SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
GERON CORPORATION
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[GERON CORPORATION LOGO]
GERON CORPORATION
230 CONSTITUTION DRIVE
MENLO PARK, CA 94025
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2002
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
17, 2002, at 9:00 a.m. local time at the Hotel Sofitel, 233 Twin Dolphin Drive,
Redwood City, California 94065, for the following purposes:
1. To elect two Class III directors to hold office until the annual
meeting of stockholders in 2005 and until the election and
qualification of their respective successors;
2. To amend the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock
to 100,000,000 shares;
3. To approve the 2002 Equity Incentive Plan for the Company that will
replace the 1992 Stock Option Plan, which is expiring;
4. To ratify appointment of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending December 31, 2002; and
5. To transact such other business as may properly come before the Annual
Meeting or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on Monday, March 25,
2002, as the record date for the determination of stockholders entitled to
notice of and to vote at this Annual Meeting and at any adjournment or
postponement thereof. Shares of common stock may be voted at the meeting only if
the holder is present at the meeting in person or by valid proxy.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please complete, sign, date and
return the enclosed proxy as promptly as possible in order to ensure your
representation at the meeting. A return envelope (which is postage prepaid if
mailed in the United States) is enclosed for that purpose. 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/ WILLIAM D. STEMPEL
William D. Stempel
Secretary
Menlo Park, California
April 1, 2002
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.
GERON CORPORATION
230 CONSTITUTION DRIVE
MENLO PARK, CA 94025
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PROXY STATEMENT
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This proxy statement is being furnished to stockholders of Geron
Corporation, a Delaware corporation (the "Company") in connection with the
solicitation by the Board of Directors of the Company of proxies to be used at
the Annual Meeting of Stockholders to be held on May 17, 2002, 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 Hotel Sofitel, 233 Twin
Dolphin Drive, Redwood City, California 94065. This proxy statement and
accompanying proxy card are being mailed to all stockholders entitled to vote at
the Annual Meeting on or about April 5, 2002.
SOLICITATION AND VOTING OF PROXIES
Only holders of record at the close of business on Monday, March 25, 2002,
(the "Record Date") will be entitled to notice of and to vote at the Annual
Meeting or any adjournment or postponement thereof. At the close of business on
the Record Date, there were shares of common stock, par value $.001
per share (the "Common Stock") outstanding. Each holder of record of Common
Stock on such date will be entitled to one vote for each share held on all
matters to be voted upon at the Annual Meeting.
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. In addition, the Company may
reimburse persons representing beneficial owners of Common Stock for their costs
of forwarding solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers, or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
In order to constitute a quorum and to transact business at the meeting, a
majority of the outstanding shares of Common Stock on the Record Date must be
represented at the meeting. Shares represented by proxies that reflect
abstentions or "broker non-votes" (i.e., shares held by a broker or nominee
which are represented at the meeting, but not empowered to vote on a particular
proposal) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. Directors will be elected by a
favorable vote of a plurality of the aggregate votes present, in person or by
proxy, at the meeting. Accordingly, neither abstentions, nor broker non-votes,
will affect the outcome of the election of candidates for director.
The proposal to amend the Company's Restated Certificate of Incorporation
to increase the number of authorized shares of the Company's Common Stock to
100,000,000 shares requires the affirmative vote of a majority of the aggregate
votes present, in person or by proxy, at the meeting. Accordingly, proxies
reflecting abstentions or broker non-votes as to this proposal will be treated
as votes against the amendment.
The proposal to approve the 2002 Equity Incentive Plan (the "2002 Plan")
requires the affirmative vote of a majority of the aggregate votes present, in
person or by proxy, at the meeting. Accordingly, proxies reflecting abstentions
as to this proposal will be treated as votes against the 2002 Plan. Broker
non-votes, however, will be treated as unvoted for purposes of this proposal,
and thus will not be counted as votes for or against the 2002 Plan.
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
grants of proxies. If your shares are held in an account with a broker or bank
participating in the ADP Investor Communication Services program, you may grant
your proxy for those shares telephonically by calling the telephone number shown
on the form received from your broker or bank, or via the Internet at ADP
Investor Communication Services' web site http://www.proxyvote.com.
Submitting your proxy via the Internet or by telephone will not affect your
right to revoke your proxy and vote in person, should you decide to attend the
Annual Meeting.
The telephone and Internet proxy granting procedures are designed to
authenticate stockholders' identities, to allow stockholders to give their proxy
granting instructions and to confirm that stockholders' instructions have been
recorded properly. Stockholders granting proxies via the Internet should
understand that there may be costs associated with electronic access, such as
usage charges from Internet access providers and telephone companies, that must
be borne by the stockholder.
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 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.
MATTERS TO BE CONSIDERED AT THE 2002 ANNUAL MEETING
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors consists of seven members. The Company's
Bylaws provide for the classification of the Board of Directors into three
classes, as nearly equal in number as possible, with staggered terms of office.
The Company's Bylaws also provide that upon expiration of the term of office for
a class of directors, nominees for such class will be elected for a term of
three years or until their successors are duly elected and qualified.
The term of the Class III directors will expire in May 2002, and two
nominees for director are to be elected as Class III directors. The two nominees
are Alexander E. Barkas, Ph.D. and Robert B. Stein, M.D., Ph.D., each of whom
currently serves as a Class III director. The Class II directors, Thomas D.
Kiley, Esq. and Edward V. Fritzky, have two years remaining on their term of
office and, the Class I directors, Thomas B. Okarma, Ph.D., M.D., John P. Walker
and Patrick J. Zenner, have one year remaining on their term of office.
The Board of Directors has selected two nominees for Class III directors,
both of whom are currently directors of the Company. The two candidates
receiving the highest number of affirmative votes of the shares represented and
entitled to vote at the Annual Meeting will be elected as Class III directors of
the Company. Accordingly, abstentions and broker non-votes will have no effect
on the outcome of the proposal.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the two nominees named below. In the event
that any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. Each person nominated for election has agreed
to serve if elected, and management has no reason to believe that any nominee
will be unable to serve.
2
Set forth below is information regarding the nominees for Class III
director, the periods during which they have served as directors, and
information furnished by them as to principal occupations and directorships held
by them in corporations whose shares are publicly registered.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE YEAR TERM EXPIRING AT THE
2005 ANNUAL MEETING
NOMINEES FOR CLASS III DIRECTORS (TERM EXPIRING AT THE 2005 ANNUAL MEETING)
NAME AGE PRINCIPAL OCCUPATION/POSITION WITH THE COMPANY
---- --- ----------------------------------------------
Alexander E. Barkas, Ph.D. ............... 54 General Partner, Prospect Venture Partners
Robert B. Stein, M.D., Ph.D. ............. 51 President and Chief Scientific Officer, Incyte
Genomics
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.
Robert B. Stein, M.D., Ph.D., has served as a director of the Company since
April 1996. Since December 2001, Dr. Stein has been President, Chief Scientific
Officer and a director at Incyte Genomics. From September 1996 to November 2001
he served as 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., 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, 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 a M.D. and a Ph.D. in Physiology and Pharmacology
from Duke University.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE FOR THE ELECTION OF EACH NOMINEE TO THE BOARD OF DIRECTORS
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Set forth below is information regarding the continuing Class I and Class
II 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 I DIRECTORS (TERM EXPIRING AT THE 2003 ANNUAL MEETING)
NAME AGE PRINCIPAL OCCUPATION/POSITION WITH THE COMPANY
---- --- ----------------------------------------------
Thomas B. Okarma, Ph.D., M.D. ............ 56 President and Chief Executive Officer
John P. Walker............................ 53 Consultant
Patrick J. Zenner......................... 55 Former President and CEO, Hoffmann La-Roche,
Inc., North America
Thomas B. Okarma, Ph.D., M.D., has served as the Company's President, Chief
Executive Officer and a director since July 1999. He is also a director of Geron
Bio-Med Limited, a United Kingdom company that is a wholly-owned subsidiary of
the Company. From May 1998 until July 1999, Dr. Okarma was the Vice President of
Research and Development of the Company. From December 1997 until May 1998, Dr.
Okarma
3
was Vice President of Cell Therapies of the Company. 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.
From 1993 to 2001, he was Chairman, Chief Executive Officer and a director of
Axys Pharmaceuticals, Inc. and its predecessor company, Arris Pharmaceutical.
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. Mr. Walker is a director of
Essential Therapeutics Corporation, Discovery Partners International Inc. and
certain other privately held biotechnology companies. He holds a B.A. from the
State University of New York at Buffalo and is a graduate of the Advanced
Executive Program, J.L. Kellogg Graduate School of Management at Northwestern
University
Patrick J. Zenner has served as a director of the Company since July 2001.
From 1969 until January 2001, Mr. Zenner held a series of executive managerial
positions with Hoffman La-Roche, Inc., North America, the prescription drug unit
of the Roche Group, a leading research-based health care enterprise. He retired
as President and Chief Executive Officer in January 2001. Mr. Zenner is a board
member of numerous associations including the Pharmaceutical Research and
Manufacturers Association, the Health Care Institute of New Jersey, the American
Foundation for Pharmaceutical Education, the American Society of Hospital
Pharmacists Foundation, the Health Care Leadership Council and the Biotechnology
Industry Organization. He is also a director of Praecis Pharmaceuticals,
Dendrite International and Genta, Inc. Mr. Zenner holds a B.A. from Creighton
University and a M.B.A. from Fairleigh Dickinson University. He serves on the
Board of Trustees for both universities.
CLASS II DIRECTORS (TERM EXPIRING AT THE 2004 ANNUAL MEETING)
NAME AGE PRINCIPAL OCCUPATION/POSITION WITH THE COMPANY
---- --- ----------------------------------------------
Thomas D. Kiley, Esq. .................... 58 Attorney-at-law
Edward V. Fritzky......................... 51 Chief Executive Officer and Chairman, Immunex
Corporation
Thomas D. Kiley, Esq., has served as a director of the Company since
September 1992. Mr. Kiley is also a director of Connetics Corp. 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.
There are no family relationships among executive officers or directors of
the Company.
4
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 2001, the Board of Directors held
five meetings and acted by written consent on one occasion. The Board has an
Audit Committee, a Compensation Committee, a Stock Option Committee and a
Nominating Committee. During the fiscal year ended December 31, 2001, each of
the incumbent directors attended at least 90% 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, which is comprised of Dr. Barkas and Messrs. Kiley and
Walker, met five times in 2001. All of the members of the Audit Committee are
"independent," as that term is defined in the listing requirements of the
National Association of Securities Dealers. The Audit Committee's
responsibilities include: (i) recommending the selection of the Company's
independent public auditors to the Board of Directors, (ii) consulting with the
independent auditors with regard to the plan and scope of the audit, (iii)
reviewing, in consultation with the independent auditors, their report of the
audit or proposed report of the audit, and the accompanying management letter,
if any, and (iv) consulting with the independent auditors and management with
regard to the adequacy of the Company's internal controls.
The Compensation Committee, which is comprised of Dr. Barkas and Mr.
Walker, met two times during fiscal 2001 and acted by written consent on four
occasions during fiscal 2001. 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 (and
will have the same power for the proposed 2002 Equity Incentive Plan) with
respect to executive officers and directors. Neither Dr. Barkas nor Mr. Walker
is a former or current officer or employee of the Company or any of its
subsidiaries, except that Dr. Barkas served as President and Chief Executive
Officer of the Company from March 1992 until May 1993, and they have no
interlocking directorships.
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 (and the proposed 2002 Equity Incentive 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 new
employees and consultants in accordance with procedures approved by the Board of
Directors. The Stock Option Committee acted by written consent on 24 occasions
during fiscal 2001.
The Nominating Committee was formed in February 2001 in order to make
recommendations to the Board for candidates to be nominated for election or
re-election as director by the stockholders or by the Board. The members of the
Nominating Committee are Drs. Barkas and Okarma. The Nominating Committee met
one time during fiscal 2001. The Nominating Committee will consider nominees for
directors nominated by stockholders upon submission in writing to the Secretary
of the Company of the names of such nominees in accordance with the Company's
Bylaws.
COMPENSATION OF DIRECTORS
FEES
Non-employee 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.
DIRECTORS' STOCK OPTION PLAN
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.
5
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.
Option Grants. As amended effective May 17, 2002, 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 45,000 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 to purchase 20,000 shares is automatically granted
under the Directors Plan, to each non-employee director (other than the Chairman
of the Board of Directors) on the date of the Annual Meeting of Stockholders in
each year during the director's service on the Board. The Subsequent Option
granted to the Chairman of the Board of Directors is for 30,000 shares. A
Committee Service Option to purchase 2,500 shares is granted to each
non-employee director upon such director's appointment to the Audit Committee or
Compensation Committee of the Board of Directors, and on the date of each Annual
Meeting during the director's service on such committee. There is currently no
compensation for participation on other committees.
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; and as to 100% of the shares subject
to each Subsequent Option or Committee Service Option on the date of grant of
each Subsequent Option or Committee Service 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
permanent and total disability, in which case the options (both those already
exercisable and those that would have become exercisable had the director
remained on the board for an additional 36 months) remain exercisable for up to
a 24 month period following death or disability.
Exercise Price and Term of Options. The exercise price of all stock
options granted under the Directors Plan is equal to the fair market value of a
share of the Company's Common Stock on the date of grant of the option, 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.
Options Granted to Directors. The following table sets forth information
with respect to the stock options granted under the 1996 Directors' Option Plan
to the non-employee directors of the Company (6 persons) for the fiscal year
ended December 31, 2001. As discussed above, the executive officers of the
Company and the employees of the Company are not eligible for grants under the
Directors Plan.
NUMBER OF SHARES SUBJECT TO WEIGHTED AVERAGE
OPTIONS GRANTED UNDER EXERCISE PRICE
DIRECTOR THE DIRECTORS PLAN PER SHARE
-------- --------------------------- ----------------
Barkas, Alexander............................. 10,000 $12.56
Fritzky, Edward............................... 20,000 $13.21
Kiley, Thomas................................. 20,000 $12.51
Stein, Robert................................. 5,000 $12.16
Walker, John.................................. 5,000 $10.00
Zenner, Patrick............................... 35,000 $14.60
As of March 25, 2002, options to purchase a total of shares were
outstanding under the Directors Plan (net of canceled or expired options), and
shares remained available for future grants under the Directors Plan. As of
March 25, 2002, the aggregate fair market value of shares subject to outstanding
options under the Directors Plan was $ , based upon the closing price
of the Common Stock on the Nasdaq National Market.
Federal Income Tax Aspects. The following is a brief summary of the effect
of federal income taxation upon the optionee and the Company with respect to the
grant and exercise of options under the Directors Plan, does not purport to be
complete, and does not discuss the income tax laws of any municipality, state or
foreign
6
country in which an optionee may reside. The Company advises all eligible
directors to consult their own tax advisors concerning tax implications of
option grants and exercises and the disposition of stock acquired upon such
exercises under the Directors Plan.
Options granted under the Directors Plan are nonstatutory stock options. An
optionee will not recognize any taxable income at the time he or she is granted
a nonstatutory stock option. However upon its exercise, the optionee will
recognize ordinary income for tax purposes measured by the excess of the then
fair market value of the shares over the option price. Upon resale of such
shares by the optionee, any difference between the sale price and the exercise
price, to the extent not recognized as ordinary income as provided above will be
treated as capital gain (or loss), and will be long-term capital gain if the
optionee has held the shares more than one year. For individual taxpayers, the
maximum U.S. federal income tax rate on long-term capital gains under current
tax law is 20%, whereas the maximum rate on other income is 39.6%. Capital
losses for individual taxpayers are allowed under U.S. tax laws in full against
capital gains plus $3,000 of other income. The Company will be entitled to a tax
deduction in the amount and at the time that the optionee recognizes ordinary
income with respect to shares acquired upon exercise of a nonstatutory stock
option.
Other Compensation. In April 1996, the Company entered into a consulting
agreement with Mr. Kiley, 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
under the 1992 Stock Option Plan 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.
This agreement expired on April 10, 2001.
In February 2001, Gary L. Neil, a director of the Company since September
1998, passed away. In recognition of his valuable service to the Company over
the years, the Board accelerated the vesting of all unvested options granted to
Mr. Neil under the 1992 Stock Option Plan. Mr. Neil's unvested options under the
Directors Plan were automatically accelerated pursuant to the Directors Plan. As
a result, Mr. Neil's estate has 24 months from the date of Mr. Neil's death to
exercise options to purchase 46,750 shares of Geron Common Stock.
In February 2001, Ronald W. Eastman submitted his resignation from the
Board, effective May 18, 2001. In recognition of Mr. Eastman's valuable service
to the Company, the Board extended the time period for Mr. Eastman's exercise of
the options previously granted to him under the 1992 Stock Option Plan (all of
which were already immediately exercisable) until the earlier of May 18, 2004 or
the tenth anniversary of the grant of the options.
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 50,000,000 shares to
100,000,000 shares.
The additional Common Stock to be authorized by adoption of the amendment
would have rights identical to the current 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 to the Company's
Restated Certificate of Incorporation, in substantially 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 as of
March 25, 2002, the Board has reserved shares for issuance upon
exercise of options and rights granted under the
7
Company's stock option and stock purchase plans and 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 in
connection with the Share Purchase Rights Plan adopted by the Board in July
2001. The Rights Plan is a "poison pill" intended to protect stockholders'
interest in the event the Company is confronted with coercive takeover tactics.
Pursuant to the Rights Plan, all holders of Common Stock were issued Rights
that, under certain circumstances related to an acquisition of shares not
approved by the Board of Directors, would allow them to acquire additional
shares of Common Stock at a low price. 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.
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 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 UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR PROPOSAL 2
PROPOSAL 3
APPROVAL OF 2002 EQUITY INCENTIVE PLAN
The Company's stockholders are being asked to approve the adoption of the
2002 Equity Incentive Plan (the "2002 Plan") at this Annual Meeting.
On February 15, 2002, the Board of Directors adopted the 2002 Plan, subject
to stockholder approval. The Board believes the proposed 2002 Plan is essential
to maintain balanced and competitive total compensation programs. Geron
currently grants options under the 1992 Stock Option Plan, as amended (the "1992
Plan"), which was approved by Geron's stockholders in July 1992. As of March 25,
2002, shares of Geron Common Stock remained available for future
grants under the 1992 Plan and shares of Common Stock were
subject to outstanding options granted (net of canceled or expired options)
under the 1992 Plan. As of March 25, 2002, the aggregate fair market value of
shares subject to outstanding options under the 1992 Plan was $ . The
1992 Plan will expire by its terms in August 2002, and no further option grants
can be made under the 1992 Plan after that date. Without the adoption of the
2002 Plan, the Company would be unable to make option grants in 2002 and beyond,
consistent with the Company's normal compensation practices and common practice
in the industry. The 2002 Plan would enable Geron to continue to attract and
retain high quality employees and consultants.
8
SUMMARY OF 2002 EQUITY INCENTIVE PLAN
The following summary of the material provisions of the proposed 2002 Plan
does not purport to be complete, and is subject to and qualified in its entirety
by reference to the complete text of the 2002 Plan, which is attached as
Appendix 2 to this proxy statement.
GENERAL
The 2002 Plan provides for grants to employees of the Company and any
parent or subsidiary of the Company (including officers and employee directors)
of "incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and for grants of non-qualified
stock options and stock purchase rights to employees (including officers and
employee directors) and consultants (including non-employee directors) of the
Company or any parent or subsidiary of the Company. As of March 25, 2002,
executive officers and approximately other
employees and consultants (including non-employee directors) are currently
eligible to participate in the 2002 Plan. See "Federal Income Tax Aspects" below
for information concerning the tax treatment of incentive stock options,
non-qualified stock options and stock purchase rights.
The 2002 Plan is not a qualified 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 2002 Plan are to attract and retain the best available
personnel for positions of substantial responsibility; to give employees and
consultants of the Company a greater personal stake in the success of the
Company's business; to provide additional incentive to the employees and
consultants of the Company to continue and advance in their employment and
service to the Company; and to promote the success of the Company's business.
ADMINISTRATION
The 2002 Plan is to be administered by the Company's Board of Directors or
a committee of the Board (the "Administrator"). The 1992 Plan is currently being
administered by the Compensation Committee and the Stock Option Committee of the
Board of Directors. With respect to executive officers of the Company (including
executive officers who are also directors), the 2002 Plan will be administered
exclusively by the Compensation Committee of the Board of Directors. The
Administrator may determine the terms of the options and stock purchase rights
granted, including the exercise or purchase price, the number of shares subject
to each option or stock purchase right and the exercisability options. The
Administrator also has the authority to select the individuals to whom options
and stock purchase rights will be granted and to make any combination of grants
to individuals. The Administrator's interpretation and construction of any
provision of the 2002 Plan will be final and binding upon all participants.
ELIGIBILITY
The 2002 Plan provides that incentive stock options may be granted only to
employees (including officers and employee directors) of the Company or any
parent or subsidiary of the Company, while non-qualified stock options and stock
purchase rights may be granted not only to employees (including officers and
employee directors), but also to consultants (including non-employee directors)
of the Company or any parent or subsidiary of the Company. The Administrator
shall have full authority to determine which eligible individuals are to receive
option grants or stock purchase rights under the 2002 Plan; the number of shares
to be covered by each such grant; whether a granted option is to be an incentive
stock option which satisfies the requirements of Section 422 of the Code or a
non-qualified stock option not intended to meet such requirements; the time or
times at which each such option is to become exercisable; and the maximum term
for which the option is to remain outstanding.
9
The 2002 Plan provides that the maximum number of shares of Common Stock
which may be granted under options or stock purchase rights to any one employee
during any fiscal year shall be 750,000 shares, subject to adjustment as
provided in the 2002 Plan. There is also a limit under the Code on the aggregate
market value of shares subject to all incentive stock options that may be
granted to an optionee during any calendar year.
STOCK SUBJECT TO THE STOCK OPTION PLAN
Under the 2002 Plan, a maximum of 5,000,000 shares of Common Stock will be
initially reserved for issuance of awards. This maximum number of shares will
automatically increase on each anniversary date of the Board of Directors
adoption of the 2002 Plan during the term of the 2002 Plan by the least of (i)
2,000,000 shares, (ii) 4% of the Company's outstanding Common Stock as of such
anniversary date, or (iii) a lesser amount determined by the Board. If stock
option awards granted under the 2002 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 2002 Plan.
TERMS OF OPTIONS
The following is a description of the terms of options under the 2002 Plan.
Individual option grants may be more or less restrictive as to any or all of the
terms described below, except for those mandatory terms described using the word
"must."
Exercise Price; Payment. The exercise price under the 2002 Plan is
determined by the Administrator and in the case of all incentive stock options
granted under the 2002 Plan, the exercise price must be at least equal to the
fair market value of the Common Stock of the Company on the date of grant. The
exercise price of any incentive stock option granted to an optionee who owns
stock representing more than 10% of the total combined voting power of all
classes of stock of the Company or any of its subsidiaries (a "10% Stockholder")
must equal at least 110% of the fair market value of the Common Stock on the
date of grant. An optionee may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such option by a cash payment
upon exercise, by authorizing the Company to withhold a portion of the stock
otherwise issuable to the optionee having a value equal to the statutory minimum
amount required to be withheld, by delivering already owned stock of the Company
that, in the case of stock acquired from the Company has been held by the
optionee for at least six months, or by a combination of these means. At March
25, 2002, the closing sales price of a share of the Company's Common Stock as
reported on the Nasdaq National Market was $ per share.
The consideration to be paid for shares issued upon exercise of options
granted under the 2002 Plan, including the method of payment, is determined by
the Administrator and may consist entirely of cash; check; promissory note;
shares of the Company's Common Stock which have been beneficially owned by the
optionee for at least six months or which were not acquired directly or
indirectly from the Company and which have a fair market value on the exercise
date equal to the aggregate exercise price of the shares purchased;
authorization for the Company to retain from the total number of shares as to
which the option is exercised a number of shares having a fair market value on
the exercise date equal to the aggregate exercise price of the shares issued; or
delivery of a properly executed notice and irrevocable instructions to a broker
to deliver promptly to the Company the amount of sale or loan proceeds required
to pay the exercise price. The Administrator may also authorize payments by any
combination of the above methods or any other consideration and method of
payment permitted by law.
Option Exercise/Restrictions on Transfer. An option is nontransferable by
the optionee other than by will or by the laws of descent and distribution. Each
option may be exercised during the lifetime of the optionee only by such
optionee or in the case of a non-qualified stock option by a transferee under a
qualified domestic relations order. In the event of an optionee's death, an
option may be exercised by a person who acquires the right to exercise that
option by bequest or inheritance. Options granted under the 2002 Plan will
generally vest in a series of installments at the rate of 12.5% of the total
number of shares as of the six month period from the date of grant, and
approximately 2.08% each month thereafter. Under certain circumstances,
10
options may be exercised prior to vesting, subject to the Company's right to
repurchase shares subject to such option at the exercise price paid per share.
The Company's repurchase rights would generally terminate on a vesting schedule
identical to the vesting schedule of the exercised option.
Term. The Administrator determines the term of options. The term of a
stock option granted under the 2002 Plan must not exceed ten years; provided,
however, that the term of an incentive stock option must not exceed five years
for 10% Stockholders.
In the event an optionee ceases to be employed or retained by the Company
for any reason other than death or disability, each outstanding option held by
such optionee will remain exercisable for the three-month period following the
date of such cessation of employment or service. Should the optionee's
employment or service terminate by reason of death or disability, all
outstanding options that would be exercisable in the next 36 months would become
exercisable and remain exercisable for 24 months following the date of death or
disability. If an optionee dies within three months after termination (other
than a termination because of disability), each outstanding option held by such
optionee will remain exercisable for 6 months following the date of termination.
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.
STOCK PURCHASE RIGHTS
The Administrator may issue stock purchase rights to employees, directors
and consultants either alone, in addition to or in tandem with the issuance of
options under the 2002 Plan. The Administrator determines:
- the number of shares subject to stock purchase rights issued to
employees, directors and consultants;
- the price per share for the restricted stock to be issued to an employee,
director or consultant pursuant to a stock purchase right;
- the time period within which an employee, director or consultant to whom
a stock purchase right has been issued must accept such offer; and
- the terms and conditions of the stock purchase rights and restricted
stock.
Restricted stock issued pursuant to the exercise of a stock purchase right
will be evidenced by a written restricted stock purchase agreement. The
restricted stock purchase agreement will contain such restrictions as the
Administrator provides, including restrictions concerning voting rights,
transferability and restrictions based on duration of employment and the
satisfaction of performance thresholds. The Company may repurchase from the
holder of restricted stock the restricted stock immediately upon the termination
of employment or consultancy for any reason (including death or disability) for
an amount equal to the price paid for the restricted stock. The Company may pay
the price for the restricted stock by canceling any indebtedness that the
stockholder may owe to the Company. The repurchase option will lapse at a rate
of at least 20% per year over five years from the date the restricted stock is
purchased.
ADJUSTMENT PROVISIONS
In the event any change is made to the Common Stock issuable under the 2002
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 2002 Plan,
(ii) the maximum number of shares for which any one person may be granted
options or stock purchase rights 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 or stock purchase right, as applicable, 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 merger or acquisition of all or
substantially all of the Company's assets, the 2002 Plan, like the 1992 Plan,
provides that each outstanding option and vesting of stock acquired
11
by a stock purchase right will accelerate so that each option will be fully
exercisable for all of the shares subject to such option immediately prior to
the effective date of the transaction and all restrictions on such stock shall
lapse immediately before the effective date of the transaction. In addition,
upon the occurrence of such a transaction, the 2002 Plan provides that all of
the outstanding repurchase rights of the Company with respect to shares of
Common Stock acquired upon exercise of options granted under the 2002 Plan will
terminate.
DURATION AND AMENDMENT
Unless terminated sooner through action by the Board of Directors, the 2002
Plan shall terminate in 2012. The Board shall have complete and exclusive power
and authority to amend or modify the 2002 Plan in any or all respects
whatsoever; provided, however, that no amendment or modification shall, without
the consent of the holders, adversely affect the rights and obligations with
respect to options outstanding under the 2002 Plan; and provided, further, that
the Board shall obtain stockholder approval of any amendment to the extent
necessary and desirable to comply with applicable statutory, regulatory or other
legal requirements.
FEDERAL INCOME TAX ASPECTS
The following is a brief summary of the U.S. federal income tax
consequences of transactions under the 2002 Plan based on federal income tax
laws in effect as of the date of this Proxy Statement. This summary is not
intended to be exhaustive and does not address all matters which may be relevant
to a particular 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 2002 Plan to consult their
own tax advisors concerning tax implications of option grants and exercises and
the disposition of stock acquired upon such exercises under the 2002 Plan.
Stock Options. Options granted under the 2002 Plan may be either
"incentive stock options," which are intended to qualify for the special tax
treatment provided by Section 422 of the Code, or non-qualified stock options,
which will not so qualify.
If an option granted under the 2002 Plan is an incentive stock option, the
optionee will recognize no income upon grant of the incentive stock option and
incur no tax liability due to the exercise. However, the difference between the
exercise price and the fair market value of the stock at the date of exercise
will be an item of adjustment for the purposes of the alternative minimum tax.
The Company will not be allowed a deduction for federal income tax purposes as a
result of the exercise of an incentive stock option regardless of the
applicability of the alternative minimum tax. Upon the sale or exchange of the
shares acquired upon exercise more than two years after grant of the option and
one year after such exercise, any gain will be treated as long-term capital
gain. If either of these holding periods is not satisfied, the optionee will
recognize ordinary income equal to the difference between the exercise price and
the lower of the fair market value of the stock at the date of the option
exercise or the sale price of the stock. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any 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.
All other options which do not qualify as incentive stock options are
referred to as non-qualified stock options. An optionee will not recognize any
taxable income under U.S. tax laws at the time he or she is granted a
non-qualified stock option. However, upon its exercise, under U.S. tax laws the
optionee will recognize ordinary income for tax purposes measured by the excess
of the then fair market value of the shares over the exercise price. In certain
circumstances, where the shares are subject to a substantial risk of forfeiture
when acquired, the date of taxation under U.S. tax laws may be deferred unless
the optionee files an election with the Internal Revenue Service under Section
83(b) of the Code. The income recognized by an optionee who is also an employee
of the Company will be subject to income and employment tax withholding by the
Company. Upon resale of such shares by the optionee, any difference between the
sales price and the fair
12
market value of the shares as of the date of exercise of the option will be
treated under U.S. tax laws as capital gain or loss, and will qualify for
long-term capital gain or loss treatment if the shares have been held for more
than one year from the date of exercise.
Stock Purchase Rights. For federal income tax purposes, if an optionee is
granted a stock purchase right, the optionee generally will not have taxable
income on the grant of the stock purchase right, nor will the Company then be
entitled to any deduction. Generally, on the purchase of restricted stock
pursuant to a stock purchase right, the optionee will also not have taxable
income, nor will the Company be entitled to a deduction, unless the optionee
makes a valid election under Section 83(b) of the Code. However, when
restrictions on shares of restricted stock lapse, such that the shares are no
longer subject to a substantial risk of forfeiture, the optionee generally will
recognize ordinary income, and the Company will be entitled to a corresponding
deduction, for an amount equal to the difference between the fair market value
of the shares at the date such restrictions lapse over the purchase price for
the restricted stock. If the optionee makes a valid election under Section 83(b)
with respect to restricted stock, the optionee generally will recognize ordinary
income at the date of issuance of the restricted stock in an amount equal to the
difference, if any, between the fair market value of the shares at that date
over the purchase price for the restricted stock, and the Company will be
entitled to a deduction for the same amount.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Code, 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 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). Grants of stock options under the 2002 Plan that
are made by the Compensation Committee are expected to comply with those
requirements.
2002 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 2002 Plan. The actual benefits, if any, to the holders of stock
options issued under the 2002 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 Plan for the fiscal year ended December 31, 2001 to (i)
each of the executive officers named in the Summary
13
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.
NUMBER OF SHARES
SUBJECT TO STOCK
WEIGHTED AVERAGE AWARDS GRANTED IN
NAME AND POSITION EXERCISE PRICE FISCAL 2001
----------------- ---------------- -----------------
Thomas B. Okarma, Ph.D., M.D. .............................. $14.73 240,000
President and Chief Executive Officer
David J. Earp, Ph.D., J.D. ................................. $13.91 119,000
Vice President of Intellectual Property
David L. Greenwood.......................................... $13.60 155,000
Chief Financial Officer, Senior Vice President of
Corporate Development and Treasurer
Calvin B. Harley, Ph.D. .................................... $13.12 85,000
Chief Scientific Officer
Jane S. Lebkowski, Ph.D. ................................... $14.27 129,000
Vice President of Cell and Gene Therapies
All Executive Officers as a group (10 persons).............. $13.22 1,167,712
All Non-Executive Officer Directors as a Group (6
persons).................................................. $13.28 95,000
All Non-Executive Officer Employees as a Group (95
persons).................................................. $12.89 1,221,230
REQUIRED VOTE
Stockholders are requested in this Proposal 3 to approve the 2002 Equity
Incentive Plan. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote on the proposal
at the meeting will be required to approve the proposal. Accordingly,
abstentions and broker non-votes will have no effect on the outcome of the
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR 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, 2002 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 from stockholders.
The Company has been informed by Ernst & Young LLP that neither the firm
nor any of its members or their associates has any direct financial interest or
material indirect financial interest in the Company or its affiliates.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board of Directors 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 of Directors will reconsider whether or not to retain that firm.
Even if the selection is ratified, the Audit Committee and the Board of
Directors 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.
14
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.
Accordingly, abstentions and broker non-votes will have no effect on the outcome
of the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR PROPOSAL 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the amount and percentage of the outstanding
shares of the Common Stock, which, according to the information supplied to
Geron, are beneficially owned by (i) each person who, to the best of the
Company's knowledge based exclusively on Schedules 13G filed with the Securities
and Exchange Commission, is the beneficial owner of more than 5% of the
Company's outstanding Common Stock, (ii) each person who is currently a
director, two of whom are also nominees for election as a director, (iii) each
Named Executive Officer, as defined on page 17 hereof, and (iv) all current
directors and executive officers as a group. Except for information based on
Schedules 13G, as indicated in the footnotes, beneficial ownership is stated as
of February 25, 2002.
BENEFICIAL OWNERSHIP(1)
------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
---------------- ---------- -----------
DIRECTORS/NOMINEES AND NAMED EXECUTIVE OFFICERS:
Alexander E. Barkas, Ph.D.(2)............................... 148,128 *
Edward V. Fritzky(3)........................................ 50,000 *
Thomas D. Kiley, Esq.(4).................................... 94,300 *
Robert B. Stein, M.D., Ph.D.(5)............................. 13,350 *
John P. Walker(6)........................................... 38,550 *
Patrick J. Zenner(7)........................................ -- *
David J. Earp, J.D., Ph.D.(8)............................... 79,674 *
David L. Greenwood(9)....................................... 300,476 1.21%
Calvin B. Harley, Ph.D.(10)................................. 260,048 1.05%
Jane S. Lebkowski, Ph.D.(11)................................ 101,023 *
Thomas B. Okarma, Ph.D., M.D.(12)........................... 500,207 2.00%
All directors and executive officers as a group (16
persons).................................................. 1,737,539 6.65%
5% BENEFICIAL HOLDERS:
RGC International Investors, LDC(13)........................ 1,588,707 6.49%
251 Saint Asaphs Road, 3 Bala Plaza East, Suite 501
Bala Cynwyd, PA 19004
---------------
* 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 February 25,
2002 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of each
other person. The persons named in this table, to the best of the Company's
knowledge, have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to community
property laws where applicable and except as indicated in the other
footnotes to this table.
15
(2) Includes 28,593 shares held directly by Alexander E. Barkas, 882 shares
held by Lynda Wijcik, the spouse of Dr. Barkas, and 118,653 shares issuable
upon the exercise of outstanding options held by Dr. Barkas exercisable
within 60 days of February 25, 2002.
(3) Represents 50,000 shares issuable upon the exercise of outstanding options
held by Edward V. Fritzky exercisable within 60 days of February 25, 2002.
(4) 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 62,941 shares issuable upon the exercise of outstanding
options held by Mr. Kiley exercisable within 60 days of February 25, 2002.
(5) Represents 13,350 shares issuable upon the exercise of outstanding options
held by Robert B. Stein exercisable within 60 days of February 25, 2002.
(6) Represents 38,550 shares issuable upon the exercise of outstanding options
held by John P. Walker exercisable within 60 days of February 25, 2002.
(7) Represents no shares issuable upon the exercise of outstanding options held
by Patrick J. Zenner exercisable within 60 days of February 25, 2002.
(8) Includes 4,425 shares held directly by David J. Earp and 75,249 shares
issuable upon the exercise of outstanding options held by Dr. Earp
exercisable within 60 days of February 25, 2002.
(9) Represents 300,476 shares issuable upon the exercise of outstanding options
held by David L. Greenwood exercisable within 60 days of February 25, 2002.
(10) Includes 19,874 shares held by the Harley Family Trust and 240,174 shares
issuable upon the exercise of outstanding options held by Dr. Harley
exercisable within 60 days of February 25, 2002.
(11) Includes 3,565 shares held directly by Jane S. Lebkowski and 97,458 shares
issuable upon the exercise of outstanding options held by Dr. Lebkowski
exercisable within 60 days of February 25, 2002.
(12) Represents 500,207 shares issuable upon the exercise of outstanding options
held by Thomas B. Okarma exercisable within 60 days of February 25, 2002.
(13) Based on Schedule 13G filed by RGC International Investors, LDC.
16
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding the annual and
long-term compensation for services rendered to Geron in all capacities for the
fiscal years ended December 31, 2001, 2000 and 1999 of those persons who were,
at December 31, 2001, (i) the chief executive officer, (ii) the other four most
highly compensated executive officers whose annual salary and bonuses exceeded
$100,000 or (iii) any other executive officer who would have qualified under
sections (i) or (ii) of this paragraph but for the fact that the individual was
not serving as an executive officer of the registrant at the end of the 2001
fiscal year (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($) OPTIONS(#)
--------------------------- ---- --------- -------- --------------- ---------- ------------
Thomas B. Okarma, M.D., Ph.D.(1)...... 2001 $342,500 $150,000 $ -- $ -- 240,000
President and Chief Executive
Officer 2000 300,000 95,000 -- -- --
1999 277,590 41,540 -- -- 335,000
David L. Greenwood.................... 2001 275,000 75,350 -- -- 155,000
Chief Financial Officer, Treasurer
and 2000 250,000 30,000 -- -- --
Senior Vice President of Corporate 1999 240,000 35,900 12,000(2) -- 95,000
Development
Calvin B. Harley, Ph.D. .............. 2001 245,000 46,060 -- -- 85,000
Chief Scientific Officer 2000 239,200 23,900 -- -- --
1999 239,200 35,880 -- -- 45,000
David J. Earp, J.D., Ph.D.(3)......... 2001 230,000 50,370 -- -- 119,000
Vice President of Intellectual
Property 2000 205,000 24,600 -- -- --
1999 51,250 26,440 3,000(4) -- 85,000
Jane S. Lebkowski, Ph.D.(5)........... 2001 220,000 48,180 -- -- 129,000
Vice President of Research and 2000 180,000 36,000 -- -- --
Development, Regenerative Medicine 1999 173,333 25,930 -- -- 55,000
---------------
(1) Dr. Okarma joined the Company in December 1997. He was promoted to President
and Chief Executive Officer in July 1999.
(2) Other annual compensation consisted of monthly housing expenses of $1,000
per month.
(3) Dr. Earp joined the Company in June 1999. He was promoted to Vice President
of Intellectual Property in October 1999.
(4) Other annual compensation consisted of monthly housing expenses of $1,500
per month.
(5) Dr. Lebkowski joined the Company in April 1998. She was promoted to Vice
President of Research and Development, Regenerative Medicine in August 1999.
17
STOCK OPTION GRANTS IN FISCAL YEAR 2001
The following table provides certain information regarding options granted
to the Chief Executive Officer and the Named Executive Officers during the year
ended December 31, 2001. No stock appreciation rights were granted during the
year.
INDIVIDUAL GRANTS
------------------------------------------------------------ POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
NUMBER OF SHARES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SH)(3) DATE 5%($) 10%($)
---- ---------------- -------------- ----------- ---------- ------------ ------------
Thomas B. Okarma, Ph.D.,
M.D. ........................ 150,000 6.3 18.63 1/26/11 1,756,974 4,452,518
90,000 3.8 8.23 12/14/11 465,822 1,180,485
David L. Greenwood............. 80,000 3.3 18.63 1/26/11 937,053 2,374,676
75,000 3.1 8.23 12/14/11 388,185 983,738
Calvin B. Harley, Ph.D. ....... 40,000 1.7 18.63 1/26/11 468,526 1,187,338
45,000 1.9 8.23 12/14/11 232,911 590,243
David J. Earp, Ph.D., J.D. .... 65,000 2.7 18.63 1/26/11 761,356 1,929,424
54,000 2.3 8.23 12/14/11 279,493 708,291
Jane S. Lebkowski, Ph.D. ...... 75,000 3.1 18.63 1/26/11 878,487 2,226,259
54,000 2.3 8.23 12/14/11 279,494 708,291
---------------
(1) Each of these stock options, which were granted under the 1992 Stock Option
Plan, is 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 a change 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 2,388,942 options granted by the Company in the
year ended December 31, 2001 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.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 2001 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to stock options
exercised during the year ended December 31, 2001 by the Chief Executive Officer
and Named Executive Officers and unexercised stock options held as of the end of
such fiscal year by such persons:
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES YEAR-END(2)($) FISCAL YEAR-END(3)($)
ACQUIRED ON VALUE ----------------------- -----------------------
NAME EXERCISE(#) REALIZED(1)($) VESTED UNVESTED VESTED UNVESTED
---- ----------- -------------- ---------- ---------- ---------- ----------
Thomas B. Okarma, Ph.D.,
M.D. ................... -- $ -- $437,913 $422,087 $941,055 $238,215
David L. Greenwood........ -- -- 266,531 220,821 821,214 203,946
Calvin B. Harley,
Ph.D. .................. 7,220 77,355 217,644 131,424 813,957 166,719
David J. Earp, J.D.,
Ph.D. .................. -- -- 59,375 139,625 -- 25,380
Jane S. Lebkowski,
Ph.D. .................. -- -- 80,667 148,333 134,998 70,002
18
---------------
(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 a change 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,
2001, quoted on the Nasdaq National Market ($8.70 per share), minus the per
share exercise price, multiplied by the number of shares underlying the
option.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT ARRANGEMENTS AND CHANGE OF
CONTROL AGREEMENTS
The Company does not have employment agreements with any of the Named
Executive Officers.
In the event of a merger, acquisition or similar change in control of the
Company, both the 1992 Plan and the 2002 Plan provide 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 2002 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 2002 Plan will terminate.
COMPENSATION COMMITTEE REPORT(1)
In 2001, 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 and are included 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; and
---------------
(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.
19
- 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
(and plans to use grants under the 2002 Equity Incentive Plan in the future, if
the 2002 Equity Incentive Plan is approved by stockholders) to underscore the
common interests of stockholders and management. Options granted to executive
officers are intended to provide a continuing financial incentive to maximize
long-term value to stockholders and to make each executive's total compensation
opportunity competitive. In addition, because stock options generally become
exercisable over a period of several years, options encourage executives to
remain in the long-term employ of the Company. In determining the size of an
option to be granted to an executive officer, the Committee takes into account
an officer's position and level of responsibility within the Company, the
officer's existing stock and option holdings, and the potential reward to the
officer if the stock price appreciates in the public market.
In December 2001, the Committee met to evaluate the Company and individual
performance against the goals for 2001. These goals included the progressive
development of the Company's scientific programs, establishment of collaborative
partnerships 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 the Committee recommended that individual
executive officers receive cash bonuses, depending on the Committee's assessment
of individual performance. None of the bonuses, except for the Chief Executive
Officer's bonus, exceeded 30% of such officer's eligible 2001 compensation.
CHIEF EXECUTIVE OFFICER COMPENSATION
At the end of 2001, the Committee increased the base salary of Dr. Okarma
by approximately 23%. The Committee's decision reflected the results of an
outside consultant's study of compensation paid to chief executive officers and
other employees of other companies in the biopharmaceutical industry, based on
which the Committee concluded that a significant increase was warranted. The
Committee's decision also recognized Dr. Okarma's contributions to the
performance of the Company, which included continued development of the
Company's research and development programs, including initiation of human
clinical trials for telomerase immunotherapy and development of a telomerase
inhibitor for the treatment of cancer. In making its determination with respect
to the bonus to be awarded to Dr. Okarma for 2001, the Committee's assessment
20
was that Dr. Okarma's performance was critical to the achievement of company
performance objectives for 2001.
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
PERFORMANCE GRAPH(1)
The following graph compares total stockholder returns of the Company since
its initial public offering of Common Stock on July 31, 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 quarterly 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 31, 1996(2)
(PERFORMANCE GRAPH)
NASDAQ - US NASDAQ - PHARMACEUTICAL GERON CORP.
----------- ----------------------- -----------
07/31/96 100 100 100
09/30/96 114 115 90
12/31/96 119 111 171
03/31/97 113 106 126
06/30/97 133 114 97
09/30/97 156 128 140
12/31/97 146 115 106
03/31/98 171 126 160
06/30/98 176 117 121
09/30/98 159 110 79
12/31/98 206 146 140
03/31/99 231 161 129
06/30/99 253 164 135
09/30/99 259 188 135
12/31/99 383 275 163
03/31/00 430 338 358
06/30/00 374 375 413
09/29/00 344 412 366
12/29/00 230 342 199
03/30/01 172 254 135
06/29/01 203 315 181
09/28/01 141 254 124
12/31/01 183 292 112
---------------
(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 31, 1996. The cumulative total return on the Company's stock has been
computed based on an initial price of $7.75 per share, the price at which
the Company's shares closed on the first day of trading.
22
AUDIT COMMITTEE REPORT(1)
The Audit Committee of Geron Corporation's Board of Directors is comprised
of independent directors as required by the listing standards of the National
Association of Securities Dealers. The Audit Committee operates pursuant to a
written charter adopted by the Board of Directors.
The role of the Audit Committee is to oversee the Company's financial
reporting process on behalf of the Board of Directors. Management of the Company
has the primary responsibility for the Company's financial statements as well as
the Company's financial reporting process, principles and internal controls. The
independent auditors are responsible for performing an audit of the Company's
financial statements and expressing an opinion as to the conformity of such
financial statements with generally accepted accounting principles.
In this context, the Audit Committee has reviewed and discussed the audited
financial statements of the Company as of and for the year ended December 31,
2001 with management and the independent auditors. The Audit Committee has
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees), as
currently in effect. In addition, the Audit Committee has received the written
disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), as currently in effect, and it has discussed with the auditors
their independence from the Company. The Audit Committee has also considered
whether the independent auditors' provision of non-audit services to the Company
is compatible with maintaining the auditors' independence.
The members of the Audit Committee are not engaged in the accounting or
auditing profession and, consequently, are not experts in matters involving
auditing or accounting. In the performance of their oversight function, the
members of the Audit Committee necessarily relied upon the information,
opinions, reports and statements presented to them by management of the Company
and by the independent auditors. As a result, the Audit Committee's oversight
and the review and discussions referred to above do not assure that management
has maintained adequate financial reporting processes, principles and internal
controls, that the Company's financial statements are accurate, that the audit
of such financial statements has been conducted in accordance with generally
accepted auditing standards or that the Company's auditors meet the applicable
standards for auditor independence.
Based on the reports and discussions described above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2001, for filing with the Securities and Exchange Commission.
Submitted on February 15, 2002 by the members of the Audit Committee of the
Company's Board of Directors.
Alexander E. Barkas, Ph.D.
Thomas D. Kiley, Esq.
John P. Walker
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP, our independent auditors for the fiscal year
ended December 31, 2001, was selected by the Board of Directors, upon
recommendation of the Audit Committee, to act in the same capacity for the
fiscal year ending December 31, 2002. The Company has been informed by Ernst &
Young
---------------
(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.
23
LLP that neither the firm nor any of its members or their associates has any
financial interest, direct or indirect in the Company or its affiliates.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they so
desire and will be available to respond to appropriate questions from the
stockholders.
AUDIT FEES AND ALL OTHER FEES
The aggregate fees billed for professional services rendered by Ernst &
Young LLP for the audit of the Company's annual financial statements for the
2001 fiscal year and the reviews of the financial statements included in the
Company's Quarterly Reports on Form 10-Q for the 2001 fiscal year were $108,410.
There were no financial systems design and implementation services provided by
Ernst & Young LLP. Fees for audit related services were approximately $31,600
and fees for non-audit related services were approximately $25,475. Audit
related services generally represent fees for assistance with SEC registration
statements and a UK statutory audit. Non-audit related services primarily
represent fees for corporate tax services. The Audit Committee of the Company's
Board of Directors has concluded that the provision of these non-audit services
is compatible with maintaining Ernst & Young LLP's independence.
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 principal residence in 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, 2001, the outstanding balance on this loan was
$37,500.
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, pursuant to a note secured by a second
deed of trust on Dr. Earp's principal residence in California. As of December
31, 2001, the outstanding balance on this loan was $100,000.
In January 2002, the Company provided an interest-free loan to Bruce L.
Scott, Vice President of Corporate Development, in the principal amount of
$150,000 due in January 2004, pursuant to a note secured by a second deed of
trust on Mr. Scott's principal residence in California. As of December 31, 2001,
the loan had not been made.
Also, the Board accelerated the vesting schedule for options previously
granted to Mr. Gary Neil and extended the term of exercisability for Mr. Neil's
outstanding options and Mr. Ronald Eastman's outstanding options. 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 Bylaws.
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
24
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, 2001, all Reporting Persons complied with the applicable filing
requirement.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
The Company expects to hold its 2003 Annual Meeting of Stockholders in May
2003. All proposals of stockholders intended to be presented at the 2003 Annual
Meeting of Stockholders must be directed to the attention of the Company's
Secretary, at the address set forth on the first page of this proxy statement,
so that they are received by December 2, 2002, if they are to be considered for
possible inclusion in the proxy statement and form of proxy used in connection
with such meeting. In compliance with the Securities Exchange Act Rule 14a-8,
stockholders wishing to submit proposals or director nominations that are not to
be included in such proxy statement and proxy must do so not less than 10 and
nor more than 60 days prior to the date of the meeting. In addition, the
Company's Bylaws provide for notice procedures to recommend a person for
nomination as a director and to propose business to be considered by
stockholders at a meeting. Copies of the Company's Bylaws may be obtained from
Geron's Secretary.
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/ WILLIAM D. STEMPEL
WILLIAM D. STEMPEL
Secretary
April 1, 2002
25
APPENDIX 1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
GERON CORPORATION
William D. Stempel hereby certifies that:
FIRST: He is the duly elected and acting Secretary of Geron Corporation, a
Delaware corporation.
SECOND: The name of this Corporation is Geron Corporation (the
"Corporation").
THIRD: The Corporation's Restated Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware (the "Secretary of State")
on March 24, 1998; a Certificate of Designation was filed with the Secretary of
State on March 27, 1998; a Certificate of Amendment of Restated Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
December 14, 1999; and a Certificate of Amendment of Restated Certificate of
Incorporation was filed with the Secretary of State on June 28, 2000.
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 One Hundred and Three Million (103,000,000) shares.
One Hundred Million (100,000,000) 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 has signed this Certificate of
Amendment of Restated Certificate of Incorporation this day of May, 2002
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
a Delaware corporation
By:
------------------------------------
William D. Stempel, Secretary
26
APPENDIX 2
GERON CORPORATION
2002 EQUITY INCENTIVE PLAN
1. Purposes of the Plan. The purposes of the Geron Corporation 2002
Equity Incentive Plan are to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to
Employees, Directors and Consultants and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options or
Non-Qualified Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Acquisition" means (1) a dissolution, liquidation or sale of all
or substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the surviving corporation; or (3)
a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether
in the form of securities, cash or otherwise.
(b) "Administrator" means the Board or the Committee responsible for
conducting the general administration of the Plan, as applicable, in
accordance with Section 4 hereof.
(c) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options or
Stock Purchase Rights are granted under the Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute or statutes thereto. Reference to any particular Code
section shall include any successor section.
(f) "Committee" means a committee appointed by the Board in accordance
with Section 4 hereof.
(g) "Common Stock" means the Common Stock of the Company.
(h) "Company" means Geron Corporation, a Delaware corporation.
(i) "Consultant" means any consultant or adviser if: (i) the
consultant or adviser renders bona fide services to the Company or any
Parent or Subsidiary of the Company; (ii) the services rendered by the
consultant or adviser are not in connection with the offer or sale of
securities in a capital-raising transaction and do not directly or
indirectly promote or maintain a market for the Company's securities; and
(iii) the consultant or adviser is a natural person who has contracted
directly with the Company or any Parent or Subsidiary of the Company to
render such services.
(j) "Director" means a member of the Board.
(k) "Employee" means any person, including an Officer or Director, who
is an employee (as defined in accordance with Section 3401(c) of the Code)
of the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee (i) during any leave of absence
approved by the Company or (ii) upon any transfer between locations of the
Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may
exceed ninety (90) days, unless reemployment upon expiration of such leave
is guaranteed by statute or contract. Neither service as a Director nor
payment of a director's fee by the Company shall be sufficient, by itself,
to constitute "employment" by the Company.
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(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto. Reference to any
particular Exchange Act section shall include any successor section.
(m) "Fair Market Value" means, as of any date, the value of a share of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including, without limitation, the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for a
share of such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or system for the last market trading day prior
to the time of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high bid and low asked prices for a
share of the Common Stock on the last market trading day prior to the
day of determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "Holder" means a person who has been granted or awarded an Option
or Stock Purchase Right or who holds Shares acquired pursuant to the
exercise of an Option or Stock Purchase Right.
(o) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
which is designated as an Incentive Stock Option by the Administrator.
(p) "Independent Director" means a Director who is not an Employee of
the Company.
(q) "Non-Qualified Stock Option" means an Option (or portion thereof)
that is not designated as an Incentive Stock Option by the Administrator,
or which is designated as an Incentive Stock Option by the Administrator
but fails to qualify as an incentive stock option within the meaning of
Section 422 of the Code.
(r) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the Company
and a Holder evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(u) "Parent" means any corporation, whether now or hereafter existing
(other than the Company), in an unbroken chain of corporations ending with
the Company if each of the corporations other than the last corporation in
the unbroken chain owns stock possessing more than fifty percent of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
(v) "Plan" means the Geron Corporation 2002 Equity Incentive Plan.
(w) "Qualified Domestic Relations Order" means a domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
(x) "Restricted Stock" means Shares acquired pursuant to the exercise
of an unvested Option in accordance with Section 10(h) below or pursuant to
a Stock Purchase Right granted under Section 12 below.
(y) "Rule 16b-3" means that certain Rule 16b-3 under the Exchange Act,
as such Rule may be amended from time to time.
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(z) "Section 16(b)" means Section 16(b) of the Exchange Act, as such
Section may be amended from time to time.
(aa) "Securities Act" means the Securities Act of 1933, as amended, or
any successor statute or statutes thereto. Reference to any particular
Securities Act section shall include any successor section.
(bb) "Service Provider" means an Employee, Director or Consultant.
(cc) "Share" means a share of Common Stock, as adjusted in accordance
with Section 13 below.
(dd) "Stock Purchase Right" means a right to purchase Common Stock
pursuant to Section 12 below, subject to such repurchase rights by the
Company and such other terms and conditions as are determined pursuant to
Section 12 below.
(ee) "Subsidiary" means any corporation, whether now or hereafter
existing (other than the Company), in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing more than fifty
percent of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the shares of stock subject to Options or Stock Purchase Rights shall
be Common Stock, initially shares of the Company's Common Stock. Subject to the
provisions of Section 13 of the Plan, the maximum aggregate number of Shares
which may be issued upon exercise of such Options or Stock Purchase Rights is
five million (5,000,000) Shares, plus an annual increase to be added on each
anniversary date of the Board's adoption of the Plan during the term of the Plan
equal to the least of (i) two million (2,000,000) Shares, (ii) four percent (4%)
of the Company's outstanding Shares on such date or (iii) a lesser amount
determined by the Board. Shares issued upon exercise of Options or Stock
Purchase Rights may be authorized but unissued, or reacquired Common Stock. If
an Option or Stock Purchase Right expires or becomes unexercisable without
having been exercised in full, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated). Shares which are delivered by the Holder or withheld by the
Company upon the exercise of an Option or Stock Purchase Right under the Plan,
in payment of the exercise price thereof or tax withholding thereon, may again
be optioned, granted or awarded hereunder, subject to the limitations of this
Section 3. If Shares of Restricted Stock are repurchased by the Company at their
original purchase price, such Shares shall become available for future grant
under the Plan. Notwithstanding the provisions of this Section 3, no Shares may
again be optioned, granted or awarded if such action would cause an Incentive
Stock Option to fail to qualify as an Incentive Stock Option under Code Section
422.
4. Administration of the Plan.
(a) Administrator. A Committee of the Board shall administer the Plan and
the Committee shall consist solely of two or more Independent Directors each of
whom is both an "outside director," within the meaning of Section 162(m) of the
Code, and a "non-employee director" within the meaning of Rule 16b-3.
Notwithstanding the foregoing, the Board or the Committee may (i) delegate to a
committee of one or more members of the Board who are not Independent Directors
the authority to grant, and otherwise act as Administrator hereunder with
respect to, awards under the Plan to eligible persons who are either (1) not
then "covered employees," within the meaning of Section 162(m) of the Code and
are not expected to be "covered employees" at the time of recognition of income
resulting from such award or (2) not persons with respect to whom the Company
wishes to comply with Section 162(m) of the Code and/or (ii) delegate to a
committee of one or more members of the Board who are not "non-employee
directors," within the meaning of Rule 16b-3, the authority to grant awards
under the Plan to eligible persons who are not then subject to Section 16 of the
Exchange Act. Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may only be
filled by the Board.
29
(b) Powers of the Administrator. Subject to the provisions of the Plan and
the specific duties delegated by the Board to such Committee, and subject to the
approval of any relevant authorities, the Administrator shall have the authority
in its sole discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each such
award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions of any Option or Stock
Purchase Right granted hereunder (such terms and conditions include, but
are not limited to, the exercise price, the time or times when Options or
Stock Purchase Rights may vest or be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or
Stock Purchase Right or the Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine) and amend such terms and conditions following the grant of such
Options and Stock Purchase Rights hereunder;
(vi) to determine whether to offer to buyout a previously granted
Option as provided in subsection 10(i) and to determine the terms and
conditions of such offer and buyout (including whether payment is to be
made in cash or Shares);
(vii) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(viii) to allow Holders to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having
a Fair Market Value equal to the minimum amount required to be withheld
based on the statutory withholding rates for federal and state tax purposes
that apply to supplemental taxable income. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined. All elections by Holders to have
Shares withheld for this purpose shall be made in such form and under such
conditions as the Administrator may deem necessary or advisable;
(ix) to amend the Plan or any Option or Stock Purchase Right granted
under the Plan as provided in Section 15; and
(x) to construe and interpret the terms of the Plan and awards granted
pursuant to the Plan and to exercise such powers and perform such acts as
the Administrator deems necessary or desirable to promote the best
interests of the Company which are not in conflict with the provisions of
the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Holders.
5. Eligibility. Non-Qualified Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee, Director or Consultant who has
been granted an Option or Stock Purchase Right may be granted additional Options
or Stock Purchase Rights.
6. Limitations.
(a) Each Option shall be designated by the Administrator in the Option
Agreement as either an Incentive Stock Option or a Non-Qualified Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares subject to a Holder's Incentive Stock Options and
other incentive stock options granted by the Company, any Parent or Subsidiary,
which become exercisable for the
30
first time during any calendar year (under all plans of the Company or any
Parent or Subsidiary) exceeds $100,000, such excess Options or other options
shall be treated as Non-Qualified Stock Options.
For purposes of this Section 6(a), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of the Shares shall be determined as of the time of grant.
(b) Neither the Plan, any Option nor any Stock Purchase Right shall confer
upon a Holder any right with respect to continuing the Holder's employment or
consulting relationship with the Company, nor shall they interfere in any way
with the Holder's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
(c) No Service Provider shall be granted, in any calendar year, Options or
Stock Purchase Rights to purchase more than 750,000 Shares. The foregoing
limitation shall be adjusted proportionately in connection with any change in
the Company's capitalization as described in Section 13. For purposes of this
Section 6(c), if an Option is canceled in the same calendar year it was granted
(other than in connection with a transaction described in Section 13), the
canceled Option will be counted against the limit set forth in this Section
6(c). For this purpose, if the exercise price of an Option is reduced, the
transaction shall be treated as a cancellation of the Option and the grant of a
new Option.
7. Term of Plan. The Plan shall become effective upon its initial
adoption by the Board and shall continue in effect until it is terminated under
Section 15 of the Plan. No Options or Stock Purchase Rights may be issued under
the Plan after the tenth (10th) anniversary of the earlier of (i) the date upon
which the Plan is adopted by the Board or (ii) the date the Plan is approved by
the stockholders.
8. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to a Holder who, at the time the Option is granted, owns (or is treated as
owning under Code Section 424) stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Except as provided in Section 13, the per share exercise price for the
Shares to be issued upon exercise of an Option shall be such price as is
determined by the Administrator, but in no event less than the par value per
Share, and in the case of an Incentive Stock Option
(i) granted to an Employee who, at the time of grant of such Option,
owns (or is treated as owning under Code Section 424) stock representing
more than ten percent (10%) of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the per Share exercise price shall
be no less than one hundred ten percent (110%) of the Fair Market Value per
Share on the date of grant.
(ii) granted to any other Employee, the per Share exercise price shall
be no less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.
(b) Notwithstanding the foregoing, Options may be granted with a per Share
exercise price other than as required above pursuant to a merger or other
corporate transaction.
(c) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) with the consent of the Administrator, a full recourse promissory
note bearing interest (at no less than such rate as shall then preclude the
imputation of interest under the Code) and payable upon such terms as may be
prescribed by the Administrator, (4) with the consent of the Administrator,
other Shares which (x) in the case of Shares acquired from the Company, have
been owned by the Holder for more than six (6) months on the date of surrender,
and (y) have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which such Option shall be exercised, (5)
with the consent of the Administrator, surrendered Shares then issuable upon
exercise of the Option having a Fair Market Value on
31
the date of exercise equal to the aggregate exercise price of the Option or
exercised portion thereof, (6) property of any kind which constitutes good and
valuable consideration, (7) with the consent of the Administrator, delivery of a
notice that the Holder has placed a market sell order with a broker with respect
to Shares then issuable upon exercise of the Options and that the broker has
been directed to pay a sufficient portion of the net proceeds of the sale to the
Company in satisfaction of the Option exercise price, provided, that payment of
such proceeds is then made to the Company upon settlement of such sale, or (8)
with the consent of the Administrator, any combination of the foregoing methods
of payment.
10. Exercise of Option.
(a) Vesting; Fractional Exercises. Except as provided in Section 13,
Options granted hereunder shall be vested and exercisable according to the terms
hereof at such times and under such conditions as determined by the
Administrator and set forth in the Option Agreement, as may be amended from time
to time. An Option may not be exercised for a fraction of a Share.
(b) Deliveries upon Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or his or her office:
(i) A written or electronic notice complying with the applicable rules
established by the Administrator stating that the Option, or a portion
thereof, is exercised. The notice shall be signed by the Holder or other
person then entitled to exercise the Option or such portion of the Option;
(ii) Such representations and documents as the Administrator, in its
sole discretion, deems necessary or advisable to effect compliance with
Applicable Laws. The Administrator may, in its sole discretion, also take
whatever additional actions it deems appropriate to effect such compliance,
including, without limitation, placing legends on share certificates and
issuing stop transfer notices to agents and registrars;
(iii) Upon the exercise of all or a portion of an unvested Option
pursuant to Section 10(h), a Restricted Stock purchase agreement in a form
determined by the Administrator and signed by the Holder or other person
then entitled to exercise the Option or such portion of the Option; and
(iv) In the event that the Option shall be exercised pursuant to
Section 10(f) by any person or persons other than the Holder, appropriate
proof of the right of such person or persons to exercise the Option.
(c) Conditions to Delivery of Share Certificates. The Company shall not be
required to issue or deliver any certificate or certificates for Shares
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(i) The admission of such Shares to listing on all stock exchanges on
which such class of stock is then listed;
(ii) The completion of any registration or other qualification of such
Shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body which the Administrator shall, in its sole discretion, deem
necessary or advisable;
(iii) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Administrator shall, in its sole
discretion, determine to be necessary or advisable;
(iv) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may establish from time to time
for reasons of administrative convenience; and
(v) The receipt by the Company of full payment for such Shares,
including payment of any applicable withholding tax, which in the sole
discretion of the Administrator may be in the form of consideration used by
the Holder to pay for such Shares under Section 9(c).
(d) Termination of Relationship as a Service Provider. If a Holder ceases
to be a Service Provider other than by reason of the Holder's total and
permanent disability (as defined in Section 22(e)(3) of the
32
Code) or death, such Holder may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination. In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Holder's termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). If, on the date
of termination, the Holder is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option immediately cease to be
issuable under the Option and shall again become available for issuance under
the Plan. If and to the extent, after termination, the Holder does not exercise
his or her Option within the time period specified herein, the Option shall
terminate, and the Shares covered by such Option shall again become available
for issuance under the Plan.
(e) Disability of Holder. If a Holder ceases to be a Service Provider as a
result of the Holder's total and permanent disability (as defined in Section
22(e)(3) of the Code), the Holder may exercise his or her Option within
twenty-four (24) months following the Holder's termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement) and such Option shall be exercisable during such period for the
number of Shares subject to the Option with respect to which the right to
exercise was (i) already accrued as of the Holder's termination and (ii) would
have accrued had the Holder remained a Service Provider continuously for
thirty-six (36) months (or such lesser period of time as is determined by the
Board) after the date of Holder's termination. If, on the date of termination,
the Holder is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option (determined after taking into account the
accelerated exercisability provided for in this Section 10(e)) shall immediately
cease to be issuable under the Option and shall again become available for
issuance under the Plan. If, and to the extent, after termination, the Holder
does not exercise his or her Option within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall again become
available for issuance under the Plan.
(f) Death of Holder. If a Holder dies while a Service Provider, the Option
may be exercised within twenty-four (24) months following the Holder's
termination by the Holder's estate or by a person who acquires the right to
exercise the Option by bequest or inheritance (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement) and
such Option shall be exercisable during such period for the number of Shares
subject to the Option with respect to which the right to exercise was (i)
already accrued as of the Holder's termination and (ii) would have accrued had
the Holder remained a Service Provider continuously for thirty-six (36) months
(or such lesser period of time as is determined by the Board) after the date of
Holder's termination. If, at the time of death, the Holder is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option (determined after taking into account the accelerated exercisability
provided for in this Section 10(f)) shall immediately cease to be issuable under
the Option and shall again become available for issuance under the Plan. The
Option may be exercised by the executor or administrator of the Holder's estate
or, if none, by the person(s) entitled to exercise the Option under the Holder's
will or the laws of descent or distribution. If, and to the extent, the Option
is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall again become available
for issuance under the Plan.
If a Holder dies within three (3) months after termination as a Service
Provider (other than as a result of the Holder's disability), the Option may be
exercised within six (6) months following the date of death (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement), by the Holder's estate or by a person who acquires the right to
exercise the Option by bequest or inheritance, but only to the extent the right
to exercise such Option had accrued as of the date of death.
(g) Regulatory Extension. A Holder's Option Agreement may provide that if
the exercise of the Option following the termination of the Holder's status as a
Service Provider (other than upon the Holder's death or Disability) would be
prohibited at any time because the issuance of shares would violate the
registration requirements under the Securities Act or because the sale of Shares
on or after exercise would be inconsistent with the terms of the Company's
insider trading policy, then the Option shall terminate on the earlier of (i)
the expiration of the term of the Option set forth in Section 8 or (ii) the
expiration of a period of three (3) months after the termination of the Holder's
status as a Service Provider during which the exercise
33
of the Option would not be in violation of such registration requirements or
inconsistent with such insider trading policy, as applicable.
(h) Early Exercisability. The Administrator may provide in the terms of a
Holder's Option Agreement that the Holder may, at any time before the Holder's
status as a Service Provider terminates, exercise the Option in whole or in part
prior to the full vesting of the Option; provided, however, that Shares acquired
upon exercise of an Option which has not fully vested may be subject to any
forfeiture, transfer or other restrictions as the Administrator may determine in
its sole discretion.
(i) Buyout Provisions. The Administrator may at any time offer to buyout
for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Holder at the time that such offer is made.
11. Non-Transferability of Options and Stock Purchase Rights. Options and
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the Holder,
only by the Holder. Notwithstanding the preceding sentence, a Non-Qualified
Stock 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 Administrator may deem appropriate.
12. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone,
in addition to, or in tandem with Options granted under the Plan and/or cash
awards made outside of the Plan. After the Administrator determines that it will
offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing of the terms, conditions and restrictions related to the offer,
including the number of Shares that such person shall be entitled to purchase,
the price to be paid, and the time within which such person must accept such
offer. The offer shall be accepted by execution of a Restricted Stock purchase
agreement in the form determined by the Administrator.
(b) Repurchase Right. Unless the Administrator determines otherwise, the
Restricted Stock purchase agreement shall grant the Company the right to
repurchase Shares acquired upon exercise of a Stock Purchase Right upon the
termination of the purchaser's status as a Service Provider for any reason. The
purchase price for Shares repurchased by the Company pursuant to such repurchase
right and the rate at which such repurchase right shall lapse shall be
determined by the Administrator in its sole discretion, and shall be set forth
in the Restricted Stock purchase agreement.
(c) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised,
the purchaser shall have rights equivalent to those of a shareholder and shall
be a shareholder when his or her purchase is entered upon the records of the
duly authorized transfer agent of the Company. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date the Stock
Purchase Right is exercised, except as provided in Section 13 of the Plan.
13. Adjustments upon Changes in Capitalization, Merger or Asset Sale.
(a) In the event that the Administrator determines that any dividend or
other distribution (whether in the form of cash, Common Stock, other securities,
or other property), recapitalization, reclassification, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the Company,
or exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar corporate
34
transaction or event, in the Administrator's sole discretion, affects the Common
Stock such that an adjustment is determined by the Administrator to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended by the Company to be made available under the Plan
or with respect to any Option, Stock Purchase Right or Restricted Stock, then
the Administrator shall, in such manner as it may deem equitable, adjust any or
all of:
(i) the number and kind of shares of Common Stock (or other securities
or property) with respect to which Options or Stock Purchase Rights may be
granted or awarded (including, but not limited to, adjustments of the
limitations in Section 3 on the maximum number and kind of shares which may
be issued and adjustments of the maximum number of Shares that may be
purchased by any Holder in any calendar year pursuant to Section 6(c));
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, Stock Purchase
Rights or Restricted Stock; and
(iii) the grant or exercise price with respect to any Option or Stock
Purchase Right.
(b) In the event of any transaction or event described in Section 13(a),
the Administrator, in its sole discretion, and on such terms and conditions as
it deems appropriate, either by the terms of the Option, Stock Purchase Right or
Restricted Stock or by action taken prior to the occurrence of such transaction
or event and either automatically or upon the Holder's request, is hereby
authorized to take any one or more of the following actions whenever the
Administrator determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended by the
Company to be made available under the Plan or with respect to any Option, Stock
Purchase Right or Restricted Stock granted or issued under the Plan or to
facilitate such transaction or event:
(i) To provide for either the purchase of any such Option, Stock
Purchase Right or Restricted Stock for an amount of cash equal to the
amount that could have been obtained upon the exercise of such Option or
Stock Purchase Right or realization of the Holder's rights had such Option,
Stock Purchase Right or Restricted Stock been currently exercisable or
payable or fully vested or the replacement of such Option, Stock Purchase
Right or Restricted Stock with other rights or property selected by the
Administrator in its sole discretion;
(ii) To provide that such Option or Stock Purchase Right shall be
exercisable as to all shares covered thereby, notwithstanding anything to
the contrary in the Plan or the provisions of such Option or Stock Purchase
Right;
(iii) To provide that such Option, Stock Purchase Right or Restricted
Stock be assumed by the successor or survivor corporation, or a parent or
subsidiary thereof, or shall be substituted for by similar options, rights
or awards covering the stock of the successor or survivor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices;
(iv) To make adjustments in the number and type of shares of Common
Stock (or other securities or property) subject to outstanding Options and
Stock Purchase Rights, and/or in the terms and conditions of (including the
grant or exercise price), and the criteria included in, outstanding
Options, Stock Purchase Rights or Restricted Stock or Options, Stock
Purchase Rights or Restricted Stock which may be granted in the future; and
(v) To provide that immediately upon the consummation of such event,
such Option or Stock Purchase Right shall not be exercisable and shall
terminate; provided, that for a specified period of time prior to such
event, such Option or Stock Purchase Right shall be exercisable as to all
Shares covered thereby, and the restrictions imposed under an Option
Agreement or Restricted Stock purchase agreement upon some or all Shares
may be terminated and, in the case of Restricted Stock, some or all shares
of such Restricted Stock may cease to be subject to repurchase,
notwithstanding anything to the contrary in the Plan or the provisions of
such Option, Stock Purchase Right or Restricted Stock purchase agreement.
35
(c) Subject to Section 3, the Administrator may, in its sole discretion,
include such further provisions and limitations in any Option, Stock Purchase
Right, Restricted Stock agreement or certificate, as it may deem equitable and
in the best interests of the Company.
(d) If the Company undergoes an Acquisition, then the vesting of any
outstanding Options, Stock Purchase Rights or Restricted Stock (and, if
applicable, the time during which such awards may be exercised) shall be
accelerated and made fully exercisable and all restrictions thereon shall lapse
at least ten (10) days prior to the closing of the Acquisition. Any surviving
corporation or entity or acquiring corporation or entity, or affiliate of such
corporation or entity, may assume any Options, Stock Purchase Rights or
Restricted Stock outstanding under the Plan or may substitute similar stock
awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 13(d)) for those
outstanding under the Plan. In the event any surviving corporation or entity or
acquiring corporation or entity in an Acquisition, or affiliate of such
corporation or entity, does not assume any Options, Stock Purchase Rights or
Restricted Stock or does not substitute similar stock awards for those
outstanding under the Plan, then such Options or Stock Purchase Rights shall
terminate if not exercised prior to the closing of such Acquisition.
(e) The existence of the Plan, any Option Agreement or Restricted Stock
purchase agreement and the Options or Stock Purchase Rights granted hereunder
shall not affect or restrict in any way the right or power of the Company or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
14. Time of Granting Options and Stock Purchase Rights. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time wholly or
partially amend, alter, suspend or terminate the Plan. However, without approval
of the Company's stockholders given within twelve (12) months before or after
the action by the Board, no action of the Board may, except as provided in
Section 13, increase the limits imposed in Section 3 on the maximum number of
Shares which may be issued under the Plan or extend the term of the Plan under
Section 7.
(b) Stockholder Approval. The Board shall obtain stockholder approval of
any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Holder,
unless mutually agreed otherwise between the Holder and the Administrator, which
agreement must be in writing and signed by the Holder and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options, Stock Purchase
Rights or Restricted Stock granted or awarded under the Plan prior to the date
of such termination.
16. Stockholder Approval. The Plan will be submitted for the approval of
the Company's stockholders within twelve (12) months after the date of the
Board's initial adoption of the Plan. Options, Stock Purchase Rights or
Restricted Stock may be granted or awarded prior to such stockholder approval,
provided that such Options, Stock Purchase Rights and Restricted Stock shall not
be exercisable, shall not vest and the restrictions thereon shall not lapse
prior to the time when the Plan is approved by the stockholders, and provided
further that if such approval has not been obtained at the end of said
twelve-month period, all
36
Options, Stock Purchase Rights and Restricted Stock previously granted or
awarded under the Plan shall thereupon be canceled and become null and void.
17. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Repurchase Provisions. The Administrator in its sole discretion may
provide that the Company may repurchase Shares acquired upon exercise of an
Option or Stock Purchase Right upon the occurrence of certain specified events,
including, without limitation, a Holder's termination as a Service Provider,
divorce, bankruptcy or insolvency.
20. Investment Intent. The Company may require a Plan participant, as a
condition of exercising or acquiring stock under any Option or Stock Purchase
Right, (i) to give written assurances satisfactory to the Company as to the
participant's knowledge and experience in financial and business matters and/or
to employ a purchaser representative reasonably satisfactory to the Company who
is knowledgeable and experienced in financial and business matters and that he
or she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option or Stock Purchase
Right; and (ii) to give written assurances satisfactory to the Company stating
that the participant is acquiring the stock subject to the Option or Stock
Purchase Right for the participant's own account and not with any present
intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (A) the issuance of the shares upon the exercise or acquisition
of stock under the applicable Option or Stock Purchase Right has been registered
under a then currently effective registration statement under the Securities Act
or (B) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
21. Governing Law. The validity and enforceability of this Plan shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to otherwise governing principles of conflicts of law.
* * * * * * *
I hereby certify that the Plan was duly adopted by the Board of Directors
of Geron Corporation on February 15, 2002.
Executed at Menlo Park, California on this 20th day of March, 2002.
/s/ WILLIAM D. STEMPEL
--------------------------------------
William D. Stempel
Secretary
37
[GERON CORPORATION LOGO]
GERON CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF GERON CORPORATION
2002 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 1, 2002, and hereby appoints
Thomas B. Okarma, David L. Greenwood and William D. Stempel, or any 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 2002
Annual Meeting of Stockholders of Geron Corporation to be held on May 17, 2002,
at 9:00 a.m., at the Hotel Sofitel, 233 Twin Dolphin Drive, Redwood City,
California 94065 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 two Class III
Directors to hold office until the annual meeting of stockholders in the year
2005; (2) to amend the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock to
100,000,000 shares; (3) to approve the 2002 Equity Incentive Plan for the
Company that will replace the 1992 Stock Option Plan, which is expiring; (4) to
ratify appointment of Ernst & Young LLP as the Company's independent auditors
for the fiscal year ending December 31, 2002; (5) to adjourn or postpone the
Annual Meeting for any reason, including to permit further solicitation of
proxies; and as said proxies deem advisable on such other matters as may come
before the meeting.
[X] Please mark your votes as in this example.
1. Election of Class III Directors.
Nominees: Alexander E. Barkas, Ph.D. and Robert B. Stein, Ph.D., M.D.
[ ] FOR all nominees (except as indicated) [ ] WITHHOLD authority to vote for
all nominees
If you wish to withhold authority to vote for any individual nominee, strike a
line through that individual's name.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
2. To amend the Company's Restated Certificate of Incorporation to increase the
number of authorized shares of the Company's Common Stock to 100,000,000
shares. [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve the 2002 Equity Incentive Plan for the Company that will replace
the 1992 Stock Option Plan, which is expiring.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify appointment of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending December 31, 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To adjourn or postpone the Annual Meeting for any reason, including to permit
further solicitation of proxies.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. To transact such other business as may properly come before the Annual
Meeting.
Date:
------------------------
------------------------
Signature(s)
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.
Note: This Proxy should
be marked, dated and
signed by the
stockholder(s) exactly
as his or her name
appears hereon, and
returned in the enclosed
envelope.