Geron DEF 14A 2012
SCHEDULE 14A INFORMATION
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[ ] Preliminary Proxy
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230 Constitution Drive
Menlo Park, CA 94025
March 29, 2012
You are cordially invited to attend the 2012 Annual Meeting of Stockholders of Geron Corporation, which will be held on May 17, 2012 at 8:00 a.m. Pacific Time. We are pleased to announce that this years Annual Meeting will be held completely virtual. You will be able to attend, vote and submit your questions during the meeting via live webcast via the Internet at www.virtualshareholdermeeting.com/geron2012. For the first time, we are hosting a stockholder-only website where you will be able to learn more about recent events at Geron, participate in a stockholder survey, vote your proxy and submit questions for the Annual Meeting in advance. To access this website, have your 12-Digit Control Number available and go to www.theinvestornetwork.com/forum/gern.
As permitted by the rules of the Securities and Exchange Commission, we are also pleased to furnish our proxy materials to stockholders primarily over the Internet. We believe this process will expedite stockholders receipt of materials, lower the costs of our annual meeting and reduce the environmental impact of printing and mailing hard copies. Stockholders who continue to receive hard copies of proxy materials may help us reduce costs by opting to receive future proxy materials by e-mail.
On or about April 4, 2012, we will distribute to our stockholders a notice containing instructions on how to access our 2012 Proxy Statement and our 2011 Annual Report on Form 10-K, and how to vote online. This notice also will include instructions on how you can receive a paper copy of the proxy materials, including the notice of the Annual Meeting, 2012 Proxy Statement and proxy card. If you received your proxy materials by mail, the notice of Annual Meeting, 2012 Proxy Statement and proxy card from our Board of Directors were enclosed. If you received your proxy materials via e-mail, the e-mail contained voting instructions and links to the 2012 Proxy Statement and 2011 Annual Report on Form 10-K, which includes information on our operations, product candidates and our audited financial statements.
At this years Annual Meeting, the agenda includes the following items:
Whether or not you plan to connect to the meeting via the webcast, please vote electronically via the Internet or by telephone, or, if you requested paper copies of the proxy materials, please complete, sign, date and return the accompanying proxy in the enclosed postage-paid envelope.
Thank you for your ongoing support of, and continued interest in, Geron Corporation. I look forward to speaking with you over the Internet at our 2012 Annual Meeting of Stockholders.
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 May 17, 2012, at 8:00 a.m. Pacific Time. To participate in the Annual Meeting via live webcast, vote your shares online and submit your questions during the meeting, please visit www.virtualshareholdermeeting.com/geron2012 and be sure to have your 12-Digit Control Number to enter the meeting. You will not be able to attend the Annual Meeting in person. The meeting will be held for the following purposes:
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 March 20, 2012, 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. Each stockholder is entitled to one vote for each share of common stock held at that time.
Your Vote Is Important To Us. Whether or not you plan to connect to the meeting via the webcast, please vote electronically via the Internet or by telephone, or, if you requested paper copies of the proxy materials, please complete, sign, date and return the accompanying proxy in the enclosed postage-paid envelope. 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.
Menlo Park, California
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER OR NOT YOU EXPECT TO CONNECT TO THE MEETING, WE URGE YOU TO SUBMIT YOUR PROXY PROMPTLY IN ORDER TO ASSURE THAT A QUORUM IS PRESENT.
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Why am I receiving these materials?
We have sent you a Notice of Availability of Proxy Materials (the Notice) because the Board of Directors (the Board) of Geron Corporation, a Delaware corporation (Geron, the Company, we or us), is soliciting your proxy to vote at our 2012 Annual Meeting of Stockholders to be held on May 17, 2012, at 8:00 a.m. Pacific Time (the Annual Meeting), or at any adjournment or postponement thereof. We invite you to attend the Annual Meeting via the Internet to vote on the proposals described in this Proxy Statement. You may vote by proxy over the Internet, by phone or by mail, if you requested printed copies of the proxy materials.
We intend to distribute the proxy materials on or about April 4, 2012 to all stockholders of record entitled to vote at the Annual Meeting.
What is the purpose of the Annual Meeting?
At our Annual Meeting, stockholders will act upon the matters described in this Proxy Statement. In addition, following the meeting, management will report on current events at Geron and respond to questions from stockholders.
Can I attend the Annual Meeting?
We will host the 2012 Annual Meeting live via the Internet. You will not be able to attend the meeting in person. Any stockholder can listen to and participate in the Annual Meeting live via the Internet at www.virtualshareholdermeeting.com/geron2012. The webcast will start at 8:00 a.m., Pacific Time, on May 17, 2012. Stockholders may vote and submit questions while connected to the Annual Meeting via the Internet.
For the first time, we are hosting a stockholder-only website at www.theinvestornetwork.com/forum/gern. This website provides validated stockholders the ability to learn more about the Company, participate in a stockholder survey, vote their proxy and submit questions in advance of the Annual Meeting. To access the website, you must have your 12-Digit Control Number available, which can be found on your Notice or proxy card.
What do I need in order to be able to participate in the Annual Meeting online?
The Annual Meeting will be held live via the Internet. You will not be able to attend the meeting in person. A summary of the information you need to attend the meeting online is provided below:
Why did I receive a Notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
We are pleased to continue to take advantage of the SEC rule that allows companies to furnish their proxy materials over the Internet. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless you request one. Instead, the Notice of Internet Availability of Proxy Materials will instruct you as to how you may access and review the proxy materials and cast your vote via the Internet. If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, please follow the instructions included in the Notice of Internet Availability of Proxy Materials. A stockholders election to receive proxy materials by mail or electronically by email will remain in effect until the stockholder terminates such election.
Why did I receive a full set of proxy materials instead of a Notice regarding the Internet availability of proxy materials?
We are providing paper copies of the proxy materials to stockholders who previously requested to receive them. If you would like to reduce the environmental impact and the costs incurred by us in mailing proxy materials, you may elect to receive all future proxy materials electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions provided with your proxy materials and on your proxy card or voting instruction card, to vote using the Internet and, when prompted, indicate that you agree to receive or access future stockholder communications electronically. Alternatively, you can go to www.proxyvote.com and enroll for online delivery of proxy materials.
How can I access the proxy materials over the Internet?
You may view and also download our proxy materials, including the 2011 Annual Report on Form 10-K and the Notice, on our website at www.geron.com as well as www.proxyvote.com.
How do I order proxy materials if I have not received them?
This Proxy Statement and the Companys 2011 Annual Report on Form 10-K are available at www.proxyvote.com. Internet distribution of proxy materials is designed to expedite receipt by stockholders, lower the cost of the Annual Meeting and conserve natural resources. However, if you have not received a copy of our proxy materials and would like to receive one for the Annual Meeting or for future stockholder meetings, you may request printed copies as follows:
Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/geron2012.
Who can vote at the Annual Meeting?
Only holders of record at the close of business on March 20, 2012 (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 132,259,325 shares of common stock, par value $0.001 per share (Common Stock), outstanding. Each holder of record of Common Stock on the Record Date will be entitled to one vote for each share held on all matters to be voted upon at the Annual Meeting. The stock transfer books will not be closed
between the Record Date and the 2012 Annual Meeting date. A list of stockholders entitled to vote at the 2012 Annual Meeting will be available for examination at our principal executive offices at the address listed above for a period of ten (10) days prior to the 2012 Annual Meeting, and during the 2012 Annual Meeting such list will be available for examination at www.virtualshareholdermeeting.com/geron2012.
What am I voting on at the Annual Meeting?
You are being asked to vote on four (4) proposals, as follows:
What are the choices in voting?
For Proposal 1, you may either vote For all nominees to the Board of Directors or you may Withhold your vote for any nominee you specify. For Proposals 2, 3 and 4, you may vote For or Against or abstain from voting.
What is the recommendation of the Board on each of the matters scheduled to be voted on at the Annual Meeting?
The Board of Directors recommends that you vote:
Could other matters be decided at the Annual Meeting?
Our bylaws require that we receive advance notice of any proposal to be brought before the Annual Meeting by our stockholders, and we have not received notice of any such proposals as of the Record Date. If any other matter were to be properly submitted for a vote at the Annual Meeting, the proxy holders appointed by the Board will have the discretion to vote on those matters for you as they see fit. This includes, among other things, considering any motion to adjourn the Annual Meeting to another time and/or place, including for the purpose of soliciting additional proxies for or against a given proposal.
What is the difference between holding shares as a stockholder of record or as a beneficial owner?
Stockholder of Record: Shares Registered in Your Name
You are a stockholder of record if at the close of business on March 20, 2012, your shares were registered directly in your name with our transfer agent, Computershare Trust Company, N.A. As a stockholder of record, you may vote during the 2012 Annual Meeting or vote by proxy.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
You are a beneficial owner, if at the close of business on March 20, 2012, your shares were held in an account at a brokerage firm, bank, dealer, or other similar organization and not in your name. The organization holding your account is considered to be the stockholder of record for purposes of voting at the 2012 Annual Meeting. Being a beneficial owner means that, like most stockholders, your shares are held in street name and these proxy materials are being forwarded to you by that organization. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account by following the voting instructions your broker or other nominee provides. If you do not provide your broker or nominee with instructions on how to vote your shares, your broker or nominee will be able to vote your shares with respect to some of the proposals, but not all. Please see What are broker non-votes? below for more information.
How do I vote my shares and what are the voting deadlines?
Please refer to the proxy card for instructions on, and access information for, voting by telephone, over the Internet or by mail.
Stockholder of Record: Shares Registered In Your Name
If you are a stockholder of record, there are several ways for you to vote your shares.
The Internet and telephone voting procedures described above, which comply with Delaware law, are designed to authenticate stockholders identities, to allow stockholders to vote their shares, and to confirm that their instructions have been properly recorded. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If you are a beneficial owner of your shares, you should have received a Notice of Internet Availability of Proxy Materials or voting instructions from the broker or other nominee holding your shares. You should follow the instructions in the Notice of Internet Availability of Proxy Materials or voting instructions provided by your broker or nominee in order to instruct your broker or other nominee on how to vote your shares. The availability of telephone and Internet voting will depend on the voting process of the broker or nominee. Please contact your bank, broker or other agent if you have questions about their instructions on how to vote your shares. To vote during the 2012 Annual Meeting, you must obtain a valid proxy from your broker, bank, or other agent.
Geron Plan Participants
Participants in the Geron 401(k) Plan will receive a proxy that incorporates all shares owned through the Geron 401(k) Plan, assuming the shares are registered in the same name. The proxy will serve as voting instructions for the trustee of the Geron 401(k) Plan. If the proxy is not voted, the plan trustee will vote those shares in the same proportion as other Geron 401(k) participants vote their Geron 401(k) Plan shares.
Shares purchased through the 1996 Employee Stock Purchase Plan will follow standard brokerage industry practices. Shares held in the name of the broker will be voted on behalf of the holder on certain routine matters. To the extent the brokerage firm votes shares on the behalf of the holder, the shares will be counted for the purpose of determining a quorum.
Can I vote my shares by filling out and returning the Notice?
No. The Notice will, however, provide instructions on how to vote by Internet, by telephone, or by requesting and returning a paper proxy card or voting instruction card.
How many votes are needed to approve a proposal?
A quorum of stockholders is necessary to hold a valid meeting. In order to constitute a quorum and to transact business at the Annual Meeting, a majority of the outstanding shares of Common Stock on the Record Date must be represented at the Annual Meeting. Shares represented by proxies that reflect abstentions or broker non-votes will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum.
What are broker non-votes?
Broker non-votes occur when a beneficial owner of shares held in street name does not give instructions to the broker or nominee holding the shares on how to vote on matters deemed non-routine. Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are considered to be routine, but not with respect to non-routine
matters. In the event that a broker, bank, custodian, nominee or other record holder of Geron Common Stock indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular proposal, then those shares will be treated as broker non-votes with respect to that proposal. Accordingly, if you own shares through a nominee, such as a broker or bank, please be sure to instruct your nominee on how to vote to ensure that your vote is counted on each of the proposals.
Which ballot measures are considered routine or non-routine?
The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2012 (Proposal 4) is considered routine under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Proposal 4 and, to the extent deemed routine, Proposal 2. The election of directors (Proposal 1) and the advisory vote on compensation for named executive officers (Proposal 3) are considered non-routine matters under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on Proposals 1 and 3. In addition, it is possible that brokers will not have discretionary voting authority with respect to the proposal to amend our Restated Certificate of Incorporation to increase the authorized number of shares from 200,000,000 to 300,000,000 shares (Proposal 2), in which case, if you do not instruct your broker on how to vote with respect to this proposal, your broker may not vote with respect to this proposal and these non-votes will be counted as broker non-votes.
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, sign and return each proxy card to ensure that all of your shares are voted.
How will your proxy be voted?
Votes will be counted by the Inspector of Election appointed for the 2012 Annual Meeting, who will separately count For and (with respect to proposals other than the election of directors) Against votes, abstentions and broker non-votes. In addition, with respect to the election of directors, the Inspector of Election will count the number of withheld votes received for the nominees. If your shares are held by your broker as your nominee (that is, in street name), you will need to obtain a proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker to vote your shares. If you do not give instructions to your broker, your broker can vote your shares with respect to routine items, but not with respect to non-routine items. See What are broker non-votes? and Which ballot measures are considered routine and non-routine? above for more information regarding routine and non-routine matters.
Can I revoke or change my vote after I submit my proxy?
Stockholder of Record: Shares Registered In Your Name
If you are a stockholder of record, you may revoke or change your vote at any time before the final vote at the Annual Meeting by:
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If you are a beneficial owner of your shares, you must contact the broker or other nominee holding your shares and follow their instructions for revoking or changing your vote.
Is my vote confidential?
Yes. Proxy cards, ballots and voting tabulations that identify stockholders by name are kept confidential. There are exceptions for contested proxy solicitations or when necessary to meet legal requirements. In addition, all comments written on a proxy card or elsewhere will be forwarded to management, but your identity will be kept confidential unless you ask that your name be disclosed.
How can I find out the results of the voting at the Annual Meeting?
Preliminary voting results will be announced at the 2012 Annual Meeting. Final voting results will be published by Geron in a Current Report on Form 8-K, filed with the Securities and Exchange Commission (the SEC) that we expect to file within four business days after the 2012 Annual Meeting. If final voting results are not available to us in time to file a Current Report on Form 8-K within four business days after the 2012 Annual Meeting, we intend to file a Current Report on Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Current Report on Form 8-K to publish the final results.
Who is paying for this proxy solicitation?
We will pay 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, we may reimburse persons representing beneficial owners of Common Stock for their costs of forwarding solicitation materials to such beneficial owners. The original solicitation of proxies by mail may be supplemented by solicitation by mail, telephone or other electronic means, or in person, by directors, officers, or other regular employees of the Company, or at our request, Alliance Advisors, LLC. No additional compensation will be paid to directors, officers or other regular employees for such services, but Alliance Advisors will be paid its customary fee, estimated to be $5,500, to render solicitation services.
When are stockholder proposals due for next years Annual Meeting?
To be considered for inclusion in next years proxy materials, your proposal must be submitted in writing by December 14, 2012, to our Corporate Secretary at Geron Corporation, 230 Constitution Drive, Menlo Park, California, 94025. However, if our 2013 Annual Meeting of Stockholders is not held between April 17, 2013 and June 16, 2013, then the deadline will be a reasonable time prior to the time we begin to print and mail our proxy materials.
If you wish to bring a proposal before the stockholders or nominate a director at the 2013 Annual Meeting of Stockholders, but you are not requesting that your proposal or nomination be included in next years proxy materials, you must notify our Corporate Secretary, in writing, not earlier than the close of business on January 18, 2013 and not later than the close of business on February 17, 2013. However, if our 2013 Annual Meeting of Stockholders is not held between April 17, 2013 and June 16, 2013, then the deadline will be the 10th day following the earlier of the day on which the first public announcement of the date of the 2013 Annual Meeting of Stockholders was made or the day the notice of the 2013 Annual Meeting of Stockholders is mailed. The chairman of the 2013 Annual Meeting of Stockholders may determine, if the facts warrant, that a matter has not been properly brought before the meeting and, therefore, may not be considered at the meeting. Stockholders interested in submitting a proposal are advised to contact knowledgeable counsel with regard to the detailed requirements of the applicable securities laws. The submission of a stockholder proposal does not guarantee that it will be included in our Proxy Statement.
What is householding and how does it affect me?
Some brokers and other nominee record holders may be participating in the practice of householding proxy statements. This means that only one copy of this proxy may have been sent to multiple stockholders in a stockholders household. We will promptly deliver copies of the Proxy Statement and annual report to any stockholder who contacts our investor relations department at (650) 473-7765 or by mail addressed to Investor Relations, Geron Corporation, 230 Constitution Drive, Menlo Park, California 94025, requesting such copies. If a stockholder is receiving multiple copies of the Proxy Statement and annual report at the stockholders household and would like to receive a single copy of the Proxy Statement and annual report for a stockholders household in the future, stockholders should contact their broker, other nominee record holder, or our investor relations department to request mailing of a single copy of the proxy statement and annual report.
MATTERS TO BE CONSIDERED AT THE 2012 ANNUAL MEETING
ELECTION OF DIRECTORS
Our Board currently consists of eight members, seven of which are independent, as that term is defined by NASDAQ Rule 5606(a)(2). Our Bylaws provide for the classification of the Board into three classes, as nearly equal in number as possible, with staggered terms of office. Our Bylaws also provide that upon expiration of the term of office for a class of directors, nominees for such class will be elected for a term of three years or until their successors are duly elected and qualified.
The term of office of the Class I directors will expire at the Annual Meeting in May 2012, and three nominees for director are to be elected as Class I directors. The three nominees are Thomas Hofstaetter, Ph.D., John A. Scarlett, M.D. and Robert J. Spiegel, M.D., FACP. The Class II directors, Edward V. Fritzky, Hoyoung Huh, M.D., Ph.D., and Thomas D. Kiley, Esq., have one year remaining on their terms of office. The Class III directors, Karin Eastham and V. Bryan Lawlis, Ph.D., have two years remaining on their terms of office.
NOMINEES FOR ELECTION TO THE BOARD OF
The Board has selected three nominees for Class I directors, all of whom are currently directors of the Company. The three candidates receiving the highest number of affirmative votes of the shares represented and entitled to vote at the Annual Meeting will be elected as Class I directors of the Company. Accordingly, abstentions will not affect the outcome of this proposal. The election of directors is a non-routine matter on which a broker or other nominee is not empowered to vote. Accordingly, if the beneficial owner does not give a broker specific instructions, the beneficially owned shares may not be voted on this proposal and will not be counted in determining the number of shares necessary for approval.
Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the three nominees named below. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, such shares will be voted for the election of such substitute nominee as Geron may propose. Each person nominated for election has agreed to serve if elected, and management has no reason to believe that any nominee will be unable to serve.
Set forth below is information regarding the nominees for Class I director, the periods during which they have served as a director of the Company, and information furnished by them as to principal occupations and directorships held by them in corporations whose shares are publicly registered.
Class I Directors (Term Expiring at the 2015 Annual Meeting)
Thomas Hofstaetter, Ph.D., has served as a director of the Company since March 2010 and was President, Chief Executive Officer and a director of VaxInnate Corporation, a privately-held biotechnology vaccine company, from January 2010 to December 2011. From September 2004 to October 2009, Dr. Hofstaetter was Senior Vice President, Corporate Development and Head of Global Business Development and a member of the Wyeth Management Committee at Wyeth, Inc., a global pharmaceutical company. At Wyeth, he closed more than 70 transactions, including acquisitions of biotechnology companies, in-licensing of products and broad technology collaborations. Wyeth merged with Pfizer, Inc. in October 2009. From December 1999 to August 2004, Dr. Hofstaetter was Senior Vice President of Corporate Development of Aventis, a global pharmaceutical company. While at Aventis, he was responsible for more than 100 transactions including research alliances, product in- and out-licensing, divestments and spin-outs. In 1978, Dr. Hofstaetter joined Behringwerke AG in Germany as a research scientist and rose to become Head of Research in 1988 and head of the Immunology/Oncology business unit in 1989. From 1991 to 1999, Dr. Hofstaetter served in various executive managerial positions around the world, including the United States, Japan, France and his native Germany, with Hoechst Pharma, a global pharmaceutical company. Dr. Hofstaetter holds a Master of Science degree in biochemistry and a Ph.D. in molecular biology, magna cum laude, from the University of Tuebingen in Germany. From 2001 to 2004, he was a director of Merial Limited, a joint venture between Aventis and Merck & Co. focusing on pharmaceutical products and vaccines for livestock, pets and wildlife. From 2000 to 2004, he was a member of the board of trustees of the New Jersey Symphony Orchestra.
The Board believes Dr. Hofstaetters expertise with numerous technology transactions developed through his roles as a senior executive responsible for corporate development and his significant operating and management knowledge of large, global pharmaceutical companies, qualifies Dr. Hofstaetter to be nominated as a director.
John A. Scarlett, M.D., has served as our Chief Executive Officer and a director since September 2011 and President since January 2012. Prior to joining Geron, Dr. Scarlett served as President, Chief Executive Officer and a member of the board of directors of Proteolix, Inc., a privately-held oncology-oriented biopharmaceutical company, from February 2009 until its acquisition by Onyx Pharmaceuticals, Inc., a global oncology-oriented biopharmaceutical company, in November 2009. From February 2002 until its acquisition by Ipsen, S.A. in October 2008, Dr. Scarlett served as the Chief Executive Officer and a member of the board of directors of Tercica, Inc., an endocrinology-oriented company, and also as its President from February 2002 through February 2007. From March 1993 to May 2001, Dr. Scarlett served as President and Chief Executive Officer of Sensus Drug Development Corporation. In 1995, he co-founded Covance Biotechnology Services, Inc., and served as a member of its board of directors from inception to 2000. From 1991 to 1993, Dr. Scarlett headed the North American Clinical Development Center and served as Senior Vice President of Medical and Scientific Affairs at Novo Nordisk Pharmaceuticals, Inc., a wholly-owned subsidiary of Novo Nordisk A/S. Dr. Scarlett received his B.A. degree in chemistry from Earlham College and a M.D. from the University of Chicago, Pritzker School of Medicine.
As the only management representative on the Board, Dr. Scarlett brings an insiders perspective in board discussions about the business and strategic direction of the Company. In addition, the Board believes Dr. Scarletts medical background and extensive drug development experience provides substantial understanding of our clinical product candidates, qualifying Dr. Scarlett to be nominated as a director.
Robert J. Spiegel, M.D., FACP, has served as a director of the Company since May 2010. He is also a director of Talon Therapeutics, Inc. (formerly Hana Biosciences, Inc.), a biopharmaceutical oncology company, Clavis Pharma ASA, a pharmaceutical company based in Oslo, Norway, and Avior Computing Corporation, a
governance risk and compliance process technology company. He served as a director for the Cancer Institute of New Jersey from 1999 to 2009 and as a director of Cancer Care New Jersey from 1995 to 2011. After 26 years with the Schering-Plough Corporation (now Merck & Co.), a global healthcare company, Dr. Spiegel retired in 2009 as Chief Medical Officer and Senior Vice President of the Schering-Plough Research Institute, the pharmaceutical research arm of the Schering-Plough Corporation. He initially joined Schering-Plough as Director of clinical research for oncology and rose to hold various positions including Senior Director of clinical research for oncology and anti-infectives, Vice President of clinical research and Senior Vice President of worldwide clinical research. During his tenure at Schering-Plough, Dr. Spiegel lead the oncology development team for over 10 years where he took several antibiotics, anti-fungals and anti-virals through successful registration worldwide, including anti-HIV indications. As Vice President and Senior Vice President of worldwide clinical research, Dr. Spiegel managed Phase 1 to Phase 3 clinical development in all therapy areas, including allergy, respiratory, cardiovascular, immunology, dermatology, oncology and infectious diseases. As Chief Medical Officer, Dr. Spiegel was involved with over 30 New Drug Applications, participated in multiple due diligence reviews and in-licensing decisions, re-engineered pharmacovigilence and risk management areas and built a quality system for all research operations. Following a residency in internal medicine, Dr. Spiegel completed a fellowship in medical oncology at the National Cancer Institute and from 1981 to 1999, he held academic positions at the National Cancer Institute and New York University Cancer Center. He currently is an Associate Fellow at the University of Pennsylvania Center for Bioethics. Dr. Spiegel holds a B.A. from Yale University and a M.D. from the University of Pennsylvania.
The Board believes Dr. Spiegels extensive medical experience developing oncology products, his deep understanding of pharmaceutical research and development and broad expertise in gaining regulatory approval for drug candidates, enhances the Boards ability to critically assess the progress and potential of our programs, qualifying Dr. Spiegel to be nominated as a director.
Vote Required and Board Recommendation
Directors are elected by a plurality of the votes of the holders of shares present in person or represented by proxy and entitled to vote on the election of directors. The three nominees receiving the highest number of affirmative votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the three nominees named above. If any nominee becomes unavailable for election as a result of an unexpected occurrence, your shares will be voted for the election of a substitute nominee proposed by Geron. Abstentions and broker non-votes will not have any effect on the outcome of this proposal. In tabulating the voting results for the election of directors, only FOR and WITHHOLD votes are counted.
The Board of Directors Unanimously
Recommends That Stockholders
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Set forth below is information regarding the continuing Class II and Class III directors of the Company, including their ages, the periods during which they have served as directors, and information furnished by them as to principal occupations and directorships held by them in corporations whose shares are publicly registered.
Class II Directors (Term Expiring at the 2013 Annual Meeting)
Edward V. Fritzky has served as a director of the Company since July 1998. From July 2002 to May 2005, he served as a director and advisor to Amgen Corporation, a U.S. pharmaceutical company, where he established a leading research center in Seattle. From January 1994 to July 2002, he served as Chief Executive Officer and Chairman of Immunex Corporation, a biopharmaceutical company that developed, manufactured, and marketed therapeutic products for the treatment of cancer, infectious diseases, and autoimmune disorders, during which
time he managed the companys growth to over $15 billion in market value and completed its acquisition by Amgen in 2002. Since 2004, Mr. Fritzky has been a director of Jacobs Engineering Group, Inc., a professional technical services firm providing scientific and specialty consulting services supporting industrial, commercial and government clients. From 1998 to 2009, Mr. Fritzky was a director of Sonosite, Inc., a leading company of hand-carried ultrasound equipment. From 1992 to 1994, Mr. Fritzky served as President of Lederle Laboratories, a division of American Cyanamid, and from 1989 to 1992, as Vice President of Lederle Laboratories. While at Lederle Laboratories, Mr. Fritzky oversaw the launch of six new products. Prior to joining Lederle Laboratories, Mr. Fritzky was an executive of Searle Pharmaceuticals, Inc., a subsidiary of the Monsanto Company that manufactures, develops and markets health care products and pharmaceuticals. During his tenure at Searle, Mr. Fritzky was Vice President of Marketing in the United States and later President and General Manager of Searle Canada, Inc. and Lorex Pharmaceuticals, a joint venture between G.D. Searle & Company, a U.S. pharmaceutical company, and Synthelabo, a French pharmaceutical company, to market existing and new Synthelabo products in the United States. Mr. Fritzky served as a Trustee of the Fred Hutchinson Cancer Center from July 2001 to June 2007. Mr. Fritzky holds a B.A. from Duquesne University and is a graduate of the Advanced Executive Program, J.L. Kellogg Graduate School of Management at Northwestern University.
The Board believes Mr. Fritzkys management and operational experience as Chairman and Chief Executive Officer of Immunex Corporation and as President of other biopharmaceutical companies, his knowledge of therapeutic product launches and the substantial understanding of the Company and its operations he has gained during his 14 years as a director of the Company, qualifies Mr. Fritzky to serve as a director.
Hoyoung Huh, M.D., Ph.D., currently serves as Chairman of the Board, served as Executive Chairman from February 2011 to September 2011 and has served as a director of the Company since May 2010. He is Chairman of the board of directors of Cytomx Therapeutics, Inc., an emerging medical technology company, and also is a director of ADDEX Pharmaceuticals, a pharmaceutical discovery and development company. From February 2008 to December 2011, Dr. Huh was Chairman of the board of directors of BiPar Sciences, Inc., a wholly-owned subsidiary of Sanofi-Aventis, a global pharmaceutical company developing treatments in cardiology, oncology, central nervous system disorders, metabolic diseases, ophthalmology and vaccines, since the April 2009 merger and served as BiPars President and Chief Executive Officer from February 2008 to December 2009. Additionally, Dr. Huh serves on the boards of directors of several privately-held companies. Dr. Huh served on the board of directors of Facet Biotech (a wholly-owned subsidiary of Abbott, a global, broad-based health care company devoted to the discovery, development, manufacture and marketing of pharmaceuticals and medical products, including nutritionals, devices and diagnostics) from September 2009 to April 2010. From February 2008 to May 2009, he was a member of the board of directors at Nektar Therapeutics, a clinical-stage biopharmaceutical company developing small molecule drugs, peptides and other biologic drug candidates as treatments for oncology, pain, anti-infectives, anti-virals and immunology. From March 2005 to February 2008, Dr. Huh held positions as Nektars Chief Operating Officer and Senior Vice President of Business Development and Marketing where he was responsible for the companys worldwide business development, marketing and manufacturing and led Nektars PEGylation business. Dr. Huh was a partner at McKinsey & Company, a global management consulting firm, where he was in the biotechnology and biopharmaceutical sectors. Prior to McKinsey, he held positions as a physician and researcher at Cornell University Medical College and Sloan-Kettering Cancer Center. Dr. Huh holds an A.B. in biochemistry from Dartmouth College and a M.D. and Ph.D. in genetics and cell biology from Cornell University Medical College and Sloan-Kettering Institute.
The Board believes Dr. Huhs management and operational experience as President and Chief Executive Officer of BiPar Sciences and Chief Operating Officer of Nektar Therapeutics, his significant expertise with implementing strategic and line management initiatives from McKinsey and his knowledge of biotechnology and pharmaceutical collaborations, qualifies Dr. Huh to serve as a director and Chairman of the Board.
Thomas D. Kiley, Esq., served as a director of the Company since September 1992. Mr. Kiley is currently a director of Transcept Pharmaceuticals, Inc., a specialty pharmaceutical company developing therapies in the field of neuroscience, Ceres, Inc., an energy crop company, several privately-held biotechnology companies and the Hospital de la Familia Foundation. Mr. Kiley was a director of Connetics Corporation, a specialty pharmaceutical company that developed dermatology products, from 1994 to 2006 when it was acquired by Stiefel Laboratories, Inc. He has been self-employed since 1988 as an attorney, consultant and investor. From 1980 to 1988, he was
an officer of Genentech, Inc., a biotechnology company using human genetic information to develop medical treatments, serving as Vice President and General Counsel, Vice President for Legal Affairs and Vice President for Corporate Development where he managed patent litigation, developed patent strategy and negotiated numerous corporate partnership deals. From 1969 to 1980, he was with Lyon & Lyon, a Los Angeles-based law firm specializing in domestic and international intellectual property law matters and was a partner at the firm from 1975 to 1980. Mr. Kiley holds a B.S. in chemical engineering from Pennsylvania State University and a J.D. from The George Washington University.
The Board believes Mr. Kileys specialized knowledge of intellectual property matters for biopharmaceutical companies, his experience as a board member for other public companies and the substantial understanding of the Company and its operations he has gained during his 20 years as a director of the Company, qualifies Mr. Kiley to serve as a director.
Karin Eastham has served as a director of the Company since March 2009. She currently serves as a director for Amylin Pharmaceuticals, Inc., a biopharmaceutical company focused on peptide hormone drug candidates for the treatment of diabetes, obesity and other metabolic diseases; Illumina, Inc., a manufacturer of life-science tools and integrated systems for the analysis of genetic variation and biological function; and Trius Therapeutics, Inc., a biopharmaceutical company focused on the discovery, development and commercialization of innovative antibiotics for serious, life-threatening infections. She also served as a director for Genoptix, Inc., a specialized laboratory service provider, until March 2011 when it was acquired by Novartis. Ms. Eastham served as a director for Tercica, Inc., a biopharmaceutical company developing endocrine products, from 2003 until its acquisition in 2008 by the Ipsen Group and as a director of SGX Pharmaceuticals, Inc., a biopharmaceutical company developing anti-cancer therapies targeting specific enzymes that have been implicated in human cancers, from 2005 until its acquisition in 2008 by Eli Lilly and Company. From May 2004 to September 2008, Ms. Eastham served as Executive Vice President and Chief Operating Officer and a member of the Board of Trustees of Burnham Institute for Medical Research, a non-profit corporation engaged in medical research, where she established a business development function to support translational research into commercial opportunities and managed the general and administrative operations. From April 1999 to May 2004, Ms. Eastham served as Senior Vice President, Finance and Chief Financial Officer of Diversa Corporation, a genomics technology company. While at Diversa, Ms. Eastham completed the companys initial public offering in 2000 and participated in negotiations for several product and technology acquisitions and collaboration agreements. From April 1997 to April 1999, Ms. Eastham served as Vice President, Finance and Administration and Chief Financial Officer for CombiChem, Inc., a computational chemistry company. While at CombiChem, Ms. Eastham established the administrative infrastructure for the company, assisted in the completion of its initial public offering in 1998 and participated in negotiations and completion of several pharmaceutical collaborations. From October 1992 to April 1997, Ms. Eastham served as Vice President, Finance and Administration and Chief Financial Officer for Cytel Corporation, a biopharmaceutical company, where she completed several public and private financings and was responsible for all administrative and financial functions. Ms. Eastham also held several similar positions with other companies, including Vice President, Finance, at Boehringer Mannheim Diagnostics from 1976 to 1988. Ms. Eastham holds a B.S. and an M.B.A. from Indiana University and is a Certified Public Accountant.
The Board believes Ms. Easthams significant financial expertise developed through her experience as a financial officer for several public biotechnology companies, her first-hand knowledge and experience in audit and financial control-related matters and her understanding of public and private equity financings, qualifies Ms. Eastham to serve as a director.
V. Bryan Lawlis, Ph.D., has served as a director of the Company since March 2012. He currently serves as a director for BioMarin Pharmaceuticals, Inc., a biopharmaceutical company specializing in rare genetic diseases, and several privately-held biotechnology companies. Dr. Lawlis is a co-founder and currently serves as the President and
Chief Executive Officer of Itero Biopharmaceuticals LLC, a privately-held, early stage biopharmaceutical company that was founded in 2006. Dr. Lawlis served as President and Chief Executive Officer of Aradigm Corporation, a specialty drug company focused on drug delivery technologies, from August 2004, and served on its board of directors from February 2005, continuing in both capacities until August 2006. Dr. Lawlis served as Aradigm Corporations President and Chief Operating Officer from June 2003 to August 2004 and its Chief Operating Officer from November 2001 to June 2003. Previously, Dr. Lawlis co-founded Covance Biotechnology Services, a contract biopharmaceutical manufacturing operation, served as its President and Chief Executive Officer from 1996 to 1999, and served as Chairman from 1999 to 2001, when it was sold to Diosynth RTP, Inc., a division of Akzo Nobel, NV. From 1981 to 1996, Dr. Lawlis was employed at Genencor, Inc. and Genentech, Inc. His last position at Genentech was Vice President of Process Sciences. Dr. Lawlis holds a B.A. in microbiology from the University of Texas at Austin and a Ph.D. in biochemistry from Washington State University.
The Board believes Dr. Lawliss extensive experience in manufacturing biotechnology and other pharmaceutical products, research and development of drug products and managing and conducting clinical trials and drug regulatory processes, qualifies Dr. Lawlis to serve as a director.
CORPORATE GOVERNANCE MATTERS
We have an ongoing commitment to excellence in corporate governance and business practices. In furtherance of this commitment, we regularly monitor developments in the area of corporate governance and review our processes, policies and procedures in light of such developments. We comply with the rules and regulations promulgated by the SEC and NASDAQ, and implement additional corporate governance practices that we believe are in the best interest of our Company and stockholders.
Corporate Governance Guidelines
Our Board has adopted Corporate Governance Guidelines that set forth key principles to guide the Board in their exercise of responsibilities and serve the interests of our Company and stockholders. These guidelines can be found on the Corporate Governance page under the Investor Relations section of our website at www.geron.com. In addition, these guidelines are available in print to any stockholder who requests a copy. Please direct all requests to our Corporate Secretary, Geron Corporation, 230 Constitution Drive, Menlo Park, California 94025. In accordance with these guidelines, a member of our Board may serve as a director of another company only to the extent such position does not conflict or interfere with such persons service as our director.
In accordance with NASDAQ rules and Gerons Corporate Governance Guidelines, our Board, based on the legal opinion of outside legal counsel, Latham & Watkins, has determined that all nominees for election at the Annual Meeting and all continuing directors, other than Dr. Scarlett, are independent under NASDAQ rules.
There are no family relationships among the executive officers or directors of the Company. There are no current legal proceedings or claims to which the executive officers, directors or the Company are a party. There are no current, nor in the past ten years have there been any, legal proceedings involving any director or executive officer related to, among others: (i) federal bankruptcy, (ii) criminal proceedings, (iii) federal or state securities laws, (iv) any judgment, decree or order enjoining a director or officer from acting as an investment advisor, broker or dealer of securities or engaging in any type of business practice, (v) proceedings resulting from involvement in mail or wire fraud or fraud in connection with any business activity or (vi) any disciplinary sanctions or orders imposed by stock, commodities or derivatives exchange or other self-regulatory organization.
Board Leadership Structure
One class of the Board is elected annually, and each class of directors stands for election every three years. The Board is comprised of eight directors, one of whom is an executive officer, and seven of whom have been affirmatively determined by the Board to be independent, meeting the objective requirements set forth by the SEC and NASDAQ, and having no relationship, direct or indirect, to the Company other than as stockholders or through their service on the Board. The Board has authorized nine directors to serve; there is currently one vacancy.
The role of Chairman of the Board historically has been separate from the Chief Executive Officer of the Company. The Board has determined that its structure is appropriate to fulfill its duties effectively and efficiently, so that our business receives the undivided attention of the Chief Executive Officer.
In February 2011, with the appointment of David Greenwood as interim Chief Executive Officer, the Board elected to change the Board leadership structure and created two new positions an Executive Chairman and a Lead Independent Director. Dr. Huh was appointed Executive Chairman (serving as an employee), and Dr. Barkas, formerly the Chairman of the Board, was appointed Lead Independent Director. In September 2011, the Board appointed Dr. Scarlett as Chief Executive Officer, and resumed its previous leadership structure of maintaining solely a Chairman of the Board, Dr. Huh, who no longer serves as an employee.
The Board has determined that its structure is appropriate to fulfill its duties effectively and efficiently, so that our Chief Executive Officer can focus on leading our Company, while the Chairman can focus on leading the Board in overseeing management. The Board regularly meets in executive session without the presence of non-independent directors or management.
Boards Role in Risk Oversight
Geron is subject to a variety of risks, which generally include any undesired event, circumstance or outcome that could affect Gerons ability to achieve its objectives or adversely impact Gerons business, operations or financial condition. Some risks can be readily perceived and even quantified, while others are unexpected or unforeseeable. Risks can be external, such as those arising from the macroeconomic or industry environment, government policies or regulations, competitors activities or natural disasters. Alternatively, risks can arise as a result of our business or financial activities.
The Board and Gerons management team work together to manage the Companys risks. It is managements responsibility to manage risk and bring to the Boards attention the material risks to the Company. The Board has an active role in overseeing management of the Companys risks. The Board regularly reviews information regarding the Companys credit, liquidity and operations, as well as the risks associated with each. In addition, our Corporate Governance Guidelines specify each of our Board committees oversees the risks within its areas of responsibilities. While each committee is responsible for evaluating certain risks and overseeing the management of such risks within its respective oversight area, the entire Board is regularly informed through committee reports about such risks.
The Compensation Committee of the Board is responsible for overseeing the management of risks relating to the Companys employment policies and executive compensation plans and arrangements. In connection with the structuring of the compensation elements for executive officers, the Compensation Committee, together with the Board, considers whether such programs, individually or in the aggregate, encourage executive officers to take unnecessary risks.
The Audit Committee of the Board oversees management of financial risks. In addition to fulfilling its responsibilities for the oversight of the Companys financial reporting processes and annual audit of the Companys financial statements, the Audit Committee also reviews with the independent auditors and management the adequacy and effectiveness of the Companys policies and procedures to assess, monitor and manage business risk and the Companys ethical compliance program. The Audit Committee takes the appropriate actions to set the overall corporate tone for quality financial reporting, sound business risk practices and ethical behavior.
The Nominating and Corporate Governance Committee of the Board manages the Companys corporate governance practices, including certain risks that those practices are intended to address. In addition, the Nominating and Corporate Governance Committee reviews risks associated with the independence of the Board, potential conflicts of interest and risks relating to management and Board succession planning.
Compensation Risk Assessment
The Compensation Committee annually evaluates the Companys compensation elements of base salary, annual incentive awards, long-term incentive awards, severance and change in control benefits, other benefits and the Companys compensation philosophy generally as it relates to all employees. The Compensation Committee reviews the following elements of the Companys compensation practices that balance the Companys compensation programs to mitigate the risks associated with the Companys compensation practices:
The Compensation Committee has reviewed the Companys compensation policies and practices as it relates to all employees and has determined that such policies and practices do not present any risks that are reasonably likely to have a material adverse effect on the Company.
Board Committees and Meetings
During the fiscal year ended December 31, 2011, the Board held 15 meetings and acted by unanimous written consent on two occasions. The Board has an Audit Committee, a Compensation Committee, a Stock Option Committee and a Nominating and Corporate Governance Committee. During the fiscal year ended December 31, 2011, each of the incumbent directors attended at least 95% of the meetings of the Board and the committees on which the director served.
The Audit Committee, which is comprised of Ms. Eastham and Messrs. Fritzky and Kiley, met eight times in 2011. All of the members of the Audit Committee are independent, as that term is defined by NASDAQ Rule 5605(a)(2). The Board has determined that all of the members of the Audit Committee are financially literate and that at least one member of the Audit Committee, Ms. Eastham, has accounting and financial management expertise that qualifies her as an Audit Committee Financial Expert, as such term is defined in Item 407(d)(5) of Regulation S-K promulgated by the SEC. The Audit Committees responsibilities include: (i) recommending the selection of the Companys independent registered public accounting firm to the Board and pre-approval of any fees paid to such firm, (ii) consulting with the independent auditors with regard to the plan and scope of the audit, (iii) reviewing, in consultation with the independent auditors, their report of the audit or proposed report of the audit, and the accompanying management letter, if any, and (iv) consulting with the independent auditors and management with regard to the adequacy of the Companys internal controls. The Audit Committee operates under a written charter that satisfies the applicable standards of the SEC and NASDAQ. A copy of the Audit Committee Charter is available on the Internet at http://www.geron.com. See more information about the Audit Committee in the Audit Committee report on page 54.
The Compensation Committee, which is comprised of Drs. Hofstaetter, Lawlis (who joined in March 2012) and Spiegel, met seven times in 2011 and acted by unanimous written consent on seven occasions. Prior to his death in November 2011, Dr. Barkas served on the Compensation Committee in 2011. Each of the members of the Compensation Committee are independent, as that term is defined by NASDAQ Rule 5605(a)(2). The Compensation Committee makes recommendations concerning salaries and incentive compensation, administers the incentive compensation and benefit plans of the Company, and performs such other functions regarding
compensation as the Board may delegate. In addition, the Compensation Committee has authority to administer the 2011 Incentive Award Plan. The Compensation Committee operates under a written charter that satisfies the applicable standards of the SEC and NASDAQ. A copy of the Compensation Committee charter is available on the Internet at http://www.geron.com. The Compensation Committee utilized Radford as compensation consultants in evaluating certain executive compensation in 2011. For more information about the Compensation Committee and the role of our Chief Executive Officer in the determination of executive compensation see Compensation Discussion and AnalysisRole of the Compensation Committee on page 29.
Compensation Committee Interlocks and Insider Participation
Drs. Barkas, Hofstaetter and Spiegel served on the Compensation Committee for the fiscal year ended December 31, 2011(except that Dr. Barkas passed away in November 2011). With the exception of Dr. Barkass term as acting President and Chief Executive Officer of the Company from March 1992 until May 1993, not one of Drs. Barkas, Hofstaetter or Spiegel is a former or current officer or employee of the Company or any of its subsidiaries. In March 2012, in connection with his appointment to the Board, Dr. Lawlis was appointed to the Compensation Committee. None of the executive officers serves as a member of a compensation committee of any entity that has one or more executive officers serving as a member of the Companys Board or Compensation Committee.
Stock Option Committee
The Stock Option Committee was formed in December 1996 to provide timely option grants to employees and consultants (other than executive officers and directors of the Company) and currently consists of two members, John Scarlett, Gerons President and Chief Executive Officer, and Graham Cooper, Gerons Executive Vice President, Finance and Business Development, and Chief Financial Officer. In 2011, the sole members of the Stock Option Committee were Thomas Okarma, David Greenwood and Dr. Scarlett (beginning in September 2011). Concurrently with the Compensation Committee, the Stock Option Committee has limited authority to administer the Companys 2011 Incentive Award Plan. The Stock Option Committee currently has the authority to grant equity awards for up to 100,000 shares of Common Stock only to employees (other than executive officers and directors of the Company) and consultants in accordance with procedures approved by the Board. The Stock Option Committee acted by written consent on 12 occasions during 2011.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee was renamed in May 2011 in order to expand its responsibilities to include overseeing all aspects of our corporate governance functions on behalf of the Board; developing, reviewing and recommending to the Board corporate governance guidelines and principles applicable to the Company; and making recommendations to the Board for candidates to be nominated for election or re-election as a director by the stockholders or by the Board. The current members of the Nominating and Corporate Governance Committee are Mr. Fritzky and Ms. Eastham. Both members of the Nominating and Corporate Governance Committee are independent as defined in NASDAQ Rule 5605(a)(2). Prior to his death in November 2011, Dr. Barkas served on the Nominating and Corporate Governance Committee in 2011. The Nominating and Corporate Governance Committee met on four occasions during 2011. The Nominating and Corporate Governance Committee will consider nominees for director nominated by stockholders upon submission in writing to our Corporate Secretary of the names of such nominees in accordance with our Bylaws. The Nominating and Corporate Governance Committee will investigate, evaluate and interview, as appropriate, a director candidate with regard to his or her individual characteristics as well as how those characteristics fit with the needs of the Board as a whole. The Nominating and Corporate Governance Committee operates under a written charter that satisfies the applicable standards of the SEC and NASDAQ. A copy of the Nominating and Corporate Governance Committee charter is available on the Internet at http://www.geron.com. Specific qualifications and the process for identification and recommendation of director candidates are provided in more detail on page 58.
Code of Conduct
In 2003, we adopted a Code of Conduct, which is available in its entirety on the Corporate Governance page in the Investor Relations section of our website at http://www.geron.com and to any stockholder otherwise requesting a copy. All our employees, officers, and directors, including the Chief Executive Officer and Chief Financial Officer, are required to adhere to the Code of Conduct in discharging their work-related responsibilities. Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the Code of Conduct. Amendments to the Code of Conduct, and any waivers from the Code of Conduct granted to directors or executive officers, will also be made available through our website as they are adopted.
In keeping with the Sarbanes-Oxley Act of 2002, the Audit Committee has established procedures for the receipt and handling of complaints received by the Company regarding accounting, internal accounting controls or auditing matters. Contact information for the Chairperson of the Audit Committee has been distributed to all employees to allow for the confidential, anonymous submission by its employees of concerns regarding accounting or auditing matters.
Communications with the Board
Stockholders wishing to communicate with the Board, or with a specific Board member, may do so by writing to the Board, or to the particular Board member, and delivering the communication in person or mailing it to: Board of Directors, c/o Stephen Rosenfield, Corporate Secretary, Geron Corporation, 230 Constitution Drive, Menlo Park, CA 94025. All mail addressed in this manner will be delivered to the Chair or Chairs of the Committees with responsibilities touching most closely on the matters addressed in the communication. From time to time, the Board may change the process by means of which stockholders may communicate with the Board or its members. Please refer to our website for any changes to this process.
During 2011, annual cash compensation for non-employee directors was adjusted to reflect the change in board leadership structure. In February 2011, with the appointment of an interim Chief Executive Officer, the Board elected to change the Board leadership structure and created two new positions an Executive Chairman and a Lead Independent Director. Dr. Huh was appointed Executive Chairman and Dr. Barkas, formerly the Chairman of the Board, was appointed Lead Independent Director. In September 2011, the Board appointed a new Chief Executive Officer for the Company which led the Board to resume its previous leadership structure of maintaining solely a Chairman of the Board, who is currently Dr. Huh. The following table describes the annual cash compensation applicable to each role performed by non-employee directors for the specified time periods in 2011:
Annual non-employee director compensation is payable on the date of the annual meeting of stockholders with respect to the preceding 12-month period (or a pro rata portion of such amount if such director served for less than a full year), in cash or, at each directors election, in fully vested shares of Common Stock granted under the 2006 Directors Stock Option Plan (the 2006 Directors Plan) based on the closing price of our Common Stock on the NASDAQ Global Select Market on the annual meeting date.
In addition to the above annual cash compensation, non-employee directors also were eligible to receive the following:
Additionally, directors are eligible to receive equity grants, as more fully described below. The per-meeting compensation under (i) and (ii) above is payable in cash within ten business days after each meeting.
In March 2012, the Board engaged compensation consultants from Radford to conduct a comprehensive analysis of non-employee director compensation in comparison to industry practices. As a result of this analysis, and Radfords recommendation, the Board adjusted its annual cash compensation to the following:
The annual cash compensation is paid quarterly in arrears and may be payable in cash, or, at each directors election, in fully vested shares of Common Stock granted under the 2006 Directors Plan based on the closing price of our Common Stock on the NASDAQ Global Select Market.
Director Compensation Table
The following table provides compensation information for the year ended December 31, 2011 for each non-employee member of the Board.
Terms of Awards
As of December 31, 2011, the 2006 Directors Plan provided for the automatic grant of the following types of equity awards:
First Option. Each person who becomes a non-employee director, whether by election of the stockholders of the Company or by appointment by the Board to fill a vacancy, will automatically be granted an option to purchase 60,000 shares of Common Stock on the date such person first becomes a non-employee director (the First Option). The First Option shall vest annually over three years upon each anniversary date of appointment to the Board.
Subsequent Awards. Each non-employee director (other than the Chairman of the Board and any director receiving a First Option on the date of the annual meeting) will automatically be granted a subsequent option on the date of the Annual Meeting of Stockholders in each year during such directors service on the Board (a Subsequent Option) to purchase 10,000 shares of Common Stock and a restricted stock award (a Subsequent Stock Award) of 5,000 shares of Common Stock. In the case of the Chairman of the Board, the Subsequent Option will be for 20,000 shares of Common Stock and the Subsequent Stock Award shall be for 10,000 shares of Common Stock.
Committee Chair Service Awards. On the date of each Annual Meeting of Stockholders, the Chairman of the Audit Committee will automatically be granted an option to purchase 8,000 shares of Common Stock (a Committee Chair Service Option), and a restricted stock award (a Committee Chair Service Stock Award) of 4,000 shares of Common Stock. The Committee Chair Service Option for the Compensation Committee Chairman and the Nominating and Corporate Governance Committee Chairman shall be for 4,000 shares of Common Stock and the Committee Chair Service Stock Award shall be for 2,000 shares of Common Stock.
Committee Service Awards. On the date of each Annual Meeting of Stockholders, each non-employee director serving on the Audit Committee, Compensation Committee, or Nominating and Corporate Governance Committee, other than the respective Chairmen of those Committees, will automatically be granted an option to purchase 2,000 shares of Common Stock (a Committee Service Option) and a restricted stock award of 1,000 shares of Common Stock (a Committee Service Stock Award). There is currently no stock option grant or restricted stock award contemplated for participation on other committees.
The 2006 Directors Plan provides that each Subsequent Option, Committee Chair Service Option and Committee Service Option is fully vested on the date of grant. Each Subsequent Stock Award, Committee Chair Service Stock Award and Committee Service Stock Award vests annually in four equal installments over four years commencing on the date of grant and no payment shall be required from the non-employee director in order to receive the award.
Exercise Price and Term of Options. The exercise price of all stock options granted under the 2006 Directors Plan is equal to the fair market value of a share of our Common Stock on the NASDAQ Global Select Market on the date of grant of the option.
Restricted Stock and Restricted Stock Units. In addition to the automatic grant of restricted stock awards described above, the 2006 Directors Plan, as amended, also permits the discretionary grant of restricted stock and restricted stock units.
In connection with the review of non-employee director compensation conducted in March 2012, and based on the recommendation of Radford, the compensation consultant to the Compensation Committee, the Board amended the 2006 Directors Plan to replace the First Option, the Subsequent Option, the Subsequent Stock Award, the Committee Chair Service Option, the Committee Chair Service Stock Award, the Committee Service Option and the Committee Service Stock Award with the following option grants to non-employee directors. All other provisions of the 2006 Directors Plan remain unchanged.
First Director Option. Each person who becomes a non-employee director, whether by election of the stockholders of the Company or by appointment by the Board to fill a vacancy, will automatically be granted an option to purchase 70,000 shares of Common Stock on the date such person first becomes a non-employee director (the First Director Option). The First Director Option shall vest annually over three years upon each anniversary date of appointment to the Board.
Subsequent Director Option. Each non-employee director (other than any director receiving a First Option on the date of the annual meeting) will automatically be granted a subsequent option on the date of the Annual Meeting of Stockholders in each year during such directors service on the Board (a Subsequent Director Option) to purchase 35,000 shares of Common Stock. The Subsequent Director Option shall vest annually over one year.
Effect of Certain Corporate Events
In the event of the dissolution or liquidation of the Company, a sale of all or substantially all of the assets of the Company, the merger or consolidation of the Company with or into another corporation in which the Company is not the surviving corporation or any other capital reorganization in which more than 50% of the shares of the Company entitled to vote are exchanged, each non-employee director shall have a reasonable time within which
to exercise the option, including any part of the option that would not otherwise be exercisable, prior to the effectiveness of such dissolution, liquidation, sale, merger or reorganization, at the end of which time the option shall terminate, or shall receive a substitute option with comparable terms, as to an equivalent number of shares of stock of the corporation succeeding the Company or acquiring its business by reason of such dissolution, liquidation, sale, merger, consolidation or reorganization. In such an event, any unvested restricted stock awards shall immediately vest unless an award with comparable terms, as to an equivalent number of shares of stock of the corporation succeeding the Company or acquiring its business by reason of such dissolution, liquidation, sale, merger, consolidation or reorganization is substituted. In addition, except as otherwise provided in an award agreement, unvested shares subject to awards of restricted stock and restricted stock units will become fully vested immediately prior to the date of such dissolution, liquidation, sale, merger, consolidation or reorganization.
The following table sets forth the following information with respect to non-employee directors (eight persons) for the fiscal year ended December 31, 2011: (i) stock options granted under the 2006 Directors Plan; (ii) stock awards granted under the 2006 Directors Plan; and (iii) the grant date fair value of stock options and stock awards granted. As discussed above, the executive officers and employees of the Company are not eligible for grants under the 2006 Directors Plan. In 2011, additional stock options and restricted stock awards were granted to certain directors resulting from the leadership structure changes and in recognition of options that had expired unexercised during the year and stock awards with vesting based on achievement of certain performance milestones were granted to directors from the 2011 Incentive Award Plan. Also in May 2011, the vesting of certain outstanding restricted stock awards and the exercise periods of certain outstanding stock options held by Dr. Homcy were modified in connection with his retirement from the Board.
In May 2011, each director, except for Drs. Barkas, Homcy and Huh, received performance-based restricted stock awards (PSAs) covering 5,000 shares in the aggregate that vest during a three-year performance period based on our achievement of each of the following objectives:
For Dr. Barkas, the performance-based restricted stock awards were 5,000 shares for each of the milestones noted above and for Dr. Huh, the awards were 10,000 shares for each of the milestones noted above.
The following table sets forth stock options and stock awards outstanding for each non-employee director as of December 31, 2011.
APPROVAL OF AN AMENDMENT TO OUR RESTATED
CERTIFICATE OF INCORPORATION TO
The Board has adopted, subject to stockholder approval, an amendment to our Restated Certificate of Incorporation to increase our authorized number of shares of Common Stock from 200,000,000 shares to 300,000,000 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 our 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 132,259,325 shares of Common Stock outstanding as of March 20, 2012, the Board has reserved 29,709,037 shares for issuance upon exercise of options and rights granted under our stock option and stock purchase plans and up to approximately 7,006,305 shares of Common Stock which may be issued upon exercise of warrants and future milestone obligations.
Although at present the Board 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 our business through the acquisition of other businesses or technologies.
The increase in our authorized shares of Common Stock could also have an anti-takeover effect, in that additional shares could be issued (within the limits imposed by applicable law) in one or more transactions that could make a change in control or takeover of the Company difficult. For example, additional shares could be issued by us so as to dilute the stock ownership or voting rights of a person seeking to obtain control of the Company. Similarly, the issuance of additional shares to certain persons allied with our management could have the effect of making it more difficult to remove our management by diluting the stock ownership or voting rights of persons seeking to cause such removal.
Vote Required and Board Recommendation
Stockholders are requested in this proposal to approve this amendment to our Restated Certificate of Incorporation. The affirmative vote of a majority of the outstanding shares of Common Stock will be required to approve this proposal. Accordingly, proxies reflecting abstentions or broker non-votes, if any, as to this proposal will be treated as votes against the amendment.
The Board of Directors Unanimously
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
As required by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Exchange Act, the Board is requesting stockholders to vote, on a non-binding advisory basis, to approve the compensation paid to Gerons Named Executive Officers as disclosed in this Proxy Statement in the sections entitled, Compensation Discussion and Analysis and Executive Compensation Tables. This proposal, commonly known as a say-on-pay proposal, gives stockholders the opportunity to express their views on the compensation of Gerons Named Executive Officers.
As discussed in detail in the Compensation Discussion and Analysis section of this Proxy Statement, Gerons executive compensation strategy and structure is based on the following principles: a) reward successful execution of business strategy; b) attract and retain qualified talent; and c) align management and stockholder interests. The executive compensation program is designed to achieve four primary objectives:
The Compensation Committee actively reviews and assesses our executive compensation program in light of the highly competitive employment environment in the San Francisco Bay Area, the challenge of recruiting, motivating and retaining executive officer in an industry with much longer business cycles than other commercial industries, and evolving compensation governance and best practices. In reconciling these areas, the Compensation Committee strives to act in the long-term best interests of the Company and its stockholders and believes that Gerons executive compensation programs are strongly aligned with the long-term interests of our stockholders. In determining whether to approve this proposal, the Compensation Committee believes that stockholders should consider the following:
Advisory Vote and Board Recommendation
We request stockholder approval of the 2011 compensation of our Named Executive Officers as disclosed in this Proxy Statement pursuant to the SECs compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative disclosures that accompany the compensation tables within the Executive Compensation Tables section of this Proxy Statement). This vote is not intended to address any specific element of compensation, but rather the overall compensation of our Named Executive Officers and the compensation philosophy, policies and practices described in this Proxy Statement.
Accordingly, the Board recommends that stockholders vote in favor of the following resolution:
RESOLVED, that the stockholders approve, on a non-binding advisory basis, the compensation paid to Gerons Named Executive Officers, as disclosed in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation and the accompanying narrative disclosure set forth in the Proxy Statement relating to the Companys 2012 Annual Meeting of Stockholders.
Approval of the above resolution requires the affirmative vote of the holders of a majority of the votes cast in person or by proxy at this meeting. Abstentions and broker non-votes will have no effect on the outcome of this proposal.
Stockholders are not being asked to approve or disprove the Boards recommendation. As this is an advisory vote, the outcome of the vote is non-binding to us with respect to future executive officer compensation decisions, including those related to our Named Executive Officers, or otherwise. However, the Board and the Compensation Committee will review the results of the vote and take them into account when considering future executive officer compensation policies and decisions.
The Board has approved holding a say-on-pay advisory vote every year. Unless the Board modifies its policy on the frequency of future say-on-pay advisory votes, the next say-on-pay advisory vote will be held at the 2013 Annual Meeting of Stockholders.
The Board of Directors Unanimously
This Compensation Discussion and Analysis describes our compensation program as it relates to our Named Executive Officers as defined below. In this Compensation Discussion and Analysis, we present and discuss:
This Compensation Discussion and Analysis contains forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. The actual compensation programs that we adopt in the future may differ materially from currently planned programs summarized in this discussion.
2011 was a year of significant change for the Company as it narrowed its focus to the oncology therapeutic area and incorporated a new management team. In November 2011, we announced a decision to focus exclusively on the development of our oncology programs. As a consequence, we discontinued further development of our stem cell programs and intend to divest these programs in 2012. The decision to narrow our technology and therapeutic focus was made after a strategic review of the costs, value inflection timelines and clinical, manufacturing and regulatory complexities associated with our research and clinical-stage assets. By narrowing our focus to the oncology therapeutic area, we anticipate having sufficient financial resources to reach important near-term oncology value inflection points for stockholders with minimal near-term financing requirements.
Even with the significant changes in management and strategic focus, the clinical development of the Companys lead oncology programs continued to advance in 2011. Two randomized Phase 2 clinical trials of imetelstat in solid tumors continued enrollment throughout 2011: a study in patients with metastatic breast cancer (B014) and a study in patients with advanced non-small cell lung cancer (B012). These two trials require that a sufficient number of progression events occur in order to perform the planned data analyses. We anticipate an accrual of such events that will allow us to report top-line data from these two Phase 2 trials by the end of 2012. Two single-arm Phase 2 trials of imetelstat in hematological malignancies were initiated in the first quarter of 2011 to evaluate the impact of the drug on cancer progenitor cells: a study in patients with essential thrombocythemia (B015) and an exploratory study in patients with multiple myeloma (B013). Top-line data from these two trials are expected to be available by the end of 2012. Two Phase 2 clinical trials of GRN1005 were launched in the fourth quarter of 2011. Both trials, GRABM-B (GRN1005 Against Brain Metastases Breast Cancer) and GRABM-L (GRN1005 Against Brain Metastases Lung Cancer), were initiated in December 2011. We expect top-line data from these trials to be available by the end of the second quarter of 2013.
The compensation decisions in 2011 were influenced by a challenging market environment for the Company and the industry, the strategic decision to focus exclusively on our oncology programs and management transitions during the year. Highlights of significant compensation actions include:
Executive Management Changes in 2011 and 2012
In February 2011, the Board implemented a new leadership structure for the Company by appointing: (i) Mr. Greenwood as President, Interim Chief Executive Officer, Chief Financial Officer, and a member of the Board, (ii) Hoyoung Huh, M.D., Ph.D., as Executive Chairman of the Board and (iii) Alexander E. Barkas, Ph.D., as Lead Independent Director of the Board. In conjunction with the implementation of the new leadership structure, Dr. Okarma, left the Company as President and Chief Executive Officer and as a member of the Board, effective February 8, 2011.
In September 2011, John A. Scarlett, M.D., was appointed Chief Executive Officer.
In connection with the November 2011 decision to discontinue the Companys stem cell programs, a total of 66 positions were eliminated, which included positions held by Jane S. Lebkowski, Ph.D., Senior Vice President and Chief Scientific Officer, and Katharine E. Spink, Ph.D., Senior Vice President, Alliance Management and Cell Therapy Product Development. Drs. Lebkowski and Spink left the Company on December 31, 2011.
Mr. Greenwood left the Company as President and Chief Financial Officer on December 31, 2011. In January 2012, Dr. Scarlett was appointed as President, in addition to his role as Chief Executive Officer. In January 2012, Graham K. Cooper was appointed Executive Vice President, Finance and Business Development, and Chief Financial Officer. Mr. Cooper will provide direction for all financial matters for Geron and be responsible for new business opportunities and investor relations for the Company.
This Compensation Discussion and Analysis section discusses our executive compensation policies and programs and the compensation decisions made in 2011 for the following executive officers, collectively referred to herein as the Named Executive Officers:
Overview of Our Executive Compensation Program
Philosophy & Objectives
The overall objective of our compensation program is to support our business objectives by attracting, retaining and engaging the highest caliber of executive officers and other employees, while maintaining a fiscally responsible position in a highly competitive employment environment. Consistent with this overall objective, the goals of our executive compensation program are to:
Our Compensation Committee reviews and approves all of our compensation policies relating to executive officers (except the Chief Executive Officer, whose compensation is approved by the Board), including executive officer salaries, bonus and equity incentive compensation. As discussed in further detail below, our 2011 compensation program for our Named Executive Officers (as defined above) consisted of, and was intended to strike an appropriate balance among base salary, annual cash incentive bonuses and equity incentive awards. The Compensation Committee strives to act in the best interest of the Company and its stockholders, as well as ensure that the elements of compensation do not, individually or in the aggregate, encourage excessive risk taking.
The components of our executive compensation program consist primarily of base salary, annual cash incentive bonuses, equity awards and broad-based benefits. To provide competitive total direct compensation to our executive officers, we utilize a mix of cash (base salaries and annual incentives) and long-term incentives (equity awards) that are competitive with the market. The Compensation Committee has structured the Companys compensation program as follows to ensure that our executive officers are compensated in a manner consistent with stockholder interests, competitive pay practices and applicable requirements of regulatory bodies.
Role of the Compensation Committee
The Compensation Committee acts on behalf of the Board with respect to overseeing our compensation policies and programs and in determining compensation for executive officers. Compensation Committee members are independent of the Companys management and under NASDAQ listing standards. The Compensation Committee exercises judgment in allocating between cash and non-cash compensation. In setting the annual level of cash and equity compensation for our executive officers, the Compensation Committee typically considers various factors. These include: corporate performance, each executive officers individual performance, the criticality of each executive officers skill set, market data for our industry and defined peer group, and each executive officers tenure. Each of these factors is balanced against the Companys ability to award cash and equity incentives. The Compensation Committee has the authority to retain special counsel and other experts, including compensation consultants, such as Radford, to support their responsibilities in determining executive officer compensation and related programs. In addition, the Compensation Committee may receive documentary support, including industry data from third-party salary survey sources, such as Radford.
To aid the Compensation Committee in its responsibilities, the Chief Executive Officer, with input and assistance by the General Counsel and senior human resources personnel, provides the Compensation Committee with a variety of information, including analyses and recommendations relating to the Companys performance, individual performance of executive officers and compensation recommendations for every employee, including all executive officers. The Chief Executive Officer does not participate in the Compensation Committees or Boards deliberations or decisions with regard to his own compensation, which must be approved by the Board.
At the Compensation Committees request, the Chief Executive Officer reviews the performance of the other executive officers with the Compensation Committee, but no other executive officer has any input into executive compensation decisions. The Compensation Committee gives considerable weight to the Chief Executive Officers performance evaluations of the other executive officers since he has direct knowledge of each executives performance and contributions.
In 2011, the Compensation Committee reviewed independent survey data, such as the Radford Global Life Sciences compensation survey. The Compensation Committee also reviewed publicly available data from companies with which Geron competes for talent, which included Gilead Sciences, Inc.; Biogen Idec, Inc.; Affymax, Inc.; Amylin Pharmaceuticals Inc. and BioMarin Pharmaceuticals, Inc.
The Compensation Committee believes that it is important when making its compensation decisions to be informed as to the current practices of comparable publicly held companies. Therefore, in December 2011, the Compensation Committee determined that a definitive group of peer companies was necessary in connection with executive officer, employee and non-employee director compensation matters and engaged Radford to recommend a comparable peer group. Based on Radfords recommendations, the Compensation Committee approved a specific peer group in January 2012. This peer group, which the Committee uses to review executive officer compensation, consists of 19 publicly traded, U.S-based biotechnology/pharmaceutical companies. The majority of these companies are pre-commercial in nature, and have market capitalizations, headcount range and research and development expenditures that range from one-half of, to two times, those of Geron. The companies comprising our 2012 peer group are:
Executive Equity Compensation
Stock option grants and restricted stock awards (including performance-based restricted stock awards) from the 2002 Equity Incentive Plan and 2011 Incentive Award Plan encourage employee ownership in Geron, link pay with performance and align interests of stockholders and employees. Without sustained growth and positive stock price performance, all our employees, including the executive officers, carry the risk that they will not be able to realize significant gains from their equity-based awards. The Compensation Committee determines the size of any stock option grant and restricted stock award according to each executive officers position within the Company and sets a level it considers appropriate to create an opportunity for reward predicated on increasing stockholder value. The Compensation Committee takes into account each executive officers performance history and his or her potential for future responsibility and promotion. Other factors include long-term incentives previously granted, the amount of actual versus theoretical equity value per year that has been derived to date by the individual, the current actual value of the unvested equity grants for each individual, the percentage of stock option grants with exercise prices greater than the Companys stock price and the number of stock option grants that have expired unexercised as a result of market conditions. The Compensation Committee has the discretion to give relative weight to each of these factors. There is no set formula for the granting of stock options or other equity awards to individual executive officers or employees.
Equity Grant Practices and Vesting Conditions
In 2011, stock option grants to newly hired employees were made on the third Wednesday of the month following the new employees hire date, except for Dr. Scarlett, where the Board granted his stock option on the date of his appointment as Chief Executive Officer. To facilitate stock option grants to newly hired employees, the Compensation Committee authorized the Stock Option Committee to approve individual grants of equity awards up to 100,000 shares to non-executive employees. Equity awards greater than 100,000 shares or for executive
officers are approved by the Compensation Committee. In 2011, the sole members of the Stock Option Committee were Dr. Okarma, Mr. Greenwood and Dr. Scarlett (beginning in September 2011). In 2012, Mr. Cooper joined Dr. Scarlett as a member of the Stock Option Committee. The exercise price of all stock options is equal to the closing price of Geron Common Stock as reported by the NASDAQ Global Select Market on the date of grant so that the recipient will not earn any compensation from his or her options unless our share price increases above the exercise price; thus aligning the interests of our stockholders, and our employees and executive officers, during their employment, for the long-term success of the Company. Gerons standard practice is to grant options that vest monthly over four years from the date of grant, provided the employee continues to provide services to the Company.
Annual equity awards to all employees, including executive officers, are typically granted on the same date of the Annual Meeting of Stockholders, which is also the date that non-employee board members receive their equity awards in accordance with the 2006 Directors Plan. The exercise price for the annual stock option grants is equal to the closing price of Geron Common Stock as reported by the NASDAQ Global Select Market on the date of grant and the vest schedule is monthly over four years from the date of grant, provided the employee continues to provide services to the Company. For restricted stock awards, the vesting schedule is typically annually over four years from the date of grant, provided the employee continues to provide services to the Company.
2011 Corporate Performance
Each year, the Chief Executive Officer presents corporate goals to the Compensation Committee and Board, and the Board approves the goals and assigned weightings. Achievement of these goals impact payouts under our cash incentive program. The weightings for each corporate goal vary year-to-year depending on its importance and business value for the Company and for our stockholders. As part of the annual year-end performance reviews for executive officers, the Compensation Committee (with input from the Chief Executive Officer) evaluates the Companys overall performance for the given year with respect to the corporate goals and other significant Company performance accomplishments, while taking into consideration the degree of difficulty in achieving the goals and any particular events or circumstances that impacted performance. For 2011, the Compensation Committee evaluated the status of Gerons development programs, clinical progress and corporate development activities. This necessarily involved a subjective assessment of corporate performance by the Compensation Committee. Moreover, the Compensation Committee did not base its considerations on a single performance area, but rather considered the entire mix of accomplishments, challenges and efforts in evaluating Company performance and recommending a corporate performance factor to the Board for their approval. The table below summarizes our corporate performance, including weightings and our Compensation Committees and Boards assessment of Company performance that was used to calculate the overall corporate performance factor of 75% for 2011.
Highlights of 2011 accomplishments taken into account by the Compensation Committee and Board in determining overall achievement of the corporate goals and by the Compensation Committee in determining individual performance for the Named Executive Officers, included the following:
2011 Compensation Decisions
Consistent with practices in 2009 and 2010, no adjustments were made to incumbent executive officer base salaries in 2011, except for Mr. Greenwood, who received an annual base salary of $500,000 with his appointment to President and Interim Chief Executive Officer in February 2011.
In September 2011, Dr. Scarlett was appointed Chief Executive Officer and a director of the Company. In accordance with the terms of his negotiated employment agreement, Dr. Scarlett receives an annual base salary of $550,000. In January 2012, the Board appointed Dr. Scarlett as President, and he receives no additional compensation for this appointment.
Annual Cash Incentives
We have established a bonus structure for all employees, including executive officers, that provides bonuses depending on whether we achieve pre-established corporate goals related to operational and financial performance, as well as achievement of individual objectives. By using an appropriate amount of performance-based compensation, we believe our bonus structure creates a direct link between executive compensation and operational and financial performance to provide further motivation for our executive officers to implement strategic initiatives in order to meet or exceed pre-established corporate goals. Every employee, including executive officers, has an established potential award, which is equal to a percentage of the employees base salary. The percentage increases with increasing rank in the Company. The bonus targets for executive officers in 2011 ranged from 40% to 60% of base salary depending on the executive officer’s position. The executive officers 2011 bonus targets were set at the same levels as in 2010. In connection with Dr. Scarletts negotiated employment agreement, he is eligible to receive an annual bonus of up to 60% of his annual base salary, payable at the discretion of the Board.
Each employees bonus amount is calculated using individual and corporate performance factors with increasing weight on Company performance for more senior employees. There are no minimum payouts and the only multipliers that would increase a bonus amount above the targets apply to the individual performance component. The corporate performance factor ranges from 0 to 1.0 and is assigned by the Compensation Committee (as discussed above) based upon its qualitative assessment of Company performance against corporate goals. Individual performance factors for 2011 ranged from 0 to 1.25 and were based on a supervisors assessment of an employees performance. As noted below, the Chief Executive Officer reviews the performance of the other executive officers and each Board member conducts an independent assessment of the Chief Executive Officers performance, which is submitted to the Compensation Committee for tabulation and evaluation. The Compensation Committee may approve an individual performance factor above 1.25 upon evaluation of appropriate criteria.
The Compensation Committees assessment of the executive officers level of attainment of individual performance goals becomes the individual performance factor used in the calculation of the bonus for the end of the year (as described in the table set forth below which illustrates the calculation of the 2011 bonus awarded as a percentage of salary).
The following are the bonus targets and weighting percentages used to calculate the 2011 bonus for the Named Executive Officers as well as the 2011 actual bonus percentage awarded.
Assessment & Achievement of 2011 Individual Executive Officer Goals
The Chief Executive Officer evaluates individual performance for the other executive officers through written evaluations. He provides the evaluations to the Compensation Committee along with his recommendations for each executive officers individual performance factor. The Compensation Committee reviews the performance and assessment of each executive officer. The Compensation Committee obtains reviews of the Chief Executive
Officer from each Board member to evaluate the Chief Executive Officer, and makes a recommendation to the Board on his individual performance factor. For his service in 2011, Dr. Scarlett agreed that he would not receive a annual incentive award in 2011. The Compensation Committee will assess Dr. Scarletts performance from September 2011 through December 2012 when considering his annual incentive award for 2012.
For 2011, the Compensation Committee concurred with Dr. Scarletts recommendation for each executive officers achievement of his or her individual performance goals and concluded that each Named Executive Officer on an overall basis had achieved his or her individual goals, which included support of the corporate initiatives mentioned above and also departmental and functional goals, as described in detail below.
Dr. Kelsey was awarded an individual performance factor of 1.35. Dr. Kelseys achievements included:
Ms. Behrs was awarded an individual performance factor of 1.20. Ms. Behrs achievements included:
Dr. Earp was awarded an individual performance factor of 1.20. Dr. Earps achievements included:
The individual performance factors awarded to Mr. Greenwood, Dr. Lebkowski and Dr. Spink at 1.0 each were assigned in connection with their separations from the Company and their separation agreements. For a further description of the benefits paid under the separation agreements, see the Severance and Change in Control Benefits section below.
Annual Equity Compensation
In May 2011, the Compensation Committee granted a mix of stock options and restricted stock awards to all Geron employees, including executive officers. The Compensation Committee first pre-approved a grant guideline, based on employee level and individual performance ratings at the end of 2010. This guideline determined the maximum number of options and restricted stock awards that could be awarded to an employee, including executive officers. Option grants were awarded to all executive officers at one half the maximum guideline in 2011. Restricted stock awards for employees, including executive officers, were equal to one-half the number of shares of the employees option grant.
Additionally, the Compensation Committee approved the grant of performance-based restricted stock awards (PSAs) to certain employees, including executive officers and members of the Board, in connection with the clinical development of GRN1005. The vesting of each PSA is linked to the achievement of specific corporate objectives during a defined performance period, which must be certified by the Compensation Committee. Allocation of the PSAs amongst employees, including executive officers and members of the Board, was based on the potential contributions, accountability and influence an individual had on the outcome of the particular performance milestones. Performance criteria for the 2011 PSA grants are:
In September 2011, the Board approved the terms of the employment agreement for Dr. Scarlett. After considering the new hire equity awards granted to current executive officers and executive officers of competitive companies and equity awards granted in the past to Dr. Okarma, former President and Chief Executive Officer, the Board approved a stock option grant of 1,000,000 shares to Dr. Scarlett.
See section Grants of Plan-Based Awards on page 44 for additional information regarding stock option grants, restricted stock awards and performance-based restricted stock awards to Named Executive Officers in 2011.
Geron offers a comprehensive array of benefit programs to its employees, including Named Executive Officers. These include:
Executive officers pay for 30% of their health premium cost, which is deducted from their gross salary. Other employees pay either 16% or 25% of their health premium cost.
The Company does not offer any pension plans or health benefits during retirement.
Executive officers receive limited perquisites consisting of tax and financial planning services. We believe that providing these benefits is a relatively inexpensive way to enhance the competitiveness of the executives compensation package.
In accordance with his employment agreement, Dr. Scarlett receives reimbursement for housing (not to exceed $2,000 per month) and travel costs (not to exceed $20,000 per year) in connection with the commute from his personal residence in Texas. Dr. Scarlett does not receive separate compensation for serving as a member of the Board.
Severance and Change in Control Benefits
In September 2002, the Board approved a Change of Control Severance Plan (the Severance Plan) that became effective on January 21, 2003 and was subsequently revised in October 2006 and December 2008. The Severance Plan applies to all employees, and provides for each employee to receive a severance payment upon a triggering event following a change in control. A triggering event is defined as an event where (i) an employee is terminated by the Company without cause in connection with a change in control or within 12 months following a change in control; or (ii) an employee is not offered comparable employment (new or continuing) by the Company or the Companys successor or acquirer within 30 days after the change in control or any employment offer is rejected; or (iii) after accepting (or continuing) employment with the Company after a change in control, an employee resigns within six months following a change in control due to a material change in the terms of employment. Severance payments range from three to 18 months of base salary, depending on the employees position with the Company, payable in a lump sum payment. The severance payment would be 18 months for the Chief Executive Officer and 15 months for the Named Executive Officers. In addition to a cash payment, the Company will also pay health insurance premiums under the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA) for each employee through the earlier of the end of his or her severance period or the time that the employee obtains other coverage. Change in control provisions in the Severance Plan are intended to allow executive officers to focus their attention on our business operations in the face of the potentially disruptive impact of a proposed change in control transaction, to assess takeover bids objectively without regard to the potential impact on their own job security and to allow for a smooth transition in the event of a change in control of the Company.
In the event of a merger, acquisition or similar change in control of the Company, the 1992 Stock Option Plan, the 1996 Directors Stock Option Plan, the 2002 Equity Incentive Plan, the 2006 Directors Plan and the 2011 Incentive Award Plan provide that each outstanding option and award will accelerate so that each option will be fully exercisable for all of the shares subject to such option immediately prior to the effective date of the transaction and each other type of award shall be fully vested. In addition, upon the occurrence of such transaction, the 2002 Equity Incentive Plan, the 2006 Directors Plan and the 2011 Incentive Award Plan provide that all of the outstanding repurchase rights of the Company with respect to shares of Common Stock acquired upon exercise of options granted, as well as shares of restricted stock, under the 2002 Equity Incentive Plan, the 2006 Directors Plan and the 2011 Incentive Award Plan will terminate.
In January 2003, the Company entered into employment agreements with certain executive officers and key employees which were amended in 2008 to comply with the requirements of Code Section 409A. These agreements provide for severance pay, in lump-sum payment, equal to a percentage of annual salary and accrued bonus plus benefits continuation for one year to the affected executive officer in the event his or her employment is terminated involuntarily without cause. Payments under these agreements are to be reduced by the amount of any payments made under the Severance Plan previously described. The employment agreements provide that such executive officers may not interfere with the business of the Company by soliciting or attempting to solicit any employee of the Company to terminate his or her employment in order to become an employee, consultant or independent contractor to or for any competitor of the Company and most provide a general release of claims. Currently, the only Named Executive Officers with such employment agreements are Ms. Behrs and Dr. Earp, and each is entitled to a severance payment of 110% of their respective base salary.
In September 2011, the Company entered into an employment agreement with Dr. Scarlett, in connection with his appointment as Chief Executive Officer of the Company. Under Dr. Scarletts employment agreement, in the event of a Covered Termination (as defined under the agreement): (i) he will be entitled to a lump-sum severance payment equal to twenty-four (24) months of his base salary then in effect as of such termination and any unpaid Annual Bonus, (ii) Dr. Scarlett and his covered dependents will also be eligible to continued healthcare coverage as permitted by COBRA for a period of one (1) year following a Covered Termination at the same cost as in effect immediately prior to such termination; and (iii) the vested portion of any stock options or other exercisable
equity interest in the Company shall remain outstanding until the earlier of the second anniversary of the date of termination and the original expiration date of such award. Dr. Scarlett will also be eligible to participate in Gerons Severance Plan in the event of a change in control.
The Compensation Committee believes that severance benefits such as these remain essential to fulfill our objective to recruit, retain and develop key management talent in the competitive market. These arrangements enable the Company to recruit and retain high-quality new management talent because they provide reasonable protection to the executive officer in the event that he or she is not retained under limited circumstances.
In conjunction with the implementation of the new leadership structure, Thomas B. Okarma, Ph.D., M.D., left as Gerons President and Chief Executive Officer and as a member of the Board, effective February 8, 2011. On February 11, 2011, the Company and Dr. Okarma entered into a Transition and Separation Agreement (the Okarma Agreement), effective as of February 19, 2011, that provided for, among other things, a lump-sum cash severance payment of $802,500 and up to 12 months of continued health care coverage under COBRA which he was entitled to receive in connection with his termination of employment under his 2003 employment agreement, and the full acceleration of vesting and exercisability of previously unvested stock options. In addition, the exercise period of all stock options held by Dr. Okarma was extended to the earlier of February 8, 2014 or the original expiration date of such stock option. As consideration, Dr. Okarma provided the Company with a general release of claims against the Company. In addition, pursuant to the Okarma Agreement, Dr. Okarma agreed to serve as a non-exclusive independent consultant to the Company until July 9, 2013 and will receive for such services an aggregate of $401,250 in consulting fees, payable in quarterly installments, and a lump-sum cash payment of $72,000 that is intended to compensate Dr. Okarma for expenses incurred by him in connection with office space and administrative support during the consulting period. Dr. Okarma was also entitled to vesting of service-based restricted stock awards that vested in full on August 8, 2011. Unvested shares of performance-based restricted stock awards held by Dr. Okarma will remain eligible for vesting based on his continued service as a consultant and in accordance with the original terms of the award if the respective performance conditions are achieved by July 9, 2013. The Company was also obligated to pay Dr. Okarma $24,000 to compensate him for healthcare benefits not covered by Medicare and up to $12,500 for the reimbursement of legal fees. The indemnification and confidentiality provisions of his 2003 employment agreement with the Company remain in full force and effect.
In connection with the appointment of David L. Greenwood in February 2011 as President, Interim Chief Executive Officer and Chief Financial Officer of the Company, the Company entered into a new employment agreement with Mr. Greenwood. Under Mr. Greenwoods employment agreement, in the event of a Covered Termination (as defined under the agreement): (i) he was entitled to a lump-sum severance payment equal to 150% of his annual base salary in effect and (ii) continued healthcare coverage as permitted by COBRA for a period of two (2) years following a Covered Termination at the same cost as in effect immediately prior to such termination. On December 31, 2011, Mr. Greenwoods employment with the Company terminated due to a Covered Termination. On January 30, 2012, the Company and Mr. Greenwood entered into a Transition and Separation Agreement (the Greenwood Agreement), effective February 7, 2012, that provides for, among other things, a lump-sum cash severance payment of $750,000 and 12 months of continued health care coverage under COBRA, consistent with Mr. Greenwoods 2011 employment agreement. In addition, Mr. Greenwood received a lump-sum cash bonus payment of $235,800 for 2011, and the exercise period of all exercisable stock options held by Mr. Greenwood was extended to the earlier of December 31, 2013 or the original expiration date of such stock options. The Company is also obligated to pay Mr. Greenwood up to $5,000 for the reimbursement of legal fees in connection with the Greenwood Agreement. The Greenwood Agreement also provides that the indemnification and confidentiality provisions of Mr. Greenwoods 2011 employment agreement remain in full force and effect. In consideration of the entry into the Greenwood Agreement and the separation benefits described above, Mr. Greenwood provided the Company with a general release of claims against the Company. In addition pursuant to the Greenwood Agreement, Mr. Greenwood agreed to serve as an independent consultant to the Company until March 31, 2012. As provided in the agreement, the term was extended to June 30, 2012. The Company and Mr. Greenwood may each terminate the Greenwood Agreement at any time with thirty (30) days advance notice. The Greenwood Agreement provides that Mr. Greenwood will receive a consulting fee of $400 per hour. Under the Greenwood Agreement, consistent with the terms of our 2002 Equity Incentive Plan and 2011 Incentive Award Plan and the original terms of the awards and options previously granted to him, Mr. Greenwood is entitled to continued vesting of currently unvested restricted stock awards and unvested stock options during the period that Mr. Greenwood continues to serve as
a consultant to the Company and his performance-based restricted stock awards will remain eligible for vesting, in each case, conditioned on Mr. Greenwoods continued service as a consultant and subject to vesting in accordance with the original terms of the award.
On November 14, 2011, the Company announced its decision to exclusively focus on its oncology programs and discontinue further development of its stem cell programs. In connection with that decision, 66 positions were eliminated, including those held by Jane S. Lebkowski, Ph.D., Senior Vice President and Chief Scientific Officer, and Katharine E. Spink, Ph.D., Senior Vice President, Alliance Management and Cell Therapy Product Development.
On December 29, 2011, the Company and Dr. Lebkowski entered into a Transition and Separation Agreement (the Lebkowski Agreement), effective January 10, 2012, that provides for, among other things, a lump-sum cash severance payment of $368,500 and 12 months of continued health care coverage under the provisions of COBRA, consistent with Dr. Lebkowskis 2003 employment agreement. In addition, Dr. Lebkowski received a lump-sum cash bonus payment of $107,200 for 2011, and the exercise period of all exercisable stock options held by Dr. Lebkowski was extended to the earlier of December 31, 2013 or the original expiration date of such stock options. The Lebkowski Agreement also provides that the indemnification and confidentiality provisions of Dr. Lebkowskis 2003 employment agreement remain in full force and effect. In consideration of the entry into the Lebkowski Agreement and the separation benefits described above, Dr. Lebkowski provided the Company with a general release of claims against the Company. In addition, on December 29, 2011, the Company and Dr. Lebkowski entered into a Consulting Agreement effective January 14, 2012 (the Lebkowski Consulting Agreement), pursuant to which Dr. Lebkowski agreed to serve as an independent consultant to the Company until March 31, 2012. As provided in the agreement, the term was extended to June 30, 2012. The Company and Dr. Lebkowski may each terminate the Lebkowski Consulting Agreement at any time with thirty (30) days advance notice. The Lebkowski Consulting Agreement provides that Dr. Lebkowski will receive a consulting fee of $400 per hour. Under the Lebkowski Consulting Agreement, Dr. Lebkowski is entitled to continued vesting of currently unvested restricted stock awards and unvested stock options during the period that Dr. Lebkowski continues to serve as a consultant to the Company and her performance-based restricted stock awards will remain eligible for vesting, in each case, conditioned on Dr. Lebkowskis continued service as a consultant and subject to vesting in accordance with the original terms of the award.
On December 31, 2011, the Company and Dr. Spink entered into a Transition and Separation Agreement (the Spink Agreement), effective December 31, 2011, that provides for, among other things, a lump-sum cash severance payment of $319,000 and 12 months of continued health care coverage under COBRA. In addition, Dr. Spink received a lump-sum cash bonus payment of $92,800 for 2011, and the exercise period of all exercisable stock options held by Dr. Spink was extended to the earlier of December 31, 2013 or the original expiration date of such stock options. The Spink Agreement also provides that the indemnification and confidentiality provisions of Dr. Spinks Proprietary Information and Inventions Agreement executed on November 4, 2003, remain in full force and effect. In consideration of the entry into the Spink Agreement and the separation benefits described above, Dr. Spink provided the Company with a general release of claims against the Company. In addition, on December 31, 2011, the Company and Dr. Spink entered into a Consulting Agreement effective January 14, 2012 (the Spink Consulting Agreement), pursuant to which Dr. Spink agreed to serve as an independent consultant to the Company until March 31, 2012. As provided under the agreement, the term was extended to until June 30, 2012. The Company and Dr. Spink may each terminate the Spink Consulting Agreement at any time with thirty (30) days advance notice. The Spink Consulting Agreement provides that Dr. Spink will receive a consulting fee of $400 per hour. Under the Spink Consulting Agreement, Dr. Spink is entitled to continued vesting of currently unvested restricted stock awards and unvested stock options during the period that Dr. Spink continues to serve as a consultant to the Company and her performance-based restricted stock awards will remain eligible for vesting, in each case, conditioned on Dr. Spinks continued service as a consultant and subject to vesting in accordance with the original terms of the award.
Tax and Accounting Implications for Executive Compensation
The Compensation Committee is responsible to address the issues raised by Section 162(m) of the Code, which makes certain non-performance-based compensation to certain executives of the Company in excess of $1,000,000 non-deductible to the Company. To qualify as performance-based under Section 162(m), compensation payments must be determined pursuant to a plan, by a committee of at least two outside directors (as defined in the regulations promulgated under the Code) and must be based on achieving objective performance goals. In addition, the material terms of the plan must be disclosed to and approved by stockholders and the outside directors or the Compensation Committee, as applicable, must certify that the performance goals were achieved before payments can be awarded.
The Compensation Committee will continue to examine the effects of Section 162(m), to monitor the level of compensation paid to our executive officers and take appropriate action in response to the provisions of Section 162(m) to the extent practicable while maintaining competitive compensation practices. To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the Compensation Committee reserves the right to recommend and award compensation that is not deductible under Section 162(m).
In addition to considering the tax consequences, the Compensation Committee considers the accounting consequences of, including the impact of expenses being recognized in connection with equity awards, its decisions in determining the size and form of different equity-based awards.
COMPENSATION COMMITTEE REPORT
Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and contained within this Proxy Statement with management and, based on such review and discussions, our Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into our Annual Report on Form 10-K for the year ended December 31, 2011.
Submitted on March 22, 2012 by the members of the Compensation Committee of the Board of Directors:
This Section is not soliciting material, is not deemed filed with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Exchange Act of 1934, as amended (the Exchange Act), or the Securities Act of 1933, as amended (the Securities Act), whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
2011 Summary Compensation Table
The following table includes information concerning compensation for the years ended December 31, 2011, 2010 and 2009 to the Principal Executive Officer, Principal Financial Officer, the three most highly compensated executive officers of the Company, and up to two additional individuals who would have been one of our three most highly compensated executive officers except for the fact that they were not serving as executive officers at December 31, 2011 (our Named Executive Officers).
Grants of Plan-Based Awards for 2011
The following table sets forth information with respect to the stock options and restricted stock awards granted during the year ended December 31, 2011 to each of the Named Executive Officers as listed in the Summary Compensation Table shown under the caption Executive Compensation Tables.
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Outstanding Equity Awards Value at Fiscal Year-End
The following table includes information with respect to the value of all outstanding equity awards previously awarded to the Named Executive Officers as of December 31, 2011.