<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>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] 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
Geron logo
GERON CORPORATION
230 CONSTITUTION DRIVE
MENLO PARK, CA 94025
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 2000
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
26, 2000, 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 Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock
from 35,000,000 shares to 50,000,000 shares.
3. 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 500,000 shares.
4. To ratify the selection of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000.
5. 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 Monday, April 24,
2000, 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
/s/ David L. Greenwood
David L. Greenwood
Secretary
Menlo Park, California
April , 2000
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 26, 2000, 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 28, 2000 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, or other regular employees of the
Company or, at the Company's request, Corporate Investor Communications, Inc. No
additional compensation will be paid to directors, officers or other regular
employees for such services, but Corporate Investor Communications, Inc. will be
paid its customary fee, estimated to be $5,500, if it renders solicitation
services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on Monday,
April 24, 2000, (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 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, except with respect to Proposal 2, but are not counted for any purpose
in determining whether a particular matter has been approved. With respect to
Proposal 2, broker non-votes will have the same effect as negative votes.
VOTING VIA THE INTERNET OR BY TELEPHONE
Most beneficial owners whose stock is held in street name receive voting
instruction forms from their banks, brokers, or other agents, rather than the
Company's proxy card.
A number of brokers and banks are participating in a program provided
through ADP Investor Communication Services that offers telephone and Internet
voting options. If your shares are held in an account with a broker or bank
participating in the ADP Investor Communication Services program, you may
<PAGE> 4
vote those shares telephonically by calling the telephone number shown on the
voting form received from your broker or bank, or via the Internet at ADP
Investor Communication Services' voting web site http://www.proxyvote.com.
Submitting your proxy via the Internet or by telephone will not affect your
right to vote in person should you decide to attend the Annual Meeting.
The telephone and Internet voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their voting
instructions and to confirm that stockholders' instruction have been recorded
properly. Stockholders voting via the Internet should understand that there may
be costs associated with electronic access, such as usage charges from Internet
access providers and telephone companies, that must be borne by the stockholder.
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.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 2001 Annual Meeting of Stockholders must be received by the Company
not later than January 10, 2001 in order to be included in the proxy statement
and proxy relating to that Annual Meeting. Stockholders wishing to submit
proposals or director nominations that are to be included in such proxy
statement and proxy must do so not less than 10 nor more than 60 days prior to
the date of the meeting.
MATTERS TO BE CONSIDERED AT THE 2000 ANNUAL MEETING
PROPOSAL 1
ELECTION OF DIRECTORS
Geron has three classes of director; 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 2001 Annual
Meeting. Class III consists of two directors who will be elected at the 2002
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 2003 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.
2
<PAGE> 5
NOMINEES FOR CLASS I DIRECTORS (TERM ENDING IN 2003)
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION/POSITION WITH THE COMPANY
---- --- ----------------------------------------------
<S> <C> <C>
Gary L. Neil, Ph.D. ...................... 59 President and Chief Executive Officer,
Crescendo Pharmaceutical Corp.
Thomas B. Okarma, Ph.D., M.D. ............ 54 President and Chief Executive Officer
John P. Walker............................ 51 President and Chief Executive Officer, Axys
Pharmaceuticals, Inc.
</TABLE>
GARY L. NEIL, PH.D., has served as a Director of the Company since
September 1998. Dr. Neil is also a director of Crescendo Pharmaceutical
Corporation, Allergen Specialty Therapeutics, Inc. and Signal Pharmaceuticals,
Inc. He also has been the President and Chief Executive Officer of Crescendo
Pharmaceuticals since its inception in September 1997. From 1993 to 1997, he was
the President and Chief Executive Officer of Therapeutic Discovery Corporation
which was formed by ALZA Corporation and purchased by them in 1997. From 1989 to
1993, Dr. Neil served as Executive Vice President of American Home Products'
subsidiary Wyeth-Ayerst Research where he led Wyeth-Ayerst's worldwide
pharmaceutical research and development organization. Prior to joining American
Home Products, Dr. Neil served 23 years at The Upjohn company in a number of
scientific and management positions. Dr. Neil holds a B.Sc. in Chemistry from
Queen's University, Canada and a Ph.D. in Organic Chemistry from California
Institute of Technology.
THOMAS B. OKARMA, PH.D., M.D., has served as Geron's President, Chief
Executive Officer and Director since July 1999. He is also a director of Geron
Bio-Med Limited, a United Kingdom company. From May 1998 until July 1999, Dr.
Okarma was Vice President of Research and Development. From December 1997 until
May 1998, Dr. Okarma was Vice President of Cell Therapies. From 1985 until
joining Geron, Dr. Okarma, the scientific founder of Applied Immune Sciences,
Inc., served initially as its Vice President of Research and Development and
then as its Chairman and Chief Executive Officer until 1995 when it was acquired
by Rhone-Poulenc Rorer. Dr. Okarma was a Senior Vice President at Rhone-Poulenc
Rorer from the time of the acquisition of Applied Immune Sciences, Inc. until
December 1996. From 1980 to 1985, Dr. Okarma was a member of the faculty of the
Department of Medicine at Stanford University School of Medicine. Dr. Okarma
holds a A.B. from Dartmouth College and a M.D. and Ph.D. from Stanford
University.
JOHN P. WALKER has served as a Director of the Company since April 1997. He
is currently Chairman and Chief Executive Officer and a director of Axys
Pharmaceuticals, Inc., which is the corporation that resulted from the merger of
Arris Pharmaceutical Corporation and Sequana Therapeutics, Inc. Mr. Walker is
also a director of Microcide Pharmaceuticals. From 1993 to 1997, he was
President, Chief Executive Officer and a director of Arris Pharmaceutical
Corporation. Prior to his association with Arris, Mr. Walker was the Chairman
and Chief Executive Officer of Vitaphore Corporation, a biomaterials company
that was sold to Union Carbide Chemicals and Plastics Company Inc. in 1990. 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 holds a B.A. from the
State University of New York at Buffalo and conducted graduate business studies
at Northwestern University Institute for Management.
3
<PAGE> 6
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 2001)
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION/POSITION WITH THE COMPANY
---- --- ----------------------------------------------
<S> <C> <C>
Ronald W. Eastman......................... 47 President, EdeNet Communications, Inc.
Thomas D. Kiley, Esq...................... 56 Attorney-at-law
Edward V. Fritzky......................... 49 Chief Executive Officer and Chairman, Immunex
Corporation
</TABLE>
RONALD W. EASTMAN has served as a Director of the Company since May 1993.
He is President of EdeNet Communications, Inc., a company providing internet and
intranet based educational and entertainment services to hospital patients and
physicians. From May 1993 to July 1999, Mr. Eastman served as President and
Chief Executive Officer of the Company. From 1978 until May 1993, 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. Mr. Kiley is also a director Pharmacyclics, Inc., Connetics
Corp., Cardiogenesis Corporation and certain privately held biotechnology and
other companies. 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 at the firm from 1975 to 1980. Mr. Kiley holds a B.S. in
Chemical Engineering from Pennsylvania State University and a J.D. from George
Washington University.
EDWARD V. FRITZKY has served as a Director of the Company since July 1998.
He has served as Chief Executive Officer and Chairman of Immunex Corporation
since January 1994. Mr. Fritzky is also a director of Sonosite, Inc. Mr. Fritzky
served as President of Lederle Laboratories, a division of American Cyanamid,
from 1992 to 1994, and as Vice President of Lederle Laboratories from 1989 to
1992. Prior to joining Lederle Laboratories, Mr. Fritzky was an executive of
Searle Pharmaceuticals, Inc., a subsidiary of the Monsanto Company. During his
tenure at Searle, Mr. Fritzky was Vice President of Marketing in the United
States, and later President and General Manager of Searle Canada, Inc. and Lorex
Pharmaceuticals, a joint venture company. Mr. Fritzky holds a B.A. from Duquesne
University and is a graduate of the Advanced Executive Program, J.L. Kellogg
Graduate School of Management at Northwestern University.
CLASS III DIRECTORS (TERM ENDING IN 2002)
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION/POSITION WITH THE COMPANY
---- --- ----------------------------------------------
<S> <C> <C>
Alexander E. Barkas, Ph.D. ............... 52 General Partner, Prospect Venture Partners
Robert B. Stein, M.D., Ph.D. ............. 49 Executive Vice President, Research &
Preclinical Development, DuPont
Pharmaceuticals
</TABLE>
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. Dr. Barkas is also a
director of Connetics Corp. and several privately held medical technology
companies. From March 1992 until May 1993, he served as President and Chief
Executive Officer of the Company. He is a founding partner of Prospect Venture
Partners, a venture capital investment firm formed in October 1997. Dr. Barkas
was a partner with Kleiner Perkins Caufield & Byers, a venture capital
investment firm, from 1991 to October 1997. He holds a B.A. from Brandeis
University and Ph.D. from New York University.
4
<PAGE> 7
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 DuPont Pharmaceuticals. 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, 1999, the Board of Directors held
seven meetings. The Board has an Audit Committee, a Compensation Committee and a
Stock Option Committee. During the fiscal year ended December 31, 1999, all
directors attended at least 75% of the meetings of the Board and the committees,
on which he served, 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. The Audit Committee, which is comprised of Dr. Barkas and Mr.
Kiley, met in April 1999 in connection with the audit of the 1998 financial
statements.
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. Walker, met five times during fiscal 1999 and acted by written
consent on four occasions during fiscal 1999.
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, Dr.
Okarma. The Stock Option Committee has limited authority to administer the
Company's 1992 Stock Option Plan concurrently with the Compensation Committee.
The Stock Option Committee has the authority to grant options for up to 20,000
shares of Common Stock to employees and consultants in accordance with
procedures approved by the Board of Directors. The Stock Option Committee acted
by written consent on 15 occasions during fiscal 1999.
COMPENSATION OF DIRECTORS
Directors currently receive $1,000 for each board meeting attended and are
reimbursed for out-of-pocket expenses incurred in connection with attendance at
meetings of the Board of Directors.
Each non-employee director received periodic option grants for shares of
Common Stock pursuant to the Company's 1996 Directors' Stock Option Plan, as
amended (the "Directors Plan"). 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 purpose of the Directors Plan is to provide an incentive for directors
to continue to serve the Company as directors and to assist the Company in
recruiting highly qualified individuals when vacancies occur on the Board of
Directors.
5
<PAGE> 8
TERMS OF OPTIONS
The following is a description of the principal terms of options granted
under the Directors Plan.
Option Grants. The Directors Plan provides that each person who becomes a
non-employee director after the effective date of the Directors Plan shall be
automatically granted a First Option to purchase 35,000 shares of Common Stock
on the date on which such person first becomes a non-employee director, whether
through election by the stockholders of the Company or appointment by the Board
of Directors to fill a vacancy. A Subsequent Option granted to non-employee
directors, other than the Chairman of the Board of Directors, to purchase 5,000
shares is automatically granted under the Directors Plan to each non-employee
director on the anniversary date of the election of the non-employee director to
the Board. The Subsequent Option granted to the Chairman of the Board of
Directors is for 10,000 shares. In the event that a director terminates his or
her service to the Board of Directors prior to the next anniversary date of his
or her election or appointment, he or she will be granted a prorated Subsequent
Option reflecting the period of service since the last anniversary date. A
Re-election Option to purchase 15,000 shares is granted to each non-employee
director upon such director's re-election to a subsequent three-year term on the
Board of Directors.
The Directors Plan provides for neither a maximum nor a minimum number of
shares subject to options that may be granted to any one non-employee director,
but does provide for the number of shares that may be included in any grant and
the method of making a grant. No option granted under the Directors Plan is
transferable by the optionee other than by will or the laws of descent or
distribution or pursuant to the terms of a qualified domestic relations order
(as defined by the Internal Revenue Code of 1986, as amended (the "Code")), and
each option is exercisable, during the lifetime of the optionee, only by such
optionee.
The Directors Plan provides that each First Option granted thereunder
becomes exercisable in installments cumulatively as to one-third of the shares
subject to the First Option on each of the first, second and third anniversaries
of the date of grant of the First Option, as to 100% of the Shares subject to
each Subsequent Option on the date of grant of each Subsequent Option and in
installments cumulatively as to one-third of shares subject to each Re-election
Option on each of the first, second and third anniversaries of the date of grant
of such Re-election Option. The options remain exercisable for up to 90 days
following the optionee's termination of service as a director of the Company,
unless such termination is a result of death or disability, in which case the
options remain exercisable for up to a six-month period.
Exercise Price and Term of Options. The exercise price of all stock options
granted under the Directors Plan shall be equal to the fair market value of a
share of the Company's Common Stock on the date of grant of the option, which is
defined to be the closing sale price of the Company's Common Stock on the Nasdaq
National Market on the date of grant. Options granted under the Directors Plan
have a term of ten years.
During 1999, options to purchase 5,000 shares each were issued to Mr.
Fritzky, Mr. Kiley, Dr. Neil, Dr. Stein, and Mr. Walker in connection with their
anniversary dates under the Directors Plan. Options to purchase 10,000 shares
were issued to Dr. Barkas, as Chairman of the Board, in connection with his
anniversary date. Also during 1999, options to purchase 15,000 shares each were
issued to Dr. Stein and Dr. Barkas in connection with their re-election to the
Board at the 1999 Annual Meeting under the Directors Plan. In addition, options
to purchase 40,000 shares were issued to Dr. Barkas under the Company's 1992
Stock Option Plan in connection with his services to the Company as Chairman of
the Board.
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
6
<PAGE> 9
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.
PROPOSAL 2
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Restated Certificate of Incorporation to increase the
Company's authorized number of shares of Common Stock from 35,000,000 shares to
50,000,000 shares.
The additional Common Stock to be authorized by adoption of the amendment
would have rights identical to the currently outstanding Common Stock of the
Company. Adoption of the proposed amendment and issuance of the Common Stock
would not affect the rights of the holders of currently outstanding Common
Stock, except for effects incidental to increasing the number of shares of the
Common Stock outstanding, such as dilution of the earnings per share and voting
rights of current holders of Common Stock. If the amendment is adopted, it will
become effective upon filing of a Certificate of Amendment of the Company's
Restated Certificate of Incorporation, in the form of Appendix 1 hereto, with
the Secretary of State of the State of Delaware.
In addition to the shares of Common Stock outstanding at
April 24, 2000, the Board has reserved shares for issuance upon
exercise of options and rights granted under the Company's stock option and
stock purchase plans, up to approximately shares of Common Stock
which may be issued upon conversion of outstanding debentures, exercise of
warrants and future milestone obligations.
Although at present the Board of Directors has no plans to issue additional
shares of Common Stock other than as described above, it desires to have such
shares available to provide additional flexibility to use its capital stock for
business and financial purposes in the future. The additional shares may be
used, without further stockholder approval, for various purposes including,
without limitation, raising capital, providing equity incentives to employees,
officers or directors, establishing strategic relationships with other companies
and expanding the Company's business through the acquisition of other businesses
or technologies.
The additional shares of Common Stock that would become available for
issuance if the proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. For example, without further stockholder approval,
the Board could adopt a "poison pill" which would, under certain circumstances
related to an acquisition of shares not approved by the Board of Directors, give
certain holders the right to acquire additional shares of Common Stock at a low
price, or the Board could strategically sell shares of Common Stock in a private
transaction to purchasers who would oppose a takeover or favor the current
Board. Although this proposal to increase the authorized Common Stock has been
prompted by business and financial considerations and not by the threat of any
hostile takeover attempt (nor is the Board currently aware of any such attempts
directed at the Company), nevertheless, stockholders should be aware that
approval of this proposal could facilitate future efforts by the Company to
deter or prevent changes in control of the Company, including transactions in
which the stockholders might otherwise receive a premium for their shares over
then current market prices.
7
<PAGE> 10
REQUIRED VOTE
Stockholders are requested in this Proposal 2 to approve this amendment to
the Company's Restated Certificate of Incorporation. The affirmative vote of the
holders of a majority of the outstanding shares of Common Stock will be required
to approve the proposal. Therefore, abstentions and broker non-votes will have
the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2
PROPOSAL 3
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 500,000 shares. In March
2000, 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 5,444,362 to 5,944,362 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, 1999, a total of 5,144,362 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 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 2000, a total of 5,444,362 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 24, 2000, options to purchase a total of shares
were outstanding under the Stock Option Plan (net of canceled or expired
options), and shares remained available for future grants under
the Stock Option Plan. As of April 24, 2000, the aggregate fair market value of
shares subject to outstanding options under the Stock Option Plan was
$ , based upon the closing price of the Common Stock on the Nasdaq
National Market.
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 implications, which will be in effect if
the proposed amendment to the Stock Option Plan is approved. 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
of the Company at the Company's principal executive offices at 230 Constitution
Drive, Menlo Park, California 94025.
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 April 24, 2000, five executive
officers and approximately 110 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.
8
<PAGE> 11
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 affiliate 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 affiliate
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 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 shares 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 5,444,362 shares (5,944,362 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
2000. 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.
9
<PAGE> 12
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 March 27, 2000, the closing sales price of a share of the Company's Common
Stock as reported on the Nasdaq National Market was $32.13 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
12.5% of the total number of shares after the six month period from the date of
grant, and approximately 2.08% each month thereafter. Under certain
circumstances, options may be exercised prior to vesting, subject to the
Company's right to repurchase shares subject to such option at the exercise
price paid per share. The Company's repurchase rights would 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 Company to such optionee or by permitting such
optionee to pay the exercise price in installments over a period of years.
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
10
<PAGE> 13
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 Stock Option Plan, (ii) the maximum 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
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 amendment or modification
shall, without the consent of the holders, adversely affect the rights and
obligations with respect to options 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.
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, 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
11
<PAGE> 14
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. If both of these holding periods are not satisfied, the optionee will
recognize ordinary income equal to the difference between the exercise price and
the lower of the fair market value of the stock at the date of the option
exercise or the sale price of the stock. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any 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 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. For individual taxpayers, the current maximum U.S. federal income
tax on long-term capital gains is 20% (in the case of shares held more than one
year after exercise), whereas the maximum rate on other income is 39.6%. 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, 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 by the optionee or out of the optionee's current
earnings. Upon resale of such shares by the optionee, any difference between the
sales price and the fair market value of the shares as of the date of exercise
of the option will be treated under U.S. tax laws as capital gain or loss, and
will qualify for long-term capital gain or loss treatment if the shares have
been held for more than one year from the date of exercise.
The exercise of an incentive stock option may subject the optionee to
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 or a surviving spouse, $33,750 for unmarried
individual returns and $22,500 in the case of married taxpayers filing
separately or an estate or trust (which exemption amounts are phased out for
upper income taxpayers). Alternative minimum tax will be due if the tax
determined under the foregoing formula exceeds the regular tax of the taxpayer
for the year.
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 Code 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 Chief Executive
12
<PAGE> 15
Officer 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).
NEW 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 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. 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, 1999 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
SUBJECT TO STOCK
WEIGHTED AVERAGE AWARDS GRANTED IN
NAME AND POSITION EXERCISE PRICE FISCAL 1999
----------------- ---------------- -----------------
<S> <C> <C>
Thomas B. Okarma, Ph.D., M.D. .............................. $11.07 335,000
President and Chief Executive Officer
Ronald W. Eastman(1)........................................ $11.69 15,000
Former President and Chief Executive Officer
David L. Greenwood.......................................... $11.57 95,000
Chief Financial Officer, Senior Vice President of
Corporate Development, Treasurer, and Secretary
Elaine R. Hamilton(2)....................................... $ 0.00 0
Vice President of Human Resources
Calvin B. Harley, Ph.D...................................... $11.83 45,000
Chief Scientific Officer
Jane S. Lebkowski, Ph.D..................................... $11.40 55,000
Vice President of Cell and Gene Therapies
Richard L. Tolman, Ph.D. ................................... $11.25 40,000
Vice President of Drug Discovery
All Executive Officers as a group (9 persons)............... $11.15 730,000
All Non-Executive Officer Directors as a Group (6
persons).................................................. $11.85 105,000
All Non-Executive Officer Employees as a Group (95
persons).................................................. $11.45 377,350
</TABLE>
- ---------------
(1) Mr. Eastman separated employment from the Company in July 1999. He remains a
Director of the Company.
(2) Ms. Hamilton resigned from the Company in November 1999.
13
<PAGE> 16
REQUIRED VOTE
Stockholders are requested in this Proposal 3 to approve the amendment to
the Stock Option Plan to increase the number of shares reserved for issuance
thereunder by 500,000 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3
PROPOSAL 4
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, 2000 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4
14
<PAGE> 17
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 15, 2000 by: (i) each
current 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 (v) 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>
Alexander E. Barkas, Ph.D.(2)............................... 85,128 *
Ronald W. Eastman(3)........................................ 341,908 1.60%
Edward V. Fritzky(4)........................................ 16,550 *
Thomas D. Kiley, Esq.(5).................................... 77,600 *
Gary L. Neil(6)............................................. 3,300 *
Robert B. Stein, M.D., Ph.D.(7)............................. 13,300 *
John P. Walker(8)........................................... 16,900 *
David L. Greenwood(9)....................................... 176,237 *
Elaine R. Hamilton(10)...................................... 2,492 *
Calvin B. Harley, Ph.D.(11)................................. 163,440 *
Jane Lebkowski, Ph.D.(12)................................... 25,876 *
Thomas B. Okarma, Ph.D., M.D.(13)........................... 188,007 *
Richard L. Tolman, Ph.D.(14)................................ 17,396 *
3i plc, 91 Waterloo Road,
London, United Kingdom SE1 8XP............................ 1,240,000 5.86%
All directors and executive officers as a group (13
persons).................................................. 1,128,134 5.09%
</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 15, 2000
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) Includes 28,593 shares held directly by Alexander E. Barkas, 882 shares
held by Lynda Wijcik, the spouse of Dr. Barkas, and 55,653 shares issuable
upon the exercise of outstanding options held by Dr. Barkas exercisable
within 60 days of March 15, 2000, at which date 55,653 shares were fully
vested.
(3) Includes an aggregate of 13,000 shares held by Patricia Eastman, the spouse
of Ronald W. Eastman, as custodian for Mr. Eastman's three minor children.
Also includes 65,941 shares held directly by Mr. Eastman and 262,967 shares
issuable upon the exercise of outstanding options held by Mr. Eastman
exercisable within 60 days of March 15, 2000, at which date 250,002 shares
were fully vested. Mr. Eastman separated employment from the Company in
July 1999. He remains a Director of the Company.
(4) Represents 16,550 shares issuable upon the exercise of outstanding options
held by Edward V. Fritzky exercisable within 60 days of March 15, 2000, at
which date 16,550 shares were fully vested.
(5) Includes 7,352 shares held directly by Thomas D. Kiley, 9,705 shares held
by the Kiley Family Partnership and 14,302 shares held by the Thomas D.
Kiley and Nancy L.M. Kiley Revocable Trust under Agreement dated August 7,
1981. Also includes 46,241 shares issuable upon the exercise of outstanding
options held by Mr. Kiley exercisable within 60 days of March 15, 2000, at
which date 44,893 shares were fully vested.
15
<PAGE> 18
(6) Represents 3,300 shares issuable upon the exercise of outstanding options
held by Gary L. Neil exercisable within 60 days of March 15, 2000, at which
date 3,300 shares were fully vested.
(7) Represents 13,300 shares issuable upon the exercise of outstanding options
held by Robert B. Stein exercisable within 60 days of March 15, 2000, at
which date 13,300 shares were fully vested.
(8) Represents 16,900 shares issuable upon the exercise of outstanding options
held by John P. Walker exercisable within 60 days of March 15, 2000, at
which date 16,900 shares were fully vested.
(9) Represents 176,237 shares issuable upon the exercise of outstanding options
held by Mr. Greenwood exercisable within 60 days of March 15, 2000, at
which date 166,897 shares were fully vested.
(10) Includes 2,492 shares held directly by Elaine R. Hamilton and no shares
issuable upon the exercise of outstanding options held by Ms. Hamilton
exercisable within 60 days of March 15, 2000. Ms. Hamilton resigned from
the Company in November 1999.
(11) Includes 23,185 shares held by the Harley Family Trust and 140,255 shares
issuable upon the exercise of outstanding options held by Dr. Harley
exercisable within 60 days of March 15, 2000, at which date 136,479 shares
were fully vested.
(12) Represents 25,876 shares issuable upon the exercise of outstanding options
held by Jane S. Lebkowski exercisable within 60 days of March 15, 2000, at
which date 25,876 shares were fully vested.
(13) Represents 188,007 shares issuable upon the exercise of outstanding options
held by Thomas B. Okarma exercisable within 60 days of March 15, 2000, at
which date 188,007 shares were fully vested.
(14) Represents 17,396 shares issuable upon the exercise of outstanding options
held by Richard L. Tolman exercisable within 60 days of March 15, 2000, at
which date 17,396 shares were fully vested.
16
<PAGE> 19
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 $100,000 (the "Named Executive Officers") for services rendered in all
capacities to the Company for each of the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(1)($) OPTIONS(#)
--------------------------- ---- --------- -------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Thomas B. Okarma Ph.D., M.D.(2)............... 1999 $277,590 $41,540 $ -- 335,000
President and Chief Executive Officer 1998 231,615 60,180 -- 370,000
1997 16,250 -- -- 150,000
Ronald W. Eastman(3).......................... 1999 310,199 -- -- 15,000
Former President and Chief Executive Officer 1998 295,000 78,180 -- 325,297
1997 257,300 46,300 30,000 230,000
David L. Greenwood............................ 1999 240,000 35,900 12,000 95,000
Chief Financial Officer, Senior Vice 1998 205,000 62,280 30,000 241,341
President of Corporate Development,
Treasurer, 1997 198,800 38,800 64,370 165,000
and Secretary
Elaine R. Hamilton(4)......................... 1999 126,550 -- -- --
Vice President of Human Resources 1998 87,500 19,250 -- 90,000
Calvin B. Harley, Ph.D........................ 1999 239,200 35,880 -- 45,000
Chief Scientific Officer 1998 223,750 58,190 -- 194,805
1997 180,600 41,500 18,000 125,000
Jane S. Lebkowski, Ph.D.(5)................... 1999 173,333 25,930 -- 55,000
Vice President of Cell and Gene Therapies 1998 109,128 36,740 -- 80,000
Richard L. Tolman, Ph.D.(6)................... 1999 181,667 27,170 79,891 40,000
Vice President of Drug Discovery 1998 15,000 25,000 2,190 35,000
</TABLE>
- ---------------
(1) Other annual compensation consists of monthly housing allowances and
relocation allowances.
(2) Dr. Okarma joined the Company in December 1997. He was promoted to President
and Chief Executive Officer in July 1999.
(3) Mr. Eastman separated employment from the Company in July 1999. Mr. Eastman
remains a Director of the Company.
(4) Ms. Hamilton resigned from the Company in November 1999.
(5) Dr. Lebkowski joined the Company in April 1998. She was promoted to Vice
President of Cell and Gene Therapies in August 1999.
(6) Dr. Tolman joined the Company in December 1998. He was promoted to Vice
President of Drug Discovery in August 1999.
17
<PAGE> 20
STOCK OPTION GRANTS IN FISCAL YEAR 1999
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, 1999. No stock appreciation rights were granted during the
year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------ VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF SHARES TOTAL OPTIONS STOCK 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>
Thomas B. Okarma, Ph.D., M.D.... 35,000 3.2% $11.69 5/17/09 $ 257,312 $ 652,079
300,000 27.1 11.00 7/22/09 2,075,352 5,259,350
Ronald W. Eastman(5)............ 15,000 1.4 11.69 5/18/09 110,277 276,463
David L. Greenwood.............. 35,000 3.2 11.69 5/18/09 257,312 652,080
20,000 1.8 10.50 10/1/09 132,068 334,686
40,000 3.6 12.00 12/17/09 301,869 764,996
Elaine R. Hamilton(6)........... -- -- -- -- -- --
Calvin B. Harley, Ph.D.......... 12,500 1.1 11.69 5/18/09 91,897 232,886
12,500 1.1 11.69 5/18/09 91,897 232,886
20,000 1.8 12.00 12/17/09 150,935 382,498
Jane S. Lebkowski, Ph.D......... 10,000 0.9 11.69 5/18/09 73,518 186,308
20,000 1.8 10.50 10/1/09 132,068 334,686
25,000 2.3 12.00 12/17/09 188,668 478,123
Richard L. Tolman, Ph.D......... 20,000 1.8 10.50 10/1/09 132,068 334,686
20,000 1.8 12.00 12/17/09 150,935 382,498
</TABLE>
- ---------------
(1) Each of these stock options, which were granted under the 1992 Stock Option
Plan, are exercisable in a series of installments measured from the vesting
commencement date generally over 48 months, provided that each Named
Executive Officer continues to provide services to the Company. In the event
of certain transactions involving changes in control of the Company, the
options will vest in full. The maximum term of each option grant is ten
years from the date of grant.
(2) Based on an aggregate of 1,107,350 options granted by the Company in the
year ended December 31, 1999 to all employees of the Company, including the
Named Executive Officers.
(3) Exercise price is the closing sales price of the Common Stock underlying the
stock option on the grant date as reported on the Nasdaq National Market.
(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. Eastman separated employment from the Company in July 1999. He remains a
Director of the Company.
(6) Ms. Hamilton resigned from the Company in November 1999.
18
<PAGE> 21
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1999 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to options
exercised during the year ended December 31, 1999 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
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL AT FISCAL YEAR-
SHARES YEAR-END(2)(#) END($)(2)(3)
ACQUIRED ON VALUE ------------------ ------------------------
NAME EXERCISE(#) REALIZED(1)($) VESTED UNVESTED VESTED UNVESTED
---- ----------- -------------- ------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Thomas B. Okarma, Ph.D., M.D......... 0 $ 0 138,527 481,473 $ 902,732 $1,873,088
Ronald W. Eastman(4)................. 65,000 697,393 312,425 216,255 3,009,312 1,689,946
David L. Greenwood................... 30,000 414,833 130,235 242,117 1,037,396 1,367,786
Elaine R. Hamilton(5)................ 0 0 15,251 0 121,154 0
Calvin B. Harley, Ph.D............... 0 0 113,387 162,901 962,875 1,017,938
Jane S. Lebkowski, Ph.D.............. 0 0 17,500 82,500 121,091 302,629
Richard L. Tolman, Ph.D.............. 0 0 10,000 65,000 17,969 98,281
</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 exercisable in a series of installments measured from the vesting
commencement date generally over 48 months, provided that each Named
Executive Officer continues to provide services to the Company. In the event
of certain transactions involving changes in control of the Company, the
options will vest in full. The maximum term of each option grant is ten
years from the date of grant.
(3) Based on the closing sales price of the Common Stock as of December 31,
1999, quoted on the Nasdaq National Market ($12.63 per share), minus the per
share exercise price, multiplied by the number of shares underlying the
option.
(4) Mr. Eastman separated employment from the Company in July 1999. He remains a
Director of the Company.
(5) Ms. Hamilton resigned from the Company in November 1999.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT ARRANGEMENTS AND CHANGE OF
CONTROL AGREEMENTS
The Company does not have any employment agreements with 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 1992 Stock
Option Plan will terminate.
19
<PAGE> 22
COMPENSATION COMMITTEE REPORT(1)
In 1999, the Compensation Committee of the Board of Directors (the
"Committee") consisted of Dr. Barkas and Mr. Walker, 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 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, including those companies listed in the
Nasdaq-Pharmaceutical Index;
- 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 considerations necessarily involve an assessment by the
Committee of individual and 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 the 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 Chief Executive Officer 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
- ---------------
(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.
20
<PAGE> 23
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 December 1999, the Committee met to evaluate the Company and individual
performance against the goals for 1999. These goals included the progressive
development of the Company's scientific programs; completion of the Roslin
Bio-Med acquisition and integration of the nuclear transfer technology with the
Company's existing technology platforms; and the obtainment of additional
funding for the Company's operations. 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 15% of such officer's eligible 1999 compensation.
CHIEF EXECUTIVE OFFICER COMPENSATION
At the end of 1999, the Committee did not increase the salary of Dr. Okarma
as a result of his recent promotion to President and Chief Executive Officer in
July 1999. Dr. Okarma's salary was also reviewed in comparison to compensation
paid to chief executive officers of other companies in the biopharmaceutical
industry. In making its determination with respect to the bonus to be awarded to
Dr. Okarma for 1999, the Committee's assessment was that Dr. Okarma had
significant impact in achieving company performance objectives for 1999.
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. John P. Walker
21
<PAGE> 24
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)
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
US PHARMACEUTICAL GERON
-- -------------- -----
<S> <C> <C> <C>
7/31/96 100 100 100
106 107 89
9/30/96 114 115 90
112 110 98
11/29/96 119 108 102
119 111 171
1/31/97 128 121 168
121 121 139
3/31/97 113 106 126
116 99 127
5/31/97 130 114 115
133 114 97
7/31/97 148 117 87
147 116 124
9/30/97 156 128 140
148 121 135
11/30/97 149 118 110
146 115 106
1/31/98 151 114 165
165 118 142
3/31/98 171 126 160
174 123 141
5/31/98 164 119 144
176 117 121
7/31/98 174 118 98
139 90 54
9/30/98 159 110 79
166 118 80
11/30/98 182 124 145
206 146 140
1/31/99 236 160 152
215 150 136
3/31/99 230 160 129
237 148 152
5/31/99 231 157 155
252 163 135
7/31/99 248 182 158
258 198 140
9/30/99 258 187 135
277 189 123
11/30/99 306 213 139
372 273 163
</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.
22
<PAGE> 25
CERTAIN TRANSACTIONS
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
February 1999, the Company agreed to restructure the loan and extend the due
date to December 31, 2002. The loan will be paid through annual installments of
$37,500. As of December 31, 1999, the outstanding balance on this loan was
$112,500.
In July 1999, Ronald W. Eastman separated employment from the Company in
July 1999. In conjunction with his separation agreement, the Company agreed to
extend the vesting schedule of his existing options for a period of one year. In
addition, the Company continued Mr. Eastman's salary and benefits until he
became fully employed at another company. Mr. Eastman remains a Director of the
Company.
In August 1999, the Company provided an interest-free loan to David J.
Earp, Vice President of Intellectual Property, in the principal amount of
$100,000 due in two installments: one-half of the principal balance in August
2002 and the remainder in August 2003. As of December 31, 1999, the outstanding
balance on this loan was $100,000.
In addition, the Company has entered into consulting arrangements with
Messrs. Kiley and Walker. See "Compensation of Directors".
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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities (collectively "Reporting Persons"), to file with
the SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Reporting persons are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, the Company believes that during fiscal year ended
December 31, 1999, all Reporting Persons complied with the applicable filing
requirement, with the following exceptions: a Form 3 was filed late in
connection with the appointment of Amy L. Collins as Vice President of
Intellectual Property in March 1999 and in May 1999 Form 4s were filed late in
connection with options granted to directors in connection with their
re-election to the Board.
23
<PAGE> 26
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
/s/ David L. Greenwood
DAVID L. GREENWOOD
Secretary
April , 2000
24
<PAGE> 27
[GERON LOGO]
<PAGE> 28
APPENDIX 1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
GERON CORPORATION
Thomas B. Okarma and David L. Greenwood hereby certify that:
FIRST: They are the duly elected and acting President and Secretary of
Geron Corporation, a Delaware corporation.
SECOND: The name of this Corporation is Geron Corporation (the
"Corporation").
THIRD: The date on which the Restated Certificate of Incorporation as filed
with the Secretary of State of the State of Delaware (the "Secretary of State")
is March 24, 1998. The date on which the Certificate of Designation was filed
with the Secretary of State is March 27, 1998. The date on which the Certificate
of Amendment of Restated Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware is December 14, 1999.
FOURTH: The amendment to the Corporation's Restated Certificate of
Incorporation set forth below was duly adopted by the Board of Directors of the
Corporation, and approved by the Stockholders in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
FIFTH: Article IV, Paragraph (A) of the Corporation's Restated Certificate
of Incorporation is amended to read in its entirety as follows:
(A) Class of Stock. The Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the Corporation is authorized to
issue is Fifty-Three Million (53,000,000) shares. Fifty Million
(50,000,000) shares shall be Common Stock, par value $0.001 per share and
Three Million (3,000,000) shares shall be Preferred Stock, par value $0.001
per share.
IN WITNESS WHEREOF, the undersigned have signed this Certificate of
Amendment of Restated Certificate of Incorporation this day of
May, 2000 and hereby affirm and acknowledge under the penalty of perjury that
the filing of this Certificate of Amendment of Restated Certificate of
Incorporation of Geron Corporation is the act and deed of Geron Corporation.
Geron Corporation
By:
------------------------------------
Thomas B. Okarma
President
Attest:
By:
----------------------------------
David L. Greenwood
Secretary
A-1
<PAGE> 29
GERON CORPORATION
1992 STOCK OPTION PLAN
----------------------
(AS AMENDED THROUGH MARCH 2000)
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. A Committee comprised of non-employee members of the Board who
satisfy the requirements of Rule 16b-3 of the Securities Exchange Act of 1934
(the "1934 Act") as it is then in effect to exempt stock awards made hereunder
from the short-swing profit recovery rules of Section 16(b) of the 1934 Act (the
"Primary Committee") shall have sole and exclusive authority to administer the
Plan with respect to Section 16 Insiders.
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 second committee comprised of one or more Board
members ( the "Secondary Committee"), or the Board may retain the power to
administer the Plan with respect to all
1
<PAGE> 30
such persons. The members of the Secondary Committee may be individuals who are
Employees 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) or who have any other business relationship with the
Company outside their roles as members of the Board.
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) the non-employee members of the Board or the non-employee
members of the board of directors of any parent or subsidiary corporation; and
(iii) those Consultants who provide valuable services to the
Corporation (or its parent or subsidiary corporations).
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
2
<PAGE> 31
or times at which each such option is to become exercisable, and the maximum
term for which the option is to remain outstanding.
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
5,944,362 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
3
<PAGE> 32
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.
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
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<PAGE> 33
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. 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
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<PAGE> 34
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 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.
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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:
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.
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
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<PAGE> 36
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 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,
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<PAGE> 37
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. 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.
E. 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).
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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 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
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<PAGE> 39
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.
(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.
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<PAGE> 40
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.
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
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<PAGE> 41
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 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. In July 1996,
in conjunction with the 3.4 for one reverse stock split, the aggregate number of
shares issuable over the term of the Plan became 2,554,412 shares from 8,685,000
shares. In April 1997, the Board approved a further increase of 800,000 shares
in the aggregate number of shares issuable over the term of the Plan. On May 23,
1997, the stockholders approved the amendment bringing the new aggregate number
of shares issuable over the term of the Plan to 3,555,219 shares, taking into
account the annual increase for 1997. In March 1998, the Board approved a
further increase of 500,000 shares in the aggregate number of shares issuable
over the term of the Plan. On May 29, 1998, the stockholders approved the
amendment bringing the new aggregate number of shares issuable over the term of
the Plan to 4,271,137 shares, taking into account the annual increase for 1998.
In March 1999, the Board approved a further increase of 600,000 shares in the
aggregate number of shares issuable over the term of the Plan. On May 28, 1999,
the stockholders approved the amendment brining the new aggregate number of
shares issuable over the term of the Plan to 4,544,362, taking into account the
annual increase for 1999. In March 2000, the Board approved a further increase
of 500,000 shares in the aggregate number of shares issuable over the term 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.
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<PAGE> 42
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> 43
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GERON CORPORATION
2000 ANNUAL MEETING OF STOCKHOLDERS
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 , 2000, and hereby appoints
Thomas B. Okarma 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 2000 Annual Meeting
of Stockholders of Geron Corporation to be held on May 26, 2000, 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 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 Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
35,000,000 shares to 50,000,000 shares; (3) 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 500,000 shares; (4)
for ratification of the selection of Ernst & Young LLP as independent auditors
and as said proxies deem advisable on such other matters as may come before the
meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE> 44
[X] Please mark your votes as in this example.
1. Election of Class I Directors [ ] FOR all nominees (except as
indicated) [ ] WITHHOLD authority to vote for all nominees
Nominees: Gary L. Neil, Thomas B. Okarma and John P. Walker
If you wish to withhold authority to vote for any individual nominee, strike
a line through that individual's name.
2. To approve and ratify an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock
from 35,000,000 shares to 50,000,000 shares. [ ] FOR [ ] AGAINST [
] ABSTAIN
3. 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 500,000 shares. [ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the selection of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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.
SIGNATURE(S)
----------------------------
DATE
--------------------------------
Please sign exactly as name(s)
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.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE.
