copies of proxy solicitation material will be furnished to brokerage houses, fiduciaries, and custodians holding shares in their names which are beneficially owned by others to forward to such beneficial owners. In addition, we may reimburse such persons for their cost of forwarding the solicitation material to such beneficial owners. Solicitation of proxies by mail may be supplemented by one or more of telephone, email, telegram, facsimile, or personal solicitation by our directors, officers, or regular employees. No additional compensation will be paid for such services.
Shareholder Proposals to Be Presented at Next Annual Meeting
Requirements for shareholder proposals to be considered for inclusion in Oragenics proxy materials. Shareholders interested in submitting a proper proposal for inclusion in the proxy materials for our next annual meeting may do so by submitting such proposal in writing to our offices located at 4902 Eisenhower Blvd., Suite 125, Tampa, Florida 33634, Attn: Corporate Secretary. To be eligible for inclusion, stockholder proposals must be received by us not less than 120 days before the one year anniversary on which Oragenics first mailed its proxy statement to
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shareholders in connection with the previous years annual meeting of shareholders, which will be March 17, 2016 for the next annual meeting, and must otherwise comply with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the Exchange Act), provided, however, that in the event that the date of the annual meeting has been changed more than 30 days from the one year anniversary of the date of the previous years meeting, then the deadline for receipt of notice by the shareholder is within a reasonable time before the Company begins to print and send its proxy materials in order to be eligible for inclusion in the Companys Proxy Statement and Proxy relating to that meeting.
Requirements for shareholder business or nominations to be brought before Oragenics annual meetings. Our bylaws do not establish an advance notice procedure for shareholders who wish to present certain matters, including nominations of persons for election to the Board and shareholder proposals not included in our proxy statement, to be brought before an annual meeting of shareholders. Shareholder proposals, including the nomination of a person for election to the Board, brought before the meeting should consider including, among other things: information as follows: (i) a description of the business desired to be brought before the meeting and the reasons for conducting the business at the meeting, (ii) the name and address, as they appear on the Companys books, of the shareholder submitting the proposal, (iii) the number of shares that are beneficially owned by such shareholder, (iv) the dates on which the shareholder acquired the shares, (v) documentary support for any claim of beneficial ownership, (vi) any material interest of the shareholder in the proposal, (vii) a statement in support of the proposal, and (viii) any other information that may be required by applicable rules and regulations of the Commission.
Shareholders may also submit a recommendation (as opposed to a formal nomination) for a candidate for membership on our Board by following the procedures set forth in Corporate Governance Meetings of the Board of Directors Shareholder Recommendation of Nominees.
Delivery of Proxy Materials to Shareholders
If you share an address with another shareholder, each shareholder may not receive a separate copy of the Notice or Proxy Materials. Shareholders may request to receive a separate copy of the Notice or Proxy Materials, by writing to Oragenics, Inc., 4902 Eisenhower Blvd., Suite 125, Tampa, Florida 33634, Attention: Corporate Secretary or calling 813-286-7900. Alternatively, shareholders who share an address and receive multiple copies of the Notice or Proxy Materials may request to receive a single copy by following the same instructions.
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ELECTION OF DIRECTORS
The Board of Directors currently is comprised of five Board members including Dr. Frederick W. Telling, Robert C. Koski, Charles L. Pope, Dr. Alan Dunton and Dr. Alan Joslyn. All of our existing Directors are nominated for re-election at the Annual Meeting. If elected, each of the Directors will hold office until the next annual meeting of shareholders and until their successor is elected and qualified, or as otherwise provided by the Companys Bylaws or by Florida law.
If any of the nominees should be unavailable to serve for any reason, the Board of Directors may:
| designate a substitute nominee, in which case the persons named as proxies will vote the shares represented by all valid Proxies for the election of such substitute nominee; |
| allow the vacancy to remain open until a suitable candidate is located and nominated; or |
| adopt a resolution to decrease the authorized number of Directors. |
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH DIRECTOR NOMINEE.
If a choice is specified on the Proxy by the shareholder, the shares will be voted as specified. If no specification is made, the shares will be voted FOR the Director nominees. Election of each Director nominee will require the affirmative vote of a plurality of the votes cast by shares of Common Stock represented and entitled to vote at the Annual Meeting.
Information about each nominee as of July 7, 2016 is set forth below:
Name |
Age | Position | ||
Dr. Frederick W. Telling, Ph.D. |
64 | Chairman and Director | ||
Robert C. Koski |
57 | Director | ||
Alan Joslyn, Ph.D |
57 | Director | ||
Charles L. Pope |
64 | Director | ||
Dr. Alan W. Dunton, M.D. |
62 | Director |
Directors of the Company
Dr. Frederick W. Telling. Dr. Telling was elected Chairman of the Board of Directors on February 4, 2011. He has served as a Director since June 2010. Dr. Telling retired from Pfizer Inc. in June 2007 after 30 years of service. At Pfizer Dr. Telling served as its Corporate Vice President and Vice President of Corporate Strategic Planning and Policy. Dr. Telling also serves as a director, the Chair of the Compensation Committee and a member of the Audit Committee at CTI BioPharma, Inc. (NASDAQ: CTIC), a public company based in Seattle, Washington. Dr. Telling also serves on the boards of various civic and non-profit organizations. Dr. Telling holds a B.A. degree in History and Economics from Hamilton College and a MA degree in Industrial and Labor Relations and a PhD in Economics and Public Policy from Cornell University.
Dr. Telling brings to our Board an extensive array of business and industry experience as well as experience as a director of public companies.
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Robert C. Koski. Mr. Koski has served as a Director since June 2009. Mr. Koski has practiced as an attorney with the Koski Firm, a sole proprietorship located in Atlanta, Georgia since 1992, where his practice includes litigation and tax law. Mr. Koski has also served as a partner in the Koski Family Limited Partnership, which beneficially owns a controlling interest in the Company, and as a director of the Koski Family Foundation since December 1996. Mr. Koski holds a B.A. degree in Philosophy and English from Colgate University, a JD from Emory School of Law and an LLM degree in Taxation and Litigation from Emory University.
Mr. Koski brings to our Board over two decades of experience in the legal field as a practicing attorney. In addition to his legal experience, Mr. Koskis educational background provides a foundation for leadership and consensus-building.
Alan F. Joslyn, Ph.D. has served as a Director of our company since June 2016. Since 2009 he has served as Board member of Synergy Pharmaceuticals (NASDAQ: SGYP). Since 2014, Dr. Joslyn has been a partner in Lazarus Pharmaceuticals, LL. From March 2010 to April 2014, Dr. Joslyn served as CEO and a Director of Sentinella Pharmaceuticals and from August 2009 to October 2012 as CEO and Director of Edusa Pharmaceuticals, both privately held biotechnology companies. From March 2007 to March 2009, Dr. Joslyn served as President and Chief Executive Officer of Mt. Cook Pharma and as Senior Vice President of Research & Development at Penwest Pharmaceuticals from 2004 to 2007. From 1995 to 2004, Dr. Joslyn held a number of leadership positions within Johnson & Johnson focusing on development of gastroenterology products including Propulsid®, Motilium®, Aciphex® and prucalopride. Dr. Joslyn received his B.S. in medicinal chemistry, B.A. in biology and Ph.D. in biochemical pharmacology from the State University of New York at Buffalo.
Dr. Joslyn brings to our Board over two decades of experience in the pharmaceutical industry and extensive expertise in gastroenterology and infectious disease product development.
Charles L. Pope. Mr. Pope has served as a Director since June 2010. Mr. Pope served as the Chief Financial Officer of Palm Bancorp, Inc. from June 2009 to June 2012. From September 2007 through June 2009, Mr. Pope served as the Chief Financial Officer of Aerosonic Inc., a manufacturer of aviation products. Mr. Pope served as the Chief Financial Officer of Reptron Inc., a manufacturer of electronic products, from March 2005 through June 2007. From March 2002 to March 2005, Mr. Pope served as Chief Financial Officer of SRI/Surgical Express, Inc. From February 2001 to March 2002, Mr. Pope served as Chief Financial Officer of Innovaro, Inc. (formerly UTEK Corporation NYSE MKT:INV) a public company. Mr. Pope served as a director of Innovaro, Inc. from March 2010 to August 2012. He is also a director of Inuvo, Inc. (NYSE MKT: INV), a public company, specialized in marketing browser based consumer applications, managing networks of website publishers and operating specialty websites. Prior to this time, Mr. Pope served as a Partner in the Audit and Financial Advisory Consulting Divisions of PricewaterhouseCoopers LLP, and he was also a Partner in the Accounting and SEC Directorate in PricewaterhouseCoopers LLPs New York City office. Mr. Pope holds a B.S. degree in Economics and Accounting from Auburn University and is a Certified Public Accountant in Florida.
Mr. Pope brings to our Board over three decades of experience in the finance and accounting fields. In addition, Mr. Pope also has experience serving as a director of public companies.
Dr. Alan W. Dunton. Dr. Dunton has served as a Director since April 2011. Dr. Dunton is the Senior Vice President of Research and Development of Purdue Pharma L.P., a privately-held pharmaceutical company headquartered in Stamford, Connecticut. Dr. Dunton was the principal owner of Danerius, LLC, a biotechnology consulting company which he founded in 2006 until 2015. From January 2007 until March 2009, Dr. Dunton served as President and Chief Executive Officer of Panacos Pharmaceuticals, Inc. He was the non-Executive Chairman and Director of EpiCept, Inc. (OTC MKTS: EPCT) a public biotechnology company developing products for cancer, pain and inflammatory conditions. In addition to Oragenics, he is currently a Director of the public biotechnology company, Palatin, Inc. (AMEX: PTN), as well as Sancilio, Inc., a private biotechnology company. He previously served as a Director of MediciNova and Targacept, Inc. In 2005, Dr. Dunton served as the Non-Executive Chairman of the board of directors of ActivBiotics, Inc., a privately held biopharmaceutical company. Previously, he was the President and Chief Executive Officer of Metaphore Pharmaceuticals, Inc. from 2003 until 2006, when it merged with ActivBiotics. From 2004 until 2005, Dr. Dunton served as a member of the board of directors of Vicuron Pharmaceuticals until it was acquired by Pfizer, Inc. In 2002, Dr. Dunton served as President, Chief Operating Officer and a director of Emisphere Technologies, Inc., a biopharmaceutical company. From 1994 to 2001, Dr. Dunton was a
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senior executive in various capacities in the Pharmaceuticals Group of Johnson & Johnson. From 1999 to 2001, Dr. Dunton was President and Managing Director of The Janssen Research Foundation, a Johnson & Johnson company. From 1998 to 1999, he served as Group Vice President of Global Clinical Research and Development of Janssen. Prior to joining Janssen, Dr. Dunton was Vice President of Global Clinical Research and Development at the R.W. Johnson Pharmaceutical Research Institute, also a Johnson & Johnson company. Prior to joining Johnson & Johnson, Dr. Dunton held positions in clinical research and development at Syntex Corporation, CIBA-GEIGY Corporation and Hoffmann La Roche Inc. Dr. Dunton holds a MD degree from New York University School of Medicine, where he completed his residency in internal medicine. He also was a Fellow in Clinical Pharmacology at the New York Hospital/Cornell University Medical Center.
Dr. Dunton brings to our Board a significant depth of experience in the pharmaceutical industry that will be invaluable to the Company as we continue to develop biotechnology assets.
See Corporate Governance below for additional information regarding the Board.
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ADVISORY VOTE ON EXECUTIVE COMPENSATION
Summary
As provided in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) and as required by Section 14A of the Securities Exchange Act of 1934, as amended, we provide our shareholders the opportunity to advise our Compensation Committee and Board of Directors regarding the compensation of our named executive officers as described in our proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission (say on pay). Our shareholders also were previously asked to indicate how frequently we should seek a say on pay advisory vote. The shareholders were able to indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two, or three years. At the 2013 Meeting, 98.7% of shareholders voting or who abstained from voting endorsed our Boards recommendation that the advisory say on pay vote be held every year. Therefore, we are providing our shareholders the opportunity to advise our Compensation Committee and Board of Directors regarding the compensation of our named executive officers as described in this Proxy Statement.
As described in detail under the heading Executive Compensation Compensation Discussion and Analysis, our executive compensation programs are designed to attract and retain highly qualified leadership personnel, providing them attractive long-term career opportunities. Our compensation philosophy is to provide executives with a competitive total compensation package which motivates superior job performance, the achievement of our business objectives, and the enhancement of shareholder value. Rather than basing compensation on a series of specific performance objectives, we encourage initiative, teamwork and innovation, and each executive is enabled to use his or her abilities and particular area of responsibility to strengthen our overall performance. Please read the Compensation Discussion and Analysis of this Proxy Statement for a detailed description and analysis of our executive compensation programs, including information about the fiscal year 2015 compensation of our named executive officers.
It is the philosophy of the Board of Directors to align the interests of our executive officers and shareholders by integrating the executives compensation opportunities with our long-term corporate strategic and financial objectives. Our general approach to compensating executive officers is to pay cash salaries which generally are competitive within ranges of salaries paid to executives of other healthcare companies, particularly those of similar size and those in our geographic areas. Our compensation committee sets overall compensation at a level it believes to be fair, based upon a subjective analysis of the individual executives experience and past and potential contributions to us.
We are asking our shareholders to indicate their support for our named executive officer compensation as described in this Proxy Statement. This proposal, commonly known as a say-on-pay proposal, gives our shareholders the opportunity to express their views on our named executive officers compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. We will ask our shareholders to vote FOR the following resolution at the Meeting.
RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the Companys named executive officers, as disclosed in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation and the accompanying narrative disclosure set forth in the Companys 2015 Proxy Statement.
This say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board. Our Board and our Compensation Committee value the opinions of our shareholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider the outcome of the vote when making future executive compensation decisions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF PROPOSAL II, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS AS DESCRIBED IN THIS PROXY STATEMENT.
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RATIFICATION OF THE SELECTION OF MAYER HOFFMAN MCCANN P.C.
AS THE COMPANYS INDEPENDENT AUDITORS
Mayer Hoffman McCann P.C. served as the Companys independent auditors and independent registered public accounting firm for the completion of the Companys audit for the year ended December 31, 2015. The Audit Committee has again approved the appointment of Mayer Hoffman McCann P.C. as the Companys independent auditors for the year ending December 31, 2016 and the Board has further directed that the Company submit the selection of independent auditors and independent registered public accounting firm for 2016 for ratification by the shareholders at this shareholder meeting.
Representatives of Mayer Hoffman McCann P.C., who are expected to be present at the shareholder meeting, will have an opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions.
Although ratification is not required by the Bylaws or otherwise, the Company is submitting the selection to its shareholders for ratification as a matter of good corporate practice and because the Company values its shareholders views. In the event the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different auditor/independent accounting firm at any time during the year if the Audit Committee feels that such a change would be in the Companys and the Companys shareholders best interests.
MHM leases substantially all of its personnel, who work under the control of MHM shareholders, from wholly owned subsidiaries of CBIZ, Inc., in an alternative practice structure.
Independent Auditors Fees and Services
The following table provides the aggregate fees billed for professional services rendered by the Companys principal accountants, Mayer Hoffman McCann P.C. (MHM), in the categories indicated during each of the past two fiscal years ended December 31:
Services Rendered |
2015 | 2014 | ||||||
Audit Fees(1) |
$ | 150,000 | $ | 122,000 | ||||
Audit-Related Fees(2) |
| | ||||||
Tax Fees(3) |
10,145 | 14,010 | ||||||
All Other Fees(4) |
| | ||||||
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$ | 160,145 | $ | 136,010 | |||||
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(1) | Audit Fees. This category includes fees for professional services provided in conjunction with the audit of the Companys financial statements and with the audit of managements assessment of internal control over financial reporting and the effectiveness of internal control over financial reporting, review of the Companys quarterly financial statements, assistance and review of documents filed with the SEC, consents, and comfort letters and attestation services provided in connection with statutory and other regulatory filings and engagements. |
(2) | Audit-Related Fees. This category includes fees for assurance and related professional services associated with due diligence related to mergers and acquisitions, consultation on accounting standards or transactions, internal control reviews and assistance with internal control reporting requirements, services related to the audit of employee benefit plans, and other attestation services not required by statute or regulation. |
(3) | Tax Fees. This category includes fees for professional services provided related to tax compliance, tax planning and tax advice. |
(4) | All Other Fees. There were no other fees paid to MHM. |
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The Audit Committee approves in advance all audit and non-audit services to be performed by the Companys independent registered public accounting firm. The Audit Committee considers whether the provision of any proposed non-audit services is consistent with the SECs rules on auditor independence and has pre-approved certain specified audit and non-audit services to be provided by MHM for up to twelve (12) months from the date of the pre-approval. If there are any additional services to be provided, a request for pre-approval must be submitted by management to the Audit Committee for its consideration.
Vote Required and Board of Directors Recommendation
Ratification of the selection of Mayer Hoffman McCann P.C. as the Companys independent auditors for the year ending December 31, 2016 requires the affirmative vote of the holders of a majority of the shares of common stock voting on this Proposal III in person, or by proxy at the Annual Meeting. Abstentions will not be counted in the ratification of the selection of independent auditors and will have no effect on the outcome of the selection of the independent auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE SELECTION OF MAYER HOFFMAN MCCANN P.C. AS THE COMPANYS
INDEPENDENT AUDITORS.
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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The information contained in this report shall not be deemed to be soliciting material or to be filed with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference in such filing.
The following is the report of the Audit Committee with respect to our audited financial statements for the fiscal year ended December 31, 2015, and the notes thereto.
Review with Management
The Audit Committee reviewed and discussed with management our audited financial statements for the fiscal year ended December 31, 2015 and the notes thereto. Management represented to the Audit Committee that our financial statements were prepared in accordance with generally accepted accounting principles.
Review and Discussions with Independent Registered Public Accounting Firm
The Audit Committee discussed with Mayer Hoffman McCann P.C. the matters required to be discussed by Public Company Accounting Oversight Board (PCAOB) Auditing Standard 16, as amended, which includes, among other items, matters related to the conduct of the audit of our financial statements.
The Audit Committee also received and reviewed written disclosures and the letter from Mayer Hoffman McCann P.C. as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants communications with the audit committee concerning independence and has discussed with Mayer Hoffman McCann P.C. their independence from us.
Conclusion
Based on the review and discussions referred to above, the Audit Committee recommended to our Board of Directors that our audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2015 for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee:
Charles L. Pope (Chair)
Dr. Frederick W. Telling
Dr. Alan Dunton
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Oragenics current corporate governance practices and policies are designed to promote shareholder value, and Oragenics is committed to the highest standards of corporate ethics and diligent compliance with financial accounting and reporting rules. Our Board provides independent leadership in the exercise of its responsibilities. Our management oversees a system of internal controls and compliance with corporate policies and applicable laws and regulations, and our employees operate in a climate of responsibility, candor and integrity. You can access information regarding our corporate governance practices on our web site at http://ir.oragenics.com/governance-docs
Corporate Governance Principles
Our Board has adopted Board of Directors Corporate Governance Policy, which sets forth the principles that guide the Boards exercise of its responsibility to oversee corporate governance, maintain its independence, evaluate its own performance and the performance of our executive officers and set corporate strategy. Our Corporate Governance Policy, states that currently different individuals fill the roles of Chairman and Chief Executive Officer. Our Board first adopted these Corporate Governance Principles in December 2009 and may refine them from time to time. You can access our Corporate Governance Principles on our web site at http://ir.oragenics.com/governance-docs
Code of Ethics/Standards of Business Conduct
It is our policy to conduct our operations in compliance with all applicable laws and regulations and to operate our business under the fundamental principles of honesty, integrity and ethical behavior. This policy can be found in our Company Operating Principles, which is applicable to all of our directors, officers and employees, and which complies with the SECs requirements and with listing standards of the NYSE MKT we have adopted.
Our Company Operating Principles are designed to promote honest and ethical conduct and compliance with all applicable laws, rules and regulations and to deter wrongdoing. Our Company Operating Principles are also aimed at ensuring that information we provide to the public (including our filings with and submissions to the SEC) is accurate, complete, fair, relevant, timely and understandable. Our Company Operating Principles can be accessed on our web site at http://ir.oragenics.com/governance-docs. We intend to disclose amendments to certain provisions of our Company Operating Principles, or waivers of such provisions granted to directors and executive officers, on our web site in accordance with applicable SEC requirements.
On April 10, 2013 our common stock became listed on a national securities exchange, the NYSE MKT. Accordingly, in determining whether our Directors are independent, we are required to comply with the rules of the NYSE MKT. We also expect to continue to comply with securities and other laws and regulations regarding the independence of directors, including those adopted under Section 301 of the Sarbanes-Oxley Act and Rule 10A-3 under the Securities and Exchange Act of 1934 with respect to the independence of Audit Committee members. The NYSE MKT listing standards define an independent director generally as a person, other than an officer of a company, who does not, in the view of the companys Board of Directors, have a relationship with the company that would interfere with the directors exercise of independent judgment. As of June 24, 2016, the Board has affirmatively determined that each of the following directors, constituting a majority of the Board, is independent within the meaning of the NYSE MKT listing standards:
Dr. Frederick W. Telling
Charles L. Pope
Dr. Alan Dunton
As of June 24, 2016 the Board also determined that Robert Koski was no longer independent as a result of the CPB transaction with Christine Koski, his sister. Such independence definition includes a series of objective tests, including that the director is not an executive officer employee of the company and has not engaged in various types of business dealings with the company. In addition, as further required by the NYSE MKT listing standards, the Board has made a subjective determination as to each independent director that no relationships exist which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
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We currently separate the positions of Chief Executive Officer and Chairman of the Board. Since February 2011, Dr. Telling, one of our independent directors, has served as our non-executive Chairman of the Board. The responsibilities of the Chairman of the Board include: setting the agenda for each Board meeting, in consultation with the Chief Executive Officer; presiding at executive sessions; facilitating and conducting, with the Nominating Committee, the annual self-assessments by the Board and each standing committee of the Board, including periodic performance reviews of individual directors; and conducting, with the Compensation Committee, a formal evaluation of the Chief Executive Officer and other executive officers in the context of the annual compensation review.
Separating the positions of Chief Executive Officer and Chairman of the Board allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman of the Board to lead the Board in its fundamental role of providing advice to and independent oversight of management. The Board believes that having an independent director serve as Chairman of the Board is the appropriate leadership structure for the Company at this time and demonstrates our commitment to good corporate governance.
In addition, as described in more detail below, our Board has three standing committees, each chairman and each member of which is an independent director. Our Board delegates substantial responsibility to each Board committee, which reports their activities and actions back to the Board. We believe that our independent Board committees and their chairmen are an important aspect of our Board leadership structure.
Our Board, as a whole and through its committees, has responsibility for the oversight of risk management. With the oversight of our Board, our officers are responsible for the day-to-day management of the material risks Oragenics faces. In its oversight role, our Board has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. The involvement of the Board in setting our business strategy at least annually is a key part of its oversight of risk management, its assessment of managements appetite for risk and its determination of what constitutes an appropriate level of risk for Oragenics. The Board regularly receives updates from management and outside advisors regarding certain risks the Company faces, including potential litigation and various operating risks.
In addition, our Board committees each oversee certain aspects of risk management. For example, our Audit Committee is responsible for overseeing risk management of financial matters, financial reporting, the adequacy of our risk-related internal controls, and internal investigations; our Compensation Committee oversees risks related to compensation policies and practices; and our Nominating Committee oversees governance related risks, such as Board independence and conflicts of interest, as well as management and director succession planning. Our Board committees report their findings to the Board.
Senior management attends Board and Board committee meetings and is available to address any questions or concerns raised by the Board on risk management-related and any other matters. The Board holds periodic strategic planning sessions with senior management to discuss strategies, key challenges, and risks and opportunities for the Company.
Meetings of the Board of Directors and Committees
Board of Directors. Our property, affairs and business are under the general management of our Board of Directors as provided by the laws of the State of Florida and our Bylaws. The Board of Directors conducts its business through meetings of the full Board and through committees of the Board. The Board of Directors has appointed standing Audit, Compensation and Nominating Committees of the Board of Directors. The Board periodically reviews the size of the Board and recommends any changes it determines to be appropriate given our needs. Under our Bylaws, the number of members on the Board may be increased or decreased by resolution of the Board.
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The Board currently consists of five members. The Board has no formal policy regarding board member attendance at the Annual Meeting. All of our existing Directors attended the prior years annual meeting and all of our Directors are expected to attend the current Annual Meeting. The Board of Directors met or unanimously consented to resolutions eighteen times during the year ended December 31, 2015 (Fiscal 2015). Our Directors attended at least 75% of the aggregate number of meetings of the Board of Directors and Committees during Fiscal 2015. In conjunction with regularly scheduled meetings, our independent Directors met in separate executive sessions.
Audit Committee: The Audit Committee members currently consist of Mr. Charles Pope, Dr. Frederick Telling and Dr. Alan Dunton with Mr. Pope serving as Chairman. The Board has affirmatively determined that each such person met the independence requirements for audit committee purposes based on the more stringent independence standards imposed by applicable NYSE MKT and SEC rules. In addition, the Board of Directors has determined that Mr. Pope is an audit committee financial expert as that term is defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities and Exchange Act of 1934. In March 2004, the Audit Committee adopted a written charter which was modified on April 24, 2007 and on December 29, 2009. The Company believes that its Audit Committee Charter complies with the requirements related to Sarbanes-Oxley and a current copy of the Audit Committee Charter is available on our website http://ir.oragenics.com/governance-docs. The Audit Committee met unanimously or consented to resolutions four times during Fiscal 2015.
The Audit Committee has the sole authority to engage and discharge, review the independence, qualifications, activities and compensation of the Companys independent registered certified public accountants. The Audit Committee reports to the Board the appointment of the independent registered certified public accountants. The Audit Committee must assure regular rotation of the lead and concurring audit partners. The Audit Committee is responsible for the oversight of the Companys financial policies, control procedures, accounting staff, and reviews and approves the Companys financial statements. The Audit Committee is responsible for the review of transactions between the Company and any Company officer, Director or entity in which a Company officer or Director has a material interest. The Audit Committee must develop and maintain procedures for the submission of complaints and concerns about accounting and auditing matters. The Audit Committee must assure CEO and CFO certifications meet their obligations by performing a review and evaluation of the Companys disclosure controls and procedures. The Audit Committee has the authority to engage the services of an outside advisor when required. The Audit Committee must receive reports from the independent registered certified public accountants on critical accounting policies, significant accounting judgments and estimates, off-balance sheet transactions and non-Generally Accepted Accounting Principles financial measures.
Compensation Committee: The Compensation Committee currently consists of directors Dr. Alan Dunton, Dr. Frederick Telling and Charles Pope with Dr. Telling serving as Chairman. From January 1, 2015 until June 30, 2015 the Compensation Committee consisted of directors Dr. Frederick Telling, Charles Pope and Christine Koski with Dr. Telling serving as Chairman. From July 1, 2015 to June 24, 2016 the Compensation Committee consisted of Dr. Alan Dunton, Dr. Frederick Telling and Christine Koski with Dr. Dunton serving as Chairman. The Board has determined that each current member of the Compensation Committee meets the applicable requirements for independence. None of the Compensation Committee members has ever been an officer or employee of the Company. The Compensation Committee is responsible for establishing the compensation of the Companys Directors, Chief Executive Officer and all other executive officers, including salaries, bonuses, severance arrangements, and other executive officer benefits. The Committee also administers the Companys various incentive and stock option plans and designates both the persons receiving awards and the amounts and terms of the awards. The Compensation Committee adopted a charter in March 2004 to outline its compensation, benefits and management development philosophy and to communicate to shareholders the Companys compensation policies and the reasoning behind such policies as required by the Securities and Exchange Commission. The Charter was modified on April 24, 2007, on December 29, 2009 and again on June 6, 2013. A current copy of the compensation Committee charter is available on our website at http://ir.oragenics.com/governance-docs. The Compensation Committee met five times during Fiscal 2015.
Nominating Committee: The nominating committee currently consists of directors Charles Pope, Dr. Alan Dunton and Dr. Frederick Telling with Mr. Pope serving as Chairman. The nominating committee consisted of Charles Pope, Dr. Alan Dunton and Robert Koski with Mr. Pope serving as Chairman from July 1, 2015 until June 24, 2016. The nominating committee consisted of directors Dr. Alan Dunton, Charles Pope and Robert Koski with Dr. Dunton serving as Chairman from January 1, 2015,
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until June 30, 2015. The Board has determined that each current member of the Nominating Committee meets the applicable requirements for independence. The Nominating Committee met or unanimously consented to a resolution two times during Fiscal 2015. The Board adopted a nominating committee charter. The charter was updated on February 12, 2014. A current copy of the Nominating Committees charter is available on our website. In addition to recommending candidates to the Board for election at the Annual shareholder Meeting, the Nominating Committee oversees the evaluation of the board as a whole and its committees, as well as individual evaluations of those directors who are being considered for possible re-nomination to the board. The evaluation process occurs annually and has, to date, been informal.
The Nominating Committee has not established specific minimum age, education, and years of business experience or specific types of skills for potential director candidates, but, in general, expects qualified candidates will have ample experience and a proven record of business success and leadership. The Nominating Committee also believes it is appropriate for a member of the Companys management to participate as a member of the Board of Directors, although at present no such management member serves on the Board of Directors. The Nominating Committee will consider as candidates for director individuals who possess a high level of ethics, integrity and values, and who are committed to representing the long-term interests of our shareholders. Such candidates must be able to make a significant contribution to the governance of the Company by virtue of their business and financial expertise, educational and professional background. The business discipline that may be sought at any given time will vary depending on the needs and strategic direction of the Company, and the disciplines represented by incumbent directors. In evaluating candidates for nomination as a director, the Nominating Committee will also consider other criteria, including geographical representation, independence, practical wisdom, mature judgment and having sufficient time to devote to the affairs of the Company in order to carry out the responsibilities of a director. One or more of our directors is required to possess the education or experience required to qualify as an audit committee financial expert as defined in the applicable rules of the Securities and Exchange Commission. The Nominating Committee does not have a formal policy with respect to diversity; however, the Board of Directors and the Nominating Committee believe that it is essential that the members of the Board of Directors represent diverse viewpoints and a diverse mix of the specific criteria above. The entire Board of Directors is polled for suggestions as to individuals meeting the aforementioned criteria. Research may also be performed to identify qualified individuals. To date the Company has not engaged third parties to identify or evaluate or assist in identifying potential nominees.
Shareholder Recommendation of Nominees. The Board does not currently have a policy with regard to the consideration of any Director candidates recommended by security holders. Given the Companys current size, stage of development, and size of the Board, the Board believes that it is not currently appropriate to establish a separate policy for security holders to submit such recommendations. Notwithstanding the lack of a formal policy regarding security holder nominations, the Board may from time to time consider candidates proposed for consideration for service on the Companys Board by security holders. The Nominating Committee will consider qualified director nominees recommended by shareholders when such recommendations are submitted in accordance with applicable law, rule or regulation regarding director nominations. Shareholders may submit candidates for nomination to our Board of Directors by writing to: Nominating Committee of the Board of Directors, Oragenics, Inc., 4902 Eisenhower Blvd., Suite 125, Tampa, Florida 33634.
When submitting a nomination to us for consideration, a shareholder must provide certain information about each person whom the shareholder proposes to nominate for election as a director, including: (i) the name, age, business address and residence address of the person; (ii) the principal occupation or employment of the person; (iii) the class or series and number of shares of our capital stock owned beneficially or of record by the person; and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, or the Exchange Act, and the rules and regulations promulgated thereunder. Such notice must be accompanied by the proposed nominees written consent to be named as a nominee and to serve as a director if elected. The Board has not set any specific minimum qualifications that must be met by a nominee presented for consideration to the Board by a security holder. A Board member may become aware of a potential nominee and present such nominee to the full Board for consideration at a Board meeting. The Board would evaluate the candidate and determine whether such person should be considered for Board service based on a variety of criteria including but not limited to, whether the individual has experience in the Companys industry, potential conflicts, and the persons ability to work with existing Board members and expected contributions. The Board would evaluate a nominee submitted by a security holder in the same or similar manner as one recommended by the Nominating Committee.
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Direct Shareholder Communication to Board Members
The Company does not currently have a formal process for direct security holder communications to the Board. The basis for the Boards view that it is appropriate for the Company to not have such a formal process includes but is not limited to the following: the Companys limited financial and personnel resources, the Companys stage of operations and development and the ability for security holders to communicate with Board members informally.
Shareholders with questions about the Company are encouraged to contact the Companys Corporate Secretary. However, if shareholders feel their questions have not been addressed, they may communicate with the Companys Board of Directors by sending their communications to an individual director(s) or to the Companys Board of Directors, c/o Corporate Secretary, Oragenics, Inc., 4902 Eisenhower Blvd., Suite 125, Tampa, Florida 33634. All shareholder communications received by the Companys Corporate Secretary in this manner will be delivered to the individual director(s) or to the Companys Board of Directors.
The Chairman of the Board of Directors, Dr. Frederick Telling, is an independent director and has been designated by the Board of Directors to preside at the executive sessions of the independent directors. If interested parties wish to make a concern known to the independent directors, they may do so in a writing addressed to the Chairman of the Board, Oragenics, Inc., 4902 Eisenhower Blvd., Suite 125, Tampa, Florida 33634.
The Director compensation program for 2015 consisted of the following:
Non-employee directors
Cash Compensation. The Director compensation program for 2015 provided that all non-employee Directors would receive an annual base fee for service on the Board of $45,000. In addition, the Chairperson of the Board and of our Audit Committee, Compensation Committee and Nominating Committee would also receive annual fees of $40,000, $20,000, $15,000 and $10,000, respectively. All non-employee Directors serving on our Audit Committee, Compensation Committee and Nominating Committee (other than as the Chairperson) would receive an annual fee of $10,000, $7,500, and $5,000, respectively, in connection with such committee service. In addition, from time to time, the Board may establish special committees and in connection therewith determine the cash compensation that would be paid to the directors serving on a special committee at the time of the establishment of such committee. All fees for Board service are to be paid on or before the last business day of each quarter.
The Board is expecting to meet in-person for a minimum of six meetings each year. To the extent, the Board meets in excess of six in-person meetings an additional per meeting fee would also be considered to be paid to each director by the Board for such additional in-person meeting. To the extent the Board determines to establish a special committee or a special committee was previously established and continues to function, the Board would determine the cash compensation payable to each director serving on any such special committee.
Equity Compensation. Equity compensation is issued to Directors upon joining our Board. Non-employee Directors receive a stock option for the purchase of 5,000 shares of our common stock at an exercise price per share equal to the fair market value per share on date they became a Director, which will immediately vest and be exercisable for ten years, subject to early termination under the terms of the 2012 Equity Incentive Plan. As part of the Director compensation program, the Board may also make discretionary equity based awards from time to time under the Companys 2012 Equity Incentive Plan.
On March 16, 2015, the Board approved stock option awards in the amount of 80,000, to each of the Companys non-employee directors, under the Companys 2012 Equity Incentive Plan at an exercise price of $1.32 per share, the closing price on the March 16, 2015, the date of grant. In addition, each of the Companys non-employee directors were also awarded 40,000 restricted shares of Company common stock under the Companys 2012 Equity Incentive Plan of which 10,000 restricted shares vested at the end of each calendar quarter in 2015. The options are
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subject to time-based vesting in equal annual installments over a three-year period on the first, second and third anniversaries of the date of the grant, provided that the recipient remains a director of the Company through the vesting dates. The stock option and restricted stock awards are subject to the standard terms and conditions of the Companys form of stock option and restricted stock agreements which include earlier vesting upon a change in control of the Company.
Minimum dollar value stock ownership requirements. Each non-employee director receiving the above equity based awards will be subject to a minimum dollar value stock ownership holding requirement with respect to the awards received as well as all prior equity awards under the 2012 Equity Incentive Plan which requirement is intended to align the ability to sell shares with the performance of the Companys stock price. The non-employee Directors will each be subject to a minimum dollar value stock ownership requirement equal to six times the annual Board retainer ($270,000) below which dollar threshold they would be precluded from selling shares of Company stock acquired from the Company under its 2012 Equity Incentive Plan.
Reimbursement of Expenses. Non-employee Directors are also reimbursed for expenses incurred in connection with their attendance at Board or committee meetings and reasonable out-of-pocket business expenses associated with their Board service.
Long-term Incentive Compensation. The Company did not have a Long Term Incentive Compensation plan in place performance in 2015 for its Non-Employee Directors.
The following table sets forth the compensation of our non-employee Directors in 2015.
Director Compensation Table
Name |
Fees earned or paid in cash(1) |
Stock Awards(2) |
Option awards(3) |
All other compensation(4) |
Total | |||||||||||||||
Dr. Frederick W. Telling |
$ | 181,437 | $ | 52,800 | $ | 50,279 | $ | | $ | 284,516 | ||||||||||
Robert C. Koski |
$ | 50,000 | $ | 52,800 | $ | 50,279 | $ | | $ | 153,079 | ||||||||||
Charles L. Pope |
$ | 103,250 | $ | 52,800 | $ | 50,279 | $ | | $ | 206,329 | ||||||||||
Dr. Alan W. Dunton |
$ | 126,812 | $ | 52,800 | $ | 50,279 | $ | | $ | 229,891 | ||||||||||
Christine L. Koski |
$ | 52,500 | $ | 52,800 | $ | 50,279 | $ | | $ | 155,579 |
(1) | Amounts represent cash compensation earned by Directors during 2015 in connection with their Board service including service in connection with special committees established by the Board. The amount of fees earned by Directors Telling, Dunton, and Pope in connection with special committee service was $75,187, $56,812, and $27,000, respectively. |
(2) | As part of the Companys non-employee Director compensation program each non-employee was granted an award of 40,000 restricted shares of Company common stock under the Companys 2012 Equity Incentive Plan, of which 10,000 restricted shares vested at the end of each calendar quarter in 2015. The grant date fair value of these shares was $1.32 per share. |
(3) | As part of the Companys non-employee Director compensation program each non-employee was awarded 80,000 stock options, under the Companys 2012 Equity Incentive Plan at an exercise price of $1.32 per share, the closing price on the March 16, 2015, the date of grant. The options are subject to time-based vesting in equal annual installments over a three-year period on the first, second and third anniversaries of the date of the grant, provided that the recipient remains a director of the Company through the vesting dates. |
(4) | No other compensation was paid to the non-employee Directors except for reimbursement for travel expenses to Board meetings and other Board related meetings. |
(5) | Ms. Koski resigned from our Board in connection with the consummation of the sale of our consumer probiotic business to an entity she wholly owned. See Certain Relationships and Related Party Transactions Sale of Consumer Probiotic Business. |
Employee Directors
The Director compensation program provides that employee Directors receive no additional compensation in connection with their board service.
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Compensation Practices and Risk
The following Compensation Discussion and Analysis section describes generally our compensation policies and practices that are applicable for executive and management employees. We use common variable compensation designs across all of our business units and divisions, with a significant focus on corporate and business financial performance as generally described in this Proxy Statement.
Compensation Discussion and Analysis
Throughout this section of the Proxy Statement, the individuals who served as the Companys chief executive officer and chief financial officer, as well as the other individuals included in the Summary Compensation Table herein, are referred to as the named executive officers.
Overview of Compensation Program
The Compensation Committee of the Companys Board of Directors is responsible for establishing and evaluating the Companys policies governing the compensation of its executive officers, including its named executive officers. The Compensation Committee reviews and proposes recommendations to the Board of Directors regarding the compensation to be paid to the Chief Executive Officer. In addition, the Compensation Committee reviews and approves the compensation to be paid to all other executive officers. The Compensation Committee ensures that the total compensation paid to the Companys executive officers is fair, reasonable and competitive.
Compensation Objective
The Companys executive compensation programs are designed to achieve the following objectives:
| Attract and retain talented and experienced executive officers; |
| Motivate and reward executive officers whose knowledge, skills, performance and business relationships are critical to the Companys success; |
| Align the interests of the Companys executive officers and shareholders by motivating executive officers to ultimately increase shareholder value; |
| Compensate the Companys executive officers to manage the Companys business to meet its short term and long-range goals; |
| Ensure fairness among the executive officers by recognizing the contributions each executive officer makes to the Companys success; and |
| Provide a competitive compensation package which includes some pay for performance factors. |
Role of Others in Compensation Decisions
The Compensation Committee makes all of the decisions with respect to the compensation received by the Companys executive officers other than the Companys chief executive officer which the Committee reviews and proposes recommendations to the Board of Directors. The Compensation Committee meets outside the presence of all of the Companys executive officers to consider appropriate compensation recommendations for the Companys chief executive officer. For all other executive officers, the Compensation Committee meets outside the presence of all executive officers except for the Companys chief executive officer. The Companys chief executive officer periodically reviews each of the other executive officers performance with the Compensation Committee and makes recommendations to the Compensation Committee with respect to any appropriate changes in base salary, bonus and
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grants of long-term equity incentive awards for the executive officers, excluding himself. Given the vacancy of the office of chief executive officer at the Company during 2015, the Companys interim principal executive office and chief financial officer, together with the Chairman of the Board of Directors would have made such recommendation to the Compensation Committee. Based in part on these recommendations and other considerations, the Compensation Committee reviews and approves such compensation arrangements of the Companys executive officers other than the Companys chief executive officer. The Compensation Committee also annually analyzes the chief executive officers performance and determines his salary, annual cash bonus and grants of long-term equity incentive awards and makes recommendations to the Board of Directors. The Compensation Committee reviews and makes recommendation to the Board of Directors regarding all new equity related incentive plans for senior management.
Consideration of Most Recent Shareholder Advisory Vote on Executive Compensation
The Compensation Committee also considers the results of the Companys most recent shareholder advisory vote on executive compensation. At the 2015 Annual Meeting, the Companys shareholders voted overwhelmingly in favor of the compensation of our named executive officers: approximately 71.8% of the shares outstanding voted in favor of the program. In light of these results, the Compensation Committee decided to continue to include in the 2016 executive compensation program all of the features previously approved by the Companys shareholders. The Board of Directors previously determined that future shareholder advisory votes on executive compensation will be submitted to shareholders of the Company annually until the next required advisory vote on the frequency of conducting advisory votes on executive compensation.
Clawback Policy
In order to further align managements interests with those of shareholders and to support the Companys governance practices, the Board of Directors adopted a recoupment policy applicable to annual bonuses and other short-term and long-term incentive compensation based on financial targets (Incentive Compensation) received by current and former executive officers of the Company and such other senior executives/employees of the Company who may from time to time be deemed subject to the policy by the Board of Directors (Covered Executive). The policy provides that if, as a result of a restatement of the Companys financial statements due to the Companys material noncompliance with any financial reporting requirement under the securities laws, a Covered Executive received more Incentive Compensation than the Covered Executive would have received absent the incorrect financial statements, the Company shall recover said excess Incentive Compensation (defined as the excess of (i) the actual amount of Incentive Compensation paid to the Covered Executive over (ii) the Incentive Compensation that would have been paid based on the restated financial results during the three-year period preceding the date on which the Company is required to prepare such restatement). The policy also provides that if the Board of Directors makes a determination in its sole discretion that a Covered Executive engaged in Misconduct (as defined below), the Board of Directors may require reimbursement or forfeiture of all or part of the Incentive Compensation received by the Covered Executive. The Board of Directors may use its judgment in determining the amount to be recovered. Misconduct is defined as (i) conviction of a felony, (ii) material breach of any agreement with the Company, (iii) material breach of any Company policy or code, (iv) act of theft, embezzlement or fraud, (v) misrepresentation or misstatement of financial or performance results, and (vi) any other act or event that the Board of Directors has determined that recoupment is appropriate.
2015 Executive Compensation Components
For the fiscal year ended December 31, 2015, the principal components of compensation for the Companys executive officers were:
| Annual base salary; |
| Bonus; |
| Long-term equity based incentive compensation; |
| Other benefits. |
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Annual Base Salary
Base salary is designed to attract and retain experienced executive officers who can drive the achievement of the Companys goals. While the initial base salary for the Companys executive officers was determined by an assessment based upon the responsibilities of the position, the expected contribution of the position to our business, the experience and skill required for the position, and competition in the marketplace for the talent; the factors used in determining increases in base salary include individual performance, changes in role and/or responsibility and changes in the competitive market environment. The Compensation Committee periodically reviews the base salary for each executive officer.
Bonus
The Company established a formal performance based bonus for its named executive officers. See Bonus Plan 2015 below for a description of the bonus program for 2015. Discretionary bonuses for executive officers and employees may also be considered by the Compensation Committee and recommended at the discretion of the Compensation Committee for approval by our Board of Directors.
Long-Term Equity Incentive Compensation
The Company awards long-term equity incentive awards to executive officers, including the named executive officers, as part of its total compensation package. These awards are consistent with the Companys pay for performance principles and align the interests of the executive officers to the interests of the Companys shareholders. The Compensation Committee reviews and approves the amount of each award to be granted to each named executive officer. Long-term equity incentive awards are made pursuant to the 2012 Equity Incentive Plan.
The Companys long-term equity incentives are currently in the form of options to acquire its common stock. Stock option awards provide the Companys executive officers with the right to purchase shares of its common stock at a fixed exercise price for a period of up to ten years under the 2012 Equity Incentive Plan. Stock options are granted under the 2012 Equity Incentive Plan at a price not less than the prevailing market value at the time of grant and will have realizable value only if the Companys stock price increases. Stock options are earned on the basis of continued service to the Company and generally vest over a number of years or based upon other specific performance based criteria.
The Companys long-term equity incentive also can be in the form of restricted share awards of the Companys common stock under the 2012 Equity Incentive Plan. Restricted stock awards provide the Companys executive officers with the shares of its common stock subject to certain restrictions and/or vesting requirements. Restricted stock shares will be earned on the basis of continued service to the Company and will vest as set forth in the separate award agreements.
The Compensation Committee determines the amount and features of the stock options and/or restricted stock, if any, to be awarded to executive officers. The Compensation Committee evaluates a number of criteria, including the past service of each such executive officer to the Company, the present and potential contributions of such executive officer to the Companys success and such other factors as the Compensation Committee shall deem relevant in connection with accomplishing the purposes of the 2012 Equity Incentive Plan, including the executive officers current stock holdings, years of service, position with the Company and other factors. The Compensation Committee may apply a formula assigning specific weights to any of these factors when making its determination.
Other Benefits
Retirement Benefits. The Company maintains a Simple Individual Retirement Arrangement plan in which all full-time employees, including the Companys named executive officers, are eligible to participate. The Company provides this plan to help its employees save some amount of their cash compensation for retirement in a tax efficient manner. The Company does not provide an option for its employees to invest in the Companys stock under the 401k plan. The Company matches 100% of the employees contribution up to a maximum of 3% of the employees compensation.
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Health and Welfare Benefits. All full-time employees, including our named executive officers, may participate in the Companys health and welfare benefit programs, including medical, dental and vision care coverage as may be provided and applicable to all employees.
Perquisites. Because the Company provides limited perquisites to certain executive officers, the Company does not believe these perquisites and other personal benefits constitute a material component of the executive officers compensation packages.
Employment Agreements
During 2015, the Company had employment agreements in effect with Mr. Michael Sullivan, Dr. Martin Handfield and Mr. Al Fosmoe. The Company entered into employment agreements with these officers to ensure that they would perform their respective roles with the Company for an extended period of time. In addition, the Company also considered the critical nature of each of their positions and the Companys need to retain them when the Company committed to these agreements. See Employment Contracts and Change in Control Arrangements.
Bonus Plan 2015
On February 20, 2015, the Board approved the 2015 cash bonus program for Mr. Sullivan, Dr. Handfield and Mr. Fosmoe recommended by the Compensation Committee. Under such cash bonus program Mr. Sullivan, Dr. Handfield and Mr. Fosmoe are eligible for cash bonuses of up to $76,650, $48,900, and $58,075 respectively, equaling up to 35%, 25% and 25% of their respective base salaries (each a Bonus Target).
The bonuses payable to Mr. Sullivan were to be based upon the achievement of the following objectives:
(i) Up to 30% of the Bonus Target for achievement of a successful pre-Individual New Drug (IND) meeting with the FDA, within designated timing parameters in 2015;
(ii) Up to 20% of the Bonus Target for meeting operational objectives tied to consumer probiotic business, including sales and licensing initiatives;
(iii) Up to 30% of the Bonus Target for financial performance objectives related to the Companys raising capital and finalizing an approved budget and incentive plan for 2016;
(iv) Up to 10% of the Bonus Target for research and development objectives related to lantibiotics; and
(v) Up to 10% of the Bonus Target designated to be discretionary as determined by the Board.
The bonuses payable to Dr. Handfield and Mr. Fosmoe were to be based upon the achievement of the following objectives:
(i) Up to 30% of the Bonus Target for achievement of a successful pre-IND meeting with the FDA, which shall be measured by no change in the timeline for filing the IND in 2015;
(ii) Up to 10% of the Bonus Target for meeting operational objectives tied to consumer probiotic business, including sales and licensing initiatives;
(iii) Up to 10% of the Bonus Target for financial performance objectives related to the Companys raising capital and finalizing an approved budget and incentive plan for 2016;
(iv) Up to 40% of the Bonus Target for research and development objectives related to lantibiotics; and
(v) Up to 10% of the Bonus Target designated to be discretionary as determined by the Board.
Each of Mr. Sullivan, Dr. Handfield and Mr. Fosmoe were also eligible for an additional 10% of Bonus Target should the Pre-IND meeting occur earlier than currently anticipated.
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The Company believes that the total compensation paid to its named executive officers for the fiscal year ended December 31, 2015 achieved the overall objectives of its executive compensation program. In accordance with its overall objectives, executive compensation for 2015 was competitive with other similarly-sized companies. The Compensation Committee took the following key compensation actions in 2015:
| Determination of Annual Base Salaries |
The Compensation Committee did not authorize or approve any changes in the annual salary for any of the Companys named executive officers during 2015.
| Determination of Cash Bonus: |
The Compensation Committee established a performance based 2015 bonus plan for the named executive officers pursuant to the terms of their employment agreements. The Committee subsequently approved bonus awards to the named executive officers based on such bonus plan in the amounts set forth in the Summary Compensation Table below:
The following table sets forth the aggregate compensation in 2015 and 2014 for services in all capacities paid or accrued by the Company to Mr. Michael Sullivan, our Chief Financial Officer who also served as our interim principal executive officer since October of 2014, and our two next most highly compensated officers who earned more than $100,000 in total salary and bonus during the fiscal year ended December 31, 2015 (the Named Executive Officers).
Name and principal position |
Year | Salary | Bonus | Option Awards(4) |
All Other Compensation(5) |
Total | ||||||||||||||||||
Michael O. Sullivan(1) |
2015 | $ | 219,000 | $ | 41,391 | $ | 152,199 | $ | 6,570 | $ | 419,160 | |||||||||||||
Chief Financial Officer Interim Principal Executive Officer |
2014 | $ | 200,667 | $ | 20,000 | $ | 16,103 | $ | 6,020 | $ | 242,790 | |||||||||||||
Dr. Martin Handfield(2) |
2015 | $ | 195,600 | $ | 20,783 | $ | 228,288 | $ | 5,508 | $ | 450,179 | |||||||||||||
Senior Vice President of Discovery Research |
2014 | $ | 180,600 | $ | 13,500 | $ | 8,084 | $ | 5,418 | $ | 207,602 | |||||||||||||
Former Employee |
||||||||||||||||||||||||
Albert Fosmoe (3) |
2015 | $ | 232,300 | $ | 24,682 | $ | 119,192 | | $ | 376,174 | ||||||||||||||
Senior Vice President of Operations/Product Development |
2014 | $ | 172,883 | $ | 16,000 | $ | 95,382 | $ | 75,400 | $ | 359,665 |
(1) | Mr. Sullivan became our Chief Financial Officer on February 6, 2012 and upon the resignation of our former Chief Executive Officer on October 30, 2014, Mr. Sullivan became our Interim Principal Executive Officer. Pursuant to the terms of Mr. Sullivans employment agreement, the Board of Directors adopted a bonus plan for the achievement of certain financial and other performance objectives. See Employment Agreements Mr. Sullivan, and Dr. Handfield and Bonus Plan 2015 for discussion of the bonus plan. Under the bonus plan Mr. Sullivan was awarded and paid a bonus of $41,391 for 2015. |
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(2) | Under the bonus plan Dr. Handfield was awarded and paid a bonus of $20,783 for 2015. |
(3) | Mr. Fosmoe resigned from the Company effective in March of 2016 to pursue other opportunities. Under the bonus plan Mr. Fosmoe was awarded and paid a bonus of $24,682 for 2015. |
(4) | The amounts in this column represent the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification, Topic 718, CompensationStock Compensation (ASC 718). On March 16, 2015, Mr. Sullivan, Dr. Handfield and Mr. Fosmoe were awarded stock options of 200,000, 150,000 and 150,000 shares respectively under the 2012 Equity Plan. The exercise price for each of these options was $1.32 per share and was based on the closing price on the grant date. These option are subject to vesting in equal annual installments over a three-year period on the first, second and third anniversaries of the date of the grant, provided that the recipient remains employed with the Company through the vesting. Following Mr. Fosmoes resignation the options awarded to Mr. Fosmoe were not exercised and were forfeited and returned to the pool of available options eligible to be awarded under the 2012 Equity Incentive Plan. Under SEC rules relating to executive compensation disclosure, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Fair values relating to share grants have been determined under ASC 718 and were calculated using the common stock closing price on the date of grant and multiplying that price by the number of shares subject to the share grant. The equity-based compensation expense relating to the stock grants is recognized over the requisite service period of the grant. For option awards, we utilize the Black-Scholes option pricing model to determine the fair value on the date of the grant multiplied by the number of options subject to the option grants in accordance with ASC 718. The stock-based compensation expense relating to the stock option grants is recognized over the requisite service period of the grant and the amounts included in the Option Awards column do not reflect compensation actually received by the named executive officers. For information on the assumptions used to calculate the fair value of stock option grants, refer to Footnote 9 - Stock Compensation Plan in our financial statements for the year ended December 31, 2015. |
(5) | Amounts in this column for Messrs. Sullivan and Handfield represent the Companys matching contributions to our Simple IRA retirement plan. The retirement plan requires us to match employee contributions up to the first 3% of compensation earned. |
Current Executive Officers and Key Employees
We are led by a team of executives that are chosen by the Board of Directors. Currently, we have three executive officers, set forth below is biographical information for executive officers and certain identified key employees.
Executive Officers
Alan F. Joslyn, Ph.D. The biography of Dr. Joslyn is included above under Proposal I Information About Nominees.
Michael Sullivan. Mr. Sullivan, age 60, has served as our Interim Principal Executive Officer from October 30, 2014 until June 5, 2016 and served as our Chief Financial Officer, Secretary and Treasurer since February 6, 2012. Mr. Sullivan has held senior level financial positions for several publicly and privately held businesses including Utek Corporation, eANGLER, and HSN Direct International Limited. Most recently, he was the Group Financial Officer for the Investigative Services and Litigation Consulting Services segment of First Advantage Corporation a firm specializing in talent acquisition solutions where he streamlined the employee recruitment process. Mr. Sullivan is a Florida Certified Public Accountant. He graduated from the Florida State University with a Bachelor of Science in Accounting and a Master of Business Administration.
Key Employees
Dr. Martin Handfield. Dr. Handfield, age 45, is, the Companys Senior Vice President of Discovery Research and previously has served as our Director of Research and Development. Dr. Handfield has served the Company since January 2009. Prior to joining our Company, Dr. Handfield held a position as Tenured Associate Professor at the Center for Molecular Microbiology and the Department of Oral Biology at the University of Florida
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College of Dentistry, where he co-invented IVIAT and co-founded ivi Gene Corp. and Epicure Corp. to commercialize this and related technologies. Dr. Handfield holds a B.S. degree in Biochemistry, and a MS degree and PhD in Microbiology and Immunology from the Université Laval College of Medicine in Canada, and did postdoctoral training at the University of Florida.
Our executive officers serve at the pleasure of our Board of Directors until their successors are elected or qualified and subject, in certain cases to employment agreements we have entered into with our officers. Our new chief Executive Officer and President Dr. Alan Joslyn and Mr. Sullivan, our Chief Financial Officer and Dr. Handfield, our Senior Vice President of Discovery Research, each have employment agreements with us. See Executive CompensationEmployment Contracts and Change in Control Arrangements.
The Compensation Committee believes that our future success depends, in large part, upon our ability to maintain a competitive position in attracting, retaining and motivating key personnel. The Compensation Committee utilizes the 2012 Equity Incentive Plan to provide incentives to employees. We do not have any separate long-term incentive plans that provide compensation intended to serve as incentives for performance other than awards contemplated under, or pursuant to, our 2012 Equity Incentive Plan. During the year ended December 31, 2015, we made no stock awards to our named executive officers.
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The following table provides information concerning unexercised options outstanding as of December 31, 2015:
Name |
Number of securities underlying unexercised options (#) exercisable |
Number of securities underlying unexercised options (#) unexercisable |
Option exercise price ($) |
Option expiration date |
||||||||||||
Michael O. Sullivan Chief Financial Officer, Interim Principal Executive Officer |
|
20,000 25,000 45,000 |
|
|
20,000 |
(1) |
|
0.88 0.86 1.20 |
|
|
12/08/2024 10/30/2024 02/10/2022 |
| ||||
200,000 | (2) | 1.32 | 03/16/2025 | |||||||||||||
Dr. Martin Handfield Senior Vice President of Discovery Research |
|
40.000 15,000 12,500 4,275 2,500 16,800 150,000 |
(3)
(3) |
|
0.88 10.40 5.40 5.40 5.40 1.50 1.32 |
|
|
12/08/2024 09/18/2018 12/01/2019 12/01/2019 12/01/2019 09/27/2021 03/16/2025 |
| |||||||
Former Employee |
||||||||||||||||
Albert Fosmoe Senior Vice President of Operations/Product |
|
20,000 33,333 |
(4) |
|
20,000 |
(1) |
|
0.88 2.84 |
|
|
12/08/2024 04/01/2024 |
| ||||
Development (5) |
150,000 | (2) | 1.32 | 03/16/2025 |
(1) | Represents awards that are time vested with each award vesting evenly on an annual basis over two years, subject to earlier vesting upon a change in control as defined in the award agreements. |
(2) | Represents awards that are time vested with each award vesting evenly on an annual basis over three years, subject to earlier vesting upon a change in control as defined in the award agreements. |
(3) | Represents awards that vested pursuant to the Change of Control provisions of Dr. Handfields Employment Agreement. |
(4) | Represents awards in which 33,333 shares vested on April 1, 2014, subject to earlier vesting upon a change in control as defined in the award agreements. An additional 66,667 shares awarded in this grant were forfeited due to performance milestones that did not occur. |
(5) | Following Mr. Fosmoes resignation effective in March 2016, the options indicated were not exercised and were cancelled and the shares represented by the options were again available under our 2012 Equity Incentive Plan for future awards. |
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Employment Contracts and Change in Control Arrangements
Employment AgreementsDr. Joslyn
We have entered into an Executive Employment Agreement dated as of June 6, 2016, with Dr. Alan Joslyn pursuant to which Dr. Joslyn serves as our President and Chief Executive. The employment term is a one-year term with an automatic 12 month extension thereafter unless either party provides the other 30 days prior written notice of its intention not to renew the employment agreement.
Dr. Joslyn received a one-time signing bonus of $25,000 upon execution of the employment agreement and is currently entitled to receive an annual base salary of $350,000 which is subject to annual review and adjustment by the Companys Board of Directors. He is eligible to receive annual performance bonus from the Company of up to fifty percent (50%) of his annual base salary based upon appropriate Company-based and individual-based targets specified by the Compensation Committee of the Board, in its discretion, as approved by the full Board of Directors. Dr. Joslyn is also entitled to participate in our employee benefit plans on terms comparable to other full time employees as well as four weeks paid vacation annually.
The employment agreement also provided for Dr. Joslyn to be granted equity awards under the Companys 2012 Amended and Restated Equity Incentive Plan consisting of (i) stock options to purchase 300,000 shares of the Companys common stock at an exercise price equal to $0.55 per share which stock options shall vest is six installments of 50,000 shares each every six months after June 6, 2016, provided that he has continued his employment with the Company through such dates, and (ii) 30,000 shares of restricted stock of the Company, vesting in two installments on the six month and twelve month anniversaries of June 6, 2016. All of the performance bonuses, as well as any equity awards which are granted to Dr. Joslyn or which become vested as a result of the satisfaction of financial performance goals of the Company, are subject to the Companys policy on recoupment or clawback of executive incentive compensation.
Dr. Joslyn is subject to a covenant not to disclose our confidential information during his employment term and an assignment of intellectual property rights. Also, during his employment term and for a period of 12 months thereafter, Dr. Joslyn covenants not to compete with us and not to solicit any of our customers, vendors or employees. If Dr. Joslyn breaches any of these covenants, the Company will be entitled to injunctive relief.
If Dr. Joslyns employment is terminated by us for Cause (as defined in his employment agreement) or by Dr. Joslyn during the term of the agreement, he will be entitled to receive his (i) his then-current annual base salary through the date of termination; (ii) any reimbursable expenses for which he has not yet been reimbursed as of the date of termination; and (iii) any other rights and vested benefits (if any) provided under employee benefit plans and programs of the Company, determined in accordance with the applicable terms and provisions of such plans and programs (Accrued Compensation).
If Dr. Joslyns employment is terminated by us without Cause, subject to his execution of a release of claims against us, and in addition to the payment of the Accrued Compensation, the Company is obligated to make payments to Dr. Joslyn within 60 days after his termination date equal to six months of his annual base salary, as in effect at the termination date, plus any earned but unpaid bonus (the Additional Severance Payments).
The employment agreement also contains change of control provisions providing that if Dr. Joslyns employment with the Company is terminated by the Company without Cause during the period of ninety (90) days following a Change in Control (as that term is defined below) of the Company, in lieu of the Additional Severance Payments described above, Dr. Joslyn will be entitled to receive a severance payment equal to the sum of (i) six (6) months of his annual base salary, at the higher of the base salary rate in effect on the date of termination or the base salary rate in effect immediately before the effective date of the Change of Control, and (ii) his Performance Bonus for the year which includes the effective date of the Change in Control, payable at the target level of performance, which will be paid in a single lump sum after his execution and non-revocation of the Release. In addition, he will also receive in the same payment the amount of any performance bonus that, as of the date of termination, has been earned by Dr. Joslyn but has not yet been paid by the Company. If Dr. Joslyn holds any stock options or other stock awards granted under the Companys 2012 Equity Incentive Plan which are not fully vested at the time his employment with the Company is terminated by the Company without Cause during the period of
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ninety (90) days following a Change in Control, such equity awards shall become fully vested as of the termination date. For purposes of the employment agreement, the term Change in Control means a transaction or series of transactions which constitutes a sale of control of the Company, a change in effective control of the Company, or a sale of all or substantially all of the assets of the Company, or a transaction which qualifies as a change in ownership or change in effective control of the Company or a change in ownership of substantially all of the assets of the Company under the standards set forth in Treasury Regulation section 1.409A-3(i)(5).
Dr. Joslyns employment agreement also provides that each of the payments and benefits under the agreement are subject to compliance with Section 409A of the Code and it includes time of payment language intended to comply with Section 409A requirements.
Employment AgreementsMr. Sullivan and Dr. Handfield
We have entered into employment agreements with our Chief Financial Officer, Mr. Michael Sullivan and Dr. Martin Handfield, our Senior Vice-President of Research and Development (the Employment Agreements). The annual base salaries provided in the Employment Agreements are payable in installments consistent with our normal payroll practices. Mr. Sullivan and Dr. Handfield are also eligible under the Employment Agreements to receive annual bonuses during the term at the discretion of the Compensation Committee and the Board of Directors with Mr. Sullivans employment agreement providing for such a discretionary bonus of up to 35% of his base salary and with Dr. Handfields employment agreement providing for such a discretionary bonus of up to 25% of his base salary.
The Employment Agreements are terminable at any time by either party and if the executive officer is involuntarily terminated by us he shall receive his base salary and vacation pay each accrued through the date of termination, and any nonforfeitable benefits earned and payable to him under the terms of the employee handbook (which applies to all employees) and benefits available under any applicable incentive plan in which the executive participates. In addition, if the executive officers separation from employment is not voluntary and without cause, we would be obligated to pay the executive officer six months of his annual base salary as severance and the executive shall be entitled to out placement services. If the executive officer is terminated for cause, he shall be entitled to receive his base salary and accrued vacation due through the date of termination and any nonforfeitable benefits already earned and payable to the executive under the terms of the employee handbook or other applicable incentive plans maintained by us. Cause is defined in the Employment Agreements as any action that is illegal, immoral, or improper that reflects on the Company, the employee, or the ability of either to function optimally. If the executive officer voluntarily resigns, he shall be entitled to this base salary and accrued vacation due through the date of termination (including any mutually agreed upon notice period) and any nonforfeitable benefits already earned and payable to the executive officer employee under the terms of the employee handbook or other incentive plans maintained by us.
If the executive officer dies during the term of employment with us, his estate shall be paid his salary as it would have accrued over a period of thirty days after the executive officers death. We shall also extend the executive officers right to exercise vested stock options for six months. In the event the executive officer becomes disabled (as defined in the then applicable short and long-term disability insurance policies) we shall pay to the executive officer his salary as it would have accrued over a period of 30 days after the executive became so disabled and we shall extend the executive officers right to exercise vested stock options for six months.
The Employment Agreements also each include non-disclosure and Company ownership of invention provisions, as well as a provision providing for the Company to defend and indemnify the executive if the executive is named as a defendant in any lawsuit regarding any action taken within the scope of employment.
In the event of a change in control, any stock options or other awards granted (other than performance awards) under our Stock Incentive Plan shall become immediately vested in full and, in the case of stock options, exercisable in full. If the change in control results in an involuntary separation from employment of the executive officer within 180 days following a change in control, the executive officer would be entitled to (i) receive six months of salary and the extension of his benefits (excluding vacation time and paid time off) and (ii) exercise vested options for six months from the date of separation. Under the Employment Agreements, involuntary separation of employment means (i) termination without cause, (ii) any reduction in responsibilities of office altering the status of the executive officer as an employee, or (iii) the duplication of the executive officers position by an equivalent
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executive in an acquiring entity; and change in control means the sale of the entire company, or substantially all of its assets, or the sale of the business unit employing an individual which results in the termination of employment or subsequent transfer of the employment relationship to another legal entity, or entity, or single party acquiring more shares than are owned by the Koski Family Limited Partnership, including its members and their immediate families, including spouses and their children.
On February 20, 2015, we entered into an amended and restated employment agreement, effective January 1, 2015, with Mr. Sullivan and an initial employment agreement with Mr. Fosmoe, our Senior Vice President of Operations/Product Development. The terms of Mr. Sullivans amended and restated employment agreement were substantially similar to those of the previous agreement disclosed above except for:
1. | The percentage of base salary eligible for bonus awards was set as previously disclosed for Mr. Sullivan at up to 35% of base salary. |
2. | A provision was added in Mr. Sullivans agreement to provide for the clawback of bonuses pursuant to the Boards adoption of a clawback policy. In the A&R Employment Agreement Mr. Sullivan acknowledges and agrees that any incentive-based compensation paid to him will be subject to clawback or repayment to the extent such clawback or repayment is required by the terms of the Companys recoupment, clawback or similar policy as may be in effect from time to time, or as required by law. |
3. | A provision was added whereby Mr. Sullivan would be required to release the Company as a condition to receiving any severance benefit provided by his A&R Employment Agreement with the form of release added and attached as an exhibit to his A&R Employment Agreement. |
4. | The definition of a change of control in the prior agreement was revised to align it with the definition of a change in control set forth in the Companys 2012 Equity Incentive Plan as follows: |
(i) | Any person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) becomes the beneficial owner (as defined in Rule 13d 3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Companys then outstanding voting securities; |
(ii) | The consummation of the sale or disposition by the Company of all or substantially all of the Companys assets; |
(iii) | A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. Incumbent Directors means directors who either (A) are Directors as of the effective date of this Agreement, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or |
(iv) | The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation. |
We entered into an employment agreement with Mr. Fosmoe, our Senior Vice President of Operations/Product Development effective January 1, 2015. Mr. Fosmoes employment agreement was similar in form to Mr. Sullivans amended and restated agreement in all respects, except for Mr. Fosmoes designated annual base salary of $232,300 and the percentage of base salary eligible for bonus awards, which for Mr. Fosmoe was up to 25% of his base salary. Mr. Fosmoe resigned from the Company effective in March 2016.
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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of July 7, 2016, certain information concerning the beneficial ownership of each class of our voting securities by: (i) each person known by us to own beneficially 5% or more of the outstanding shares of our common stock, (ii) each of our Directors and named executive officers, and (iii) all executive officers and Directors as a group.
Name and address(1) |
Number of shares beneficially owned |
Percentage of ownership(2) |
||||||
5% shareholders |
||||||||
Koski Family Limited Partnership(3) |
16,950,407 | 34.5 | % | |||||
Randall J. Kirk (4) |
15,481,644 | 31.5 | % | |||||
Fidelity(5) |
2,795,566 | 5.7 | % | |||||
Directors and officers |
||||||||
Alan Joslyn (6) |
30,000 | * | ||||||
Robert C. Koski(3)(7) |
14,430,218 | 29.4 | % | |||||
Charles L. Pope(8) |
282,730 | * | ||||||
Dr. Alan Dunton(8) |
214,255 | * | ||||||
Dr. Frederick W. Telling(8) |
1,397,021 | 2.8 | ||||||
Michael Sullivan(9) |
299,210 | * | ||||||
(All Directors and officers as a group 7 persons) (10) |
16,653,434 | 33.6 | % |
*Beneficial ownership percentage is less than 1%.
(1) | Except as indicated, the address of the person named in the table is c/o Oragenics, Inc., 4902 Eisenhower Blvd., Suite 125, Tampa, Florida 33634. |
(2) | In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of the Common Stock subject to options or warrants held by that person that are currently exercisable or will become exercisable within 60 days after July 7, 2016, are deemed outstanding, while the shares are not deemed outstanding for purposes of computing percentage ownership of any other person. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of the Common Stock held by them. Applicable percentage ownership is based on 49,114,219 shares of the Common Stock outstanding as of July 7, 2016. The inclusion in the table above of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares. |
(3) | Based upon information provided by the Koski Family Limited Partnership, or KFLP, in the amendment to its Schedule 13D filing with the SEC on January 23, 2015 and Form 4 filing of July 1, 2016, includes (i) 12,864,822 shares held directly by the KFLP, and (ii) 1,572,523 shares held by KFLP partner Christine Koski, (iii) 1,007,878 shares held by KFLP partner Robert Koski, (iv) 28,000 shares held by KFLP partner Koski Management, Inc. (solely owned by Beverly Koski), (v) 919,666 shares held by KFLP partner, Thomas Koski, and (vi) 530,851 shares held in trusts which Robert Koski serves as sole trustee (See Note 7 below). Christine L. Koski, Robert C. Koski, Thomas L. Koski and Beverly Koski (as sole owner of Koski Management, Inc.) share voting and investment powers as general partners of the KFLP. The address for the KFLP is 3525 Turtle Creek Boulevard, Unit 19-B, Dallas, Texas 75219. |
(4) | Based upon information provided by Schedule 13D filings with the SEC, dated June 12, 2012, August 3, 2012, October 2, 2013, November 2, 2013 and December 26, 2013 and Form 4 dated July 5, 2016 the number of shares includes (i) 14,481,089 shares owned directly by Intrexon Corporation (Intrexon) that is controlled by Mr. Randal J. Kirk, and (ii) 1,000,555 shares owned directly by NRM VII Holdings, I, LLC, a Virginia Limited Liability Company that is also controlled by Mr. Kirk. Mr. Kirk is the Chairman and Chief Executive Officer of |
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Intrexon and over which Mr. Kirk, directly and through certain affiliates, has voting and dispositive power of a majority of the outstanding capital stock. Mr. Kirk may therefore be deemed to have voting and dispositive power over the 1,000,555 shares of common stock owned by NRM Holdings and the 14,481,089 shares of common stock owned by Intrexon. Mr. Kirk disclaims beneficial ownership of such shares, except to the extent of any pecuniary interest therein. Mr. Kirks principal business office is The Governor Tyler, 1881 Grove Avenue, Radford, Virginia 24141. Intrexons address as reflected in Schedule 13D is 20358 Seneca Meadows Parkway, Germantown, Maryland 20876.
(5) | Based upon information contained in Schedule 13G/A filed with the SEC on February 13, 2015, Fidelity Management & Research Company (Fidelity), 82 Devonshire Street, Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 2,795,566 shares of the Company as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940. Edward C. Johnson 3d and FMR LLC, through its control of Fidelity, and the funds each has sole power to dispose of the 2,795,566 shares owned by the Funds. Members of the family of Edward C. Johnson 3d, Chairman of FMR LLC, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Edward C. Johnson 3d, Chairman of FMR LLC, has the sole power to vote or direct the voting of the shares owned directly by the Fidelity funds, which power resides with the Funds Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the Funds Boards of Trustees. |
(6) | Includes 30,000 shares of restricted stock subject to vesting. Excludes 300,000 shares subject to options that have not yet vested. |
(7) | In addition to the shares reflected as directly owned by the KFLP, described in Note 3, the share amounts also includes: (i) 1,007,878 shares owned directly by Mr. Koski , (ii) 530,851 shares owned directly by trusts for which Mr. Koski serves as sole trustee as follows: the Robert Clayton Koski Trust for the benefit of Anthony James Hunter (107,600 shares); The Robert Clayton Koski Trust for the benefit of Hunter Buchanan Koski (107,600 shares); The Robert Clayton Koski Trust for the benefit of Clayton Ward Bennett (100,000 shares); and The Robert Clayton Koski Trust for the benefit of Robert Edward Koski (107,600 shares) and the Robert Clayton Koski Trust for the benefit of Elyse Margaux Koski (108,051 shares), (iii) 20,000 restricted shares subject to forfeiture during 2016, and (iv) 26,667 option shares able to be acquired upon the exercise of currently exercisable stock options granted pursuant to our Director compensation program. Excludes 133,333 shares subject to options that have not yet vested. |
(8) | Includes: (i) 81,667 option shares able to be acquired upon the exercise of currently exercisable stock options granted pursuant to our Director compensation program and (ii) 40,000 restricted shares awarded as part of the Companys non-employee director compensation program that are subject to forfeiture during 2016. Excludes 133,333 shares subject to options that have not yet vested. |
(9) | Includes 156,667 shares able to be acquired pursuant to currently exercisable stock options and excludes 153,333 shares subject to options that have not yet vested. |
(10) | Excludes 1,572,523 shares owned directly by Christine Koski, 28,000 shares owned directly by Koski Management, Inc. (solely owned by Beverly Koski), and 919,666 shares owned directly by Thomas Koski, which are not directors or employees of the Company, but are general partners of the KFLP. If such shares were included the beneficial ownership percentage of the group would be 38.6%. |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Audit Committee of the Board of Directors (or, to the extent applicable, our disinterested directors) is responsible for reviewing all transactions between the Company and any officer or Director of the Company or any entity in which an officer of Director has a material interest. Any such transactions must be on terms no less favorable than those that could be obtained on an arms-length basis from independent third parties.
Transactions with Intrexon Corporation (Intrexon)
Intrexon is a significant shareholder of our Company. We have entered into (i) collaboration agreements with Intrexon and (ii) financing transactions with Intrexon, each as described below.
Lantibiotic ECC with Intrexon
On June 5, 2012, the Company entered into an ECC with Intrexon that governs a channel partnering arrangement in which the Company will use Intrexons advanced transgene and cell engineering platforms for the development and production of lantibiotics, a class of peptide antibiotics that are naturally produced in Gram-positive bacteria and contain the characteristic polycyclic thioether amino acids lanthionine and methyllanthonine (collectively, the Lantibiotics Program). The ECC establishes committees comprised of Company and Intrexon representatives that will govern activities related to the Lantibiotics Program in the areas of project establishment, chemistry, manufacturing and controls matters, clinical and regulatory matters, commercialization efforts and intellectual property matters.
The ECC grants the Company an exclusive worldwide license to use patents and other intellectual property of Intrexon in connection with the research, development, use, importing, exporting, manufacture, sale, and offer for sale of drug products involving the direct administration to humans or companion animals of a lantibiotic for the prevention or treatment of infectious disease (Oragenics Products). Such license is exclusive with respect to any clinical development, selling, offering for sale or other commercialization of Oragenics Products, and otherwise is non-exclusive. Subject to limited exceptions, the Company may not sublicense the rights described without Intrexons written consent.
Under the ECC, and subject to certain exceptions, the Company is responsible for, among other things, funding the further anticipated development of lantibiotics toward the goal of commercialization, conducting preclinical and clinical development of candidate lantibiotics, as well as for other aspects of manufacturing and the commercialization of the product(s). Among other things, Intrexon is responsible for technology discovery efforts, cell-engineering development, certain aspects of the manufacturing process, and costs of filing, prosecution and maintenance of Intrexons patents.
Subject to certain expense allocations and other offsets provided in the ECC, the Company will pay Intrexon on a quarterly basis 25% of gross quarterly profits derived in that quarter from the sale of products developed from the ECC, calculated on an Oragenics Product-by-Oragenics Product basis. The Company has likewise agreed to pay Intrexon on a quarterly basis 50% of revenue obtained in that quarter from a sublicensor in the event of a sublicensing arrangement.
During the first 18 months of the agreement, neither the Company nor Intrexon may terminate the ECC, except under limited circumstances, including in the event of a material breach by the other party and Intrexon may terminate the ECC under certain circumstances if the Company assigns its rights under the ECC without Intrexons consent. Following the first 12 months of the agreement, Intrexon may also terminate the ECC if the Company fails to use diligent efforts to develop and commercialize Oragenics Products or if the Company elects not to pursue the development of a Lantibiotics Program identified by Intrexon that is a Superior Therapy as defined in the ECC. Following the first 18 months of the agreement, the Company may voluntarily terminate the ECC at any time upon 90 days written notice to Intrexon.
Upon termination of the ECC, the Company may continue to develop and commercialize any Oragenics Product that has been, at the time of termination:
| commercialized by the Company; |
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| approved by regulatory authorities; |
| a subject of an application for regulatory approval that is pending before the applicable regulatory authority; or |
| the subject of at least an ongoing Phase 1, Phase 2 or Phase 3 clinical trial in the Field (in the case of a termination by Intrexon due to an uncured material breach by the Company or a voluntary termination by the Company). |
The Companys obligation to pay 25% of gross profits or revenue described above with respect to these retained products as well as to use diligent efforts to develop and commercialize these retained Oragenics Products will survive termination of the ECC.
In addition, in partial consideration for each partys execution and delivery of the ECC, the Company entered into a Stock Issuance Agreement with Intrexon. Pursuant to the Stock Issuance Agreement the Company issued to Intrexon 4,392,425 shares of the Company common stock as an initial technology access fee, in consideration for the execution and delivery of the ECC and granted Intrexon certain equity participation rights and registration rights.
Under the Stock Issuance Agreement and as part of the ECC, the Company has also agreed to make certain payments to Intrexon upon the Companys achievement of designated milestones in the form of shares of Company Common Stock or at the Companys option make a cash payment to Intrexon (based upon the fair market value of the shares otherwise required to be issued). The milestone events and amounts payable are as follows:
(i) upon filing of the first Investigational New Drug application with the U.S. Food and Drug Administration for an Oragenics Product, that number of shares equal to the number of shares of Common Stock comprising 1.0% of the Base Shares ;
(ii) upon the dosing of the first patient in the first Phase 2 clinical study with an Oragenics Product, that number of shares equal to the number of shares of Common Stock comprising 1.5% of the Base Shares;
(iii) upon the dosing of the first patient in the first Phase 3 clinical study with an Oragenics Product, that number of shares equal to the number of shares of Common Stock comprising 2% of the Base Shares;
(iv) upon the filing of the first New Drug Application (NDA) or Biologics License Application (BLA) with the U.S. Food and Drug Administration for an Oragenics Product, or alternatively the filing of the first equivalent regulatory filing with a foreign regulatory agency, that number of shares equal to the number of shares of Common Stock comprising 2.5% of the Base Shares; and
(v) upon the granting of the first regulatory approval of an Oragenics Product, that number of shares equal to the number of shares of Common Stock comprising 3% of the Base Shares.
Base Shares is defined in the Stock Issuance Agreement to mean (i) the number of shares of Company common stock together with any securities or instruments convertible or exercisable for shares of common stock issued and outstanding at the time of the applicable milestone event, (ii) minus any shares issuable upon conversion of Capital Inducement Securities. Capital Inducement Securities is defined in the Stock Issuance Agreement to mean warrants or other convertible securities of the Company issued to investors in connection with a debt or equity investment in the Company that are issued in addition to the primary investment securities and in an amount not to exceed 10% of the overall number of shares issued in the investment (on an as-converted to common stock basis).
During the year ended December 31, 2015 and 2014, we paid $298,581 and $866,030, respectively, to Intrexon relating to work performed under the Lantibiotics ECC.
Probiotics ECC with Intrexon
On September 30, 2013, the Company entered into the Probiotics ECC with Intrexon that governs a channel collaboration arrangement in which the Company will use Intrexons proprietary technology relating to the
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identification, design and production of genetically modified cells, DNA vectors and in vivo control of expression (the Technology) for the development and commercialization of probiotics, specifically the direct administration to humans of genetically modified probiotics for the treatment of diseases of the oral cavity, throat, sinus and esophagus, including, but not limited to, aphthous stomatitis and Behcets disease (collectively, the Probiotics Program). The Probiotics ECC establishes committees comprised of Company and Intrexon representatives that will govern activities related to the Probiotics Program in the areas of project establishment, chemistry, manufacturing and controls matters, clinical and regulatory matters, commercialization efforts and intellectual property matters.
The Probiotics ECC granted the Company an exclusive worldwide license to utilize Intrexons Technology to develop and commercialize probiotics, specifically the direct administration to humans of genetically modified probiotics for the treatment of diseases of the oral cavity, throat, sinus and esophagus (Company Products). Such license is exclusive with respect to any clinical development, selling, offering for sale or other commercialization of Company Products, and otherwise is non-exclusive. Subject to limited exceptions, the Company may not sublicense the rights described without Intrexons written consent.
In addition, in partial consideration for each partys execution and delivery of the Probiotics ECC, on September 30, 2013 the Company entered into a Stock Purchase and Issuance Agreement and a First Amendment to the Stock Purchase and Issuance Agreement (collectively the SPIA) with Intrexon. Pursuant to the SPIA, the Company paid Intrexon an up-front technology access fee of $6,000,000 (the Technology Access Fee) in consideration for the execution of the Probiotics ECC. The Technology Access Fee was paid to Intrexon by the Company through the (i) issuance of 1,348,000 (at $3.00 per share) shares of the Companys common stock (the Technology Access Shares), and (ii) a convertible promissory note in the amount of $1,956,000 which is payable, at the Companys option, in cash or shares of Company common stock (the Convertible Note). The Convertible Note matured on December 31, 2013 and required the Company to obtain shareholder approval prior to conversion of the Convertible Note. The conversion price was equal to the closing price per share of the Companys common stock on the last trading day immediately prior to the date of conversion.
On December 18, 2013, the Company issued to Intrexon 698,241 shares of Company common stock in connection with the conversion of the Convertible Note and accrued interest previously issued by the Company to Intrexon on September 30, 2013 as partial consideration for the Technology Access Fee required by the Exclusive Channel Collaboration Agreement entered into with respect to the Companys probiotics research and development. The Note was payable to Intrexon, at the Companys option, in cash or shares of Company common stock prior to the maturity date of December 31, 2013 and the conversion price was equal to the closing price on the NYSE MKT of the Companys common stock on the last trading day immediately prior to the date of conversion which was $2.82 per share.
During the year ended December 31, 2015 and 2014, we paid $195 and $46,697, respectively, to Intrexon relating to work performed under the Probiotics ECC.
On September 30, 2015, the Company and Intrexon mutually agreed to terminate the Exclusive Channel Collaboration Agreement dated September 30, 2013 regarding the development and commercialization of probiotics (the Live Biotherapeutic Products ECC). The termination of the Live Biotherapeutic Products ECC was to enable Oragenics to focus its resources on the lantibiotic and oral mucositis programs.
Intrexon Purchase of our Common Stock
On September 30, 2013 the Company also sold to Intrexon 1,300,000 shares of the Companys common stock at a price per share of $3.00 for gross proceeds of $3,900,000. The Company intends to use the proceeds from this sale of common stock towards development of the Companys key initiatives relating to the Probiotics Program, and general corporate purposes.
Intrexon Participation in Underwritten Public Offering-November 2013
On November 20, 2013, the Company completed an underwritten public offering of 4,400,000 shares of common stock at a public offering price of $2.50 per share resulting in gross proceeds of $11,000,000. Intrexon participated in this public offering acquiring 1,242,490 shares of our common stock.
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Oral Mucositis ECC with Intrexon
On June 9, 2015, the Company entered into an ECC with Intrexon and Intrexon Actobiotics NV (Actobiotics), a wholly-owned subsidiary of Intrexon, through which the Company intends to research, develop and commercialize products, including the continued development and commercialization of AG013, for use in the treatment of oral mucositis in humans and/or the administration to humans of a trefoil factor via genetically modified bacteria (including L. lactis) for the treatment of diseases and conditions of the oral cavity, throat, and esophagus, but, in any case, excluding the delivery of anti-cancer effectors for the purpose of treatment or prophylaxis of cancer (collectively, the Program). Contemporaneously with the ECC, the Company and Intrexon also entered into a Stock Issuance Agreement (the SIA) which authorized the issuance of the Technology Access Fee (as defined below) and the future stock issuance of our Common Stock to Intrexon upon the achievement of designated milestones. The ECC governs the channel collaboration arrangement in which we will use Intrexons proprietary technology relating to the identification, design and production of genetically modified bacteria (the Technology) for the purpose of developing the Program. The ECC provides for the establishment of committees comprised from us and Intrexon representatives that will govern activities in the areas of project establishment, chemistry, manufacturing and controls, clinical and regulatory matters, commercialization efforts, and intellectual property.
The ECC grants the Company an exclusive worldwide license to utilize Intrexons and Actobiotics intellectual property to develop and commercialize products, including the continued development and commercialization of AG013, for use in the treatment of oral mucositis in humans and/or the administration to humans of a trefoil factor via genetically modified bacteria (including L. lactis) for the treatment of diseases and conditions of the oral cavity, throat, and esophagus, but, in any case, excluding the delivery of anti-cancer effectors for the purpose of treatment or prophylaxis of cancer (the Field). It also grants us an exclusive license in the Field under all Information Controlled by Actobiotics (or otherwise by Intrexon) and existing as of the Effective Date relating to the regulatory approval of AG013, including regulatory filings, data, clinical trial reports, and rights thereunder.
Under the Oral Mucositis ECC, and subject to certain exceptions, we are responsible for, among other things, funding the further anticipated development of products toward the goal of commercialization, conducting preclinical and clinical development of candidate products, as well as for other aspects of manufacturing and the commercialization of the product(s).
The Company will pay Intrexon on a quarterly basis 12% of the net sales derived from the sale of products developed from the exclusive channel collaboration. The Company has likewise agreed to pay Intrexon on a quarterly basis 50% of revenue obtained in that quarter from a sublicensor in the event of a sublicensing arrangement.
The Company may voluntarily terminate the Oral Mucositis ECC upon 90 days written notice to Intrexon. Intrexon may also terminate the ECC if the Company breaches and fails to cure the breach within 60 days or the Company does not pursue development of the Superior Therapy under the probiotics identified by Intrexon that is a Superior Therapy as defined in the ECC.
Upon termination of the ECC, the Company may continue to develop and commercialize any Company Product that, at the time of termination that satisfies at least one of the following criteria:
(i) | the particular Company Product is being sold by the Company triggering profit sharing payments under the ECC to Intrexon; |
(ii) | the particular Company Product has received regulatory approval; |
(iii) | the particular Company Product is a subject of an application for regulatory approval in the Field covered by the ECC that is pending before the applicable regulatory authority; |
(iv) | the particular Company Product is AG013, and such Company Product has been the subject of at least one completed Phase 2 clinical trial (as such is defined by relevant FDA guidelines) during the Term; or |
(v) | the particular Company Product other than AGO13 and such Oragenics Product is the subject of at least an ongoing Phase 1, Phase 2 or Phase 3 clinical trial in the Field. |
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The Company has also agreed to make certain payments to Intrexon upon the Companys achievement of designated milestones in the form of shares of Company Common Stock (based upon the fair market value of the shares otherwise required to be issued) unless the issuance of such shares would reasonably likely cause Intrexon to consolidate the Companys financial statements with Intrexons financial statements, or at the Companys option make a cash payment to Intrexon. The Commercialization Milestone Events and amounts payable are as follows:
(i) | two million United States dollars ($2,000,000) within thirty (30) days of the first instance of the achievement of the Phase 2 Milestone Event meaning the first dosing of a patient by or on behalf of Oragenics, or an Affiliate or permitted sublicensee of Oragenics, in a Phase 2 clinical trial, whether such occurs in the United States of America under the jurisdiction of the FDA or elsewhere under the jurisdiction of a foreign regulatory agency, for each different Oragenics Product; |
(ii) | five million United States dollars ($5,000,000) within thirty (30) days of the first instance of the achievement of the Phase 2b/3 Milestone Event meaning meeting of the primary endpoint by or on behalf of Oragenics, or an Affiliate or permitted sublicensee of Oragenics, in a Phase 3 clinical trial, whether such occurs in the United States of America under the jurisdiction of the FDA or elsewhere under the jurisdiction of a foreign regulatory agency, for each different Oragenics Product; |
(iii) | five million United States dollars ($5,000,000) within thirty (30) days of the first instance of the achievement of the Regulatory Approval Application Milestone Event for each different Oragenics Product which Regulatory Approval Application Milestone Event meaning for a given Oragenics Product, the first to occur of (a) the filing by Oragenics, an Affiliate thereof, or a permitted sublicensee thereof, of a FDA New Drug Application or a Biologics License Application with the FDA seeking approval of such Oragenics Product, or (b) the filing of an equivalent approval or marketing application for such Oragenics Product with an equivalent regulatory authority in a foreign jurisdiction; |
(iv) | ten million United States dollars ($10,000,000) within thirty (30) days of the first instance of the achievement of the Approval Milestone Event for each different Oragenics Product which Approval Milestone Event meaning the first to occur of (a) the First Commercial Sale of an Oragenics Product anywhere in the Territory, or (b) 90th day after the approval of a FDA New Drug Application for an Oragenics Product by the FDA or equivalent regulatory action in a foreign jurisdiction; |
(v) | Oragenics shall pay Intrexon a milestone payment of five million United States dollars ($5,000,000) within thirty (30) days of the first instance of the achievement of the New Indication Milestone Event meaning the filing by or on behalf of Oragenics, an Affiliate of Oragenics, or a permitted sublicensee of Oragenics a Supplemental FDA Application with the FDA or with another equivalent regulatory agency seeking approval of an indication for use of the product AG013 other than the current regulatory-approved indication; and |
(vi) | Oragenics shall pay Intrexon a milestone payment of five million United States dollars ($5,000,000) within thirty (30) days of the first instance of the achievement of the New Product Milestone Event meaning the filing of a regulatory package filed with the FDA or with another equivalent regulatory agency by or on behalf of Oragenics, an Affiliate of Oragenics, or a permitted sublicensee of Oragenics, that is deemed (according to relevant FDA guideline) to be a different drug product than AG013. |
During the year ended December 31, 2015 we paid $263,590 to Intrexon relating to work performed under the Oral Mucositis ECC.
Repayment of Intrexon Convertible Note
On December 1, 2015, the Company issued to Intrexon 3,381,004 shares of the Companys common stock in connection with the conversion of the Convertible Note and accrued interest previously issued by the Company to Intrexon on June 9, 2015 as partial consideration for the Technology Access Fee required by the Oral Mucositis Exclusive Channel Collaboration Agreement. The Convertible Note was payable to Intrexon, at the Companys option, in cash or shares of Company common stock prior to the maturity date of December 31, 2015 and the conversion price was equal to the closing price on the NYSE MKT of the Companys common stock on the last trading day immediately prior to the date of conversion which was $1.50 per share.
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Sale of Consumer Probiotic Business
On June 24, 2016, we completed the sale of the assets comprising the Companys Consumer Probiotic Business (CPB Assets). The sale of the CPB Assets was made pursuant to an Asset Purchase Agreement (APA) dated June 22, 2016 with ProBiora Health, LLC, a Delaware limited liability company (the Purchaser). The Purchaser is an entity owned by Ms. Christine L. Koski, a director of the Company until June 24, 2016 and a significant shareholder through the Koski Family Limited Partnership. Ms. Koski resigned as a director of the Company commensurate with the closing of the APA. Ms. Koski is also the sister of Robert Koski, a member of our Board of Directors. Pursuant to the APA, the aggregate purchase price was $1,700,000 of which $1,250,000 was paid in cash at closing and $450,000 is to be payable on or before July 31, 2016. This transaction also included the Promissory Note and Guaranty, Contingent Consideration, Transition Services Agreement and Sublease described below.
Promissory Note and Guaranty
At closing of the APA, the Purchaser delivered an unsecured promissory note to the Company in the principal amount of $450,000 (the Promissory Note). The interest rate on the Promissory Note is one percent (1%) per annum calculated for the number of days the unpaid portion of the purchase price remains outstanding after closing and the Promissory Note is personally guaranteed by Ms. Koski (the Guaranty).
Contingent Consideration
The APA also provides that the Purchaser will be obligated to pay the Company contingent consideration in amounts calculated at five percent (5%) of Purchasers Contribution Margin on sales of products which utilize the Purchased Assets in excess of two million dollars ($2,000,000), annually, by Purchaser. Contribution Margin for this purpose is calculated gross revenue from sales of products utilizing the Purchased Assets less cost of goods sold, credit card processing fees, sales tax, shipping costs, coupons, returns, allowances, and direct and indirect sales commissions paid by Purchaser. The aggregate contingent consideration is capped at two million dollars ($2,000,000) (the Contingent Consideration Cap), payable over the Contingent Consideration Period. The Contingent Consideration Period runs from the termination of the 90 day transition services period until the earlier of: (i) achieving the Contingent Consideration Cap, or (ii) December 31, 2025. There is no minimum contingent consideration payable by Purchaser.
Transition Services Agreement
The parties also entered into a Transition Services Agreement upon closing of the sale of the CPB Assets pursuant to which for a period of up to 90 days the Company will provide Purchaser with transition assistance services in exchange for payments equaling three percent (3%) of the net sales of Probiora3 products sold during the term of the transition services agreement. The Transition Services Agreement also provides for the deferral of payment under the promissory note until such time that the Company provides certain deliverables to the Purchaser.
Sublease
The Purchaser and the Company also entered into a Sublease upon closing of the sale of the CPB Assets pursuant to which the Purchaser is subleasing certain excess space from the Company. The term of the sublease expires on February 28, 2017 and the rent payable to the Company is $1,622.60 per month.
Financing Transaction with Intrexon, Koski Family Limited Partnership and our Chairman
On June 30, 2016, we entered into a Stock Purchase Agreement pursuant to which we issued and sold to three accredited investors an aggregate of 9,045,679 shares of restricted common at a purchase price of $0.5159 per Share which was the midpoint of the closing quote on the Companys primary exchange, NYSE MKT, on June 29, 2016 as required by NYSE listing standards. The offering resulted in aggregate gross proceeds of approximately $4.667 million of which $2 million is payable to the Company on September 30, 2016 by the Koski Family Limited Partnership (the KFLP) pursuant to an unsecured promissory note (the Note) which Note accrues interest at the rate of 3% per annum. The Investors in the Offering included current Company shareholders, KFLP and Intrexon Corporation, as well as our Chairman, Dr. Frederick Telling. Robert Koski, a member of our Board of Directors, is a partner in the KFLP.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Companys officers and Directors and any persons who beneficially own more than ten percent of the Companys Common Stock to file reports of ownership and changes in ownership of such securities with the Securities and Exchange Commission Officers, Directors and beneficial owners of more than ten percent of the Common Stock are required by applicable regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of copies of forms furnished to the Company and written representations from the executive officers, directors and holders of ten percent or more of the Companys Common Stock, the Company believes, all persons subject to the reporting requirements with regard to the Common Stock complied with the applicable filing requirements during 2015.
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Interim Corporate Mailings
In accordance with National Instrument 54-102 of the Canadian Securities Administrators, registered and beneficial shareholders of the Company may elect annually to receive interim corporate mailings, including interim financial statements of the Company, if they so request. If you wish to receive such mailings, please complete the form in Appendix A and mail as instructed on the form.
Availability of Annual Report on Form 10-K
Accompanying this Proxy Statement is a copy of the Companys Annual Report on Form 10-K for 2015 and Form 10-K Amendment for 2015. Shareholders who would like additional copies of the Annual Report on Form 10-K should direct their requests in writing to:
Oragenics, Inc.
4902 Eisenhower Blvd., Suite 125
Tampa, Florida 33634
Attention: Michael Sullivan, Secretary.
Miscellaneous
Management does not know of any matters to be brought before the Annual Meeting other than as described in this Proxy Statement. Should any other matters properly come before the Annual Meeting, the persons designated as proxies will vote in accordance with their best judgment on such matters.
BY ORDER OF THE
BOARD OF DIRECTORS
Michael Sullivan,
Secretary
Tampa, Florida
July 15, 2016
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Oragenics, Inc.
Request for Interim Financial Statements
In accordance with National Instrument 54-102 of the Canadian Securities Administrators, registered and beneficial shareholders of the subject Corporation may elect annually to receive interim corporate mailings, including interim financial statements of the Corporation, if they so request. If you wish to receive such mailings, please complete and return this form to:
Oragenics, Inc.
Investor Relations
4902 Eisenhower Blvd., Suite 125
Tampa, Florida 33634
NAME: |
||
ADDRESS: |
||
POSTAL CODE: |
I confirm that I am an owner of common stock of the Corporation.
SIGNATURE OF SHAREHOLDER: |
DATE: |
CUSIP: 684023203
SCRIP COMPANY CODE: ORGQ
A-1
Appendix B
Vote Your Proxy by Mail: |
Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided.
|
Please submit votes via mail by 7:00 p.m., Eastern Time, on August 24, 2016
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
PROXY THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL THE NOMINEES LISTED AND FOR PROPOSALS II and III. |
Please mark your votes like this |
x
| ||||||||||||||
FOR | AGAINST | ABSTAIN | ||||||||||||||
I. Election of Directors | FOR | WITHHOLD AUTHORITY | II. | ADVISORY VOTE ON EXECUTIVE COMPENSATION |
¨ | ¨ | ¨ | |||||||||
NOMINEES: | (01) Dr. Frederick W. Telling | ¨ | ¨ | |||||||||||||
(02) Dr. Alan Joslyn | ¨ | ¨ | ||||||||||||||
(03) Robert C. Koski | ¨ | ¨ | III. | RATIFICATION OF THE SELECTION OF MAYER | ||||||||||||
(04) Charles L. Pope | ¨ | ¨ | HOFFMAN MCCANN P.C. AS THE COMPANYS | FOR | AGAINST | ABSTAIN | ||||||||||
(05) Dr. Alan W. Dunton | ¨ | ¨ | INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2016 |
¨ | ¨ | ¨ | ||||||||||
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
DIRECTORS LISTED HERE AND FOR PROPOSALS II AND III.
COMPANY ID:
PROXY NUMBER:
ACCOUNT NUMBER: |
Signature | Signature | Date | , 2016 | |||||||||
Note: Please sign exactly as name appears hereon. When shares are held by joint owners, both should sign. When signing as attorney, executor, administrator, trustee, guardian, or corporate officer, please give title as such. |
Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting of Stockholders to be held August 25, 2016
This proxy statement and our 2015 Annual Report to Shareholders
are available at http://ir.oragenics.com/annual-reports
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Oragenics, Inc.
The undersigned shareholder of Oragenics, Inc.(the Company), Tampa, Florida, hereby constitutes and appoints Dr. Alan Joslyn with full power of substitution or in the place of the foregoing, Michael Sullivan as proxy holder, for and on behalf of the undersigned shareholder with the power of substitution to attend, act and vote the number of shares of Common Stock which the undersigned would be entitled to vote if personally present at the annual meeting of Shareholders or at any adjournments thereof (the Annual Meeting), upon the proposals described in the Notice to the Holders of Common Stock of the Annual Meeting of Shareholders and Proxy Statement, both dated July 15, 2016, the receipt of which is acknowledged, in the manner specified below. The proxies, in their discretion, are further authorized to vote on any shareholder proposals not submitted to the Company for a vote of the shareholders at the Annual Meeting within a reasonable time prior to the mailing of the proxy materials, as well as on the election of any person as a Director if a Director nominee named in Proposal I is unable to serve or for good cause will not serve, and on matters incident to the conduct of the Annual Meeting. At the present time, the Board of Directors knows of no other business to be presented to a vote of the shareholders at the Annual Meeting.
This Proxy, when properly executed, will be voted in the manner directed by the undersigned shareholder. If no direction is made, this Proxy will be voted FOR the election of the Directors listed on the reverse side and FOR Proposals II and III.
(Continued, and to be marked, dated and signed, on the other side)