<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
GERON CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
GERON CORPORATION
230 CONSTITUTION DRIVE
MENLO PARK, CA 94025
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 1997
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 Friday, May
23, 1997, at 9:00 a.m. local time at the company headquarters, 230 Constitution
Drive, Menlo Park, California 94025 for the following purposes:
1. To elect the three Class I Directors to serve for a term of three years,
or until their successors are elected.
2. To approve an amendment to the Company's 1992 Stock Option Plan to
increase the aggregate number of shares of Common Stock authorized for
issuance under such Plan by 800,000 shares.
3. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for the fiscal year ending December 31, 1997.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business, including the nominees for Class I
Directors, are more fully described in the Proxy Statement accompanying this
Notice.
The Board of Directors has fixed the close of business on Friday, April 11,
1997, 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.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please complete, date, sign 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. 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
LOGO
DAVID L. GREENWOOD
Secretary
Menlo Park, California
April 17, 1997
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
<PAGE> 3
GERON CORPORATION
230 CONSTITUTION DRIVE
MENLO PARK, CA 94025
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Geron Corporation, a Delaware corporation (the "Company") for use at the Annual
Meeting of Stockholders to be held on May 23, 1997, at 9:00 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 headquarters, 230 Constitution Drive,
Menlo Park, California 94025. The Company intends to mail this proxy statement
and accompanying proxy card on or about April 22, 1997 to all stockholders
entitled to vote at the Annual Meeting.
SOLICITATION
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 telephone, telegram or
personal solicitation by directors, officers, other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on Friday,
April 11, 1997, (the "Record Date") will be entitled to notice of and to vote at
the Annual Meeting. At the close of business on the Record Date, the Company had
outstanding and entitled to vote 10,221,467 shares of Common Stock. 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.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a particular
matter has been approved.
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. It may be revoked by filing with the
Secretary of the Company at the Company's offices, 230 Constitution Drive, Menlo
Park, California 94025, a written notice of revocation or a duly executed proxy
bearing a later date, or it may be revoked by attending the meeting and voting
in person. Attendance at the meeting will not, by itself, revoke a proxy.
<PAGE> 4
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company
not later than January 23, 1998 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL I
ELECTION OF DIRECTORS
Geron has three classes of directors; serving staggered three-year terms.
Class I consists of three directors who will be elected at this Annual Meeting;
Class II consists of three directors who will be elected at the 1998 Annual
Meeting; and Class III consists of two directors who will be elected at the 1999
Annual Meeting. At this Annual Meeting, the Class I Directors are to be elected
for three-year terms expiring on the date of the Annual Meeting in 2000 or until
their successors are elected and qualified. The Board of Directors has selected
three nominees for Class I Directors, all of whom are currently directors of the
Company. The three 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 I Directors of the Company.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the three 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.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE
Set forth below is information regarding the nominees for Class I Director,
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.
NOMINEES FOR CLASS I DIRECTOR (TERM ENDING IN 2000)
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION/POSITION WITH THE COMPANY
---------------------------- --- ----------------------------------------------------
<S> <C> <C>
Charles M. Hartman.......... 55 General Partner, CW Group
John P. Walker.............. 48 President and CEO, Arris Pharmaceutical Corporation
Michael D. West, Ph.D....... 44 Vice President of New Technologies
</TABLE>
CHARLES M. HARTMAN has served as a Director of the Company since August
1992. He has been a general partner of CW Group, a venture capital partnership,
since 1983. From 1965 to 1983, Mr. Hartman held a number of positions with
Johnson & Johnson. He is also a director of SUGEN, Inc., Ribozyme
Pharmaceuticals, Inc. and several privately held life sciences companies. He is
also a director of the Hastings Center, a nonprofit organization dedicated to
the study of ethics in medicine and the life sciences. Mr. Hartman holds a B.S.
in Chemistry from Notre Dame University and an M.B.A. from the University of
Chicago.
JOHN P. WALKER has served as a Director of the Company since April 1997. He
has been President, Chief Executive Officer and a director of Arris
Pharmaceutical Corporation since February 1993. From 1991 to 1993, he was
Chairman, President and Chief Executive Officer of Vitaphore Corporation, a
company which was acquired in April 1990 by Union Carbide Chemicals and Plastics
Company Inc. Following that acquisition, Mr. Walker served as the latter
company's Vice President, Biomaterials Systems. From 1971 to 1985, Mr. Walker
was employed by American Hospital Supply Corporation in a variety of general
management, sales and marketing positions, most recently serving as President of
the American Hospital Company. He received his B.A. degree from the State
University of New York at Buffalo and conducted
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<PAGE> 5
graduate business studies at Northwestern University Institute for Management.
Mr. Walker serves as a director of Microcide Pharmaceuticals, Signal
Pharmaceuticals, and the Northern California Chapter of the Multiple Sclerosis
Society.
MICHAEL D. WEST, PH.D., the founder of the Company, has served as a
Director of the Company since November 1990 and as Vice President of New
Technologies of the Company since October 1993. From the founding of the Company
to October 1993, Dr. West held various executive positions within the Company.
Prior to joining the Company, Dr. West was a Senior Research Scientist at the
University of Texas Southwestern Medical Center at Dallas in the Department of
Cell Biology and Neuroscience, and from 1989 to 1990, he was a Postdoctoral
Research Fellow in the same department. Dr. West holds a B.S. from Rensselaer
Polytechnic Institute, an M.S. from Andrews University, and a Ph.D. from Baylor
College of Medicine.
CONTINUING DIRECTORS
Set forth below is information regarding the continuing Class II and Class
III 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 II DIRECTORS (TERM ENDING IN 1998)
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION/POSITION WITH
NAME AGE THE COMPANY
- ------------------------------------- --- -------------------------------------
<S> <C> <C>
Brian H. Dovey....................... 55 General Partner, Domain Associates
Ronald W. Eastman.................... 45 President and Chief Executive Officer
Thomas D. Kiley, Esq................. 54 Attorney-at-law
</TABLE>
BRIAN H. DOVEY has served as a Director of the Company since June 1993. Mr.
Dovey has been a general partner of Domain Associates, a venture capital
investment firm, since 1988. From 1986 to 1988, Mr. Dovey was President of Rorer
Group, Inc. (now Rhone Poulenc Rorer, Inc.), a pharmaceutical company. Mr. Dovey
is also a director of Athena Neurosciences, Inc., Resound Corporation, NABI,
Creative BioMolecules, Inc., Vivus, Inc., Connetics Corp. and several privately
held companies. He holds a B.A. from Colgate University and an M.B.A. from
Harvard Business School.
RONALD W. EASTMAN has served as President, Chief Executive Officer and
Director of the Company since May 1993. From 1978 until joining the Company, Mr.
Eastman was employed with American Cyanamid Co., most recently as a Vice
President and General Manager of Lederle Laboratories, American Cyanamid's
pharmaceutical business. Mr. Eastman holds a B.A. from Williams College and an
M.B.A. from Columbia University.
THOMAS D. KILEY, ESQ., has served as a Director of the Company since
September 1992. 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, serving variously as Vice President and General Counsel,
Vice President for Legal Affairs and Vice President for Corporate Development.
From 1969 to 1980, he was with the Los Angeles law firm of Lyon & Lyon and was a
partner in such firm from 1975 to 1980. Mr. Kiley is also a director of Athena
Neurosciences, Inc., Pharmacyclics, Inc., Connectics Corp., Cardiogenesis
Corporation and certain privately held biotechnology and other companies. Mr.
Kiley holds a B.S. in Chemical Engineering from Pennsylvania State University
and a J.D. from George Washington University.
CLASS III DIRECTORS (TERM ENDING IN 1999)
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION/POSITION WITH THE COMPANY
-------------------------------- --- -------------------------------------------------
<S> <C> <C>
Alexander E. Barkas, Ph.D....... 49 Partner, Kleiner Perkins Caufield & Byers
Robert B. Stein, M.D., Ph.D..... 46 Executive Vice President, Research & Preclinical
Development DuPont Merck Research Labs
</TABLE>
3
<PAGE> 6
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. He
has been a partner of Kleiner Perkins Caufield & Byers, a venture capital
investment firm, since 1991, prior to which he was a retained consultant to such
firm for two years. Dr. Barkas is also a director of Connetics Corp. and several
privately held medical technology companies. He holds a B.A. from Brandeis
University and Ph.D. from New York University.
ROBERT B. STEIN, M.D., PH.D., has served as a Director of the Company since
April 1996. Since September 1996 Dr. Stein has been Executive Vice President of
Research & Preclinical Development at The DuPont Merck Research Labs. From
August 1993 to September 1996, Dr. Stein was Senior Vice President and Chief
Scientific Officer of Ligand Pharmaceuticals, Inc., a pharmaceutical company,
and from May 1990 to August 1993, he was Vice President of Research at Ligand.
From 1982 to 1990, Dr. Stein held various positions with Merck, Sharp, and Dohme
Research Laboratories, a pharmaceutical company, including Senior Director and
Head of the Department of Pharmacology from 1989 to 1990. Dr. Stein holds a B.S.
in Biology and Chemistry from Indiana University and an M.D. and a Ph.D. in
Physiology and Pharmacology from Duke University.
There are no family relationships among executive officers or directors of
the Company.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1996, the Board of Directors held
nine meetings and acted by written consent on one occasion. The Board has an
Audit Committee, a Compensation Committee and a Stock Option Committee. During
the fiscal year ended December 31, 1996, all directors except Mr. Dovey and Dr.
Stein attended at least 75% of the meetings of the Board and the committees on
which he served, held during the period for which he was a director or committee
member, respectively.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the auditors' comments as to financial controls, adequacy
of staff, as well as management performance and procedures in connection with
the annual audit and financial controls. The Audit Committee, which is composed
of Dr. Barkas and Mr. Kiley, was formed in May 1996 in connection with the
Company's initial public offering and held its first meeting in March 1997.
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 exclusive
authority to administer the 1992 Stock Option Plan with respect to executive
officers and directors. The Compensation Committee, which is comprised of Dr.
Barkas and Mr. Dovey, acted by written consent on two occasions during fiscal
1996.
The Stock Option Committee was formed in December 1996 in order to provide
timely option grants to new employees and consultants (other than executive
officers and directors of the Company) and currently consists of one member, Mr.
Eastman. The Stock Option Committee has limited authority to administer the
Company's 1992 Stock Option Plan concurrent with the Compensation Committee. The
Stock Option Committee has the authority to grant options for up to 20,000
shares of Common Stock to new employees and consultants in accordance with
procedures approved by the Board of Directors. The Stock Option Committee did
not meet in fiscal 1996.
COMPENSATION OF DIRECTORS
Directors currently receive no cash fees for services provided in that
capacity but are reimbursed for out-of-pocket expenses incurred in connection
with attendance at meetings of the Board of Directors.
Each non-employee director will also receive periodic option grants for
shares of Common Stock pursuant to the Company's 1996 Directors' Stock Option
Plan (the "Directors' Plan"). The Directors' Plan provides that a nonemployee
director of the Company will be granted a nonstatutory stock option to purchase
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<PAGE> 7
25,000 shares of Common Stock (the "First Option") on the date on which the
optionee first becomes a nonemployee director of the Company. Thereafter, on the
date of each annual meeting of the Company's stockholders, each nonemployee
director will be granted an option to purchase 5,000 shares of Common Stock (a
"Subsequent Option") if, on such date, he or she has served on the Board of
Directors for at least six months. The First Options become exercisable in
installments as to 33 1/3% of the total number of shares subject to the First
Option on each of the first, second and third anniversaries of the date of grant
of the First Option; the Subsequent Options become exercisable in whole on the
first anniversary of the date of grant. The exercise price of all stock options
granted under the Directors' Plan will be equal to the fair market value of a
share of the Company's Common Stock on the date of grant of the option. Options
granted under the Directors' Plan have a term of ten years. For more information
with respect to the Directors' Plan, see Appendix I.
During 1996, no options were granted to non-employee directors under the
Directors' Plan. Prior to the adoption of the Directors' Plan, options to
purchase 141,177 shares were granted to non-employee directors at a weighted
average exercise price of $3.41 under the Company's 1992 Stock Option Plan in
1996. In April 1997, Mr. Walker was granted a First Option for 25,000 shares
under the Directors' Plan. In addition, the Company has entered into consulting
arrangements with Messrs. Kiley and Walker. See "Certain Transactions."
PROPOSAL 2
APPROVAL OF AMENDMENT TO THE 1992 STOCK OPTION PLAN
The Company's stockholders are being asked to approve an amendment to the
Company's 1992 Stock Option Plan, as amended (the "Stock Option Plan") to
increase the number of shares issuable thereunder by 800,000 shares. In April
1997, the Board amended the Stock Option Plan, subject to stockholder approval,
to increase the aggregate number of shares authorized for issuance under the
Stock Option Plan from 2,755,219 to 3,555,219. The Board adopted the amendment
to ensure that the Company can continue to grant stock options, at levels
determined appropriate by the Board, to attract and retain qualified employees
and consultants.
The Stock Option Plan was initially adopted by the Board of Directors in
May 1992 and approved by the stockholders in July 1992 and has been amended
several times since then. As of December 31, 1996, a total of 2,554,411 shares
of Common Stock had been authorized for issuance under the Stock Option Plan
with an automatic increase on the first trading day of the 1997, 1998, 1999,
2000 and 2001 calendar years of an additional number of shares equal to 2% of
the number of shares of Common Stock outstanding on December 31 of the
immediately preceding calendar year, with no such annual increase to exceed
300,000 shares. Taking into account the annual increase for 1997, a total of
2,755,219 shares of Common Stock have been authorized for issuance under the
Stock Option Plan, as of the date of this Proxy Statement.
As of April 11, 1997, options to purchase a total of 1,597,433 shares were
outstanding under the Stock Option Plan (net of canceled or expired options),
and 1,273,578 shares remained available for future grants under the Stock Option
Plan, subject to stockholder approval of this proposal to increase the number of
shares available under the Stock Option Plan by 800,000. As of April 11, 1997,
the aggregate fair market value of shares subject to outstanding options under
the Stock Option Plan was $13,777,860, based upon the closing price of the
Common Stock on the Nasdaq National Market. The actual benefits, if any, to the
holders of stock options issued under the Stock Option Plan are not determinable
prior to exercise as the value, if any, of such stock options to their holders
is represented by the difference between the market price of a share of the
Company's Common Stock on the date of exercise and the exercise price of a
holder's stock option.
SUMMARY OF 1992 STOCK OPTION PLAN
The following is a summary of the principal features of the Stock Option
Plan, together with the applicable tax and accounting implications, which will
be in effect if the amendment to the Stock Option is amended. This summary is
being provided, in accordance with the applicable requirements of the federal
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securities laws, to assure that the Stock Option Plan will qualify under Rule
16b-3 (as in effect at the time the Plan was adopted) of the Securities and
Exchange Commission and thereby provide the Company's executive officers and
Board members with certain exemptions from the short-swing liability provisions
of the federal securities laws for their transactions under the Stock Option
Plan. The summary, however, does not purport to be a complete description of all
the provisions of the Stock Option Plan. Any stockholder of the Company who
wishes to obtain a copy of the actual plan document may do so upon written
request to the Secretary to the Company at the Company's principal executive
offices in Menlo Park, California.
General
The Stock Option Plan provides for grants to employees of the Company and
any subsidiary of the Company (including officers and employee directors) of
"incentive stock options" ("ISO's") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and for grants of
nonstatutory stock options ("NSO's") to employees (including officers and
employee directors) and consultants (including non-employee directors) of the
Company or any affiliate of the Company. As of March 31, 1997, six executive
officers and approximately 120 other employees and consultants (including non-
employee directors) were eligible to participate in the Stock Option Plan. See
"Federal Income Tax Aspects" below for information concerning the tax treatment
of incentive stock options and nonstatutory stock options.
The Stock Option Plan is not a qualified deferred compensation 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 ("ERISA").
Purpose
The purposes of the Stock Option 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 Stock Option Plan is administered by the Company's Board of Directors
or a committee of the Board (the "Administrator"). The Stock Option Plan is
currently being administered by the Compensation Committee and the Stock Option
Committee of the Board of Directors with review by the entire Board of
Directors. With respect to executive officers and directors of the Company
(including executive officers who are also directors), the Stock Option Plan
will be administered exclusively by the Compensation Committee of the Board of
Directors. The Administrator may determine the terms of the options granted,
including the exercise price, the number of shares subject to each option and
the exercisability of the option. The Administrator also has the authority to
select the individuals to whom options will be granted and to make any
combination of grants to individuals. The Administrator's interpretation and
construction of any provision of the Stock Option Plan are final and binding
upon all participants. Members of the Board receive no additional compensation
for their services in connection with the administration of the Stock Option
Plan.
Eligibility
The Stock Option Plan provides that incentive stock options may be granted
only to employees (including officers and employee directors) of the Company or
any subsidiary of the Company, while nonstatutory stock options may be granted
not only to employees (including officers and employee directors), but also
consultants (including non-employee directors) of the Company or any subsidiary
of the Company. The Administrator shall have full authority to determine which
eligible individuals are to receive option grants under the Plan, the number of
shares to be covered by each such grant, whether the granted option is to be an
incentive stock option which satisfies the requirements of Section 422 of the
Code or a nonstatutory stock
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<PAGE> 9
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 Stock Option Plan provides that the maximum number of shares of Common
Stock which may be granted under options to any one employee during any fiscal
year shall be 500,000 subject to adjustment as provided in the Stock Option
Plan. There is also a limit on the aggregate market value of shares subject to
all incentive stock options that may be granted to an optionee during any
calendar year.
Stock Subject to the Stock Option Plan
An aggregate of 2,755,219 shares (3,555,219 shares assuming the proposed
amendment is approved) of Common Stock has been authorized for issuance under
the Stock Option Plan, as amended, including the automatic annual increase for
1997. If stock option awards granted under the Stock Option Plan expire or
otherwise terminate without being exercised, the shares of Common Stock not
purchased pursuant to such award again become available for issuance under the
Stock Option Plan.
Terms of Options
The following is a description of the permissible terms of options under
the Stock Option Plan. Individual option grants may be more restrictive as to
any or all of the permissible terms described below.
Exercise Price; Payment. The exercise price under the Stock Option Plan is
determined by the Administrator and in the case of all incentive stock options
granted under the Stock Option 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 all nonstatutory stock options must equal at least 85% of
the fair market value of the Common Stock 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.
At April 11, 1997, the closing sales price of a share of the Company's Common
Stock as reported on the Nasdaq National Market was $8.625 per share.
The consideration to be paid for shares issued on exercise of options
granted under the Stock Option 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, with a fair market value on
the exercise date equal to the aggregate exercise price of the shares purchased,
authorization from 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. Each option may be exercised during the lifetime of the
optionee only by such optionee or in the case of a nonstatutory stock option by
a transferee under a qualified domestic relations order. Options granted under
the Stock Option Plan generally vest in a series of installments at the rate of
10% of the total number of shares after the six month period from the date of
grant, and approximately 1.67% 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 terminate on a
vesting schedule identical to the vesting schedule of the exercised option. In
addition, the Stock Option Plan provides that the Administrator, in its sole
discretion, may assist any optionee in the exercise of an option by authorizing
the extension of a loan from the Corporation to such optionee or by permitting
such optionee to pay the exercise price in installments over a period of years.
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Term. The Administrator determines the term of options. The term of a
stock option granted under the Stock Option Plan may not exceed ten years;
provided, however, that the term of an incentive stock option may 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 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 disability, each outstanding option
will remain exercisable for the six month period following the date of such
cessation of employment. Should the disability be deemed a permanent disability
or should the optionee's employment terminate by reason of death, options held
by such optionee will remain exercisable for 12 months following such cessation
of employment or service. The Board will have 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.
Adjustment Provisions
In the event any change is made to the Common Stock issuable under the
Stock Option Plan by reason of any stock split, stock dividend, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without receipt of consideration, appropriate adjustments shall
be made to (i) the aggregate number and/or class of shares issuable under the
Plan, (ii) the maximum number of shares for which any one person may be granted
options per calendar year, (iii) the aggregate number and/or class of shares and
(iv) the option price per share in effect under each outstanding option in order
to prevent the dilution or enlargement of benefits thereunder. 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 change in control of the Company,
the Stock Option 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 Stock Option 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 under the Stock Option
Plan will terminate.
Duration and Amendment
Unless terminated sooner through action by the Board of Directors, the
Stock Option Plan shall terminate in 2002. The Board shall have complete and
exclusive power and authority to amend or modify the Stock Option Plan in any or
all respects whatsoever; provided, however, that no such amendment or
modification shall, without the consent of the holders, adversely affect the
rights and obligations with respect to options at the time outstanding under the
Stock Option Plan; and provided, further that the Board shall not, without the
approval of the Company's stockholders, (i) increase the maximum number of
shares issuable under the Stock Option Plan or the maximum number of shares for
which any person may be granted options per calendar year, (ii) materially
modify the eligibility requirements for the grant of options under the Stock
Option Plan, (iii) materially increase the benefits accruing to Stock Option
Plan participants or (iv) increase the annual limitation on grants to
participants under the Stock Option Plan.
Restrictions on Transfer
An option is nontransferable by the optionee other than by will or the laws
of descent and distribution provided, however, that certain nonstatutory stock
options may be transferable. An option is exercisable during the optionee's
lifetime only by the optionee or permitted transferee and in the event of the
optionee's death, by a person who acquires the right to exercise the option by
bequest or inheritance or by reason of death of the optionee or permitted
transferee.
8
<PAGE> 11
Federal Income Tax Aspects
The following is a brief summary of the U.S. federal income tax
consequences of transactions under the Stock Option 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 optionee 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 Stock Option Plan to consult
their own tax advisors concerning tax implications of options grants and
exercises and the disposition of stock acquired upon such exercises, under the
Stock Option Plan.
Options granted under the Stock Option 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 nonstatutory stock options, which will not so
qualify.
If an option granted under the Stock Option Plan is an incentive stock
option, under U.S. tax laws the optionee will recognize no income upon grant of
the incentive stock option and incur no tax liability due to the exercise,
except to the extent that such exercise causes the optionee to incur alternative
minimum tax (see discussion below). 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 will
be treated as long-term capital gain under U.S. tax laws. If both of these
holding periods are not satisfied, the optionee will recognize ordinary income
under U.S. tax laws 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. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director or 10% Stockholder of the Company. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any 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
will be characterized under U.S. tax laws as long-term capital gain if the sale
occurs more than one year after exercise of the option or as short-term capital
gain if the sale is made earlier. The current federal tax rate on long-term
capital gains is capped at 28%. Capital losses are allowed under U.S. tax laws
in full against capital gains plus $3,000 of other income.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory stock options. An optionee will not recognize any
taxable income under U.S. tax laws at the time he or she is granted a
nonstatutory 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 or where the optionee is an officer, director or 10% Stockholder
of the Company, 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 by payment in cash or out of the current earnings paid to the optionee.
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.
The exercise of an incentive stock option may be subject the optionee to
the alternative minimum tax under Section 55 of the Code. The alternative
minimum tax is calculated by applying a tax rate of 26% to alternative minimum
taxable income of joint filers up to $175,000 ($87,500 for married taxpayers
filing separately) and 28% to alternative minimum taxable income above that
amount. Alternative minimum taxable income is equal to (i) taxable income
adjusted for certain items, plus (ii) items of tax preference less (iii) an
exclusion of $45,000 for joint returns and $33,750 for individual returns.
Alternative minimum tax will be due if the tax determined under the foregoing
formula exceeds the regular tax of the taxpayer for the year.
9
<PAGE> 12
In computing alternative minimum taxable income, shares purchased upon
exercise of an incentive stock option are treated as if they had been acquired
by the optionee pursuant to exercise of a nonstatutory stock option. As a
result, the optionee recognizes alternative minimum taxable income equal to the
excess of the fair market value of the shares on the date of exercise over the
option's exercise price. Because the alternative minimum tax calculation may be
complex, any optionee who upon exercising an incentive stock option would
recognize (together with other alternative minimum taxable income preference and
adjustment items for the year) alternative minimum taxable income in excess of
the exclusion amount noted above should consult his or her own tax advisor prior
to exercising the incentive stock option.
If an optionee pays alternative minimum tax, the amount of such tax may be
carried forward as a credit against any subsequent year's regular tax in excess
of the alternative minimum tax for such year.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code of 1986, as amended, enacted as
part of the Omnibus Budget Reconciliation Act of 1993, provides that a publicly
held corporation cannot deduct compensation of a covered employee (the CEO and
the four other most highly compensated employees for the taxable year whose
compensation is required to be reported to stockholders under the Securities
Exchange Act of 1934, as amended) to the extent the compensation exceeds $1
million per tax year. There is a statutory exception to this limitation for
compensation based on the attainment of performance goals. 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). The 1992 Stock Option Plan complies with those
requirements. However, because the 1992 Stock Option Plan is being amended to
increase the number of shares of Common Stock reserved for issuance under the
1992 Stock Option Plan, the Company is again required to obtain stockholder
approval for the amended plan in order for the options to continue to qualify as
performance-based compensation under Section 162(m).
PLAN BENEFITS
The Company cannot currently determine the number of shares subject to
options that may be granted in the future to executive officers and employees
under the Stock Option Plan. The following table presents certain information
with respect to stock awards granted under the 1992 Stock Option Plan for the
fiscal year ended December 31, 1996 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 as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
WEIGHTED AVERAGE SUBJECT TO STOCK AWARDS
NAME AND POSITION EXERCISE PRICE GRANTED IN FISCAL 1996
-------------------------------------------------- ---------------- -----------------------
<S> <C> <C>
Ronald W. Eastman................................. $ 3.70 127,058
President and Chief Executive Officer
David L. Greenwood................................ $ 3.70 58,823
Chief Financial Officer, Treasurer, and
Secretary
Richard T. Haiduck(1)............................. $ 3.70 35,294
Vice President of Corporate Development
Calvin B. Harley, Ph.D............................ $ 3.70 35,294
Chief Scientific Officer
Jeryl L. Hilleman................................. $ 3.70 35,294
Vice President of Operations
Daniel J. Levitt, M.D., Ph.D.(2).................. $ 3.70 44,117
Vice President of Drug Development and
Chief Medical Officer
All Executive Officers as a group (8 persons)..... $ 3.70 424,114
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
NUMBER OF SHARES
WEIGHTED AVERAGE SUBJECT TO STOCK AWARDS
NAME AND POSITION EXERCISE PRICE GRANTED IN FISCAL 1996
-------------------------------------------------- ---------------- -----------------------
<S> <C> <C>
All Non-Executive Officer Directors as a Group
(6 persons)..................................... $ 3.41 141,177
All Non-Executive Officer Employees as a Group (88
persons)........................................ $ 3.77 180,232
</TABLE>
- ---------------
(1) Mr. Haiduck resigned from the Company in March 1997.
(2) Dr. Levitt resigned from the Company in October 1996.
In January 1996, options to purchase 130,850 shares of Company's Common
Stock, with an exercise price equal to $12.75, the then fair market value, were
granted to non-executive officer employees as a group. In April 1997, an option
for 10,000 shares was granted to Mr. Walker, a Director of the Company, in
connection with a consulting agreement.
REQUIRED VOTE
Stockholders are requested in this Proposal 2 to approve the amendment to
the Stock Option Plan to increase the number of shares reserved for issuance
thereunder by 800,000 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.
Abstentions will be counted toward the tabulation of votes cast on the proposal
and will have the same effect as negative votes. Broker non-votes are counted
towards a quorum, but are not counted for any purpose in determining whether
this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has served as the Company's independent auditors 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.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's By-laws 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 different independent auditors 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 be counted toward the tabulation of votes cast on the proposal
and will have the same effect as negative votes. Broker non-votes are counted
towards a quorum, but are not counted for any purpose in determining whether
this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
11
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1997 by: (i) each
nominee for director, (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all executive officers and directors of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
------------------------------------------------------- --------- ----------
<S> <C> <C>
Kleiner Perkins Caufield & Byers VI(2)................. 990,757 9.69%
2750 Sand Hill Road
Menlo Park, California 94025
Venrock Associates(3).................................. 838,228 8.20%
30 Rockefeller Plaza, Room 5508
New York, New York 10112
CW Ventures II, L.P.(4)................................ 749,580 7.33%
1041 Third Avenue
New York, New York 10021
Domain Partners II, L.P................................ 641,838 6.28%
One Palmer Square, Suite 515
Princeton, New Jersey 08542
Alexander E. Barkas, Ph.D.(5).......................... 1,046,048 10.20%
Brian H. Dovey(6)...................................... 669,779 6.55%
Charles M. Hartman(7).................................. 774,579 7.56%
Thomas D. Kiley, Esq.(8)............................... 84,300 *
John P. Walker(9)...................................... -- *
Robert B. Stein, M.D., Ph.D.(10)....................... 25,000 *
Ronald W. Eastman(11).................................. 424,030 4.03%
David L. Greenwood(12)................................. 132,352 1.28%
Richard T. Haiduck(13)................................. 81,858 *
Calvin B. Harley, Ph.D.(14)............................ 154,919 1.50%
Jeryl L. Hilleman(15).................................. 135,575 1.31%
Michael D. West, Ph.D.(16)............................. 274,842 2.67%
All directors and executive officers as a group
(14 persons)(17)..................................... 3,911,859 35.07%
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of the Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. 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 March 31, 1997
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 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) Represents 990,757 shares held by Kleiner Perkins Caufield & Byers VI.
Alexander E. Barkas, a Director of the Company, is a limited partner of
KPCB VI Associates, the general partner of Kleiner Perkins Caufield & Byers
VI, and as such, may be deemed to share voting and investment power with
respect to such shares. Dr. Barkas disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest in such shares.
12
<PAGE> 15
(3) Includes 578,673 shares held by Venrock Associates and 259,555 shares held
by Venrock Associates II, L.P.
(4) Includes 440,421 shares held by CW Ventures II, L.P. and 309,159 shares
held by CW R&D II (Financial Fund), L.P. Charles M. Hartman, a Director of
the Company, is a general partner of CW Ventures and CW R&D II (Financial
Fund) and, as such, may be deemed to share voting and investment power with
respect to such shares. Mr. Hartman disclaims beneficial ownership with
respect to such shares except to the extent of his pecuniary interest in
such shares.
(5) Includes 22,056 shares held directly by Alexander E. Barkas, 882 shares
held by Lynda Wijcik, the spouse of Dr. Barkas, and 32,353 shares issuable
upon the exercise of outstanding options held by Dr. Barkas exercisable
within 60 days of March 31, 1997, at which date 10,785 shares were vested.
The address of Dr. Barkas is c/o Kleiner Perkins Caufield & Byers, 2750
Sand Hill Road, Menlo Park, California 94025.
(6) Includes 641,838 shares held by Domain Partners II, L.P., 24,999 shares
held by Domain Associates and 2,942 shares issuable upon exercise of
outstanding options held by Mr. Dovey exercisable within 60 days of March
31, 1997, at which date 981 shares were vested. By contractual arrangement,
Domain Associates acts as the U.S. Capital Advisor to Biotechnology
Investments Limited ("BIL"). Domain Associates and its partners have no
voting and investment power over BIL's shares and disclaim beneficial
ownership of these shares. Brian H. Dovey, a Director of the Company, is a
general partner of Domain Associates and a general partner of the general
partner of Domain Partners II, L.P. Mr. Dovey disclaims beneficial
ownership of such shares up and to the extent of his pecuniary interest in
such shares. The address of Mr. Dovey is c/o Domain Associates, One Palmer
Square, Suite 515, Princeton, New Jersey 08542.
(7) Includes 24,999 shares issuable upon the exercise of outstanding options
held by Charles M. Hartman exercisable within 60 days of March 31, 1997, at
which date 9,804 shares were fully vested. The address of Mr. Hartman is
c/o CW Ventures, 1041 Third Avenue, New York, New York 10021.
(8) Includes 7,352 shares held directly by Thomas D. Kiley, 14,705 shares held
by the Kiley Family Partnership and 34,302 shares held by the Thomas D.
Kiley and Nancy L.M. Kiley Revocable Trust under Agreement dated August 7,
1981. Also includes 27,941 shares issuable upon the exercise of outstanding
options held by Mr. Kiley exercisable within 60 days of March 31, 1997, at
which date 8,456 shares were fully vested.
(9) John P. Walker joined the Board of Directors as of April 3, 1997. At that
time, Mr. Walker was granted an option to purchase 25,000 shares of Common
Stock under the Directors' Plan. In addition, in connection with a
consulting agreement, Mr. Walker was granted an option to purchase 10,000
shares of Common Stock under the Stock Option Plan.
(10) Represents 25,000 shares issuable upon the exercise of outstanding options
held by Robert B. Stein exercisable within 60 days of March 31, 1997, at
which date 8,334 shares were vested.
(11) Includes an aggregate of 29,409 shares held by Patricia Eastman, the spouse
of Ronald W. Eastman, as custodian for Mr. Eastman's three minor children.
Also includes 102,941 shares held directly by Mr. Eastman and 291,680
shares issuable upon the exercise of outstanding options held by Mr.
Eastman exercisable within 60 days of March 31, 1997, at which date 106,016
shares were fully vested. The address of Mr. Eastman is c/o Geron
Corporation, 230 Constitution Drive, Menlo Park, California 94025.
(12) Includes 132,352 shares issuable upon exercise of outstanding options held
by Mr. Greenwood exercisable within 60 days of March 31, 1997, at which
date 42,648 shares were fully vested.
(13) Includes 73,035 shares held directly by Richard T. Haiduck and 8,823 shares
issuable upon the exercise of outstanding options held by Mr. Haiduck
exercisable within 60 days of March 31, 1997, at which date all shares were
fully vested. Mr. Haiduck resigned from the Company in March 1997.
(14) Includes 44,117 shares held by the Harley Family Trust and 110,802 shares
issuable upon the exercise of outstanding options held by Calvin B. Harley
exercisable within 60 days of March 31, 1997, at which date 47,203 shares
were fully vested.
13
<PAGE> 16
(15) Includes 33,938 shares held by the Hilleman/Albright Family Trust. Also
includes 101,637 shares issuable upon the exercise of outstanding options
held by Ms. Hilleman exercisable within 60 days of March 31, 1997, at which
date 48,871 shares were fully vested.
(16) Includes 185,942 shares held directly by Michael D. West. Also includes
88,900 shares issuable upon the exercise of outstanding options held by Dr.
West exercisable within 60 days of March 31, 1997, at which date 36,411
shares were fully vested.
(17) Includes 21,329 shares held directly by Kevin R. Kaster, an executive
officer of the Company. Also includes 87,248 shares issuable upon the
exercise of outstanding options held by Mr. Kaster exercisable within 60
days of March 31, 1997, at which date 23,952 shares were fully vested.
14
<PAGE> 17
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides certain information summarizing compensation
awarded or paid to, or earned by the Company's Chief Executive Officer and its
four other most highly compensated executive officers whose compensation was in
excess of $100,000 (the "Named Executive Officers") for services rendered in all
capacities to the Company for each of the last two fiscal years:
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(2)($) OPTIONS(#)
- ------------------------------- ----- -------- ------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Ronald W. Eastman.............. 1996 $245,000 $36,750 $ 30,000 127,058
President and Chief Executive 1995 214,750 38,660 30,000 68,235
Officer
David L. Greenwood(3).......... 1996 184,100 86,820 30,000 58,823
Chief Financial Officer, 1995 78,750 41,200 13,750 73,529
Treasurer, Secretary
Richard T. Haiduck(4).......... 1996 176,700 26,500 18,000 35,294
Vice President of Corporate 1995 169,000 30,420 18,000 26,921
Development
Calvin B. Harley, Ph.D......... 1996 172,000 25,800 18,000 35,294
Vice President of Research 1995 154,897 27,890 18,000 28,928
Jeryl L. Hilleman.............. 1996 154,300 21,610 12,000 35,294
Vice President of Operations 1995 139,285 26,650 9,000 25,709
Daniel J. Levitt, M.D., 1996 164,784 -- 20,000 44,117
Ph.D.(5).....................
Vice President of Drug 1995 136,581 28,490 10,000 79,417
Development and
Chief Medical Officer
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission, no
information is provided for fiscal years prior to fiscal year 1995 because
the Company first became a reporting company pursuant to Section 13(a) or
15(d) of the Exchange Act of 1934, as amended, in 1996 and the Company was
not required to provide such information in response to Commission filing
requirements prior to that time.
(2) Other annual compensation consists solely of monthly housing allowances.
(3) Mr. Greenwood joined the Company in July 1995.
(4) Mr. Haiduck resigned from the Company in March 1997.
(5) Dr. Levitt resigned from the Company in October 1996.
15
<PAGE> 18
STOCK OPTION GRANTS IN FISCAL YEAR 1996
The following table provides certain information regarding options granted
to the Chief Executive Officer and the Named Executive Officers during the year
ended December 31, 1996. No stock appreciation rights were granted during the
year:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------ ANNUAL RATES OF
PERCENT OF STOCK
NUMBER OF SHARES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SH)(3) DATE 5%($) 10%($)
- --------------------------- ---------------- -------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ronald W. Eastman.......... 91,761 15.2% $2.04 4/30/06 $473,461 $864,787
35,297 5.8 8.00 7/24/06 403,540 809,831
David L. Greenwood......... 42,482 7.0 2.04 4/30/06 219,194 400,365
16,341 2.7 8.00 7/24/06 186,822 374,917
Richard T. Haiduck(5)...... 25,489 4.2 2.04 4/30/06 131,516 240,217
9,805 1.6 8.00 7/24/06 112,098 224,960
Calvin B. Harley, Ph.D..... 25,489 4.2 2.04 4/30/06 131,516 240,217
9,805 1.6 8.00 7/24/06 112,098 224,960
Jeryl L. Hilleman.......... 25,489 4.2 2.04 4/30/06 131,516 240,217
9,805 1.6 8.00 7/24/06 112,098 224,960
Daniel J. Levitt, M.D.,
Ph.D.(6)................. 31,861 5.3 2.04 4/30/06 164,394 300,269
12,256 2.0 8.00 7/24/06 140,119 281,194
</TABLE>
- ---------------
(1) Each of these stock options, which were granted under the 1992 Stock Option
Plan, are immediately exercisable for all option shares, but any shares
purchased under the option are subject to repurchase by the Company at the
original exercise price per share upon the cessation of the optionee's
employment with the Company. Since each Named Executive Officer was a
continuing employee at the time of grant, the Company's repurchase right
lapses at the rate of 1/60th of the total number of shares at the end of
each month thereafter. In the event of certain transactions involving
changes in control of the Company, the Company's repurchase rights will
terminate. The maximum term of each option grant is ten years from the date
of grant.
(2) Based on an aggregate of 604,346 options granted by the Company in the year
ended December 31, 1996 to all employees of the Company, including the Named
Executive Officers.
(3) Exercise price is the average fair market value of the Common Stock
underlying the stock option on the grant date.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the Securities and Exchange Commission. There is no
assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the ten
year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the Common Stock appreciates over
the option term, no value will be realized from the option grants made to
the executive officers.
(5) Mr. Haiduck resigned from the Company in March 1997.
(6) Dr. Levitt resigned from the Company in October 1996.
16
<PAGE> 19
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1996 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to options
exercised during the year ended December 31, 1996 by the Chief Executive Officer
and Named Executive Officers and unexercised options held as of the end of such
fiscal year by such persons:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
ACQUIRED ON VALUE ------------------------------ -----------------------------
NAME EXERCISE(#) REALIZED(1)($) EXERCISABLE(2) UNEXERCISABLE EXERCISABLE(3) UNEXERCISABLE
- ------------------------------- ----------- -------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald W. Eastman.............. 0 $ 0 291,680 0 $ 3,261,700 $ 0
David L. Greenwood............. 0 0 132,352 0 1,476,273 0
Richard T. Haiduck(4).......... 52,361 64,090 35,294 0 337,208 0
Calvin B. Harley, Ph.D. ....... 0 0 110,802 0 1,277,925 0
Jeryl L. Hilleman.............. 0 0 101,637 0 1,162,671 0
Daniel J. Levitt, M.D.,
Ph.D.(5)..................... 26,087 29,331 14,275 0 161,041 0
</TABLE>
- ---------------
(1) Fair market value of the Company's Common Stock on the date of exercise
(based on the closing sales price reported on the Nasdaq National Market or
the actual sales price if the shares were sold by the optionee on the same
date) less the exercise price.
(2) These stock options, which were granted under the 1992 Stock Option Plan,
are immediately exercisable for all option shares, but any shares purchased
under the option are subject to repurchase by the Company at the original
exercise price per share upon the cessation of the optionee's employment
with the Company. The Company's repurchase right generally lapses at the
rate of 1/10th of the total number of shares at the end of the first six
month period after the commencement of the optionee's employment with the
Company and 1/60th of the total number of shares at the end of each month
thereafter.
(3) Based on the fair market value of the Common Stock as of December 31, 1996,
quoted on the Nasdaq National Market ($13.25 per share), minus the per share
exercise price, multiplied by the number of shares underlying the option.
(4) Mr. Haiduck resigned from the Company in March 1997. In connection with Mr.
Haiduck's resignation, the Company accelerated the vesting with respect to
25,000 shares subject to repurchase.
(5) Dr. Levitt resigned from the Company in October 1996.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT ARRANGEMENTS AND CHANGE OF
CONTROL AGREEMENTS
The Company does not have any existing employment agreements with the Chief
Executive Officer or any of the Named Executive Officers.
In the event of a change in control of the Company, the 1992 Stock Option
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 transaction, the Stock Option 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 under the Plan will
terminate.
COMPENSATION COMMITTEE REPORT(1)
The Compensation Committee of the Board of Directors (the "Committee")
consists of Dr. Barkas and Mr. Dovey, neither of whom is an officer or an
employee of the Company. The Committee is responsible for making recommendations
and taking actions concerning salaries and incentive compensation of officers
and employees of the Company, including the award of stock options under the
Company's stock option plan. In
- ---------------
(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 Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, whether made before or after the date hereof and irrespective
of any general incorporation language in any such filing.
17
<PAGE> 20
particular, the Committee evaluates the performance of management and determines
the compensation of the Chief Executive Officer and other executive officers on
an annual basis. Executive Officers who are also directors are not present
during the discussion of their compensation.
PHILOSOPHY
The Company's executive compensation philosophy is to attract and retain
executive officers capable of leading the Company to fulfillment of its business
objectives by offering competitive compensation opportunities that reward
individual contributions as well as corporate performance. Accordingly, the
Company's executive compensation policies include:
- competitive pay practices, taking into account the pay practices of life
science and pharmaceutical companies with which the Company competes for
talented executives;
- annual incentive programs which are designed to encourage executives to
focus on the achievement of specific short-term corporate goals as well
as longer-term strategic objectives;
- equity-based incentives designed to motivate executives over the long
term, to align the interests of management and stockholders and to ensure
that management is appropriately rewarded for achievements which benefit
the Company's stockholders.
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 the Company's current stage
of development, the Committee evaluates other indications of performance, such
as 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. These qualitative factors necessarily involve a subjective
assessment by the Committee of corporate performance. In addition, total
compensation paid by the Company to its executive officers is designed to be
comparable to compensation packages paid to the management of other companies of
comparable size in the biopharmaceutical industry. Toward that end, the
Committee may review both independent survey data as well as data gathered
internally.
EXECUTIVE OFFICER COMPENSATION
Compensation for each of the Company's executive officers, including the
Chief Executive Officer, generally consists of three elements: a cash salary, a
cash incentive bonus and stock option grants with exercise prices generally set
at fair market value at the time of the grant. Base salaries are determined at
the beginning of the fiscal year, whereas cash bonuses are awarded on a
discretionary basis, usually following the Company's fiscal year-end, and are
based on the achievement of corporate and individual goals set by the Board and
the Company's CEO at the beginning of the year, as well as the financial
condition and prospects for the Company.
The Company has used the grant of options under its 1992 Stock Option Plan
to underscore the common interests of stockholders and management. Options
granted to executive officers are intended to provide a continuing financial
incentive to maximize long-term value to stockholders and to make each
executive's total compensation opportunity competitive. In addition, because
stock options generally become exercisable over a period of several years,
options encourage executives to remain in the long-term employ of the Company.
In determining the size of an option to be granted to an executive officer, the
Committee takes into account an officer's position and level of responsibility
within the Company, the officer's existing stock and option holdings, and the
potential reward to the officer if the stock price appreciates in the public
market.
In February 1996, the Committee met to consider the compensation of the
Company's executive officers for fiscal 1996 and to set certain performance
goals. The Committee considered a variety of factors, both individual and
corporate, in evaluating the performance of the Company's executive officers. In
addition, the Committee reviewed the results of independent surveys that
provided information regarding management
18
<PAGE> 21
compensation for approximately 100 companies in the biopharmaceutical industry,
categorized by geographic area and management position.
In January 1997, the Committee met to evaluate the Company and individual
performance against the goals for 1996. The Committee determined that the
Company successfully achieved many of its objectives. As a result, based on
corporate performance, the Committee recommended that individual executive
officers receive cash bonuses, depending on the Committee's assessment of
individual performance, of up to 20% of such officer's eligible 1996
compensation and options to purchase Common Stock at levels ranging from 30,000
to 150,000 shares, vesting over 5 years.
CEO COMPENSATION
For 1996, the Committee increased the salary of Mr. Eastman by
approximately 14% reflecting, the Committee's evaluation of Mr. Eastman's
contribution to the performance of the Company in 1995. In particular, the
Committee took into account the signing of the collaboration with Kyowa Hakko
Kogyo Co., Ltd., a successful private market financing of the Company (Series D
Preferred Stock), as well as Mr. Eastman's achievements in recruiting
individuals to serve in key positions at the Company. Mr. Eastman's salary was
also reviewed in comparison to compensation paid to chief executive officers of
companies in the biopharmaceutical industry. Similar factors accounted for the
increase in base salaries of the other executive officers. In making its
determination with respect to the bonus to be awarded to Mr. Eastman for 1996,
the Committee's assessment was that Mr. Eastman had significant success in
achieving his individual performance objectives for 1996, in particular, the
contributions of Mr. Eastman in connection with the Company's initial public
offering of Common Stock and the negotiation of a major strategic collaboration
in telomerase inhibition with Pharmacia & Upjohn S.p.A.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the U.S. Internal Revenue Code limits the tax
deductibility by a corporation of compensation in excess of $1 million paid to
any of its five most highly compensated executive officers. However,
compensation which qualifies as "performance-based" is excluded from the $1
million limit if, among other requirements, the compensation is payable only
upon attainment of pre-established, objective performance goals under a plan
approved by stockholders.
The Compensation Committee does not presently expect total cash
compensation payable for salaries to exceed the $1 million limit for any
individual executive. Having considered the requirements of Section 162(m), the
Compensation Committee believes that stock option grants to date meet the
requirement that such grants be "performance based" and are, therefore, exempt
from the limitations on deductibility. The Compensation Committee will continue
to monitor the compensation levels potentially payable under the Company's cash
compensation programs, but intends to retain the flexibility necessary to
provide total cash compensation in line with competitive practice, the Company's
compensation philosophy, and the Company's best interests.
Alexander E. Barkas, Ph.D. Brian H. Dovey
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former or current officer or
employee of the Company or any of its subsidiaries, except that Dr. Barkas
served as acting President and Chief Executive Officer of the Company from March
1992 until May 1993. No executive officer of the Company serves as a member of
the board of directors or compensation committee of any entity which has one or
more executive officers serving as a member of the Company's Board of Directors
or Compensation Committee.
Dr. Barkas is a limited partner of KPCB VI Associates, the general partner
of Kleiner Perkins Caufield & Byers VI, a principal stockholder of the Company.
Mr. Dovey is a general partner of Domain Associates and a general partner of the
general partner of Domain Partners II, L.P., a principal stockholder of the
Company. See "Security Ownership of Certain Beneficial Owners and Management."
19
<PAGE> 22
PERFORMANCE GRAPH(1)
The following graph compares total stockholder returns of the Company since
its initial public offering of Common Stock on July 30, 1996 to two indices: the
Nasdaq CRSP Total Return Index for the Nasdaq Stock Market-U.S. Companies (the
"Nasdaq-US") and the Nasdaq Pharmaceutical Index (the "Nasdaq-Pharmaceutical").
The total return for the Company's stock and for each index assumes the
reinvestment of dividends, although dividends have never been declared on the
Company's stock, and is based on the returns of the component companies weighted
according to their capitalizations as of the end of each monthly period. The
Nasdaq-US tracks the aggregate price performance of equity securities of U.S.
companies traded on the Nasdaq National Market (the "NNM"). The
Nasdaq-Pharmaceutical tracks the aggregate price performance of equity
securities of pharmaceutical companies traded on the NNM. The Company's Common
Stock is traded on the NNM and is a component of both the Nasdaq-US and the
Nasdaq-Pharmaceutical.
COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT SINCE
THE COMPANY'S INITIAL PUBLIC OFFERING ON JULY 30, 1996(2)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ
(FISCAL YEAR COVERED) GERON NASDAQ US PHARMACEUTICAL
<S> <C> <C> <C>
7/31/96 100 100 100
8/30/96 89 106 107
9/30/96 90 114 115
10/31/96 98 112 110
11/29/96 102 119 108
12/31/96 171 119 111
</TABLE>
- ---------------
(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 Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, whether made before or after the date hereof and irrespective
of any general incorporation language in any such filing.
(2) Shows the cumulative total return on investment assuming an investment of
$100 in each of the Company, the Nasdaq-US and the Nasdaq-Pharmaceutical on
July 30, 1996. The cumulative total return on the Company's stock has been
computed based on an initial price of $8.00 per share, the price at which
the Company's shares were sold in its initial public offering on July 30,
1996.
CERTAIN TRANSACTIONS
In May 1993, the Company provided an interest-free loan to Jeryl L.
Hilleman, Vice President of Operations, in the principal amount of $50,000, due
May 20, 1996, pursuant to a note secured by a second deed of trust to Ms.
Hilleman's residence in Palo Alto, California. On May 20, 1996, the Company
agreed to extend the due date of this note to the earlier of May 22, 1997 or
nine months following the closing of an initial
20
<PAGE> 23
public offering of the Common Stock, with an interest rate of 6% per annum,
beginning as of May 21, 1996. On January 28, 1997, the Company agreed to extend
the due date of this note to December 31, 1998 on an interest-free basis with
all unpaid principal and interest due at such time. As of December 31, 1996,
$51,842 was outstanding under the note.
In July 1993, the Company provided a loan to Michael D. West, Vice
President of New Technologies and a Director of the Company, in the principal
amount of $55,000, with an interest rate of 3.95%, due July 7, 1996, pursuant to
a note secured by stock pledge agreement. On May 20, 1996, the Company agreed to
extend the due date of this note to the earlier of July 7, 1997 or nine months
following the closing of an initial public offering of the Company's Common
Stock, with an interest rate of 6.0% per annum, beginning as of July 8, 1996. On
January 28, 1997, the Company agreed to extend the due date of this note to
December 31, 1998 at an interest rate of 6.0% with all unpaid principal and
interest due at such time. As of December 31, 1996, $57,026 was outstanding
under the note.
In December 1993, the Company provided an interest-free loan to Calvin B.
Harley, Chief Scientific Officer, in the principal amount of $150,000, due
December 1, 1996, pursuant to a note secured by a second deed of trust to Dr.
Harley's residence in Palo Alto, California. On December 1, 1996, the Company
agreed to extend the due date of the interest-free loan to December 31, 1998. In
addition, in connection with the exercise of an option to purchase Common Stock
granted pursuant to the Stock Option Plan, in October 1994, the Company provided
a loan to Dr. Harley, pursuant to a note secured by a stock pledge agreement, in
the principal amount of $14,850, with an interest rate of 5.91%, due upon the
earlier of October 20, 1997 or 30 days following any sale of the shares of
Common Stock purchased with the loan by Dr. Harley. As of December 31, 1996,
$16,776 was outstanding under the note.
In March 1995, in connection with the exercise of an option to purchase
Common Stock granted pursuant to the Stock Option Plan, the Company provided a
loan to Ronald W. Eastman, pursuant to a note secured by a stock pledge
agreement, in the principal amount of $44,550, with an interest rate of 7.07%,
due upon the earlier of March 6, 1998 or 30 days following any sale of the
shares of Common Stock purchased with the loan by Mr. Eastman. As of December
31, 1996, $50,281 was outstanding under the note.
In September 1995, the Company provided two loans to David L. Greenwood,
Chief Financial Officer, Treasurer and Secretary, one in the principal amount of
$200,000, with an interest rate of 6.00%, due September 30, 1996, and the other
in the principal amount of $120,000, interest-free, due on the earlier of
September 30, 1998 or nine months following the closing of an initial public
offering of the Common Stock. Both loans were made pursuant to notes secured by
a second deed of trust to Mr. Greenwood's residence in Monte Sereno, California.
On September 30, 1996, an aggregate of $200,000 in principal amount under such
notes remained outstanding and the Company combined the two notes and extended
the due date to December 31, 1998 on an interest-free basis. As of December 31,
1996, $203,093 was outstanding under the note.
In April 1996, the Company entered into a Consulting Agreement with Thomas
D. Kiley, a Director of the Company, pursuant to which Mr. Kiley agreed to
provide such advice and consultation as reasonably requested by the Company to
its officers and scientists on the direction, implementation and operations of
its scientific programs, business plans and management of intellectual property.
As compensation for his services under this agreement, Mr. Kiley received an
option to purchase 7,352 shares of Common Stock at an exercise price of $2.04
per share, with monthly vesting over a five year period. Unless otherwise
terminated by either the Company or Mr. Kiley, this agreement will expire on
April 10, 2001.
In April 1997, the Company entered into a Consulting Agreement with John P.
Walker, a Director of the Company, pursuant to which Mr. Walker agreed to
provide such advice and consultation as reasonably requested by the Company to
its officers and scientists on the direction, implementation and operations of
its scientific programs and business plans. As compensation for his services
under this agreement, Mr. Walker received an option to purchase 10,000 shares of
Common Stock at an exercise price of $9.25 per share, with annual vesting over a
three year period. In addition, Mr. Walker will receive cash compensation in the
amount of $10,000 per year, payable quarterly. Unless otherwise terminated by
either the Company or Mr. Walker, this agreement will expire on April 3, 2000.
21
<PAGE> 24
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 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 By-laws.
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, 1996, Reporting Persons complied with all applicable filing
requirements.
ADDITIONAL INFORMATION REGARDING
1996 DIRECTORS' STOCK OPTION PLAN AND 1996
EMPLOYEE STOCK PURCHASE PLAN
Attached to this Proxy Statement as Appendix 1 is certain information
concerning the Company's 1996 Directors' Stock Option Plan and 1996 Employee
Stock Purchase Plan, and attached as Appendix 2 is certain information
concerning the federal tax consequences of participating in those plans. Such
information is being furnished under Rule 16b-3 (as in effect at the time the
Plans were adopted) promulgated under the Exchange Act, in order to perfect the
stockholder approval requirement of such Rule with respect to such Plans.
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
LOGO
DAVID L. GREENWOOD
Secretary
April 17, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO GERON CORPORATION, 230 CONSTITUTION
DRIVE, MENLO PARK, CALIFORNIA, 94025.
22
<PAGE> 25
APPENDIX 1
DESCRIPTIONS OF THE 1996 DIRECTORS' STOCK OPTION PLAN
AND 1996 EMPLOYEE STOCK PURCHASE PLAN
1996 DIRECTORS' STOCK OPTION PLAN
GENERAL
The Company's 1996 Directors' Stock Option Plan (the "Directors' Plan") was
adopted by the Board of Directors in June 1996 and approved by the stockholders
in July 1996. A total of 300,000 shares of Common Stock has been reserved for
issuance under the Directors' Plan.
The Directors' Plan is designed to provide nonemployee directors with a
proprietary interest in the Company, to encourage these individuals to continue
to serve the Company as directors and to assist the Company in recruiting highly
qualified individuals when vacancies occur on the Board.
As of April 11, 1997, an option to purchase 25,000 shares of Common Stock
has been granted to the Company's nonemployee directors under the Directors'
Plan.
SUMMARY OF THE DIRECTORS' PLAN
The essential features of the Directors' Plan are outlined below.
Administration
The 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 of Directors. The interpretation and construction of any
provisions of the Directors' Plan by the Board of Directors shall be final and
conclusive. Members of the Board receive no additional compensation for their
services in connection with the administration of the Directors' Plan. The Board
of Directors is classified into three (3) classes and all directors hold office
for a term of three (3) years following their election, or until their
successors are duly elected and qualified.
Eligibility
The Directors' Plan provides for the grant of nonstatutory options to
nonemployee directors of the Company. The Directors' Plan provides that each
person who becomes a nonemployee director of the Company shall be granted a
nonstatutory stock option to purchase 25,000 shares of Common Stock (the "First
Option") on the date on which the optionee first becomes a nonemployee director
of the Company. Thereafter, on the date of each Annual Meeting of the Company's
stockholders, each nonemployee director shall be granted an additional option to
purchase 5,000 shares of Common Stock (a "Subsequent Option") if, on such date,
he or she shall have served on the Company's Board of Directors for at least six
months (with the first such grant to be made at the 1997 Annual Meeting). The
Directors' Plan provides for neither a maximum nor a minimum number of option
shares that may be granted to any one nonemployee director, but does provide for
the number or shares which may be included in any grant and the method of making
a grant. The Company currently has six (6) nonemployee directors.
Terms of Options
Options granted under the Directors' Plan have a term of ten years. Each
option is evidenced by a option agreement between the Company and the director
to whom such option is granted and is subject to the following additional terms
and conditions:
(a) Exercise of the Option: The First Option becomes exercisable in
installments as to 33 1/3% of the total number of shares subject to the
First Option on each of the first, second and third anniversaries of
the date of grant of the First Option; the Subsequent Option becomes
exercisable in whole on the first anniversary of the date of grant. An
option is exercised by giving written notice of exercise to the
1-1
<PAGE> 26
Company, specifying the number of full shares of Common Stock to be
purchased and tendering payment to the Company of the purchase price.
Payment for shares issued upon exercise of an option may consist of
cash, check, an exchange of shares of the Company's Common Stock,
which, if acquired from the Company, have been held for at least six
months, or a combination thereof.
(b) Option Price: The exercise price of all options granted under the
Directors' Plan will be equal to the fair market value of the Company's
Common Stock on the date of grant. The Board of Directors determines
such fair market value based upon the closing sales price of the
Company's Common Stock on the Nasdaq National Market on the date the
option is granted. As of April 11, 1997, the closing sales price of the
Company's Common Stock as reported on the Nasdaq National Market was
$8.625 per share.
(c) Termination of Status as a Director: The Directors' Plan provides that
if an optionee ceases to serve as a director of the Company, the option
may be exercised within 90 days after the date he or she ceases to be a
director as to all or part of the shares that the optionee was entitled
to exercise at the date of such termination.
(d) Death: If an optionee should die while serving as a director of the
Company, the option may be exercised at any time within six months
after death but only to the extent that the option would have been
exercisable had the optionee continued living and remained a director
of the Company for twelve months (or such lesser period of time as is
determined by the Board) after the date of death. If an optionee should
die within three months after ceasing to serve as a director of the
Company, the option may be exercised within six months after death to
the extent the option was exercisable on the date of such termination.
(e) Disability: If an optionee is unable to continue his or her service as
a director of the Company as a result of his or her total and permanent
disability, the option may be exercised at any time within six months
(or such other period, of time not exceeding twelve months as
determined by the Board) after the date of his or her termination, but
only to the extent he or she was entitled to exercise it at the date of
such termination.
(f) Termination of Options: No option is exercisable by any person after
the expiration of ten years from the date the option was granted.
(g) Nontransferability of Options: An option is nontransferable by the
optionee, other than by will or the laws of descent and distribution,
and is exercisable only by the optionee during his or her lifetime or,
in the event of death, by a person who acquires the right to exercise
the option by bequest or inheritance or by reason of the death of the
optionee.
(h) Acceleration of Options: 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 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 nonemployee
director shall have either (i) 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, consolidation or
reorganization, at the end of which time the option shall terminate or
(ii) the right to exercise the option, including any part of the option
that would not otherwise be exercisable, 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.
(i) Other Provisions: The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Directors' Plan as
may be determined by the Board of Directors.
1-2
<PAGE> 27
Adjustment Upon Changes in Capitalization
In the event any change, such as a stock split or dividend, is made in the
Company's capitalization which results in an increase or decrease in the
outstanding shares of Common Stock without receipt of consideration by the
Company, an appropriate adjustment shall be made in the option price and in the
number of shares subject to each outstanding option. In addition, the number of
shares authorized for issuance under the Directors' Plan shall be appropriately
adjusted.
Amendment and Termination
The Board of Directors may amend the Directors' Plan at any time or from
time to time or may terminate it without approval of the stockholders, but no
amendment or termination shall be made that would impair the rights of any
optionee under any grant theretofore made, without his or her consent. In
addition, the Company shall obtain stockholder approval of any amendment to the
Directors' Plan in such a manner and to the extent necessary to comply with Rule
16b-3 under the Exchange Act (or any other applicable law or regulation).
Further, the provisions of the Directors' Plan concerning the administration of
and grants of options under the Plan may not be amended more than once every six
months, other than to comport with changes in ERISA or the Internal Revenue Code
of 1986, as amended (the "Code"). If not terminated earlier, the Directors' Plan
will have a term of ten years.
1996 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Company's 1996 Employee Stock Purchase Plan (the "Stock Purchase Plan")
was adopted by the Board of Directors in June 1996 and approved by the
stockholders in July 1996. A total of 300,000 shares of Common Stock are
reserved for issuance under the Stock Purchase Plan.
The Stock Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under Section 423 of the Code. The Stock
Purchase Plan is not a qualified deferred compensation plan under Section 401(a)
of the Code, and is not subject to the provisions of ERISA. See "Appendix 2-1996
Employee Stock Purchase Plan."
The purpose of the Stock Purchase Plan is to provide employees of the
Company (and any of its subsidiaries designated by the Board) who participate in
the Stock Purchase Plan with an opportunity to purchase Common Stock of the
Company through payroll deductions.
SUMMARY OF THE STOCK PURCHASE PLAN
The essential features of the Stock Purchase Plan are outlined below:
Administration
The Stock Purchase Plan may be administered by the Board or a committee
appointed by the Board. Initially, the Purchase Plan will be administered by the
Board of Directors, except that with respect to executive officers (including
executive officers who are also directors), the Stock Purchase Plan will be
administered exclusively by the Compensation Committee (comprised of Dr. Barkas
and Mr. Dovey, outside directors of the Company who are not eligible to
participate in the Purchase Plan). All questions of interpretation of the Stock
Purchase Plan are determined by the Board or its committee, and its decisions
are final and binding upon all participants. Members of the Board or its
committee who are eligible employees are permitted to participate in the Stock
Purchase Plan, provided that any such eligible member may not vote on any matter
affecting the administration of the Stock Purchase Plan or the grant of any
option pursuant to it, or serve on a committee appointed to administer the Stock
Purchase Plan. No charges for administrative or other costs may be made against
the payroll deductions of a participant in the Stock Purchase Plan. Members of
the Board receive no additional compensation for their services in connection
with the administration of the Stock Purchase Plan. The Board of Directors is
classified into three (3) classes and all directors currently hold office for a
term of three (3) years following their election, or until their successors are
duly elected and qualified.
1-3
<PAGE> 28
Eligibility
Any person who is employed by the Company (or any of its majority-owned
subsidiaries) for at least twenty hours per week and more than five months in a
calendar year is eligible to participate in the Stock Purchase Plan, provided
that the employee is employed on the first day of an offering period and subject
to certain limitations imposed by Section 423(b) of the Code. As of March 31,
1997, approximately 92 employees, including 6 executive officers, were eligible
to participate in the Stock Purchase Plan.
Offering Dates
The Stock Purchase Plan will be implemented by a series of offering periods
of 12 months duration, with new offering periods (other than the first offering
period) commencing on or about January 1 and July 1 of each year. Each offering
period consists of two consecutive purchase periods of six months' duration,
with the last day of such period being designated a purchase date. The first
offering period began on July 30, 1996 (the date of the Company's initial public
offering) and will continue through June 30, 1997. If the fair market value of
the Common Stock on a purchase date is less than the fair market value at the
beginning of the offering period, a new 12 month offering period will begin
immediately on the first business day following the purchase date with a new
fair market value. The Board may alter the duration of the offering periods
without stockholder approval.
Participation in the Plan
Eligible employees become participants in the Stock Purchase Plan by
delivering to the Company a subscription agreement authorizing payroll
deductions prior to the applicable offering date, unless a later time for filing
the subscription agreement has been set by the Board for all eligible employees
with respect to a given offering.
Purchase Price
The purchase price per share at which shares are sold under the Stock
Purchase Plan is the lower of 85% of the fair market value of the Common Stock
on the applicable date of commencement of the offering period or on the
applicable exercise date. The fair market value of the Common Stock on a given
date shall be the closing price of the Common Stock as reported on the Nasdaq
National Market as of such date. As of April 11, 1997, the fali market value of
the Common Stock was $8.625 per share.
Payment of Purchase Price; Payroll Deductions
The purchase price of the shares is accumulated by payroll deductions
during the offering period. The deductions may be not less than 1% and not more
than 10% of a participant's eligible compensation received on each payday during
the offering period. Eligible compensation consists of the regular straight time
gross earnings and commissions and excludes payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses and other
compensation. Payroll deductions shall commence on the first payday following
the offering date, and shall continue at the same rate until the end of the
offering period unless sooner terminated as provided in the Stock Purchase Plan.
A participant may discontinue his or her participation in the Stock
Purchase Plan at any time during an offering period. A participant may, on one
occasion only during any particular offering period, decrease the rate of his or
her contributions during such offering period by completing and filing with the
Company a new subscription agreement. The change in rate shall be effective as
of the beginning of the calendar month following the date of filing of the new
subscription agreement.
All payroll deductions are credited to the participant's account under the
Stock Purchase Plan and are deposited with the general funds of the Company. All
payroll deductions received or held by the Company may be used by the Company
for any corporate purpose. No interest accrues on the payroll deductions of a
participant in the Stock Purchase Plan.
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Purchase of Stock; Exercise of Option
By executing a subscription agreement to participate in the Stock Purchase
Plan, the participant is entitled to have shares placed under option. The
maximum number of shares a participant may purchase in a 12-month offering
period is subject to certain limitations provided by the Plan and the Code,
provided, however, that the participant's actual purchase will be limited to the
number of shares determined by dividing the amount of the participant's total
payroll deductions accumulated during each 12-month offering period by the lower
of (i) 85% of the fair market value of the Common Stock at the beginning of the
offering period, or (ii) 85% of the fair market value of the Common Stock on the
applicable exercise date. Unless the participant's participation is
discontinued, each participant's option for the purchase of shares will be
exercised automatically at the end of the offering period at the applicable
price.
Notwithstanding the foregoing, no participant shall be permitted to
subscribe for shares under the Stock Purchase Plan if immediately after the
grant of the option the participant would own five percent (5%) or more of the
voting power or value of all classes of stock of the Company or of a parent or
of any of its subsidiaries (including stock that may be purchased under the
Stock Purchase Plan or pursuant to any other options), nor shall any participant
be granted an option that would permit the participant to buy pursuant to the
Stock Purchase Plan more than $25,000 worth of stock (determined at the fair
market value of the shares at the time the option is granted) in any calendar
year. Furthermore, if the number of shares that would otherwise be placed under
option at the beginning of an offering period exceeds the number of shares then
available for issuance under the Stock Purchase Plan, a pro rata allocation of
the available shares shall be made in as equitable a manner as is practicable.
Withdrawal
While each participant in the Stock Purchase Plan is required to sign a
subscription agreement authorizing payroll deductions, the participant's
interest may be decreased once during any given offering period by completing
and filing a new subscription agreement with the Company. In addition, a
participant's interest may be terminated in whole, but not in part, by signing
and delivering to the Company a notice of withdrawal from the Stock Purchase
Plan. Such withdrawal may be elected at any time prior to the end of the
applicable 12-month period prior to an exercise date under the Plan.
Any withdrawal by the participant of accumulated payroll deductions for a
given offering period automatically terminates the participant's interest in
that offering period. In effect, the participant is given an option, for a
maximum number of shares, which may or may not be exercised at the end of each
12-month purchase period. However, unless the participant actively withdraws
from the offering period, the option will be exercised automatically at the end
of each purchase period, and the maximum number of full shares purchasable
(within the limits of the Stock Purchase Plan) with the participant's
accumulated payroll deductions will be purchased for that participant at the
applicable price.
A participant's withdrawal from an offering period does not have an effect
upon such participant's eligibility to participate in subsequent offering
periods under the Stock Purchase Plan; however, the participant may not
re-enroll in the same offering period after withdrawal.
Termination of Employment
Termination of a participant's employment for any reason, including
retirement or death, prior to any exercise date cancels his or her participation
in the Stock Purchase Plan immediately. In such event, the payroll deductions
credited to the participant's account during the offering period will be
returned to such participant, or in the case of death, to the person or persons
entitled thereto as specified in the participant's subscription agreement.
Capital Changes
In the event any change, such as a stock split of stock dividend, is made
in the Company's capitalization which results in an increase or decrease in the
number of outstanding shares of Common Stock without receipt
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of consideration by the Company, appropriate adjustments will be made in the
shares subject to purchase and in the purchase price per share, as well as in
the number of shares available for issuance under the Stock Purchase Plan.
Nontransferability
No rights or accumulated payroll deductions of a participant under the
Stock Purchase Plan may be assigned, transferred, pledged or otherwise disposed
of for any reason (other than by will, or the laws of descent and distribution,
or as otherwise provided in the Stock Purchase Plan) and any such attempt may be
treated by the Company as an election to withdraw from the Stock Purchase Plan.
Amendment and Termination of the Plan
The Board may at any time amend or terminate the Stock Purchase Plan,
except that such termination shall not affect options previously granted nor may
any amendment make any change in an option granted prior thereto which adversely
affects the rights of any participant. No amendment may be made to the Stock
Purchase Plan without prior approval of the Stockholders of the Company if such
amendment would increase the number of shares reserved under the Stock Purchase
Plan, permit a new class of employees to participate in the Stock Purchase Plan
or make any other change to the Stock Purchase Plan for which Stockholder
approval is required to comply with the rules under Section 16 of the Exchange
Act and Rule 16b-3 (or any successor rule) thereto.
Plan Benefits
No shares were issued under the Purchase Plan in 1996. In January 1997,
7,671 shares were issued to non-executive employees as a group under the
Purchase Plan at a purchase price of $6.59 per share. In addition, 2,850 shares
were issued to executive officers of the Company as a group at a purchase price
per share of $6.59 as follows: 211 shares to Mr. Greenwood, 1,231 shares to Mr.
Haiduck, 1,201 shares to Dr. Harley, 103 shares to Mr. Kaster, and 104 shares to
Dr. West.
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APPENDIX 2
FEDERAL TAX INFORMATION CONCERNING THE CONSEQUENCES OF PARTICIPATING
IN THE 1996 DIRECTORS' STOCK OPTION PLAN AND
1996 EMPLOYEE STOCK PURCHASE PLAN
The following is only a summary of the effect of United States federal
income taxation upon the participants and the Company under the 1996 Directors'
Stock Option Plan and the 1996 Employee Stock Purchase Plan, and does not
purport to be complete. Reference should be made to the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). In addition, this
summary does not discuss the income tax laws of any municipality, state or
foreign country in which the participant may reside, or the tax consequences of
the participant's death. It is advisable that a participant consult his own tax
advisor concerning application of these tax laws.
1996 DIRECTORS' STOCK OPTION PLAN
Options granted under the 1996 Directors' Stock Option Plan are
nonstatutory stock options. An optionee will not recognize any taxable income at
the time he or she is granted a nonstatutory stock option. However, upon its
exercise, the optionee will recognize ordinary income for tax purposes measured
by the excess of the then fair market value of the shares over the option
exercise price. Because the optionee is a director of the Company, the date of
taxation (and the date of measurement of taxable ordinary income) may be
deferred for up to six months unless the optionee files an election under
Section 83(b) of the Code. 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 (or the date of taxation, if later) will be
treated as capital gain or loss. Currently, the tax rate on net capital gain
(net long-term capital gain minus net short-term capital loss) is capped at 28%.
Capital losses are allowed in full against capital gains plus $3,000 of other
income.
1996 EMPLOYEE STOCK PURCHASE PLAN
The 1996 Employee Stock Purchase Plan, and the right of participants to
make purchases thereunder, is intended to qualify under the provisions of
Sections 421 and 423 of the Code. Under these provisions, no income will be
taxable to a participant until the shares purchased under the Plan are sold or
otherwise disposed of. Upon sale or other disposition of the shares, the
participant will generally be subject to tax and the amount of the tax will
depend upon how long the shares have been held by the participant. If the shares
are sold or otherwise disposed of more than two years from the first day of the
offering period and one year from the purchase date, the participant will
recognize ordinary income measured as the lesser of (a) the excess of the fair
market value of the shares at the time of such sale or disposition over the
purchase price, or (b) an amount equal 15% of the fair market value of the
shares as of the first day of the offering period. Any additional gain will be
treated as long-term capital gain. If the shares are sold or otherwise disposed
of before the expiration of this holding period, the participant will recognize
ordinary income generally measured as the excess of the fair market value of the
shares on the date the shares are purchased over the purchase price. Any
additional gain or loss on such sale or disposition will be long-term or
short-term capital gain or loss, depending on how long the shares were held by
the participant. The Company is not entitled to a deduction for amounts taxed as
ordinary income or capital gain to a participant except to the extent of
ordinary income recognized by a participant upon a sale or disposition of shares
prior to the expiration of the holding period(s) described above. Currently, the
tax rate on net capital gain (net long-term capital gain minus net short-term
capital loss) is capped at 28%. Capital losses are allowed in full against
capital gains plus $3,000 of other income.
The ordinary income reported under the rules described above, added to the
actual purchase price of the shares, determines the tax basis of the shares for
the purpose of determining capital gain or loss on a sale or exchange of the
shares.
The Company is entitled to a deduction for amounts taxed as ordinary income
to a participant only to the extent that ordinary income must be reported upon
disposition of shares by the participant before the expiration of the holding
periods described above.
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APPENDIX A
(not distributed to stockholders)
GERON CORPORATION
1992 STOCK OPTION PLAN
(AS AMENDED THROUGH MAY 22, 1996)
I. PURPOSES OF THE PLAN
This 1992 Stock Option Plan (the "Plan") is intended to promote the
interests of Geron Corporation, a Delaware corporation (the "Corporation"), by
providing a method whereby eligible individuals who provide valuable services to
the Corporation (or its parent or subsidiary corporations) may be offered
incentives and rewards which will encourage them to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
and continue to render services to the Corporation (or its parent or subsidiary
corporations).
For purposes of the Plan, the following provisions shall be applicable
in determining the parent and subsidiary corporations of the Corporation:
(i) Any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation shall be considered to be a
parent corporation of the Corporation, provided each such corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
(ii) Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be considered to be a
subsidiary of the Corporation, provided each such corporation (other than the
last corporation) in the unbroken chain owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
II. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Plan with respect to Section 16 Insiders. No non-employee Board
member shall be eligible to serve on the Primary Committee if such individual
has, during the twelve (12)-month period immediately preceding the date of his
or her appointment to the Committee or (if shorter) the period commencing with
the date on which the Corporation's outstanding Common Stock is registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Section
12(g) Registration Date") and ending with the date of his or her appointment to
the Primary Committee, received an option grant or direct stock issuance under
the Plan or any stock option, stock appreciation, stock bonus or other stock
plan of the Corporation (or any Parent or Subsidiary), other than pursuant to
the Corporation's 1996 Directors' Stock Option Plan.
B. Administration of the Plan with respect to all other persons
eligible to participate in the Plan may, at the Board's discretion, be vested in
the Primary Committee or a Secondary Committee, or the Board may retain the
power to administer the Plan with respect to all such persons. The members of
the Secondary Committee may be individuals who are Employees
<PAGE> 33
eligible to receive option grants under the Plan or any stock option, stock
appreciation, stock bonus or other stock plan of the Corporation (or any Parent
or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Plan and to make such
determinations under, and issue such interpretations of, the provisions of the
Plan and any outstanding options thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Plan under its jurisdiction or any option
thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any grants under the Plan.
III. ELIGIBILITY FOR OPTION GRANTS
A. The persons eligible to receive option grants under the Plan are as
follows:
(i) key employees (including officers and directors) of the
Corporation (or its parent or subsidiary corporations);
(ii) those Consultants who provide valuable services to the
Corporation (or its parent or subsidiary corporations), provided, however, that
after the Section 12(g) Registration Date, the term Consultant shall thereafter
not include directors who are not compensated for their services or are paid
only a director's fee by the Corporation.
B. Each Plan Administrator shall have full authority to determine which
eligible individuals are to receive option grants under the Plan, the number of
shares to be covered by each such grant, whether the granted option is to be an
incentive stock option ("Incentive Option") which satisfies the requirements of
Section 422 of the Internal Revenue Code or a non-statutory 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.
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IV. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired Common Stock. The aggregate
number of shares which may be issued over the term of the Plan shall not exceed
8,685,000 shares. The total number of shares issuable under the Plan shall be
subject to adjustment from time to time in accordance with the provisions of
this Section IV.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of the 1997,
1998, 1999, 2000 and 2001 calendar years by an amount equal to two percent (2%)
of the shares of Common Stock outstanding on December 31 of the immediately
preceding calendar year; but in no event shall any such annual increase exceed
300,000 shares.
C. No one person participating in the Plan may receive options for more
than 500,000 shares of Common Stock per calendar year, beginning with the 1996
calendar year.
D. Shares subject to outstanding options shall be available for
subsequent option grants under the Plan to the extent (i) options expire or
terminate for any reason prior to exercise in full and (ii) options are
cancelled in accordance with the cancellation-regrant provisions of Section VIII
of the Plan. Shares subject to outstanding options shall not be available for
subsequent option grants under the Plan to the extent options are surrendered in
accordance with the limited cash-out rights provisions of Section IX of the
Plan. Shares repurchased by the Corporation pursuant to its repurchase rights
under the Plan shall not be available for subsequent option grants.
E. In the event any change is made to the Common Stock issuable under
the Plan by reason of any stock split, stock dividend, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without receipt of consideration, appropriate adjustments shall be made to
(i) the aggregate number and/or class of shares issuable under the Plan, (ii)
the number of shares for which any one person may be granted options per
calendar year and (iii) the aggregate number and/or class of shares and the
option price per share in effect under each outstanding option in order to
prevent the dilution or enlargement of benefits thereunder. The adjustments
determined by the Plan Administrator shall be final, binding and conclusive.
V. TERMS AND CONDITIONS OF OPTIONS
A. Options granted pursuant to the Plan shall be authorized by action
of the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive Options or non-statutory options. Individuals who are not
Employees (as defined in subsection D.3 below) may only be granted non-statutory
options. Each granted option shall be evidenced by one or more instruments in
the form approved by the Plan Administrator; provided, however, that each such
instrument shall comply with and incorporate the terms and conditions specified
below. Each instrument evidencing an Incentive Option shall, in addition, be
subject to the applicable provisions of Section VI.
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<PAGE> 35
B. Option Price.
1. The option price per share shall be fixed by the Plan
Administrator. In no event, however, shall the option price per share be less
than eighty-five percent (85%) of the Fair Market Value (as defined below) of a
share of Common Stock on the date of the option grant.
2. The option price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section X and the instrument
evidencing the grant, be payable in one or more of the forms specified below:
(i) cash or check drawn to the Corporation's order;
(ii) in shares of Common Stock held by the optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise
Date; or
(iii) to the extent the option in exercised for vested shares,
through a special sale and remittance procedure pursuant to which the optionee
is to provide irrevocable written instructions (I) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the settlement date, an
amount sufficient to cover the aggregate option price payable for the purchased
shares plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such purchase and (II)
concurrently to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to effect the sale transaction.
For purposes of this subparagraph 2, the Exercise Date shall be
the first date on which there shall have been delivered to the Corporation both
written notice of the exercise of the option and, except to the extent such sale
and remittance procedure is utilized, payment of the option price for the
purchased shares.
3. The Fair Market Value of a share of Common Stock on any relevant
date under subparagraphs 1 or 2 above (and for all other valuation purposes
under the Plan) shall be determined in accordance with the following provisions:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the Nasdaq National Market, the
Fair Market Value shall be the closing selling price of one share of Common
Stock on the date in question, as such price is reported by the National
Association of Securities Dealers through its Nasdaq system or any successor
system. If there is no closing selling price for the Common Stock on the date in
question, then the closing selling price on the last preceding date for which
such quotation exists shall be determinative of Fair Market Value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the stock
exchange determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted
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<PAGE> 36
in the composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the Fair
Market Value shall be the closing selling price on the exchange on the last
preceding date for which such quotation exists.
(iii) If the Common Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, or if the Plan Administrator determines that the value determined
pursuant to subparagraphs (i) and (ii) above does not accurately reflect the
Fair Market Value of the Common Stock, then such Fair Market Value shall be
determined by the Plan Administrator after taking into account such factors as
the Plan Administrator shall deem appropriate, including one or more independent
professional appraisals.
C. Term and Exercise of Options.
Each option granted under the Plan shall be exercisable at such time
or times, during such period, and for such number of shares as shall be
determined by the Plan Administrator and set forth in the instrument evidencing
such option. No such option, however, shall have a maximum term in excess of ten
(10) years from the grant date and no Incentive Option granted to a 10%
Stockholder shall have a maximum term in excess of five (5) years from the grant
date. During the lifetime of the optionee, the option shall be exercisable only
by the optionee and shall not be assignable or transferable by the optionee
otherwise than by will or by the laws of descent and distribution.
D. Effect of Termination of Employment.
1. Except to the extent otherwise provided pursuant to subparagraph
4 below, the following provisions shall govern the exercise period applicable to
any options held by the optionee at the time of cessation of Service or death.
- Should the optionee cease to remain in Service for any reason
other than death or Disability, then the period during which each outstanding
option held by such optionee is to remain exercisable shall be limited to the
three (3)-month period following the date of such cessation of Service.
- Should the optionee's Service terminate by reason of
Disability, then the period during which each outstanding option held by the
optionee is to remain exercisable shall be limited to the six (6)-month period
following the date of such cessation of Service. However, should such Disability
be deemed to constitute Permanent Disability, then the period during which each
outstanding option held by the optionee is to remain exercisable shall be
extended by an additional six (6) months so that the exercise period shall be
limited to the twelve (12)-month period following the date of the optionee's
cessation of Service by reason of such Permanent Disability. For the purposes of
the Plan, Disability shall mean the inability of an individual to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute Permanent Disability in
the event that such Disability is
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<PAGE> 37
expected to result in death or has lasted or can be expected to last for a
continuous period of not less than twelve (12) months.
- Should the optionee die while holding one or more outstanding
options, then the period during which each such option is to remain exercisable
shall be limited to the twelve (12)-month period following the date of the
optionee's death. During such limited period, the option may be exercised by the
personal representative of the optionee's estate or by the person or persons to
whom the option is transferred pursuant to the optionee's will or in accordance
with the laws of descent and distribution.
- During the applicable post-Service exercise period, the option
may not be exercised in the aggregate for more than the number of vested shares
for which the option is exercisable on the date of the optionee's cessation of
Service. Upon the expiration of the applicable exercise period or (if earlier)
upon the expiration of the option term, the option shall terminate and cease to
be exercisable for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the optionee's cessation
of Service, terminate and cease to be outstanding with respect to any option
shares for which the option is not at that time exercisable or in which the
optionee is not otherwise at that time vested.
2. Under no circumstances shall any option be exercisable after the
specified expiration date of the option term.
3. For all purposes under the Plan, unless specifically provided
otherwise in the option agreement evidencing the option grant and/or the
purchase agreement evidencing the purchased shares, the optionee shall be deemed
to remain in Service for so long as such individual renders services on a
periodic basis to the Corporation or any parent or subsidiary corporation in the
capacity of an Employee, a non-employee member of the Board of Directors or a
consultant. The optionee shall be considered to be an Employee for so long as
such individual remains in the employ of the Corporation or one or more of its
parent or subsidiary corporations, subject to the control and direction of the
employer entity as to both the work to be performed and the manner and method of
performance.
4. The Board shall have 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 from the three (3)-month (six (6) months in
the case of Disability or twelve (12) months in the case of death or Permanent
Disability) or shorter period set forth in the option agreement to such greater
period of time as the Board shall deem appropriate; provided, that in no event
shall such option be exercisable after the specified expiration date of the
option term.
E. Stockholder Rights. An optionee shall have none of the rights of a
stockholder with respect to the shares subject to the option until such
individual shall have exercised the option and paid the option price.
F. Repurchase Rights. The shares of Common Stock acquired upon the
exercise of options granted under the Plan may be subject to one or more
repurchase rights of the Corporation in accordance with the following
provisions:
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<PAGE> 38
1. The Plan Administrator may in its discretion determine that it
shall be a term and condition of one or more options exercised under the Plan
that the Corporation (or its assignees) shall have the right, exercisable upon
the optionee's cessation of Service, to repurchase at the option price all or
(at the discretion of the Corporation and with the consent of the optionee) part
of the unvested shares of Common Stock at the time held by the optionee. Any
such repurchase right shall be exercisable by the Corporation (or its assignees)
upon such terms and conditions (including the establishment of the appropriate
vesting schedule and other provision for the expiration of such right in one or
more installments over the optionee's period of Service) as the Plan
Administrator may specify in the instrument evidencing such right.
2. All of the Corporation's outstanding repurchase rights shall
automatically terminate upon the occurrence of any Corporate Transaction under
Section VII, except to the extent the Corporation's outstanding repurchase
rights are to be assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction.
G. Limited Transferability of Options. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option may
be assigned in accordance with the terms of a Qualified Domestic Relations
Order. The assigned option may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to such Qualified Domestic
Relations Order. The terms applicable to the assigned option (or portion
thereof) shall be the same as those in effect for the option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate
VI. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under the Plan. Incentive Options may only be granted
to individuals who are Employees of the Corporation. Options which are
specifically designated as "non-statutory" options when issued under the Plan
shall not be subject to such terms and conditions.
A. Option Price. The option price per Share of the Common Stock subject
to an Incentive Option shall in no event be less than one hundred percent (100%)
of the Fair Market Value of a share of Common Stock on the date of grant. If the
individual to whom the option is granted is the owner of stock (as determined
under Section 424(d) of the Internal Revenue Code) possessing ten percent (10%)
or more of the total combined voting power of all classes of stock of the
Corporation or any one of its parent or subsidiary corporations (such person to
be herein referred to as a 10% Stockholder), then the option price per share
shall not be less than one hundred and ten percent (110%) of the Fair Market
Value of one share of Common Stock on the grant date.
B. Dollar Limitation. The aggregate Fair Market Value (determined as of
the respective date or dates of grant) of the Common Stock for which one or more
options granted to any Employee under this Plan (or any other option plan of the
Corporation or its parent or subsidiary corporations) may for the first time
become exercisable as incentive stock options under the Federal tax laws during
any one calendar year shall not exceed the sum of One Hundred
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Thousand Dollars ($100,000). To the extent the Employee holds two or more such
options which become exercisable for the first time in the same calendar year,
the foregoing limitation on the exercisability thereof as incentive stock
options under the Federal tax laws shall be applied on the basis of the order in
which such options are granted.
Except as modified by the preceding provisions of this Section
VI, all the provisions of the Plan shall be applicable to the Incentive Options
granted hereunder.
VII. CORPORATE TRANSACTIONS
A. In the event of one or more of the following transactions (a
"Corporate Transaction"):
(i) a merger or consolidation in which the Corporation is
not the surviving entity, except for a transaction the principal purpose of
which is to change the State of the Corporation's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation or
dissolution of the Corporation, or
(iii) any reverse merger in which the Corporation is the
surviving entity but in which all of the Corporation's outstanding voting stock
is transferred to the acquiring entity or its wholly-owned subsidiary,
then each option outstanding under the Plan shall automatically accelerate so
that each such option shall, immediately prior to the effective date of the
Corporate Transaction, become fully exercisable for all of the shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock.
B. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor Corporation (or parent thereof).
C. Each outstanding option which is assumed in connection with the
Corporate Transaction or is otherwise to continue in effect shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would be issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Common Stock as are subject to such option immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be made to
the option price payable per share, provided the aggregate option price payable
for such securities shall remain the same. Appropriate adjustments shall also be
made to the class and number of securities available for issuance under the Plan
following the consummation of such Corporate Transaction.
D. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights which do
not otherwise terminate at the time of the Corporate
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<PAGE> 40
Transaction shall automatically terminate and the shares of Common Stock subject
to those terminated rights shall immediately vest in full) in the event the
Optionee's Service should subsequently terminated by reason of an Involuntary
Termination within eighteen (18) months following the effective date of such
Corporate Transaction. Any options so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination.
E. The Plan Administrator shall have the discretion, exercisable either
at the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to these rights) upon the occurrence of a Change in Control or (ii)
condition any such option acceleration (and the termination of any outstanding
repurchase rights) upon the subsequent Involuntary Termination of the Optionee's
Service within a specified period following the effective date of such Change in
Control. Any options accelerated in connection with a Change in Control shall
remain fully exercisable until the expiration or sooner termination of the
option term.
F. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
G. The grant of options under this Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
VIII. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options under the Plan covering the same or different
numbers of shares of Common Stock but having an option price per share not less
than eighty-five percent (85%) of Fair Market Value of the Common Stock on the
new grant date (or one hundred percent (100%) of such Fair Market Value in the
case of an Incentive Option or, in the case of an Incentive Option granted to a
10% Stockholder, not less than one hundred and ten percent (110%) of such Fair
Market Value).
IX. CASH-OUT OF OPTIONS
A. Once the Corporation's outstanding Common Stock is registered under
Section 12(g) of the 1934 Act, one or more optionees subject to the short-swing
profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be
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granted limited cash-out rights to operate in tandem with their outstanding
options under the Plan. Any option with such a limited right in effect for at
least six (6) months shall automatically be cancelled upon the acquisition of
fifty percent (50%) or more of the Corporation's outstanding Common Stock
(excluding the Common Stock holdings of officers and directors of the
Corporation who participate in this Plan) pursuant to a tender or exchange offer
made by a person or group of related persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by or is under common
control with the Corporation) which the Board does not recommend the
Corporation's stockholders to accept. In return for the cancelled option, the
optionee shall be entitled to a cash distribution from the Corporation in an
amount equal to the excess of (i) the Cash-Out Price of the shares of Common
Stock in which the optionee is vested under the cancelled option over (ii) the
aggregate option price payable for such vested shares. The cash distribution
payable upon such cancellation shall be made within five (5) days following the
completion of such tender or exchange offer, and neither the approval of the
Plan Administrator nor the consent of the Board shall be required in connection
with such cancellation and distribution.
B. For purposes of calculating the cash distribution, the Cash-Out
Price per share of the vested Common Stock subject to the cancelled option shall
be deemed to be equal to the greater of (i) the Fair Market Value per share on
the date of surrender, as determined in accordance with the valuation provisions
of subsection V.B.3, or (ii) the highest reported price per share paid in
effecting the tender or exchange offer. However, if the cancelled option is an
Incentive Option, then the Cash-Out Price shall not exceed the value per share
determined under clause (i) above.
C. The shares of Common Stock subject to any option cancelled for an
appreciation distribution in accordance with this Section IX shall not be
available for subsequent option grants under the Plan.
X. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or upon the vesting of such shares under the Plan shall
be subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Taxes incurred by such holders in connection with the exercise of their
options . Such right may be provided to any such holder in either or both of the
following formats:
(i) Stock Withholding. The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
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(ii) Stock Delivery. The election to deliver to the Corporation, at
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
XI. LOANS
A. The Plan Administrator may assist any optionee (including an
optionee who is an officer or director of the Corporation) in the exercise of
one or more options granted to such optionee, including the satisfaction of any
Federal, state and local income and employment tax obligations arising
therefrom, by
(i) authorizing the extension of a loan from the Corporation to
such optionee, or
(ii) permitting the optionee to pay the option price for the
purchased Common Stock in installments over a period of years.
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
granted with or without security or collateral. However, any loan made to a
consultant or other non-employee advisor must be secured by property other than
the purchased shares of Common Stock. In all events, the maximum credit
available to each optionee may not exceed the sum of (i) the aggregate option
price payable for the purchased shares plus (ii) any Federal, state and local
income and employment tax liability incurred by the optionee in connection with
such exercise.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under the financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Board in its discretion deems appropriate.
XII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the optionee any right to
continue in the service or employ of the Corporation (or any parent or
subsidiary corporation of the Corporation employing or retaining such optionee)
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any parent or subsidiary corporation
of the Corporation employing or retaining such optionee) or of the optionee,
which rights are hereby expressly reserved by each, to terminate the Service of
the optionee at any time for any reason, with or without cause.
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<PAGE> 43
XIII. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects whatsoever; provided, however,
that no such amendment or modification shall, without the consent of the
holders, adversely affect the rights and obligations with respect to options at
the time outstanding under the Plan; and provided, further that the Board shall
not, without the approval of the Corporation's stockholders, (i) increase the
maximum number of shares issuable under the Plan or the maximum number of shares
for which any person may be granted options per calendar year, except for
permissible adjustments under Section IV, (ii) materially modify the eligibility
requirements for the grant of options under the Plan or (iii) materially
increase the benefits accruing to Plan participants.
B. Options may be granted under this Plan to purchase shares of Common
Stock in excess of the number of shares then available for issuance under the
Plan, provided (i) an amendment to increase the maximum number of shares
issuable under the Plan is adopted by the Board prior to the initial grant of
any such option and within one (1) year thereafter such amendment is approved by
the Corporation's stockholders and (ii) each option granted is not to become
exercisable, in whole or in part, at any time prior to the obtaining of such
stockholder approval.
XIV. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan became effective when adopted by the Board on May 21, 1992
and was approved by the Corporation's stockholders on July 8, 1992. On November
13, 1992 the Board adopted an increase in the maximum aggregate number of shares
issuable over the term of the Plan from 650,000 to 1,650,000 shares. The
increase was approved by the Corporation's stockholders on December 8, 1992. On
August 11, 1993 the Board adopted a further increase in the maximum aggregate
number of shares issuable over the term of the Plan from 1,650,000 to 2,150,000
shares. The increase was approved by the Corporation's stockholders on October
8, 1993. On January 13, 1994, the Board approved a further increase in the
aggregate number of shares issuable over the term of the Plan from 2,150,000 to
2,500,000 shares. The increase was approved by the Corporation's stockholders on
June 28, 1994. On September 14, 1994, the Board approved a further increase of
3,385,000 shares in the aggregate number of shares issuable over the term of the
Plan bringing the new aggregate to 5,885,000 shares. The increase was approved
by the Corporation's stockholders on October 5, 1994. On April 25, 1996, the
Board approved a further increase of 2,800,000 shares in the aggregate number of
shares issuable over the term of the Plan bringing the new aggregate to
8,685,000 shares, subject to stockholder approval of the 2,800,000-share
increase within twelve (12) months of the date of approval by the Board. On May
22, 1996, the Board approved certain amendments to the Plan in connection with
the filing of a Registration Statement for the initial public offering of the
Company's Common Stock, subject to shareholder approval of such changes within
twelve (12) months of the date of approval by the Board. Options may be granted
in reliance on the 2,800,000 share increase prior to approval of such increase
by the Corporation's stockholders but no option granted in reliance on such
increase shall become exercisable, in whole or in part, unless and until the
increase shall have been approved by the Corporation's stockholders. If such
stockholder approval is not obtained within twelve (12) months after the date of
the Board's adoption of the increase, then all
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<PAGE> 44
options previously granted in reliance on such increase shall terminate and no
further options shall be granted. Subject to such limitation, the Plan
Administrator may grant options under the Plan at any time after the effective
date and before the date fixed herein for termination of the Plan.
B. Unless sooner terminated in accordance with Section VII, the Plan
shall terminate upon the earlier of (i) the expiration of the ten (10) year
period measured from the date of the Board's adoption of the Plan, (ii) the date
on which all shares available for issuance under the Plan shall have been issued
pursuant to the exercise or surrender of options granted hereunder or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. If the date of termination is determined under clause (i) or (iii)
above, then options outstanding on such date shall thereafter continue to have
force and effect in accordance with the provisions of the instruments evidencing
such options.
XV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to options granted under the Plan shall be used for general corporate
purposes.
XVI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option hereunder,
and the issuance of stock upon the exercise or surrender of any such option
shall be subject to the procurement by the Corporation of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options granted under it and the stock issued pursuant to it, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
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<PAGE> 45
GERON CORPORATION
STOCK OPTION AGREEMENT
WITNESSETH:
RECITALS
A. The Board of Directors of the Corporation has adopted the Geron
Corporation 1992 Stock Option Plan (the "Plan") for the purpose of attracting
and retaining the services of selected key employees (including officers and
directors), non-employee members of the Board of Directors and consultants who
contribute to the financial success of the Corporation or its parent or
subsidiary corporations.
B. Optionee is an individual who is to render valuable services to
the Corporation or its parent or subsidiary corporations, and this Agreement is
executed pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Corporation's grant of a stock option to Optionee.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set
forth in this Agreement, the Corporation hereby grants to Optionee, as of the
grant date (the "Grant Date") specified in the accompanying Notice of Grant of
Stock Option (the "Grant Notice"), a stock option to purchase up to that number
of shares of the Corporation's Common Stock (the "Option Shares") as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term at the option price per share (the "Option
Price") specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the expiration date (the "Expiration Date") specified in the Grant
Notice, unless sooner terminated in accordance with Paragraph 5, 6 or 18.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole or
in part at any time prior to the time the 3,385,000-share increase in the
aggregate number of shares issuable over the term of the Plan is approved by the
Corporation's stockholders in accordance with Paragraph 18. Provided such
stockholder approval is obtained, this option shall thereupon become exercisable
for the Option Shares in one or more installments as is specified in the Grant
Notice. As the option becomes exercisable in one or more installments, the
installments shall accumulate and the option shall remain
<PAGE> 46
exercisable for such installments until the Expiration Date or the sooner
termination of the option term under Paragraph 5 or Paragraph 6 of this
Agreement.
5. ACCELERATED TERMINATION OF OPTION TERM. The option term specified
in Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should any of the following provisions become
applicable:
(i) Except as otherwise provided in subparagraph (ii) or (iii)
below, should Optionee cease to remain in Service while this option is
outstanding, then the period for exercising this option shall be
reduced to a three (3)-month period commencing with the date of such
cessation of Service, but in no event shall this option be exercisable
at any time after the Expiration Date. Upon the expiration of such
three (3)-month period or (if earlier) upon the Expiration Date, this
option shall terminate and cease to be outstanding.
(ii) Should Optionee die while this option is outstanding, then
the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the law of descent and distribution shall
have the right to exercise this option. Such right shall lapse and this
option shall cease to be exercisable upon the earlier of (A) the
expiration of the twelve (12) month period measured from the date of
Optionee's death or (B) the Expiration Date. Upon the expiration of
such twelve (12) month period or (if earlier) upon the Expiration Date,
this option shall terminate and cease to be outstanding.
(iii) Should Optionee cease Service by reason of Disability while
this option is outstanding, then Optionee shall have a period of six
(6) months (commencing with the date of such cessation of Service)
during which to exercise this option. However, should such Disability
be deemed to constitute Permanent Disability, then the period during
which this option is to remain exercisable shall be extended by an
additional six (6) months so that the exercise period shall be limited
to the twelve (12)-month period following the date of the Optionee's
cessation of Service by reason of such Permanent Disability. In no
event shall this option be exercisable at any time after the Expiration
Date. Upon the expiration of the applicable six (6) or twelve
(12)-month period or (if earlier) upon the Expiration Date, this option
shall terminate and cease to be outstanding. For the purposes of the
Plan and of this Agreement, DISABILITY shall mean the inability of the
Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and shall be
determined by the Plan Administrator on the basis of such medical
evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT
DISABILITY in the event that such Disability is expected to result in
death or has lasted or can be expected to last for a continuous period
of not less than twelve (12) months.
Note: Exercise of this option on a date later than three (3)
months following cessation of Service due to Disability will
result in loss of
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<PAGE> 47
favorable incentive stock option treatment, unless such Disability
constitutes Permanent Disability. In the event that incentive stock
option treatment is not available, this option will be treated as a
non-statutory stock option.
(iv) During the limited period of exercisability applicable under
subparagraph (i), (ii) or (iii) above, this option may not be exercised
in the aggregate for more than the lesser of (a) the number of Option
Shares for which this option is, at the time of the Optionee's
cessation of Service, exercisable in accordance with the exercise
schedule specified in the Grant Notice or (ii) the number of Option
Shares in which Optionee is, at the time of the Optionee's cessation of
Service, vested in accordance with the vesting schedule specified in
the Grant Notice.
(v) For purposes of this Paragraph 5 and for all other purposes
under this Agreement:
A. The Optionee shall be deemed to remain in SERVICE for so long
as the Optionee continues to render periodic services to the
Corporation or any parent or subsidiary corporation, whether as an
Employee, a non-employee member of the Board of Directors, or a
consultant.
B. The Optionee shall be deemed to be an EMPLOYEE of the
Corporation and to continue in the Corporation's employ for so long as
the Optionee remains in the employ of the Corporation or one or more of
its parent or subsidiary corporations, subject to the control and
direction of the employer entity as to both the work to be performed
and the manner and method of performance.
C. A corporation shall be considered to be a SUBSIDIARY
corporation of the Corporation if it is a member of an unbroken chain
of corporations beginning with the Corporation, provided each such
corporation in the chain (other than the last corporation) owns, at the
time of determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the
other corporations in such chain.
D. A corporation shall be considered to be a PARENT corporation
of the Corporation if it is a member of an unbroken chain ending with
the Corporation, provided each such corporation in the chain (other
than the Corporation) owns, at the time of determination, stock
possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
6. SPECIAL TERMINATION OF OPTION.
A. In the event of one or more of the following stockholder-approved
transactions (a "Corporate Transaction"):
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<PAGE> 48
(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of
which is to change the State of the Corporation's incorporation;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation; or
(iii) any reverse merger in which the Corporation is the
surviving entity but in which all of the Corporation's outstanding
voting stock is transferred to the acquiring entity or its wholly-owned
subsidiary,
then this option, to the extent not previously exercised, shall terminate upon
the consummation of the Corporate Transaction and cease to be exercisable,
unless it is expressly assumed by the successor corporation or parent thereof.
B. This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Corporation's outstanding
Common Stock by reason of any stock split, stock dividend, combination of
shares, exchange of shares, or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the total number of Option Shares subject to this option,
(ii) the number of Option Shares for which this option is to be exercisable from
and after each installment date specified in the Grant Notice and (iii) the
Option Price payable per share in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a Corporate
Transaction described in Paragraph 6 or is otherwise to remain outstanding, then
this option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable to the Optionee in the consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Option Price
payable per share, provided the aggregate Option Price payable hereunder shall
remain the same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall not
have any of the rights of a stockholder with respect to the Option Shares until
such individual shall have exercised the option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
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<PAGE> 49
A. In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or in the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions:
(i) Execute and deliver to the Secretary of the Corporation a
stock purchase agreement (the "Purchase Agreement") in substantially
the form of Exhibit B to the Grant Notice.
(ii) Pay the aggregate Option Price for the purchased shares in
one or more of the following alternative forms:
1. full payment in cash or check; or
2. any other form which the Plan Administrator may, in its
discretion, approve at the time of exercise in accordance with
the provisions of paragraph 15 of this Agreement.(1)
Should the Corporation's outstanding Common Stock be registered
under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "1934 Act") at the time the option is exercised, then
the Option Price may also be paid as follows:
3. in shares of Common Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair
Market Value (as defined below) on the Exercise Date; or
4. through a special sale and remittance procedure pursuant
to which the Optionee is to provide irrevocable written
instructions (a) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Option
Price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to
be withheld by the Corporation by reason of such purchase and (b)
to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to effect the
sale transaction.
- ------------------
(1) Authorization of a loan or installment payment method under such
provisions may, under currently proposed Treasury Regulations, result in the
loss of incentive stock option treatment under the Federal tax laws.
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<PAGE> 50
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option, if other than Optionee,
have the right to exercise this option.
Except to the extent the sale and remittance procedure is utilized
in connection with the exercise of the option, payment of the Option Price must
accompany the Purchase Agreement delivered to the Corporation.
B. For purposes of this Agreement, the Exercise Date shall be the
date on which the executed Purchase Agreement shall have been delivered to the
Corporation, and the Fair Market Value of a share of Common Stock on any
relevant date shall be determined in accordance with subparagraphs (i) through
(iii) below:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the Nasdaq National
Market, the Fair Market Value shall be the closing selling price of one
share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers through its
Nasdaq system or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the closing
selling price on the last preceding date for which such quotation
exists shall be determinative of Fair Market Value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question
on the stock exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially quoted
in the composite tape of transactions on such exchange. If there is no
reported sale of Common Stock on such exchange on the date in question,
then the Fair Market Value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
(iii) If the Common Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the
over-the-counter market, or if the Plan Administrator determines that
the value determined pursuant to subparagraphs (i) and (ii) above does
not accurately reflect the Fair Market Value of the Common Stock, then
such Fair Market Value shall be determined by the Plan Administrator
after taking into account such factors as the Plan Administrator shall
deem appropriate, including one or more independent professional
appraisals.
C. As soon after the Exercise Date as practical, the Corporation
shall mail or deliver to Optionee or to the other person or persons exercising
this option a certificate or certificates representing the shares so purchased
and paid for, with the appropriate legends affixed thereto.
D. In no event may this option be exercised for any fractional
shares.
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10. REPURCHASE RIGHTS. THE OPTIONEE HEREBY AGREES THAT ALL OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THIS OPTION SHALL BE SUBJECT TO CERTAIN
RIGHTS OF THE CORPORATION AND ITS ASSIGNS TO REPURCHASE SUCH SHARES IN
ACCORDANCE WITH THE TERMS AND CONDITIONS SPECIFIED IN THE PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of Option Shares
upon such exercise shall be subject to compliance by the Corporation and the
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange on which shares of the
Corporation's Common Stock may be listed at the time of such exercise and
issuance.
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in writing as may be
requested by the Corporation in order for it to comply with the applicable
requirements of Federal and state securities laws.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Corporation.
13. LIABILITY OF CORPORATION.
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without stockholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Section XII of the Plan.
B. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
14. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal corporate
offices. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
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15. LOANS. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the Option Price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.
16. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
17. GOVERNING LAW. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
18. STOCKHOLDER APPROVAL. The grant of this option is subject to
approval by the Corporation's stockholders of the 3,385,000-share increase in
the aggregate number of shares issuable over the term of the Plan within twelve
(12) months after September 14, 1994, the date of the adoption of the increase
by the Board of Directors. Notwithstanding any provision of this Agreement to
the contrary, this option may not be exercised in whole or in part until such
stockholder approval is obtained. In the event that such stockholder approval is
not obtained, then this option shall thereupon terminate in its entirety and the
Optionee shall have no further rights to acquire any Option Shares hereunder.
19. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In the
event this option is designated an incentive stock option in the Grant Notice,
the following terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable tax treatment as
an incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or Permanent Disability or (ii) more than one (1) year after the date
the Optionee ceases to be an Employee by reason of Permanent Disability.
B. Should this option be designated as immediately exercisable in
the Grant Notice, then this option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Corporation's Common Stock for which this
option would otherwise first become exercisable in such calendar year would,
when added to the aggregate Fair Market Value (determined as of the respective
date or dates of grant) of the Corporation's Common Stock for which this option
or one or more other incentive stock options granted to the Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the
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extent the exercisable of this option is deferred by reason of the foregoing
limitation, the deferred portion will first become exercisable in the first
calendar year or years thereafter in which the One Hundred Thousand Dollar
($100,000) limitation of this Paragraph 19.B would not be contravened, but such
deferral shall in all events end immediately prior to the effective date of a
Corporate Transaction in which this option is not to be assumed, whereupon the
option shall become exercisable as a non-statutory stock option for the balance
of the Option Shares.
C. Should this option be designated as exercisable in installments
in the Grant Notice, then no installment under this option (whether annual or
monthly) shall qualify for favorable tax treatment as an incentive stock option
under the Federal tax laws if (and to the extent) the aggregate Fair Market
Value (determined at the Grant Date) of the Corporation's Common Stock for which
such installment first becomes exercisable hereunder will, when added to the
aggregate Fair Market Value (determined as of the respective date or dates of
grant) of the Corporation's Common Stock for which one or more other incentive
stock options granted to the Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any parent or subsidiary
corporation) first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate. Should such One Hundred
Thousand Dollar ($100,000) limitation be exceeded in any calendar year, this
option shall nevertheless become exercisable for the option shares in such
calendar year as a non-statutory stock option.
D. Should Optionee hold, in addition to this option, one or more
other options to purchase the Corporation's Common Stock which became
exercisable for the first time in the same calendar year as this option, then
the foregoing limitations on the exercisability of such options as incentive
stock options shall be applied on the basis of the order in which such options
are granted.
20. WITHHOLDING. Optionee hereby agrees to make appropriate
arrangements with the Corporation or parent or subsidiary corporation employing
Optionee for the satisfaction of all Federal, state or local income tax
withholding requirements and Federal social security employee tax requirements
applicable to the exercise of this option.
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APPENDIX B
(not distributed to stockholders)
GERON CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock
Purchase Plan of Geron Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended. The provisions of the Plan shall, accordingly,
be construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Geron Corporation, a Delaware corporation.
(e) "Compensation" shall mean all regular straight time gross
earnings, overtime and shift premium and shall not include payments for
incentive compensation, incentive payments, bonuses, commissions and other
compensation.
(f) "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that such leave is for a period of
not more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(g) "Contributions" shall mean all amounts credited to the account
of a participant pursuant to the Plan.
(h) "Designated Subsidiaries" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(i) "Employee" shall mean any person, including an Officer, who is
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
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(j) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(k) "Purchase Date" shall mean the last day of each Purchase Period
of the Plan.
(l) "Offering Date" shall mean the first business day of each
Offering Period of the Plan.
(m) "Offering Period" shall mean a period of twelve (12) months
commencing on January 1 and July 1 of each year, except for the first Offering
Period as set forth in Section 4(a).
(n) "Officer" shall mean 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.
(o) "Plan" shall mean this Employee Stock Purchase Plan.
(p) "Purchase Period" shall mean a period of six (6) months within
an Offering Period, except for the first Purchase Period as set forth in Section
4(b).
(q) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
3. Eligibility.
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company, or (ii) if such option would permit
his or her rights to purchase stock under all employee stock purchase plans
(described in Section 423 of the Code) of the Company and its Subsidiaries to
accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of fair
market value of such stock (determined at the time such option is granted) for
each calendar year in which such option is outstanding at any time.
4. Offering Periods and Purchase Periods.
(a) Offering Periods. The Plan shall be implemented by a series of
Offering Periods of twelve (12) months duration, with new Offering Periods
commencing on or about January 1 and July 1 of each year (or at such other time
or times as may be determined by the
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Board of Directors). The first Offering Period shall commence on the beginning
of the effective date of the Registration Statement on Form S-1 for the initial
public offering of the Company's Common Stock (the "IPO Date") and continue
until June 30, 1997. The Plan shall continue until terminated in accordance with
Section 19 hereof. The Board of Directors of the Company shall have the power to
change the duration and/or the frequency of Offering Periods with respect to
future offerings without shareholder approval if such change is announced at
least fifteen (15) days prior to the scheduled beginning of the first Offering
Period to be affected. Eligible employees may not participate in more than one
Offering Period at a time.
(b) Purchase Periods. Each Offering Period shall consist of two (2)
consecutive purchase periods of six (6) months duration. The last day of each
Purchase Period shall be the "Purchase Date" for such Purchase Period. A
Purchase Period commencing on January 1 shall end on the next June 30. A
Purchase Period commencing on July 1 shall end on the next December 31. The
first Purchase Period shall commence on the IPO Date and shall end on December
31, 1996. The Board of Directors of the Company shall have the power to change
the duration and/or frequency of Purchase Periods with respect to future
purchases without shareholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Purchase Period
to be affected.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given offering. The
subscription agreement shall set forth the percentage of the participant's
Compensation (which shall be not less than 1% and not more than 10%) to be paid
as Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following
the Offering Date and shall end on the last payroll paid on or prior to the last
Purchase Period of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in Section
10.
6. Method of Payment of Contributions.
(a) The participant shall elect to have payroll deductions made on
each payday during the Offering Period in an amount not less than one percent
(1%) and not more than ten percent (10%) of such participant's Compensation on
each such payday. All payroll deductions made by a participant shall be credited
to his or her account under the Plan. A participant may not make any additional
payments into such account.
(b) A participant may discontinue his or her participation in the
Plan as provided in Section 10, or, on one occasion only during the Offering
Period, may decrease the rate of his or her Contributions during the Offering
Period by completing and filing with the
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Company a new subscription agreement. The change in rate shall be effective as
of the beginning of the next calendar month following the date of filing of the
new subscription agreement, if the agreement is filed at least ten (10) business
days prior to such date and, if not, as of the beginning of the next succeeding
calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased to 0% at such time during any Offering
Period which is scheduled to end during the current calendar year that the
aggregate of all payroll deductions accumulated with respect to such Offering
Period and any other Offering Period ending within the same calendar year equal
$21,250. Payroll deductions shall re-commence at the rate provided in such
participant's subscription Agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10.
7. Grant of Option.
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Purchase Date a number of shares of the Company's Common Stock
determined by dividing such Employee's Contributions accumulated prior to such
Purchase Date and retained in the participant's account as of the Purchase Date
by the lower of (i) eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date, or (ii) eighty-five
percent (85%) of the fair market value of a share of the Company's Common Stock
on the Purchase Date; provided however, that the maximum number of shares an
Employee may purchase during each Offering Period shall be determined at the
Offering Date by dividing $25,000 by the fair market value of a share of the
Company's Common Stock on the Offering Date, and provided further that such
purchase shall be subject to the limitations set forth in Sections 3(b) and 13.
The fair market value of a share of the Company's Common Stock shall be
determined as provided in Section 7(b).
(b) The option price per share of the shares offered in a given
Offering Period shall be the lower of: (i) 85% of the fair market value of a
share of the Common Stock of the Company on the Offering Date; or (ii) 85% of
the fair market value of a share of the Common Stock of the Company on the
Purchase Date. The fair market value of the Company's Common Stock on a given
date shall be determined by the Board in its discretion based on the closing
price of the Common Stock for such date (or, in the event that the Common Stock
is not traded on such date, on the immediately preceding trading date), as
reported by the National Association of Securities Dealers Automated Quotation
(Nasdaq) National Market or, if such price is not reported, the mean of the bid
and asked prices per share of the Common Stock as reported by Nasdaq or, in the
event the Common Stock is listed on a stock exchange, the fair market value per
share shall be the closing price on such exchange on such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported in The Wall Street Journal. For purposes of the
Offering Date under the first Offering Period under the Plan, the fair market
value of a share of the Common Stock of the Company shall be the Price to Public
as set forth in the final prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424 under the Securities Act of 1933, as amended.
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8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in paragraph 10, his or her option for the purchase of shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full shares subject to the option will be purchased at the
applicable option price with the accumulated Contributions in his or her
account. The shares purchased upon exercise of an option hereunder shall be
deemed to be transferred to the participant on the Purchase Date. During his or
her lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after each Purchase Date of
each Offering Period, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option or the deposit of such number of shares with
the broker selected by the Company for administration of Plan stock purchases,
as determined by the Company. Any cash remaining to the credit of a
participant's account under the Plan after a purchase by him or her of shares at
the termination of each Purchase Period, or which is insufficient to purchase a
full share of Common Stock of the Company, shall be carried over to the next
Purchase Period if the Employee continues to participate in the Plan, or if the
Employee does not continue to participate, shall be returned to said
participant.
10. Voluntary Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current period will be automatically terminated, and no further
Contributions for the purchase of shares will be made during the Offering
Period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status
as an Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account will be returned to him or her and his or her option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. Automatic Withdrawal. If the fair market value of the shares on the
first Purchase Date of an Offering Period is less than the fair market value of
the shares on the Offering Date for
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such Offering Period, then every participant shall automatically (i) be
withdrawn from such Offering Period at the close of such Purchase Date and after
the acquisition of shares for such Purchase Period, and (ii) be enrolled in the
Offering Period commencing on the first business day subsequent to such Purchase
Period.
12. Interest. No interest shall accrue on the Contributions of a
participant in the Plan.
13. Stock.
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be 300,000 shares
(on a post-split basis), subject to adjustment upon changes in capitalization of
the Company as provided in Section 18. If the total number of shares which would
otherwise be subject to options granted pursuant to Section 7(a) on the Offering
Date of an Offering Period exceeds the number of shares then available under the
Plan (after deduction of all shares for which options have been exercised or are
then outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby and shall similarly
reduce the rate of Contributions, if necessary.
(b) The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. The composition of the committee shall be in accordance with the
requirements to obtain or retain any available exemption from the operation of
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to the end of
a Purchase Period but prior to delivery to him or her of such shares and cash.
In addition, a participant may file a written designation of a beneficiary who
is to receive any cash from the participant's account under the Plan in the
event of such participant's death prior to the Purchase Date of an Offering
Period. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
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(b) Such designation of beneficiary may be changed by the
participant (and his or her spouse, if any) at any time by written notice. In
the event of the death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
16. Transferability. Neither Contributions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10.
17. Use of Funds. All Contributions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such Contributions.
18. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees promptly following the Purchase Date, which statements will set forth
the amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization; Corporate Transactions.
(a) Adjustment. Subject to any required action by the shareholders
of the Company, the number of shares of Common Stock covered by each option
under the Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan but have not
yet been placed under option (collectively, the "Reserves"), as well as the
price per share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option.
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(b) Corporate Transactions. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board. In the event of a proposed sale of all or substantially
all of the assets of the Company, or the merger of the Company with or into
another corporation, each option under the Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
to shorten the Offering Period then in progress by setting a new Purchase Date
(the "New Purchase Date"). If the Board shortens the Offering Period then in
progress in lieu of assumption or substitution in the event of a merger or sale
of assets, the Board shall notify each participant in writing, at least ten (10)
days prior to the New Purchase Date, that the Purchase Date for his or her
option has been changed to the New Purchase Date and that his or her option will
be exercised automatically on the New Purchase Date, unless prior to such date
he or she has withdrawn from the Offering Period as provided in Section 10. For
purposes of this paragraph, an option granted under the Plan shall be deemed to
be assumed if, following the sale of assets or merger, the option confers the
right to purchase, for each share of option stock subject to the option
immediately prior to the sale of assets or merger, the consideration (whether
stock, cash or other securities or property) received in the sale of assets or
merger by holders of Common Stock for each share of Common Stock held on the
effective date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if such
consideration received in the sale of assets or merger was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Board may, with the consent of the successor corporation and
the participant, provide for the consideration to be received upon exercise of
the option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time terminate
or amend the Plan. Except as provided in Section 19, no such termination may
affect options previously granted, nor may an amendment make any change in any
option theretofore granted which adversely affects the rights of any
participant. In addition, to the extent necessary to comply with Rule 16b-3
under the Exchange Act, or under Section 423 of the Code (or any successor rule
or provision or any applicable law or regulation), the Company shall obtain
shareholder approval in such a manner and to such a degree as so required.
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(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan; Effective Date. The Plan shall become effective upon
the earlier to occur of its adoption by the Board of Directors or its approval
by the shareholders of the Company. It shall continue in effect for a term of
twenty (20) years unless sooner terminated under Section 20.
24. Additional Restrictions of Rule 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
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GERON CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the
GERON CORPORATION 1996 Employee Stock Purchase Plan (the "Plan") for the
Offering Period ______________, 19__ to _______________, 19__, and subscribe to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 10% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the
Purchase Date my participation in the Plan as provided in Section 10 of the
Plan. I also understand that I can decrease the rate of my Contributions to not
less than 1% of my Compensation on one occasion only during any Offering Period
by completing and filing a new Subscription Agreement with such decrease taking
effect as of the beginning of the calendar month following the date of filing of
the new Subscription Agreement, if filed at least ten (10) business days prior
to the beginning of such month. Further, I may change the rate of deductions for
future Offering Periods by filing a new Subscription Agreement, and any such
change will be effective as of the beginning of the next Offering Period. In
addition, I acknowledge that, unless I discontinue my participation in the Plan
as provided in Section 10 of the Plan, my election will continue to be effective
for each successive Offering Period.
<PAGE> 64
5. I have received a copy of the Company's most recent description of
the Plan and a copy of the complete "GERON CORPORATION 1996 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
6. Shares purchased for me under the Plan should be issued in the
name(s) of (name of employee or employee and spouse only):
_____________________________________
_____________________________________
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) _____________________________________
(First) (Middle) (Last)
_________________________ _____________________________________
(Relationship) (Address)
_____________________________________
8. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Offering Date (the first day of the
Offering Period during which I purchased such shares) or within 1 year after the
Purchase Date, I will be treated for federal income tax purposes as having
received ordinary compensation income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares on the
Purchase Date over the price which I paid for the shares, regardless of whether
I disposed of the shares at a price less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days after
the date of any such disposition, and I will make adequate provision for
federal, state or other tax withholding obligations, if any, which arise upon
the disposition of the Common Stock. The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the
2-year and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received compensation income only to the
extent of an amount equal to the lesser of (1) the excess of the fair market
value of the shares at the time of such disposition over the purchase price
which I paid for the shares under the option, or (2) 15% of the fair market
value of the
<PAGE> 65
shares on the Offering Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
I understand that this tax summary is only a summary and is subject to
change. I further understand that I should consult a tax advisor concerning the
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
SIGNATURE: ______________________
SOCIAL SECURITY #: ______________
DATE: ___________________________
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
_________________________________
(Signature)
_________________________________
(Print name)
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<PAGE> 66
GERON CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________________, hereby elect to withdraw my
participation in the GERON CORPORATION 1996 Employee Stock Purchase Plan (the
"Plan") for the Offering Period _________. This withdrawal covers all
Contributions credited to my account and is effective on the date designated
below.
I understand that all Contributions credited to my account will be paid
to me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
If the undersigned is an Officer or Director of GERON CORPORATION or
other person subject to Section 16 of the Securities Exchange Act of 1934, the
undersigned further understands that under rules promulgated by the U.S.
Securities and Exchange Commission he or she may not re-enroll in the Plan for a
period of six (6) months after withdrawal.
Dated:___________________ ______________________________
Signature of Employee
______________________________
Social Security Number
<PAGE> 67
APPENDIX C
(not distributed to stockholders)
GERON CORPORATION
1996 DIRECTORS' STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Directors' Stock
Option Plan are to attract and retain the best available personnel for service
as Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be "nonstatutory stock
options".
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Common Stock" shall mean the Common Stock of the
Company.
(d) "Company" shall mean Geron Corporation, a Delaware
corporation.
(e) "Continuous Status as a Director" shall mean the
absence of any interruption or termination of service as a Director.
(f) "Director" shall mean a member of the Board.
(g) "Employee" shall mean any person, including officers
and directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be sufficient
in and of itself to constitute "employment" by the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(i) "Option" shall mean a stock option granted pursuant
to the Plan. All options shall be nonstatutory stock options (i.e., options that
are not intended to qualify as incentive stock options under Section 422 of the
Code).
(j) "Optioned Stock" shall mean the Common Stock subject
to an Option.
(k) "Optionee" shall mean an Outside Director who
receives an Option.
(l) "Outside Director" shall mean a Director who is not
an Employee.
(m) "Parent" shall mean a "parent corporation", whether
now or hereafter existing, as defined in Section 424(e) of the Code.
(n) "Plan" shall mean this 1996 Directors' Stock Option
Plan.
<PAGE> 68
(o) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(p) "Subsidiary" shall mean a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 250,000 Shares (on a post-split basis) (the
"Pool") of Common Stock. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. If Shares which were acquired upon
exercise of an Option are subsequently repurchased by the Company, such Shares
shall not in any event be returned to the Plan and shall not become available
for future grant under the Plan.
4. Administration of and Grants of Options under the Plan.
(a) Administrator. Except as otherwise required herein,
the Plan shall be administered by the Board.
(b) Procedure for Grants. All grants of Options
hereunder shall be automatic and non discretionary and shall be made strictly in
accordance with the following provisions:
(i) No person shall have any discretion to
select which Outside Directors shall be granted Options or to determine the
number of Shares to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically
granted an Option to purchase Shares 25,000 Shares (on a post-split basis) (the
"First Option") on the date on which such person first becomes an Outside
Director, whether through election by the shareholders of the Company or
appointment by the Board of Directors to fill a vacancy.
(iii) Each Outside Director shall be automatically
granted an Option to purchase 5,000 Shares (on a post-split basis) (a
"Subsequent Option") on the date of each Annual Meeting of the Company's
shareholders following which such Outside Director is serving on the Board,
provided that, on such date, he or she shall have served on the Board for at
least six (6) months prior to the date of such Annual Meeting.
(iv) Notwithstanding the provisions of
subsections (ii) and (iii) hereof, in the event that a grant would cause the
number of Shares subject to outstanding Options plus the number of Shares
previously purchased upon exercise of Options to exceed the Pool, then each such
automatic grant shall be for that number of Shares determined by dividing the
total number of Shares remaining available for grant by the number of Outside
Directors receiving an Option on such date on the automatic grant date. Any
further grants shall then be deferred until such time, if
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<PAGE> 69
any, as additional Shares become available for grant under the Plan through
action of the shareholders to increase the number of Shares which may be issued
under the Plan or through cancellation or expiration of Options previously
granted hereunder.
(v) Notwithstanding the provisions of
subsections (ii) and (iii) hereof, any grant of an Option made before the
Company has obtained shareholder approval of the Plan in accordance with Section
17 hereof shall be conditioned upon obtaining such shareholder approval of the
Plan in accordance with Section 17 hereof.
(vi) The terms of each First Option granted
hereunder shall be as follows:
(1) the First Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Section 9 hereof.
(2) the exercise price per Share shall
be 100% of the fair market value per Share on the date of grant of the First
Option, determined in accordance with Section 8 hereof.
(3) the First Option shall become
exercisable in installments cumulatively as to 33 1/3% of the Shares subject to
the First Option on each of the first, second and third anniversaries of the
date of grant of the Option.
(vii) The terms of each Subsequent Option granted
hereunder shall be as follows:
(1) the Subsequent Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Section 9 hereof.
(2) the exercise price per Share shall
be 100% of the fair market value per Share on the date of grant of the
Subsequent Option, determined in accordance with Section 8 hereof.
(3) the Subsequent Option shall become
exercisable as to one hundred percent 100% of the Shares subject to the
Subsequent Option on the first anniversary of the date of grant of the
Subsequent Option.
(c) Powers of the Board. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock; (ii) to
determine the exercise price per share of Options to be granted, which exercise
price shall be determined in accordance with Section 8(a) of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
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<PAGE> 70
(d) Effect of Board's Decision. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Optionees and any other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the President
or his or her designee reasonably believes that an Optionee has committed an act
of misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the Outside
Director accused of such misconduct). If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Company, breach of fiduciary duty or deliberate disregard of the
Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any option whatsoever. In making such determination, the
Board of Directors (excluding the Outside Director accused of such misconduct)
shall act fairly and shall give the Optionee an opportunity to appear and
present evidence on Optionee's behalf at a hearing before the Board or a
committee of the Board.
5. Eligibility. Options may be granted only to Outside
Directors. All Options shall be automatically granted in accordance with the
terms set forth in Section 4(b) hereof. An Outside Director who has been granted
an Option may, if he or she is otherwise eligible, be granted an additional
Option or Options in accordance with such provisions.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his or her directorship at any time.
6. Term of Plan; Effective Date. The Plan shall become effective
on the effectiveness of the registration statement under the Securities Act of
1933 relating to the Company's initial public offering of securities. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Options. The term of each Option shall be ten (10)
years from the date of grant thereof.
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<PAGE> 71
8. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be 100% of the fair
market value per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value shall be
determined by the Board; provided, however, that where there is a public market
for the Common Stock, the fair market value per Share shall be the mean of the
bid and asked prices of the Common Stock in the over-the-counter market on the
date of grant, as reported in The Wall Street Journal (or, if not so reported,
as otherwise reported by the National Association of Securities Dealers
Automated Quotation ("Nasdaq") System) or, in the event the Common Stock is
traded on the Nasdaq National Market or listed on a stock exchange, the fair
market value per Share shall be the closing price on such system or exchange on
the date of grant of the Option, as reported in The Wall Street Journal. With
respect to any Options granted hereunder concurrently with the initial
effectiveness of the Plan, the fair market value shall be the Price to Public as
set forth in the final prospectus relating to such initial public offering.
(c) Form of Consideration. The consideration to be paid
for the Shares to be issued upon exercise of an Option shall consist entirely of
cash, check, other Shares of Common Stock having a fair market value on the date
of surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised (which, if acquired from the Company, shall have
been held for at least six months), or any combination of such methods of
payment and/or any other consideration or method of payment as shall be
permitted under applicable corporate law.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4(b) hereof; provided, however, that no Options shall be exercisable
prior to shareholder approval of the Plan in accordance with Section 17 hereof
has been obtained.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may consist of any consideration and
method of payment allowable under Section 8(c) of the Plan. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.
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<PAGE> 72
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Status as a Director. If an Outside
Director ceases to serve as a Director, he or she may, but only within ninety
(90) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (which he or
she was entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. Notwithstanding Section 9(b)
above, in the event a Director is unable to continue his or her service as a
Director with the Company as a result of his or her total and permanent
disability (as defined in Section 22(e)(3) of the Internal Revenue Code), he or
she may, but only within six (6) months (or such other period of time not
exceeding twelve (12) months as is determined by the Board) from the date of
such termination, exercise his or her Option to the extent he or she was
entitled to exercise it at the date of such termination. Notwithstanding the
foregoing, in no event may the Option be exercised after its term set forth in
Section 7 has expired. To the extent that he or she was not entitled to exercise
the Option at the date of termination, or if he or she does not exercise such
Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an
Optionee:
(i) During the term of the Option who is, at the
time of his or her death, a Director of the Company and who shall have been in
Continuous Status as a Director since the date of grant of the Option, the
Option may be exercised, at any time within six (6) months following the date of
death, by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that would have accrued had the Optionee continued living and
remained in Continuous Status as Director for twelve (12) months (or such lesser
period of time as is determined by the Board) after the date of death.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired.
(ii) Within three (3) months after the
termination of Continuous Status as a Director, the Option may be exercised, at
any time within six (6) months following the date of death, by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent of the right to exercise that had accrued
at the date of termination. Notwithstanding the foregoing, in no event may the
option be exercised after its term set forth in Section 7 has expired.
10. Nontransferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution or pursuant to a
qualified domestic relations order (as defined by the Code or the rules
thereunder). The designation of a beneficiary by an Optionee does not constitute
a transfer.
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<PAGE> 73
An Option may be exercised during the lifetime of an Optionee only by the
Optionee or a transferee permitted by this Section.
11. Adjustments Upon Changes in Capitalization; Corporate
Transactions.
(a) Adjustment. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, and the number of shares of Common Stock to be granted under the
provisions set forth in Section 4 of the Plan, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Corporate Transactions. In the event of (i) a
dissolution or liquidation of the Company, (ii) a sale of all or substantially
all of the Company's assets, (iii) a merger or consolidation in which the
Company is not the surviving corporation, or (iv) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, the Company shall give to the Eligible
Director, at the time of adoption of the plan for liquidation, dissolution,
sale, merger, consolidation or reorganization, either a reasonable time
thereafter within which to exercise the Option, including Shares as to which the
Option would not be otherwise exercisable, prior to the effectiveness of such
liquidation, dissolution, sale, merger, consolidation or reorganization, at the
end of which time the Option shall terminate, or the right to exercise the
Option, including Shares as to which the Option would not be otherwise
exercisable (or 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 liquidation, dissolution, sale,
merger, consolidation or reorganization.
12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date determined in accordance with Section 4(b)
hereof. Notice of the determination shall be given to each Outside Director to
whom an Option is so granted within a reasonable time after the date of such
grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that, to the extent necessary and desirable to comply with
Rule 16b-3 under the Exchange Act (or any other
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<PAGE> 74
applicable law or regulation), the Company shall obtain approval of the
shareholders of the Company to Plan amendments to the extent and in the manner
required by such law or regulation. Notwithstanding the foregoing, the
provisions set forth in Section 4 of this Plan (and any other Sections of this
Plan that affect the formula award terms required to be specified in this Plan
by Rule 16b-3) shall not be amended more than once every six months, other than
to comport with changes in the Code, the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder.
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan that would impair the rights of any
Optionee shall not affect Options already granted to such Optionee and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan. Inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written
option agreements in such form as the Board shall approve.
17. Shareholder Approval. Continuance of the Plan shall be subject
to approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option hereunder.
If such shareholder approval is obtained at a duly held shareholders' meeting,
it may be obtained by the affirmative vote of the holders of a majority of the
outstanding shares of the Company present or represented and entitled to vote
thereon. If such shareholder approval is obtained by written consent, it may be
obtained by the written consent of the holders of a majority of the outstanding
shares of the Company. Options may be granted, but not exercised, before such
shareholder approval.
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<PAGE> 75
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GERON CORPORATION
1997 ANNUAL MEETING OF STOCKHOLDERS
PROXY
The undersigned stockholder of Geron Corporation, a Delaware
corporation, (the "Company") hereby acknowledges receipt of the Notice of
Annual Meeting of Stockholders and Proxy Statement, each dated April 17, 1997,
and hereby appoints Ronald W. Eastman and David L. Greenwood, or either of
them, as proxies and attorneys-in-fact with full power to each of substitution,
on behalf and in the name of the undersigned, to represent the undersigned at
the 1997 Annual Meeting of Stockholders of Geron Corporation to be held on May
23, 1997, at 9:00 a.m., at the headquarters of the Company at 230 Constitution
Drive, Menlo Park, California 94025, and at any adjournment(s) or
postponement(s) thereof, and to vote all shares of Common Stock that the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth on the reverse side, and in their discretion, upon such
other matter or matters that may properly come before the meeting and any
adjournment(s) thereof.
This proxy will be voted as directed or, if no contrary direction is
indicated, will be voted as follows: (1) for the election of the three Class I
Directors to serve for a term of three years; (2) for the approval and
ratification of an amendment to the Company's 1992 Stock Option Plan, to
increase the number of shares of Common Stock reserved for issuance thereunder
by 800,000 shares and as said proxies deem advisable on such other matters as
may come before the meeting; (3) for ratification of the selection of Ernst &
Young LLP as independent auditors.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE> 76
NOTE: This Proxy should be marked, dated, signed by the stockholder(s) exactly
as his or her name appears hereon, and returned in the enclosed envelope.
/X/ PLEASE MARK YOUR
VOTES IN THIS
EXAMPLE
<TABLE>
<CAPTION>
FOR ALL NOMINEES WITHHOLD AUTHORITY TO
LISTED TO THE RIGHT VOTE FOR ALL NOMINEES
(EXCEPT AS INDICATED) LISTED TO THE RIGHT
<S> <C> <C>
1. Election of / / / /
Class I Directors
/ / / /
Nominees: CHARLES M. HART
MICHAEL D. WEST
JOHN P. WALKERMAN
If you wish to withhold authority to vote for
any individual nominee, strike a line through
that individual's name.
FOR AGAINST ABSTAIN
2. To approve and ratify an amendment to the
Company's 1992 Stock Option Plan / / / / / /
to increase the number of shares of Common
Stock reserved for issuance thereunder by
800,000 shares.
FOR AGAINST ABSTAIN
3. To ratify the selection of Ernst & Young LLP
as the Company's independent auditors for / / / / / /
the fiscal year ending December 31, 1997.
</TABLE>
SIGNATURE(S)____________________________________________________ DATE _________
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
