Unassociated Document
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule 14a-12
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Response Genetics, Inc.
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(Name of Registrant as Specified In Its Charter)
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N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing:
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Amount previously paid:
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Form, Schedule or Registration Statement No:
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September 2, 2011
Dear Stockholder,
You are cordially invited to attend the 2011 Annual Meeting of Stockholders (the “Annual Meeting”) of Response Genetics, Inc. (“RGI,” the “Company,” “we,” “our” or “us”) to be held on Thursday, October 13, 2011 at 10:00 a.m., Eastern time, at The Belvedere Hotel, 319 West 48th Street, New York, NY 10036.
We will be proposing a slate of seven director nominees for election to our board of directors (the “Board”) at the Annual Meeting. Details about the Annual Meeting, the nominees for our Board and other matters to be acted on are included in the accompanying notice and proxy statement.
Consistent with the Securities and Exchange Commission rules, we are furnishing proxy materials to our stockholders principally by notifying you of the availability and location at which you can access our proxy materials on the Internet. We believe this process, which utilizes the e-proxy process known as “notice and access,” expedites stockholders’ receipt of proxy materials and lowers our printing and mailing costs.
On or about September 2, 2011, we will mail a Notice of Internet Availability to certain of our stockholders containing instructions on how to access our proxy materials online and on how to vote.
We hope you plan to attend the Annual Meeting. Whether you plan to attend or not, it is important that your shares are represented at the Annual Meeting. We urge you to vote using one of the methods described in the Notice of Internet Availability of Proxy Materials, or if you receive paper copies of the proxy statement, you can also vote by mail, telephone or Internet by following the instructions on the proxy card or voting instruction card. We encourage you to vote by proxy so that your shares will be represented and voted at the Annual Meeting, whether or not you can attend.
Thank you for your continued support. If you have any questions, please contact American Stock and Transfer Company, toll free at 1-800-937-5449.
Sincerely,
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Denise McNairn
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Vice President, General Counsel and Secretary
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YOUR VOTE IS IMPORTANT
PLEASE TAKE TIME TO VOTE AS SOON AS POSSIBLE
September 2, 2011
NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on October 13, 2011
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 2011 Annual Meeting of Stockholders (the “Annual Meeting”) of Response Genetics, Inc. (“RGI,” the “Company,” “we,” “our” or “us”) will be held on Thursday, October 13, 2011, at 10:00 a.m., Eastern time, at The Belvedere Hotel, 319 West 48th Street, New York, NY 10036, for the following purposes, as more fully described in the proxy statement accompanying this notice:
1. To elect seven directors to serve until the 2012 annual meeting of stockholders and until their successors are duly elected and qualified.
2. To consider and vote upon a proposal to ratify the appointment of BDO USA, LLP as the Company’s independent public accountants for the fiscal year ending December 31, 2011.
3. To consider any other business that is properly presented at the Annual Meeting or any adjournments or postponements thereof.
WHO MAY VOTE: You may vote if you were the record owner of RGI stock at the close of business on August 30, 2011. A list of stockholders of record will be available at the Annual Meeting and, during the 10 days prior to the Annual Meeting, at our corporate headquarters, 1640 Marengo Street, 6th Floor, Los Angeles, CA 90033.
All stockholders are cordially invited to attend the Annual Meeting. We hope all stockholders will be able to attend the Annual Meeting. However, in order to ensure that a quorum is present at the Annual Meeting, please take the time to vote now, whether or not you plan to attend the Annual Meeting. You may vote using one of the methods described in the Notice of Internet Availability of Proxy Materials, or if you receive paper copies of the proxy statement, you can also vote by mail, telephone or Internet by following the instructions on the proxy card or voting instruction card.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 13, 2011
Our proxy statement and our 2010 Annual Report on Form 10-K and Form 10-K/A will be made available on the
Internet at http://www.responsegenetics.com.
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If you have any questions about your voting of shares, please contact American Stock and Transfer Company, toll free at 1-800-937-5449.
By Order of the Board of Directors,
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Denise McNairn
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Vice President, General Counsel and Secretary
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Los Angeles, California
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PAGE
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Notice of 2011 Annual Meeting of Stockholders To Be Held on October 13, 2011
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General Information about the Annual Meeting
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1
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Stock Ownership Information
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5
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Proposal 1: To Elect Seven (7) Directors of the Company
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7
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General Information About the Board of Directors
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10
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Proposal 2: Ratification of the Appointment of Our Independent Registered Public Accounting Firm
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17
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Executive Officers and Executive Compensation
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19
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Report of Audit Committee
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23
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Section 16(a) Beneficial Ownership Reporting Compliance
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23
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Related Party Transactions
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24
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Other Matters
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24
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Response Genetics, Inc.
1640 Marengo St., 6th Floor
Los Angeles, California 90033
(323) 224-3900
PROXY STATEMENT
For the 2011 Annual Meeting of Stockholders
To Be Held On October 13, 2011
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
Why am I receiving these proxy materials?
You are receiving these proxy materials because the board of directors (the “Board”) of Response Genetics, Inc., a Delaware corporation (“we,” “our,” “us,” “RGI” or the “Company”) is soliciting your proxy to cast your vote at the 2011 Annual Meeting of Stockholders (the “Annual Meeting”) and any adjournment or postponement of the Annual Meeting. For the Annual Meeting we are proposing a slate of seven director nominees for election to the Board, consisting of seven incumbent director nominees.
This proxy statement and accompanying Notice of Annual Meeting of Stockholders summarize the purposes of the meeting and the information you need to know to vote at the Annual Meeting.
Why did I receive a notice in the mail regarding the Internet availability of proxy materials?
Pursuant to the rules adopted by the Securities and Exchange Commission (the “SEC”), we are providing you with Internet access to our proxy materials and our 2010 Annual Report on Form 10-K and 10-K/A, which includes our financial statements for the fiscal year ended December 31, 2010 (the “Annual Report”). Accordingly, on or about September 2, 2011, we will send certain of our stockholders a Notice of Internet Availability of Proxy Materials. All stockholders receiving the notice have the ability to access the proxy materials over the Internet and to request a paper copy of these materials. Instructions on how to access the proxy materials or submit your proxy over the Internet or to request a paper copy of the proxy materials may be found in the notice. In addition, the notice contains instructions on how stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. Stockholders receiving the notice will not receive a printed copy of the proxy materials unless you request one.
Copies of this proxy statement, a proxy card and our Annual Report will be furnished without charge to any stockholder upon written or oral request to : American Stock and Transfer Company, toll free at 1-888-Proxy-NA (1-888-776-9962) or 1-718-921-8562 (for international callers) or by email at infor@amstock.com , or via the Internet at http://www.amstock.com/proxyservices/requestmaterials.asp. This proxy statement and our Annual Report are also available in the Investors section of our website at www. responsegenetics.com and the SEC ’ s website at www.sec.gov.
Where and When is the Annual Meeting going to be held?
The Annual Meeting will be held at The Belvedere Hotel, 319 West 48th Street, New York, NY 10036 on Thursday, October 13, 2011, at 10:00 a.m., Eastern time.
What is the purpose of the Annual Meeting?
At the Annual Meeting, stockholders will vote on the matters described in the accompanying Notice of 2011 Annual Meeting and this proxy statement. The only matters expected to be voted on at the Annual Meeting are (1) the election of seven directors and (2) a proposal to ratify the appointment of BDO USA, LLP as our independent public accountants for the fiscal year ending December 31, 2011.
How Does the Board Recommend that I Vote on the Proposals?
The Board recommends that you vote your shares as follows:
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Proposal 1: FOR the election of each of Kirk K. Calhoun, Kathleen Danenberg, Michael Metzger, Gary D. Nusbaum, Michael Serruya, Richard van den Broek and David M. Wurzer; and
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Proposal 2: FOR ratification of the appointment of BDO USA, LLP as our independent public accountants for the fiscal year ending December 31, 2011.
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As of the date of this proxy statement, we know of no matters that will be presented for determination at the Annual Meeting other than those referred to herein. If any other matters properly come before the Annual Meeting calling for a vote of stockholders, proxies in the enclosed form returned to us or voted by telephone or through the Internet will be voted in accordance with the recommendation of the Board or, in the absence of such a recommendation, in accordance with the judgment of the proxy holders.
Who Can Vote?
Only stockholders who owned our common stock at the close of business on August 30, 2011 are entitled to vote at the Annual Meeting. Common stock is our only class of voting stock.
You do not need to attend the Annual Meeting to vote your shares. Shares represented by valid proxies solicited by us, received in time for the Annual Meeting and not revoked prior to the Annual Meeting, will be voted at the Annual Meeting.
How Many Votes Do I Have?
Each share of RGI common stock that you own entitles you to one vote.
How Do I Vote?
Whether you plan to attend the Annual Meeting or not, we urge you to vote by proxy. Voting by proxy will not affect your right to attend the Annual Meeting. You may vote:
• By Mail : If you receive printed copies of these proxy materials, vote by marking, signing and dating the enclosed proxy card and returning it in the envelope provided.
• By Internet : Vote via the Internet by following the voting instructions on the proxy card or the Notice of Internet Availability of Proxy Materials;
• By Telephone : Place your vote by telephone by following the instructions on the proxy card or the Notice of Internet Availability of Proxy Materials; or
• In Person : If you are a stockholder of record, you may vote in person by attending the Annual Meeting. If your shares are held in “street name” and you wish to vote in person at the Annual Meeting, you must obtain and produce at the Annual Meeting a valid proxy (referred to as a “legal proxy”) from the organization that holds your shares, along with valid identification. We will distribute written ballots to any eligible stockholder who wishes to vote in person at the Annual Meeting.
May I Revoke My Proxy?
If you give us your proxy, you may revoke it at any time before the Annual Meeting. You may revoke your proxy in any one of the following ways:
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By signing a new proxy card and timely submitting it as instructed above;
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If you are a stockholder of record, by timely notifying Denise McNairn, RGI’s Secretary, in writing before the Annual Meeting that you have revoked your proxy; or
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If you are a stockholder of record, or you hold your shares in “street name” and you have a valid proxy from the organization that holds your shares, by attending the Annual Meeting in person and voting in person. Attending the Annual Meeting in person will not in and of itself revoke a previously submitted proxy.
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Will My Shares be Voted if I Do Not Return My Proxy Card?
If you hold your shares in “street name” and do not provide voting instructions to your broker, your shares will not be voted on any proposal on which your broker does not have discretionary authority to vote. In this situation, a “broker non-vote” occurs. Shares constituting broker non-votes are not counted or deemed to be present or represented for the purpose of determining whether stockholders have approved a matter, but they are counted as present for the purpose of determining a quorum at the Annual Meeting. Your broker or other nominee does not have discretionary authority to vote on the election of directors, but does have discretionary authority to vote on the ratification of our independent public accountants. Thus, if your shares are held in “street name” and you do not provide instructions as to how your shares are to be voted in the election of directors, your broker or other nominee will not be able to vote your shares in the election of directors. We urge you to provide instructions to your broker or nominee so that your votes may be counted on this important matter.
What Vote is Required to Approve Each Proposal and How are Votes Counted?
Proposal 1: Elect Directors
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The seven nominees for director who receive the most votes (also known as a “plurality” of the votes) will be elected. Abstentions are not counted for purposes of electing directors. You may vote either FOR all of the nominees, WITHHOLD your vote from all of the nominees or WITHHOLD your vote from any one or more of the nominees. Votes that are withheld will not be included in the vote tally for the election of directors.
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Proposal 2: Ratify Selection of Auditors
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The affirmative vote of a majority of the shares cast affirmatively or negatively for this proposal is required to ratify the selection of independent public accountants. Abstentions will have no effect on the results of this vote. We are not required to obtain the approval of our stockholders to select our independent accountants. However, if our stockholders do not ratify the selection of BDO USA, LLP as our independent accountants for 2011, our Audit Committee of our Board will reconsider its selection.
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Am I entitled to appraisal rights?
The Board has not proposed for consideration at the Annual Meeting any transaction for which the laws of Delaware entitle stockholders to appraisal rights.
What Constitutes a Quorum for the Meeting?
The presence, in person or by proxy, of the holders of a majority of the outstanding shares of our common stock is necessary to constitute a quorum at the Annual Meeting. Votes of stockholders of record who are present at the Annual Meeting in person or by proxy, abstentions, and broker non-votes are counted for purposes of determining whether a quorum exists.
Attending the Annual Meeting
The Annual Meeting will be held at 10:00 a.m. on Thursday, October 13, 2011 at The Belvedere Hotel, 319 West 48th Street, New York, NY 10036. When you arrive at The Belvedere Hotel, signs will direct you to the appropriate meeting rooms. You need not attend the Annual Meeting in order to vote.
Householding of Annual Disclosure Documents
In December 2000, the SEC adopted a rule concerning the delivery of annual disclosure documents. The rule allows us or your broker, if you do not participate in electronic delivery of proxy materials, to send a single set of our annual report and proxy statement to any household at which two or more of our stockholders reside, if we or your broker believe that the stockholders are members of the same family. This practice, referred to as “householding,” benefits both you and us. It reduces the volume of duplicate information received at your household and helps to reduce our expenses. The rule applies to our annual reports, proxy statements and information statements. Once you receive notice from your broker or from us that communications to your address will be “householded,” the practice will continue until you are otherwise notified or until you revoke your consent to the practice. Each stockholder will continue to receive a separate proxy card or voting instruction card.
If you elected to receive a printed copy of the proxy materials and your household received a single set of disclosure documents this year, but you would prefer to receive your own copy, please contact our transfer agent, American Stock Transfer and Trust Company, by calling their toll free number: 1-800-937-5449. If you do not wish to participate in “householding” and would like to receive your own set of our annual disclosure documents in future years, follow the instructions described below. Conversely, if you share an address with another stockholder of the Company and together both of you would like to receive only a single set of our annual disclosure documents, follow these instructions:
• If your shares are registered in your own name, please contact our transfer agent, American Stock Transfer & Trust Company, and inform them of your request by calling them at 1-800-937-5449 or writing them at 6201 15th Avenue, Brooklyn, NY 11219.
• If a broker or other nominee holds your shares, please contact the broker or other nominee directly and inform them of your request. Be sure to include your name, the name of your brokerage firm and your account number.
STOCK OWNERSHIP INFORMATION
The following table sets forth certain information regarding the beneficial ownership of our common stock as of August 10, 2011 by each of our named executive officers, each of our directors and director nominees, all of our current directors and executive officers as a group and each person, entity or group of affiliated person or entities known by us to own beneficially more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. We deem shares of common stock that may be acquired by an individual or group within 60 days of August 10, 2011 pursuant to the exercise of options or warrants to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them based on information provided to us by these stockholders. Percentage of ownership is based on 19,537,232 shares of common stock outstanding on August 10, 2011.
Name of Beneficial Owner
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Number of Shares Beneficially
Owned
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Percentage Shares Beneficially
Owned
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Directors and Executive Officers
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David Smith
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1,402,042 |
(2) |
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7.2 |
% |
Michael Serruya
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19,752 |
(2) |
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Kathleen Danenberg
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764,904 |
(1) |
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3.9 |
% |
Gary D. Nusbaum
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26,594 |
(2) |
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* |
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Kirk K. Calhoun
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15,813 |
(2) |
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* |
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Jan Fagerberg, M.D.
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- |
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Michael Metzger
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- |
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Richard van den Broek
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182,700 |
(3) |
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David M. Wurzer
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- |
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Christine Meda
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- |
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* |
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Denise McNairn
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120,028 |
(2) |
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David O’Toole
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28,500 |
(2) |
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* |
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All current executive officers and directors
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2,560,333 |
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13.1 |
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5% or More Stockholders
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Clara Serruya
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1,367,856 |
(4) |
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7.0 |
% |
Samuel Serruya
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1,367,856 |
(5) |
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7.0 |
% |
AWM Investment Co, Inc.
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3,324,424 |
(6) |
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17.0 |
% |
Lansdowne Partners Limited Partnership
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3,905,676 |
(7) |
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19.9 |
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SRB Management, L.P.
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1,596,101 |
(8) |
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8.2 |
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* Indicates ownership of less than 1%.
(1) Includes of 426,108 shares of common stock jointly owned by Mrs. Danenberg and her husband, Peter Danenberg. Includes 338,796 shares of common stock issuable upon the exercise of options within 60 days of August 10, 2011.
(2) Includes amounts for stock options that have vested or will vest within 60 days of August 10, 2011.
(3) This number represents 182,700 shares of Common Stock held by HSMR Capital Partners QP LP.
(4) Includes 864,328 shares of common stock owned by her husband, Samuel Serruya, as to which Mrs. Serruya disclaims beneficial
ownership.
(5) Includes 864,328 shares of common stock owned by his wife, Clara Serruya, as to which Mrs. Serruya disclaims beneficial ownership.
(6) According to a Form 4 filed by Austin W. Marxe and David M. Greenhouse on May 17, 2011, Mr. Marxe and Mr. Greenhouse have shared power to vote and dispose of or direct the disposition of 3,324,424 common shares. MGP Advisors Limited (“MGP”) is the general partner of the Special Situations Fund III QP, L.P. (“QP”). AWM Investment Company, Inc. (“AWM”) is the general partner of MGP, the general partner of and investment adviser to the Special Situations Cayman Fund, L.P. (“Cayman”) and the investment adviser to QP and the Special Situations Life Sciences Fund, L.P. (“LS”). Austin W. Marxe and David M. Greenhouse are the principal owners of MGP and AWM. Through their control of MGP and AWM, Messrs. Marxe and Greenhouse share voting and investment control over the portfolio securities of each of the funds listed above, which include respectively 1,057,162 common shares held by QP, 1,149,745 common shares held by Cayman, and 1,117,517 common shares held by LS. The principal address for AWM Investment Co. is 527 Madison Ave. #2600, New York, NY 10022.
(7) According to Schedule 13G/A filed by Lansdowne Partners Limited Partnership on February 14, 2011, 3,658,676 common shares are held in the account of Lansdowne UK Strategic Investment Master Fund Limited (the "Master Fund") and may be deemed to be beneficially owned by Lansdowne Partners Limited Partnership by virtue of its role as the investment advisor of the Master Fund. Lansdowne Partners Limited Partnership disclaims beneficial ownership of the reported securities. The principal address for Lansdowne Partners Limited Partnership is 15 Davies Street, London, United Kingdom W1K 3AG.
(8) Includes 984,034 shares of common stock owned by Becker Drapkin QP ("Becker Drapkin QP"), 115,884 shares of common stock owned by Becker Drapkin LP (“Becker Drapkin L.P."), 381,679 shares of common stock owned by Mr. Steven R. Becker and 114,504 shares of common stock owned by Mr. Matthew A. Drapkin. According to Amendment No. 3 to the Schedule 13D filed on November 1, 2010, Becker Drapkin Management (“BD Management”), as the general partner of, and investment manager for the Becker Drapkin QP and Becker Drapkin LP (“Becker Drapkin Fund”), may be deemed to have the shared power to vote or direct the vote of the Becker Drapkin Fund shares. As co-managing members of BCA, each of Mr. Becker and Mr. Drapkin may be deemed to have the shared power to vote or direct the vote of any shares owned by BCA. BD Management, BCA, Becker Drapkin QP., Becker Drapkin LP, Mr. Becker and Mr. Drapkin disclaim any beneficial ownership of any common stock referenced herein, other than shares of common stock owned directly by them. The principal address for SRB Management is 300 Crescent Court, Suite 1111 Dallas, TX 75201.
PROPOSAL 1: TO ELECT SEVEN (7) DIRECTORS OF THE COMPANY
(Notice Item 1)
Our Board currently consists of nine directors and will be reduced to seven directors effective as of the Annual Meeting. At the Annual Meeting, seven directors are to be elected. Our directors hold office until their successors are elected at the next annual meeting of stockholders (or special meeting of stockholders at which directors are to be elected) and are qualified, or until their earlier resignation or removal. Directors are elected by a plurality vote of our stockholders, such that the nominees receiving the greatest number of votes, up to the number of directors to be elected, are elected to office. Any director may be removed from office at any time by our stockholders, with or without cause, by the affirmative vote of a majority of the outstanding voting power entitled to elect such director, at an annual or special meeting of the stockholders called for that purpose.
Our Board recommends that you vote to elect the Company’s slate of nominees, which consists of seven incumbent directors —Kirk K. Calhoun, Kathleen Danenberg, Gary D. Nusbaum, Michael Serruya, Michael Metzger, Richard van den Broek and David M. Wurzer. These nominees were chosen because we believe they collectively bring to the Board a wealth of experience in drug discovery and development, diagnostics development, business strategy and development and licensing and mergers and acquisitions activity in the pharmaceutical industry. Each director nominee has consented to be named in the proxy statement and to serve as a director if elected at the Annual Meeting.
Unless authority to vote for any of these nominees is withheld, the shares represented by the enclosed proxy will be voted FOR such nominees. In the event that any of the nominees becomes unable or unwilling to serve, the shares represented by the enclosed proxy will be voted for the election of such other person as the Board may recommend in his/her place. We have no reason to believe that any nominee will be unable or unwilling to serve as a director.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE SEVEN DIRECTOR NOMINEES TO SERVE UNTIL THE 2012 ANNUAL MEETING OR UNTIL THEIR EARLIER RESIGNATION OR REMOVAL.
Information About Our Nominees
Set forth below is certain information about our director nominees, including information about each nominee’s specific experience, qualifications, attributes or skills that led the Board to conclude that the nominee should serve as a director of the Company at the time we are filing this proxy statement, in light of our business and corporate structure. We believe each of our nominees has other attributes necessary to create an effective Board: the willingness to engage management and each other in a constructive and collaborative fashion; good judgment; the willingness to offer a diverse perspective; high personal and professional ethics, integrity and values; the ability to devote ample time to serve on our Board and its committees; and a commitment to representing the interests of all our stockholders. Collectively, we believe our nominees possess a broad set of competencies and experiences that will further the interests of the Company, its stockholders and other stakeholders.
Name
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Age
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Position with the Company
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Kirk K. Calhoun (1)(3)
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67
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Director, Chairman of the Board
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Kathleen Danenberg
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64
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Director, Founder & Executive Scientific and Technology Officer
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Michael A. Metzger (2)
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40
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Director
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Gary D. Nusbaum (1)(2)
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45
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Director
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Michael Serruya
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47
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Director
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Richard van den Broek (2)
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45
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Director
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David M. Wurzer (1)(3)
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53
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Director
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(1).
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Member of Audit Committee. Mr. Calhoun is chair of this committee.
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(2).
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Member of Nominating Committee. Mr. Nusbaum is chair of this committee.
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(3).
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Member of the Compensation Committee. Mr. Wurzer is chair of this committee.
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Each of our director nominees is a current director of the Company. There are no family relationships among any of the executive officers, directors or director nominees.
Kirk K. Calhoun joined as a member of our board of directors in May 2008. Mr. Calhoun joined Ernst & Young, LLP, a public accounting firm, in 1965 and served as a partner of the firm from 1975 until his retirement in 2002. Mr. Calhoun is a Certified Public Accountant. He has served on a number of board of directors, including Abraxis Bioscience, Inc., Myogen, Inc. and Adams Respiratory Therapeutics, Inc. Mr. Calhoun received a B.S. in Accounting from the University of Southern California.
Mr. Calhoun brings to the Board experience and skills in finance, management and corporate governance, developed over his career in public accounting and through his service as an audit committee financial expert on various public company boards and his service as a director of other life sciences companies.
Kathleen Danenberg has served as our Founder and Executive Scientific and Technology Officer since July 2011. Prior to that, she served as our Chief Executive Officer from 2002 to July 2011, our President from 2002 to February 2011 and our Vice President and Chief Scientific Officer from December 2000 to December 2002. Mrs. Danenberg has served as one of our board members since March 2000. Mrs. Danenberg began her career in molecular research and developed broad expertise in a variety of areas and applications. While at USC, Mrs. Danenberg invented a patented method to extract RNA from formalin-fixed paraffin embedded tissue specimens which became the basis for the establishment of Response Genetics, Inc. Prior to her work at USC, Mrs. Danenberg worked with the renowned enzyme kineticist Dr. W.W. Cleland at the University of Wisconsin to elucidate mechanism of action of the enzyme hexokinase. Mrs. Danenberg has over 100 scientific publications to her credit.
Mrs. Danenberg provides to the Board a unique and well-developed understanding of our company and our challenges and opportunities. Mrs. Danenberg has an understanding of our technology, operations, strategic partners, and regulatory environments.
Michael A. Metzger joined as a member of our board of directors in December 2010. Mr. Metzger has served as Executive Vice President and Chief Operating Officer of Mersana Therapeutics since April 2011. Mr. Metzger previously served as Senior Director, Business Development at Forest Laboratories, Inc., a company focused on pharmaceutical development, since 2006, where he also served as the head of the Mergers & Acquisitions practice. Prior to 2006, Mr. Metzger was Vice President Corporate Development at Onconova Therapeutics, Inc., a clinical stage biopharmaceutical company focused on novel discovery and development of oncology compounds, from 2001 until 2006. Mr. Metzger was Managing Director at Mesa Partners, Inc., from 1997 to 2001. In addition, Mr. Metzger has served as a director of various life sciences companies. Mr. Metzger holds a B.A. from George Washington University and an M.B.A. from the New York University Stern School of Business.
Mr. Metzger brings to the Board financial and business expertise directly related to the growth and development of life sciences companies like RGI, most significantly through his background in business strategy and development, and licensing and mergers and acquisitions activity, in the life sciences and pharmaceutical industry. Currently, growth is achieved by licensing and acquisition of relevant technologies as well as through in-house development. Mr. Metzger’s experience in this area is important to the Board’s ability to oversee our growth in both the diagnostic and pharmaceutical partnership sectors of our business.
Gary D. Nusbaum has served as a member of our board of directors since August 2007. From 1989-2002, Mr. Nusbaum was at the Private Equity firm Warburg Pincus, where he was a Managing Director, and from 2002 until 2005, Mr. Nusbaum was a Managing Director at Aetos Capital, an asset management firm. At Aetos Capital, Mr. Nusbaum was the firm’s Chief Financial Officer, and also headed its private equity business. From 2006 until 2010, Mr. Nusbaum joined Palladium Equity Partners, LLC, as a Managing Director. Mr. Nusbaum received his Bachelor of Science in Economics, summa cum laude, and Master of Business Administration degrees from The Wharton School of the University of Pennsylvania. He has been a board member of several public and private companies.
Mr. Nusbaum’s broad experience in corporate financings, mergers and acquisitions and corporate governance, developed over more than 20 years in the private equity industry and service on the boards of directors of private equity portfolio companies, brings to the Board important skills and strategic insights for the development and management of our business.
Michael Serruya joined as a member of our board of directors in March 2000. Since February 2000, Mr. Serruya has been Chairman of Yogen Fruz World Wide Incorporated, and from 1995 to February 2000 he was President, Chief Executive Officer and Chairman of Yogen Fruz, a consumer products company. Mr. Serruya was also a member of the Ontario Jobs and Investment Board, an Ontario government organization. Mr. Serruya is currently the President and Chief Executive Officer of CoolBrands International Inc. (TSE:COB.A). Mr. Serruya also serves on the Board of Directors of Jamba Juice, Inc. (NASDAQ: JMBA). Mr. Serruya attended Ryerson Polytechnical Institute.
Mr. Serruya’s business experience, including a diversified background as an executive and in operational roles in both public and private companies, and as a board member of several public companies, give him a breadth of knowledge and valuable understanding of our business. As a member of a family that collectively owns approximately 9.4% of our common stock, Mr. Serruya brings to the Board the perspective of a significant stockholder.
Richard van den Broek has served as a member of our board of directors since December 2010. Mr. van den Broek has served as the Managing Partner of HSMR Advisors, LLC, an investment fund focused on the biotechnology industry, since 2004. Mr. van den Broek, previously, was a Partner at Cooper Hill Partners, LLC, an investment fund primarily focused on the healthcare sector for the period of 2000 through 2003. Mr. van den Broek also serves as a director of the board of directors of Pharmaxis Ltd (in Australia) and Pharmacyclics, Inc. and is a member of the Pharmacyclics’ audit committee.
Mr. van den Broek’s business and investment experience in the biotechnology industry is valuable to the Board and the Company, given the focus on growth and creating partnerships in various sectors. In addition, Mr. van den Broek adds relevant experience as a Board member, due to his public company Board service on both diagnostics and pharmaceutical companies.
David M. Wurzer joined as a member of our board of directors in December 2010. Mr. Wuzer has served as Managing Director, Investments at Connecticut Innovations (“CI”), a quasi-public authority responsible for technology investing and innovation development since November 2009, where he is responsible for sourcing and analyzing investment opportunities. Prior to joining CI, Mr. Wurzer was a consultant from January 2008 to November 2009 and served as Executive Vice President, Treasurer and Chief Financial Officer of CuraGene Corporation of Bradford, Connecticut, from September 1998 through December 2007. From February 1994 until September 1997, Mr. Wurzer served as the Senior Vice President, Treasurer and Chief Financial Officer at Value Health, Inc. Mr. Wurzer has served on the board of directors of Strategic Diagnostics Inc. since February 2010 and of DUSA Pharmaceuticals Inc. since July 2010. Mr. Wurzer previously served on the 454 Life Sciences board of directors from June 2000 through May 2007.
Mr. Wurzer has valuable experience as a director of diagnostics and life sciences companies which is beneficial as a Board member of our Company. This experience, coupled with his business and development background, supplements the Board and aid in its continued focus on, and oversight of, Company growth.
David A. Smith and Jan C. Fagerberg, M.D., Ph.D., who are current directors of the Company, are not standing for re-election at the Annual Meeting.
GENERAL INFORMATION ABOUT THE BOARD OF DIRECTORS
Settlement with Special Situations
In September 2010, RGI entered into a settlement agreement (the “Settlement Agreement”) with Special Situations Fund III QP, L.P., Special Situations Cayman Fund, L.P. and Special Situations Life Sciences Fund, L.P., and certain of their affiliates (“SSF”) to settle the proxy contest SSF initiated in 2010. Under the terms of the Settlement Agreement, SSF agreed, among other things, to terminate its proxy solicitation and to vote for the Board’s slate of nominees, which would include two nominees independent of, but designated by, SSF. At the 2010 annual meeting of the shareholders, and pursuant to the terms of the Settlement Agreement, we expanded the size of our Board to nine and nominated Kathleen Danenberg, Kirk K. Calhoun, Gary D. Nusbaum, Michael Serruya, David Smith, Jan Fagerberg, M.D., Ph.D., Michael Metzger, Richard van den Broek and David M. Wurzer for election at the 2010 annual meeting. Messrs. van den Broek and Wurzer (the “SSF Designees”) were the individuals designated by SSF for inclusion on the Board’s slate of nominees.
Under the terms of the Settlement Agreement, SSF agreed not to engage in certain specified restricted activities, including, among other things, participating in any solicitation of proxies, seeking to advise or influence other stockholders with respect to the voting of the Company’s common stock or attempting to seek control of or influence the management, Board or policies or affairs of the Company, subject to certain exceptions (the “Standstill Provisions”). The Standstill Provisions continue in effect until the completion of our Annual Meeting, unless prior thereto we provide timely written notice to SSF that we do not intend to nominate the SSF Designees (or acceptable replacement nominees) for election as directors at the Annual Meeting.
Because we are nominating the SSF Designees for election at the Annual Meeting, SSF will be required, pursuant to the terms of the Settlement Agreement, to vote the shares of Company common stock it owns or controls in favor of the election of all of our seven director nominees at the Annual Meeting.
Director Independence
Our Board of Directors has reviewed the materiality of any relationship that each of our directors has with Response Genetics, Inc., either directly or indirectly. Based upon this review, our Board has determined that the following members of the Board are “independent directors” as defined by The NASDAQ Stock Market: Kirk K. Calhoun, Jan C. Fagerberg, Michael Metzger, Gary D. Nusbaum, Richard van den Broek and David M. Wurzer.
On March 4, 2010, we received a notice of deficiency from the NASDAQ Capital Market noting that the Company is no longer in compliance with NASDAQ Listing Rule 5605(b)(1), which requires our Board to be comprised of a majority of independent directors. The non-compliance cited by NASDAQ was the result of Mr. Hubertus Spierings’ resignation from the Board on February 8, 2010. NASDAQ Listing Rule 5605 provides that the Company may cure the deficiency by the earlier of its next annual stockholders meeting or one year from the occurrence of the event that caused the failure to comply with the requirement. The Company regained compliance with NASDAQ’s independent director requirement at the 2010 annual meeting of shareholders upon the election of the current directors of the Company.
Board of Directors Meetings and Attendance
Our board of directors met eleven times during the fiscal year ended December 31, 2010, either in person or by teleconference. During 2010, each of our directors attended at least 75% of the aggregate of the number of meetings of the Board and of committees of the Board on which he or she served during fiscal 2010, with the exception of Dr. Mitchell, who is not currently a director or director nominee, who attended four of the nine Board meetings held during the time she served on the Board and two of the compensation committee meetings held in 2010.
Our corporate governance guidelines provide that directors are strongly encouraged to attend the annual meeting of stockholders. Mr. Calhoun, Mrs. Danenberg, Dr. Fagerberg, Mr. Metzger, Mr. Nusbaum, Mr. Serruya, and Mr. Wurzer attended the 2010 annual meeting of our stockholders as either Directors or Director Nominees.
Board Composition
The Board of Directors seeks to ensure that the Board is composed of members whose particular experience, qualifications, attributes and skills, when taken together, will allow the Board to satisfy its oversight responsibilities effectively.
How Directors are Chosen
The Nominating and Governance Committee is responsible for assisting the Board in identifying individuals qualified to become Board members and recommending director nominees to the Board for each annual meeting of stockholders. It is the Nominating and Governance Committee’s policy to consider candidates recommended by stockholders, Company management or any other Board members. All candidate recommendations submitted by stockholders will be considered in the same manner and under the same process as any other candidate recommendations submitted from other sources.
The Nominating and Governance Committee considers the qualifications of candidates based upon its charter and the Company’s corporate governance guidelines. The Nominating and Governance Committee selects individuals as director nominees who have the highest personal and professional integrity, who have demonstrated exceptional ability and judgment and who would be most effective, in conjunction with the other members of the Board of Directors, in collectively serving the long-term interests of the stockholders, and all other factors it considers appropriate. The Nominating and Governance Committee does not have a formal policy with regard to the consideration of diversity in identifying director candidates. However, the Nominating and Governance Committee believes that having diversity amongst Board members enhances the Board’s ability to make fully informed, comprehensive, decisions and demonstrates leadership with respect to the Company’s initiatives to recruit and retain the best employees. As a result, the Nominating and Governance Committee believes that the Board should be comprised of a well-balanced group of individuals with diverse backgrounds, experiences, ages, races, genders and national origins as well as differences of viewpoint, professional experience, financial, business, academic, public sector and other and other expertise, education, skill and other individual qualities and attributes that contribute to board heterogeneity. The Nominating and Governance Committee has authority to retain search firms to assist in identifying and evaluating director candidates and to approve fees and retention terms for such advisors. After conducting an initial evaluation of a candidate, the Nominating and Governance Committee will interview that candidate if it believes the candidate might be suitable to be a director and may also ask the candidate to meet with other directors and members of management. If the Nominating and Governance Committee believes a candidate would be a valuable addition to the Board, it will recommend to the full Board that candidate’s election.
Leadership Structure
The Board does not have a prescribed policy on whether the roles of the Chairman of the Board and the Chief Executive Officer should be separate or combined, however the positions have been, and are currently, held separately in recognition of the differences between the two roles. Since his appointment in December 2010, Mr. Calhoun has served as the Chairman of the Board, and until her resignation from the position in July 2011, Mrs. Danenberg served as the Chief Executive Officer of the Company. Ms. McNairn currently holds the position of Interim Chief Executive Officer of the Company, until a permanent successor to Mrs. Danenberg is chosen. Upon hiring a new Chief Executive Officer, we intend to keep the positions of Chairman of the Board and Chief Executive Officer separate. We believe that having these positions held by separate persons is beneficial to the Company in that it enhances the Board’s risk management and oversight and provides greater checks and balances by not instilling too much authority or power in one individual. In accordance with our Bylaws, the Chairman is responsible for chairing Board meetings and setting the agenda for these meetings. Each director also may suggest items for inclusion on the agenda and may raise at any Board meeting subjects that are not on the agenda for that meeting.
Our Board has three standing committees, each of which is comprised solely of independent directors with a different committee chair, each as described below. In addition, in its discretion, the Board may authorize and appoint special committees with such duties and powers deemed necessary and appropriate by the Board. For example, in connection with the consideration of financing transactions in 2009 and 2010, our Board formed Special Financing Committees authorized to make recommendations to the Board with regards to financing alternatives and proposals. In addition, in response to proxy solicitations of certain of our significant stockholders, the Board had formed a committee of independent directors authorized to make recommendations to the Board regarding any changes to the structure or composition to the Board of Directors. We believe that the separation of the Chairman and Chief Executive Officer position, coupled with experienced independent directors, separate committee chairs and special committee support where necessary, provides an effective leadership structure for the Company.
Oversight of Risk Management
It is management’s responsibility to manage risk and bring to the Board’s attention the most material risks to the company. It is the Board’s responsibility to oversee management in this effort. The Board has oversight responsibility of the processes established to report and monitor systems for material risks applicable to the Company. In exercising its oversight, the Board has allocated some areas of focus to its committees and has retained areas of focus for itself, as described below. The Audit Committee regularly reviews financial risk, such as accounting, finance, internal controls other risk management functions. The Nominating and Governance Committee considers risks related to succession planning and oversees the appropriate allocation of responsibility for risk oversight among the committees of the Board. The Compensation Committee considers risks related to the attraction and retention of talent and risks relating to the design of compensation programs and arrangements. The Compensation Committee also reviews compensation and benefits plans affecting employees in addition to those applicable to executive officers. Oversight responsibility for compliance risk is shared among the Board committees. The full Board considers strategic risks and opportunities and regularly receives detailed reports from the committees regarding risk oversight in their areas of responsibility.
Communications Between Stockholders and Board of Directors
Generally, stockholders who have questions or concerns should contact our Corporate Headquarters to the attention of David O’Toole, Vice President, Chief Financial Officer, at (323) 224-3900. However, any stockholders who wish to address questions regarding our business directly with the Board, or any individual director, should direct his or her questions to the Board members via e-mail at Directors@responsegenetics.com. Communications will be distributed to the Board, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communications. Items that are unrelated to the duties and responsibilities of the Board, such as junk mail and mass mailings, resumes and other forms of job inquiries, surveys and solicitations or advertisements, may be excluded. In addition, any material that is unduly hostile, threatening, or illegal in nature may be excluded, provided that any communication that is filtered out will be made available to any outside director upon request.
Board Committees
In order to fulfill its responsibilities, our board of directors has delegated certain authority to its committees. There are three standing committees.
A brief description of each of the Board committees and their functions is described below. Additional information about the committees can be found in the committee charters, which are available on the Investor Relations section of our website at www.responsegenetics.com. Printed copies of these charters or the Code may be obtained without charge by writing to the Corporate Secretary.
Our board of directors has determined that all of the members of each of the board’s three standing committees are independent as defined under the rules of the NASDAQ Stock Market, including, in case of all members of the audit committee, the independence requirements contemplated by Rule 10A−3 under the Securities and Exchange Act of 1934.
Audit Committee
Our audit committee’s responsibilities include:
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assisting the Board in monitoring the integrity of the financial statements of the Company and financial reporting procedures and the Company’s compliance with legal and regulatory requirements;
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approving and retaining the independent registered public accounting firm to conduct the annual audit of our books and records and informing the Board of any significant accounting matters, including accounting policies;
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reviewing management’s accounting for the Company’s financial results and reviewing the timeliness and adequacy of the reporting of those results and related judgments;
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reviewing the proposed scope and results of the audit;
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reviewing and pre−approving the independent registered public accounting firm’s audit and non−audit services rendered;
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approving the audit fees to be paid;
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reviewing accounting and financial controls with the independent registered public accounting firm and our financial and accounting staff;
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reviewing and approving transactions between us and our directors, officers and affiliates;
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recognizing and preventing prohibited non−audit services by our independent registered accounting firm;
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reviewing the performance of the Audit Committee;
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establishing procedures for the receipt, retention and treatment of complaints relating to accounting, internal accounting controls, and for the confidential, anonymous submission by employees of concerns regarding accounting or auditing matters;
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·
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reviewing and reporting to the Board on the Company’s management of its financial resources; and
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preparing the report of the audit committee that SEC rules require to be included in our annual meeting proxy statement.
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Until December 1, 2010, the members of our audit committee included Mr. Calhoun, Mr. Ferrara, and Mr. Nusbaum. The current members of our audit committee are Mr. Calhoun, Mr. Nusbaum and Mr. Wurzer. Mr. Calhoun chairs the committee. Kirk Calhoun, the Chairman of the Audit Committee, is an independent director who has been determined by our Board of Directors to be an audit committee financial expert. Stockholders should understand that this designation is a disclosure requirement of the SEC related to Mr. Calhoun’s experience and understanding with respect to certain accounting and auditing matters. The designation does not impose upon Mr. Calhoun any duties, obligations or liability that are greater than are generally imposed on him as a member of the Audit Committee and the Board of Directors, and his designation as an audit committee financial expert pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the Audit Committee or the Board of Directors. Our audit committee met nine times during 2010.
A copy of the Audit Committee’s written charter is publicly available on our website at www.responsegenetics.com.
Compensation Committee
Our compensation committee is composed of three members and is authorized to:
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review and recommend the compensation arrangements for management, including the compensation for our president and chief executive officer;
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establish and review general compensation policies with the objective to attract and retain superior talent, to reward individual performance and to achieve our financial goals;
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administer our stock incentive plans; and
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prepare a report of the compensation committee that SEC rules require to be included in our annual meeting proxy statement.
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The Compensation Committee has adopted a combination of compensation elements in order to further our compensation goals. The elements include: (i) base salary, (ii) annual incentive bonus compensation based upon individual and corporate performance; and (iii) long−term incentive compensation in the forms of equity participation. In furtherance of our compensation objectives, the Compensation Committee also considers publicly available compensation data for directors and management, provided by our compensation consultant, Vivient Consulting LLC. In addition, the Compensation Committee considers the recommendation of our chief executive officer with respect to the appropriate compensation of our other executive officers.
Until December 1, 2010, the members of our compensation committee included Mr. Calhoun, Dr. Mitchell and Mr. Ferrara. Our compensation committee met five times during 2010. Mr. Calhoun chaired the committee through December 1, 2010. Following the December 1, 2010 annual shareholders meeting, the current members of our compensation committee are Mr. Calhoun, Dr. Fagerberg, and Mr. Wurzer. Mr. Wurzer chairs the committee.
A copy of the Compensation Committee’s written charter is publicly available on our website at www.responsegenetics.com.
Nominating and Governance Committee
Our nominating and governance committee is composed of three members and is authorized to:
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seek and identify individuals qualified to become Board members, and reviews and recommends possible candidates for Board membership, taking into account such criteria as independence, skills, diversity, occupation and experience in the context of the needs of the Board;
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review the structure of the Board, its committees and overall size;
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recommend for Board approval assignments of Board members to committees and selection of Board committee chairs;
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oversee the implementation of the Code of Business Conduct and Ethics and monitors compliance with the Code;
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determine a schedule for regular executive sessions of the Board in which non−management directors meet without management participation;
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develop and recommend to the Board corporate governance principles applicable to our company;
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oversee the process of succession planning for management;
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review and maintain oversight of matters relating to the independence of Board and committee members;
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review the performance of the nominating and governance committee; and
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oversee the annual performance evaluation of the board of directors and management.
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Until the December 1, 2010 annual shareholders meeting, the members of our Nominating and Governance Committee were Mr. Nusbaum and Mr. Ferrara. The current members of the nominating and governance committee are Mr. Metzger, Mr. Nusbaum, and Mr. van den Broek. Mr. Nusbaum chairs the committee. Our nominating and governance committee met twelve times during 2010.
A copy of the Nominating Committee’s written charter is publicly available on the Company’s website at www.responsegenetics.com.
The following table shows the total compensation paid or accrued during the fiscal year ended December 31, 2010 to each of our non-employee directors.
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Fees Earned $
(1)
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Option Awards $
(2)
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Total
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Gary D. Nusbaum (3)
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$ |
38,750 |
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$ |
20,700 |
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$ |
58,750 |
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John C. Ferrara (4)
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$ |
39,500 |
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$ |
0 |
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$ |
39,500 |
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Kirk. K. Calhoun (4)
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$ |
29,500 |
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$ |
20,700 |
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$ |
50,200 |
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David M. Smith (4)
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$ |
20,000 |
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|
$ |
20,700 |
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|
$ |
40,700 |
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Michael Serruya (4)
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$ |
20,000 |
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|
$ |
20,700 |
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|
$ |
40,700 |
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Tom DeMeester, M.D. (4)
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$ |
20,000 |
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|
$ |
0 |
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|
$ |
20,000 |
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Hubertus Spierings
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$ |
8,835 |
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|
$ |
0 |
|
|
$ |
8,835 |
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David. R. Gandara, M.D.
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$ |
8,335 |
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|
$ |
0 |
|
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$ |
8,835 |
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Edith Mitchell, M.D.
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$ |
18,835 |
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|
$ |
20,700 |
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$ |
39,535 |
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Jan Fagerberg, M.D. (5)
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$ |
0 |
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|
$ |
20,700 |
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|
$ |
20,700 |
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Michael Metzger (5)
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$ |
0 |
|
|
$ |
20,700 |
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$ |
20,700 |
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Richard van den Broek (5)
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$ |
0 |
|
|
$ |
20,700 |
|
|
$ |
20,700 |
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David M. Wurzer (5)
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$ |
0 |
|
|
$ |
20,700 |
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|
$ |
20,700 |
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(1) A full description of all fees paid to our directors is provided below. The cash portion of fees paid represent either a 100% of the annual retainer and 100% of the committee meeting fees described below or a pro-rated percentage of the annual retainer and 100% of the committee meeting fees described below.
(2) This column represents the aggregate grant date fair value of stock options granted to our directors in 2010, determined under FASB ASC Topic 718, Compensation — Stock Compensation. Assumptions used in the calculation of these amounts are included in Note 7 to our financial statements for the year ended December 31, 2010.
(3) The aggregate number of stock options outstanding for this director as of 12/31/10 was 41,688.
(4) The aggregate number of stock options outstanding for each of these directors as of 12/31/10 was 34,500.
(5) The aggregate number of stock options outstanding for each of these directors as of 12/31/10 was 11,500.
On February 12, 2008, the Compensation Committee of the Board of Directors revised and adopted a director compensation policy. Under the terms of this policy, which was effective for 2010, all directors received the following:
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An annual retainer of $20,000 paid quarterly in arrears on the last day of the quarter;
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An annual grant of options to purchase 11,500 shares of our common stock at an exercise price equal to the fair market value of our common stock on the date of grant, vesting quarterly over the four-year period following the date of grant, subject to continued service on the board of directors;
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A per-meeting fee of $500 for each meeting of the audit committee, the compensation committee, and the nominating and governance committee of the board of directors attended, as applicable, either in person or telephonically; and
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A per-meeting fee of $750 for the Chairman of each of the committees for each committee meeting attended, either in person or telephonically.
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PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
(Notice Item 2)
The Audit Committee has appointed BDO USA, LLP, independent public accountants, to audit our financial statements for the fiscal year ending December 31, 2011. The Board proposes that the stockholders ratify this appointment. BDO USA, LLP audited our financial statements for the fiscal year ended December 31, 2011. We expect that representatives of BDO USA, LLP will be present at the Annual Meeting, will be able to make a statement if they so desire, and will be available to respond to appropriate questions.
Audit Services And Fees
The professional services provided by BDO USA, LLP and the aggregate fees for those services rendered during the years ended December 31, 2010 and 2009 were as follows:
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2010
|
|
|
2009
|
|
Audit Fees
|
|
$ |
197,970 |
|
|
$ |
223,032 |
|
Audit Related Fees
|
|
|
- |
|
|
|
— |
|
Tax Fees
|
|
$ |
17,750 |
|
|
|
— |
|
All Other Fees
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|
|
— |
|
|
|
— |
|
Total
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|
$ |
215,720 |
|
|
$ |
223,032 |
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The professional services provided by SingerLewak LLP and the aggregate fees for those services rendered during the year ended December 31, 2009 were as follows:
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|
|
2009 |
|
Audit Fees
|
|
$ |
241,449 |
|
Audit Related Fees
|
|
|
— |
|
Tax Fees
|
|
|
— |
|
All Other Fees
|
|
|
— |
|
Total
|
|
$ |
241,449 |
|
Change In Independent Registered Public Accounting Firm
On July 14, 2009, the Company dismissed SingerLewak LLP as independent registered public accounting firm for the Company. The decision to dismiss SingerLewak LLP was approved by the Audit Committee. Based on the recommendation of the Audit Committee, the Company approved the decision to engage BDO USA, LLP as its new principal independent registered public accounting firm and the change in auditors became effective on July 17, 2009.
Policy on Audit Committee Pre−Approval of Audit and Permissible
Non−audit Services of Independent Auditors
Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent auditor. In recognition of this responsibility, the Audit Committee has established a policy to pre−approve all audit and permissible non−audit services provided by the independent auditor.
Prior to engagement of the independent auditor for the next year's audit, management will submit an aggregate of services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.
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1.
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Audit services include audit work performed in the preparation of financial statements, as well as work that generally only the independent registered public accounting firm can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.
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2.
|
Audit−Related services are for assurance and related services that are traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.
|
|
3.
|
Tax services include all services performed by the independent auditor's tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.
|
|
|
Other Fees are those associated with services not captured in the other categories. The Company generally does not request such services from the independent auditor.
|
Prior to engagement, the Audit Committee pre−approves these services by category of service. The fees are budgeted and the Audit Committee requires the independent auditor and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent auditor for additional services not contemplated in the original pre−approval. In those instances, the Audit Committee requires specific pre−approval before engaging the independent auditor.
The Audit Committee may delegate pre−approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre−approval decisions to the Audit Committee at its next scheduled meeting.
In the event the stockholders fail to ratify the appointment, the Audit Committee will consider 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 independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders.
The affirmative vote of a majority of the shares cast affirmatively or negatively at the annual meeting is required to ratify the appointment of the independent public accountants.
THE BOARD RECOMMENDS A VOTE TO RATIFY THE APPOINTMENT OF BDO USA, LLP AS THE COMPANY’S INDEPENDENT PUBLIC ACCOUNTANTS
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
The following table sets forth certain information regarding our executive officers.
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Kathleen Danenberg
|
|
64
|
|
Former President, Chief Executive Officer and Director, Current Founder and Executive Scientific and Technology Officer
|
Christine Meda
|
|
63
|
|
President
|
David O’Toole
|
|
52
|
|
Vice President and Chief Financial Officer
|
Denise McNairn
|
|
44
|
|
Interim Chief Executive Officer, Vice President, General Counsel and Secretary
|
The following is a brief summary of the background of each of our officers. There are no family relationships among any of the executive officers, directors or director nominees.
Kathleen Danenberg had been our Chief Executive Officer and President since 2002. In February 2011, Ms. Dannenberg stepped down from the position of President of the Company. On July 22, 2011, Ms. Danenberg stepped down from the position of Chief Executive Officer of the Company and was appointed by the Board of Directors as Founder and Executive Scientific and Technology Officer of the Company. Prior to serving as Founder and Executive Scientific and Technology Officer and as the Chief Executive Officer of the Company, Ms. Danenberg served as our Vice President and Chief Scientific Officer from December 2000 to December 2002. Ms. Danenberg has served as one of our Board members since March 2000. While conducting research at the University of Southern California, Ms. Danenberg co-invented a breakthrough patented method to extract RNA from formalin-fixed paraffin embedded tissue specimens which became the basis for the establishment of the Company. Ms. Danenberg received her B.S. in biochemistry from the University of Wisconsin.
Christine Meda has served as our President since February 2011. She most recently served as President and Chief Executive Officer of Arcxis Biotechnologies, an early-stage molecular diagnostics company, since December 2007. Ms. Meda founded and is also President of RxDxLink, a consulting service company to early state and small biotechnology companies. Ms. Meda served as President and Chief Operating Officer for Diamics, Inc., an early-stage diagnostics company, from January 2007 to July 2007. From January 2003 through 2006, Ms. Meda held various positions, including Vice President Business Development and Vice President of Women’s Health Development, at Roche Molecular Diagnostics, where she was responsible for research medical device business strategy.
David O’Toole has served as our Vice President and Chief Financial Officer since May 2010. Prior to joining us, from 2008 to 2009, Mr. O’Toole served as Executive Vice President and Chief Financial Officer of Abraxis Bioscience, a fully integrated biotechnology company. As Chief Financial Officer of Abraxis, Mr. O’Toole was responsible for, and was a key participant in, that company’s shareholder communications function. Prior to his experience with Abraxis, Mr. O’Toole spent sixteen years with Deloitte & Touche serving as Partner and working with many large multinational corporations and financial institutions. During his last ten years working in public accounting, his industry focus was in Life Science and Biotech. Mr. O’Toole received his B.S. in Accounting from the University of Arizona.
Denise McNairn has served as our Vice President and General Counsel since February 2007 and Interim Chief Executive Officer since August 2011. Ms. McNairn was appointed by the Board as the Company’s Secretary in July of 2010. Prior to joining us, from 2001 to 2007, Ms. McNairn was an attorney at Kenyon & Kenyon LLP. Prior to working for Kenyon & Kenyon, Ms. McNairn worked as a Technology Transfer Specialist at the National Cancer Institute Technology Transfer Branch, where she began her career in drafting and negotiating transactional agreements. Ms. McNairn received her B.S. from Virginia Polytechnic Institute and State University, an M.S. from Johns Hopkins University and her J.D. from the University of Maryland School of Law.
The following table shows the total compensation awarded to, earned by, or paid to our former Chief Executive Officer and our two next most highly compensated executive officers (our “named executive officers”) during the last two completed fiscal years.
Summary Compensation Table
Name and Principal Position
|
Year
|
|
Salary ($)
|
|
|
Bonus
($)
|
|
|
Stock Options
($) (1)
|
|
|
All Other Compensation ($)
|
|
|
Total
|
|
Kathleen Danenberg
|
2010
|
|
$ |
400,000 |
|
|
$ |
186,600 |
|
|
|
144,000 |
|
|
$ |
24,000 |
|
|
$ |
754,600 |
|
Former President & CEO
|
2009
|
|
$ |
371,000 |
|
|
$ |
145,000 |
|
|
|
50,582 |
|
|
$ |
24,000 |
|
|
$ |
590,582 |
|
Denise McNairn
|
2010
|
|
$ |
255,000 |
|
|
$ |
110,000 |
|
|
|
72,000 |
|
|
$ |
0 |
|
|
$ |
437,000 |
|
Vice President, General Counsel
|
2009
|
|
$ |
238,500 |
|
|
$ |
80,000 |
|
|
|
25,291 |
|
|
$ |
0 |
|
|
$ |
343,791 |
|
David O’Toole
Vice President, Chief Financial Officer
|
2010
|
|
$ |
157,000 |
|
|
$ |
100,000 |
|
|
|
180,000 |
|
|
$ |
3,236 |
|
|
$ |
440,236 |
|
(1) This column represents the aggregate grant date fair value of stock options granted to our named executive officers in each of 2010 and 2009, determined under FASB ASC Topic 718, Compensation — Stock Compensation. Assumptions used in the calculation of these amounts for 2010 are included in Note 7 to our financial statements for the year ended December 31, 2010.
The Danenberg Employment Agreement
We entered into an employment agreement with Mrs. Danenberg on October 26, 2006, which was subsequently amended on December 14, 2006, and on May 29, 2007, pursuant to which she served in the positions of President until February 2011 and Chief Executive Officer until July 22, 2011. In connection with Mrs. Danenberg’s stepping down from the positions of President and CEO and her transition to the position of Founder and Executive Scientific and Technology Officer, the Company and Mrs. Danenberg have entered into an amended and restated employment agreement dated as of July 22, 2011, which supersedes her prior employment agreement. The amended and restated employment agreement provides for an initial term that expires on December 31, 2012, subject to automatic year-to-year extensions absent a non-renewal by either party. Pursuant to the agreement, Mrs. Danenberg’s base salary through December 31, 2011, will be based on an annual rate of $420,000, and thereafter her base salary will be $330,000 per year.
Upon a termination of Mrs. Danenberg’s employment either by the Company without “cause” or by Mrs. Danenberg for “good reason,” or upon any non-renewal of the agreement beyond the expiration of its term, Mrs. Danenberg will receive a severance benefit consisting of (i) an amount in cash equal to 150% (or 100% in the case of a Company non-renewal and 50% in the case of Mrs. Danenberg’s non-renewal) of the sum of $420,000 and her most recent annual bonus under the agreement, (ii) any earned but unpaid annual bonus from a prior completed year, (iii) a prorated annual bonus for the year of termination, based on actual performance, and (iv) except in the case of Mrs. Danenberg’s non-renewal, accelerated vesting in all equity awards that would have vested based solely upon her continued employment during the 24 months following such termination. Mrs. Danenberg’s rights to receive such severance benefits will be conditioned upon her execution of a general release of claims against the Company.
Upon a change in control of the Company, Mrs. Danenberg will become vested in all time-vested equity awards, and all performance-vested equity awards will vest based on pro-forma performance over the entire performance period extrapolated from the Company’s performance through the date of such change in control. Payments to Mrs. Danenberg in connection with a change in control will be reduced to the extent that such reduction will result in a greater after-tax benefit to her as a result of the treatment of “parachute payments” under Section 280G of the Internal Revenue Code.
The agreement also contains customary covenants of non-disclosure, non-competition, and non-solicitation. Additionally, the agreement provides for registration rights with respect to shares of the Company’s common stock owned by Mrs. Danenberg, now or in the future, at her request, to permit her to sell all or any portion of such common stock.
The O’Toole Employment Agreement
We entered into an employment agreement with David O’Toole dated as of May 3, 2010, pursuant to which he serves in the positions of Vice President and Chief Financial Officer. The agreement had an initial term of one year and is now subject to automatic one-year renewal terms. Mr. O’Toole is to receive an initial base salary of $255,000 per year. Mr. O’Toole is also eligible to earn an annual bonus of up to 35% of his base salary based upon our meeting certain performance targets and his meeting personal objectives as agreed upon with the CEO and approved by our Board. Mr. O’Toole’s agreement also provides for change in control benefits consisting of a cash payment that is equivalent to six (6) months’ base salary, to the extent that the change in control occurs during his first year of employment, or nine (9) months’ base salary, to the extent that the change in control occurs during his second or third year of employment. The agreement also provides that, upon termination of his employment, Mr. O’Toole will receive payment for all then-accrued and unused paid time off in accordance with the Company’s paid time off policy and applicable law. The employment agreement also places customary confidentiality, assignment of inventions, and nonsolicitation obligations on Mr. O’Toole.
The McNairn Employment Agreement
We entered into an employment agreement with Denise McNairn on February 20, 2007, which was amended on May 29, 2007 and September 10, 2010, pursuant to which she serves in the positions of Vice President and General Counsel. The agreement had an initial term of three years and is now subject to automatic one-year renewal terms. Ms. McNairn is to receive an initial base salary of $225,000 per year. Ms. McNairn is also eligible to earn an annual bonus of up to 35% of her base salary based upon our meeting certain performance targets and her meeting personal objectives as agreed upon with the CEO and approved by our Board. Ms. McNairn’s agreement also provides for change in control and severance benefits consisting of a cash payment that is equivalent to nine (9) months salary, in each case. The agreement also provides that, upon termination of her employment, Ms. McNairn will receive payment for all then-accrued and unused paid time off in accordance with the Company’s paid time off policy and applicable law. The employment agreement also places customary confidentiality, assignment of inventions, and nonsolicitation obligations on Ms. McNairn.
Outstanding Equity Awards at Fiscal Year-End
The following table shows grants of stock options held by our named executive officers on December 31, 2010.
Name
|
|
Grant Date
|
|
Number of
Securities
Underlying Unexercised Options (#) Exercisable
|
|
|
Number of
Securities
Underlying Unexercised Options (#) Unexercisable
|
|
|
Options
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Kathleen Danenberg
|
|
6/4/07
|
|
|
212,577 |
|
|
|
— |
|
|
|
7.00 |
|
6/4/17
|
|
|
|
6/17/08
|
(1) |
|
7,190 |
|
|
|
4,310 |
|
|
|
3.15 |
|
6/17/18
|
|
|
|
9/17/08
|
(2) |
|
46,875 |
|
|
|
28,125 |
|
|
|
3.05 |
|
9/17/18
|
|
|
|
6/16/09
|
(2) |
|
35,000 |
|
|
|
45,000 |
|
|
|
1.35 |
|
6/16/19
|
|
|
|
7/13/10
|
(2) |
|
20,000 |
|
|
|
60,000 |
|
|
|
2.71 |
|
7/13/20
|
|
Denise McNairn
|
|
6/4/07
|
(3) |
|
53,459 |
|
|
|
17,820 |
|
|
|
7.00 |
|
6/4/17
|
|
|
|
9/17/08
|
(2) |
|
18,750 |
|
|
|
11,250 |
|
|
|
3.05 |
|
9/17/18
|
|
|
|
6/16/09
|
(2) |
|
17,500 |
|
|
|
22,500 |
|
|
|
1.35 |
|
6/16/19
|
|
|
|
7/13/10
|
(2) |
|
10,000 |
|
|
|
30,000 |
|
|
|
2.71 |
|
7/13/20
|
|
David O’Toole
|
|
5/4/10
|
(4) |
|
0 |
|
|
|
100,000 |
|
|
|
2.21 |
|
5/4/20
|
|
(1) These options vest quarterly over the four-year period following the date of grant, subject to continued service on the board of directors.
(2) One quarter of these options vest immediately upon the date of grant and the remainder vest in four equal installments on the first four anniversaries of the date of grant.
(3) These options vest in four equal installments on the first four anniversaries of the date of grant. The options will vest immediately upon a change in control.
(4) These options vest in equal annual amounts over the four-year period following the date of grant.
REPORT OF AUDIT COMMITTEE
Report of Audit Committee
The Audit Committee of the Board of Directors, which consists entirely of directors who meet the independence and experience requirements of The NASDAQ Stock Market, has furnished the following report:
The Audit Committee assists the Board in overseeing and monitoring the integrity of our financial reporting process, compliance with legal and regulatory requirements and the quality external audit processes. This committee’s role and responsibilities are set forth in our charter adopted by the Board, which is available on our website at www.responsegenetics.com. This committee reviews and reassesses our charter annually and recommends any changes to the Board for approval. The Audit Committee is responsible for overseeing our overall financial reporting process, and for the appointment, compensation, retention, and oversight of the work of BDO USA, LLP. In fulfilling its responsibilities for the financial statements for fiscal year 2010, the Audit Committee took the following actions:
|
•
|
Reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2010 with management and BDO USA, LLP, our independent registered public accounting firm;
|
|
•
|
Discussed with BDO USA, LLP the matters required to be discussed by Statement on Auditing Standards No. 90, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T, relating to the conduct of the audit; and
|
|
•
|
Received written disclosures and the letter from BDO USA, LLP regarding its independence as required by Independence Standards Board Standard No. 1, as adopted by the Public Company Accounting Oversight Board in Rule 3600T. The Audit Committee further discussed with BDO USA, LLP their independence. The Audit Committee also considered the status of pending litigation, taxation matters and other areas of oversight relating to the financial reporting and audit process that the committee determined appropriate.
|
Based on the Audit Committee’s review of the audited financial statements and discussions with management and BDO USA, LLP, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10−K for the fiscal year ended December 31, 2010 for filing with the SEC.
Members of the Response Genetics, Inc.
Audit Committee on March 30, 2011
Kirk K. Calhoun
Gary Nusbaum
David M. Wurzer
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s directors and executive officers, and any persons who own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Directors, executive officers and greater than ten percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms and written representations from certain reporting persons, the Company believes that all filing requirements applicable to its directors and executive officers have been complied with during 2010.
RELATED PARTY TRANSACTIONS
The Board of Directors has adopted a written policy requiring that any transaction involving the Company in which one of our directors, executive officers, or greater than five percent shareholders, or the immediate family members of any of the foregoing persons, has a direct or indirect material interest, be approved or ratified by a majority of the full Board or by a designated committee of the Board.
The Board has designated the Audit Committee as having responsibility for reviewing and approving, in advance, all such transactions. In determining whether to approve or ratify any such transaction, the Audit Committee must consider, in addition to other factors deemed appropriate, whether the transaction is in the best interests of the Company and on terms comparable to those involving unrelated parties. No member of the Audit Committee may participate in any review, approval or ratification of any transaction if he or she, or his or her immediate family member, has a direct or indirect material interest in the transaction.
The following is a description of transactions that were entered into with our executive officers, directors or 5% stockholders during the prior fiscal year. We believe that all of the transactions described below were made on terms no less favorable to us than could have been obtained from unaffiliated hired parties.
Royalty Payment Related to University of Southern California
While employed at USC, Kathleen Danenberg, our Chief Executive Officer and a director, developed and patented (RGI−1). USC retains ownership of this patent but has exclusively licensed this technology to us. In consideration for this license, we are obligated to pay as royalties to USC a percentage of the net sales of products or services using the technology, and to meet a certain minimum in royalty payments. Pursuant to USC policy, the inventors of technology owned by the University and then licensed for commercialization are paid a portion of royalties received by the University from the licensed technology. USC therefore pays a portion of royalties received from us to Mrs. Danenberg in recognition of her invention. Amounts paid to Mrs. Danenberg by USC amounted to $5,465 and $32,758, for the years ended December 31, 2009 and 2010, respectively.
Other Transactions
Liga Danenberg, Mrs. Danenberg’s daughter, is employed by the Company as IT Director. In 2010, she was paid an aggregate salary and bonus of $107,685, plus granted options to purchase 3,750 shares of the Company’s common stock at an exercise price of $2.71 per share as well as provided benefits under the Company’s benefits program. Peter Danenberg, Mrs. Danenberg’s son, is employed as a Software Architect of the Company. He received an aggregate salary and consulting services fees of $174,474 for the year ended December 31, 2010.
OTHER MATTERS
Expenses of Solicitation
We will pay the cost of soliciting proxies and the expenses incurred in connection with preparing and distributing the Proxy Statement, its enclosures and additional soliciting materials. We will reimburse brokerage firms and others for their expenses in forwarding solicitation materials to the beneficial owners of its shares. In addition to the solicitation of proxies by mail, our officers or our other representatives may also solicit proxies by telephone, facsimile, Internet or in person.
Other Business Presented at the Annual Meeting
The Board knows of no other business which will be presented to the Annual Meeting. If any other business is properly brought before the Annual Meeting, proxies in the enclosed form will be voted in accordance with the judgment of the persons voting the proxies.
Stockholder Proposals and Nominations for Director
To be considered for inclusion in the proxy statement relating to our 2012 Annual Meeting, stockholder proposals must be received no later than 120 days prior to the date that is one year from this year’s mailing date; provided, however, that in the event the 2012 Meeting is more than 30 days before or more than 30 days after the anniversary date of the 2011 Annual Meeting, the deadline for receipt of stockholders proposals shall be a reasonable time before the Company begins to print and send its proxy materials relating to the 2012 Annual Meeting. To be considered for presentation at the 2012 Annual Meeting, although not included in the proxy statement, proposals and director nominations must be received no earlier than 75 days prior to the date that is one year from this year’s mailing date and no later than 45 days prior to the date that is one year from this year’s mailing date; provided, however, that in the event that the date of the 2012 Annual Meeting is more than 30 days before or more than 30 days after the anniversary date of the 2010 Annual Meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to the 2012 Annual Meeting or the close of business on the tenth (10th) day following the day on which public announcement of the date of the 2012 Annual Meeting is first made by the Company. Proposals and nominations that are not received in a timely manner will not be voted on at the 2012 Annual Meeting. All stockholder proposals and director nominations should be marked for the attention of Denise McNairn, Vice President, General Counsel and Secretary, 103 S. Carroll Street, Suite 2B, Frederick, Maryland 21701.
Future Proxy Materials and Annual Reports
Stockholders may elect to receive future proxy statements and annual reports in the mail or over the Internet. If you are a stockholder of record, you can choose these options for future proxy statements and annual reports by following the instructions in the Notice of Internet Availability or by notifying our transfer agent upon written or oral request to: email: infor@amstock.com; website: http://www.amstock.com/proxyservices/requestmaterials.asp; telephone: 888-Proxy-NA (888.776.9962) or 718.921.8562 (for international callers). If you hold your shares through a bank, broker or other holder of record, please refer to the information provided by that entity for instructions on how to elect to receive future proxy statements and annual reports through the mail or over the Internet.
If you choose to view future proxy statements and annual reports only over the Internet, next year you will receive a notice with instructions containing the Internet address of those materials. If you choose to receive future proxy statements and annual reports, you will receive printed copies of all proxy materials. Your choice will remain in effect indefinitely until you give notification otherwise by following the instructions to be provided.
Los Angeles, California
September 2, 2011
Our Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended December 31, 2010 (other than exhibits thereto) filed with the SEC, which provides additional information about us, is available on the Internet at www.responsegenetics.com and is available in paper form to beneficial owners of our common stock without charge upon written request to David O’Toole, Vice President, Chief Financial Officer, 1640 Marengo St., 6th Floor, Los Angeles, California 90033.