def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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STEMCELLS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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(1) Amount Previously Paid:
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SEC 1913 (02-02)
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Persons who are to respond to the collection of
information contained in this form are not required to
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control number. |
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TABLE OF CONTENTS
STEMCELLS,
INC.
3155 Porter Drive
Palo Alto, California 94304
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on June 3,
2010
To the Stockholders of STEMCELLS, INC.
Notice is hereby given that the Annual Meeting of Stockholders
of StemCells, Inc. (StemCells or the
company) will be held on Thursday, June 3,
2010, at 2 p.m., local time, at 3155 Porter Drive, Palo
Alto, California 94304 for the following purposes:
1. to elect the two Class I directors named in the
accompanying proxy materials to serve until the 2013 Annual
Meeting of Stockholders;
2. to consider and vote upon a proposal to ratify the
selection of Grant Thornton LLP as independent public
accountants for the company for the fiscal year ending
December 31, 2010; and
3. to transact any and all other business that may properly
come before the meeting.
The Board of Directors has fixed the close of business on
Friday, April 9, 2010, as the record date for determining
those stockholders who are entitled to notice of, and to vote
at, the annual meeting of stockholders and any postponements or
adjournments thereof. The stock transfer books will not be
closed between the record date and the date of the meeting.
Representation of at least a majority of all outstanding shares
of common stock of StemCells is required to constitute a quorum.
Accordingly, it is important that your shares be represented at
the meeting.
This year, we are taking advantage of Securities and Exchange
Commission rules that allow issuers to furnish proxy materials
to their stockholders on the Internet. We believe these rules
allow us to provide our stockholders with the information they
need, while lowering the costs of delivery and reducing the
environmental impact of our Annual Meeting.
Please read the proxy materials carefully. All stockholders are
invited to attend the Annual Meeting. Your vote is important,
and the company appreciates your cooperation in considering and
acting on the matters presented.
By Order of the Board of Directors,
Kenneth B. Stratton, J.D.
Secretary
April 22, 2010
Palo Alto, California
PROXY
STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OF
STEMCELLS, INC.
The accompanying proxy is solicited on behalf of the Board of
Directors of StemCells, Inc. (the company) for use
at its annual meeting of stockholders (the Annual
Meeting) to be held on Thursday, June 3, 2010, at
2 p.m., local time, at the companys headquarters at
3155 Porter Drive, Palo Alto, California 94304. The company will
bear the cost of solicitation of proxies. Directors, officers
and employees of the company may solicit proxies by telephone,
facsimile or in person for no additional compensation. The
company will reimburse banks, brokerage firms, proxy solicitors,
and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy materials to the
beneficial owners of shares.
The Board has fixed the close of business on Friday,
April 9, 2010, as the record date for determining
stockholders entitled to notice of, and to vote at, the Annual
Meeting or at any postponement or adjournment thereof. There
were 119,673,325 shares of our common stock, $.01 par
value, outstanding on April 9, 2010, each of which is
entitled to one vote for each share on the matters to be voted
upon.
Shares of our common stock represented by proxies in the form
enclosed that are properly executed and returned to us and not
revoked will be voted as specified in the proxy by the
stockholder. In the absence of contrary instructions, or in
instances where no specifications are made, the shares will be
voted:
(i) FOR the election as directors of the nominees as
described herein under Proposal Number 1
Election of Directors;
(ii) FOR ratification of the selection of accountants as
described herein under Proposal Number 2
Ratification of Selection of Independent Public
Accountants; and
(iii) in the discretion of the named proxies as to any
other matter that may properly come before the Annual Meeting.
Any stockholder signing and delivering a proxy may revoke it at
any time before it is voted by delivering to the companys
corporate secretary a written revocation or a duly executed
proxy bearing a date later than the date of the proxy being
revoked. Any stockholder attending the Annual Meeting in person
may revoke his, her or its proxy and vote his, her or its shares
at the Annual Meeting.
Our 2010 Proxy Materials are Available on the
Internet. This year we have elected to provide
access to our proxy materials over the Internet in accordance
with rules adopted by the Securities and Exchange Commission.
Accordingly, we are sending a Notice of Internet Availability of
Proxy Materials (the Notice) to our stockholders of
record and beneficial owners, which will instruct them as to how
they may access and review all of the proxy materials on the
Internet and how they may submit their proxy on the Internet.
Any stockholder wishing to receive a paper copy of our proxy
materials can request them from us by following the instructions
found in the Notice for requesting such materials, or by calling
1
(800) 579-1639.
Requests for a paper copy of our proxy materials should be made
on or before May 20, 2010 to facilitate timely delivery.
How to
vote shares at our 2010 Annual Meeting.
This year company stockholders may cast their vote in any of the
following ways:
Vote by Internet. Any stockholder can vote
over the Internet at www.proxyvote.com by following the
instructions on the Notice or proxy card. Internet voting
facilities for stockholders of record will be available
24 hours a day and will close at 11:59 p.m. (EDT) on
June 2, 2010.
1
Vote by Phone. Any stockholder can vote by
phone by following the instructions on the proxy card and
calling 1 (800) 690-6903 up until 11:59 p.m. (EDT) on
June 2, 2010.
Vote by Mail. Any stockholder that receives
proxy materials by mail can vote by mail by signing, dating and
mailing the enclosed proxy card in the postage-paid envelope
provided. If the envelope is missing, such a stockholder can
mail the completed proxy card or voting instruction card to Vote
Processing,
c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717. The completed card
must be received no later than June 2, 2010.
Voting at the Annual Meeting. All company
stockholders are invited to attend the Annual Meeting in person.
Any stockholder that attends the meeting in person may deliver a
completed proxy card in person or vote by completing a ballot,
which will be available at the meeting. However, each
stockholder intending to vote in person at the Annual Meeting
should note that if his, her or its shares are held in the name
of a bank, broker or other nominee, such stockholder must obtain
a legal proxy, executed in his, her or its favor, from the
holder of record to be able to vote at the Annual Meeting.
Stockholders should allow enough time prior to the Annual
Meeting to obtain this proxy from the holder of record, if
needed.
The shares voted electronically or represented by the proxy
cards received, properly marked, dated, signed and not revoked,
will be voted at the Annual Meeting.
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QUORUM,
REQUIRED VOTES AND METHOD OF TABULATION
Consistent with Delaware law and the companys amended and
restated by-laws, a majority of the votes entitled to be cast on
a particular matter, present in person or represented by proxy,
constitutes a quorum as to such matter. The company will appoint
one or more election inspectors for the meeting to count votes
cast by proxy or in person at the Annual Meeting.
Election of directors by stockholders will be determined by a
plurality of the votes cast by the stockholders entitled to vote
at the election that are either present in person or represented
by proxy. The approval of the proposal to ratify the selection
of accountants will require a majority of the votes properly
cast to be affirmative.
The election inspectors will count shares represented by proxies
that withhold authority to vote for a nominee for election as a
director or that reflect abstentions and broker
non-votes (i.e., shares represented at the meeting held by
brokers or nominees as to which (i) instructions have not
been received from the beneficial owners or persons entitled to
vote and (ii) the broker or nominee does not have
discretionary voting power on a particular matter) only as
shares that are present and entitled to vote on the matter for
purposes of determining the presence of a quorum, but neither
abstentions nor broker non-votes have any effect on the outcome
of voting on the election of directors or the selection of
accountants.
Management does not know of any matters to be presented at this
Annual Meeting other than those set forth in this proxy
statement and in the notice accompanying this proxy statement.
If other matters should properly come before the meeting, the
proxy holders will vote such matters in their discretion. Any
stockholder has the right to revoke his, her or its proxy at any
time before it is voted.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table shows the number of shares of our common
stock beneficially owned, as of April 1, 2010, by
(i) each of our directors, (ii) each of our named
executive officers, and (iii) our directors and executive
officers as a group. To our knowledge, there are no beneficial
owners of more than 5% of our common stock. In general,
beneficial ownership refers to shares that an
individual or entity has the power to vote or dispose of, and
any rights to acquire common stock that are currently
exercisable or will become exercisable within 60 days of
April 1, 2010. Unless otherwise indicated, we believe that
each person named below, based on information furnished by such
owners, holds sole investment and voting power with respect to
such shares, subject to community property laws where
applicable. We calculated percentage ownership in accordance
with the rules of the SEC using the total number of shares
outstanding as of April 1, 2010, as well as shares deemed
to be outstanding for such owner because of outstanding rights
to acquire common stock that are currently exercisable or will
be exercisable within 60 days of April 1, 2010.
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Amount and
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Nature of
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Percentage of
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of Beneficial
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Class Beneficially
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Name and Address of Beneficial Owner*
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Ownership
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Owned
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Eric Bjerkholt(1)
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70,000
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**
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Stewart Craig(2)
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89,711
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**
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Ricardo Levy(3)
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122,165
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**
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Martin McGlynn(4)
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1,943,542
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1.62
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%
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Roger Perlmutter(5)
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143,503
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**
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John Schwartz(6)
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133,000
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**
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Ken Stratton(7)
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153,957
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**
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Ann Tsukamoto(8)
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704,356
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**
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Irving Weissman(9)
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859,107
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**
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Rodney Young(10)
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730,622
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**
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All directors and executive officers as a group
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4,949,963
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4.14
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%
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3
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* |
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The address of all persons listed in the table is
c/o StemCells,
Inc., 3155 Porter Drive, Palo Alto, California 94304. |
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** |
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Less than one percent. |
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(1) |
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Includes 70,000 shares issuable upon exercise of stock
options exercisable within 60 days. |
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(2) |
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Includes 83,333 shares issuable upon exercise of stock
options exercisable within 60 days. Includes
6,378 shares included in Dr. Craigs 401(k) plan. |
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(3) |
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Includes 122,165 shares issuable upon exercise of stock
options exercisable within 60 days. |
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(4) |
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Includes 1,909,677 shares issuable upon exercise of
1,851,011 stock options and 58,666 restricted stock units,
exercisable or vesting within 60 days. Includes
33,865 shares included in Mr. McGlynns 401(k)
plan. |
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(5) |
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Includes 143,503 shares issuable upon exercise of stock
options exercisable within 60 days. |
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(6) |
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Includes 133,000 shares issuable upon exercise of stock
options exercisable within 60 days. |
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(7) |
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Includes 153,957 shares issuable upon exercise of 130,624
stock options and 23,333 restricted stock units, exercisable or
vesting within 60 days. |
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(8) |
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Includes 639,475 shares issuable upon exercise of 616,142
stock options and 23,333 restricted stock units, exercisable or
vesting within 60 days. Includes 42,047 shares
included in Dr. Tsukamotos 401(k) plan. Includes a
total of 22,834 shares held in trusts for the benefit of
Dr. Tsukamoto and her family members, including
4,000 shares owned by Dr. Tsukamotos parents as
to which she disclaims beneficial ownership. |
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(9) |
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Includes 220,292 shares issuable upon exercise of stock
options exercisable within 60 days. Includes
14,511 shares held in trust for Dr. Weissmans
children as to which he disclaims beneficial ownership. |
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(10) |
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Includes 730,622 shares issuable upon exercise of 673,956
stock options and 56,666 restricted stock units, exercisable or
vesting within 60 days. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the Exchange Act), requires our executive
officers, directors, and persons who own more than 10% of a
registered class of our equity securities, to file with the SEC
reports of ownership of our securities and changes in reported
ownership. Executive officers, directors and greater than 10%
beneficial owners are required by SEC rules to furnish us with
copies of all Section 16(a) reports they file.
Based solely on a review of the copies of such forms furnished
to us, or written representations from the reporting persons
that no Form 5 was required, we believe that, during the
fiscal year ended December 31, 2009, all Section 16(a)
filing requirements applicable to our officers, directors and
greater than 10% beneficial owners have been met, except that
(i) one executive officer, Dr. Craig, failed to timely
file a Form 4 by one day to report the award of restricted
stock units and options by the company as equity compensation,
and (ii) one executive officer, Mr. Young, failed to
timely file a Form 4 to report a reallocation of investment
funds held in his 401(k) plan, which inadvertently resulted in
the sale of 3,647 shares of company stock.
INFORMATION
CONCERNING DIRECTORS OF THE COMPANY
Board of
Directors; Committees
We currently have six directors serving on our Board of
Directors. Since July 2008, our Board has been composed of
Drs. Ricardo Levy, Roger Perlmutter, John Schwartz, and
Irving Weissman and Messrs. Eric Bjerkholt and Martin
McGlynn. Because we have a classified board, with each of our
directors serving a staggered three-year
4
term, only two of our directors are expected to stand for
reelection at our 2010 Annual Meeting. The following table shows
the composition of the three classes of our Board:
Class I Directors (terms scheduled to expire in 2010, but
standing for reelection at our Annual Meeting):
Eric Bjerkholt
John Schwartz, Ph.D.
Class II Directors (terms scheduled to expire in 2011):
Ricardo Levy, Ph.D.
Irving Weissman, M.D.
Class III Directors (terms scheduled to expire in 2012):
Martin McGlynn
Roger Perlmutter, M.D., Ph.D.
The following table shows the names, ages, principal
occupations, and public company board memberships for the last
five years of our directors, as of April 1, 2010:
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Eric Bjerkholt
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50
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Eric Bjerkholt was elected to the Board of Directors in March
2004. He is Senior Vice President, Corporate Development and
Finance, and Chief Financial Officer of Sunesis Pharmaceuticals,
Inc. From 2004 to 2007, he served as Senior Vice President and
Chief Financial Officer of Sunesis.
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Ricardo Levy, Ph.D.
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65
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Ricardo Levy, Ph.D. was elected to the Board of Directors
in September 2001. He currently serves as a director on the
boards of a number of private companies as well as the board of
Accelrys, Inc., a public company focused on molecular modeling
and simulation software for both life and materials science
research.
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Martin McGlynn
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63
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Martin McGlynn was elected to the Board of Directors in February
2001. He is President and Chief Executive Officer of the
company, a position he has held since January 2001.
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Roger Perlmutter, M.D., Ph.D.
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57
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Roger Perlmutter, M.D., Ph.D., was elected to the
Board of Directors in December 2000. He is Executive Vice
President, Research and Development, of Amgen, Inc., a position
he has held since January 2001.
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John Schwartz, Ph.D.
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75
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John Schwartz, Ph.D., was elected to the Board of Directors
in December 1998 and was elected Chairman of the Board at the
same time. He is currently President of Quantum Strategies
Management Company.
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Irving Weissman, M.D.
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70
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Irving Weissman, M.D., was elected to the Board of
Directors in September 1997. He is the Virginia and Daniel K.
Ludwig Professor of Cancer Research, Professor of Pathology and
Professor of Developmental Biology at Stanford University.
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The independent members of our Board, as determined by the Board
of Directors in accordance with the existing Nasdaq Listing
rules, are Mr. Bjerkholt and Drs. Levy, Perlmutter and
Schwartz. The Board of Directors held four regular meetings and
two special meetings during the fiscal year ended
December 31, 2009. Each of the directors attended more than
75% of the meetings of the Board of Directors and of the
committees on which they served.
5
For many years the roles of chairman and chief executive officer
at the company have been separated. We believe that this is
appropriate under current circumstances, because it allows
management to make the operating decisions necessary to manage
the business, while helping to maintain Board independence so
that it can provide an effective oversight function. We feel
that this has provided an appropriate balance of operational
focus, flexibility and oversight. Our independent directors meet
at regularly scheduled executive sessions without members of
management.
During 2009, the Board had three standing committees
the Compensation and Stock Option Committee (the
Compensation Committee), the Corporate Governance
and Nominating Committee (the Corporate Governance
Committee), and the Audit Committee as well as
a single-member committee established under the companys
2001, 2004 and 2006 equity incentive plans. In addition,
effective January 2009, the Board established an ad hoc
committee called the Strategic Transactions Committee with
direction to consult with management and advise the full Board
on various corporate initiatives, such as the acquisition of
substantially all of the operating assets of Stem Cell Sciences
plc, which the company completed on April 1, 2009. All
members of the Compensation Committee, the Corporate Governance
Committee and the Audit Committee are, and are required by the
charters of the respective committees to be, independent as
determined under Nasdaq Marketplace rules.
Since July 2008, the Compensation Committee has been composed of
Dr. Schwartz and Mr. Bjerkholt. The Compensation
Committee held six meetings in 2009. The Compensation Committee
makes recommendations to our Board and management concerning
salaries in general, determines executive compensation and,
except to the extent that such decisions have been delegated to,
and made by, the single-member committee, approves incentive
compensation for our employees and consultants. The Compensation
Committee acts pursuant to a written charter which is available
through our website at www.stemcellsinc.com.
The Corporate Governance Committee is composed of
Drs. Levy, Perlmutter and Schwartz. The Corporate
Governance Committee held three meetings in 2009. The committee
oversees nominations to the Board and considers the experience,
ability and character of potential nominees to serve as
directors, as well as particular skills or knowledge that may be
desirable in light of the companys position at any time.
It may identify potential candidates through any reliable means
available, including recommendations of past or current members
of the Board from their knowledge of the industry and of the
company. From time to time, the committee has also engaged the
services of a paid search firm to help the committee identify
potential nominees to the Board. The committee has not adopted a
formulaic approach to evaluating potential nominees to the
Board; it does not have a formal policy concerning diversity,
for example. Rather, the committee weighs and considers the
experience, expertise, intellect, and judgment of potential
nominees irrespective of their race, gender, age, religion, or
other personal characteristics. The committee often looks for
nominees that can bring new skill sets or diverse business
perspectives. Potential candidates recommended by security
holders will be considered as provided in the companys
Policy Regarding Shareholder Candidates for Nomination as
a Director, which sets forth the procedures and conditions
for such recommendations. This policy is available through our
website at www.stemcellsinc.com. The Corporate Governance
Committee operates pursuant to a written charter, a copy of
which is also available through our website at
www.stemcellsinc.com. The members of the Corporate Governance
Committee approved the nomination of the Class I directors
standing for reelection at the Annual Meeting.
The Audit Committee is composed of Mr. Bjerkholt and
Drs. Schwartz and Levy. The Audit Committee held four
meetings in 2009. The primary function of the Audit Committee is
to assist our Board in fulfilling its oversight
responsibilities. The committee does this primarily by reviewing
our financial reports and other financial information as well as
the companys systems of internal controls regarding
finance, accounting, legal compliance, and ethics that
management and the Board have established. The committee also
assesses our auditing, accounting and financial processes more
generally. The Audit Committee meets quarterly, and at such
other times as it finds necessary. It recommends to our Board
the appointment of a firm of independent auditors to audit the
financial statements of the company and meets with such
personnel of the company to review the scope and the results of
the annual audit, the amount of audit fees, the companys
internal accounting controls, the companys financial
statements contained in this proxy statement and other related
matters. Each of the members of the Audit Committee is
independent, and the Board has determined that
Mr. Bjerkholt is an audit committee financial
expert, as defined in SEC rules. The Audit Committee acts
pursuant to a written charter which is available through our
website at www.stemcellsinc.com.
6
The following table shows the members of our three standing
Board committees:
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Corporate
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Compensation
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Governance
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Audit
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Director
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Independent
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Committee
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Committee
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Committee
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Eric H. Bjerkholt
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Yes
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ü
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Chair
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Ricardo B. Levy, Ph.D.
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Yes
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Chair
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ü
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Martin M. McGlynn
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No
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Roger Perlmutter, M.D., Ph.D.
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Yes
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ü
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John J. Schwartz, Ph.D.
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Yes
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Chair
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ü
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ü
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Irving Weissman, M.D.
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No
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While management is responsible for the
day-to-day
management of the risks the company faces, the Board, as a whole
and through its committees, has responsibility for the oversight
of risk management. An important part of risk management is not
only understanding the risks facing the company and what steps
management is taking to manage those risks, but also
understanding what level of risk is appropriate for the company.
In support of this oversight function, the Board receives
regular reports from our Chief Executive Officer and members of
senior management on operational, financial, legal and
regulatory issues and risks. The Audit Committee additionally is
charged under its charter with oversight of financial risk,
including the companys internal controls, and it receives
regular reports from management, the companys internal
auditors and the companys independent auditors. The
Chairman of the Board and independent members of the Board work
together to provide strong, independent oversight of the
companys management and affairs through its standing
committees and, when necessary, special meetings of directors.
Stockholders who wish to communicate with our Board of Directors
or with a particular director may send a letter to our corporate
secretary at the following address: StemCells, Inc., 3155 Porter
Drive, Palo Alto, California 94304
(c/o Legal
Department). Any communication should clearly specify that it is
intended to be made to the entire Board or to one or more
particular director(s). Our corporate secretary will review all
such correspondence and forward to our Board a summary of all
such correspondence and copies of all correspondence that, in
the opinion of the secretary, deals with the functions of the
Board or committees thereof or that he otherwise determines
requires their attention. The secretary maintains a log of all
correspondence received by us that is addressed to members of
the Board, and any director may at any time review and request
copies of any such correspondence.
Concerns relating to accounting, internal controls or auditing
matters will immediately be brought to the attention of the
chairman of the Audit Committee and handled in accordance with
established procedures, which are set out in the Audit
Committees Policy on Receipt, Retention and Treatment of
Complaints Regarding Accounting, Internal Controls and Auditing
Matters. A copy of this policy is available through our website
at www.stemcellsinc.com.
Director
Compensation
Cash Compensation. Prior to December 2009,
non-employee directors received quarterly retainers for Board
service in the amount of $4,500 ($8,750 for the Chairman of the
Board). Each of the chairs of the standing committees also
received quarterly stipends of either $1,000 (Audit Committee)
or $500 (Compensation and Corporate Governance Committees).
Non-employee directors also received $1,500 for each board
meeting attended in person or by videoconference and $1,000 for
each standing committee meeting attended in person or by
videoconference, plus $500 for each board or committee meeting
attended by phone. The non-employee directors serving on the
Strategic Transactions Committee received $1,200 per meeting
attended in person or by videoconference, plus $500 for each
meeting attended by phone, but the chair of the Strategic
Transactions Committee did not receive a quarterly stipend. All
dollar amounts were paid in cash.
In early 2009, management began a review of our director
compensation practices. We wanted to assess whether we were
being responsive to market dynamics, as we had not adjusted
director compensation for almost five years. We obtained and
reviewed, among other things, the 2009 Radford Board of
Directors Compensation Analysis Level 2, Life
Sciences Edition, which provided us with a broad survey of
director compensation paid by publicly traded life science
companies in the United States. We also benchmarked our
compensation practices
7
against compensation information from other publicly traded
companies in the stem cell
field.1
From this information, we determined that the median (i.e.,
50th percentile) cash compensation paid by comparable
companies tended to be approximately 40% higher than that paid
by the company and that the average initial equity grants
awarded by comparable companies tended to be approximately 25%
higher.
Therefore, in both June and December 2009, management presented
to the Board a series of recommendations to change both the cash
and equity compensation paid to our non-employee directors. The
Board considered in particular the market comparables collected
by management. In recognition of the fact that the
companys director compensation fell significantly below
the average compensation paid by market comparables, the Board
approved the recommended changes to the cash-based and equity
compensation paid to the companys non-employee directors.
Since December 2009, non-employee directors have received
quarterly retainers for Board service in the amount of $6,250
($12,500 for the Chairman of the Board). The chairs of the
standing committees have received quarterly stipends of either
$2,500 (Audit Committee) or $1,250 (Compensation and Corporate
Governance Committees). Non-employee directors have also
received $2,000 for each board meeting attended in person or by
videoconference and $1,000 for each board meeting attended by
phone, as well as $1,000 for each standing committee meeting
attended in person or by videoconference and $500 for each
committee meeting attended by phone. The non-employee directors
serving on the Strategic Transactions Committee will continue to
receive $1,200 per meeting attended in person and $500 for each
meeting attended by phone. All dollar amounts have been paid,
and we expect will continue to be paid, in cash.
Directors are reimbursed for their expenses in attending
meetings of the Board and meetings of committees of the Board.
Equity Compensation. Prior to June 2009,
non-employee directors received an initial option to purchase
20,000 shares upon appointment to the Board, with one-third
of these option shares vesting on each of the first three
anniversaries following the grant. Following appointment, each
non-employee director received an option to purchase
10,000 shares upon each anniversary of his or her
appointment, vesting one year after issuance, with each
exercisable at the fair market value of the stock on the date of
the respective grant.
In June 2009, however, the Board adopted managements
recommendation to award non-employee directors with annual
equity grants paid in restricted stock units rather than common
stock options. The Boards decision to change the annual
grants followed several months of deliberation by the
companys management and Compensation Committee, which
considered among other things equity compensation practices at
various comparable companies, as described above, outside
reports, the companys trading history, and market trends,
such as the growing use of restricted stock units as director
compensation by comparable companies. Each of the annual grants
since June 2009 has been for 10,000 restricted stock units,
vesting on the first anniversary of the grant.
Then, in December 2009, the Board approved further changes
proposed by management to the equity compensation practices for
non-employee directors. Among other changes, the Board approved
managements recommendation to award newly appointed
directors an initial grant of restricted stock units rather than
options. Presently, newly appointed non-employee directors will
receive an initial grant upon their first appointment to the
Board of 50,000 restricted stock units, with one third of this
grant vesting on each of the three anniversaries following the
grant. Thereafter, each non-employee director, other than the
Chairman of the Board, will receive an annual grant on each
anniversary of his or her appointment to the Board in the form
of 10,000 restricted stock units, vesting on the first
anniversary of the grant. In addition, the Board determined that
the Chairman of the Board will receive an annual grant of 15,000
restricted stock units, vesting on the first anniversary of the
grant.
1 In
2009 we collected director compensation information from the
recent SEC filings of Aastrom Biosciences, Inc.; Athersys, Inc.;
Cytori Therapeutics, Inc.; Geron Corporation; Neuralstem, Inc.;
and Osiris Therapeutics, Inc.
8
The following table summarizes compensation information for our
non-employee directors, including annual Board and committee
retainer fees and meeting attendance fees, for the year ended
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
Restricted
|
|
Stock
|
|
|
|
|
|
|
or Paid
|
|
Stock Unit
|
|
Option
|
|
All Other
|
|
|
|
|
in Cash
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Total
|
Name
|
|
($)
|
|
($)(1)
|
|
($)(1)
|
|
($)
|
|
($)
|
|
Eric Bjerkholt
|
|
|
40,900
|
(2)
|
|
|
|
|
|
|
13,119
|
(3)
|
|
|
|
|
|
|
54,019
|
|
Ricardo Levy, Ph.D.
|
|
|
37,600
|
(4)
|
|
|
16,400
|
(5)
|
|
|
|
|
|
|
|
|
|
|
54,000
|
|
Roger Perlmutter, M.D., Ph.D.
|
|
|
27,000
|
(6)
|
|
|
13,100
|
(7)
|
|
|
|
|
|
|
|
|
|
|
40,100
|
|
John Schwartz, Ph.D.
|
|
|
55,500
|
(8)
|
|
|
|
|
|
|
14,494
|
(9)
|
|
|
|
|
|
|
69,994
|
|
Irving Weissman, M.D.
|
|
|
23,500
|
(10)
|
|
|
15,800
|
(11)
|
|
|
|
|
|
|
50,000
|
(12)
|
|
|
89,300
|
|
|
|
|
(1) |
|
These amounts reflect the aggregate grant date fair value
computed in accordance with U.S. GAAP. See Note 10
Stock-Based Compensation, in our
Form 10-K
for the period ended December 31, 2009, for assumptions
used in the calculation of these amounts for grants made in
2009. Prior to December 2009, each non-employee director was
granted, after an initial grant of an option to purchase
20,000 shares upon appointment, an option to purchase
10,000 shares upon each anniversary of their appointments.
Beginning in June 2009, we began awarding non-employee directors
10,000 restricted stock units on each anniversary rather than
common stock options. The exercise price of option grants has
consistently been the closing price of the stock on the grant
date or, if the NASDAQ market is not open on that date, the
closing price on the last preceding market day. Prior to
September 2004, each non-employee director was granted, after an
initial grant of an option to purchase 20,000 shares upon
appointment, an option for 15,000 shares upon each
three-year re-election to the Board. Each of these options vest
in equal portions on each of the first three anniversaries of
the respective grants. |
|
(2) |
|
Includes an annual retainer of $18,000, a fee for
Mr. Bjerkholts role on the Audit Committee of $4,000,
and additional fees of $18,900 for Board and committee meetings
attended. Also, includes $9,000 earned in 2009 but paid in 2010. |
|
(3) |
|
Mr. Bjerkholt was granted an option to purchase
10,000 shares of common stock on March 1, 2009. As of
December 31, 2009, Mr. Bjerkholt had options
outstanding for the purchase of 70,000 shares. |
|
(4) |
|
Includes an annual retainer of $18,000, a fee for
Dr. Levys role on the Corporate Governance Committee
of $2,000, and additional fees of $17,600 for Board and
committee meetings attended. Also includes $9,500 earned in 2009
but paid in 2010. |
|
(5) |
|
Dr. Levy was granted an option to purchase
10,000 shares of common stock on September 26, 2009.
As of December 31, 2009, Dr. Levy had options and
restricted stock units outstanding for the purchase in aggregate
of 132,165 shares. |
|
(6) |
|
Includes an annual retainer of $18,000, and additional fees of
$9,000 for Board and committee meetings attended. Also includes
$8,500 earned in 2009 but paid in 2010. |
|
(7) |
|
Dr. Perlmutter was granted a restricted stock unit award to
purchase 10,000 shares of common stock on December 14,
2009. As of December 31, 2009, Dr. Perlmutter had
options and restricted stock units outstanding for the purchase
in aggregate of 153,503 shares. |
|
(8) |
|
Includes an annual retainer of $35,000, a fee for
Dr. Schwartzs role on the Compensation Committee of
$2,000, and additional fees of $18,500 for Board and committee
meetings attended. Also includes $15,250 earned in 2009 but paid
in 2010. |
|
(9) |
|
Dr. Schwartz was granted an option to purchase
10,000 shares of common stock on April 18, 2009. As of
December 31, 2009, Dr. Schwartz had options
outstanding for the purchase of 133,000 shares. |
|
(10) |
|
Includes an annual retainer of $18,000 and additional fees of
$5,500 for Board and committee meetings attended. Also includes
$6,500 earned in 2009 but paid in 2010. |
|
(11) |
|
Dr. Weissman was granted a restricted stock unit award to
purchase 10,000 shares of common stock on October 1,
2009. As of December 31, 2009, Dr. Weissman had
options and restricted stock units outstanding for the purchase
in aggregate of 230,292 shares. |
|
(12) |
|
Dr. Weissman receives $50,000 per year for his services as
a consultant and as the chairman of our Scientific Advisory
Board. |
Code of
Business Conduct and Ethics
We have adopted a Code of Ethics and Conduct that applies to all
of our directors, officers, employees, and consultants. A copy
of our code of ethics is posted on our website at
www.stemcellsinc.com. We intend to disclose any substantive
amendment or waivers to this code on our website. There were no
substantive amendments or waivers to this code in 2009.
9
INFORMATION
CONCERNING EXECUTIVE OFFICERS OF THE COMPANY
Executive
Officers
Following are the name, age and other information for our named
executive officers, as of April 1, 2010. All company
officers have been elected to serve until their successors are
elected and qualified or until their earlier resignation or
removal.
|
|
|
|
|
|
|
Martin McGlynn,
President and Chief Executive Officer
|
|
|
63
|
|
|
Martin McGlynn joined the company in January 2001, when he was
appointed President and Chief Executive Officer of the company
and of its wholly-owned subsidiaries. Mr. McGlynn was elected to
the Board of Directors in February 2001.
|
Ann Tsukamoto, Ph.D.
Executive Vice President, Research and Development
|
|
|
57
|
|
|
Ann Tsukamoto, Ph.D., joined the company in November 1997
as Senior Director of Scientific Operations; was appointed Vice
President, Scientific Operations in June 1998; Vice President,
Research and Development in February 2002; and Chief Operating
Officer, with responsibility for the companys research and
development efforts, in November 2006. In October 2008,
Dr. Tsukamoto was appointed Executive Vice President,
Research and Development, with responsibility for the
companys scientific and clinical development programs.
Dr. Tsukamoto is married to one of our outside directors.
|
Rodney Young,
Chief Financial Officer and Vice President, Finance and
Administration
|
|
|
47
|
|
|
Rodney Young joined the company in September 2005 as Chief
Financial Officer and Vice President, Finance. In November 2006
he became CFO and Vice President, Finance and Administration. He
is responsible for functions that include Finance, Information
Technology and Investor Relations. From 2003 to 2005, Mr. Young
was Chief Financial Officer and a director of Extropy
Pharmaceuticals, Inc., a private biopharmaceutical company
focused on developing drugs for pediatric indications.
|
Stewart Craig, Ph.D.
Senior Vice President, Development and Operations
|
|
|
48
|
|
|
Stewart Craig, Ph.D., joined the company in September 2008
with responsibilities for Development, Manufacturing,
Regulatory, Quality Systems, and Facilities. From 2005 to 2008,
Dr. Craig was Chief Technology Officer and Vice President
of Progenitor Cell Therapy, a contract services provider for
research, development, manufacture, and commercialization of
cell-based therapies, prior to which he has held executive
positions at Xcyte Therapies, Osiris Therapeutics and SyStemix.
|
Ken Stratton, J.D.
General Counsel
|
|
|
41
|
|
|
Ken Stratton, J.D., joined the company in February 2007 as
General Counsel, with responsibility for corporate compliance
and legal affairs. In March 2008, he assumed responsibility for
the Human Resources function. Prior to joining StemCells,
Mr. Stratton served as Deputy General Counsel for Threshold
Pharmaceuticals and as Senior Legal Counsel for Medtronic,
Inc.s Vascular business unit.
|
10
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
We structure our compensation programs to attract and retain
talented employees and reward them for helping us achieve our
short-term and long-term goals. We intend for our compensation
programs to be equitable and competitive when measured against
those offered by companies against whom we compete for
high-level scientific and executive personnel. We also intend
for them to link pay to both company and individual performance.
In seeking to accomplish these objectives, we follow a
compensation strategy designed, ultimately, to reward increasing
stockholder value. However, because achievement of our principle
mission the research, development, and
commercialization of stem cell therapeutics and related enabling
technologies for academia and industry is a long,
expensive and challenging process, we often set individual
compensation by using surrogate endpoints to gauge employee
contributions towards building sustained stockholder value, such
as:
|
|
|
|
|
the achievement of stated corporate goals adopted from time to
time by the Board;
|
|
|
|
the leadership an executive officer has shown in inspiring and
marshalling excellent performances in his or her direct reports;
|
|
|
|
the anticipation, identification and successful disposition of
issues and problems that, if not addressed timely and
effectively, might have a deleterious effect on the
company; and
|
|
|
|
the speed and effectiveness with which an executive officer
discovers, assesses and, where appropriate, pursues promising
opportunities for the company.
|
Compensation elements. We, like most
biotechnology companies, use a combination of base salary,
bonuses and equity awards to compensate our employees, including
our executive officers. As a small company we have
approximately 80 employees in total and only five executive
officers we feel that having so few people in each
job classification and level makes it inefficient to establish a
formulaic allocation of total compensation among its various
elements; we rely, instead, on our experience and judgment.
In exercising this judgment, we periodically collect and review
information (i) from third party market reports such as the
Radford Biotechnology Survey Executive
Report; and (ii) from the proxy statements of other
similar biotechnology companies, especially those operating in
the San Francisco Bay Area, as well as those pursuing stem
cell
therapeutics.2
In the case of the executive officers who report directly to the
chief executive officer, we also carefully consider the
recommendations of the chief executive officer when setting
compensation. We integrate all of this information with our
evaluation of the individual performance of each of our
executive officers.
While we believe our officers and other employees are
outstanding, we realize that the company is not yet profitable
and that it is still in a relatively early stage of development.
We therefore generally prefer to target our compensation
practices so that our employees base salaries, bonuses,
equity compensation, and benefits all fall close to the
50th percentile paid by comparable companies for similar
positions. Actual compensation may fall slightly above or below
these targets, however, because of any number of factors such as
general economic conditions, market competition for specific
jobs, personal performance, and the need for internal equities
within the company. For example, we have recently paid many of
our employees, including some of our executive officers, at
below the 50th percentile because of the global recession
and the crisis in the financial markets. At the same time,
however, we have paid many of our employees, including some of
our executive officers, at above the 50th percentile
because of highly competitive demand for workers with their
unique skill sets.
Interaction of compensation elements. The
basic compensation elements base salary, bonuses and
equity awards are, as noted, standard in our
industry. Though not set independently of one other, we use each
element as
2 In
2009 we collected executive compensation information from the
recent SEC filings of Aastrom Biosciences, Inc.; Affymax, Inc.;
ARYx Therapeutics, Inc.; Athersys, Inc.; Cerus Corporation;
Cytokinetics, Incorporated; Cytori Therapeutics, Inc.; Dynavax
Technologies Corporation; Geron Corporation; InterMune, Inc.;
MAP Pharmaceuticals, Inc.; Medivation, Inc.; Neuralstem, Inc.;
Osiris Therapeutics, Inc.; and Sangamo Biosciences, Inc.
11
a portion of total compensation because we believe we would not
otherwise be competitive and because we feel that together they
are the proper components of a balanced compensation package:
|
|
|
|
|
base salary is compensation for current efforts;
|
|
|
|
bonuses, whether in cash or equity, are typically paid for
achievements in meeting stated corporate goals; and
|
|
|
|
equity awards are inducements to remain with the company and to
build future value.
|
On occasion, we have considered our employee compensation
programs, including our executive compensation programs, and the
effect they may have on company risk. We have concluded that our
employee compensation programs are designed with the appropriate
balance of risk and reward in relation to our companys
overall business strategy and do not incentivize executives or
other employees to take unnecessary or excessive risks. As a
result, we believe that risks arising from our employee
compensation policies and practices are not reasonably likely to
have a material adverse effect on the company.
Other compensation elements and benefits. We
offer all employees various health and welfare benefit plans.
Our executive officers may participate in these on the same
terms as other employees. We do not have a pension plan nor do
we use non-qualified deferred
compensation.3We
offer employees (again, including executive officers on the same
terms as others) a 401(k) defined contribution plan, and match
employee contributions on a 1:2 basis to a maximum of 3% of the
employees salary, subject to legal limitations. At this
time, our match is made in the form of registered shares of
common stock in the company.
Compensation
of Named Executive Officers
Base salary compensation; target bonuses. We
consider base salary to be a critical component of our executive
officers overall compensation packages. We intend the
salaries of our executive officers to reflect their actual
responsibilities and job scope. We also endeavor to set base
compensation levels so that their salaries are competitive with
salaries paid by comparable companies to employees with similar
experience, taking into account the cost of living in the
San Francisco Bay Area. However, as of late, we have been
paying heightened attention to the global recession and the
companys need to carefully manage its cash resources. As a
result, the last company-wide salary increase was in March 2007.
Instead, we have made occasional adjustments to the salaries of
certain employees to address perceived below market anomalies,
address specific retention concerns or reward special
contributions made to the company. As described below, we
changed the base compensation paid to certain of our executive
officers in both 2009 and 2010.
In addition to base salary, each full-time employee of the
company, including each of our named executive officers, is
given a personal target bonus (calculated as a percentage of
base salary), based upon factors such as seniority, job title
and the existing targets of co-workers with comparable job
responsibilities within the company. Bonuses at the company are
discretionary and awarded by the Board in its sole discretion.
But when bonuses are awarded, we use the personal target of each
employee to calculate his or her bonus amount.
With these various principles in mind, we recently took the
following actions with respect to the base compensation and
bonus targets of our executive officers.
From March 2007 through 2008, we maintained the annual base
salary of Mr. McGlynn at $385,000, plus a housing and
transportation allowance. Effective January 2009, we eliminated
Mr. McGlynns housing and transportation allowance of
approximately $200,000 per year and increased
Mr. McGlynns annual base salary by $140,000, from
$385,000 to $525,000, and began providing him a car allowance in
the amount of $10,000 per year. The net effect of these changes
was a decrease in Mr. McGlynns base compensation of
approximately 11% for 2009. There have been no changes to
Mr. McGlynns base compensation since this time.
Concurrent with these changes, we increased
Mr. McGlynns target bonus from 40 percent to
55 percent of his base salary, beginning with the 2009
fiscal year, to reflect the Boards view that
Mr. McGlynns leadership is a major factor in the
achievement of the companys corporate goals and to
increasingly align his compensation to corporate success.
3 Accordingly,
we omit tables showing pension benefits and non-qualified
deferred compensation.
12
From March 2007 through 2009, we maintained the annual base
salary of Mr. Young at $275,000. In January 2010, we
increased Mr. Youngs annual base salary to $325,000
in recognition of contributions made on behalf of the company
and job scope. In January 2010, we also increased
Mr. Youngs target bonus rate from 25% to 30% of his
base salary, beginning with the 2010 fiscal year, to
increasingly align his compensation to corporate success.
Since March 2007, we have maintained the annual base salary of
Dr. Tsukamoto at $300,000. In January 2010, we increased
Dr. Tsukamotos target bonus from 25% to 30% of her
base salary, beginning with the 2010 fiscal year, to
increasingly align her compensation to corporate success.
Dr. Craig joined the company in September 2008, with an
annual base salary of $275,000 and a target bonus rate of 25% of
his base salary. In January 2010, we increased
Dr. Craigs target bonus from 25% to 30% of his base
salary, beginning with the 2010 fiscal year, to increasingly
align his compensation to corporate success.
Mr. Stratton joined the company in February 2007, with an
annual base salary of $220,000 and a target bonus rate of 20% of
his base salary. In February 2008, we increased
Mr. Strattons annual base salary to $250,000 in
recognition of contributions made on behalf of the company and
because he had assumed additional responsibilities in early
2008. In January 2010, we increased Mr. Strattons
annual base salary to $275,000 in recognition of contributions
made on behalf of the company and job scope. In January 2010, we
also increased Mr. Strattons target bonus rate from
20% to 30% of his base salary, beginning with the 2010 fiscal
year, to increasingly align his compensation to corporate
success.
The base salary and target bonus information presented above can
be summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 12/31/07
|
|
Year Ended 12/31/08
|
|
Year Ended 12/31/09
|
|
As of 01/01/10
|
|
|
Base Salary/Target
|
|
Base Salary/Target
|
|
Base Salary/Target
|
|
Base Salary/Target
|
|
|
Bonus
|
|
Bonus
|
|
Bonus
|
|
Bonus
|
|
CEO
|
|
$
|
385,000/40
|
%
|
|
$
|
385,000/40
|
%
|
|
$
|
525,000/55
|
%
|
|
$
|
525,000/55
|
%
|
CFO
|
|
$
|
275,000/25
|
%
|
|
$
|
275,000/25
|
%
|
|
$
|
275,000/25
|
%
|
|
$
|
325,000/30
|
%
|
EVP, R&D
|
|
$
|
300,000/25
|
%
|
|
$
|
300,000/25
|
%
|
|
$
|
300,000/25
|
%
|
|
$
|
300,000/30
|
%
|
SVP, D&O
|
|
|
|
|
|
$
|
275,000/25
|
%
|
|
$
|
275,000/25
|
%
|
|
$
|
275,000/30
|
%
|
GC
|
|
$
|
220,000/20
|
%
|
|
$
|
250,000/20
|
%
|
|
$
|
250,000/20
|
%
|
|
$
|
275,000/30
|
%
|
Bonus compensation. We view periodic bonuses,
whether paid in cash or equity, as an important element of
compensation for several reasons. Bonuses help align individual
employee efforts with overall corporate strategies and
objectives. Bonuses also help us manage salary expense, while
still allowing us to reward successes. By using discretionary
bonuses as part of the compensation mix, we have greater
flexibility in managing the timing and amounts of compensation.
Over the past few years, we have awarded bonuses on an annual
basis after considering, among other things, the companys
accomplishments against stated corporate goals adopted by the
Board the prior year. We design these goals to be challenging,
so that one would not expect consistent achievement of all of
them. In recent years, we have adopted annual corporate goals
covering such things as advancement of our clinical strategies
for our HuCNS-SC cells, efforts towards fundraising, advancement
in cell manufacturing practices, and advancement of our Liver
Program. In any given year, the Board may grant more than 100%
of the bonus pool for the year. The Board may also grant less
than 100% of the bonus pool even if all of the corporate goals
have been achieved. Actual bonus levels are influenced to a
significant degree by the progress made towards the
accomplishment of the corporate goals. However, the grant of
bonuses is not formulaic. The number and nature of these goals
are taken into consideration, with more important corporate
goals typically weighing more heavily in the consideration
process. In determining whether to award a bonus, the Board also
considers such factors as the companys financial position,
the status of its development programs, clinical progress,
corporate development activities, and general economic factors.
This necessarily involves a subjective assessment of corporate
performance by the Compensation Committee. While the
Compensation Committee and the Board as a whole use the
corporate goals as a measure of success, the amount of any bonus
grant, as well as how and when it will be paid, is completely
within the Boards sole discretion.
With these various principles in mind, we recently took the
following actions with respect to corporate bonuses.
13
In January 2010, as part of its annual year-end review of
performance, the Compensation Committee (with input from the
Chief Executive Officer and other Board members) considered,
among other things, significant company performance
accomplishments in 2009, the companys successes measured
against its 2009 corporate goals, the degree of difficulty in
achieving these goals, as well as other events and circumstances
that affected performance. The 2009 goals, as approved by our
Board, consisted generally of the following: (i) progress
in our CNS Program, including activities aimed at initiating
clinical trials of our HuCNS-SC proprietary cell-based product
in multiple therapeutic indications; (ii) progress in our
Liver Program; (iii) successful fundraising efforts;
(iv) successful corporate development activities; and
(v) advancement of our scientific development programs.
Highlights of the 2009 accomplishments taken into account by the
Compensation Committee in determining the overall company
performance included:
|
|
|
|
|
In January 2009, we completed a Phase I clinical trial of our
HuCNS-SC®
product candidate (purified human neural stem cells) in
infantile and late infantile neuronal ceroid lipofuscinosis
(NCL, also often referred to as Batten disease), a fatal
neurodegenerative disorder in children.
|
|
|
|
In June 2009, we announced positive results from our NCL trial.
The Phase I data demonstrated that the HuCNS-SC cells, the
transplantation procedure, and the immunosuppression regimen
were well tolerated, and that the patients medical,
neurological and neuropsychological conditions, following
transplantation, appeared consistent with the normal course of
the disease. In addition to this favorable safety profile, we
reported evidence of engraftment and long-term survival of the
HuCNS-SC cells.
|
|
|
|
In November 2009, we initiated a Phase I clinical trial designed
to test the safety and preliminary efficacy of our HuCNS-SC
cells in Pelizaeus-Merzbacher Disease (PMD), a fatal myelination
disorder that primarily afflicts infants and young children.
|
|
|
|
In September 2009, we received ethics committee approval at the
Université Catholique de Louvain (UCL) in Belgium to
initiate a clinical study evaluating our human liver engrafting
cells (hLEC) as a potential cellular therapy for liver-based
metabolic disorders.
|
|
|
|
In May 2009, our collaborators at Oregon Health &
Science University (OHSU) Casey Eye Institute presented data
showing that our human neural stem cells, when transplanted into
an animal model of retinal degeneration, engraft long term and
protect the retina from progressive degeneration.
|
|
|
|
In April 2009, we closed the acquisition of substantially all of
the operating assets and liabilities of Stem Cell Sciences plc
for 2,650,000 shares of our common stock and approximately
$700,000 in cash. As a result of this transaction, we added
proprietary cell technologies relating to embryonic stem cells,
induced pluripotent (iPS) stem cells, and tissue-derived (adult)
stem cells; expertise and infrastructure for providing
cell-based assays for drug discovery; a specialty cell culture
products business; an intellectual property portfolio with
claims relevant to cell processing, reprogramming and
manipulation, as well as to gene targeting and insertion; and a
European presence with operations in Cambridge, UK.
|
|
|
|
In November 2009, we raised $12,500,000 in gross proceeds
through the sale of 10,000,000 shares of common stock and
warrants to purchase 4,000,000 shares of common stock at an
exercise price of $1.50 per share. We received total proceeds,
net of offering expenses and placement agency fees, of
approximately $11,985,000.
|
Following this review, the Compensation Committee recommended,
and the Board subsequently approved, a bonus award to all
employees of the company, including our executive officers,
equal to 70 percent of the 2009 bonus pool. The bonuses
were calculated using each employees annual base salary as
of January 1, 2009, and paid in January 2010.
In Mr. McGlynns case, because his base salary on
January 1, 2009 was $525,000 and because his target bonus
was 55%, his 2009 bonus was $202,125. In
Dr. Tsukamotos case, because her base salary on
January 1, 2009 was $300,000 and because her target bonus
was 25%, her 2009 bonus was $52,500. In Mr. Youngs
case, because his base salary on January 1, 2009 was
$275,000 and because his target bonus was 25%, his 2009 bonus
was $48,125. In Dr. Craigs case, because his base
salary on January 1, 2009 was $275,000 and his target bonus
was 25%, his 2009 bonus was $48,125. In Mr. Strattons
case, because his base salary on January 1, 2009 was
$250,000 and because his target bonus was 20%, his 2009 bonus
was $35,000.
14
Equity Compensation general
practices. We believe that equity compensation
awards are an important component of our overall compensation
policy because equity compensation can provide strong inducement
to remain with the company and to build future stockholder
value. In order to achieve these objectives, we believe that
equity compensation awards need to be structured to provide both
meaningful value and a meaningful opportunity to realize that
value. Accordingly, from time to time, we have considered
several forms of equity compensation awards, including stock
options, stock appreciation rights, restricted stock, and
restricted stock units, because each of these have certain
advantages and disadvantages relative to the others with respect
to how they might reward effort and success and how they might
help us retain high contributors.
Generally speaking, over the years, we have used stock options
as the most common equity compensation instrument. However,
since 2006 we have granted our named executive officers a
mixture of options, restricted stock units and stock
appreciation rights, as described below, because we feel each of
these forms of equity has unique and important features for
employee retention and for incentivizing the executive officers
to build a profitable and sustainable business. We have
typically granted company-wide equity awards to full-time
employees once every year or two. In addition, we have typically
granted stock option awards to newly hired employees, effective
as of their date of hire, and occasionally to existing employees
upon their promotion. Both on-hire awards to non-executive
officers and awards upon the promotion of current employees are
usually made by either Mr. McGlynn, acting as the
Boards single-member committee, or by the Compensation
Committee. Awards to executive officers are made by either the
Compensation Committee or by the full Board. Company-wide awards
have usually been made at either a regularly scheduled Board or
Compensation Committee meeting.
Unless otherwise specifically noted in the tables herein, all
option awards:
|
|
|
|
|
to our employees, including our executive officers, are intended
to be qualified incentive stock options (ISOs) to the fullest
extent permitted by law;
|
|
|
|
have an exercise price set at the closing market price of our
common stock on the grant date, or on an adjacent market trading
date if the market on which we are listed (now the Nasdaq Global
Market) is not open on the grant date; and
|
|
|
|
vest over four years, with one-fourth of the shares included in
any grant vesting on the first anniversary of the grant and the
remainder vesting 1/48th per month thereafter, always
provided that the grantee remains in the companys employ
on the vesting dates. These awards are time-vesting and do not
depend on performance factors.
|
With these various principles in mind, we recently took the
following actions with respect to equity compensation.
In January 2008 and then again in March 2008, the Compensation
Committee, having noted the significant decline in share prices
for biotechnology companies generally and the poor economic and
financial conditions in the United States, met to discuss how
best to provide long-term incentives to key employees of the
company. In particular, the Compensation Committee noted that
most (approximately 90%) of the outstanding employee options at
the end of 2007 had a strike price significantly higher than the
trading price of the companys common stock and that these
options were therefore not likely to provide a strong retention
incentive. The weighted average exercise price of outstanding
employee options at the end of 2007 was $2.36 and the average
closing price for January 2008 was $1.31 per share.
After discussing this with management, the Compensation
Committee determined it was in the companys interest to
grant additional long-term equity compensation to a limited
number of employees considered particularly important to our
long-term success. Consequently, in March 2008, the Compensation
Committee approved the award of 1,650,000 restricted stock units
to certain employees of the company. Each of the restricted
stock grants vests over three years, with one-third vesting on
each of the first three anniversaries following the grant. Of
this amount, the executive officers of the company received, in
the aggregate, 907,500 restricted stock units. These restricted
stock units were intended to augment the existing outstanding
options held by employees, including our executive officers, to
provide additional retention incentives and to encourage actions
designed to increase long-term stockholder value.
15
In early 2009, consistent with our practice of reviewing equity
incentives on a periodic basis, we evaluated once again the
equity awards held by the companys employees in order to
evaluate the retention value these past awards likely provided.
We noted that a number of key employees continued to hold
predominantly unexercisable options with a strike price more
than 200% the companys recent trading price. Furthermore,
our review of market trends indicated that biotechnology
companies with volatile trading prices were using restricted
stock units with increasing regularity. We also continued to
believe the retention benefit of equity compensation would be
enhanced by awarding a mixture of both options and restricted
stock units. The Compensation Committee therefore determined to
award equity grants to the companys employees, including
those working for its U.K. subsidiaries and the companys
named executive officers.
In May 2009, after a review of the market and company-specific
information described above, the Compensation Committee approved
a company-wide award to employees of 1,046,400 restricted stock
units and options to purchase up to 1,055,800 shares of
common stock, in the aggregate. All of the restricted stock
units awarded at this time have four-year vesting, with
one-fourth vesting on each of the first four anniversaries
following the grant date. All of the options awarded at this
time will vest one-fourth on the first anniversary following the
grant and then 1/48th each month thereafter, in keeping
with the companys standard practices. In this award, our
named executive officers received, in the aggregate, 741,333
restricted stock units and options to purchase up to
278,000 shares of common stock. The Compensation Committee
decided to defer the equity grant award to Dr. Craig,
consisting of 93,333 restricted stock units and 35,000 options,
until his one-year anniversary of hire in September 2009. The
Compensation Committee also approved the grant of up to 750,000
stock options to employees working for our Stem Cell Sciences
(UK) Ltd. and Stem Cell Sciences Holdings Limited subsidiaries,
which we awarded in 2010 because of foreign tax considerations.
The following table summarizes the restricted stock units
awarded to our named executive officers in March 2008 and May
2009:
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted
|
|
|
Stock Units Granted
|
Name & Principal Position
|
|
March 2008
|
|
May 2009
|
|
Martin McGlynn President and CEO
|
|
|
412,500
|
|
|
|
234,667
|
|
Ann Tsukamoto, Ph.D. Executive VP,
Research & Development
|
|
|
206,250
|
|
|
|
93,333
|
|
Rodney Young CFO
|
|
|
206,250
|
|
|
|
226,667
|
|
Stewart Craig, Ph.D. SVP,
Development & Operations
|
|
|
|
(1)
|
|
|
99,333
|
(2)
|
Ken Stratton, J.D. General Counsel
|
|
|
82,500
|
|
|
|
93,333
|
|
|
|
|
(1) |
|
Dr. Craig joined the company after the relevant grant date. |
|
(2) |
|
Granted on Dr. Craigs one-year anniversary of
employment, September 15, 2009. |
We may grant additional options, restricted stock units or other
equity compensation to current employees, including our
executive officers, in 2010.
Employment,
Severance and
Change-in-Control
Agreements
Employment agreements. Mr. McGlynn joined
the company as our president and chief executive officer on
January 15, 2001. Under the terms of an employment
agreement between Mr. McGlynn and the company, dated
January 2, 2001, as amended, Mr. McGlynn received an
initial annual base salary of $275,000 per year, reviewable
annually by the Board of Directors, and a bonus, in the
Boards sole discretion, of up to 25% of his base salary.
Over time, however, we have increased Mr. McGlynns
base salary and target bonus so that they are, respectively,
$525,000 and 55% of his base salary. Pursuant to his January
2001 employment agreement, we granted Mr. McGlynn an option
to purchase 400,000 shares of our common stock with an
exercise price equal to the fair market value of the common
stock on the initial date of his employment, one-fourth to vest
on the first anniversary of his employment and the remaining
three-fourths to vest in equal monthly installments during his
second through fourth years of employment. The employment
agreement also provided that the Board could, in its sole
discretion, grant Mr. McGlynn a bonus option to purchase up
to an additional 25,000 shares, which it did. We also
agreed to pay Mr. McGlynn a $50,000 relocation bonus and to
reimburse him for relocation expenses, and have done so. Since
January 2009, we have been paying Mr. McGlynn an annual car
allowance of $10,000.
16
Dr. Tsukamoto joined the company in November 1997 and has
served as our executive vice president of research and
development since September 2008. Under the terms of an
employment agreement between Dr. Tsukamoto and the company,
dated February 2, 1998, Dr. Tsukamoto received an
annual base salary of $130,000 per year and a discretionary
target bonus of up to 10% of her base salary. Over time,
however, we have increased her base salary and target bonus so
that they are, respectively, $300,000 and 30% of her base
salary. Also pursuant to her employment agreement, we provide
Dr. Tsukamoto with $750,000 of term life insurance on an
annual basis during her employment.
Mr. Young joined the company in September 2005 as our chief
financial officer and vice president of finance. Under the terms
of his agreement with the company, dated August 16, 2005,
Mr. Young received an initial annual base salary of
$250,000 per year, with a target bonus of up to 25% of his base
salary. Over time, however, we have increased
Mr. Youngs base salary and target bonus so that they
are, respectively, $325,000 and 30% of his base salary. Pursuant
to his August 2005 employment agreement, we granted
Mr. Young an option to purchase 450,000 shares of our
common stock. This option will vest over 48 months; with
one-fourth of the shares vesting on the first anniversary of the
date on which Mr. Youngs employment began and with
the remaining shares vesting, subject to his continued
employment by the company, at the rate of 1/48th per month
on the last day of each month during the ensuing 36 months.
In addition, the employment agreement provided for an option
grant on the first anniversary of his employment to acquire an
additional 25,000 shares of our common stock. The grant of
25,000 shares was duly made, and will vest in the same
manner as his earlier option grant over 48 months, subject
to Mr. Youngs continued employment by the company.
Dr. Craig joined the company in September 2008 as our
senior vice president of development and operations. Under the
terms of his agreement with the company, dated July 24,
2008, Dr. Craig has received an annual base salary of
$275,000 per year, with a target bonus of up to 25% of his base
salary. Effective January 2010, however, we increased his target
bonus to 30%. Pursuant to Dr. Craigs July 2008
employment agreement, we granted him an option to purchase
200,000 shares of our common stock. This option will vest
over 48 months, with one-fourth of the shares vesting on
the first anniversary of the date on which Dr. Craigs
employment began and with the remaining shares vesting, subject
to his continued employment by the company, at the rate of
1/48th per month on the last day of each month during the
ensuing 36 months.
Mr. Stratton joined the company in February 2007 as our
general counsel. Under the terms of his agreement with the
company, dated February 2, 2007, Mr. Stratton
initially received an annual base salary of $220,000 per year,
with a target bonus of up to 20% of his base salary. Over time,
however, we have increased Mr. Strattons base salary
and target bonus so that they are, respectively, $275,000 and
30% of his base salary. Pursuant to Mr. Strattons
February 2007 employment agreement, we granted him an option to
purchase 150,000 shares of our common stock. This option
will vest over 48 months, with one-fourth of the shares
vesting on the first anniversary of the date on which
Mr. Strattons employment began and with the remaining
shares vesting, subject to his continued employment by the
company, at the rate of 1/48th per month on the last day of
each month during the ensuing 36 months.
Severance arrangements. Each of our executive
officers has entered into a severance agreement with the company
under which he or she would receive payments upon termination of
his or her employment by us without
cause4 or
consequent to a change of control or, in the case of
Mr. McGlynn, by virtue of disability.
In the case of Mr. McGlynn, upon termination without cause,
we would continue to pay his salary and provide benefits for one
year, at the base wage rate then in effect. If the termination
of Mr. McGlynns employment were associated with a
change of control, the company would pay (in a lump sum)
(i) two years of his salary and the reasonably projected
cost of healthcare benefits, (ii) a bonus with respect to
the termination year at 25% of the base salary, pro-rated for
the portion of the year served, and (iii) a tax gross up
for his continued healthcare benefits. In addition, all unvested
stock options would vest and all stock options would be
exercisable for two years after termination. If
Mr. McGlynns employment were terminated on account of
disability, we would continue to pay his salary for up to six
months (or until he obtained other employment or became eligible
for disability income under a company plan, if sooner).
4 Or
termination by the executive officer for good reason, as defined
in their respective agreements.
17
In the case of Dr. Tsukamoto, upon involuntary termination
without cause whether or not associated with a change of
control, we would continue to pay Dr. Tsukamotos
salary and provide benefits for twelve months, at the rate then
in effect. Dr. Tsukamotos agreement provides that if
the termination were associated with a change of control, any
unvested options granted pursuant to the companys 1992
Equity Incentive Plan would vest upon termination.
In the case of Mr. Young, upon involuntary termination
without cause, we would continue to pay his salary and provide
benefits for six months, at the rate then in effect. If the
termination were associated with a change of control, we would
continue to pay Mr. Youngs salary and provide
benefits (including his share of COBRA, grossing up for the tax
effects, if any) for twelve months; in this event, any unvested
options and any other stock awards held by him would vest upon
termination.
In the case of Dr. Craig, upon involuntary termination
without cause, whether or not associated with a change of
control, we would continue to pay his salary and provide
benefits for six months, at the rate then in effect.
In the case of Mr. Stratton, upon involuntary termination
without cause, we would continue to pay his salary and provide
benefits for six months, at the rate then in effect. If the
termination were associated with a change of control, we would
continue to pay Mr. Strattons salary and provide
benefits for twelve months; in this event, any unvested options
and any other stock awards held by him would vest upon
termination.
If we terminate the employment of any executive officer for
cause, or if the officer resigns without good cause, he or she
would not be entitled to any severance or other benefits.
Potential
Payments Upon Termination or
Change-in-Control
The following table displays the value of what the executive
officers would have received from us had their employment been
terminated on December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated Vesting of
|
|
|
|
|
|
|
|
|
|
|
Options and Restricted
|
|
|
Officer
|
|
Salary
|
|
Bonus
|
|
Health
|
|
Stock Units*
|
|
Total
|
|
Martin McGlynn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminated without cause
|
|
$
|
525,000
|
|
|
|
|
|
|
$
|
19,416
|
|
|
|
|
|
|
$
|
544,416
|
|
Terminated, change of control
|
|
$
|
1,050,000
|
|
|
$
|
288,750
|
|
|
$
|
56,307
|
(1)
|
|
|
|
(2)
|
|
$
|
1,395,057
|
|
Disability(3)
|
|
$
|
262,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
262,500
|
|
Ann Tsukamoto, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminated without cause
|
|
$
|
300,000
|
|
|
|
|
|
|
$
|
11,480
|
|
|
|
|
|
|
$
|
311,480
|
|
Terminated, change of control
|
|
$
|
300,000
|
|
|
|
|
|
|
$
|
11,480
|
|
|
$
|
329,850
|
(4)
|
|
$
|
641,330
|
|
Rodney Young
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminated without cause
|
|
$
|
137,500
|
|
|
|
|
|
|
$
|
7,692
|
|
|
|
|
|
|
$
|
145,192
|
|
Terminated, change of control
|
|
$
|
275,000
|
|
|
|
|
|
|
$
|
15,384
|
|
|
$
|
458,850
|
(4)
|
|
$
|
749,234
|
|
Stewart Craig, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminated without cause
|
|
$
|
137,500
|
|
|
|
|
|
|
$
|
7,192
|
|
|
|
|
|
|
$
|
144,692
|
|
Terminated, change of control
|
|
$
|
137,500
|
|
|
|
|
|
|
$
|
7,192
|
|
|
$
|
145,600
|
(4)
|
|
$
|
290,292
|
|
Ken Stratton, J.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminated without cause
|
|
$
|
125,000
|
|
|
|
|
|
|
$
|
7,754
|
|
|
|
|
|
|
$
|
132,754
|
|
Terminated, change of control
|
|
$
|
250,000
|
|
|
|
|
|
|
$
|
15,507
|
|
|
$
|
186,900
|
(4)
|
|
$
|
452,407
|
|
|
|
|
* |
|
Value shown represents the difference between the closing market
price of our stock on December 31, 2009 of $1.26 per share
and the applicable exercise price of each grant. |
|
(1) |
|
Includes tax
gross-up on
2 years of healthcare costs. |
|
(2) |
|
By agreement, all options vest and remain exercisable for
2 years. |
|
(3) |
|
Payments stop before 6 months if individual obtains other
full-time employment or qualifies for payments under any
disability income plan provided by the company. |
|
(4) |
|
All unvested options and restricted stock units issued under the
applicable equity incentive plans vest upon a change of control
under the terms of those plans. |
18
Compensation
Committee and Stock Option Report
The Compensation and Stock Option Committee has reviewed and
discussed the Compensation Discussion and Analysis required by
Item 402(b) of SEC
Regulation S-K
with management. Based on this review and these discussions, the
Compensation Committee has recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in the
companys proxy statement for 2010.
COMPENSATION AND STOCK OPTION COMMITTEE
John Schwartz, Ph.D., Chairman
Eric Bjerkholt
Notwithstanding anything to the contrary set forth in any of
our previous filings under the Securities Act of 1933, as
amended, or the Exchange Act that incorporate future filings, in
whole or in part, the foregoing Compensation and Stock Option
Committee Report shall not be incorporated by reference into any
such filings.
Executive
Officer Compensation Tables
The following tables set forth information with respect to the
compensation of our executive officers for the fiscal years
ended December 31, 2009, 2008 and 2007.
Because the Stock awards and Option
awards column reflects the dollar amounts recognized as
compensation expense for financial statement reporting purposes
in accordance with U.S. GAAP, these imputed values include
amounts from awards granted from 2003 through 2009.
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
($)(1)
|
|
$(2)
|
|
($)(3)
|
|
($)(3)
|
|
$(4)
|
|
$
|
|
Martin McGlynn
|
|
|
2009
|
|
|
|
540,885
|
|
|
|
202,125
|
|
|
|
410,667
|
|
|
|
132,079
|
|
|
|
38,626
|
(5)
|
|
|
1,324,382
|
|
President and CEO
|
|
|
2008
|
|
|
|
385,000
|
|
|
|
77,000
|
|
|
|
519,750
|
|
|
|
|
|
|
|
229,221
|
|
|
|
1,210,971
|
|
|
|
|
2007
|
|
|
|
383,019
|
|
|
|
116,800
|
|
|
|
|
|
|
|
783,675
|
|
|
|
213,927
|
|
|
|
1,497,421
|
|
Ann Tsukamoto, Ph.D
|
|
|
2009
|
|
|
|
311,538
|
|
|
|
52,500
|
|
|
|
163,333
|
|
|
|
52,532
|
|
|
|
22,338
|
(6)
|
|
|
602,241
|
|
EVP, Research
|
|
|
2008
|
|
|
|
300,000
|
|
|
|
37,500
|
|
|
|
259,875
|
|
|
|
|
|
|
|
21,591
|
|
|
|
618,966
|
|
and Development
|
|
|
2007
|
|
|
|
296,827
|
|
|
|
55,000
|
|
|
|
|
|
|
|
261,225
|
|
|
|
23,562
|
|
|
|
636,614
|
|
Rodney Young
|
|
|
2009
|
|
|
|
285,577
|
|
|
|
48,125
|
|
|
|
396,667
|
|
|
|
127,577
|
|
|
|
24,435
|
(7)
|
|
|
882,381
|
|
CFO and VP,
|
|
|
2008
|
|
|
|
275,000
|
|
|
|
34,375
|
|
|
|
259,875
|
|
|
|
|
|
|
|
21,765
|
|
|
|
591,015
|
|
Finance and Administration
|
|
|
2007
|
|
|
|
271,731
|
|
|
|
50,000
|
|
|
|
|
|
|
|
261,225
|
|
|
|
21,668
|
|
|
|
604,624
|
|
Stewart Craig, Ph.D.
|
|
|
2009
|
|
|
|
285,577
|
|
|
|
48,125
|
|
|
|
159,599
|
|
|
|
50,712
|
|
|
|
23,629
|
(8)
|
|
|
567,642
|
|
Senior VP, Development and Operations
|
|
|
2008
|
|
|
|
74,038
|
|
|
|
10,077
|
|
|
|
|
|
|
|
186,460
|
|
|
|
5,187
|
|
|
|
275,762
|
|
Ken Stratton, J.D.
|
|
|
2009
|
|
|
|
259,615
|
|
|
|
35,000
|
|
|
|
163,333
|
|
|
|
52,532
|
|
|
|
25,166
|
(9)
|
|
|
535,646
|
|
General Counsel
|
|
|
2008
|
|
|
|
244,962
|
|
|
|
47,000
|
|
|
|
103,950
|
|
|
|
|
|
|
|
22,794
|
|
|
|
418,706
|
|
|
|
|
2007
|
|
|
|
180,231
|
|
|
|
29,333
|
|
|
|
|
|
|
|
321,405
|
|
|
|
16,088
|
|
|
|
547,057
|
|
|
|
|
(1) |
|
We pay salaries on a bi-weekly basis. There were 27 pay periods
in 2009. |
|
(2) |
|
Each employees target bonus is based on his or her salary
as of January 1 of the year to which it applies. For 2009, the
Board awarded 70% of the target bonus for all company employees.
For further description of the non-equity incentive plan see
discussion in Compensation Discussion and Analysis
and Compensation of Named Executive Officers, above. |
|
(3) |
|
These amounts reflect the aggregate grant date fair value
computed in accordance with U.S. GAAP. For assumptions used in
the calculation of these amounts for grants made in 2009, see
Note 10 Stock-Based Compensation in our
Form 10-K
for the period ended December 31, 2009, filed with the SEC
on March 11, 2010. |
19
|
|
|
(4) |
|
Amounts include employer contributions credited under our 410(k)
plan. Under the 401(k) plan, which is open to substantially all
of our employees, we make matching contributions based on each
participants voluntary salary deferrals, subject to plan
and Code limits in the form of company common stock. We match
participant contributions on a 1:2 basis up to a maximum of 3%
of the employees salary. Registered stock is valued and
transferred to the employees 401(k) account at the end of
calendar each quarter. |
|
(5) |
|
Includes $7,350 in company contributions under the 401(k) plan,
as well as an annual car allowance of $10,000. |
|
(6) |
|
Includes $7,350 in company contributions under the 401(k) plan,
as well as life insurance in addition to the group life coverage
($1,180). |
|
(7) |
|
Includes $7,350 in company contributions under the 401(k) plan. |
|
(8) |
|
Includes $7,350 in company contributions under the 401(k) plan. |
|
(9) |
|
Includes $7,350 in company contributions under the 401(k) plan. |
Grants of
Plan-Based Awards
The following table shows grants of plan-based equity awards
made to our named executive officers during the fiscal year
ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Exercise
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
or Base
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
Price of
|
|
Grant Date
|
|
|
|
|
Shares of
|
|
Securities
|
|
Option
|
|
Fair Value
|
|
|
Grant
|
|
Stock or
|
|
Underlying
|
|
Awards
|
|
of Option
|
Name & Principal Position
|
|
Date
|
|
Units #(1)
|
|
Options (#)(2)
|
|
($/share)
|
|
Awards ($)
|
|
Martin McGlynn President and CEO
|
|
|
5/15/09
|
|
|
|
234,667
|
|
|
|
|
|
|
|
|
|
|
$
|
410,667
|
|
|
|
|
5/15/09
|
|
|
|
|
|
|
|
88,000
|
|
|
$
|
1.75
|
|
|
$
|
132,079
|
|
Ann Tsukamoto, Ph.D. EVP, Research and
Development
|
|
|
5/15/09
|
|
|
|
93,333
|
|
|
|
|
|
|
|
|
|
|
$
|
163,333
|
|
|
|
|
5/15/09
|
|
|
|
|
|
|
|
35,000
|
|
|
$
|
1.75
|
|
|
$
|
52,532
|
|
Rodney Young CFO and VP,
Finance and Administration
|
|
|
5/15/09
|
|
|
|
226,667
|
|
|
|
|
|
|
|
|
|
|
$
|
396,667
|
|
|
|
|
5/15/09
|
|
|
|
|
|
|
|
85,000
|
|
|
$
|
1.75
|
|
|
$
|
127,577
|
|
Stewart Craig, Ph.D. Senior VP,
Development and Operations
|
|
|
9/15/09
|
|
|
|
93,333
|
|
|
|
|
|
|
|
|
|
|
$
|
159,599
|
|
|
|
|
9/15/09
|
|
|
|
|
|
|
|
35,000
|
|
|
$
|
1.71
|
|
|
$
|
50,712
|
|
Ken Stratton, J.D. General Counsel
|
|
|
5/15/09
|
|
|
|
93,333
|
|
|
|
|
|
|
|
|
|
|
$
|
163,333
|
|
|
|
|
5/15/09
|
|
|
|
|
|
|
|
35,000
|
|
|
$
|
1.75
|
|
|
$
|
52,532
|
|
|
|
|
(1) |
|
Restricted stock units granted in 2009 to our name executive
officers were made pursuant to our 2006 Equity Incentive Plan.
These restricted stock units vest over a four-year period from
the date of grant and one-fourth of the award will vest on each
grant date anniversary over the following four years. |
|
(2) |
|
The options granted in 2009 to our named executive officers were
made pursuant to our 2006 Equity Incentive Plan. Generally,
stock options granted to employees have a maximum term of
10 years, and vest over a four year period from the date of
grant: one-fourth vests at the end of the first year, and the
remaining three-fourths vests in equal increments on a monthly
basis over the remaining three years. We may grant options with
different vesting terms from time to time. However, the options
granted in 2009 to our named executive officer have our standard
vesting terms. Unless an employees termination of service
is due to retirement, disability or death, upon termination of
service, any unexercised vested options will be forfeited at the
end of three months or the expiration of the option, whichever
is earlier. |
20
Outstanding
Equity Awards at Fiscal 2009 Year-End
The following tables show equity awards held by our named
executive officers as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
SARs Awards
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
Securities
|
|
Number of
|
|
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
|
Underlying
|
|
Securities
|
|
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
|
|
Unexercised
|
|
Underlying
|
|
SAR
|
|
|
|
|
Option
|
|
Options
|
|
Options
|
|
Exercise
|
|
Option
|
|
|
|
SARs
|
|
Unexercised
|
|
Exercise
|
|
SAR
|
|
|
Grant
|
|
(#)
|
|
(#)
|
|
Price
|
|
Expiration
|
|
Date of
|
|
(#)
|
|
SARs(#)
|
|
Price
|
|
Expiration
|
Name
|
|
Date
|
|
Exercisable(1)
|
|
Unexercisable(1)
|
|
($/sh)(1)
|
|
Date
|
|
Award
|
|
Exercisable(2)
|
|
Unexercisable(2)
|
|
($)(2)
|
|
Date
|
|
Martin McGlynn
|
|
|
1/15/2001
|
|
|
|
400,000
|
|
|
|
|
|
|
$
|
2.88
|
|
|
|
1/15/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and CEO
|
|
|
10/2/2001
|
|
|
|
75,000
|
|
|
|
|
|
|
$
|
2.09
|
|
|
|
10/2/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2002
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
2.96
|
|
|
|
2/12/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/2/2002
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
2.01
|
|
|
|
5/2/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/2/2004
|
|
|
|
350,000
|
|
|
|
|
|
|
$
|
1.53
|
|
|
|
9/2/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/21/2006
|
|
|
|
574,567
|
|
|
|
98,098
|
|
|
$
|
2.00
|
|
|
|
7/21/2016
|
|
|
|
7/21/2006
|
|
|
|
651,161
|
|
|
|
111,174
|
|
|
$
|
2.00
|
|
|
|
7/21/2016
|
|
|
|
|
8/23/2007
|
|
|
|
262,500
|
|
|
|
187,500
|
|
|
$
|
2.21
|
|
|
|
8/23/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/15/2009
|
|
|
|
|
|
|
|
88,000
|
|
|
$
|
1.75
|
|
|
|
5/15/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ann Tsukamoto, Ph.D.
|
|
|
6/26/2001
|
(3)
|
|
|
12,000
|
|
|
|
|
|
|
$
|
3.10
|
|
|
|
6/26/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVP, Research and
|
|
|
10/22/2001
|
|
|
|
30,000
|
|
|
|
|
|
|
$
|
2.62
|
|
|
|
10/22/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
10/7/2002
|
|
|
|
60.000
|
|
|
|
|
|
|
$
|
0.61
|
|
|
|
10/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/3/2004
|
|
|
|
225,000
|
|
|
|
|
|
|
$
|
1.53
|
|
|
|
9/3/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/21/2006
|
|
|
|
158,000
|
|
|
|
26,976
|
|
|
$
|
2.00
|
|
|
|
7/21/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/23/2007
|
|
|
|
87,500
|
|
|
|
62,500
|
|
|
$
|
2.21
|
|
|
|
8/23/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/15/2009
|
|
|
|
|
|
|
|
35,000
|
|
|
$
|
1.75
|
|
|
|
5/15/2019
|
|
|
|
7/21/2006
|
|
|
|
124,600
|
|
|
|
21,274
|
|
|
$
|
2.00
|
|
|
|
7/21/2016
|
|
Rodney Young
|
|
|
9/6/2005
|
|
|
|
450,000
|
|
|
|
|
|
|
$
|
5.43
|
|
|
|
9/6/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CFO and
|
|
|
7/21/2006
|
|
|
|
68,333
|
|
|
|
11,667
|
|
|
$
|
2.00
|
|
|
|
7/21/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VP, Finance
|
|
|
9/6/2006
|
|
|
|
20,312
|
|
|
|
4,688
|
|
|
$
|
2.28
|
|
|
|
9/6/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Administration
|
|
|
8/23/2007
|
|
|
|
87,500
|
|
|
|
62,500
|
|
|
$
|
2.21
|
|
|
|
8/23/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/15/2009
|
|
|
|
|
|
|
|
85,000
|
|
|
$
|
1.75
|
|
|
|
5/15/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stewart Craig, Ph.D.
|
|
|
09/15/2008
|
|
|
|
62,500
|
|
|
|
137,500
|
|
|
$
|
1.12
|
|
|
|
9/15/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior VP, Development
|
|
|
9/15/2009
|
|
|
|
|
|
|
|
35,000
|
|
|
$
|
1.71
|
|
|
|
9/15/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ken Stratton, J.D.
|
|
|
02/28/2007
|
|
|
|
106,250
|
|
|
|
43,750
|
|
|
$
|
2.62
|
|
|
|
02/28/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Counsel
|
|
|
5/15/2009
|
|
|
|
|
|
|
|
35,000
|
|
|
$
|
1.75
|
|
|
|
5/15/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Securities
|
|
Market Value of
|
|
|
|
|
Underlying
|
|
Securities of
|
|
|
|
|
Restricted
|
|
Restricted
|
|
|
|
|
Stock Units
|
|
Stock Units
|
|
|
|
|
That Have Not
|
|
That Have Not
|
|
|
|
|
Vested (4)
|
|
Vested (4)
|
Name
|
|
Date of Award
|
|
#
|
|
$
|
|
Martin McGlynn
|
|
|
3/10/2008
|
|
|
|
275,000
|
|
|
$
|
346,500
|
|
President and CEO
|
|
|
5/15/2009
|
|
|
|
234,667
|
|
|
$
|
295,680
|
|
Ann Tsukamoto, Ph.D.
|
|
|
3/10/2008
|
|
|
|
137,500
|
|
|
$
|
173,250
|
|
EVP, Research and Development
|
|
|
5/15/2009
|
|
|
|
93,333
|
|
|
$
|
117,599
|
|
Rodney Young
|
|
|
3/10/2008
|
|
|
|
137,500
|
|
|
$
|
173,250
|
|
CFO and VP, Finance and Administration
|
|
|
5/15/2009
|
|
|
|
226,667
|
|
|
$
|
285,600
|
|
Stewart Craig, Ph.D.
|
|
|
9/15/2009
|
|
|
|
93,333
|
|
|
$
|
117,599
|
|
Senior VP, Development and Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Ken Stratton, J.D.
|
|
|
3/10/2008
|
|
|
|
55,000
|
|
|
$
|
69,300
|
|
General Counsel
|
|
|
5/15/2009
|
|
|
|
93,333
|
|
|
$
|
117,599
|
|
|
|
|
(1) |
|
Unless otherwise noted, options are granted at the close of
market price on the grant date (or on an adjacent market trading
day if the Nasdaq Global Market is closed on the grant date).
They vest over a period of four years as follows: one-fourth of
the option vests on the first anniversary of the grant date and
1/48th of the original grant vests each additional month of
service. |
|
(2) |
|
The terms of the SARs are essentially identical to those of the
options granted on the same date and they have the same vesting
schedule and same exercise price. |
21
|
|
|
(3) |
|
This was one of eight non-qualified, performance-based options
granted by the Compensation Committee on June 26, 2001 to
employees who had been given year-long goals in January 2001.
The exercise price was set at $3.10, which the committee
determined to be approximately equal to the average market price
during January 2001. The grants vested on December 31, 2001
to the extent that the individual goals had been achieved by the
respective employees. It was determined that 12,000 of the
12,500 shares originally covered by the option issued to
Dr. Tsukamoto had been earned, and the remaining
500 shares were cancelled. In accordance with APB 25, the
company recorded $19,375 of compensation expense in 2001 in
respect of this award. |
|
(4) |
|
Restricted stock units granted under our 2006 Equity Incentive
Plan. These restricted stock units vest ratably over a three to
four-year period on each grant date anniversary. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Related parties can include any of our directors or executive
officers, certain of our stockholders and their immediate family
members. Each year, we prepare and require our directors and
executive officers to complete Director and Officer
Questionnaires identifying any transactions with us in which the
officer or director or their family members have an interest.
This helps us identify potential conflicts of interest. A
conflict of interest occurs when an individuals private
interest interferes, or appears to interfere, in any way with
the interests of the company as a whole. Our code of ethics
requires all directors, officers and employees who may have a
potential or apparent conflict of interest to immediately notify
our general counsel, who serves as our compliance officer. In
addition, the Corporate Governance Committee of the Board of
Directors is responsible for considering and reporting to the
Board any questions of possible conflicts of interest of Board
members. Our code of ethics further requires pre-clearance
before any employee, officer or director engages in any personal
or business activity that may raise concerns about conflict,
potential conflict or apparent conflict of interest. Copies of
our code of ethics and the Corporate Governance Committee
charter are posted on the corporate governance section of our
website at www.stemcellsinc.com.
In evaluating related party transactions and potential conflicts
of interest, our compliance officer and independent directors
apply the same standards of good faith and fiduciary duty they
apply to their general responsibilities. They will approve a
related party transaction only when, in their good faith
judgment, the transaction is in the best interest of the company.
Dr. Weissman, a member of the Board of Directors, was
retained in September 1997 to serve as a consultant to us.
Pursuant to his consulting agreement, Dr. Weissman provides
consulting services to us and serves on our Scientific Advisory
Board. In return, we pay Dr. Weissman $50,000 per year for
his services and we granted him, in 1997, an option to purchase
500,000 shares of common stock for $5.25 per share. This
option expired in 2007 on the ten-year anniversary of its grant
without being exercised. We also agreed to nominate
Dr. Weissman for a position on the Board of Directors, and
he agreed to serve if elected. Since October 1, 2000, he
has been compensated for this service in the same manner and
amount as other non-employee members of the Board. The
consulting agreement with Dr. Weissman contains
confidentiality, non-competition, and assignment of invention
provisions and is for a term of fifteen years, subject to
earlier termination by either party.
PRINCIPAL
ACCOUNTING FEES AND SERVICES
Audit and
Tax Fees
The Board of Directors, upon the recommendation of the Audit
Committee, has selected the independent accounting firm of Grant
Thornton LLP to audit the accounts of the company for the year
ending December 31, 2010.
The Audit Committee considered the tax compliance services
provided by Grant Thornton LLP, concluded that provision of such
services is compatible with maintaining the independence of the
independent accountants, and approved the provision by Grant
Thornton LLP of tax compliance services with respect to the year
ending December 31, 2009.
22
The Audit Committee received the following information
concerning the fees of the independent accountants for the years
ended December 31, 2008 and 2009, has considered whether
the provision of these services is compatible with independence
of the independent accountants, and concluded that it is:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
12/31/09
|
|
12/31/08
|
|
Audit fees(1)
|
|
$
|
446,023
|
|
|
$
|
454,460
|
|
Tax fees
|
|
$
|
27,820
|
|
|
$
|
30,934
|
|
|
|
|
(1) |
|
Audit fees represents fees for the integrated audit of our
annual consolidated financial statements and reviews of the
interim consolidated financial statements, and review of
audit-related SEC filings; also includes fees related to issuing
comfort letter(s) in 2008 and 2009. |
Audit and tax fees include administrative overhead charges and
reimbursement for
out-of-pocket
expenses.
Pre-Approval
Policies and Procedures
The Audit Committee has adopted policies and procedures for
pre-approving all services (audit and non-audit) performed by
our independent auditors. In accordance with such policies and
procedures, the Audit Committee is required to pre-approve all
audit and non-audit services to be performed by the independent
auditors in order to assure that the provision of such services
is in accordance with the rules and regulations of the SEC and
does not impair the auditors independence. Under the
policy, pre-approval is generally provided up to one year and
any pre-approval is detailed as to the particular service or
category of services and is subject to a specific budget. In
addition, the Audit Committee may pre-approve additional
services on a
case-by-case
basis. During 2009 and 2008, all services performed by our
independent auditors were pre-approved.
23
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee oversees our accounting and financial
reporting processes and the audits of our financial statements
on behalf of the Board, and selects an independent public
accounting firm to perform these audits. Management has the
primary responsibility for establishing and maintaining adequate
internal control over financial reporting, preparing the
financial statements, and establishing and maintaining adequate
controls over public reporting. Our independent registered
public accounting firm for fiscal 2009, Grant Thornton LLP, had
responsibility for conducting an audit of our annual financial
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States) and
expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting
principles.
The Audit Committee oversaw the independent public accounting
firms qualifications and independence, as well as its
performance. The Audit Committee assisted the Board in
overseeing the preparation of the companys financial
statements, the companys compliance with legal and
regulatory requirements, and the performance of the
companys internal audit function. The Audit Committee met
with personnel of the company and Grant Thornton LLP to review
the scope and the results of the annual audit, the amount of
audit fees, the companys internal accounting controls, the
companys financial statements contained in the
companys Annual Report to Stockholders and other related
matters.
The Audit Committee has reviewed and discussed with management
the financial statements for fiscal year 2009 audited by Grant
Thornton LLP, as well as managements report on internal
control over financial reporting, using the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control Integrated
Framework. The Audit Committee has discussed with Grant Thornton
LLP various matters related to the financial statements,
including those matters required to be discussed by SAS 114 (The
Auditors Communication with Those Charged with
Governance). The Audit Committee has also discussed with Grant
Thornton LLP its report on internal control over financial
reporting, has received the written disclosures and the letter
from Grant Thornton LLP required by Public Company Accounting
Oversight Board (PCAOB) Ethics and Independence Rule 3526,
Communication with Audit Committees Concerning Independence
(Rule 3526), and has discussed with Grant Thornton LLP
its independence.
Based upon such review and discussions, the Audit Committee
recommended to the Board of Directors, and the Board approved
the recommendation, that the audited financial statements be
included in the companys Annual Report on
Form 10-K
for the fiscal year ending December 31, 2009 for filing
with the SEC.
AUDIT COMMITTEE
Eric Bjerkholt, Chairman
Ricardo Levy, Ph.D.
John Schwartz, Ph.D.
24
PROPOSAL NUMBER
1
Election
of Directors
The number of directors is currently fixed at six. Both our
restated certificate of incorporation, as amended to date, and
our amended and restated by-laws provide for the classification
of the Board of Directors into three classes (Class I,
Class II and Class III), as nearly equal in number as
possible, with the term of office of one class expiring each
year. Unless otherwise instructed, the enclosed proxy will be
voted to elect the nominees named below, who are now
Class I directors, as Class I directors for a term of
three years expiring at the 2013 Annual Meeting of Stockholders
and until their successors are duly elected and qualified. Both
Class I director nominees have been recommended by the
company because of their past experience serving on the
companys Board of Directors, the breadth of their business
expertise, sound judgment, and demonstrated leadership, among
other things. In prior years, the Class II and
Class III directors were nominated for appointment to the
Board for similar reasons. Proxies cannot be voted for a greater
number of persons than the number of nominees named below. It is
expected that the nominees will be able to serve, but if any are
unable to serve, the proxy will be voted for a substitute
nominee or nominees designated by the Board of Directors.
The nominees for election as Class I directors, and the
incumbent and continuing Class II and Class III
directors, are as follows:
NOMINEES
FOR ELECTION AS CLASS I DIRECTORS TERMS TO
EXPIRE 2013
|
|
|
|
|
|
|
|
|
Name
|
|
Principal Occupation
|
|
Age*
|
|
Position
|
|
Eric Bjerkholt
|
|
Senior Vice President and CFO,
Sunesis Pharmaceuticals, Inc.
|
|
|
50
|
|
|
Director
|
John Schwartz, Ph.D.
|
|
President, Quantum Strategies Management Company
|
|
|
75
|
|
|
Director, Chairman of the Board
|
|
|
|
* |
|
Ages are as of April 1, 2010. |
Eric Bjerkholt was elected to the Board of Directors of
the company in March 2004. He is senior vice president and chief
financial officer of Sunesis Pharmaceuticals, Inc., a small
molecule biopharmaceutical company in South San Francisco,
California. Before joining Sunesis, Mr. Bjerkholt served as
the senior vice president and chief financial officer of
IntraBiotics Pharmaceuticals, Inc. Previously,
Mr. Bjerkholt co-founded LifeSpring Nutrition, Inc., a
privately held nutraceutical company, and served as its chief
financial officer, and later as its president and chief
executive officer. From 1990 to 1997, Mr. Bjerkholt was an
investment banker at J.P. Morgan & Co., Inc.
Mr. Bjerkholt holds an M.B.A. from Harvard Business School
and a Cand. Oecon degree in economics and econometrics from the
University of Oslo, Norway. He is a member of the board of
directors of Round Table Pizza, Inc.
John Schwartz, Ph.D., was elected to the Board of
Directors of the company in December 1998 and was elected the
chairman of the Board at the same time. He is the former
president and chief executive officer of SyStemix, Inc.
Dr. Schwartz is currently the president of Quantum
Strategies Management Company, a registered investment advisor
located in Palo Alto, California. Prior to his positions at
SyStemix, he served as assistant professor, vice president and
general counsel at Stanford University in California.
Dr. Schwartz graduated from Harvard Law School in 1958 and
received his Ph.D. degree in physics from the University of
Rochester in 1965.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE ELECTION OF THE NOMINEES DESCRIBED ABOVE.
25
INCUMBENT
CLASS II DIRECTORS TERMS EXPIRE 2011
|
|
|
|
|
|
|
|
|
Name
|
|
Principal Occupation
|
|
Age*
|
|
Position
|
|
Ricardo Levy, Ph.D.
|
|
Lead Director, Renegy Holdings, Inc.
|
|
|
65
|
|
|
Director
|
Irving Weissman, M.D.
|
|
Professor, Stanford University
|
|
|
70
|
|
|
Director
|
|
|
|
* |
|
Ages are as of April 1, 2010. |
Ricardo Levy, Ph.D. was elected to the
companys Board of Directors in September 2001.
Dr. Levy is the lead director of Renegy Holdings, Inc. and
has been a member of its board of directors since October 2007.
Dr. Levy served as chairman of the board of Catalytica
Energy Systems, Inc., between 1995 and 2007 when the company
merged to form Renegy. He also served as director of
Catalytica Pharmaceuticals Inc. from 1995 to 2000. Prior to
this, in 1974, Dr. Levy cofounded Catalytica, Inc., a
manufacturing technology and components company. He served as
Catalyticas chief operating officer from 1974 until 1991
and as its president and chief executive officer until December
2000, when Catalytica and Catalytica Pharmaceuticals were both
sold to DSM N.V. Before founding Catalytica, Dr. Levy was a
founding member of Exxons chemical physics research team,
and prior to that he served as the chief executive officer of
Sudamericana C.A. in Quito, Ecuador. He currently also serves on
the board of directors of Accelrys Inc. (formerly Pharmacopeia,
Inc.) and NovoDynamics, Inc. Dr. Levy holds an M.S. from
Princeton University and a Ph.D. in chemical engineering from
Stanford University.
Irving Weissman, M.D. was elected to the Board of
Directors of the company in September 1997 and has served as the
chairman of the companys Scientific Advisory Board since
that time. Dr. Weissman is the Virginia and Daniel K.
Ludwig Professor of Cancer Research, Professor of Pathology and
Professor of Developmental Biology at Stanford University. He is
also the director of the Stanford Institute for Stem Cell
Biology and Regenerative Medicine and the director of the
Stanford Comprehensive Cancer Center. Previously,
Dr. Weissman was a cofounder of SyStemix, Inc. and
cofounder and a director of Cellerant Therapeutics, Inc., both
stem cell sciences companies. He has also served on the
scientific advisory boards of several biotechnology companies,
including Amgen, DNAX and T-Cell Sciences. Dr. Weissman is
a member of the National Academy of Science, the Institute of
Medicine of the National Academies, the American Academy of Arts
and Sciences, the American Society of Microbiology, and several
other societies.
26
INCUMBENT
CLASS III DIRECTORS TERMS TO EXPIRE
2012
|
|
|
|
|
|
|
|
|
Name
|
|
Principal Occupation
|
|
Age*
|
|
Position
|
|
Martin McGlynn
|
|
President and Chief Executive Officer, StemCells, Inc.
|
|
|
63
|
|
|
Director, Executive Officer
|
Roger Perlmutter, M.D., Ph.D.
|
|
Executive Vice President, Research and Development, Amgen, Inc.
|
|
|
57
|
|
|
Director
|
|
|
|
* |
|
Ages are as of April 1, 2010. |
Martin McGlynn joined the company on January 15,
2001, when he was appointed president and chief executive
officer of the company and of its wholly-owned subsidiary,
StemCells California, Inc. He was elected to the Board of
Directors in February 2001. Mr. McGlynn began his career
with Becton Dickinson, Ireland Ltd., and spent 8 years in
manufacturing operations. He joined Abbott Labs in 1977 where he
held positions as the general manager of Abbott Ireland Ltd.,
the president and general manager of Abbott Canada Ltd. and the
vice president of Abbott International Ltd. In 1990, he joined
the BOC Group as the president of Anaquest, Inc., a company
focused on anesthesia and acute care pharmaceuticals. From 1994
until he joined StemCells, Mr. McGlynn was the president
and chief executive officer of Pharmadigm, Inc., a privately
held company in Salt Lake City, Utah, engaged in research and
development in the fields of inflammation and genetic
immunization. Mr. McGlynn is a native of Dublin, Ireland.
He received a Bachelor of Commerce degree from University
College, Dublin, Ireland in 1968, a diploma in industrial
engineering from the Irish Institute of Industrial Engineering
in 1970, and a diploma in production planning from the
University of Birmingham, England in 1971. He is a former member
of the board of directors of the Confederation of Irish
Industries and the Pharmaceutical Manufacturers Association of
Canada.
Roger Perlmutter, M.D., Ph.D., was elected to
the companys Board of Directors in December 2000.
Dr. Perlmutter is the executive vice president of research
and development of Amgen, Inc., a position he has held since
January 2001. Prior to joining Amgen, he was the executive vice
president of worldwide basic research and preclinical
development of Merck Research Laboratories, a division of
Merck & Co., Inc., a position he had held since August
1999. He joined Merck in February 1997 as the senior vice
president of Merck Research Laboratories, from February 1997 to
December 1998 and as its executive vice president from February
1999 to January 2001. Prior to joining Merck,
Dr. Perlmutter was a professor in the Departments of
Immunology, Biochemistry and Medicine at the University of
Washington from January 1991 to January 1997 and served as
chairman of the Department of Immunology at the University of
Washington from May 1989 to January 1997. He also was an
investigator at the Howard Hughes Medical Institute from October
1991 to January 1997. Dr. Perlmutter was a member of the
board of directors of The Irvington Institute for Immunological
Research from 1997 to 2001 and of the Institute for Systems
Biology, where he has been its chairman of the board since 1999.
Dr. Perlmutter is licensed to practice medicine in the
State of Washington. He graduated from Reed College in 1973 and
received his M.D. and Ph.D. degrees from Washington University,
St. Louis, Missouri in 1979.
PROPOSAL NUMBER
2
Ratification
of Selection of Independent Public Accountants
The company is asking the stockholders to ratify the selection
of Grant Thornton LLP as the companys independent public
accountants for the fiscal year ending December 31, 2010.
The affirmative vote of the holders of a majority of the shares
represented and voting at the Annual Meeting will be required to
ratify the selection of Grant Thornton LLP.
In the event the stockholders fail to ratify the appointment,
the Audit Committee of the Board of Directors will consider it
as a direction to select other auditors for the subsequent year.
Even if the selection is ratified, the Audit Committee of the
Board at its discretion could decide to terminate the engagement
of Grant Thornton LLP and engage another firm at any time if the
Audit Committee determines that such a change would be necessary
or desirable in the best interests of the company and its
stockholders.
27
A representative of Grant Thornton LLP is expected to attend the
Annual Meeting and is not expected to make a statement, but will
be available to respond to appropriate questions and may make a
statement if such representative desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE PROPOSAL TO RATIFY THE SELECTION OF GRANT
THORNTON LLP AS THE COMPANYS INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2010.
OTHER
MATTERS
Stockholder
Proposals
Stockholders who wish to present proposals for inclusion in the
companys proxy materials for the 2010 Annual Meeting of
Stockholders may do so by following the procedures prescribed in
Rule 14a-8
under the Exchange Act. To be eligible, the stockholder
proposals must be received by our corporate secretary on or
before December 23, 2010.
Stockholders who wish to make a proposal at the 2011 Annual
Meeting of Stockholders, other than one that will be included in
our proxy materials, must notify us no later than March 8,
2011 (see
Rule 14a-4
under the Exchange Act). If a stockholder who wishes to present
a proposal fails to notify us by March 8, 2011, the proxies
that management solicits for the meeting will confer
discretionary authority to vote on the stockholders
proposal if it is properly brought before the meeting.
Stockholder
Nominations of Directors
Stockholders or groups of stockholders that, individually or as
a group, have beneficially owned at least 5% of the
companys common stock for at least one year prior to the
date of such submission (the Nominating Stockholder)
may submit a candidate for nomination for election as a director
at any annual meeting of stockholders in accordance with Board
policy. The submission must be in writing and delivered to
StemCells, Inc., Attn: Secretary, Board of Directors, 3155
Porter Drive, Palo Alto, California 94304, no later than on or
about April 4, 2011 for nominees to be considered for
nomination at the 2011 annual meeting. Submissions must include
the name, address and number of shares of common stock
beneficially owned by each participant in the Nominating
Stockholder group, a representation that the Nominating
Stockholder meets the requirements described in the Board policy
and will continue to meet them through the date of the annual
meeting, a description of all arrangements or understandings
between or among the Nominating Stockholder group (or any
participant in the Nominating Stockholder group) and the
candidate or any other person or entity regarding the candidate,
all information regarding the candidate that the company would
be required to disclose in a proxy statement under SEC rules,
including whether the candidate is independent or, if not, a
description of the reasons why not, the consent of the candidate
to serve as a director, and representations by the candidate
regarding his or her performance of the duties of a director.
Full details may be obtained from the secretary of the Board of
Directors at the address above or on our website at
www.stemcellsinc.com. The Corporate Governance Committee will
consider and evaluate up to two candidates recommended in
accordance with this policy in connection with any annual
meeting. The Corporate Governance Committee will consider and
evaluate candidates recommended by stockholders on the same
basis as candidates recommended by other sources.
In addition, the companys by-laws provide that a
stockholder entitled to vote for the election of directors at a
meeting may nominate persons for election as directors by giving
timely notice thereof in proper written form to the Secretary
accompanied by a petition signed by at least 100 record holders
of capital stock of the company representing in the aggregate 1%
or more of the outstanding shares entitled to vote in the
election of directors, which petition must show the class and
number of shares held by each person. To be timely, such notice
and petition must be received at the principal executive offices
of the company not less than 60 days nor more than
90 days prior to the meeting, except if less than
70 days notice of the date of the meeting is given to
stockholders, in which case the notice and petition must be
received not later than the close of business on the tenth day
following the day on which notice of the date of the meeting was
mailed or public disclosure of such date was made. The
requesting stockholder
28
is required to provide information with respect to the
nominee(s) for director similar to that described above, as more
fully set forth in the companys by-laws.
Form 10-K
The companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, as filed with
the SEC, is available without charge upon request by writing to
StemCells, Inc. at 3155 Porter Drive, Palo Alto, California
94304, Attention: Investor Relations. A copy of this report is
also available through our website at www.stemcellsinc.com or,
alternatively, at www.sec.gov.
Householding
of Proxy Materials
The SEC has adopted rules that permit companies and
intermediaries such as brokers to satisfy delivery requirements
for proxy statements with respect to two or more stockholders
sharing the same address by delivering a single proxy statement
addressed to those stockholders. This process, which is commonly
referred to as householding, potentially provides
extra convenience for stockholders and cost savings for
companies. The company and some brokers household proxy
materials, delivering a single proxy statement to multiple
stockholders sharing an address unless contrary instructions
have been received from the affected stockholders. Once you have
received notice from your broker or us that they or we will be
householding materials to your address, householding will
continue until you are notified otherwise or until you revoke
your consent. If, at any time, you no longer wish to participate
in householding and would prefer to receive a separate proxy
statement, or if you are receiving multiple copies of the proxy
statement and wish to receive only one, please notify your
broker if your shares are held in a brokerage account or us if
you hold registered shares. You can notify us by sending a
written request to StemCells, Inc., 3155 Porter Drive, Palo
Alto, California 94304, Attention: Investor Relations.
Other
Business
The Board of Directors knows of no business that will come
before the meeting for action except as described in the
accompanying Notice of Meeting. However, as to any such
business, the persons designated as proxies will have authority
to act in their discretion.
By Order of the Board of Directors
Kenneth B. Stratton, J.D.
Secretary
April 22, 2010
29
STEMCELLS, INC.
C/O EQUISERVE TRUST COMPANY N.A. P.O. BOX8694 EDISON, NJ 08818-8694
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
For Withhold For All To withhold authority to vote for any
All All Except individual nominee(s), mark For All
Except and write the number(s) of the
The Board of Directors recommends that you nominee(s) on the line below.
vote FOR the following:
1. Election of Directors
Nominees
01 Eric Bjerkholt 02 John Schwartz, Ph.D.
The Board of Directors recommends you vote FOR the following proposal(s): For Against Abstain
2 To ratify the selection of Grant Thornton LLP as independent public accountants of the company for the fiscal year ending
December 31, 2010.
NOTE: In their discretion, upon such other matters that may properly come before the meeting or any postponements or adjournments
thereof.
For address change/comments, mark here. (see reverse for instructions)
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
Signature [PLEASE SIGN WITHIN BOX] Date
Signature (Joint Owners) Date
0000060830_1 R2.09.05.010
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Form 10-K is/are available at www.proxyvote.com.
STEMCELLS, INC.
ANNUAL MEETING OF STOCKHOLDERS, JUNE 3, 2010 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
The undersigned stockholder, by completing this card, hereby appoints Martin McGlynn and Kenneth Stratton, or either of them with power of substitution to each, proxies of the undersigned to vote at the Annual Meeting of Stockholders of StemCells, Inc. to be held on June 3, 2010 at 3155 Porter Drive, Palo Alto, California at 2:00 p.m., local time, or at any postponements or adjournments thereof, all of the shares of Common Stock, par value $.01 per share, of StemCells, Inc. that the undersigned would be entitled to vote if personally present. The undersigned instructs such proxies or their substitutes to act on the following matter as specified by the undersigned, and to vote in such manner as they may determine on any other matter that may properly come before the meeting.
Address change/comments:
(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side
0000060830_2 R2.09.05.010
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