geron_def14a.htm
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED
IN PROXY STATEMENT
SCHEDULE 14A
INFORMATION
Proxy Statement
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14a-12
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by Rule 14a-6(e)(2))
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Additional Materials
GERON
CORPORATION
------------------------------------------------------------------------------------------------------------------------------------------------------
(Name of Registrant as
Specified In Its Charter)
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GERON CORPORATION
230 Constitution Drive
Menlo Park, CA 94025
____________________
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
To Be Held on May 19, 2010
To the Stockholders
of Geron Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting
of Stockholders of GERON CORPORATION, a Delaware corporation (the Company), will
be held on Wednesday, May 19, 2010, at 8:30 a.m. local time at the Company’s
headquarters, 230 Constitution Drive, Menlo Park, California 94025, for the
following purposes:
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1. |
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To
elect the members of Class II of the Board of Directors to serve for the
following three years or until their successors are elected and
qualified; |
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2. |
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To
approve an amendment to the Company’s 2002 Equity Incentive Plan to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 5,000,000 shares; |
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3. |
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To
ratify appointment of Ernst & Young LLP as the Company’s independent
registered public accounting firm for the fiscal year ending December 31,
2010; and |
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4. |
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To
transact such other business as may properly come before the Annual
Meeting or any postponement or adjournment
thereof. |
The foregoing items of business are more fully
described in the Proxy Statement accompanying this Notice.
The Board of Directors has fixed the
close of business on Monday, March 22, 2010, as the record date for the
determination of stockholders entitled to notice of and to vote at this Annual
Meeting and at any adjournment or postponement thereof. Shares of common stock
may be voted at the meeting only if the holder is present at the meeting in
person or by valid proxy.
All stockholders are cordially invited to
attend the meeting in person. Whether or not you expect to attend the meeting,
please complete, sign, date and return the enclosed proxy as promptly as
possible in order to ensure your representation at the meeting. A return
envelope (which is postage prepaid if mailed in the United States) is enclosed
for that purpose. Or, you can vote over the telephone or the Internet as
described on the enclosed proxy card. Even if you have given your proxy, you may
still vote in person if you attend the meeting. Please note, however, that if
your shares are held of record by a broker, bank or other nominee and you wish
to vote at the meeting, you must obtain from the record holder a proxy issued in
your name.
By Order of the Board of
Directors, |
|
David L. Greenwood |
Secretary |
Menlo Park,
California
March 29, 2010
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE
NUMBER OF SHARES YOU OWN. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, WE
URGE YOU TO SUBMIT YOUR PROXY PROMPTLY IN ORDER TO ASSURE THAT A QUORUM IS
PRESENT.
GERON CORPORATION
230 Constitution
Drive
Menlo Park, CA 94025
____________________
PROXY
STATEMENT
____________________
INFORMATION CONCERNING SOLICITATION AND
VOTING
General
This proxy statement is being furnished to the
stockholders of Geron Corporation, a Delaware corporation (the Company), in
connection with the solicitation by the Board of Directors (the Board) of the
Company of proxies to be used at the Annual Meeting of Stockholders to be held
on May 19, 2010, at 8:30 a.m. local time (the Annual Meeting), or at any
adjournment or postponement thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting. The Annual Meeting will be held at
the Company’s headquarters at 230 Constitution Drive, Menlo Park, California
94025. This proxy statement and accompanying proxy card are being mailed to all
stockholders entitled to vote at the Annual Meeting on or about March 29, 2010.
Solicitation and Voting of Proxies
Only holders of record at the close of
business on Monday, March 22, 2010 (the Record Date) will be entitled to notice
of and to vote at the Annual Meeting or any adjournment or postponement thereof.
At the close of business on the Record Date, there were 97,458,243 shares of
common stock, par value $0.001 per share (Common Stock), outstanding. Each
holder of record of Common Stock on such date will be entitled to one vote for
each share held on all matters to be voted upon at the Annual Meeting.
The Company will bear the entire cost of
solicitation of proxies, including preparation, assembly, printing and mailing
of this proxy statement, the proxy and any additional information furnished to
stockholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, fiduciaries and custodians holding in their names shares of
Common Stock beneficially owned by others to forward to such beneficial owners.
In addition, the Company may reimburse persons representing beneficial owners of
Common Stock for their costs of forwarding solicitation materials to such
beneficial owners. The original solicitation of proxies by mail may be
supplemented by solicitation by mail, telephone or other electronic means, or in
person, by directors, officers, or other regular employees of the Company, or at
the Company’s request, The Altman Group. No additional compensation will be paid
to directors, officers or other regular employees for such services, but The
Altman Group will be paid its customary fee, estimated to be $6,000, to render
solicitation services.
Quorum Requirement and Votes Required for the
Proposals
In order to constitute a quorum and to
transact business at the Annual Meeting, a majority of the outstanding shares of
Common Stock on the Record Date must be represented at the Annual Meeting.
Shares represented by proxies that reflect abstentions or “broker non-votes”
(i.e., shares held by a broker or nominee which are represented at the Annual
Meeting, but not empowered to vote on a particular proposal) will be counted as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum.
Directors will be elected by a favorable vote
of a plurality of the aggregate votes present, in person or by proxy, at the
Annual Meeting. Accordingly, abstentions will not affect the outcome of the
election of candidates for director. Absent instructions from the beneficial
owner of such shares, a broker is not entitled to vote shares held for a
beneficial owner on certain non-routine items, such as the election of
directors. Thus, if the beneficial owner does not give a broker specific
instructions, the beneficially owned shares may not be voted on the election of
directors and will not be counted in determining the number of shares necessary
for approval, although they will count for purposes of determining whether a
quorum exists. Stockholders are not permitted to cumulate their shares for the
purpose of electing directors or otherwise.
1
The proposal to approve an amendment to the
2002 Equity Incentive Plan (the 2002 Plan) requires the affirmative vote of a
majority of the aggregate votes present, in person or by proxy, at the Annual
Meeting. Accordingly, proxies reflecting abstentions to this proposal will be
treated as votes against the amendment to the 2002 Plan. A broker is not
entitled to vote shares held for a beneficial owner on this proposal. Thus, if
the beneficial owner does not give a broker specific instructions, the
beneficially owned shares may not be voted on this proposal and will not be
counted in determining the number of shares necessary for approval, although
they will count for purposes of determining whether a quorum
exists.
The proposal to ratify the selection of Ernst
& Young LLP as independent registered public accounting firm for the fiscal
year ending December 31, 2010 requires the affirmative vote of a majority of the
aggregate votes present, in person or by proxy, and entitled to vote at the
Annual Meeting. Abstentions will have the same effect as a vote against this
proposal. However, ratification of the selection of Ernst & Young LLP is
considered a routine matter on which a broker or other nominee is empowered to
vote. Accordingly, no broker non-votes will result from this proposal.
Geron Plan Participants
Participants in the Geron 401(k) Plan will
receive a proxy that incorporates all shares owned through the Geron 401(k)
Plan, assuming the shares are registered in the same name. The proxy will serve
as voting instructions for the trustee of the 401(k) Plan. If the proxy is not
voted, the plan trustee will vote those shares in the same proportion as other
401(k) participants vote their 401(k) Plan shares.
Shares purchased through the 1996 Employee
Stock Purchase Plan (Purchase Plan) will follow standard brokerage industry
practices. Shares held in the name of the broker will be voted on behalf of the
holder on certain routine matters. To the extent the brokerage firm votes shares
on the behalf of the holder, the shares will be counted for the purpose of
determining a quorum.
Householding of Annual Meeting Materials
Some brokers and other nominee record holders
may be participating in the practice of “householding” proxy statements. This
means that only one copy of this proxy may have been sent to multiple
stockholders in a stockholder’s household. The Company will promptly deliver
copies of the proxy statement and annual report to any stockholder who contacts
the Company’s investor relations department at (650) 473-7765 or by mail
addressed to Investor Relations, Geron Corporation, 230 Constitution Drive,
Menlo Park, California 94025, requesting such copies. If a stockholder is
receiving multiple copies of the proxy statement and annual report at the
stockholder’s household and would like to receive a single copy of the proxy
statement and annual report for a stockholder’s household in the future,
stockholders should contact their broker, other nominee record holder, or the
Company’s investor relations department to request mailing of a single copy of
the proxy statement and annual report.
Voting Via the Internet or by Telephone
Stockholders whose shares are registered in
the name of a bank or brokerage firm may be eligible to vote electronically
through the Internet or by telephone. Many banks and brokerage firms participate
in the Broadridge Financial Solutions, Inc. (Broadridge) online and telephone
program. This program provides eligible stockholders the opportunity to vote via
the Internet or by telephone. Voting forms will provide instructions for
stockholders whose banks or brokerage firms participate in Broadridge’s online
and telephone program.
Registered stockholders may vote
electronically through the Internet or by telephone by following the
instructions included with their proxy card. A stockholder not wishing to vote
electronically through the Internet or by telephone or whose form does not
reference Internet or telephone voting information should complete and return
the enclosed paper proxy card. Signing and returning the proxy card or
submitting the proxy via the Internet or by telephone does not affect the right
to vote in person at the Annual Meeting.
The telephone and Internet proxy granting
procedures are designed to authenticate stockholders’ identities, to allow
stockholders to give their proxy granting instructions and to confirm that
stockholders’ instructions have been recorded properly. Stockholders granting
proxies via the Internet should understand that there may be costs associated
with electronic access, such as usage charges from Internet access providers and
telephone companies that must be borne by the stockholder.
2
Internet and Electronic Availability of Proxy
Materials
As permitted by the Securities and Exchange
Commission (the SEC), the Company is sending a Notice of Internet Availability
of Proxy Materials (the Notice) to stockholders who hold shares in “street name”
through a bank, broker or other holder of record. All such stockholders will
have the ability to access this Proxy Statement and the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2009 as filed with the SEC
on February 26, 2010 (the Annual Report) electronically through
www.proxyvote.com or to request a printed set of these materials at no charge.
Instructions on how to access these materials over the Internet or to request a
printed copy may be found in the Notice. The Annual Report does not constitute,
and should not be considered, a part of this proxy solicitation material.
In addition, any stockholder may request to
receive proxy materials in printed form by mail or electronically by email on an
ongoing basis. Choosing to receive future proxy materials by email will save the
Company the cost of printing and mailing documents to stockholders and will
reduce the impact of annual meetings on the environment. A stockholder’s
election to receive proxy materials by email will remain in effect until the
stockholder terminates it.
Revocability of Proxies
Any person giving a proxy pursuant to this
solicitation has the power to revoke it at any time before it is voted. A proxy
may be revoked by filing a written notice of revocation or a duly executed proxy
bearing a later date with the Secretary at the Company’s offices, 230
Constitution Drive, Menlo Park, California 94025, or it may be revoked by
attending the meeting and voting in person. Attendance at the meeting will not,
by itself, revoke a proxy.
MATTERS TO BE CONSIDERED AT THE 2010 ANNUAL
MEETING
PROPOSAL 1
ELECTION OF DIRECTORS
The Company’s Board currently consists of
eight members, seven of which are “independent,” as that term is defined by
Nasdaq Rule 5605(a)(2). The Company’s Bylaws provide for the classification of
the Board into three classes, as nearly equal in number as possible, with
staggered terms of office. The Company’s Bylaws also provide that upon
expiration of the term of office for a class of directors, nominees for such
class will be elected for a term of three years or until their successors are
duly elected and qualified.
The term of office of the Class II directors
will expire at the Annual Meeting in May 2010, and two nominees for director are
to be elected as Class II directors. The two nominees are Edward V. Fritzky and
Thomas D. Kiley, Esq. The Class III directors, Alexander E. Barkas, Ph.D., Karin
Eastham and Charles J. Homcy, M.D. have one year remaining on their terms of
office. The Class I directors, Thomas Hofstaetter, Ph.D., Thomas B. Okarma,
Ph.D., M.D. and Patrick J. Zenner, have two years remaining on their terms of
office. On March 25, 2010, Mr. Zenner notified the Company of his decision to
retire as a member of the Board effective as of May 19, 2010, the date of the
Annual Meeting.
The Board has selected two nominees for Class
II directors, both of whom are currently directors of the Company. The two
candidates receiving the highest number of affirmative votes of the shares
represented and entitled to vote at the Annual Meeting will be elected as Class
II directors of the Company. Accordingly, abstentions will not affect the
outcome of the proposal. The election of directors is a non-routine matter on
which a broker or other nominee is not empowered to vote. Accordingly, if the
beneficial owner does not give a broker specific instructions, the beneficially
owned shares may not be voted on this proposal and will not be counted in
determining the number of shares necessary for approval.
Shares represented by executed proxies will be
voted, if authority to do so is not withheld, for the election of the two
nominees named below. In the event that any nominee should be unavailable for
election as a result of an unexpected occurrence, such shares will be voted for
the election of such substitute nominee as management may propose. Each person
nominated for election has agreed to serve if elected, and management has no
reason to believe that any nominee will be unable to serve.
Set forth below is information regarding the
nominees for Class II director, the periods during which they have served as a
director of the Company, and information furnished by them as to principal
occupations and directorships held by them in corporations whose shares are
publicly registered.
3
NOMINEES FOR ELECTION TO THE BOARD OF
DIRECTORS
For a Three Year Term Expiring at the
2013 Annual
Meeting
Class II Directors (Term Expiring at the 2013
Annual Meeting)
Name |
|
|
Age |
|
Principal Occupation |
|
Edward V. Fritzky |
|
59 |
|
Former Chairman, Chief Executive Officer
and President, |
|
|
|
|
Immunex Corporation |
Thomas D. Kiley, Esq. |
|
66 |
|
Attorney-at-law |
Edward V. Fritzky
has served as a director of the Company since July 1998. From July 2002 to May
2005, he served as a director and advisor to Amgen Corporation, a U.S.
pharmaceutical company, where he established a leading research center in
Seattle. From January 1994 to July 2002, he served as Chief Executive Officer
and Chairman of Immunex Corporation, a biopharmaceutical company that developed,
manufactured and marketed therapeutic products for the treatment of cancer,
infectious diseases and autoimmune disorders, during which time he managed the
company’s growth to over $15 billion in market value and completed its
acquisition by Amgen in 2002. Since 2004, Mr. Fritzky has been a director of
Jacobs Engineering Group, Inc., a professional technical services firm providing
scientific and specialty consulting services supporting industrial, commercial
and government clients. From 1998 to 2009, Mr. Fritzky was a director of
Sonosite, Inc., a leading company of hand-carried ultrasound equipment. From
1992 to 1994, Mr. Fritzky served as President of Lederle Laboratories, a
division of American Cyanamid, and from 1989 to 1992, as Vice President of
Lederle Laboratories. While at Lederle Laboratories, Mr. Fritzky oversaw the
launch of six new products. Prior to joining Lederle Laboratories, Mr. Fritzky
was an executive of Searle Pharmaceuticals, Inc., a subsidiary of the Monsanto
Company that manufactures, develops and markets health care products and
pharmaceuticals. During his tenure at Searle, Mr. Fritzky was Vice President of
Marketing in the United States and later President and General Manager of Searle
Canada, Inc. and Lorex Pharmaceuticals, a joint venture between G.D. Searle
& Company, a U.S. pharmaceutical company and Synthelabo, a French
pharmaceutical company, to market existing and new Synthelabo products in the
United States. Mr. Fritzky served as a Trustee of the Fred Hutchinson Cancer
Center from July 2001 to June 2007. Mr. Fritzky holds a B.A. from Duquesne
University and is a graduate of the Advanced Executive Program, J.L. Kellogg
Graduate School of Management at Northwestern University. The Board believes Mr.
Fritzky’s management and operational experience as Chairman and Chief Executive
Officer of Immunex Corporation and as President of other biopharmaceutical
companies, his knowledge of therapeutic product launches and the substantial
understanding of the Company and its operations he has gained during his 12
years as a director of the Company, qualifies Mr. Fritzky to again be nominated
to serve as a director.
Thomas D. Kiley, Esq., has served as a director of the Company since September 1992. Mr.
Kiley is currently a director of Transcept Pharmaceuticals, Inc., a specialty
pharmaceutical company developing therapies in the field of neuroscience. Mr.
Kiley was a director of Connetics Corporation, a specialty pharmaceutical
company that developed dermatology products, from 1994 to 2006 when it was
acquired by Stiefel Laboratories, Inc. He has been self-employed since 1988 as
an attorney, consultant and investor. From 1980 to 1988, he was an officer of
Genentech, Inc., a biotechnology company using human genetic information to
develop medical treatments, serving as Vice President and General Counsel, Vice
President for Legal Affairs and Vice President for Corporate Development where
he managed patent litigation, developed patent strategy and negotiated numerous
corporate partnership deals. From 1969 to 1980, he was with Lyon & Lyon, a
Los Angeles-based law firm specializing in domestic and international
intellectual property law matters and was a partner at the firm from 1975 to
1980. Mr. Kiley holds a B.S. in Chemical Engineering from Pennsylvania State
University and a J.D. from The George Washington University. The Board believes
Mr. Kiley’s specialized knowledge of intellectual property matters for
biopharmaceutical companies, his experience as a board member for other public
companies and the substantial understanding of the Company and its operations he
has gained during his 18 years as a director of the Company, qualifies Mr. Kiley
to again be nominated to serve as a director.
The Board of Directors Unanimously Recommends
That Stockholders
Vote FOR the Election of
Each Nominee to the Board of Directors
4
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING
IN OFFICE
Set forth below is information regarding the
continuing Class III and Class I directors of the Company, including their ages,
the periods during which they have served as directors, and information
furnished by them as to principal occupations and directorships held by them in
corporations whose shares are publicly registered.
Class III Directors (Term Expiring at the 2011
Annual Meeting)
Name |
|
|
Age |
|
Principal Occupation |
|
Alexander E. Barkas,
Ph.D. |
|
62 |
|
Managing Member, Prospect Management
Company, LLC, the General Partner of Prospect Venture Partners L.P.;
Managing Member, Prospect Management Co. II, LLC, the General Partner of
Prospect Venture Partners II, L.P. and Prospect Associates II, L.P.; and
Managing Member, Prospect Management Co. III, LLC., the General Partner of
Prospect Venture Partners III, L.P. |
Karin Eastham |
|
60 |
|
Independent Director |
Charles J. Homcy,
M.D. |
|
61 |
|
President and Chief Executive Officer,
Portola Pharmaceuticals, Inc. |
Alexander E. Barkas, Ph.D., has served as Chairman of the Board since July 1993 and as a director
of the Company since March 1992. From March 1992 until May 1993, he served as
President and Chief Executive Officer of the Company. Dr. Barkas is a Managing
Director of Prospect Venture Partners, a venture capital firm. Prior to
co-founding Prospect Venture Partners I, II and III, he was a partner at Kleiner
Perkins Caufield & Byers (Kleiner Perkins), a venture capital firm, from
1991 to 1997, where he focused on healthcare product company investments. Prior
to Kleiner Perkins, Dr. Barkas was a founder and Chief Executive Officer of
BioBridge Associates, a healthcare industry consulting firm. Dr. Barkas
currently serves on the board of directors of Amicus Therapeutics, Inc., a
biotechnology company developing pharmacological chaperones to improve treatment
options for patients with genetic diseases. From 2000 to 2008, Dr. Barkas served
as a director for Tercica, Inc., a biopharmaceutical company developing
endocrine products, and its chairman from 2003 until its acquisition in 2008 by
the Ipsen Group. Dr. Barkas received a Ph.D. in Biology from New York University
and a B.A. in Biology from Brandeis University, where he currently is Chairman
of the University Science Advisory Council and serves on the Board of Trustees.
The Board believes Dr. Barkas’ extensive knowledge of the healthcare industry,
his experience as a board member for other public companies and the substantial
understanding of the Company and its operations he has gained during his 18
years as a director of the Company and 17 years as Chairman, qualifies Dr.
Barkas to serve as a director.
Karin Eastham has
served as a director of the Company since March 2009. She currently serves as a
director for Amylin Pharmaceuticals, Inc., a biopharmaceutical company focused
on peptide hormone drug candidates for the treatment of diabetes, obesity and
other metabolic diseases; Illumina, Inc., a manufacturer of life-science tools
and integrated systems for the analysis of genetic variation and biological
function; and Genoptix, Inc., a specialized laboratory service provider focused
on personalized and comprehensive diagnostic services to community-based
hematologists and oncologists. Ms. Eastham is also a director of several
non-profit organizations, including UCSD Moores Cancer Center and Corporate
Directors Forum. Ms. Eastham served as a director for Tercica, Inc., a
biopharmaceutical company developing endocrine products, from 2003 until its
acquisition in 2008 by the Ipsen Group and as a director of SGX Pharmaceuticals,
Inc., a biopharmaceutical company developing anti-cancer therapies targeting
specific enzymes that have been implicated in human cancers, from 2005 until its
acquisition in 2008 by Eli Lilly and Company. From May 2004 to September 2008,
Ms. Eastham served as Executive Vice President and Chief Operating Officer and a
member of the Board of Trustees of Burnham Institute for Medical Research, a
non-profit corporation engaged in medical research, where she established a
business development function to support translational research into commercial
opportunities and managed the general and administrative operations. From April
1999 to May 2004, Ms. Eastham served as Senior Vice President, Finance and Chief
Financial Officer of Diversa Corporation, a genomics technology company. While
at Diversa, Ms. Eastham completed the company’s initial public offering in 2000
and negotiated several product and technology acquisitions. From April 1997 to
April 1999, Ms. Eastham served as Vice President, Finance and Administration and
Chief Financial Officer for CombiChem, Inc., a computational chemistry company.
While at CombiChem, Ms. Eastham established the administrative infrastructure
for the company, assisted in
5
the completion of its
initial public offering in 1998 and provided guidance on accounting and
structural issues for several pharmaceutical collaborations. From October 1992
to April 1997, Ms. Eastham served as Vice President, Finance and Administration
and Chief Financial Officer for Cytel Corporation, a biopharmaceutical company,
where she completed several public and private financings and implemented
numerous improvements in employee benefit plans. Ms. Eastham also held several
similar positions with other companies, including Vice President, Finance, at
Boehringer Mannheim Diagnostics from 1976 to 1988. Ms. Eastham holds a B.S. and
an M.B.A. from Indiana University and is a Certified Public Accountant. The
Board believes Ms. Eastham’s significant financial expertise developed through
her experience as a financial officer for numerous public biotechnology
companies, her first-hand knowledge and experience in audit and financial
control-related matters and her understanding of public and private equity
financings, qualifies Ms. Eastham to serve as a director.
Charles J. Homcy, M.D., has served as a director of the Company since July 2005 and is
currently President and Chief Executive Officer of Portola Pharmaceuticals,
Inc., a biopharmaceutical company focusing on the treatment of cardiovascular
disease and inflammation. Dr. Homcy also has served as a director for Millennium
Pharmaceuticals, Inc., a genomics company developing anti-cancer therapies, from
2003 to 2008; Kosan Biosciences, Inc., a biopharmaceutical company developing
cancer treatments based on a natural product, polyketides, from 2003 to 2008;
and Cytokinetics, Inc., a biopharmaceutical company focused on the treatment of
heart failure and cancer, from 2004 to 2008. From January 2003 to November 2003,
Dr. Homcy served as senior R&D advisor at Millennium Pharmaceuticals, having
joined them in 2002 as President, Research and Development. Prior to that, he
served as Executive Vice President, Research and Development of COR
Therapeutics, Inc., a biopharmaceutical company focused on the treatment of
heart failure, from 1995 to 2002 and as a director of COR from January 1998 to
2002 until its acquisition by Millennium Pharmaceuticals in 2002. Since 1997,
Dr. Homcy has been Clinical Professor of Medicine, University of California at
San Francisco Medical School and an attending physician at the San Francisco VA
Hospital. From 1994 until 1995, Dr. Homcy was President of the medical research
division of American Cyanamid Company-Lederle Laboratories (now a division of
Wyeth-Ayerst Laboratories). From 1990 until 1994, Dr. Homcy was Executive
Director of the cardiovascular and central nervous system research section at
Lederle Laboratories. From 1991 to 1995, Dr. Homcy also served as an attending
physician at The Presbyterian Hospital, College of Physicians and Surgeons, at
Columbia University in New York. From 1979 to 1990, he was an attending
physician at Massachusetts General Hospital and an Associate Professor of
Medicine at Harvard Medical School. Dr. Homcy received his B.A. and M.D. degrees
from The Johns Hopkins University. The Board believes Dr. Homcy’s scientific and
clinical expertise as well as leadership and operational management experience
as President of Portola and other biopharmaceutical companies, qualifies Dr.
Homcy to serve as a director.
Class I Directors (Term Expiring at the 2012
Annual Meeting)
Name |
|
|
Age |
|
Principal Occupation/Position with the
Company |
|
Thomas Hofstaetter,
Ph.D. |
|
61 |
|
President and Chief Executive Officer,
VaxInnate Corporation |
Thomas B. Okarma, Ph.D., M.D. |
|
64 |
|
President and Chief Executive
Officer |
Patrick J.
Zenner |
|
63 |
|
Former President and Chief Executive
Officer, Roche North America |
Thomas Hofstaetter, Ph.D., has served as a director of the Company since March 2010 and is
currently President, Chief Executive Officer and a director of VaxInnate
Corporation, a privately-held biotechnology company developing novel,
proprietary vaccines for both pandemic and seasonal influenza. From September
2004 to October 2009, Dr. Hofstaetter was Senior Vice President, Corporate
Development and Head of Global Business Development and a member of the Wyeth
Management Committee at Wyeth, Inc., a global pharmaceutical company developing
pharmaceuticals, biotechnology products, vaccines, non-prescription medicines
and animal health products. At Wyeth, he closed more than 70 transactions,
including acquisitions of biotechnology companies, in-licensing of products and
broad technology collaborations. Wyeth merged with Pfizer, Inc. in January 2009.
From December 1999 to August 2004, Dr. Hofstaetter was Senior Vice President of
Corporate Development of Aventis, a global pharmaceutical company focused on
treatments in cardiology, oncology, metabolic diseases and central nervous
system disorders. While at Aventis, he was responsible for more than 100
transactions including research alliances, product in- and out-licensing,
divestments and spin-outs. From 1991 to 1999, Dr. Hofstaetter served in various
executive managerial positions around the world, including the United States,
Japan, France and his
6
native Germany, with
Hoescht Pharma, a global pharmaceutical company focused on therapies for
cardiovascular, allergic, metabolic and central nervous system disorders, and
infectious diseases, where he served as a member of the integration steering
committee when Aventis was created from the merger between Hoescht and
Rhone-Poulenc Rorer. In 1978, Dr. Hofstaetter joined Behringwerke AG in Germany
as a research scientist and rose to become head of Research in 1988 and head of
the Immunology/Oncology business unit in 1989. Dr. Hofstaetter holds a Master of
Science degree in Biochemistry and a Ph.D. in Molecular Biology, magna cum
laude, from the University of Tuebingen in Germany. From 2001 to 2004, he was a
director of Merial Limited, a joint venture between Aventis and Merck & Co.
focusing on pharmaceutical products and vaccines for livestock, pets and
wildlife. From 2000 to 2004, he was a member of the board of trustees of the New
Jersey Symphony Orchestra. The Board believes Dr. Hofstaetter’s expertise with
numerous technology transactions developed through his roles as a senior
executive responsible for corporate development and his significant operating
and management knowledge of large, global pharmaceutical companies, qualifies
Dr. Hofstaetter to serve as a director.
Thomas B. Okarma, Ph.D., M.D., has served as President, Chief Executive
Officer of the Company and a member of the Board since July 1999. He is also a
director of Geron Bio-Med Limited, a United Kingdom company and Geron’s
wholly-owned subsidiary, and TA Therapeutics, Ltd., a Hong Kong company and
Geron’s majority-owned subsidiary. From May 1998 until July 1999, Dr. Okarma was
the Vice President of Research and Development of the Company. From December
1997 until May 1998, Dr. Okarma was Vice President of Cell Therapies. Dr. Okarma
currently serves on the board of directors of BIO and was Chairman of the board
of directors of Overseers of Dartmouth Medical School from 2001 to 2006. In
1985, Dr. Okarma founded Applied Immune Sciences, Inc., a biotechnology company
using living cell infusions to achieve therapeutic effect in disease treatment,
and served initially as Vice President of Research and Development of Applied
Immune Sciences and then as Chairman, Chief Executive Officer and a director of
Applied Immune Sciences until 1995 when it was acquired by Rhone-Poulenc Rorer,
a global pharmaceutical company with core competencies in life sciences, applied
chemistry, specialty chemicals and chemical intermediaries. Dr. Okarma was a
Senior Vice President at Rhone-Poulenc Rorer from the time of the acquisition of
Applied Immune Sciences until December 1996. From 1980 to 1992, Dr. Okarma was a
member of the faculty of the Department of Medicine at Stanford University
School of Medicine. Dr. Okarma holds a A.B. from Dartmouth College, a M.D. and
Ph.D. from Stanford University and is a graduate of the Executive Education
program of the Stanford Graduate School of Business. As the only management
representative on the Board, Dr. Okarma brings an insider’s perspective in board
discussions about the business and strategic direction of the Company. In
addition, Dr. Okarma’s scientific and medical background provides substantial
understanding of the Company’s technologies and programs. Because of these
factors, the Board believes that Dr. Okarma should serve as a
director.
Patrick J. Zenner
has served as a director of the Company since July 2001. Mr. Zenner currently
serves as Chairman of the board of directors for Arqule, Inc., a biotechnology
company developing small molecule cancer therapeutics and Exact Sciences
Corporation, a molecular diagnostics company focused on screening technology for
the detection of colorectal cancer. Mr. Zenner currently also serves as a
director for West Pharmaceutical Services, a manufacturer of components and
systems for injectable drug delivery and plastic packaging and delivery system
components for healthcare and consumer product markets; and XOMA Ltd., a
biotechnology company developing therapeutic antibodies. He also is a director
for several non-profit organizations, including Farleigh Dickinson University,
Creighton University and The Myositis Association. From 2002 to 2008, he was a
director for Sciele Pharma Inc., a specialty pharmaceutical company focused on
the treatment of cardiovascular, pediatric and women’s health conditions and
disorders until its acquisition by Shionogi & Co., Ltd., a Japanese
pharmaceutical company targeting treatments for infectious diseases, pain and
metabolic syndrome. From 2002 to 2007, he was a director of Dendrite
International, a provider of services and software that focused on managing and
analyzing sales efforts for the pharmaceutical and other life sciences
industries, until its acquisition in 2007 by Cegedim S.A., a French company
developing exclusive databases and high value added software solutions. From
2002 to 2009, he was a director for CuraGen Corporation, a biopharmaceutical
company developing anti-cancer treatments, until its acquisition in 2009 by
Celldex Therapeutics, a biopharmaceutical company developing anti-cancer
therapies using monoclonal antibodies, antibody-targeted vaccines and
immunomodulators. For part of 2007, Mr. Zenner served as interim Chief Executive
Officer of Exact Sciences and served as interim Chief Executive Officer for
CuraGen from May 2005 through March 2006. From 1969 until January 2001, Mr.
Zenner held a series of executive managerial positions with Hoffmann La-Roche,
Inc., the prescription drug unit of the
7
Roche Group, a
leading research-based health care enterprise. He retired as President and Chief
Executive Officer of Roche North America in January 2001 after growing the North
American operations to over $3 billion in revenue and integrating acquisitions
of Syntex Corporation and Boehringer Mannheim into the organization. While at
Roche, Mr. Zenner also was a member of the clinical and research oversight
boards and the global pharmaceutical executive committee. The Board believes Mr.
Zenner’s significant operating and management knowledge of a large,
multinational pharmaceutical company as President of Roche North America, his
extensive experience as a board member with numerous public biopharmaceutical
companies and his substantial understanding of the Company and its operations he
has gained during his 9 years as a director of the Company, qualifies Mr. Zenner
to serve as a director. On March 25, 2010, Mr. Zenner notified the Company of
his decision to retire as a member of the Board effective as of May 19, 2010,
the date of the Annual Meeting.
There are no family relationships among the
executive officers or directors of the Company. There are no current legal
proceedings and claims, either asserted or unasserted, which arise in the
ordinary course of business to which the executive officers, directors or the
Company are a party. There are no current, nor in the past ten years have there
been any, legal proceedings involving any director or executive officer related
to, among others, (i) federal bankruptcy, (ii) criminal proceedings, (iii)
federal or state securities laws, (iv) any judgment, decree or order enjoining a
director or officer from acting as an investment advisor, broker or dealer of
securities or engaging in any type of business practice, (v) proceedings
resulting from involvement in mail or wire fraud or fraud in connection with any
business activity and (vi) any disciplinary sanctions or orders imposed by
stock, commodities or derivatives exchange or other self-regulatory
organization.
Board Committees and Meetings
During the fiscal year ended December 31,
2009, the Board held seven meetings and acted by written consent on six
occasions. The Board has an Audit Committee, a Compensation Committee, a Stock
Option Committee and a Nominating Committee. During the fiscal year ended
December 31, 2009, each of the incumbent directors attended at least 90% of the
meetings of the Board and the committees on which the director served. Currently
the Company does not maintain a formal policy regarding director attendance at
the Annual Meeting of Stockholders. However, it is expected that, absent
compelling circumstances, directors will be in attendance. Last year all seven
directors incumbent at that time were in attendance.
Audit Committee.
The Audit Committee acts pursuant to a written charter adopted by the Board. The
Audit Committee, which is comprised of Ms. Eastham and Messrs. Fritzky and
Kiley, met six times in 2009 and acted by written consent on one occasion. All
of the members of the Audit Committee are “independent,” as that term is defined
by Nasdaq Rule 5605(a)(2). The Board has determined that all of the members of
the Audit Committee are financially literate and that at least one member of the
Audit Committee, Ms. Eastham, has accounting and financial management expertise
that qualifies her as an “Audit Committee Financial Expert,” as such term is
defined in Item 407(d)(5) of Regulation S-K promulgated by the SEC. The Audit
Committee’s responsibilities include: (i) recommending the selection of the
Company’s independent registered public accounting firm to the Board and
pre-approval of any fees paid to such firm, (ii) consulting with the independent
auditors with regard to the plan and scope of the audit, (iii) reviewing, in
consultation with the independent auditors, their report of the audit or
proposed report of the audit, and the accompanying management letter, if any,
and (iv) consulting with the independent auditors and management with regard to
the adequacy of the Company’s internal controls. The Audit Committee operates
under a written charter that satisfies the applicable standards of the SEC and
the Nasdaq Global Market. A copy of the Audit Committee Charter is available on
the Internet at http://www.geron.com. See more information about the Audit
Committee in the Audit Committee report on page 23 herein.
Compensation
Committee. The
Compensation Committee, which was comprised of Dr. Barkas and Mr. Zenner, met
three times in 2009 and acted by written consent on eight occasions. Currently,
the Compensation Committee is comprised of Drs. Barkas and Hofstaetter and Mr.
Zenner. On March 25, 2010, Mr. Zenner notified the Company of his decision to
retire as a member of the Board effective as of May 19, 2010, the date of the
Annual Meeting. Mr. Zenner will cease being a member of the Compensation
Committee effective May 19, 2010. All current and past members of the
Compensation Committee are “independent,” as that term is defined by Nasdaq Rule
5605(a)(2). The Compensation Committee makes recommendations concerning salaries
and incentive compensation, administers the incentive compensation and benefit
plans of the Company, and performs such other functions regarding compensation
as the Board may delegate. In addition, the Compensation Committee
has
8
exclusive authority
to administer the 2002 Equity Incentive Plan with respect to executive officers
and directors. The Compensation Committee operates under a written charter that
satisfies the applicable standards of the SEC and the Nasdaq Global Market. A
copy of the Compensation Committee charter is available on the Internet at
http://www.geron.com. See more information about the Compensation Committee in
the Compensation Committee report on page 37 herein.
The Compensation Committee has
reviewed the Company’s compensation policies and practices and has determined
that no policies or practices will have a reasonably likely material adverse
effect on the Company. In determining this, the Compensation Committee evaluated
the Company’s compensation elements of base salary, annual incentive awards,
long-term incentive awards, severance and change in control benefits and other
benefits. Based upon this review, the Compensation Committee noted the following
policies that balance the compensation elements and mitigate the risk associated
with the Company’s compensation practices.
- Performance assessment based upon
a mix of individual and corporate achievement.
- Annual incentive awards determined
along a range of performance with no minimum payments.
- Utilization of a combination of
cash and equity awards to encourage short-term and long-term
incentives.
- Absence of employment agreements
or contracts that contain multi-year guarantees of salary increases,
non-performance-based bonuses or equity compensation.
- Emphasis on pay equity amongst its
employees in comparison to internal and external benchmarks.
- No perquisites for any employee
sub-set, including executive officers.
Stock Option Committee. The Stock Option Committee was formed in December 1996 in order to
provide timely option grants to employees and consultants (other than executive
officers and directors of the Company) and currently consists of one member, Dr.
Okarma. The Stock Option Committee has limited authority to administer the
Company’s 2002 Equity Incentive Plan concurrently with the Compensation
Committee. The Stock Option Committee has the authority to grant options for up
to 50,000 shares of Common Stock only to employees (other than executive
officers and directors of the Company) and consultants in accordance with
procedures approved by the Board. The Stock Option Committee acted by written
consent on 11 occasions during fiscal 2009.
Nominating Committee. The Nominating Committee makes recommendations to the Board for
candidates to be nominated for election or re-election as a director by the
stockholders or by the Board. The members of the Nominating Committee are Dr.
Barkas and Mr. Fritzky. Both members of the Nominating Committee are
“independent” as that term is defined by Nasdaq Rule 5605(a)(2). The Nominating
Committee did not meet during fiscal 2009. The Nominating Committee will
consider nominees for directors nominated by stockholders upon submission in
writing to the Secretary of the Company of the names of such nominees in
accordance with the Company’s Bylaws. The Nominating Committee will investigate,
evaluate and interview, as appropriate, a director candidate with regard to his
or her individual characteristics as well as how those characteristics fit with
the needs of the Board as a whole. The Nominating Committee operates under a
written charter that satisfies the applicable standards of the SEC and the
Nasdaq Global Market. A copy of the Nominating Committee charter is available on
the Internet at http://www.geron.com. Specific qualifications and the process
for identification and recommendation of director candidates are provided in
more detail on page 46 herein.
Compensation of Directors
Fees
Non-employee directors currently
receive the following cash compensation:
|
(i) |
|
Twenty Thousand
Dollars ($20,000) per year, plus an additional Ten Thousand Dollars
($10,000) for service as Chairman of the Board or Chairperson of the Audit
Committee and an additional Five Thousand Dollars ($5,000) for service as
Chair of the Compensation Committee or the Nominating Committee of the
Board; plus |
|
|
|
(ii) |
|
One Thousand Five
Hundred Dollars ($1,500) for each regular or special Board meeting
attended by such director in person, and Seven Hundred Fifty Dollars
($750) for each regular or special Board meeting attended by such director
by telephone or videoconference; plus |
9
|
(iii) |
|
For members of
the Audit Committee, Nominating Committee and the Compensation Committee
of the Board, Seven Hundred Fifty Dollars ($750) for each meeting of any
such committee attended by such director in person, and Two Hundred Fifty
Dollars ($250) for each meeting of any such committee attended by such
director by telephone or videoconference; plus
|
|
|
|
(iv) |
|
Reimbursement
for out-of-pocket expenses incurred in connection with attendance at
meetings of the Board.
|
The annual director compensation under (i)
above shall be payable on the date of the annual meeting of stockholders with
respect to the preceding twelve-month period (or a pro rata portion of such
amount if such director served for less than a full year), in cash or, at each
director’s election, in fully vested shares of Common Stock granted under the
2006 Directors’ Stock Option Plan (the 2006 Directors Plan). The per-meeting
compensation under (ii) and (iii) above shall be payable in cash within ten
business days after each meeting. In addition to cash compensation, non-employee
directors also receive automatic equity grants pursuant to the 2006 Directors
Plan, as described below.
The following table provides compensation
information for the year ended December 31, 2009 for each non-employee member of
the Board.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension |
|
|
|
|
|
|
|
|
|
|
Fees |
|
|
|
|
|
|
|
Non-Equity |
|
Value and Non- |
|
|
|
|
|
|
|
|
|
|
Earned |
|
|
|
|
|
|
|
Incentive |
|
qualified Deferred |
|
All |
|
|
|
|
|
or Paid in |
|
Stock |
|
Option |
|
Plan |
|
Compensation |
|
Other |
|
|
|
|
|
Cash |
|
Awards |
|
Awards |
|
Compensation |
|
Earnings |
|
Compensation |
|
Total |
Director |
|
|
($) |
|
($)(1) |
|
($)(1) |
|
($) |
|
($) |
|
($)(2) |
|
($) |
Barkas, Alexander |
|
$ |
50,250 |
(3) |
|
$ |
211,900 |
|
$ |
321,012 |
|
$— |
|
$— |
|
|
$ |
— |
|
|
$ |
583,162 |
Eastham, Karin |
|
$ |
11,750 |
|
|
$ |
48,900 |
|
$ |
166,657 |
|
$— |
|
$— |
|
|
$ |
1,979 |
|
|
$ |
229,286 |
Fritzky, Edward |
|
$ |
30,000 |
(3) |
|
$ |
171,150 |
|
$ |
62,419 |
|
$— |
|
$— |
|
|
$ |
5,521 |
|
|
$ |
269,090 |
Hofstaetter, Thomas(4) |
|
$ |
— |
|
|
$ |
— |
|
$ |
— |
|
$— |
|
$— |
|
|
$ |
— |
|
|
$ |
— |
Homcy, Charles |
|
$ |
29,000 |
(3) |
|
$ |
163,000 |
|
$ |
35,668 |
|
$— |
|
$— |
|
|
$ |
— |
|
|
$ |
227,668 |
Kiley, Thomas |
|
$ |
29,750 |
(3) |
|
$ |
167,075 |
|
$ |
57,961 |
|
$— |
|
$— |
|
|
$ |
— |
|
|
$ |
254,786 |
Walker, John (5) |
|
$ |
20,000 |
|
|
$ |
— |
|
$ |
— |
|
$— |
|
$— |
|
|
$ |
— |
|
|
$ |
20,000 |
Zenner, Patrick (6) |
|
$ |
29,750 |
|
|
$ |
167,075 |
|
$ |
50,025 |
|
$— |
|
$— |
|
|
$ |
6,087 |
|
|
$ |
252,937 |
____________________
(1) |
|
Amounts
represent the aggregate grant date fair value of stock awards and option
awards granted during the fiscal year ended December 31, 2009. These stock
awards and option awards are not subject to performance conditions. For
additional information, refer to Note 8 of the consolidated financial
statements in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2009 regarding assumptions underlying the valuation of equity
awards and the calculation method. Refer to the supplemental table on page
14 herein for information as to each non-employee director’s unvested
stock award holdings and vested and unvested stock option holdings and
page 13 herein for the number of stock awards and option awards granted
during 2009.
|
|
(2) |
|
Amounts
represent reimbursement of out-of-pocket expenses in connection with
attendance of Board or Committee meetings.
|
|
(3) |
|
Annual director
compensation paid in stock in lieu of cash. See table below for stock
grant information.
|
|
(4) |
|
Dr. Hofstaetter
joined the Board in March 2010.
|
|
(5) |
|
Mr. Walker
resigned from the Board in January 2009.
|
|
(6) |
|
On March 25,
2010, Mr. Zenner notified the Company of his decision to retire as a
member of the Board effective as of May 19, 2010, the date of the Annual
Meeting.
|
2006 Directors’ Stock Option Plan
The 2006 Directors Plan was adopted by the
Company’s stockholders in May 2006 and replaced the 1996 Directors’ Stock Option
Plan that expired in July 2006. No further option grants can be made under the
1996 Directors’ Stock Option Plan. A total of 2,500,000 shares of the Company’s
Common Stock are reserved for issuance pursuant to the 2006 Directors Plan. As
amended, the 2006 Directors Plan provides for the automatic grant
10
of non-qualified
stock options and restricted stock awards, as described below, as well as the
discretionary grant of options, restricted stock and restricted stock units to
non-employee directors of the Company. The 2006 Directors Plan is designed to
work automatically and not to require administration; however, to the extent
administration is necessary, it will be provided by the Board.
The purpose of the 2006 Directors Plan is to
provide an incentive for non-employee directors to continue to serve the Company
as directors and to assist the Company in recruiting highly qualified
individuals when vacancies occur on the Board. Currently, seven non-employee
directors of the Company are eligible to receive stock and option grants under
the 2006 Directors Plan.
Terms of
Awards
The 2006 Directors Plan provides for
the automatic grant of the following types of equity awards.
First Option. Each
person who becomes a non-employee director, whether by election of the
stockholders of the Company or by appointment by the Board to fill a vacancy,
will automatically be granted an option to purchase 45,000 shares of Common
Stock on the date on such person first becomes a non-employee director (the
First Option).
Subsequent Awards.
Each non-employee director (other than the Chairman of the Board and any
director receiving a First Option on the date of the annual meeting) will
automatically be granted a subsequent option on the date of the Annual Meeting
of Stockholders in each year during such director’s service on the Board (a
Subsequent Option) to purchase 10,000 shares of Common Stock and a restricted
stock award (a Subsequent Stock Award) of 5,000 shares of Common Stock. In the
case of the Chairman of the Board, the Subsequent Option will be for 20,000
shares of Common Stock and the Subsequent Stock Award shall be for 10,000 shares
of Common Stock.
Committee Chair Service Awards. On the date of each Annual Meeting of
Stockholders, the Chairman of the Audit Committee receives an option to purchase
5,000 shares of Common Stock (a Committee Chair Service Option), and a
restricted stock award (a Committee Chair Service Stock Award) of 2,500 shares
of Common Stock. The Committee Chair Service Option for the Compensation
Committee Chairman and the Nominating Committee Chairman shall be for 2,500
shares of Common Stock and the Committee Chair Service Stock Award shall be for
1,250 shares of Common Stock.
Committee Service Awards. Upon each non-employee director’s appointment to the Audit Committee,
Compensation Committee or Nominating Committee of the Board, the director will
receive an option to purchase 2,500 shares of Common Stock (a First Committee
Service Option). Thereafter, an option to purchase 1,250 shares of Common Stock
(a Subsequent Committee Service Option) and a restricted stock award of 625
shares of Common Stock (a Subsequent Committee Service Stock Award) shall be
granted to each non-employee director on the date of each Annual Meeting during
the director’s service on such committee, other than the Chairman of such
committee. There is currently no stock option grant or restricted stock award
contemplated for participation on other committees.
The 2006 Directors Plan provides that each
First Option vests annually over three years upon each anniversary date of
appointment to the Board. Each Subsequent Option, Committee Chair Service
Option, First Committee Service Option and Subsequent Committee Service Option
is fully vested on the date of grant. Each Subsequent Stock Award, Committee
Chair Service Stock Award and Subsequent Committee Service Stock Award vests
annually in four equal installments over four years commencing on the date of
grant and no payment shall be required from the non-employee director in order
to receive the award. Options under the 2006 Directors Plan remain exercisable
for up to 90 days following the optionee’s termination of service as a Company
director, unless such termination is a result of death or permanent and total
disability, in which case the options (both those already exercisable and those
that would have become exercisable had the director remained on the Board for an
additional 36 months) remain exercisable for up to a 24-month period or unless
there is a death of an optionee within three months following his or her
termination of service, in which case the options will remain exercisable for an
additional six month period from the date of death. Upon termination of service
as a Company director, any unvested restricted stock awards shall return to the
2006 Directors Plan, unless such termination is a result of death or permanent
and total disability, in which case any unvested restricted stock awards shall
immediately vest.
11
Exercise Price and Term of Options. The exercise price of all stock options
granted under the 2006 Directors Plan is equal to the fair market value of a
share of the Company’s Common Stock on the date of grant of the option. The
Board determines the fair market value; provided, however, that where there is a
public market for the Common Stock, the fair market value per share shall be
determined based on the public market. Currently, the Common Stock is traded on
the Nasdaq Global Market and the fair market value per share is equal to the
closing price of the Company’s Common Stock on the Nasdaq Global Market on the
date of grant of the option. Options granted under the 2006 Directors Plan have
a term of ten years.
Restricted Stock and Restricted Stock Units. In addition to the automatic grant of
restricted stock awards described above, the 2006 Directors Plan, as amended,
also permits the discretionary grant of restricted stock and restricted stock
units. A restricted stock award is the grant of shares of common stock at a
price determined by the Board (which may also not require the payment of any
purchase price), that is nontransferable and may be subject to substantial risk
of forfeiture until specific conditions are met. During the period of
restriction, participants holding shares of restricted stock may have full
voting and dividend rights with respect to such shares. The restrictions will
lapse in accordance with a schedule or other conditions determined by the
Compensation Committee.
A restricted stock unit award provides for the
issuance of common stock at a future date upon the satisfaction of specific
conditions set forth in the applicable award agreement. The vesting and maturity
dates will be established at the time of grant, and may provide for the deferral
of receipt of the common stock beyond the vesting date. On the maturity date,
the Company will transfer to the participant one unrestricted, fully
transferable share of common stock for each restricted stock unit scheduled to
be paid out on such date and not previously forfeited (although the award may
also be settled in the form of cash at the discretion of the
Board).
Effect of Certain Corporate
Events
In the event of the dissolution or liquidation
of the Company, a sale of all or substantially all of the assets of the Company,
the merger or consolidation of the Company with or into another corporation in
which the Company is not the surviving corporation or any other capital
reorganization in which more than 50% of the shares of the Company entitled to
vote are exchanged, each non-employee director shall have a reasonable time
within which to exercise the option, including any part of the option that would
not otherwise be exercisable, prior to the effectiveness of such dissolution,
liquidation, sale, merger or reorganization, at the end of which time the option
shall terminate, or shall receive a substitute option with comparable terms, as
to an equivalent number of shares of stock of the corporation succeeding the
Company or acquiring its business by reason of such dissolution, liquidation,
sale, merger, consolidation or reorganization. In such an event, any unvested
restricted stock awards shall immediately vest unless an award with comparable
terms, as to an equivalent number of shares of stock of the corporation
succeeding the Company or acquiring its business by reason of such dissolution,
liquidation, sale, merger, consolidation or reorganization is substituted. In
addition, except as otherwise provided in an award agreement, unvested shares
subject to awards of restricted stock and restricted stock units will become
fully vested immediately prior to the date of such dissolution, liquidation,
sale, merger, consolidation or reorganization.
Duration and
Termination
The Board may at any time amend or terminate
the 2006 Directors Plan, except that such termination cannot affect awards
previously granted without the agreement of any optionee so affected. If not
terminated earlier, the 2006 Directors Plan will expire in 2016.
12
2006 Directors Plan
Benefits
The following table sets forth the following
information with respect to non-employee directors (seven persons) for the
fiscal year ended December 31, 2009: (i) stock options granted under the 2006
Directors Plan; (ii) stock awards granted under the 2006 Directors Plan; and
(iii) the grant date fair value of stock options and stock awards granted. As
discussed below, the executive officers and employees of the Company are not
eligible for grants under the 2006 Directors Plan. In May 2009, additional
options were granted to certain directors in recognition of options that expired
unexercised during the year. Also in May 2009, additional restricted stock
awards were granted to certain directors in recognition of their long-term
service to the Board.
|
|
|
|
|
Option |
|
|
|
|
|
|
|
|
|
|
|
Awards |
|
Stock Awards |
|
Grant Date Fair Value of
Option |
|
|
|
|
|
Granted |
|
Granted |
|
and Stock Awards
Granted |
|
|
Grant |
|
During 2009 |
|
During 2009 |
|
During 2009 |
Director |
|
|
Date |
|
(#) |
|
(#) |
|
($)(1) |
Barkas, Alexander |
|
5/29/09 |
(2) |
|
|
25,000 |
|
|
|
— |
|
|
|
$ |
89,170 |
|
|
|
5/29/09 |
(7) |
|
|
25,000 |
|
|
|
— |
|
|
|
$ |
89,170 |
|
|
|
5/29/09 |
(6) |
|
|
40,000 |
|
|
|
— |
|
|
|
$ |
142,672 |
|
|
|
5/29/09 |
(4) |
|
|
— |
|
|
|
12,500 |
|
|
|
$ |
81,500 |
|
|
|
5/29/09 |
(5) |
|
|
— |
|
|
|
6,135 |
|
|
|
$ |
40,000 |
|
|
|
5/29/09 |
(10) |
|
|
— |
|
|
|
20,000 |
|
|
|
$ |
130,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastham, Karin |
|
3/30/09 |
(3) |
|
|
45,000 |
|
|
|
— |
|
|
|
$ |
107,199 |
|
|
|
3/30/09 |
(2) |
|
|
2,500 |
|
|
|
— |
|
|
|
$ |
5,956 |
|
|
|
5/29/09 |
(2) |
|
|
15,000 |
|
|
|
— |
|
|
|
$ |
53,502 |
|
|
|
5/29/09 |
(4) |
|
|
— |
|
|
|
7,500 |
|
|
|
$ |
48,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fritzky, Edward |
|
5/29/09 |
(2) |
|
|
12,500 |
|
|
|
— |
|
|
|
$ |
44,585 |
|
|
|
5/29/09 |
(8) |
|
|
5,000 |
|
|
|
— |
|
|
|
$ |
17,834 |
|
|
|
5/29/09 |
(4) |
|
|
— |
|
|
|
6,250 |
|
|
|
$ |
40,750 |
|
|
|
5/29/09 |
(5) |
|
|
— |
|
|
|
3,067 |
|
|
|
$ |
20,000 |
|
|
|
5/29/09 |
(10) |
|
|
— |
|
|
|
20,000 |
|
|
|
$ |
130,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hofstaetter, Thomas(11) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homcy, Charles |
|
5/29/09 |
(2) |
|
|
10,000 |
|
|
|
— |
|
|
|
$ |
35,668 |
|
|
|
5/29/09 |
(4) |
|
|
— |
|
|
|
5,000 |
|
|
|
$ |
32,600 |
|
|
|
5/29/09 |
(5) |
|
|
— |
|
|
|
3,067 |
|
|
|
$ |
20,000 |
|
|
|
5/29/09 |
(10) |
|
|
— |
|
|
|
20,000 |
|
|
|
$ |
130,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kiley, Thomas |
|
5/29/09 |
(2) |
|
|
11,250 |
|
|
|
— |
|
|
|
$ |
40,127 |
|
|
|
5/29/09 |
(9) |
|
|
5,000 |
|
|
|
— |
|
|
|
$ |
17,834 |
|
|
|
5/29/09 |
(4) |
|
|
— |
|
|
|
5,625 |
|
|
|
$ |
36,675 |
|
|
|
5/29/09 |
(5) |
|
|
— |
|
|
|
3,067 |
|
|
|
$ |
20,000 |
|
|
|
5/29/09 |
(10) |
|
|
— |
|
|
|
20,000 |
|
|
|
$ |
130,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zenner, Patrick(12) |
|
2/11/09 |
(2) |
|
|
2,500 |
|
|
|
— |
|
|
|
$ |
9,898 |
|
|
|
5/29/09 |
(2) |
|
|
11,250 |
|
|
|
— |
|
|
|
$ |
40,127 |
|
|
|
5/29/09 |
(4) |
|
|
— |
|
|
|
5,625 |
|
|
|
$ |
36,675 |
|
|
|
5/29/09 |
(10) |
|
|
— |
|
|
|
20,000 |
|
|
|
$ |
130,400 |
|
____________________
(1) |
|
Amounts
represent the grant date fair value of stock options and stock awards
calculated using the Black Scholes option-pricing model. For additional
information, refer to Note 8 of the consolidated financial statements in
the Company’s Annual Report on Form 10-K for the year ended December 31,
2009 regarding assumptions underlying the valuation of equity awards and
the calculation method.
|
|
(2) |
|
Stock options
were fully vested upon grant.
|
|
(3) |
|
Stock option
vests in three equal consecutive annual installments from the date of
grant, provided the director continues to provide services to the
Company.
|
13
(4) |
|
Restricted
stock awards vest in four equal consecutive annual installments from the
date of grant, provided the director continues to provide services to the
Company.
|
|
(5) |
|
Stock awards
represent payment of annual director compensation in lieu of cash as of
May 29, 2009 at $6.52 per share. Awards were fully vested upon
grant.
|
|
(6) |
|
Stock options
are exercisable in a series of 24 equal consecutive monthly installments
commencing on December 18, 2009, provided the director continues to
provide services to the Company.
|
|
(7) |
|
Stock options
are exercisable in a series of 24 equal consecutive monthly installments
commencing on May 29, 2009, provided the director continues to provide
services to the Company.
|
|
(8) |
|
Stock options
are exercisable in a series of 24 equal consecutive monthly installments
commencing on July 10, 2009, provided the director continues to provide
services to the Company.
|
|
(9) |
|
Stock options
are exercisable in a series of 24 equal consecutive monthly installments
commencing on September 14, 2009, provided the director continues to
provide services to the Company.
|
|
(10) |
|
Restricted
stock awards vest over two years with 25% of the total award vesting on
the first anniversary of the date of grant and the remaining 75% on the
second anniversary of the date of grant, provided the director continues
to provide services to the Company.
|
|
(11) |
|
Dr. Hofstaetter
joined the Board in March 2010.
|
|
(12) |
|
On March 25,
2010, Mr. Zenner notified the Company of his decision to retire as a
member of the Board effective as of May 19, 2010, the date of the Annual
Meeting.
|
The following table sets forth stock options
and stock awards outstanding for each non-employee director (seven persons) as
of December 31, 2009.
|
|
Option Awards
Outstanding |
|
Stock Awards Outstanding as
of |
|
|
as of December 31, 2009 |
|
December 31, 2009 |
Director |
|
|
Exercisable (#) |
|
Unexercisable (#) |
|
Unvested (#) |
Barkas, Alexander |
|
|
351,042 |
|
|
|
61,458 |
|
|
|
48,125 |
|
Eastham, Karin |
|
|
17,500 |
|
|
|
45,000 |
|
|
|
7,500 |
|
Fritzky, Edward |
|
|
193,542 |
|
|
|
7,708 |
|
|
|
33,749 |
|
Hofstaetter, Thomas(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Homcy, Charles |
|
|
95,000 |
|
|
|
— |
|
|
|
31,250 |
|
Kiley, Thomas |
|
|
131,875 |
|
|
|
4,375 |
|
|
|
32,655 |
|
Zenner, Patrick(2) |
|
|
193,750 |
|
|
|
— |
|
|
|
32,655 |
|
____________________
(1) |
|
Dr. Hofstaetter
joined the Board in March 2010.
|
|
(2) |
|
On March 25,
2010, Mr. Zenner notified the Company of his decision to retire as a
member of the Board effective as of May 19, 2010, the date of the Annual
Meeting.
|
14
PROPOSAL 2
APPROVAL OF AMENDMENT TO THE 2002 EQUITY
INCENTIVE PLAN
The Company’s stockholders are being asked to
approve an amendment to the Company’s 2002 Equity Incentive Plan (the 2002 Plan)
at this Annual Meeting to increase the number of shares issuable thereunder by
5,000,000 shares. In March 2010, the Board amended the 2002 Plan, subject to
stockholder approval to increase the aggregate number of shares authorized for
issuance under the 2002 Plan from 19,579,603 to 24,579,603, which share reserve
is increased automatically each year as described below. The Board adopted the
amendment to ensure that the Company can continue to grant stock options and
restricted stock awards to attract and retain high quality employees and
consultants. Without the approval of this amendment, the Company would be unable
to grant options or restricted stock awards consistent with the Company’s normal
compensation practices and common practice in the industry. The annual automatic
share reserve increase is insufficient to accommodate the growing number of
employees for the Company.
The 2002 Plan was initially adopted by the
Board in February 2002 and approved by the stockholders in May 2002. Upon
adoption, the 2002 Plan had an initial reserve of 5,000,000 shares of Common
Stock for issuance of awards. This initial reserve was automatically increased
on each anniversary date of the Board’s adoption of the 2002 Plan by the least
of (i) 2,000,000 shares, (ii) 4% of the Company’s outstanding Common Stock as of
such anniversary date, or (iii) a lesser amount determined by the Board. As of
March 1, 2010, a total of 19,579,603 shares of Common Stock had been authorized
for issuance under the 2002 Plan. The last automatic increase in the authorized
number of shares under the 2002 Plan occurred February 15, 2010 for 2,000,000
shares.
Summary of 2002 Equity Incentive
Plan
The following is a summary of the principal
features of the 2002 Plan, together with the applicable tax implications with
respect to the 2002 Plan. The summary is qualified by reference to the full text
of the 2002 Plan, as amended, which is attached as Appendix A to this proxy
statement.
General
The 2002 Plan provides for grants to employees
of the Company and any parent or subsidiary of the Company (including officers
and employee directors) of “incentive stock options” within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the Code), and for
grants of non-qualified stock options and stock purchase rights to employees
(including officers and employee directors) and consultants (including
non-employee directors) of the Company or any parent or subsidiary of the
Company. As of March 1, 2010, 7 executive officers and approximately 175 other
employees and consultants (including non-employee directors) are currently
eligible to participate in the 2002 Plan. See “Federal Income Tax Aspects” below
for information concerning the tax treatment of incentive stock options,
non-qualified stock options and stock purchase rights.
The 2002 Plan is not a qualified retirement
plan under Section 401(a) of the Code, and is not subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended.
Purpose
The purposes of the 2002 Plan are to attract
and retain the best available personnel for positions of substantial
responsibility; to give employees and consultants of the Company a greater
personal stake in the success of the Company’s business; to provide additional
incentive to the employees and consultants of the Company to continue and
advance in their employment and service to the Company; and to promote the
success of the Company’s business.
Administration
The 2002 Plan is currently being administered
by the Compensation Committee and the Stock Option Committee of the Board (the
Administrator). With respect to executive officers of the Company (including
executive officers who are also directors), the 2002 Plan is administered
exclusively by the Compensation Committee of the
15
Board. The
Administrator may determine the terms of the options and stock purchase rights
granted, including the exercise or purchase price, the number of shares subject
to each option or stock purchase right and the exercisability options. The
Administrator also has the authority to select the individuals to whom options
and stock purchase rights will be granted and to make any combination of grants
to individuals. The Administrator’s interpretation and construction of any
provision of the 2002 Plan will be final and binding upon all participants.
Eligibility
The 2002 Plan provides that incentive stock
options may be granted only to employees (including officers and employee
directors) of the Company or any parent or subsidiary of the Company, while
non-qualified stock options and stock purchase rights may be granted not only to
employees (including officers and employee directors), but also to consultants
(including non-employee directors) of the Company or any parent or subsidiary of
the Company. The Administrator shall have full authority to determine which
eligible individuals are to receive option grants or stock purchase rights under
the 2002 Plan; the number of shares to be covered by each such grant; whether a
granted option is to be an incentive stock option which satisfies the
requirements of Section 422 of the Code or a non-qualified stock option not
intended to meet such requirements; the time or times at which each such option
is to become exercisable; and the maximum term for which the option is to remain
outstanding.
The 2002 Plan provides that the maximum number
of shares of Common Stock which may be granted under options or stock purchase
rights to any one service provider during any calendar year shall be 750,000
shares, subject to adjustment as provided in the 2002 Plan. There is also a
limit under the Code on the aggregate market value of shares subject to all
incentive stock options granted to an optionee which may first become
exercisable during any calendar year.
Stock Subject to the Stock Option Plan
As described above, an aggregate of 19,579,603
shares (24,579,603 shares assuming the proposed amendment is approved) of Common
Stock has been authorized for issuance under the 2002 Plan, including the
automatic increase in 2010. This number of shares authorized for issuance under
the 2002 Plan will automatically increase on each anniversary date of the
Board’s adoption of the 2002 Plan during the term of the 2002 Plan by the least
of (i) 2,000,000 shares, (ii) 4% of the Company’s outstanding Common Stock as of
such anniversary date, or (iii) a lesser amount determined by the Board. To the
extent that an award granted under the 2002 Plan expires or otherwise terminates
without being exercised in full or shares of restricted stock acquired pursuant
to a stock purchase right are reacquired at their original price, such shares of
Common Stock will again become available for issuance under the 2002
Plan.
Terms of Options
The following is a description of the terms of
options under the 2002 Plan. Individual option grants may be more or less
restrictive as to any or all of the terms described below, except for those
mandatory terms described using the word “must.”
Exercise Price;
Payment. The exercise
price under the 2002 Plan is determined by the Administrator and in the case of
all incentive stock options granted under the 2002 Plan, the exercise price must
be at least equal to the fair market value of the Common Stock of the Company on
the date of grant. The exercise price of any incentive stock option granted to
an optionee who owns stock representing more than 10% of the total combined
voting power of all classes of stock of the Company or any of its subsidiaries
(a 10% Stockholder) must equal at least 110% of the fair market value of the
Common Stock on the date of grant. In addition, although the 2002 Plan does not
establish a minimum exercise price for non-qualified stock options, the
Administrator has historically granted each non-qualified stock option with an
exercise price equal to the fair market value of the Common Stock on the date of
grant. An optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such option by a cash payment upon
exercise, by authorizing the Company to withhold a portion of the stock
otherwise issuable to the optionee having a value equal to the statutory minimum
amount required to be withheld (if permitted by the Administrator), by
delivering already owned stock of the Company (if permitted by the
Administrator) that, in the case of stock acquired from the Company has been
held by the optionee for at least six months, or by a combination of these
means. As of March 1, 2010, the closing sales price of a share of the Company’s
Common Stock as reported on the Nasdaq Global Market was $5.71 per
share.
16
The consideration to be paid for shares issued
upon exercise of options granted under the 2002 Plan, including the method of
payment, is determined by the Administrator and may consist entirely of cash;
check; promissory note; shares of the Company’s Common Stock which have been
beneficially owned by the optionee for at least six months or which were not
acquired directly or indirectly from the Company and which have a fair market
value on the exercise date equal to the aggregate exercise price of the shares
purchased; authorization for the Company to retain from the total number of
shares as to which the option is exercised a number of shares having a fair
market value on the exercise date equal to the aggregate exercise price of the
shares issued; or delivery of a properly executed notice and irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds required to pay the exercise price. The Administrator may also
authorize payments by any combination of the above methods or any other
consideration and method of payment permitted by law.
Option Exercise/Restrictions on Transfer. An option is nontransferable by the optionee
other than by will or by the laws of descent and distribution. Each option may
be exercised during the lifetime of the optionee only by such optionee or in the
case of a non-qualified stock option by a transferee under a qualified domestic
relations order. In the event of an optionee’s death, an option may be exercised
by a person who acquires the right to exercise that option by bequest or
inheritance. Options granted under the 2002 Plan generally vests in a series of
installments at the rate of 12.5% of the total number of shares as of the six
month period from the date of grant, and approximately 2.08% each month
thereafter. Under certain circumstances, options may be exercised prior to
vesting, subject to the Company’s right to repurchase shares subject to such
option at the exercise price paid per share. The Company’s repurchase rights
would generally terminate on a vesting schedule identical to the vesting
schedule of the exercised option.
Term. The
Administrator determines the term of options granted under the 2002 Plan. The
term of a stock option granted under the 2002 Plan must not exceed ten years;
provided, however, that the term of an incentive stock option must not exceed
five years for 10% Stockholders.
In the event an optionee ceases to be employed
or retained by the Company for any reason other than death or disability, each
outstanding option held by such optionee will generally remain exercisable for
the three-month period following the date of such cessation of employment or
service. Should the optionee’s employment or service terminate by reason of
death or disability, all outstanding options that would be exercisable in the
next 36 months would become exercisable and remain exercisable for 24 months
following the date of death or disability. If an optionee dies within three
months after termination (other than a termination because of disability), each
outstanding option held by such optionee will remain exercisable for six months
following the date of termination. The Board has full power and authority to
extend the period of time for which the option is to remain exercisable
following the optionee’s termination of service, and in no event will the
post-termination exercise periods described above allow an option to be
exercised after the expiration of the term of such option.
Stock Purchase Rights
The Administrator may issue stock purchase
rights to employees, directors and consultants either alone, in addition to or
in tandem with the issuance of options under the 2002 Plan, and such rights are
nontransferable by the holder other than by will or by the laws of descent and
distribution. The Administrator determines:
- the number of shares subject to
stock purchase rights issued to employees, directors and
consultants;
- the price per share for the
restricted stock to be issued to an employee, director or consultant
pursuant to a stock purchase
right;
- the time period within which an
employee, director or consultant to whom a stock purchase right has
been issued must accept such offer;
and
- the terms and conditions of the
stock purchase rights and restricted stock.
Restricted stock issued pursuant to the
exercise of stock purchase right will be evidenced by a written restricted stock
purchase agreement. The restricted stock purchase agreement will contain such
restrictions as the Administrator provides, including restrictions concerning
voting rights, transferability and restrictions based on duration of employment
and the satisfaction of performance thresholds. The Company may repurchase from
the holder of restricted stock the restricted stock immediately upon the
termination of employment or consultancy
17
for any reason
(including death or disability) for an amount equal to the price paid for the
restricted stock. The Company may pay the price for the restricted stock by
canceling any indebtedness that the stockholder may owe to the Company.
Adjustment Provisions
Certain transactions with our stockholders not
involving our receipt of consideration, such as a stock split, spin-off, stock
dividend or certain recapitalizations may affect the share price of our Common
Stock (which transactions are referred to collectively as equity
restructurings). In the event that an equity restructuring occurs, the
Administrator will equitably adjust the class and the maximum number of shares
of stock subject to the 2002 Plan as well as the maximum number of shares for
which any one person may be granted options or stock purchase rights per
calendar year, and will equitably adjust outstanding awards as to the class,
number of shares and price per share of our stock. Other types of transactions
may also affect our Common Stock, such as a dividend or other distribution,
reorganization, merger, or other changes in corporate structure. In the event
that there is such a transaction, the transaction is not an equity
restructuring, and the Administrator determines that an adjustment to the 2002
Plan and any outstanding awards would be appropriate to prevent any dilution or
enlargement of benefits under the 2002 Plan, the Administrator will equitably
adjust the 2002 Plan as to the class of shares issuable and the maximum number
of shares of our stock subject to the 2002 Plan, as well as the maximum number
of shares that may be issued to any person during any calendar year, and will
adjust any outstanding awards as to the class, number of shares, and price per
share of our stock in such manner as it may deem equitable. The adjustments
determined by the Administrator shall be final, binding and
conclusive.
Effect of Certain Corporate Events
In the event of a transaction involving a
merger or acquisition of all or substantially all of the Company’s assets, the
2002 Plan provides that each outstanding option will accelerate so that each
option will be fully exercisable for all of the shares subject to such option
immediately prior to the effective date of the transaction. In addition, upon
the occurrence of such a transaction, the 2002 Plan provides that all of the
outstanding repurchase rights of the Company with respect to previously unvested
shares of Common Stock acquired upon exercise of options or stock purchase
rights granted under the 2002 Plan will terminate. Any surviving or acquiring
corporation or entity may either assume outstanding awards under the 2002 Plan
or substitute similar awards.
Duration and Amendment
Unless terminated sooner through action by the
Board, the 2002 Plan shall terminate in 2012. The Board shall have complete and
exclusive power and authority to amend or modify the 2002 Plan in any or all
respects whatsoever; provided, however, that no amendment or modification shall,
without the consent of the holders, adversely affect the rights and obligations
with respect to options outstanding under the 2002 Plan; and provided, further,
that the Board shall obtain stockholder approval of any amendment to the extent
necessary and desirable to comply with applicable statutory, regulatory or other
legal requirements.
Federal Income Tax Aspects
The following is a brief summary of the U.S.
federal income tax consequences of transactions under the 2002 Plan based on
federal income tax laws in effect as of the date of this Proxy Statement. This
summary is not intended to be exhaustive and does not address all matters which
may be relevant to a particular individual based on his or her specific
circumstances. The summary addresses only current U.S. federal income tax law
and expressly does not discuss the income tax law of any state, municipality or
non-U.S. taxing jurisdiction or gift, estate or other tax laws other than
federal income tax law. The Company advises all participants under the 2002 Plan
to consult their own tax advisors concerning tax implications of grants and
exercises and the disposition of stock acquired upon such exercises under the
2002 Plan.
Stock Options.
Options granted under the 2002 Plan may be either “incentive stock options,”
which are intended to qualify for the special tax treatment provided by Section
422 of the Code, or non-qualified stock options, which will not so
qualify.
18
If an option granted under the 2002 Plan is an
incentive stock option, the optionee will recognize no income upon grant of the
incentive stock option and incur no tax liability due to the exercise. However,
the excess of the fair market value of the stock at the date of exercise over
the exercise price will be an item of adjustment for the purposes of the
alternative minimum tax. The Company will not be allowed a deduction for federal
income tax purposes as a result of the exercise of an incentive stock option
regardless of the applicability of the alternative minimum tax. Upon the sale or
exchange of the shares acquired upon exercise more than two years after grant of
the option and one year after such exercise, any gain or loss will be treated as
long-term capital gain or loss. If either of these holding periods is not
satisfied, the optionee will recognize ordinary income equal to the difference
between the exercise price and the lower of the fair market value of the stock
at the date of the option exercise or the sale price of the stock. The Company
will be entitled to a deduction in the same amount as the ordinary income
recognized by the optionee. Any capital gain recognized on a disposition of the
shares prior to completion of both of the above holding periods in excess of the
amount treated as ordinary income (or any capital loss recognized on such
disposition) will be characterized as long-term if the sale occurs more than one
year after exercise of the option or as short-term if the sale is made
earlier.
All other options which do not qualify as
incentive stock options are referred to as non-qualified stock options. An
optionee will not recognize any taxable income under U.S. tax laws at the time
he or she is granted a non-qualified stock option. However, upon its exercise,
under U.S. tax laws the optionee will recognize ordinary income for tax purposes
measured by the excess of the then fair market value of the shares over the
exercise price. In certain circumstances, where the shares are subject to a
substantial risk of forfeiture when acquired, the date of taxation under U.S.
tax laws may be deferred unless the optionee files an election with the Internal
Revenue Service under Section 83(b) of the Code. The income recognized by an
optionee who is also an employee of the Company will be subject to income and
employment tax withholding by the Company. Upon resale of such shares by the
optionee, any difference between the sales price and the fair market value of
the shares as of the date of exercise of the option will be treated under U.S.
tax laws as capital gain or loss, and will qualify for long-term capital gain or
loss treatment if the shares have been held for more than one year from the date
of exercise.
Stock Purchase Rights. For federal income tax purposes, if an individual is granted a stock
purchase right, the individual generally will not have taxable income on the
grant of the stock purchase right, nor will the Company then be entitled to any
deduction. Generally, on the purchase of restricted stock pursuant to a stock
purchase right, the individual will also not have taxable income, nor will the
Company be entitled to a deduction, unless the individual makes a valid election
under Section 83(b) of the Code. However, when restrictions on shares of
restricted stock lapse, such that the shares are no longer subject to a
substantial risk of forfeiture, the individual generally will recognize ordinary
income, and the Company will be entitled to a corresponding deduction, for an
amount equal to the difference between the fair market value of the shares at
the date such restrictions lapse over the purchase price for the restricted
stock. The income recognized by an individual who is also an employee of the
Company will be subject to income and employment tax withholding by the Company.
If the individual makes a valid election under Section 83(b) with respect to
restricted stock, the individual generally will recognize ordinary income at the
date of issuance of the restricted stock in an amount equal to the difference,
if any, between the fair market value of the shares at that date over the
purchase price for the restricted stock, and the Company will be entitled to a
deduction for the same amount.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Code provides that a
publicly-held corporation cannot deduct compensation of a covered employee (the
Chief Executive Officer and certain other executive officers) to the extent the
compensation paid to such employee exceeds $1 million per tax year. There is a
statutory exception to this limitation for certain performance-based
compensation. Income derived from stock options will qualify for this exception
and thus be treated as performance-based compensation if granted in accordance
with the requirements set forth in Section 162(m). Section 162(m) requires that
the stock option grant be approved by a committee consisting of outside
directors (as defined in Section 162(m)), the plan states the maximum number of
shares that can be granted to any person within a specified period and the
compensation must be based solely on an increase in the stock price after the
grant date (i.e., the option exercise price is equal to or greater than the fair
market value of the stock subject to the award on the grant date). We have
designed the 2002 Plan in a manner which allows for options granted thereunder
to comply with those requirements.
19
2002 Plan Benefits
The following table presents certain
information with respect to cumulative stock awards outstanding under the 2002
Plan as of December 31, 2009 to (i) each of the executive officers named in the
Summary Compensation Table, (ii) all executive officers as a group, (iii) all
non-executive officer directors as a group and (iv) all non-executive officer
employees and consultants as a group. Amounts of future grants of awards under
the 2002 Plan are not determinable because under the terms of the 2002 Plan,
grants of awards are made at the discretion of the Administrator.
|
|
|
|
|
|
|
|
|
Cumulative |
|
|
Cumulative |
|
|
|
|
|
|
Number of Shares |
|
|
Number of Shares |
|
|
|
Subject to Unvested |
|
|
Subject to Stock |
|
|
|
Restricted Stock |
|
|
Options Granted |
|
Weighted Average |
|
Awards Under the |
Name and Position |
|
|
Under the 2002 Plan |
|
Exercise Price |
|
2002 Plan |
Thomas B. Okarma, Ph.D., M.D. |
|
|
1,650,000 |
|
|
|
$ |
5.66 |
|
|
|
172,500 |
|
President and Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Greenwood |
|
|
1,046,341 |
|
|
|
$ |
5.59 |
|
|
|
134,375 |
|
Executive Vice President and |
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Kelsey, M.D., F.R.C.P.,
F.R.C.Path. |
|
|
200,000 |
|
|
|
$ |
6.76 |
|
|
|
40,000 |
|
Executive Vice President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Medical Officer, Oncology |
|
|
|
|
|
|
|
|
|
|
|
|
|
David J. Earp, J.D., Ph.D. |
|
|
536,250 |
|
|
|
$ |
6.21 |
|
|
|
96,250 |
|
Senior Vice President Business Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Chief Patent Counsel |
|
|
|
|
|
|
|
|
|
|
|
|
|
Jane S. Lebkowski, Ph.D. |
|
|
542,500 |
|
|
|
$ |
5.97 |
|
|
|
96,250 |
|
Senior Vice President, Chief Scientific Officer, |
|
|
|
|
|
|
|
|
|
|
|
|
|
Regenerative Medicine |
|
|
|
|
|
|
|
|
|
|
|
|
|
All Executive Officers as a group (7
persons) |
|
|
4,479,416 |
|
|
|
$ |
5.91 |
|
|
|
705,656 |
|
All Non-Executive Officer
Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
as
a Group (7 persons) |
|
|
107,500 |
|
|
|
$ |
6.24 |
|
|
|
43,434 |
|
All Non-Executive Officer
Employees |
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Consultants as a Group (174 persons) |
|
|
4,983,283 |
|
|
|
$ |
6.31 |
|
|
|
780,994 |
|
As of December 31, 2009, options to purchase
9,570,199 shares were outstanding (net of canceled or expired options), unvested
restricted stock awards of 1,530,084 were outstanding and 1,569,023 shares
remained available for future grants under the 2002 Plan. As of December 31,
2009, the aggregate fair value of shares subject to outstanding options and
restricted stock awards under the 2002 Plan was $61,606,571 assuming a market
value of $5.55 per share as of December 31, 2009.
REQUIRED VOTE
Stockholders are requested in this Proposal 2
to approve the amendment to the 2002 Plan to increase the number of shares
reserved for issuance thereunder by 5,000,000 shares. The affirmative vote of
the holders of a majority of the shares present in person or represented by
proxy and entitled to vote on the proposal at the meeting will be required to
approve the proposal. Accordingly, proxies reflecting abstentions to this
proposal will be treated as votes against the amendment to the 2002 Plan. A
broker is not entitled to vote shares held for a beneficial owner on this
proposal. Thus, if the beneficial owner does not give a broker specific
instructions, the beneficially owned shares may not be voted on this proposal
and will not be counted in determining the number of shares necessary for
approval.
The Board of Directors Unanimously Recommends
That
Stockholders Vote FOR Proposal
2
20
PROPOSAL 3
RATIFICATION OF SELECTION
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
On the recommendation of the Audit Committee,
the Board has selected Ernst & Young LLP as the Company’s independent
registered public accounting firm for the fiscal year ending December 31, 2010,
and has further directed that management submit the selection of the independent
registered public accounting firm for ratification by the stockholders at the
Annual Meeting. Ernst & Young LLP has served as the Company’s independent
registered public accounting firm since 1992. Representatives of Ernst &
Young LLP are expected to be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions from stockholders.
The Company has been informed by Ernst &
Young LLP that, to the best of their knowledge, neither the firm nor any of its
members or their associates has any direct financial interest or material
indirect financial interest in the Company or its affiliates.
Stockholder ratification of the selection of
Ernst & Young LLP as the Company’s independent registered public accounting
firm is not required by the Company’s Bylaws or otherwise. However, the Board is
submitting the selection of Ernst & Young LLP to the stockholders for
ratification as a matter of good corporate practice. If the stockholders fail to
ratify the selection, the Audit Committee and the Board will reconsider whether
or not to retain that firm. Even if the selection is ratified, the Audit
Committee and the Board in their 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.
REQUIRED VOTE
The affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled to
vote on the proposal at the meeting will be required to ratify the selection of
Ernst & Young LLP. Abstentions will have the same effect as a vote against
this proposal. However, ratification of the selection of Ernst & Young LLP
is a matter on which a broker or other nominee is empowered to vote.
Accordingly, no broker non-votes will result from this proposal.
The Board of Directors Unanimously Recommends
That
Stockholders Vote FOR Proposal
3
PRINCIPAL ACCOUNTANT FEES AND
SERVICES
The Audit Committee maintains policies and
procedures for the pre-approval of work performed by the independent registered
public accounting firm. Under the Audit Committee’s charter, all engagements of
the independent registered public accounting firm must be approved in advance by
the Audit Committee. The Chairman of the Audit Committee must be notified at any
time the fees for a specific project exceed 20% of the approved budget for
authorization to continue the project. Management recommendations will be
considered in connection with such engagements, but management will have no
authority to approve engagements. For each quarterly Audit Committee meeting,
management prepares a schedule of all fees paid to Ernst & Young LLP during
the previous quarter and estimated fees for projects contemplated in the
following quarter.
Upon recommendation by the Audit Committee,
the Board selected Ernst & Young LLP to act in the same capacity for the
fiscal year ending December 31, 2010. The Company has been informed by Ernst
& Young LLP, to the best of their knowledge, that neither the firm nor any
of its members or their associates has any financial interest, direct or
indirect in the Company or its affiliates.
21
Audit Fees and All Other Fees
The Audit Committee approved 100% of all
audit, tax and other services provided by Ernst & Young LLP in 2009 and
2008. The total fees paid to Ernst & Young LLP for the last two fiscal years
are as follows:
|
|
Fiscal Year Ended |
|
Fiscal Year Ended |
|
|
December 31, 2009 |
|
December 31, 2008 |
Audit Fees(1) |
|
|
$ |
675,414 |
|
|
|
$ |
585,449 |
|
Tax Fees(2) |
|
|
|
22,374 |
|
|
|
|
11,340 |
|
All Other Fees |
|
|
|
1,740 |
|
|
|
|
1,500 |
|
____________________
(1) |
|
Audit Fees
include the integrated audit of annual consolidated financial statements
and internal control over financial reporting, audits of certain
subsidiaries, reviews of quarterly consolidated financial statements
included in Quarterly Reports on Forms 10-Q, consultations on matters
addressed during the audit or quarterly reviews, and services provided in
connection with SEC filings, including consents and comment and comfort
letters. |
|
(2) |
|
Tax Fees consist
of services related to the filing of tax returns and other assistance with
tax compliance. |
22
AUDIT COMMITTEE REPORT(1)
The Audit Committee of Geron Corporation’s
Board of Directors is comprised of three independent directors as required by
the listing standards of the Nasdaq Global Market (Nasdaq). The Audit Committee
operates pursuant to a written charter adopted and amended by the Board of
Directors in March 2005. A copy of the Committee’s amended and restated charter
is available on the Company’s website at http://www.geron.com.
The members of the Audit Committee are Ms.
Eastham (Chairperson) and Messrs. Fritzky and Kiley. The Board has determined
that all members of the Committee are financially literate as required by
Nasdaq. The Board has also determined that Ms. Eastham is an audit committee
financial expert as defined by Nasdaq.
The function of the Audit Committee is to
assist the Board of Directors in fulfilling its oversight responsibilities
regarding (i) the quality and integrity of the Company’s financial statements,
(ii) the Company’s compliance with legal and regulatory requirements, (iii) the
qualifications and independence of the independent registered public accounting
firm serving as auditors of the Company and (iv) the performance of the
independent registered public accounting firm.
Management is responsible for the Company’s
internal controls and financial reporting. The independent registered public
accounting firm is responsible for performing an independent audit of the
Company’s consolidated financial statements in accordance with generally
accepted auditing standards and to issue a report thereon. The Audit Committee’s
responsibility is to monitor and oversee these processes.
In this context, the Audit Committee
hereby reports as follows:
|
1) |
|
The
Audit Committee has reviewed and discussed the audited financial
statements of the Company as of and for the year ended December 31, 2009
with management and the independent registered public accounting firm
serving as the Company’s independent auditors. |
|
|
|
2) |
|
The
Audit Committee has discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees), other professional standards,
membership provisions of the SEC Practice Session, and other SEC rules, as
currently in effect. |
|
|
|
3) |
|
The
Audit Committee has received the written disclosures and the letter from
the independent auditors required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), as currently in
effect, and it has discussed with the auditors their independence from the
Company. |
|
|
|
4) |
|
The
Audit Committee has considered whether the independent auditors’ provision
of non-audit services to the Company is compatible with maintaining the
auditors’ independence. |
Based on the reports and discussions described
above, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2009, for filing with the SEC.
Submitted on February 19, 2010 by the members
of the Audit Committee of the Company’s Board of Directors.
|
Karin Eastham (Chairperson) |
|
Edward V. Fritzky |
|
Thomas D. Kiley,
Esq. |
____________________
(1) |
|
This
Section is not “soliciting material,” is not deemed “filed” with the SEC
and is not to be incorporated by reference in any filing of the Company
under the Securities Exchange Act of 1934, as amended (the Exchange Act),
or the Securities Act of 1933, as amended (the Securities Act), whether
made before or after the date hereof and irrespective of any general
incorporation language in any such
filing. |
23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the amount and
percentage of the outstanding shares of Common Stock, which, according to the
information supplied to the Company, are beneficially owned by (i) each person
who, to the best of the Company’s knowledge based exclusively on Schedules 13G
filed with the Securities and Exchange Commission (SEC), is the beneficial owner
of more than 5% of the Company’s outstanding Common Stock, (ii) each person who
is currently a director, two of whom are also nominees for election as
directors, (iii) each Named Executive Officer, as defined on page 39 herein and
(iv) all current directors and executive officers as a group. Unless otherwise
indicated, the address for each of the stockholders in the table below is c/o
Geron Corporation, 230 Constitution Drive, Menlo Park, CA 94025. Except for
information based on Schedules 13G, as indicated in the footnotes, beneficial
ownership is stated as of January 31, 2010.
|
|
Beneficial Ownership(1) |
|
|
Number of |
|
Percent of |
Beneficial Owner |
|
|
Shares |
|
Total |
Directors/Nominees and Named Executive
Officers: |
|
|
|
|
|
|
|
|
Alexander E. Barkas, Ph.D.(2) |
|
|
569,110 |
|
|
|
* |
|
Karin Eastham(3) |
|
|
39,850 |
|
|
|
* |
|
Edward V. Fritzky(4) |
|
|
307,771 |
|
|
|
* |
|
Thomas Hofstaetter, Ph.D.(5) |
|
|
— |
|
|
|
* |
|
Charles J. Homcy, M.D.(6) |
|
|
160,251 |
|
|
|
* |
|
Thomas D. Kiley, Esq.(7) |
|
|
336,946 |
|
|
|
* |
|
Patrick J. Zenner(8) |
|
|
270,271 |
|
|
|
* |
|
David J. Earp, J.D., Ph.D.(9) |
|
|
758,098 |
|
|
|
* |
|
David L. Greenwood(10) |
|
|
1,249,483 |
|
|
|
1.27 |
% |
Stephen M. Kelsey, M.D., F.R.C.P.,
F.R.C.Path.(11) |
|
|
85,833 |
|
|
|
* |
|
Jane S. Lebkowski, Ph.D.(12) |
|
|
780,189 |
|
|
|
* |
|
Thomas B. Okarma, Ph.D.,
M.D.(13) |
|
|
1,899,145 |
|
|
|
1.92 |
% |
All directors and executive officers as
a group (14 persons) |
|
|
7,090,927 |
|
|
|
6.91 |
% |
____________________
* |
|
Represents beneficial ownership
of less than 1% of Common Stock. |
|
|
|
(1) |
|
Beneficial ownership is determined in accordance with the rules of
the SEC. In computing the number of shares beneficially owned by a person
and the percentage of ownership of that person, shares of Common Stock
subject to options held by that person that are currently exercisable or
exercisable within 60 days of January 31, 2010 are deemed outstanding.
Such shares, however, are not deemed outstanding for the purpose of
computing the percentage ownership of each other person. The persons named
in this table, to the best of the Company’s knowledge, have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and except as indicated in the other footnotes to this
table. |
|
(2) |
|
Includes 169,686 shares held directly by Alexander E. Barkas, 882
shares held by Lynda Wijcik, the spouse of Dr. Barkas, 48,125 shares held
under unvested restricted stock awards, and 350,417 shares issuable upon
the exercise of outstanding options held by Dr. Barkas exercisable within
60 days of January 31, 2010. |
|
(3) |
|
Includes 7,500 shares held under unvested restricted stock awards
by Karin Eastham and 32,350 shares issuable upon the exercise of
outstanding options held by Ms. Eastham exercisable within 60 days of
January 31, 2010. |
|
(4) |
|
Includes 78,605 shares held directly by Edward V. Fritzky, 33,749
shares held under unvested restricted stock awards and 195,417 shares
issuable upon the exercise of outstanding options held by Mr. Fritzky
exercisable within 60 days of January 31, 2010. |
|
(5) |
|
Dr.
Hofstaetter joined the Board in March
2010. |
24
(6) |
|
Includes 34,001 shares held directly by Charles J. Homcy, 31,250
shares held under unvested restricted stock awards and 95,000 shares
issuable upon the exercise of outstanding options held by Dr. Homcy
exercisable within 60 days of January 31, 2010. |
|
(7) |
|
Includes 115,433 shares held directly by Thomas D. Kiley, 32,655
shares held under unvested restricted stock awards, 9,705 shares held by
the Kiley Family Partnership and 46,653 shares held by the Thomas D. Kiley
and Nancy L.M. Kiley Revocable Trust under Agreement dated August 7, 1981.
Also includes 132,500 shares issuable upon the exercise of outstanding
options held by Mr. Kiley exercisable within 60 days of January 31,
2010. |
|
(8) |
|
Includes 43,866 shares held directly by Patrick J. Zenner, 32,655
shares held under unvested restricted stock awards and 193,750 shares
issuable upon the exercise of outstanding options held by Mr. Zenner
exercisable within 60 days of January 31, 2010. On March 25, 2010, Mr.
Zenner notified the Company of his decision to retire as a member of the
Board effective as of May 19, 2010, the date of the Annual
Meeting. |
|
(9) |
|
Includes 112,418 shares held directly by David J. Earp, 96,250
shares held under unvested restricted stock awards and 549,430 shares
issuable upon the exercise of outstanding options held by Dr. Earp
exercisable within 60 days of January 31, 2010. |
|
(10) |
|
Includes 117,433 shares held directly by David L. Greenwood,
134,375 shares held under unvested restricted stock awards and 997,675
shares issuable upon the exercise of outstanding options held by Mr.
Greenwood exercisable within 60 days of January 31, 2010. |
|
(11) |
|
Includes 40,000 shares held under unvested restricted stock awards
by Stephen M. Kelsey and 45,833 shares issuable upon the exercise of
outstanding options held by Dr. Kelsey exercisable within 60 days of
January 31, 2010. |
|
(12) |
|
Includes 109,771 shares held directly by Jane S. Lebkowski, 96,250
shares held under unvested restricted stock awards and 574,168 shares
issuable upon the exercise of outstanding options held by Dr. Lebkowski
exercisable within 60 days of January 31, 2010. |
|
(13) |
|
Includes 238,105 shares held directly by Thomas B. Okarma, 172,500
shares held under unvested restricted stock awards and 1,488,540 shares
issuable upon the exercise of outstanding options held by Dr. Okarma
exercisable within 60 days of January 31,
2010. |
EQUITY COMPENSATION PLANS
The following table summarizes information
with respect to equity awards under the Company’s equity compensation plans at
December 31, 2009:
|
|
Number of |
|
Weighted- |
|
Number of securities |
|
|
securities to be |
|
average |
|
remaining available
for |
|
|
issued upon exercise |
|
exercise price |
|
future issuance
under |
|
|
of outstanding |
|
of outstanding |
|
equity compensation |
|
|
options, warrants |
|
options, warrants |
|
plans (excluding
securities |
|
|
and rights |
|
and rights |
|
reflected in column
(a)) |
|
|
(a) |
|
(b) |
|
(c) |
Equity compensation plans approved by
security |
|
|
|
|
|
|
|
|
|
|
|
|
|
holders(1) |
|
|
11,761,395 |
|
|
|
$ |
6.93 |
|
|
|
4,095,388 |
(2),(3) |
Equity compensation plans not approved by security |
|
|
|
|
|
|
|
|
|
|
|
|
|
holders |
|
|
730,000 |
(4) |
|
|
$ |
6.16 |
|
|
|
— |
|
Total |
|
|
12,491,395 |
|
|
|
$ |
6.88 |
|
|
|
4,095,388 |
|
____________________
(1) |
|
Includes the 1992 Stock Option Plan, the 2002 Equity Incentive
Plan, the 1996 Directors’ Stock Option Plan and the 2006 Directors’ Stock
Option Plan. |
|
(2) |
|
Includes 627,951 shares of Common Stock reserved for issuance under
the Company’s 1996 Employee Stock Purchase
Plan. |
25
(3) |
|
Does
not include future automatic annual increases under the Company’s 2002
Equity Incentive Plan. The maximum number of shares to be reserved will
automatically increase on each anniversary date of the Board’s adoption of
the 2002 Equity Incentive Plan during the term of the plan by the least of
(i) 2,000,000 shares, (ii) 4% of the Company’s outstanding Common Stock as
of such anniversary date, or (iii) a lesser amount determined by the
Board. |
|
(4) |
|
Represents outstanding warrants issued in conjunction with
consulting services and license agreements with research institutions. For
further details, see Note 8 of the consolidated financial statements in
the Company’s Annual Report on Form 10-K filed with the SEC on February
26, 2010. |
INFORMATION CONCERNING CERTAIN EXECUTIVE
OFFICERS
The information required by this section
concerning our executive officers is incorporated by reference from the section
captioned “Executive Officers of the Company” contained in Part I, Item 1 of our
Annual Report on Form 10-K for the year ended December 31, 2009, filed with the
SEC on February 26, 2010.
COMPENSATION DISCUSSION AND
ANALYSIS
Executive Compensation
Philosophy
Executive compensation programs impact all
employees by establishing a general framework for compensation and creating a
work environment focused on expectations, goals and rewards. Because the
performance of every employee is important to overall success, the Board is
mindful of the impact executive compensation and incentive programs have on all
employees. In considering executive compensation policies and practices, the
Board balances the needs to conserve cash and minimize shareholder dilution
against the requirements to attract, retain and motivate company management and
employees.
We maintain our headquarters and operations in
the San Francisco Bay area, which has a high cost of living and a highly
competitive employment environment. Specifically, numerous biotechnology and
other high-growth or commercial companies are nearby and compete for the same
personnel that we seek to recruit, motivate and retain. In addition, the
business cycle in the biotechnology industry is much longer than other
commercial industries requiring long-term dedication from employees. Building an
infrastructure that fosters growth and technological innovation requires
substantial investment in people and resources with no guarantee of return.
In reconciling these areas, the Board strives
to act in the long-term best interests of the Company and its stockholders.
Because of these challenges, the Board has structured the Company’s executive
compensation strategy and structure based on the following
principles:
- Reward Successful Execution of
Business Strategy:
Bonus compensation for executive officers is predicated on
organizational success in addition to individual achievement. The compensation program is designed to support
the corporate business strategy
and business plan by clearly communicating what is expected of each executive
officer with respect to goals
and results, and reward entity/team success, not just individual
effort.
- Attract and Retain Qualified
Talent:
Successful
execution of the business strategy necessitates keeping the Company’s
management team in place and
focused on business goals. Therefore, the Company’s program must be
competitive including equity
awards granted with vesting schedules designed to promote retention.
- Align Management and Stockholder
Interests:
Long-term equity compensation underscores the common interests of
stockholders and management by
providing a continuing financial incentive to maximize long-term value to
stockholders.
26
Objectives of the Executive Compensation
Program
The executive compensation program
is designed to achieve four primary objectives:
|
1. |
|
Ensure
base pay is competitive for the role or job to be performed and to retain
the executive for succession planning while providing reasonable and
responsible pay arrangements in order to maintain a sustainable cost
framework. |
|
|
|
2. |
|
Recognize achievement of annual goals and milestones through annual
incentives. |
|
|
|
3. |
|
Reward
successful completion of long-term goals and enhancement of shareholder
wealth through the long-term incentive program. |
|
|
|
4. |
|
Provide a cost effective but competitive benefits package that
promotes a positive work environment fostering teamwork among and high
morale within the executive team. |
Compensation Elements and
Purpose
Executive compensation at the
Company consists of the following elements:
- Base salary: Compensation for
ongoing performance throughout the year.
- Annual incentive awards: Awarded
to recognize and reward performance, in the context of individual,
team and Company performance, in the
fiscal year just ended.
- Long-term incentive awards: Equity
compensation to provide an incentive to manage the Company from the perspective of an owner with an
equity stake in the business.
- Other benefits: Employee benefit
plans in which executive officers and all employees participate.
- Severance and change in control
benefits: Remuneration paid to executive officers in the event of a
change in control of the Company or
involuntary employment termination.
To date, we have not structured our
compensation elements for executive officers so as to target each separate
component at a specific percentage of their total direct compensation for the
year. The component elements of the compensation plan work together to help
attract, retain and incentivize an experienced and highly capable management
team.
Compensation Committee
Role
The Compensation Committee determines all
compensation for executive officers. Both Compensation Committee members are
independent of the Company’s management. The Chief Executive Officer does not
participate in the Compensation Committee’s deliberations or decision with
regard to his compensation.
To aid the Compensation Committee in its
responsibilities, the Chief Executive Officer (assisted by senior human
resources personnel) provides the Compensation Committee with a variety of
information, including survey data, analyses and recommendations relating to the
Company’s performance, individual performance of other executive officers and
compensation recommendations for every employee, including all executive
officers, except the Chief Executive Officer. In preparation for the
Compensation Committee’s review and decision, the Chief Executive Officer tasks
senior human resources personnel with project leadership for internal
compensation and performance review. Each executive officer is responsible for
ensuring employee performance reviews within their groups are completed on a
timely basis and such reviews objectively reflect the employee’s accomplishments
as well as areas for improvement. All of the executive officers, including the
Chief Executive Officer, review the performance ratings for each employee, the
proposed salary change and the recommended bonus award. This comprehensive
review includes consideration of effective performance management, motivation
and retention of key employees, internal equity considerations, compliance with
legal and benefit plan requirements, tax and accounting treatment, disclosure
and other legal requirements.
At the Compensation Committee’s request, the
Chief Executive Officer reviews the performance of the other executive officers
with the Compensation Committee, but no other executive officer has any input
into the executive compensation decisions. The Compensation Committee gives
considerable weight to the Chief Executive Officer’s
27
evaluation of the
other executive officers because of his direct knowledge of each executive’s
performance and contributions. For each executive officer, the Compensation
Committee independently determines each component of compensation based on their
collective assessment of the executive’s performance using the following
factors:
- performance against corporate and
individual goals for the previous year;
- difficulty of achieving desired
results in the coming year;
- value of unique skills and
capabilities to support long-term performance of the Company;
- performance of general management
responsibilities;
- reporting structure and internal
pay relationships;
- extraordinary contributions as a
member of the executive management team;
- market information; and
- overall company
performance.
The Compensation Committee exercises judgment
in allocating between cash and non-cash compensation. The Compensation Committee
has the authority to retain special counsel and other experts, including
compensation consultants, to support their responsibilities in determining
executive compensation and related programs. The Compensation Committee did not
utilize any consultants in evaluating executive compensation in
2009.
Calculation of Compensation
Elements
Base Salary
The Compensation Committee annually evaluates
executive officer base salaries and adjustments are made at the beginning of the
year to reflect changes in job responsibilities and market conditions. When
establishing or reviewing base salaries for each executive officer, the
Compensation Committee considers numerous factors, including the qualifications
of the executive, his or her level of relevant experience, nature and
responsibility of the position, strategic goals for which the executive has
responsibility, Company and individual performance, salary norms for persons in
comparable positions at comparable companies, the competitiveness of the market
for the executive’s services and industry compensation levels.
In determining base salary, the Compensation
Committee reviews independent survey data, such as the Radford Biotech Survey,
as well as publicly available data from companies with which Geron competes for
talent. The businesses chosen for comparison may differ from one executive to
the next depending on the scope and nature of the business for which the
particular executive is responsible. Companies used for compensation evaluation
may include Gilead Sciences, Inc., Amgen Inc., Genzyme Corporation, Biogen Idec
Inc., Affymax, Inc. and others. These companies are larger than us with respect
to market capitalization, revenue and employees and represent the market in
which we compete for talented executives, especially for positions which we will
be developing in the future to help us plan for our next stage of anticipated
growth. Companies such as Genentech Inc. and CV Therapeutics have been
eliminated from the list since they have been acquired by pharmaceutical
companies. Although base salary information from comparable companies is useful
comparative information, the Compensation Committee does not require that the
base salary of individual executives bear any particular relationship to
salaries of executives of similar positions of those comparable companies. In
the biopharmaceutical industry, many traditional measures of corporate
performance, such as earnings per share or sales growth, may not readily apply
in reviewing performance of executives. Because of Geron’s current stage of
development, the Compensation Committee evaluates other indications of
performance, including progress of the Company’s research and development
programs and corporate development activities, as well as the Company’s success
in securing capital sufficient to enable the Company to continue research and
development activities.
2009 Compensation
Decisions
The Compensation Committee met in December
2008 to evaluate executive officer performance and compensation and faced a very
challenging economic environment given the distress in the financial markets
beginning in the third quarter of 2008. In light of the volatile economic
environment, the deterioration of the
28
capital markets, the
related limitations on stockholder returns and available cash resources, the
Compensation Committee placed a freeze on base salaries for all executive
officers, including the Chief Executive Officer, for fiscal year 2009.
In April 2009, the Compensation Committee
approved the terms of the offer letter agreement for Dr. Stephen Kelsey. After
considering the base salaries for all executive officers, including the Chief
Executive Officer, the base salary earned by Dr. Kelsey while at Genentech, Inc.
and the base salary paid to prior employees in Dr. Kelsey’s position, the
Compensation Committee approved an annual base salary of $400,000 for Dr.
Kelsey.
Annual Incentive Awards
Annual incentive awards are awarded on a
discretionary basis, usually at the end of the Company’s fiscal year-end. They
are designed to reward achievement of corporate and individual goals set by the
Compensation Committee at the beginning of the year, as well as qualify, to the
extent applicable, for performance-based compensation which is not subject to
the $1,000,000 limitation on company income tax deductibility per executive
officer imposed under Section 162(m) of the Internal Revenue Code. For more
information about Section 162(m), please see page 37 herein.
All employees, including executive
officers, have an established potential award which is equal to a percentage of
the employee’s base salary. The percentage increases with increasing rank in the
Company. The maximum bonus targets for executive officers in 2009 ranged from
40% to 60% of base salary depending on the executive’s position. There are no
minimum threshold targets or multipliers that would increase the bonus targets.
In addition, the bonus targets are weighted by individual and Company
performance factors as noted below with increasing weight on Company performance
for more senior employees. Overall corporate performance factor ranges from 0%
to 100% and is assigned by the Compensation Committee based upon their
qualitative assessment of Company performance against corporate goals.
Individual performance factors range from 0% to 100% and are based on written
employee performance reviews. As noted below, the Chief Executive Officer
reviews the performance of executive officers and each Board member conducts an
independent assessment of the Chief Executive Officer’s performance which is
submitted to the Compensation Committee for tabulation and evaluation.
Each year, the Chief Executive Officer
provides Company goals to the Board for review and approval and the Board
approves the goals and assigned weightings. The weightings for each goal vary
year to year depending on the importance of the goal for a particular year. The
goals correlate with increased business value of the Company and for its
stockholders. Annual goals typically include the following:
- product development, such as
enhancements in technology or manufacturing;
- clinical progress, such as
initiation of clinical trials, patient enrollment and patient data;
- corporate development, such as
strategic collaborations; and
- finance, legal and administration,
such as patent enforcement, budget controls and maintenance of a strong balance sheet.
Individual goals for executive officers focus
on contributions that facilitate the achievement of overall Company goals and
development of the organization. Each year, the Board reviews and approves the
individual goals for executive officers. Corporate and individual goals are
sufficiently difficult to require the Company and executive officers to perform
at a high level in order to meet the goals and the likelihood of attaining these
goals is not assured.
As part of the annual year-end performance
reviews, the Compensation Committee (with input from the Chief Executive Officer
and the other Board members) evaluates the Company’s overall performance for the
given year with respect to the approved goals as well as other significant
Company performance accomplishments while also taking into consideration the
degree of difficulty in achieving the goal and any particular events or
circumstances that impacted performance. For this assessment, the Compensation
Committee evaluates the status of Geron’s development programs, clinical
progress and corporate development activities. This necessarily involves a
subjective assessment of corporate performance by the Compensation Committee.
Moreover, the Compensation Committee does not base its considerations on a
single performance area, but rather considers the entire mix of accomplishments,
challenges and efforts in evaluating Company performance and assigning a
corporate performance factor.
29
The Chief Executive Officer evaluates
individual performance (for executives other than himself) through written
evaluations. He provides the evaluations to the Compensation Committee along
with his recommendations for each executive officer’s individual performance
factor. The Compensation Committee reviews the performance and assessment of
each executive officer. The Compensation Committee obtains reviews of the Chief
Executive Officer from each Board member to evaluate the Chief Executive
Officer. The Compensation Committee also considers the following general
criteria when evaluating individual performance, not all of which are applicable
to all executive officers:
- the individual’s role in the
research, development, acquisition and/or licensing of product
candidates and
technologies;
- the individual’s contribution to
the achievement of key research, development and business milestones;
- the individual’s contribution to
the management team and development and application of leadership skills to drive future performance of the
Company;
- the individual’s ability to
attract, hire, manage, retain and motivate staff in support of the
achievement of the Company’s
performance objectives;
- the individual’s contribution to
the achievement of key financial objectives of the Company, including
the management of financial budgets
and forecasts, and as appropriate, involvement in investor relations
and corporate funding initiatives;
and
- effectiveness of the individual’s
management of regulatory compliance requirements related to his or
her responsibilities.
At the end of the year, the Compensation
Committee evaluates, on a qualitative basis, the level of each executive
officer’s attainment of his or her individual performance goals, including the
Chief Executive Officer. The Compensation Committee does not specifically
allocate or weight these goals and considers the attainment of individual goals
on an overall basis when assessing performance for each executive officer. The
Compensation Committee’s assessment of the executive officer’s level of
attainment of individual performance goals becomes the factor for the individual
performance weighting used in the calculation of the bonus for the end of the
year (as described in the second table set forth below which illustrates the
calculation of the 2009 bonus awarded as a percentage of salary).
Corporate
Performance
The table below summarizes our performance
goal categories, 2009 weightings and our Compensation Committee’s assessment of
Company performance as measured in terms of each category that was used to
calculate the overall corporate performance factor of 85%.
|
|
|
|
2009 Weighting |
|
2009 Result |
|
Total |
Corporate Performance
Category |
|
|
Description |
|
(A) |
|
(B) |
|
(A x B) |
Clinical Development |
|
Progress of product candidates |
|
50% |
|
82 |
% |
|
|
41% |
|
|
|
to and through clinical trials |
|
|
|
|
|
|
|
|
|
Product Development |
|
Research and development, |
|
30% |
|
80 |
% |
|
|
24% |
|
|
|
including process |
|
|
|
|
|
|
|
|
|
|
|
improvements |
|
|
|
|
|
|
|
|
|
Corporate Development |
|
In-licensing and out-licensing |
|
10% |
|
100 |
% |
|
|
10% |
|
|
|
technology and strategic |
|
|
|
|
|
|
|
|
|
|
|
transactions to enhance |
|
|
|
|
|
|
|
|
|
|
|
corporate business plan |
|
|
|
|
|
|
|
|
|
Administration |
|
Finance, legal, human |
|
10% |
|
100 |
% |
|
|
10% |
|
|
|
resources and intellectual |
|
|
|
|
|
|
|
|
|
|
|
property management |
|
|
|
|
|
|
|
|
|
|
|
Total Corporate Performance
Factor |
|
|
|
|
|
85% |
|
30
Highlights of the 2009 accomplishments taken
into account by the Compensation Committee in determining overall Company
performance as well as individual performance for executive officers included
the following:
Clinical Development
- Implemented alternative dosing
schedules for Phase I studies of imetelstat (GRN163L) in order to optimize exposure while reducing
toxicity.
- Interim clinical data from the
trial of imetelstat (GRN163L) in patients with refractory, advanced
solid tumors showed that modified
dosing schedules achieved exposures to imetelstat that exceed the levels that have been associated with tumor
inhibition in several models of human cancers. In addition, telomerase inhibition was observed in tissue
samples from patients.
- Clinical data from multiple Phase
I trials provided evidence to assess the safety, tolerability, pharmacokinetics and pharmacodynamics of
imetelstat.
- Established Phase II dose and
dosing schedule for imetelstat in order to advance the program to Phase
II clinical trials in
2010.
- Completed patient enrollment for
the Phase II trial of GRNVAC1 in patients with acute myelogenous leukemia (AML) at high risk of
relapse.
- Interim clinical data from the
GRNVAC1 trial showed that 14 of 20 patients who remain in complete
remission are negative for the gene
marker WT-1, a tumor gene involved in the differentiation and proliferation of AML.
- Obtained FDA concurrence for use
of data from an ongoing preclinical study of GRNOPC1 in an animal model of cervical injury to support
both the release of the clinical hold and expansion to cervical patients for the Investigational New Drug
(IND) for spinal cord injury.
Product Development
- Preclinical data presented at the
American Association for Cancer Research Annual Meeting showing that imetelstat inhibits cancer stem cells
from multiple tumor types.
- Demonstrated key process
improvements for manufacturing imetelstat yield with higher purity and
reduced costs.
- Developed and implemented new
technology to generate higher purification of hESC-derived cell types for use in IND-enabling preclinical
studies.
- Established manufacturing process
for GRNCM1 in order to produce cells for future IND-enabling studies.
- Modified methods to derive
pancreatic islet cells from hESCs that shortened production and
increased yield.
- Identified significant line
extension indications for GRNOPC1 and initiated collaborations with
appropriate academics for Alzheimer’s,
stroke, and multiple sclerosis.
- Established proof of concept for
hESC-derived chondrocytes in small animal models of cartilage damage.
Corporate Development
- Entered into a global exclusive
license and alliance agreement with GE Healthcare to develop and commercialize cellular assay products
derived from hESCs for use in drug discovery, development and toxicity screening.
- Funded an equity contribution to
ViaGen, Inc., in which Geron now holds a 28% ownership interest. ViaGen is the global leader in animal
cloning, a modern breeding technology that can be used to produce a genetic copy of an existing
animal. The technology has important applications in agriculture and human medicine.
31
Finance, Legal and
Administration
- Maintained strong balance sheet by
raising $45.9 million in net proceeds upon closing a public offering
of common stock.
- U.S. Patent Office granted Geron’s
request to declare an interference between a patent application owned by Geron and U.S. Patent No. 7,510,876
owned by Novocell, Inc. The patent filings cover technology for the differentiation of hESCs
into the precursors of numerous endoderm cell types, including pancreatic islet cells.
Executive Officer
Performance
For 2009, the Compensation Committee concluded
that on an overall basis Dr. Okarma had achieved 100% of his individual goals,
which included providing overall management and leadership for all research and
development programs; recruiting key positions in the oncology management team,
specifically clinical operations; representing the Company to the investment
community through frequent corporate presentations to provide updates on
developments and progress; developing and mentoring other executive officers and
employees for succession planning; serving as the primary Company spokesperson
for the media and building overall corporate branding and image for recognition
by physicians, patients and potential collaborators and partners, including
governmental funding agencies in the U.S. and abroad. For 2009, the Compensation
Committee concurred with Dr. Okarma’s recommendation for each executive
officer’s achievement of his or her individual performance goals and concluded
that each Named Executive Officer (NEO) on an overall basis had achieved 100% of
his or her individual goals, which included support of the corporate initiatives
mentioned above and also functional departmental goals, as described
below.
- Mr. Greenwood’s 2009 individual
goals included leadership of our finance department; establishing budgets and maintaining expense control in
line with budgets; executing appropriate financing initiatives to keep the company optimally
capitalized; ensuring compliance with all relevant SEC and other regulations and continued
assessment of current and potential new collaborative strategic relationships to enhance our
programs.
- Dr. Kelsey’s 2009 individual goals
included leadership of clinical and preclinical oncology project teams; identifying, planning and executing
appropriate clinical approaches for oncology product candidates; establishing and implementing
preclinical strategy for new oncology indications or product candidates; and building the proper teams to
support all oncology projects by recruiting and developing key individuals.
- Dr. Earp’s 2009 individual goals
included execution of our alliance with GE Healthcare; development
and implementation of appropriate
strategies to ensure the most advantageous intellectual property protection for our technologies, product
candidates and research programs; review of potential technology licensing opportunities to
enhance our programs; and maintenance of current collaborative relationships.
- Dr. Lebkowski’s 2009 individual
goals included leadership of our regenerative medicine project teams;
initiation of a Phase I trial for
GRNOPC1; establishment of a consistent manufacturing process for GRNCM1 and selection of a preclinical
development path; identification of new clinical indications for GRNOPC1; increasing yield for
differentiation of GRNIC1 and affirming proof of concept for hESC-derived chondrocytes.
For 2009, the Compensation Committee adjusted
the weighting percentages between corporate and individual performance for each
executive officer, including the Chief Executive Officer. In prior years, the
weighting percentages were 50% each for corporate and individual performance.
For 2009, the weighting percentages were increased for corporate performance to
80% and decreased for individual performance to 20%. The Compensation Committee
implemented this change to more closely align annual incentive awards with the
achievement of company goals that contribute to operational and financial
success and create shareholder value.
32
Following were the bonus targets and weighting
percentages used to calculate the 2009 bonus for the Named Executive Officers
(NEOs):
|
|
|
|
|
|
|
|
Bonus |
|
|
Bonus |
|
Corporate |
|
Individual |
|
Awarded |
|
|
Potential as a |
|
Performance |
|
Performance |
|
as a % of |
Officer and Position |
|
|
% of Salary |
|
Weighting |
|
Weighting |
|
Salary |
Thomas B. Okarma, Ph.D., M.D. |
|
|
|
|
|
|
|
|
President and Chief Executive Officer |
|
60% |
|
80% |
|
20% |
|
53% |
David L. Greenwood |
|
|
|
|
|
|
|
|
Executive Vice President, Chief Financial Officer |
|
45% |
|
80% |
|
20% |
|
40% |
Stephen M. Kelsey, M.D., F.R.C.P.,
F.R.C.Path. |
|
|
|
|
|
|
|
|
Executive Vice President, Chief Medical |
|
|
|
|
|
|
|
|
Officer, Oncology |
|
45% |
|
80% |
|
20% |
|
40% |
David J. Earp, J.D., Ph.D. |
|
|
|
|
|
|
|
|
Senior Vice President, Business Development |
|
|
|
|
|
|
|
|
and
Chief Patent Counsel |
|
40% |
|
80% |
|
20% |
|
35% |
Jane S. Lebkowski, Ph.D. |
|
|
|
|
|
|
|
|
Senior Vice President, Chief Scientific Officer, |
|
|
|
|
|
|
|
|
Regenerative Medicine |
|
40% |
|
80% |
|
20% |
|
35% |
The bonus awarded as a percentage of salary is
equal to the product of the bonus potential multiplied by the sum of the (1) the
product of the level of achievement of the Company’s performance in 2009 (85%,
as described above), multiplied by the 80% weighting, and (2) the product of the
level of achievement of individual goals (100% for each NEO in 2009), multiplied
by the 20% weighting.
Long-Term Incentive Awards
Historically, long-term incentive awards
consisted primarily of stock options. However, in recent years there has been
rapid evolution of practices relating to long-term incentive awards among
companies with which the Company competes. Like many of these companies, in 2007
the Company began to utilize a mix of stock options and restricted stock awards
for all employees, including executive officers. A number of factors contributed
to the shift in higher use of restricted stock grants including:
- the desire to provide employees
with the opportunity to receive and maintain an equity interest in the
Company;
- the opportunity to increase
employee and stockholder benefit through a diversity of types and
designs of equity
awards;
- reduction of the dilutive impact
on shares outstanding in comparison to stock options; and
- recognition of a significant
number of stock options with exercise prices above the Company’s stock
price.
Stock option grants and restricted stock
awards from the 2002 Equity Incentive Plan encourage employee ownership in
Geron, link pay with performance and align interests of stockholders and
employees. Without sustained growth and positive stock price performance, all
our employees, including executive officers, carry the risk that they will not
be able to realize significant gains from their equity-based awards. The
Compensation Committee determines the size of the stock option grant and
restricted stock award according to each executive’s position within the Company
and sets a level it considers appropriate to create an opportunity for reward
predicated on increasing stockholder value. The Compensation Committee takes
into account an individual’s performance history, his or her potential for
future responsibility and promotion, and competitive total compensation targets
for the individual’s position and level of contribution. Other factors include
long-term incentives previously granted, the amount of actual versus theoretical
equity value per year that has been derived to date by the individual, the
current actual value of the unvested equity grants for each individual, the
percentage of stock option grants with exercise prices greater than the
Company’s stock price and the number of stock option grants that have expired
unexercised as a result of market conditions. The relative weight given to each
of these factors varies among individuals at the Compensation Committee’s
discretion. There is no set formula for the granting of stock options or other
equity awards to individual executive officers or employees.
33
Equity Grant Practices and
Vesting Conditions
The Company has a consistent approach to
equity granting practices. We do not backdate options nor grant options
retroactively. In addition, we do not coordinate our option or restricted stock
grants so that they are made before an announcement of favorable information or
after an announcement of unfavorable information. Stock option grants to all
newly hired employees are made on the third Wednesday of the month following the
new employee’s hire date. To facilitate this practice, the Compensation
Committee has authorized the Chief Executive Officer as the sole member of the
Stock Option Committee to approve individual stock option grants up to 50,000
shares to non-executive employees. Restricted stock awards and stock option
grants greater than 50,000 shares or for executive officers must be approved by
the Compensation Committee. The exercise price of all stock options is equal to
the closing price of Geron Common Stock as reported by the Nasdaq Global Market
on the date of grant so that the recipient will not earn any compensation from
his or her options unless our share price increases above the exercise price;
thus aligning the interests of our stockholders, and our employees and
executives, during their employment, in the long-term success of the Company.
Geron’s standard practice is to grant options that vest monthly over four years
from the date of grant, provided the employee continues to provide services to
the Company.
Annual equity awards to all employees,
including executive officers, are typically granted on the same date of the
Annual Meeting of Stockholders, which is also the date that non-employee board
members receive their equity awards in accordance with the 2006 Directors Plan.
The exercise price for the annual stock option grants is equal to the closing
price of Geron Common Stock as reported by the Nasdaq Global Market on the date
of grant and the vest schedule is monthly over four years from the date of
grant, provided the employee continues to provide services to the Company. For
restricted stock awards, the vesting schedule is typically annually over four
years from the date of grant, provided the employee continues to provide
services to the Company. Given the intensely dynamic business environment in
which the Company operates, it would be extremely difficult to craft meaningful
performance objectives with such a long horizon. As a result, the vesting of all
equity awards is contingent on an employee’s (including executive officer’s)
continued service to the Company, rather than on performance with regard to
specific business objectives.
2009 Compensation
Decisions
In May 2009, the Compensation Committee
granted a mix of stock options and restricted stock awards to all Geron
employees, including executive officers. The Compensation Committee first
pre-approved a grant matrix, based on employee base salary, level and individual
performance ratings at the end of 2008, which determined the number of options
that may be awarded to each employee, including executive officers. Once the
number of stock options for each employee was determined, that number was then
reduced by 50%. The restricted stock award for each employee, including
executive officers, was equal to one-half of the reduced option grant. In
addition, the Compensation Committee considered declines in the stock price due
to market conditions that have caused stock options granted in earlier periods
to remain significantly out of the money and therefore have little value as
incentives or retention. The Compensation Committee noted that these out of the
money options that were close to expiry would likely be unexercised. In
consideration of these factors, the Compensation Committee granted additional
stock options to employees, including executive officers, in order to provide
new incentive and retention motivation. These additional stock options vest
monthly over two years from the date of expiration of the out of the money
unexercised options, provided the employee continues to provide services to the
Company. Given the difficult economic environment and the salary freeze imposed
on all employees, including executive officers, for fiscal 2009, the
Compensation Committee approved grants of restricted stock awards to selected
individuals, including executive officers, as a retention tool. These special
restricted stock awards vest over two years with 25% of the total award vesting
on the first anniversary of the date of grant and the remaining 75% on the
second anniversary of the date of grant, provided the employee continues to
provide services to the Company.
In April 2009, the Compensation Committee
approved the terms of the offer letter agreement for Dr. Stephen Kelsey. After
considering the new hire equity awards granted to each executive officer,
including the Chief Executive Officer, the equity awards earned by Dr. Kelsey
while at Genentech, Inc. and the equity awards granted to prior employees in Dr.
Kelsey’s position, the Compensation Committee approved the following equity
awards to be granted to Dr. Kelsey:
34
- an option to purchase 200,000
shares of the Company’s Common Stock with an exercise price equal to the market value of the Common Stock on
the third Wednesday of the month following Dr. Kelsey’s hire date, in accordance with the Company’s
practice for all new employees; and
- a restricted stock award for
40,000 shares of the Company’s Common Stock granted on the first date
of Dr. Kelsey’s employment that vests
over two years with 25% of the total award vesting on the first anniversary of the date of grant and the
remaining 75% on the second anniversary of the date of grant, provided the executive continues to provide
services to the Company.
See section “Grants of Plan-Based Awards” on
page 41 herein for additional information regarding stock option grants and
restricted stock awards to Named Executive Officers in 2009.
Other Benefits
Geron offers a comprehensive array of benefit
programs to its employees, including all executive officers. These
include:
- Comprehensive medical, dental,
vision coverage and life insurance;
- A cafeteria plan administered
pursuant to Section 125 of the Internal Revenue Code of 1986, as
amended (the Code). The
cafeteria plan includes Geron’s medical and dental insurance, medical
reimbursement, and dependent
care reimbursement plans;
- A 401(k) plan. In 2009, the
Company matched 100% of each employee’s annual contributions in Geron
Common Stock, subject to a four-year
vesting schedule from the employee’s start date; and
- The Purchase Plan, which is
implemented and administered pursuant to Section 423 of the Code.
Executive officers pay for 25% of their health
premium cost which is deducted from their gross salary. Other employees pay
either 8% or 15% of their health premium cost.
The Company does not offer any
pension plans or health benefits during retirement.
Severance and Change in Control Benefits
In September 2002, the Board approved a Change
of Control Severance Plan (the Severance Plan) that became effective on January
21, 2003 and was subsequently revised in October 2006 and December 2008. The
Severance Plan applies to all employees, and provides for each employee to
receive a severance payment upon a triggering event following a change of
control. A triggering event is defined as an event where (i) an employee is
terminated by the Company without cause in connection with a change of control
or within 12 months following a change of control; or (ii) an employee is not
offered comparable employment (new or continuing) by the Company or the
Company’s successor or acquirer within 30 days after the change of control or
any employment offer is rejected; or (iii) after accepting (or continuing)
employment with the Company after a change of control, an employee resigns
within six 6 months following a change of control due to a material change in
the terms of employment. Severance payments range from three to 18 months of
base salary, depending on the employee’s position with the Company, payable in a
lump sum payment. For executive officers, severance payments would be 15 months
for Named Executive Officers, other than the Chief Executive Officer and 18
months for the Chief Executive Officer. In addition to a cash payment, the
Company will also pay the COBRA health insurance premiums for each employee
through the earlier of the end of his or her severance period (or the time that
the employee obtains other coverage).
In the event of a merger, acquisition or
similar change in control of the Company, the 1992 Stock Option Plan, the 1996
Directors’ Stock Option Plan, the 2002 Equity Incentive Plan and the 2006
Directors Plan provide that each outstanding option and award will accelerate so
that each option will be fully exercisable for all of the shares subject to such
option immediately prior to the effective date of the transaction and each other
type of award shall be fully vested. In addition, upon the occurrence of such
transaction, the 2002 Equity Incentive Plan provides that all of the outstanding repurchase rights
of the Company with respect to shares of Common Stock acquired upon exercise of
options granted, as well as shares of restricted stock, under the 2002 Equity
Incentive Plan will terminate.
35
In January 2003, the Company entered into
employment agreements with certain executive officers and key employees which
were amended in 2008 to comply with the requirements of Code Section 409A. These
agreements provide for severance pay, in lump-sum payment, equal to a percentage
of annual salary (150% in the case of the Chief Executive Officer, 125% in the
case of the Chief Financial Officer, and 110% in the case of each of the other
executive officers) plus benefits continuation for one year to the affected
executive officer in the event his or her employment is terminated involuntarily
without cause. Payments under these agreements are to be reduced by the amount
of any payments made under the Severance Plan previously described. The
employment agreements provide that such executive officers may not interfere
with the business of the Company by soliciting or attempting to solicit any
employee of the Company to terminate his or her employment in order to become an
employee, consultant or independent contractor to or for any competitor of the
Company.
The table below summarizes the potential
payments under the Severance Plan or individual employment agreements for the
Named Executive Officers if a termination or change in control event occurred on
December 31, 2009:
|
|
|
|
Before Change in
Control |
|
After Change in Control |
|
|
|
|
|
|
|
|
Termination w/o Cause
or |
|
Termination w/o Cause
or |
|
Change |
Officer and Position |
|
|
Benefit |
|
for Good Reason(1) |
|
for Good Reason(2) |
|
in Control(3) |
Thomas B. Okarma, Ph.D., M.D. |
|
Severance |
|
|
$ |
802,500 |
|
|
|
$ |
802,500 |
|
|
|
|
|
President and Chief Executive |
|
Benefits |
|
|
|
13,242 |
|
|
|
|
24,756 |
|
|
|
|
|
Officer |
|
Option and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Vesting |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,051,225 |
Total |
|
|
|
|
$ |
815,742 |
|
|
|
$ |
827,256 |
|
|
|
$ |
2,051,225 |
David L. Greenwood |
|
Severance |
|
|
$ |
518,750 |
|
|
|
$ |
518,750 |
|
|
|
|
|
Executive Vice President, |
|
Benefits |
|
|
|
13,242 |
|
|
|
|
20,630 |
|
|
|
|
|
Chief Financial Officer |
|
Option and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Vesting |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,508,800 |
Total |
|
|
|
|
$ |
531,992 |
|
|
|
$ |
539,380 |
|
|
|
$ |
1,508,800 |
Stephen M. Kelsey, M.D.,
F.R.C.P, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F.R.C.Path |
|
Severance |
|
|
$ |
— |
|
|
|
$ |
500,000 |
|
|
|
|
|
Executive Vice President, |
|
Benefits |
|
|
|
— |
|
|
|
|
28,514 |
|
|
|
|
|
Chief Medical Officer, Oncology |
|
Option and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Vesting |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
222,000 |
Total |
|
|
|
|
$ |
— |
|
|
|
$ |
528,514 |
|
|
|
$ |
222,000 |
David J. Earp, J.D., Ph.D. |
|
Severance |
|
|
$ |
357,500 |
|
|
|
$ |
406,250 |
|
|
|
|
|
Senior Vice President, |
|
Benefits |
|
|
|
18,081 |
|
|
|
|
28,427 |
|
|
|
|
|
Business Development and |
|
Option and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Patent Counsel |
|
Restricted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Vesting |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
747,163 |
Total |
|
|
|
|
$ |
375,581 |
|
|
|
$ |
434,677 |
|
|
|
$ |
747,163 |
Jane S. Lebkowski, Ph.D. |
|
Severance |
|
|
$ |
368,500 |
|
|
|
$ |
418,750 |
|
|
|
|
|
Senior Vice President, |
|
Benefits |
|
|
|
13,200 |
|
|
|
|
20,578 |
|
|
|
|
|
Chief Scientific Officer, |
|
Option and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regenerative Medicine |
|
Restricted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Vesting |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
827,213 |
Total |
|
|
|
|
$ |
381,700 |
|
|
|
$ |
439,328 |
|
|
|
$ |
827,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1) |
|
Amounts represent lump sum severance payments and continued
benefits that could be paid to the Named Executive Officer under such
executive’s employment agreement as of December 31,
2009. |
36
(2) |
|
Amounts represent
lump sum payments and continued benefits that could be paid to the Named
Executive Officer under the Company’s Severance Plan as adopted in
December 2008 in the event of a termination in connection with a change in
control on December 31, 2009. Any payments made under the Named Executive
Officer’s employment agreement would be deducted from payments due under
the Severance Plan. |
|
(3) |
|
Amounts represent
an estimate of the intrinsic value of options that would become fully
vested and exercisable and restricted stock awards that would fully vest
upon a change of control assuming a market value of $5.55 per share as of
December 31, 2009. |
Perquisites
Executive Officers do not receive
perquisites.
Tax and Accounting Implications for Executive
Compensation
The Compensation Committee is responsible to
address the issues raised by Section 162(m) of the Code, which makes certain
“non-performance-based” compensation to certain executives of the Company in
excess of $1,000,000 non-deductible to the Company. To qualify as
“performance-based” under Section 162(m), compensation payments must be
determined pursuant to a plan, by a committee of at least two “outside”
directors (as defined in the regulations promulgated under the Code) and must be
based on achieving objective performance goals. In addition, the material terms
of the plan must be disclosed to and approved by stockholders, and the outside
directors or the Compensation Committee, as applicable, must certify that the
performance goals were achieved before payments can be awarded.
The Compensation Committee will continue to
examine the effects of Section 162(m), to monitor the level of compensation paid
to the Company’s executive officers and take appropriate action in response to
the provisions of Section 162(m) to the extent practicable while maintaining
competitive compensation practices. To maintain flexibility in compensating
executive officers in a manner designed to promote varying corporate goals, the
Compensation Committee reserves the right to recommend and award compensation
that is not deductible under Section 162(m).
In addition to considering the tax
consequences, the Compensation Committee considers the accounting consequences
of, including the impact of expenses being recognized in connection with equity
awards, its decisions in determining the size and form of different equity-based
awards.
COMPENSATION COMMITTEE REPORT(1)(2)
Our Compensation Committee has reviewed and
discussed the Compensation Discussion and Analysis required by Item 402(b) of
Regulation S-K and contained within this Proxy Statement with management and,
based on such review and discussions, our Compensation Committee recommended to
our Board that the Compensation Discussion and Analysis be included in this
Proxy Statement and incorporated into our Annual Report on Form 10-K for the
year ended December 31, 2009.
Submitted on February 22, 2010 by the members
of the Compensation Committee of the Board of Directors:
Alexander E. Barkas, Ph.D. |
|
Compensation Committee Chair |
Patrick J. Zenner |
|
Compensation Committee
Member |
____________________
(1) |
|
This
Section is not “soliciting material,” is not deemed “filed” with the SEC
and is not to be incorporated by reference in any filing of the Company
under the Securities Exchange Act of 1934, as amended (the Exchange Act),
or the Securities Act of 1933, as amended (the Securities Act), whether
made before or after the date hereof and irrespective of any general
incorporation language in any such filing. |
|
(2) |
|
Dr.
Hofstaetter joined the Board and became a member of the Compensation
Committee in March 2010. |
37
CERTAIN TRANSACTIONS
There has not been, nor is there currently
proposed, any transaction or series of similar transactions to which the Company
was or is to be a party in which the amount involved exceeds $120,000 and in
which any current director, executive officer, holder of more than 5% of the
Company’s Common Stock or any immediate family member of any of the foregoing
persons had or will have a direct or indirect material interest other than
compensation arrangements, described under the caption “Executive Compensation,”
and the transactions described below.
The Company has entered into indemnity
agreements with all of its officers and directors which provide, among other
things, that the Company will indemnify such officer or director, under the
circumstances and to the extent provided for therein, for expenses, damages,
judgments, fines, settlements he or she may be required to pay in actions or
proceedings which he or she is or may be made a party by reason for his or her
position as a director, officer or other agent of the Company, and otherwise to
the full extent permitted under Delaware law and the Company’s
Bylaws.
Policies and Procedures
Our Audit Committee is responsible for
reviewing and approving, in advance, all related party transactions. Related
parties include any of our directors or executive officers, certain of our
stockholders and their immediate family members. This obligation is set forth in
writing in the Audit Committee charter. A copy of the Audit Committee charter is
available on our website at http://www.geron.com in the Investors section under
“Corporate Governance.” To identify related party transactions, each year, we
have our directors and officers complete Director and Officer Questionnaires
identifying any transactions with us in which the executive officer or director
or their family members have an interest. We review related party transactions
due to the potential for a conflict of interest. A conflict of interest occurs
when an individual’s private interest interferes, or appears to interfere, with
our interests. In addition, our Nominating Committee Charter determines, on an
annual basis, which members of our Board meet the definition of independent
director as defined by Nasdaq Rule 5605(a)(2). This obligation is set forth in
writing in the Nominating Committee charter. A copy of the Nominating and
Corporate Governance charter is available on our website at http://www.geron.com
in the Investors section under “Corporate Governance.” Our Nominating Committee
reviews and discusses any relationships with directors that would potentially
interfere with his or her exercise of independent judgment in carrying out the
responsibilities of a director. Finally, our Code of Conduct establishes the
corporate standards of behavior for all our employees, officers, and directors
and sets our expectations of contractors and agents. The Code of Conduct is
available on our website at http://www. geron.com in the Investors section under
“Corporate Governance.” Our Code of Conduct requires any person who becomes
aware of any departure from the standards in our Code of Conduct to report his
or her knowledge promptly to a supervisor or an attorney in the legal
department.
Compensation Committee Interlocks and Insider
Participation
Dr. Barkas and Mr. Zenner both served on the
Compensation Committee for the fiscal year ended December 31, 2009. Dr.
Hofstaetter joined the Board and became a member of the Compensation Committee
in March 2010. Mr. Zenner will cease being a member of the Compensation
Committee effective May 19, 2010. With the exception of Dr. Barkas’ term as
President and Chief Executive Officer of the Company from March 1992 until May
1993, neither Dr. Barkas nor Mr. Zenner is a former or current officer or
employee of the Company or any of its subsidiaries. None of the executive
officers serves as a member of a compensation committee of any entity that has
one or more executive officers serving as a member of the Company’s Board or
Compensation Committee.
38
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table includes information
concerning compensation for the years ended December 31, 2009, 2008 and 2007 to
the Principal Executive Officer, Principal Financial Officer and the three most
highly compensated executive officers of the Company (Named Executive Officers
or NEOs).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
qualified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
Deferred |
|
All |
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
Plan |
|
Compensation |
|
Other |
|
|
|
|
|
|
Salary |
|
Bonus |
|
Awards |
|
Awards |
|
Compensation |
|
Earnings |
|
Compensation |
|
Total |
Name and Principal
Position |
|
Year |
|
($) |
|
($)(2) |
|
($)(1) |
|
($)(1) |
|
($) |
|
($) |
|
($)(3) |
|
($) |
Thomas B. Okarma, Ph.D., M.D. |
2009 |
|
$ |
535,000 |
|
$ |
282,500 |
|
$ |
717,200 |
|
$ |
1,551,558 |
|
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
15,742 |
|
|
$ |
3,102,000 |
President and Chief Executive |
2008 |
|
|
535,000 |
|
|
280,900 |
|
|
198,500 |
|
|
788,750 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
14,508 |
|
|
|
1,817,658 |
Officer |
2007 |
|
|
510,000 |
|
|
275,000 |
|
|
3,163,141 |
|
|
606,120 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
14,517 |
|
|
|
4,568,778 |
David L. Greenwood |
2009 |
|
$ |
415,000 |
|
$ |
164,300 |
|
$ |
570,500 |
|
$ |
606,356 |
|
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
36,817 |
|
|
$ |
1,792,973 |
Executive Vice President, |
2008 |
|
|
415,000 |
|
|
163,400 |
|
|
148,875 |
|
|
607,114 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
36,623 |
|
|
|
1,371,012 |
Chief Financial Officer |
2007 |
|
|
395,000 |
|
|
160,000 |
|
|
1,615,404 |
|
|
454,590 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
34,429 |
|
|
|
2,659,423 |
Stephen M. Kelsey, M.D.,
F.R.C.P, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F.R.C.Path |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Medical Officer, Oncology |
2009 |
|
$ |
272,821 |
|
$ |
158,400 |
|
$ |
193,600 |
|
$ |
735,060 |
|
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
12,101 |
|
|
$ |
1,371,982 |
David J. Earp, J.D., Ph.D. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice President, |
2009 |
|
$ |
325,000 |
|
$ |
114,400 |
|
$ |
423,800 |
|
$ |
463,684 |
|
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
35,781 |
|
|
$ |
1,362,665 |
Business Development and |
2008 |
|
|
325,000 |
|
|
113,800 |
|
|
99,250 |
|
|
102,435 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
32,386 |
|
|
|
672,871 |
Chief Patent Counsel |
2007 |
|
|
310,000 |
|
|
112,000 |
|
|
1,271,504 |
|
|
303,060 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
27,885 |
|
|
|
2,024,449 |
Jane S. Lebkowski, Ph.D. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice President, |
2009 |
|
$ |
335,000 |
|
$ |
117,900 |
|
$ |
423,800 |
|
$ |
374,514 |
|
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
35,200 |
|
|
$ |
1,286,414 |
Chief Scientific Officer |
2008 |
|
|
335,000 |
|
|
117,300 |
|
|
99,250 |
|
|
194,627 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
32,271 |
|
|
|
778,448 |
Regenerative Medicine |
2007 |
|
|
320,000 |
|
|
115,000 |
|
|
1,201,604 |
|
|
303,060 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
32,150 |
|
|
|
1,971,814 |
____________________
(1) |
|
Amounts represent the aggregate grant date fair value of stock
awards and option awards granted during fiscal years 2009, 2008 and 2007.
These stock awards and option awards are not subject to performance
conditions. For additional information, refer to Note 8 of the
consolidated financial statements in the Company’s Annual Report on Form
10-K for the year ended December 31, 2009 regarding assumptions underlying
the valuation of equity awards and the calculation method. Refer to the
supplemental table on page 42 herein for information as to each Named
Executive Officers unvested stock award holdings and vested and unvested
stock option holdings and page 41 herein for the number of stock awards
and option awards granted during 2009. |
|
(2) |
|
Amounts represent cash payments for Annual Incentive Awards. See
discussion on page 29 herein. |
|
(3) |
|
Amounts shown include: (a) the net portion of health insurance
premiums paid by the Company; (b) the matching contributions made to the
Geron 401(k) Plan on behalf of the Named Executive Officers; and (c)
contributions toward tax return preparation services as
follows: |
39
|
|
|
|
|
|
401(k) Match |
|
Tax Return |
|
|
Name |
|
|
Year |
|
Premiums ($) |
|
($) (a) |
|
Preparation ($) |
|
Total
($) |
Thomas B. Okarma, Ph.D., M.D. |
|
2009 |
|
|
$ |
13,242 |
|
|
|
$ |
— |
|
|
|
$ |
2,500 |
|
|
$ |
15,742 |
|
|
2008 |
|
|
|
12,008 |
|
|
|
|
— |
|
|
|
|
2,500 |
|
|
|
14,508 |
|
|
2007 |
|
|
|
12,017 |
|
|
|
|
— |
|
|
|
|
2,500 |
|
|
|
14,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Greenwood |
|
2009 |
|
|
$ |
13,242 |
|
|
|
$ |
22,000 |
|
|
|
$ |
1,575 |
|
|
$ |
36,817 |
|
|
2008 |
|
|
|
12,008 |
|
|
|
|
20,500 |
|
|
|
|
4,115 |
|
|
|
36,623 |
|
|
2007 |
|
|
|
11,933 |
|
|
|
|
20,496 |
|
|
|
|
2,000 |
|
|
|
34,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Kelsey, M.D., F.R.C.P,
F.R.C.Path. |
|
2009 |
|
|
$ |
12,101 |
|
|
|
$ |
— |
|
|
|
$ |
— |
|
|
$ |
12,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David J. Earp, J.D., Ph.D. |
|
2009 |
|
|
$ |
18,081 |
|
|
|
$ |
16,500 |
|
|
|
$ |
1,200 |
|
|
$ |
35,781 |
|
|
2008 |
|
|
|
16,286 |
|
|
|
|
15,500 |
|
|
|
|
600 |
|
|
|
32,386 |
|
|
2007 |
|
|
|
11,185 |
|
|
|
|
15,500 |
|
|
|
|
1,200 |
|
|
|
27,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jane S. Lebkowski, Ph.D. |
|
2009 |
|
|
$ |
13,200 |
|
|
|
$ |
22,000 |
|
|
|
$ |
— |
|
|
$ |
35,200 |
|
|
2008 |
|
|
|
11,771 |
|
|
|
|
20,500 |
|
|
|
|
— |
|
|
|
32,271 |
|
|
2007 |
|
|
|
11,654 |
|
|
|
|
20,496 |
|
|
|
|
— |
|
|
|
32,150 |
____________________
(a) |
|
Under the Geron
401(k) Plan, all participating employees may contribute up to the annual
Internal Revenue Service contribution limit. In December 2009, 2008 and
2007, the Board approved a matching contribution equal to 100% of each
employee’s annual contributions during 2009, 2008 and 2007, respectively.
The matching contribution is invested in the Company’s Common Stock and
vests ratably over four years for each year of service completed by the
employee, commencing from the date of hire, until it is fully vested when
the employee has completed four years of service. The 2009 match was made
on January 4, 2010 at $6.22 per share. The 2008 match was made on January
2, 2009 at $4.82 per share. The 2007 match was made on January 2, 2008 at
$5.73 per share.
|
40
Grants of Plan-Based
Awards
The following table sets forth information
with respect to the stock options and restricted stock awards granted during the
year ended December 31, 2009 to each of the Named Executive Officers as listed
in the Summary Compensation Table shown under the caption “Executive
Compensation.”
|
|
|
|
|
All |
|
All |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Option |
|
Stock |
|
Exercise |
|
|
|
|
|
|
|
|
Awards: |
|
Awards: |
|
or Base |
|
Grant Date |
|
|
|
|
|
Number of |
|
Number of |
|
Price |
|
Fair Value of |
|
|
|
|
|
Securities |
|
Shares of |
|
of Stock |
|
Stock and |
|
|
|
|
|
Underlying |
|
Stock or |
|
Option |
|
Option |
|
|
|
|
|
Options |
|
Units |
|
Awards |
|
Awards |
Name |
|
|
Grant Date |
|
(#) |
|
(#) |
|
($/Sh) |
|
($)(1) |
Thomas B. Okarma, Ph.D., M.D. |
|
5/29/09 |
(2) |
|
|
100,000 |
|
|
|
— |
|
|
|
$ |
6.52 |
|
|
$ |
356,680 |
|
|
5/29/09 |
(6) |
|
|
35,000 |
|
|
|
— |
|
|
|
|
6.52 |
|
|
|
124,838 |
|
|
5/29/09 |
(7) |
|
|
300,000 |
|
|
|
— |
|
|
|
|
6.52 |
|
|
|
1,070,040 |
|
|
5/29/09 |
(3) |
|
|
— |
|
|
|
50,000 |
|
|
|
|
— |
|
|
|
326,000 |
|
|
5/29/09 |
(4) |
|
|
— |
|
|
|
60,000 |
|
|
|
|
— |
|
|
|
391,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Greenwood |
|
5/29/09 |
(2) |
|
|
75,000 |
|
|
|
— |
|
|
|
$ |
6.52 |
|
|
$ |
267,510 |
|
|
5/29/09 |
(6) |
|
|
35,000 |
|
|
|
— |
|
|
|
|
6.52 |
|
|
|
124,838 |
|
|
5/29/09 |
(8) |
|
|
20,000 |
|
|
|
— |
|
|
|
|
6.52 |
|
|
|
71,336 |
|
|
5/29/09 |
(9) |
|
|
40,000 |
|
|
|
— |
|
|
|
|
6.52 |
|
|
|
142,672 |
|
|
5/29/09 |
(3) |
|
|
— |
|
|
|
37,500 |
|
|
|
|
— |
|
|
|
244,500 |
|
|
5/29/09 |
(4) |
|
|
— |
|
|
|
50,000 |
|
|
|
|
— |
|
|
|
326,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Kelsey, M.D., F.R.C.P,
F.R.C.Path. |
|
5/20/09 |
(10) |
|
|
200,000 |
|
|
|
— |
|
|
|
$ |
6.76 |
|
|
$ |
735,060 |
|
|
4/27/09 |
(4) |
|
|
— |
|
|
|
40,000 |
|
|
|
|
— |
|
|
|
193,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David J. Earp, J.D., Ph.D. |
|
5/29/09 |
(2) |
|
|
50,000 |
|
|
|
— |
|
|
|
$ |
6.52 |
|
|
$ |
178,340 |
|
|
5/29/09 |
(5) |
|
|
35,000 |
|
|
|
— |
|
|
|
|
6.52 |
|
|
|
124,838 |
|
|
5/29/09 |
(8) |
|
|
20,000 |
|
|
|
— |
|
|
|
|
6.52 |
|
|
|
71,336 |
|
|
5/29/09 |
(9) |
|
|
25,000 |
|
|
|
— |
|
|
|
|
6.52 |
|
|
|
89,170 |
|
|
5/29/09 |
(3) |
|
|
— |
|
|
|
25,000 |
|
|
|
|
— |
|
|
|
163,000 |
|
|
5/29/09 |
(4) |
|
|
— |
|
|
|
40,000 |
|
|
|
|
— |
|
|
|
260,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jane S. Lebkowski, Ph.D. |
|
5/29/09 |
(2) |
|
|
50,000 |
|
|
|
— |
|
|
|
$ |
6.52 |
|
|
$ |
178,340 |
|
|
5/29/09 |
(6) |
|
|
10,000 |
|
|
|
— |
|
|
|
|
6.52 |
|
|
|
35,668 |
|
|
5/29/09 |
(8) |
|
|
20,000 |
|
|
|
— |
|
|
|
|
6.52 |
|
|
|
71,336 |
|
|
5/29/09 |
(9) |
|
|
25,000 |
|
|
|
— |
|
|
|
|
6.52 |
|
|
|
89,170 |
|
|
5/29/09 |
(3) |
|
|
— |
|
|
|
25,000 |
|
|
|
|
— |
|
|
|
163,000 |
|
|
5/29/09 |
(4) |
|
|
— |
|
|
|
40,000 |
|
|
|
|
— |
|
|
|
260,800 |
____________________
(1) |
|
Amounts
represent the grant date fair value of stock options and restricted stock
awards calculated using the Black Scholes option-pricing model. For
additional information, refer to Note 8 of the consolidated financial
statements in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2009 regarding assumptions underlying the valuation of equity
awards and the calculation method.
|
|
(2) |
|
Options are
exercisable in a series of 48 equal consecutive monthly installments
commencing May 29, 2009, provided the executive continues to provide
services to the Company.
|
|
(3) |
|
Restricted
stock awards vest in a series of four equal consecutive annual
installments commencing May 29, 2009, provided the executive continues to
provide services to the Company.
|
|
(4) |
|
Restricted
stock awards vest over two years with 25% of the total award vesting on
the first anniversary of the date of grant and the remaining 75% on the
second anniversary of the date of grant, provided the executive continues
to provide services to the Company.
|
41
(5) |
|
Options are
exercisable in a series of 24 equal consecutive monthly installments
commencing April 13, 2009, provided the executive continues to provide
services to the Company.
|
|
(6) |
|
Options are
exercisable in a series of 24 equal consecutive monthly installments
commencing May 19, 2009, provided the executive continues to provide
services to the Company.
|
|
(7) |
|
Options are
exercisable in a series of 24 equal consecutive monthly installments
commencing July 23, 2009, provided the executive continues to provide
services to the Company.
|
|
(8) |
|
Options are
exercisable in a series of 24 equal consecutive monthly installments
commencing October 2, 2009, provided the executive continues to provide
services to the Company.
|
|
(9) |
|
Options are
exercisable in a series of 24 equal consecutive monthly installments
commencing December 18, 2009, provided the executive continues to provide
services to the Company.
|
|
(10) |
|
Option is
exercisable as follows: 25,000 shares on October 27, 2009, and the
remaining 175,000 shares become exercisable in a series of 42 equal
consecutive monthly installments commencing October 27, 2009, provided the
executive continues to provide services to the
Company.
|
Outstanding Equity Awards Value at Fiscal
Year-End
The following table includes information with
respect to the value of all outstanding equity awards previously awarded to the
Named Executive Officers as of December 31, 2009.
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
|
|
|
Number |
|
Number |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
|
|
of |
|
of |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Value of |
|
|
|
|
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares or |
|
Shares |
|
|
|
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
|
|
|
|
Units of |
|
or Units of |
|
|
|
|
|
Unexercised |
|
Unexercised |
|
Option |
|
|
|
|
|
|
|
|
Stock |
|
Stock |
|
|
|
|
|
Options |
|
Options |
|
Exercise |
|
Option |
|
|
|
|
That Have |
|
That Have |
|
|
Grant |
|
(#) |
|
(#) |
|
Price |
|
Expiration |
|
Grant |
|
Not Vested |
|
Not Vested |
Name |
|
|
Date |
|
Exercisable |
|
Unexercisable |
|
($) |
|
Date |
|
Date |
|
(#) |
|
($)(1) |
Thomas B. Okarma, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ph.D., M.D. |
|
1/26/01 |
(2) |
|
|
150,000 |
|
|
|
— |
|
|
|
$ |
18.63 |
|
|
|
1/26/11 |
|
|
5/23/07 |
(12) |
|
25,000 |
|
|
$ |
138,750 |
|
|
|
12/14/01 |
(3) |
|
|
90,000 |
|
|
|
— |
|
|
|
$ |
8.23 |
|
|
|
12/14/11 |
|
|
5/28/08 |
(12) |
|
37,500 |
|
|
$ |
208,125 |
|
|
|
6/27/02 |
(3) |
|
|
60,000 |
|
|
|
— |
|
|
|
$ |
8.23 |
|
|
|
6/27/12 |
|
|
5/29/09 |
(12) |
|
50,000 |
|
|
$ |
277,500 |
|
|
|
9/5/02 |
(2) |
|
|
245,000 |
|
|
|
— |
|
|
|
$ |
3.76 |
|
|
|
9/5/12 |
|
|
5/29/09 |
(13) |
|
60,000 |
|
|
$ |
333,000 |
|
|
|
5/30/03 |
(2) |
|
|
100,000 |
|
|
|
— |
|
|
|
$ |
5.08 |
|
|
|
5/30/13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/27/04 |
(2) |
|
|
100,000 |
|
|
|
— |
|
|
|
$ |
7.56 |
|
|
|
5/27/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/6/05 |
(2) |
|
|
110,000 |
|
|
|
— |
|
|
|
$ |
6.40 |
|
|
|
5/6/15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/24/06 |
(2) |
|
|
156,771 |
|
|
|
18,229 |
|
|
|
$ |
6.63 |
|
|
|
5/24/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/23/07 |
(2) |
|
|
64,583 |
|
|
|
35,417 |
|
|
|
$ |
9.32 |
|
|
|
5/23/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/28/08 |
(2) |
|
|
39,583 |
|
|
|
60,417 |
|
|
|
$ |
3.97 |
|
|
|
5/28/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/28/08 |
(5) |
|
|
178,125 |
|
|
|
106,875 |
|
|
|
$ |
3.97 |
|
|
|
5/28/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(2) |
|
|
14,583 |
|
|
|
85,417 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(7) |
|
|
10,208 |
|
|
|
24,792 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(8) |
|
|
62,500 |
|
|
|
237,500 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
|
|
|
Number |
|
Number |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
|
|
of |
|
of |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Value of |
|
|
|
|
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares or |
|
Shares |
|
|
|
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
|
|
|
|
Units of |
|
or Units of |
|
|
|
|
|
Unexercised |
|
Unexercised |
|
Option |
|
|
|
|
|
|
|
|
Stock |
|
Stock |
|
|
|
|
|
Options |
|
Options |
|
Exercise |
|
Option |
|
|
|
|
That Have |
|
That Have |
|
|
Grant |
|
(#) |
|
(#) |
|
Price |
|
Expiration |
|
Grant |
|
Not Vested |
|
Not Vested |
Name |
|
|
Date |
|
Exercisable |
|
Unexercisable |
|
($) |
|
Date |
|
Date |
|
(#) |
|
($)(1) |
David L. Greenwood |
|
1/26/01 |
(2) |
|
|
80,000 |
|
|
|
— |
|
|
|
$ |
18.63 |
|
|
|
1/26/11 |
|
|
5/23/07 |
(12) |
|
18,750 |
|
|
$ |
104,063 |
|
|
|
12/14/01 |
(3) |
|
|
75,000 |
|
|
|
— |
|
|
|
$ |
8.23 |
|
|
|
12/14/11 |
|
|
5/28/08 |
(12) |
|
28,125 |
|
|
$ |
156,094 |
|
|
|
6/27/02 |
(3) |
|
|
50,000 |
|
|
|
— |
|
|
|
$ |
8.23 |
|
|
|
6/27/12 |
|
|
5/29/09 |
(12) |
|
37,500 |
|
|
$ |
208,125 |
|
|
|
9/5/02 |
(2) |
|
|
145,000 |
|
|
|
— |
|
|
|
$ |
3.76 |
|
|
|
9/5/12 |
|
|
5/29/09 |
(13) |
|
50,000 |
|
|
$ |
277,500 |
|
|
|
5/30/03 |
(2) |
|
|
75,000 |
|
|
|
— |
|
|
|
$ |
5.08 |
|
|
|
5/30/13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/27/04 |
(2) |
|
|
75,000 |
|
|
|
— |
|
|
|
$ |
7.56 |
|
|
|
5/27/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/6/05 |
(2) |
|
|
85,000 |
|
|
|
— |
|
|
|
$ |
6.40 |
|
|
|
5/6/15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/24/06 |
(2) |
|
|
111,979 |
|
|
|
13,021 |
|
|
|
$ |
6.63 |
|
|
|
5/24/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/23/07 |
(2) |
|
|
48,438 |
|
|
|
26,562 |
|
|
|
$ |
9.32 |
|
|
|
5/23/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/28/08 |
(2) |
|
|
29,688 |
|
|
|
45,312 |
|
|
|
$ |
3.97 |
|
|
|
5/28/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/28/08 |
(5) |
|
|
138,338 |
|
|
|
83,003 |
|
|
|
$ |
3.97 |
|
|
|
5/28/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(2) |
|
|
10,938 |
|
|
|
64,062 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(7) |
|
|
10,208 |
|
|
|
24,792 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(9) |
|
|
1,667 |
|
|
|
18,333 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(10) |
|
|
— |
|
|
|
40,000 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Kelsey, M.D., |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F.R.C.P, F.R.C.Path. |
|
5/20/09 |
(11) |
|
|
33,333 |
|
|
|
166,667 |
|
|
|
$ |
6.76 |
|
|
|
5/20/19 |
|
|
4/27/09 |
(13) |
|
40,000 |
|
|
$ |
222,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David J. Earp, J.D., Ph.D. |
|
1/26/01 |
(2) |
|
|
65,000 |
|
|
|
— |
|
|
|
$ |
18.63 |
|
|
|
1/26/11 |
|
|
5/23/07 |
(12) |
|
12,500 |
|
|
$ |
69,375 |
|
|
|
12/14/01 |
(3) |
|
|
54,000 |
|
|
|
— |
|
|
|
$ |
8.23 |
|
|
|
12/14/11 |
|
|
5/28/08 |
(12) |
|
18,750 |
|
|
$ |
104,063 |
|
|
|
6/27/02 |
(3) |
|
|
36,000 |
|
|
|
— |
|
|
|
$ |
8.23 |
|
|
|
6/27/12 |
|
|
5/29/09 |
(12) |
|
25,000 |
|
|
$ |
138,750 |
|
|
|
9/5/02 |
(2) |
|
|
65,000 |
|
|
|
— |
|
|
|
$ |
3.76 |
|
|
|
9/5/12 |
|
|
5/29/09 |
(13) |
|
40,000 |
|
|
$ |
222,000 |
|
|
|
5/30/03 |
(2) |
|
|
37,500 |
|
|
|
— |
|
|
|
$ |
5.08 |
|
|
|
5/30/13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/27/04 |
(2) |
|
|
50,000 |
|
|
|
— |
|
|
|
$ |
7.56 |
|
|
|
5/27/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/6/05 |
(2) |
|
|
60,000 |
|
|
|
— |
|
|
|
$ |
6.40 |
|
|
|
5/6/15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/24/06 |
(2) |
|
|
83,984 |
|
|
|
9,766 |
|
|
|
$ |
6.63 |
|
|
|
5/24/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/23/07 |
(2) |
|
|
32,292 |
|
|
|
17,708 |
|
|
|
$ |
9.32 |
|
|
|
5/23/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/28/08 |
(2) |
|
|
19,792 |
|
|
|
30,208 |
|
|
|
$ |
3.97 |
|
|
|
5/28/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(2) |
|
|
7,292 |
|
|
|
42,708 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(4) |
|
|
11,667 |
|
|
|
23,333 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(9) |
|
|
1,667 |
|
|
|
18,333 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(10) |
|
|
— |
|
|
|
25,000 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jane S. Lebkowski, Ph.D. |
|
1/26/01 |
(2) |
|
|
75,000 |
|
|
|
— |
|
|
|
$ |
18.63 |
|
|
|
1/26/11 |
|
|
5/23/07 |
(12) |
|
12,500 |
|
|
$ |
69,375 |
|
|
|
12/14/01 |
(3) |
|
|
54,000 |
|
|
|
— |
|
|
|
$ |
8.23 |
|
|
|
12/14/11 |
|
|
5/28/08 |
(12) |
|
18,750 |
|
|
$ |
104,063 |
|
|
|
6/27/02 |
(3) |
|
|
36,000 |
|
|
|
— |
|
|
|
$ |
8.23 |
|
|
|
6/27/12 |
|
|
5/29/09 |
(12) |
|
25,000 |
|
|
$ |
138,750 |
|
|
|
9/5/02 |
(2) |
|
|
70,000 |
|
|
|
— |
|
|
|
$ |
3.76 |
|
|
|
9/5/12 |
|
|
5/29/09 |
(13) |
|
40,000 |
|
|
$ |
222,000 |
|
|
|
5/30/03 |
(2) |
|
|
37,500 |
|
|
|
— |
|
|
|
$ |
5.08 |
|
|
|
5/30/13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/27/04 |
(2) |
|
|
50,000 |
|
|
|
— |
|
|
|
$ |
7.56 |
|
|
|
5/27/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/6/05 |
(2) |
|
|
60,000 |
|
|
|
— |
|
|
|
$ |
6.40 |
|
|
|
5/6/15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/24/06 |
(2) |
|
|
67,188 |
|
|
|
7,812 |
|
|
|
$ |
6.63 |
|
|
|
5/24/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/23/07 |
(2) |
|
|
32,292 |
|
|
|
17,708 |
|
|
|
$ |
9.32 |
|
|
|
5/23/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/28/08 |
(2) |
|
|
19,792 |
|
|
|
30,208 |
|
|
|
$ |
3.97 |
|
|
|
5/28/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/28/08 |
(6) |
|
|
33,958 |
|
|
|
11,042 |
|
|
|
$ |
3.97 |
|
|
|
5/28/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(2) |
|
|
7,292 |
|
|
|
42,708 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(7) |
|
|
2,917 |
|
|
|
7,083 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(9) |
|
|
1,667 |
|
|
|
18,333 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5/29/09 |
(10) |
|
|
— |
|
|
|
25,000 |
|
|
|
$ |
6.52 |
|
|
|
5/29/19 |
|
|
|
|
|
|
|
|
|
|
|
43
____________________
(1) |
|
Amounts
represent an estimate of the market value of unvested restricted stock
awards as of December 31, 2009, assuming a market value of $5.55 per
share.
|
|
|
|
(2) |
|
Options are
exercisable in a series of 48 equal consecutive monthly installments
commencing on the date of grant, provided the executive continues to
provide services to the Company.
|
|
|
|
(3) |
|
Options are
exercisable in a series of 48 equal consecutive monthly installments
commencing January 1, 2002, provided the executive continues to provide
services to the Company.
|
|
|
|
(4) |
|
Options are
exercisable in a series of 24 equal consecutive monthly installments
commencing in April 2009, provided the executive continues to provide
services to the Company.
|
|
|
|
(5) |
|
Options are
exercisable in a series of 24 equal consecutive monthly installments
commencing in September 2008, provided the executive continues to provide
services to the Company.
|
|
|
|
(6) |
|
Options are
exercisable in a series of 24 equal consecutive monthly installments
commencing in May and September 2008, provided the executive continues to
provide services to the Company.
|
|
|
|
(7) |
|
Options are
exercisable in a series of 24 equal consecutive monthly installments
commencing in May 2009, provided the executive continues to provide
services to the Company.
|
|
|
|
(8) |
|
Options are
exercisable in a series of 24 equal consecutive monthly installments
commencing in July 2009, provided the executive continues to provide
services to the Company.
|
|
|
|
(9) |
|
Options are
exercisable in a series of 24 equal consecutive monthly installments
commencing in October 2009, provided the executive continues to provide
services to the Company.
|
|
|
|
(10) |
|
Options are
exercisable in a series of 24 equal consecutive monthly installments
commencing in December 2009, provided the executive continues to provide
services to the Company.
|
|
|
|
(11) |
|
Option is
exercisable as follows: 25,000 shares on October 27, 2009, the remaining
175,000 shares become exercisable in a series of 42 equal consecutive
monthly installments commencing October 27, 2009, provided the executive
continues to provide services to the Company.
|
|
|
|
(12) |
|
Restricted
stock awards vest in four equal consecutive annual installments commencing
on the date of grant, provided the executive continues to provide services
to the Company.
|
|
|
|
(13) |
|
Restricted
stock awards vest over two years with 25% of the total award vesting on
the first anniversary of the date of grant and the remaining 75% on the
second anniversary of the date of grant, provided the executive continues
to provide services to the
Company.
|
Option Exercises and Stock Awards
Vested
The following table includes certain
information with respect to the options exercised and restricted stock awards
vested by the Named Executive Officers during the year ended December 31,
2009.
|
|
Option Awards |
|
Stock Awards |
|
|
Number of |
|
Value |
|
Number of |
|
Value |
|
|
Shares Acquired |
|
Realized on |
|
Shares Acquired |
|
Realized on |
|
|
On Exercise |
|
Exercise |
|
On Vesting |
|
Vesting |
Name |
|
|
(#) |
|
($) |
|
(#) |
|
($) |
Thomas B. Okarma, Ph.D., M.D. |
|
— |
|
$ — |
|
|
171,541 |
|
|
$ |
1,099,394 |
David L. Greenwood |
|
— |
|
$ — |
|
|
88,208 |
|
|
$ |
544,631 |
Stephen M. Kelsey, M.D., F.R.C.P,
F.R.C.Path. |
|
— |
|
$ — |
|
|
— |
|
|
$ |
— |
David J. Earp, J.D., Ph.D. |
|
— |
|
$ — |
|
|
69,458 |
|
|
$ |
428,388 |
Jane S. Lebkowski, Ph.D. |
|
— |
|
$ — |
|
|
65,708 |
|
|
$ |
402,925 |
Pension Benefits
None of the Named Executive Officers
participates in or has an account balance under qualified or non-qualified
defined benefit plans sponsored by the Company.
44
Non-qualified Deferred
Compensation
None of the Named Executive Officers
participates in or has an account balance under non-qualified defined
contribution plans or other deferred compensation plans maintained by the
Company.
Potential Payments Upon Termination or Change
in Control
See discussion of potential payments upon
termination or change in control in the section entitled, “Compensation
Discussion and Analysis – Severance and Change in Control
Benefits.”
CORPORATE GOVERNANCE
The Company has an ongoing commitment to good
governance and business practices. In furtherance of this commitment, the
Company regularly monitors developments in the area of corporate governance and
reviews its processes and procedures in light of such developments. The Company
complies with the rules and regulations promulgated by the SEC and Nasdaq, and
implements other corporate governance practices which it believes are in the
best interest of the Company and its stockholders.
Code of Conduct
In 2003, the Company adopted a Code of Conduct
(the Code of Conduct), which is available in its entirety on the Company’s
website at http://www.geron.com and to any stockholder otherwise requesting a
copy. All Company employees, officers, and directors, including the Chief
Executive Officer and Chief Financial Officer, are required to adhere to the
Code of Conduct in discharging their work-related responsibilities. Employees
are required to report any conduct that they believe in good faith to be an
actual or apparent violation of the Code of Conduct. Amendments to the Code of
Conduct, and any waivers from the Code of Conduct granted to directors or
executive officers, will also be made available through the Company’s website as
they are adopted.
In keeping with the Sarbanes-Oxley Act of
2002, the Audit Committee has established procedures for the receipt and
handling of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters. Contact information for the Chairperson
of the Audit Committee has been distributed to all employees to allow for the
confidential, anonymous submission by its employees of concerns regarding
accounting or auditing matters.
The Board of Directors
One class of the Board is elected annually,
and each of the directors stands for election every three years. Presently the
Board is comprised of eight directors, one of whom is an executive officer and
seven of whom have been affirmatively determined by the Board to be independent,
meeting the objective requirements set forth by the SEC and Nasdaq, and having
no relationship, direct or indirect, to the Company other than as stockholders
or through their service on the Board. The role of Chairman of the Board is
separate from the Chief Executive Officer of the Company. The Board has
determined that its structure is appropriate to fulfill its duties effectively
and efficiently, so that the Company’s business receives the undivided attention
of the Chief Executive Officer.
The Board maintains four committees whose
functions are described beginning on page 8 herein. Committee membership is
determined by the Board, and, except for the Stock Option Committee composed of
Dr. Okarma, all committee members are independent directors as determined by the
Board. Each committee maintains a written charter detailing its authority and
responsibilities. These charters are reviewed periodically as legislative and
regulatory developments and business circumstances warrant and are available in
their entirety on the Company’s website at http://www.geron.com and to any
stockholder otherwise requesting a copy.
It is management’s responsibility to manage
risk and bring to the Board’s attention the most material risks to the Company.
The Board has an active role, as a whole, in overseeing management of the
Company’s risks. The Board regularly reviews information regarding the Company’s
credit, liquidity and operations, as well as the risks associated with each. In
addition, each of our Board committees considers the risks within its areas of
responsibilities. The Company’s Compensation Committee is responsible for
overseeing the management of risks relating to the Company’s employment
policies, executive compensation plans and arrangements. In connection
45
with the structuring
of the compensation elements for executive officers, the Compensation Committee
also considered whether such programs, individually or in the aggregate,
encourage executives to take unnecessary or excessive risks, and has concluded
that the compensation elements and executive compensation program do not
encourage such risk taking. The Audit Committee oversees management of financial
risks. In addition to fulfilling its responsibilities for the oversight of the
Company’s financial reporting processes and annual audit of the Company’s
financial statements, the Audit Committee also reviews with the independent
auditors and management the adequacy and effectiveness of the Company’s policies
and procedures to assess, monitor and manage business risk and the Company’s
legal and ethical compliance program. The Audit Committee also takes appropriate
actions to set the overall corporate “tone” for quality financial reporting,
sound business risk practices and ethical behavior. The Nominating Committee
manages risks associated with the independence of the Board and potential
conflicts of interest, and risks relating to management and Board succession
planning. While each committee is responsible for evaluating certain risks and
overseeing the management of such risks, the entire Board is regularly informed
through committee reports about such risks. The Board’s administration of its
risk oversight function has not affected the Board’s leadership structure, which
separates the roles of the Chairman of the Board and the Chief Executive Officer
of the Company.
Stockholders wishing to communicate with the
Board, or with a specific Board member, may do so by writing to the Board, or to
the particular Board member, and delivering the communication in person or
mailing it to: Board of Directors, c/o David L. Greenwood, Corporate Secretary,
Geron Corporation, 230 Constitution Drive, Menlo Park, CA 94025. All mail
addressed in this manner will be delivered to the Chair or Chairs of the
Committees with responsibilities touching most closely on the matters addressed
in the communication. From time to time, the Board may change the process by
means of which stockholders may communicate with the Board or its members.
Please refer to the Company’s website for any changes to this
process.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act requires the
Company’s directors and executive officers, and persons who own more than 10% of
a registered class of the Company’s equity securities (collectively, Reporting
Persons), 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.
Reporting Persons are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company’s knowledge, based solely on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, the Company believes that
during the fiscal year ended December 31, 2009, all Reporting Persons complied
with the applicable filing requirement.
Stockholder Nominations and Proposals for 2011
Annual Meeting
The Company expects to hold its 2011 Annual
Meeting of Stockholders in May 2011. All proposals or director nominations of
stockholders intended to be presented at the 2011 Annual Meeting of Stockholders
must be directed to the attention of the Company’s Secretary, at the address set
forth on the first page herein. A stockholder’s notice to include any proposal
in the 2011 Annual Meeting of Stockholders must be delivered to the Company’s
Secretary not less than 90 days and not more than 120 days before the
anniversary date of the immediately preceding annual meeting. For the 2011
Annual Meeting of Stockholders, the notice must be delivered between January 19,
2011 and February 18, 2011. However, if the 2011 Annual Meeting of Stockholders
is not within 30 days of May 19, 2011, the notice must be delivered no later
than the close of business on the 10th day following the earlier of the day on
which the first public announcement of the date of the 2011 Annual Meeting of
Stockholders was made or the day the notice of the 2011 Annual Meeting of
Stockholders is mailed. In addition, the Company’s Bylaws provide that the
stockholder’s notice must include certain information for the person making the
proposal or the nomination for director, including:
- name and address;
- the class and number of shares of
the Company owned of record or beneficially owned;
- any derivative, swap or other
transaction which gives economic risk similar to ownership of shares of
the Company;
46
- any proxy, agreement, arrangement,
understanding or relationship that confers a right to vote any shares of the Company;
- any agreement, arrangement,
understanding or relationship, engaged in to increase or decrease the
level of risk related to, or the
voting power with respect to, shares of the Company;
- any performance related fees that
the proposing /nominating person is entitled to based on any increase
or decrease in the value of any shares
of the Company; and
- any other information required by
the SEC to be disclosed in a proxy statement.
The stockholder’s notice must also
include the following information for each proposed director
nominee:
- the same information as for the
nominating person set forth above;
- all information required to be
disclosed in a proxy statement in connection with election of
directors; and
- financial or other relationships
between the nominating person and the nominee during the past three
years.
Copies of the Company’s Bylaws may
be obtained from the Company’s Secretary.
Stockholders who wish to submit a proposed
nominee to the Nominating Committee should send written notice to Dr. Alexander
Barkas, Nominating Committee Chairman, Geron Corporation, 230 Constitution
Drive, Menlo Park, CA 94025, within the time periods set forth above. Such
notification should set forth all information relating to such nominee as is
required to be disclosed in solicitations of proxies for elections of directors
pursuant to Regulation 14A under the Exchange Act, including such person’s
written consent to being named in a proxy statement as a nominee and to serving
as a director if elected, the name and address of such stockholder or beneficial
owner on whose behalf the nomination is being made, and the class and number of
shares of the Company owned beneficially and of record by such stockholder or
beneficial owner. The Nominating Committee will consider stockholder nominees on
the same terms as nominees selected by the Nominating Committee.
The Nominating Committee believes that
nominees for election to the Board must possess certain minimum qualifications
and attributes. The nominee must 1) meet the
objective independence requirements set forth by the SEC and Nasdaq, 2) exhibit
strong personal integrity, character and ethics, and a commitment to ethical
business and accounting practices, 3) not be involved in on-going litigation
with the Company or be employed by an entity which is engaged in such litigation
and 4) not be the subject of any on-going criminal investigations, including
investigations for fraud or financial misconduct. In addition, the Committee may
consider the following criteria, among others:
|
(i) |
|
experience in
corporate management, such as serving as an officer or former officer of a
publicly held company, and a general understanding of marketing, finance
and other elements relevant to the success of a publicly traded company in
today’s business environment;
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(ii) |
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experience in
the Company’s industry and with relevant social policy
concerns;
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(iii) |
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experience as a
board member of other publicly held companies;
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(iv) |
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expertise in an
area of the Company’s operations; and
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(v) |
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practical and
mature business judgment, including the ability to make independent
analytical inquiries.
|
The Nominating Committee does not specifically
consider diversity in identifying nominees for election as a director. However,
specific experience or expertise that could assist the Company in developing its
product candidates provides added value and insight to the Board. In general,
the Committee aspires the Board to be comprised of individuals that represent a
diversity of professional experience, perspective and experience, and who
portray characteristics of diligence, commitment, mutual respect and
professionalism with an emphasis on consensus building. The Board does not
follow any ratio or formula to determine the appropriate mix. Rather, it uses
its judgment to identify nominees whose backgrounds, attributes and experiences,
taken as a whole, will contribute to the high standards of board service at the
Company.
47
Directors are expected to rigorously prepare
for, attend and participate in Board meetings and meetings of the Committees of
the Board on which they serve, to ask direct questions and require straight
answers, and to spend the time needed and meet as frequently as necessary to
properly discharge their responsibilities and duties as directors. Each Board
member is expected to ensure that other existing and planned future commitments
do not materially interfere with the member’s service as an outstanding
director.
OTHER MATTERS
The Board of Directors knows of no other
matters that will be presented for consideration at the Annual Meeting. If any
other matters are properly brought before the meeting, it is the intention of
the persons named in the accompanying proxy to vote on such matters in
accordance with their best judgment.
By Order of the Board of Directors, |
|
David L.
Greenwood
|
Secretary
|
March 29,
2010
48
APPENDIX A
GERON CORPORATION
2002 EQUITY INCENTIVE PLAN
(As Amended March 2009, Effective as of May 2009)
The following constitutes the
provisions of the 2002 Equity Incentive Plan, as amended, of Geron
Corporation.
1. Purposes of the
Plan.
The purposes of the Geron Corporation 2002
Equity Incentive Plan are to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to
Employees, Directors and Consultants and to promote the success of the Company’s
business. Options granted under the Plan may be Incentive Stock Options or
Non-Qualified Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions.
As used herein, the following
definitions shall apply:
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(a) |
|
“Acquisition”
means (1) a dissolution, liquidation or sale of all or substantially all
of the assets of the Company; (2) a merger or consolidation in which the
Company is not the surviving corporation; or (3) a reverse merger in which
the Company is the surviving corporation but the shares of the Company’s
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of
securities, cash or otherwise. |
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(b) |
|
“Administrator”
means the Board or the Committee responsible for conducting the general
administration of the Plan, as applicable, in accordance with Section 4
hereof. |
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(c) |
|
“Applicable
Laws” means the requirements relating to the administration of
stock option plans under U.S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or quotation system on which
the Common Stock is listed or quoted and the applicable laws of any
foreign country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan. |
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(d) |
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“Board” means
the Board of Directors of the Company. |
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(e) |
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“Code” means the
Internal Revenue Code of 1986, as amended, or any successor statute or
statutes thereto. Reference to any particular Code section shall include
any successor section. |
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(f) |
|
“Committee”
means a committee appointed by the Board in accordance with Section 4
hereof. |
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(g) |
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“Common Stock”
means the Common Stock of the Company. |
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(h) |
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“Company” means
Geron Corporation, a Delaware corporation. |
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(i) |
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“Consultant”
means any consultant or adviser if: (i) the consultant or adviser renders
bona fide services to the Company or any Parent or Subsidiary of the
Company; (ii) the services rendered by the consultant or adviser are not
in connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market
for the Company’s securities; and (iii) the consultant or adviser is a
natural person who has contracted directly with the Company or any Parent
or Subsidiary of the Company to render such services. |
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(j) |
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“Director” means
a member of the Board. |
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(k) |
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“Employee” means
any person, including an Officer or Director, who is an employee (as
defined in accordance with Section 3401(c) of the Code) of the Company or
any Parent or Subsidiary of the Company. A Service Provider shall not
cease to be an Employee (i) during any leave of absence approved by the
Company or (ii) upon any transfer between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. For
purposes of Incentive Stock Options, no such leave may exceed ninety (90)
days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. Neither service as a Director nor payment of a
director’s fee by the Company shall be sufficient, by itself, to
constitute “employment” by the Company. |
A-1
|
(l) |
|
“Equity
Restructuring” means a non-reciprocal transaction between the
Company and its stockholders, such as a stock dividend, stock split,
spin-off, rights offering or recapitalization through a large,
nonrecurring cash dividend, that affects the shares of Common Stock (or
other securities of the Company) or the share price of Common Stock (or
other securities of the Company) and causes a change in the per share
value of the Common Stock underlying outstanding awards granted under the
Plan. |
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(m) |
|
“Exchange Act”
means the Securities Exchange Act of 1934, as amended, or any successor
statute or statutes thereto. Reference to any particular Exchange Act
section shall include any successor section. |
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|
(n) |
|
“Fair Market Value”
means, as of any date, the value of a share of Common Stock determined as
follows: |
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|
(i) |
|
If the
Common Stock is listed on any established stock exchange or a national
market system, its Fair Market Value shall be the closing sales price for
a share of such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or system for such date, or if no bids or sales
were reported for such date, then the closing sales price (or the closing
bid, if no sales were reported) on the trading date immediately prior to
such date during which a bid or sale occurred, in each case, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable; |
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(ii) |
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If the
Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, its Fair Market Value shall be the mean
between the high bid and low asked prices for a share of the Common Stock
on such date, or if no closing bid and asked prices were reported for such
date, the date immediately prior to such date during which closing bid and
asked prices were quoted for such Common Stock, in each case, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable; or |
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|
(iii) |
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In the
absence of an established market for the Common Stock, the Fair Market
Value thereof shall be determined in good faith by the
Administrator. |
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(o) |
|
“Holder” means a
person who has been granted or awarded an Option or Stock Purchase Right
or who holds Shares acquired pursuant to the exercise of an Option or
Stock Purchase Right. |
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(p) |
|
“Incentive Stock
Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and which is
designated as an Incentive Stock Option by the Administrator. |
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(q) |
|
“Independent
Director” means a Director who is not an Employee of the
Company. |
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(r) |
|
“Non-Qualified Stock
Option” means an Option (or portion thereof) that is not designated
as an Incentive Stock Option by the Administrator, or which is designated
as an Incentive Stock Option by the Administrator but fails to qualify as
an incentive stock option within the meaning of Section 422 of the
Code. |
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(s) |
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“Officer” means a
person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated
thereunder. |
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(t) |
|
“Option” means a
stock option granted pursuant to the Plan. |
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(u) |
|
“Option Agreement”
means a written agreement between the Company and a Holder evidencing the
terms and conditions of an individual Option grant. The Option Agreement
is subject to the terms and conditions of the Plan. |
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(v) |
|
“Parent” means any
corporation, whether now or hereafter existing (other than the Company),
in an unbroken chain of corporations ending with the Company if each of
the corporations other than the last corporation in the unbroken chain
owns stock possessing more than fifty percent of the total combined voting
power of all classes of stock in one of the other corporations in such
chain. |
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(w) |
|
“Plan” means the
Geron Corporation 2002 Equity Incentive Plan, as may be amended from time
to time. |
A-2
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(x) |
|
“Qualified Domestic Relations
Order” means a domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder. |
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(y) |
|
“Restricted Stock” means Shares
acquired pursuant to the exercise of an unvested Option in accordance with
Section 10(h) below or pursuant to a Stock Purchase Right granted under
Section 12 below. |
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(z) |
|
“Rule 16b-3” means that certain
Rule 16b-3 under the Exchange Act, as such Rule may be amended from time
to time. |
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(aa) |
|
“Section 16(b)” means Section
16(b) of the Exchange Act, as such Section may be amended from time to
time. |
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(bb) |
|
“Securities Act” means the
Securities Act of 1933, as amended, or any successor statute or statutes
thereto. Reference to any particular Securities Act section shall include
any successor section. |
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(cc) |
|
“Service Provider” means an
Employee, Director or Consultant. |
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(dd) |
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“Share” means a share of Common
Stock, as adjusted in accordance with Section 13 below. |
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(ee) |
|
“Stock Purchase Right” means a
right to purchase Common Stock pursuant to Section 12 below. |
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(ff) |
|
“Subsidiary” means any
corporation, whether now or hereafter existing (other than the Company),
in an unbroken chain of corporations beginning with the Company if each of
the corporations other than the last corporation in the unbroken chain
owns stock possessing more than fifty percent of the total combined voting
power of all classes of stock in one of the other corporations in such
chain. |
3. Stock Subject to the
Plan.
Subject to the provisions of Section 13 of the
Plan, the shares of stock subject to Options or Stock Purchase Rights shall be
Common Stock, initially 24,579,603 shares of the Company’s Common Stock. Subject
to the provisions of Section 13 of the Plan, the maximum aggregate number of
Shares which may be issued upon exercise of such Options or Stock Purchase
Rights will increase annually on each anniversary date of the Board’s adoption
of the Plan during the term of the Plan equal to the least of (i) two million
(2,000,000) Shares, (ii) four percent (4%) of the Company’s outstanding Shares
on such date or (iii) a lesser amount determined by the Board. Shares issued
upon exercise of Options or Stock Purchase Rights may be authorized but
unissued, or reacquired Common Stock. If an Option or Stock Purchase Right
expires or becomes unexercisable without having been exercised in full, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated). Shares which are
delivered by the Holder or withheld by the Company upon the exercise of an
Option or Stock Purchase Right under the Plan, in payment of the exercise price
thereof or tax withholding thereon, may again be optioned, granted or awarded
hereunder, subject to the limitations of this Section 3. If Shares of Restricted
Stock are repurchased by the Company at their original purchase price, such
Shares shall become available for future grant under the Plan. Notwithstanding
the provisions of this Section 3, no Shares may again be optioned, granted or
awarded if such action would cause an Incentive Stock Option to fail to qualify
as an Incentive Stock Option under Code Section 422.
4. Administration of the
Plan.
|
(a) |
|
Administrator. A Committee of
the Board shall administer the Plan and the Committee shall consist solely
of two or more Independent Directors each of whom is both an “outside
director,” within the meaning of Section 162(m) of the Code, and a
“non-employee director” within the meaning of Rule 16b-3. Notwithstanding
the foregoing, the Board or the Committee may (i) delegate to a committee
of one or more members of the Board who are not Independent Directors the
authority to grant, and otherwise act as Administrator hereunder with
respect to, awards under the Plan to eligible persons who are either (1)
not then “covered employees,” within the meaning of Section 162(m) of the
Code and are not expected to be “covered employees” at the time of
recognition of income resulting from such award or (2) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the
Code and/or (ii) delegate to a committee of one or more members of the
Board who are not “non-employee directors,” within the meaning of Rule
16b-3, the authority to grant awards
under |
A-3
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the Plan to eligible persons who are not then subject to Section 16
of the Exchange Act. Appointment of Committee members shall be effective
upon acceptance of appointment. Committee members may resign at any time
by delivering written notice to the Board. Vacancies in the Committee may
only be filled by the Board. |
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|
(b) |
|
Powers of the
Administrator. Subject to the provisions of the Plan and the
specific duties delegated by the Board to such Committee, and subject to
the approval of any relevant authorities, the Administrator shall have the
authority in its sole discretion: |
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(i) |
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to
determine the Fair Market Value; |
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(ii) |
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to
select the Service Providers to whom Options and Stock Purchase Rights may
from time to time be granted hereunder; |
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(iii) |
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to
determine the number of Shares to be covered by each such award granted
hereunder; |
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(iv) |
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to
approve forms of agreement for use under the Plan; |
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(v) |
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to
determine the terms and conditions of any Option or Stock Purchase Right
granted hereunder (such terms and conditions include, but are not limited
to, the exercise price, the time or times when Options or Stock Purchase
Rights may vest or be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions,
and any restriction or limitation regarding any Option or Stock Purchase
Right or the Common Stock relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall determine) and
amend such terms and conditions following the grant of such Options and
Stock Purchase Rights hereunder; |
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(vi) |
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to
determine whether to offer to buyout a previously granted Option as
provided in subsection 10(i) and to determine the terms and conditions of
such offer and buyout (including whether payment is to be made in cash or
Shares); |
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(vii) |
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to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub plans established for the
purpose of qualifying for preferred tax treatment under foreign tax
laws; |
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(viii) |
|
to
allow Holders to satisfy withholding tax obligations by electing to have
the Company withhold from the Shares to be issued upon exercise of an
Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the minimum amount required to be withheld based on the
statutory withholding rates for federal and state tax purposes that apply
to supplemental taxable income. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be
withheld is to be determined. All elections by Holders to have Shares
withheld for this purpose shall be made in such form and under such
conditions as the Administrator may deem necessary or
advisable; |
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(ix) |
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to
amend the Plan or any Option or Stock Purchase Right granted under the
Plan as provided in Section 15; and |
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|
(x) |
|
to
construe and interpret the terms of the Plan and awards granted pursuant
to the Plan and to exercise such powers and perform such acts as the
Administrator deems necessary or desirable to promote the best interests
of the Company which are not in conflict with the provisions of the
Plan. |
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|
(c) |
|
Effect of Administrator’s
Decision. All decisions, determinations and interpretations of the
Administrator shall be final and binding on all
Holders. |
5. Eligibility.
Non-Qualified Stock Options and Stock Purchase
Rights may be granted to Service Providers. Incentive Stock Options may be
granted only to Employees. If otherwise eligible, an Employee, Director or
Consultant who has been granted an Option or Stock Purchase Right may be granted
additional Options or Stock Purchase Rights.
A-4
6. Limitations.
|
(a) |
|
Each
Option shall be designated by the Administrator in the Option Agreement as
either an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair
Market Value of Shares subject to a Holder’s Incentive Stock Options and
other incentive stock options granted by the Company, any Parent or
Subsidiary, which become exercisable for the first time during any
calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options or other options shall be treated as
Non-Qualified Stock Options. |
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For
purposes of this Section 6(a), Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value
of the Shares shall be determined as of the time of grant. |
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(b) |
|
Neither the Plan, any Option nor any Stock Purchase Right shall
confer upon a Holder any right with respect to continuing the Holder’s
employment or consulting relationship with the Company, nor shall they
interfere in any way with the Holder’s right or the Company’s right to
terminate such employment or consulting relationship at any time, with or
without cause. |
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(c) |
|
No
Service Provider shall be granted, in any calendar year, Options or Stock
Purchase Rights to purchase more than 750,000 Shares. The foregoing
limitation shall be adjusted proportionately in connection with any change
in the Company’s capitalization as described in Section 13. For purposes
of this Section 6(c), if an Option is canceled in the same calendar year
it was granted (other than in connection with a transaction described in
Section 13), the canceled Option will be counted against the limit set
forth in this Section 6(c). For this purpose, if the exercise price of an
Option is reduced, the transaction shall be treated as a cancellation of
the Option and the grant of a new Option. |
7. Term of Plan.
The Plan shall become effective upon its
initial adoption by the Board and shall continue in effect until it is
terminated under Section 15 of the Plan. No Options or Stock Purchase Rights may
be issued under the Plan after the tenth (10th) anniversary of the earlier of
(i) the date upon which the Plan is adopted by the Board or (ii) the date the
Plan is approved by the stockholders.
8. Term of Option.
The term of each Option shall be stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to a Holder who, at the time the Option is granted, owns (or is
treated as owning under Code Section 424) stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Option shall be five (5) years from the
date of grant or such shorter term as may be provided in the Option
Agreement.
9. Option Exercise Price and
Consideration.
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(a) |
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Except as provided in Section 13, the per share exercise price for
the Shares to be issued upon exercise of an Option shall be such price as
is determined by the Administrator, but in no event less than the par
value per Share, and in the case of an Incentive Stock
Option: |
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(i) |
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granted to an Employee who, at the time of grant of such Option,
owns (or is treated as owning under Code Section 424) stock representing
more than ten percent (10%) of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than one hundred ten percent (110%) of the Fair Market
Value per Share on the date of grant. |
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(ii) |
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granted to any other Employee, the per Share exercise price shall
be no less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant. |
A-5
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(b) |
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Notwithstanding the foregoing, Options may be granted with a per
Share exercise price other than as required above pursuant to a merger or
other corporate transaction. |
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(c) |
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The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant). Such consideration may
consist of (1) cash, (2) check, (3) with the consent of the Administrator,
a full recourse promissory note bearing interest (at no less than such
rate as shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Administrator, (4)
with the consent of the Administrator, other Shares which (x) in the case
o |