e10vkza
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(Amendment No. 1)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2007
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
COMMISSION FILE NUMBER 0-19871
STEMCELLS, INC.
(Exact name of Registrant as specified in its charter)
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A Delaware Corporation
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94-3078125 |
(State or other jurisdiction
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(I.R.S. Employer |
of incorporation or organization)
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Identification No.) |
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3155 PORTER DRIVE
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94304 |
PALO ALTO, CA
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(zip code) |
(Address of principal offices) |
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Registrants telephone number, including area code:
(650) 475-3100
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
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Name of Each Exchange on Which Registered |
Common Stock, $0.01 par value
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Nasdaq Global Market |
Junior Preferred Stock Purchase Rights |
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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o Large accelerated filer
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þ Accelerated filer
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o Non-accelerated filer
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o Smaller reporting company |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
Aggregate market value of common stock held by non-affiliates at June 30, 2007: $182,141,740.
Inclusion of shares held beneficially by any person should not be construed to indicate that such
person possesses the power, direct or indirect, to direct or cause the direction of management
policies of the registrant, or that such person is controlled by or under common control with the
Registrant.
Common stock outstanding at February 29, 2008: 80,732,542 shares.
Documents incorporated by reference: None
TABLE OF CONTENTS
Year 2007 Form 10-K/A Annual Report
EXPLANATORY NOTE
This Amendment No. 1 on Form
10-K/A amends our annual report on Form 10-K for the year ended
December 31, 2007, as filed with the Securities and Exchange Commission on March 14, 2008 (the
Original Report), to include the information required by Part III of
Form 10-K and to include certain Item 9B information. Specifically,
information required by Items 10 through 14 of Part III is no longer being incorporated by
reference to the proxy statement relating to our 2008 annual meeting
of stockholders and we are reporting the resignation of one of our
directors. We hereby
amend Item 9B of Part II and Items 10, 11, 12, 13, and 14 of Part III of our Original Report by deleting the text of those
items in their entirety from the Original Report and replacing them with the information provided
below under the respective headings. This amendment does not affect any other items in our
Original Report. As a result of this amendment, we are also filing as exhibits to this amendment
the certifications required by section 302 of the Sarbanes-Oxley Act of 2002. Because no financial
statements are contained in this amendment, we are not including certifications under section 906
of the Sarbanes-Oxley Act of 2002.
Item description
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Page |
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Other Information |
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3 |
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Directors, Executive Officers and Corporate Governance |
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Executive Compensation
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Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
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Certain Relationships and Related Transactions, and
Director Independence |
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Principal Accounting Fees and Services
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EXHIBIT 31.1 |
EXHIBIT 31.2 |
Notes regarding certain references
Except as otherwise expressly stated, this amendment continues to speak as of the date of the
Original Report and we have not updated the disclosure contained in this amendment to reflect
events that have occurred since the filing of the Original Report. Accordingly, this amendment
should be read in conjunction with our Original Report and our other filings made with the SEC
subsequent to the filing of the Original Report.
Throughout this Form 10-K/A, the words we, us, our, and StemCells refer to StemCells,
Inc., including StemCells California, Inc., our wholly-owned subsidiary, and the owner or licensee
of most of our intellectual property. Common stock refers to our common stock, $.01 par value.
2
PART II
Item 9B.
OTHER INFORMATION
On April
25, 2008, Mr. Desmond OConnell, Jr. informed our Board of
Directors that he has decided, for personal reasons, to not stand for
reelection as a director at our 2008 annual stockholder meeting.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Board of Directors; Committees
We currently have seven directors serving on our Board of Directors. Since January 2007, our
Board has been composed of Messrs. Eric Bjerkholt, Desmond
OConnell, Jr. and Martin McGlynn and Drs.
Ricardo Levy, Roger Perlmutter, John Schwartz, and Irving Weissman. Because we have a classified
board, with each of our directors serving a staggered three-year
term, only two of our directors
are expected to stand for reelection at our 2008 annual stockholder meeting. The following table
shows the composition of the three classes of our Board:
Class I Directors (terms scheduled to expire in 2010):
Eric Bjerkholt
John J. Schwartz, Ph.D.
Class II
Directors (terms scheduled to expire in 2008):
Ricardo B. Levy, Ph.D.
Desmond H. OConnell, Jr.
Irving Weissman, M.D.
Class III Directors (terms scheduled to expire in 2009):
Martin M. McGlynn
Roger Perlmutter, M.D., Ph.D.
The independent members of our Board, as determined by the Board of Directors in accordance
with the existing Nasdaq Marketplace rules, are Messrs. Bjerkholt and OConnell and Drs. Levy,
Perlmutter and Schwartz. The Board of Directors held four regular meetings and three special
meetings during the fiscal year ended December 31, 2007; the non-employee directors met in
executive session at each of the regular meetings of the Board. Each of the directors attended
more than 75% of the meetings of the Board of Directors and of the committees on which they served.
During 2007, 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. 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.
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Since January 2007, the Compensation Committee has been composed of Dr. Schwartz and Messrs.
Bjerkholt and OConnell. The Compensation Committee held two meetings in 2007. 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 no meetings in 2007. It 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. The Corporate Governance Committee may identify potential candidates through any
reliable means available, including identification by a search firm and recommendations of past or
current members of the Board from their knowledge of the industry and of the company. 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 Audit Committee is composed of Mr. Bjerkholt and Drs. Schwartz and Levy. The Audit Committee
held four meetings in 2007. The primary function of the Audit Committee is to assist our Board
of Directors 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 of Directors 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 annual
report 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 and Nasdaq Marketplace rules. The Audit Committee acts pursuant to a written charter which is
available through our website at www.stemcellsinc.com.
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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 |
Director |
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Independent |
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Committee |
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Committee |
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Committee |
Eric H. Bjerkholt |
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Yes |
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ü |
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Chair |
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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Desmond H. OConnell, Jr. |
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Yes |
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ü |
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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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Stockholders who wish to communicate with the 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 of Directors or to one or more
particular director(s). Our corporate secretary will review all such correspondence and forward to
our Board of Directors 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 of Directors 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 of Directors, 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.
Directors
The following table provides our directors names, ages and principal occupations for at least
the last five years:
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Eric H. Bjerkholt
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48 |
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Eric H. Bjerkholt
joined our Board of
Directors in March
2004. Since
February 2007, Mr.
Bjerkholt has
served as the chief
financial officer
and the senior vice
president of
corporate
development and
finance of Sunesis
Pharmaceuticals,
Inc. From 2004
until February
2007, he served as
its senior vice
president and chief
financial officer.
From 2002 to 2004,
Mr. Bjerkholt was
the chief financial
officer and a
senior vice
president of
IntraBiotics
Pharmaceuticals,
Inc. |
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Ricardo B. Levy, Ph.D.
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63 |
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Ricardo B. Levy,
Ph.D. joined our
Board of Directors
in September 2001.
Dr. Levy currently
serves on several
boards of directors
and is the lead
director of Renegy
Holdings, Inc. He
served as the chief
operating officer
of Catalytica,
Inc., from 1974
until 1991, and
then as its chief
executive officer
until 2000. |
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Martin M. McGlynn
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Martin M. McGlynn
joined our Board of
Directors in
February 2001. Mr.
McGlynn has been
our president and
chief executive
officer since
January 2001. |
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Desmond H. OConnell, Jr.
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72 |
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Desmond H.
OConnell, Jr.
joined our Board of
Directors in
January 2007. Mr.
OConnell has been
an independent
management
consultant and
private investor
since 1990. |
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Roger M. Perlmutter, M.D., Ph.D.
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55 |
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Roger M. Perlmutter, M.D., Ph.D.,
joined our Board of Directors in
December 2000. Dr. Perlmutter
currently serves as the executive
vice president of research and
development of Amgen, Inc., a
position he has held since January
2001. |
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John J. Schwartz, Ph.D.
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John J. Schwartz, Ph.D., joined our
Board of Directors in December
1998. He has been the chairman of
our Board ever since then. He is
currently the president of Quantum
Strategies Management Company, a
position he has held since 1998.
Prior to this, he served as the
chief executive officer of
SyStemix, Inc. |
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Irving L. Weissman, M.D.
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68 |
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Irving L. Weissman, M.D., joined
our Board of Directors in September
1997. He is the director of the
Institute of Cancer/Stem Cell
Biology and Regenerative Medicine
at Stanford University, a position
he has held since 2003. He is also
the Virginia and Daniel K. Ludwig
Professor of Cancer Research,
Professor of Pathology and
Professor of Developmental Biology
at Stanford, a position he has held
since 1989. |
Family Relationships
There are no family relationships between our directors and executive officers.
Executive Officers
The following table provides our executive officers names, ages and principal occupations for
at least the last five years:
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Martin M. McGlynn,
President and Chief
Executive Officer
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62 |
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Martin M. McGlynn joined StemCells in
January 2001 as our president and
chief executive officer. In this
capacity, he also serves as the
president of our wholly-owned
subsidiary, StemCells California,
Inc. Mr. McGlynn became a director
in February 2001. As our president
and chief executive officer, Mr.
McGlynn has overall responsibility
for leading the management of the
company and our operations. |
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Ann Tsukamoto, Ph.D.,
Chief Operating Officer
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55 |
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Ann Tsukamoto, Ph.D., joined
StemCells in November 1997 as our
senior director of scientific
operations. In June 1998 she became
our vice president of scientific
operations. In February 2002 she
became our vice president of research
and development. In November 2006,
she became our chief operating
officer. As our chief operating
officer, Dr. Tsukamoto continues to
be responsible for our research and
development efforts. |
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Rodney K.B. Young,
Chief Financial Officer
and Vice President,
Finance and Administration
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45 |
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Rodney K.B. Young joined StemCells in
September 2005 as our chief financial
officer and vice president of
finance. In November 2006 he became
our chief financial officer and vice
president of finance and
administration. From 2003 to 2005,
Mr. Young was the chief financial
officer and a director of Extropy
Pharmaceuticals, Inc., a private
biopharmaceutical company focused on
developing drugs for pediatric
indications. As our chief financial
officer, Mr. Young has responsibility
for the financial functions of our
company, including reporting and
controls. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of 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% stockholders 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, 2007, all Section 16(a) filing requirements applicable to our
officers, directors and greater than 10% beneficial owners have been met.
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 amendments or waivers to this code in 2007.
Item 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Our compensation programs are designed to attract and retain employees and reward them for
their efforts toward helping us achieve our short-term and long-term goals, including leading us
toward profitability and developing stockholder value. Compensation programs in which our
executive officers participate are designed to be equitable and competitive with the compensation
programs of companies with whom we compete for high-level scientific and executive personnel, and
to link pay to performance.
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In seeking to accomplish the objectives of our compensation policy, the Compensation Committee
follows a compensation program designed, ultimately, to reward increasing stockholder value.
Because achievement of our mission to develop and commercialize cell-based therapeutics to treat
damage to, or degeneration of, major organ systems is a long and challenging process, we use the
following as, in effect, surrogate endpoints:
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the achievement of stated corporate goals adopted from time to time by the Board; |
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the effectiveness of leadership an executive officer has shown in inspiring and
marshalling excellent performances in his or her direct reports; |
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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 |
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the speed and effectiveness with which an executive officer discovers, assesses and,
where appropriate, pursues promising opportunities for the company. |
Compensation elements: We use, like most biotechnology companies, a combination of base salary,
bonus and equity awards to compensate our employees, including our executive officers. As a small
company we have approximately 60 employees in total and only three executive officers we feel
that having so few people in each cohort 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 evaluate the range of each element paid by comparable
companies for each position. Each year, the Compensation Committee considers the performance of
the executive officers during the prior year and determines their salary and target bonus. Equity
compensation is generally determined by the Board on the recommendation of the Compensation
Committee and awarded at one of the companys regular Board meetings. We collect information from
the Radford Biotechnology Survey Executive Report, which we review regularly; from the proxies
of other similar biotechnology companies, including Nektar Therapeutics, Maxygen, Inc., Sunesis
Pharmaceuticals, Inc., Affymax, Inc., Exelixis, Inc., CV Therapeutics, Inc., Geron Corporation, PDL
BioPharma, Inc., Gilead Sciences, Inc., and Genzyme Corporation, which we also review; and from the
reports of experts whom we consult from time to time. In the case of the chief operating officer
and chief financial officer, we also take the recommendation of the chief executive officer into
account in setting compensation. We integrate all of this information with our evaluation of the
performance of each of our executive officers but while we believe our officers and other
employees are outstanding, we prefer to keep compensation of our senior management at around the
50th percentile at this point, given that the company is at a relatively early stage of
development.
Interaction of compensation elements: The basic compensation elements base salary, bonus and
equity awards are, as noted, standard in our industry; we pay each element because we would not
otherwise be competitive and because we feel that together they are the proper components of a
balanced compensation package:
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base salary is compensation for current efforts; |
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bonuses, whether in cash or equity, are typically paid for achievements in meeting
stated corporate goals; and |
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equity awards are inducements to remain with the company and to build future value. |
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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.1 We 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
Salary and bonus compensation. We consider base salary to be a critical component of our executive
officers overall compensation packages. We endeavor to set base compensation levels so that their
salaries are competitive with salaries paid by similarly situated companies to employees with
similar experience, taking into account the cost of living in the San Francisco Bay Area. We also
intend the salaries of our executive officers to reflect their actual responsibilities and job
scope.
Meanwhile, we view periodic bonuses, whether paid in cash or equity, as an important element
of compensation for several reasons. Each full-time employee of the company 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 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 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 reviewing the companys accomplishments against stated corporate goals
adopted by the Board the prior year. These goals are designed to be challenging, so that one would
not expect consistent achievement of 100% of the goals. In both 2006 and 2007, the company adopted
annual corporate goals covering such things as advancement of our clinical strategies for our
HuCNS-SC cells, effort towards fundraising, advancement in cell manufacturing practices, and
development in our Liver Program. The Board may grant more than 100% of the target bonus in
exceptional circumstances. Bonus levels are generally adjusted based upon the realization of these
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. The Compensation Committee and the Board as a whole use the
corporate goals as a measure of success, but the amount of any bonus grant is completely within the
Boards sole discretion.
Keeping these various principles in mind, we increased the annual base salary of our chief
executive officer, Mr. McGlynn, from $365,000 to $385,000, effective March 2007. In 2007, we also
increased Mr. McGlynns target bonus from 35 percent to 40 percent of his base salary, effective
with respect to 2007 corporate goals, to reflect our view that his leadership is a major factor in
the achievement of the corporate goals.
We increased the annual base salary of our chief operating officer, Dr. Tsukamoto, from
$275,000 to $300,000, effective March 2007, in recognition of her promotion in November 2006 to the
position of chief operating officer. Her target bonus rate is 25 percent of her base salary.
We increased the annual base salary of our chief financial officer, Mr. Young, from $250,000
to $275,000, effective March 2007, in recognition of his assuming additional duties in November
2006, becoming responsible for administrative functions including information technology in
addition to his financial responsibilities. His target bonus rate is 25 percent of his base
salary.
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Accordingly, we omit tables showing pension benefits
and non-qualified deferred compensation. |
9
In January 2007, after reviewing the companys successes measured against its 2006 corporate
goals, the Board and management awarded all employees of the company, including our executive
officers, 80 percent of their target bonuses for 2006. The bonuses were calculated using each
employees base wage rate as of January 1, 2006, and paid in February 2007. In Mr. McGlynns case,
because his base salary on January 1, 2006 was $324,000 and because his target bonus was 35%, his
2006 bonus was $90,720. In Dr. Tsukamotos case, because her base salary on January 1, 2006 was
$275,000 and because her target bonus was 25%, her 2006 bonus was $50,000. In Mr. Youngs case,
because his base salary on January 1, 2006 was $250,000 and because his target bonus was 25%, his
2006 bonus was $50,000.
In January 2008, after reviewing the companys successes measured against its 2007 corporate
goals, the Board and management awarded all employees of the company, including our executive
officers, 80 percent of their target bonuses for 2007. The bonuses were calculated using each
employees base wage rate as of January 1, 2007, and paid in February 2008. In Mr. McGlynns case,
because his base salary on January 1, 2007 was $365,000 and because his target bonus rate was 40%,
his 2007 bonus was $116,800. In Dr. Tsukamotos case, because her base salary on January 1, 2007
was $275,000 and because her target bonus was 25%, her 2007 bonus was $55,000. In Mr. Youngs
case, because his base salary on January 1, 2007 was $250,000 and because his target bonus was 25%,
his 2007 bonus was $50,000.
Keeping in mind that salary increases for 2006 and 2007 were effective in the first payroll
period in March of those years, and that bonuses are not paid until the February following the year
to which they apply, the base salary and target bonus information presented above may be summarized
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2006 |
|
Fiscal 2007 |
|
Fiscal 2008 |
|
|
Base Salary/Target |
|
Base Salary/Target |
|
Base Salary/Target |
|
|
Bonus |
|
Bonus |
|
Bonus |
Martin M. McGlynn
President and CEO |
|
$365,000/35% of $324,000 |
|
$385,000/40% of $365,000 |
|
$385,000/40% of $385,000 |
Ann Tsukamoto, Ph.D. COO |
|
$275,000/25% of $275,000 |
|
$300,000/25% of $275,000 |
|
$300,000/25% of $300,000 |
Rodney K.B. Young CFO |
|
$250,000/25% of $250,000 |
|
$275,000/25% of $250,000 |
|
$275,000/25% of $275,000 |
Other compensation of note: In the case of our chief executive officer, who moved to California to
join the company, we also pay certain housing and transportation expenses. The Compensation
Committee has taken this into account in deciding on his base salary. These reimbursements for
housing and transportation expenses which, when grossed up for taxes, amount to approximately
$200,000 per year.
Equity
Compensation general practices:
We typically grant company-wide stock option awards to full-time employees once every year or
two. In addition, we typically grant stock option awards to newly hired employees, effective as of
their date of hire, and to existing employees upon their promotion. Both on-hire awards to
non-executive officers and awards upon their promotion 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 only 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. The Compensation Committee has, however, expressed an interest in considering a
change to a system whereby company-wide option awards would be made on a fixed date each year, and
has requested a report from management on this topic.
10
In August 2007, we awarded our employees stock options, on a company-wide basis, to purchase
up to approximately 1.4 million shares of common stock at an exercise price of $2.21 per share.
The companys executive officers received, in the aggregate, options to purchase up to 750,000
shares. We may grant additional options to current employees in 2008.
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 quarter of the shares included in any grant vesting on
the anniversary of the grant and the remainder vesting at 1/48 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. |
Of course, the Board or its committees have authority to make different provisions, but this seldom
occurs at all and, in the case of executive officers, this has not occurred for at least five
years, except as described below. All unvested options now held by executive officers are
time-vesting rather than performance based.
Equity Compensation general practices:
Special note on 2006 equity
compensation: As of 2006, employee ownership of the company, including ownership
by executive officers, had been for a number of years been well below the norm for comparable
biotechnology companies, and well below what the Compensation Committee considered desirable.
Because biotechnology companies and especially those pursuing truly novel therapeutics, as in
our case can face many challenges and potential delays before they can expect to become
profitable, company ownership in the form of stock options or other stock-based awards such as
stock appreciation rights (SARs) is a powerful incentive to employees to remain with us. Even
though we have been fortunate in securing the loyalty of our most valuable employees, including our
executive officers, we think it desirable both to reinforce that loyalty with incentives to stay on
and to demonstrate a reciprocal loyalty on the part of the Board.
The Board and the Compensation Committee had for some time
been considering ways to address
this sub-optimal degree of employee ownership (which we referred to as the Historical Issue), and
in 2006, after reviewing data, including reports from two independent consultants, we took action
to remedy the Historical Issue by increasing ownership levels and creating long-term compensation
incentives for our employees, including our executive officers. The results of these two reports
proved extremely similar. One of the reports, by Radford Consultants (the CEO Compensation
Assessment), evaluated our chief executive officers compensation against some 19 other companies
approved by the Compensation Committee based upon criteria such as stage of development, employee
size and market capitalization. (See the companys Schedule 14A for 2007 for a listing of these
companies and more discussion.) We also considered the table of ratios from the 2005 Stock
Options as a percentage of Outstanding Shares Report BIO published by Radford (the Radford
Ratios) which showed typical ownership levels of various officers and employees of biotech
companies relative to the ownership of the chief executive officer.
11
Using the CEO Compensation Assessment and the Radford Ratios as a guideline for remedying the
Historical Issue, the Compensation Committee recommended to the full Board that employee ownership
be keyed to 2.8 percent ownership (of fully diluted outstanding stock) by the chief executive
officer. The Board unanimously adopted this recommendation at its July 21, 2006 meeting, at which
the Board granted employees a total of 1,389,600 cash-settled stock appreciation rights plus
options to purchase up to 1,909,451 shares. The Compensation Committee further recommended that an
additional grant of 175,000 SARs be made to Mr. McGlynn, bringing his percentage ownership to 3
percent, reflecting its view of his outstanding performance; this brought his equity ownership to a
point between the 50th and the 75th percentile among the companies considered
in the CEO Compensation Assessment Report. Again, the Board concurred unanimously (with the
exception of Mr. McGlynn, who was not present for the discussion or vote).
The effect of these decisions on the executive officers in July 2006 was as follows:
|
|
|
|
|
|
|
|
|
Name & Principal |
|
Number of SARs |
|
Number of Shares Underlying |
Position |
|
Granted |
|
Options Granted |
Martin M. McGlynn
President and CEO |
|
|
762,335 |
|
|
|
672,665 |
|
Ann Tsukamoto, Ph.D. COO |
|
|
145,874 |
|
|
|
184,976 |
|
Rodney K.B. Young CFO |
|
|
|
|
|
|
80,000 |
|
Special note on 2008 equity compensation: In January 2008 and then again in March 2008, the
Compensation Committee, having noted the significant decline in market prices for biotechnology
companies generally and of the poor economic and market 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.
Being mindful of these things, the Compensation Committee determined it was in the companys
interest to grant additional long-term equity compensation to a limited number of employees
considered 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 three anniversaries following the grant. Of this amount, the executive officers of the
company received, in the aggregate, 825,000 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.
12
The following table summarizes the restricted stock units awarded to our executive officers in
March 2008:
|
|
|
|
|
Name & Principal Position |
|
Number of Restricted Stock Units Granted |
Martin M. McGlynn President and CEO |
|
|
412,500 |
|
Ann Tsukamoto, Ph.D. COO |
|
|
206,250 |
|
Rodney K.B. Young CFO |
|
|
206,250 |
|
Employment, Severance and Change-in-Control Agreements
Employment
agreements: Mr. Martin 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, the Board has increased
his base salary and target bonus so that they are, as of March 2008, $385,000 and 40% of his
base salary, respectively. By virtue of his January 2001 employment agreement, Mr. McGlynn was
granted 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.
Dr. Ann Tsukamoto joined the company in November 1997 and has served as our chief operating
officer since November 2006. 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, the
Board has increased her base salary and target bonus
so that they are, as of March
2008, $300,000 and 25% of her base salary, respectively. 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.
Rodney 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, the Board has increased
his base salary so that they are, as of March 2008, $275,000 and 25% of his base salary, respectively. By virtue of
his August 2005 employment agreement, Mr. Young was granted an option to purchase 450,000 shares of
our common stock. This option will vest over 48 months; with one-quarter of the shares vesting on
the first anniversary of the date on which Mr. Youngs employment began and the remaining shares
vest, subject to his continued employment by the company, vesting 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 to acquire no less than 25,000 shares of our common stock at the closing
price of the stock on the date of grant, the first anniversary of his employment. 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 his continued employment by the company.
13
Severance arrangements: Each of the executive officers would receive payments upon termination of
his or her employment by us without cause2 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 salary and provide benefits for one year, at the base wage
rate wage rate then in effect. If the termination were associated with a change of control, the
company would pay (in a lump sum) (i) two years of 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; 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).
In the case of Dr. Tsukamoto, upon termination without cause whether or not associated with a
change of control, we would continue to pay Dr. Tsukamotos salary and provide benefits for 12
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 termination without cause, we would continue to pay 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 12 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.
|
|
|
2 |
|
Or termination by the executive officer for good
reason, as defined in the agreement. |
14
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, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Early Vesting of |
|
|
Officer |
|
Salary |
|
Bonus |
|
Health |
|
Options |
|
Total |
CEO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminated without cause |
|
$ |
385,000 |
|
|
|
0 |
|
|
$ |
19,439 |
|
|
|
0 |
|
|
$ |
404,439 |
|
Terminated, change of control |
|
$ |
770,000 |
|
|
$ |
96,250 |
|
|
$ |
56,665 |
(1) |
|
$ |
1,969 |
(2) |
|
$ |
924,884 |
|
Disability(3) |
|
$ |
192,500 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
192,500 |
|
Other |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
COO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminated without cause |
|
$ |
300,000 |
|
|
|
0 |
|
|
$ |
10,298 |
|
|
|
0 |
|
|
$ |
310,298 |
|
Terminated, change of control |
|
$ |
300,000 |
|
|
|
0 |
|
|
$ |
10,298 |
|
|
$ |
1,266 |
(4) |
|
$ |
311,564 |
|
Other |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
CFO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminated without cause |
|
$ |
137,500 |
|
|
|
0 |
|
|
$ |
6,196 |
|
|
|
0 |
|
|
$ |
143,696 |
|
Terminated, change of control |
|
$ |
275,000 |
|
|
|
0 |
|
|
$ |
12,392 |
|
|
$ |
0 |
(5) |
|
$ |
287,392 |
|
Other |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
(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) |
|
An agreement with Dr. Tsukamoto provided for vesting of her options issued under an equity
incentive plan that did not provide for 100% automatic vesting on change of control, but those
options have all vested. All of our other equity incentive plans provide for accelerated vesting
of outstanding unvested options upon a change of control. |
|
(5) |
|
All unvested options issued under the applicable equity incentive plans vest upon a change of
control under the terms of those plans. |
Compensation Committee 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 annual report
and proxy statement for 2008.
COMPENSATION AND STOCK OPTION COMMITTEE
John J. Schwartz, Ph.D., Chairman
Eric Bjerkholt
Desmond OConnell
Notwithstanding anything to the contrary set forth in any of our previous filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, 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 Table
The following table sets forth information with respect to the compensation of our executive
officers for the fiscal year ended December 31, 2007. Because the Option awards column reflects
the dollar amounts recognized for financial statement reporting purposes for the fiscal year ended
December 31, 2007 in accordance with SFAS 123(R), these imputed values include amounts from awards
granted from 2002 through 2007.
15
Summary Compensation Table for 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option |
|
All other |
|
|
Name & Position |
|
Year |
|
Salary ($)(1) |
|
Bonus $(2) |
|
awards(3) ($) |
|
Compensation $(4) |
|
Total $ |
Martin McGlynn,
President and CEO |
|
|
2007 |
|
|
|
383,019 |
|
|
|
116,800 |
|
|
|
748,547 |
|
|
|
213,927 |
(5) |
|
|
1,462,293 |
|
|
|
|
2006 |
|
|
|
357,115 |
|
|
|
90,720 |
|
|
|
497,604 |
|
|
|
213,110 |
|
|
|
1,158,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ann Tsukamoto,
Ph.D., COO |
|
|
2007 |
|
|
|
296,827 |
|
|
|
55,000 |
|
|
|
228,721 |
|
|
|
23,562 |
(6) |
|
|
604,110 |
|
|
|
|
2006 |
|
|
|
270,192 |
|
|
|
50,000 |
|
|
|
155,008 |
|
|
|
13,650 |
|
|
|
488,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney Young, CFO |
|
|
2007 |
|
|
|
271,731 |
|
|
|
50,000 |
|
|
|
518,908 |
|
|
|
21,668 |
(7) |
|
|
862,307 |
|
|
|
|
2006 |
|
|
|
250,000 |
|
|
|
50,000 |
|
|
|
468,974 |
|
|
|
8,911 |
|
|
|
777,885 |
|
|
|
|
(1) |
|
Includes amounts earned but deferred at the election of the named
executive officers, such as salary deferrals under the companys
401(k) plan established under Section 401(k) of the U.S. Internal
Revenue Code. |
|
(2) |
|
Each employees target bonus is based on his or her salary as of
January 1 of the year to which it applies. Salary increases for 2007
went into effect for the first pay period in March 2007, so bonuses
were based on the salaries in effect before those increases. The
Board awarded 80% 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) |
|
Reference is made to Note 6 Stock-Based Compensation in our Form
10-K for the period ended December 31, 2007, filed with the SEC on
March 14, 2008, which identifies assumptions made in the valuation of
option awards in accordance with SFAS 123R. The companys stock-based
compensation expense recognized under SFAS 123R reflects an estimated
forfeiture rate of 13.06% in 2007. The values recognized in the
Option Awards column above do not reflect such expected forfeitures. |
|
(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 $10,609 in company contributions under the 401(k) plan, as
well as an allowance for housing and transportation costs plus a tax
gross-up on that allowance ($201,406). |
|
(6) |
|
Includes $10,250 in company contributions under the 401(k) plan, as
well as life insurance in addition to the group life coverage
($1,180). |
|
(7) |
|
Includes $7,750 in company contributions under the 401(k) plan. |
16
Grants of Plan-Based Awards
The following table shows grants of plan-based awards made to our named executive officers during
the fiscal year ended December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
Option |
|
Exercise |
|
|
|
|
|
|
|
|
Awards: |
|
or Base |
|
|
|
|
|
|
|
|
Number of |
|
Price of |
|
Grant Date |
|
|
|
|
|
|
Securities |
|
Option |
|
Fair Value of |
|
|
Grant |
|
Underlying |
|
Awards |
|
Option |
Name & Principal Position |
|
Date |
|
Options (#) |
|
($/share) |
|
Awards ($) |
Martin McGlynn
President and CEO |
|
|
8/23/07 |
|
|
|
450,000 |
|
|
|
2.21 |
|
|
|
783,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ann Tsukamoto, Ph.D.
COO |
|
|
8/23/07 |
|
|
|
150,000 |
|
|
|
2.21 |
|
|
|
261,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney K.B. Young CFO |
|
|
8/23/07 |
|
|
|
150,000 |
|
|
|
2.21 |
|
|
|
261,000 |
|
|
|
|
|
|
With respect to non-equity incentive plan awards for fiscal year 2007, the
Compensation Committee set specific corporate targets and goals as described in
the Compensation Discussion and Analysis above. |
|
|
|
The options granted in 2007 to our named executive officers were made pursuant
to our 2004 and 2006 equity incentive plans. 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: 25% vest at the end of the first year, and 75% vest
monthly in equal increments over the remaining three years. We may grant
options with different vesting terms from time to time. However, the options
granted in 2007 to our named executive officers 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. |
17
Outstanding Equity Awards at Fiscal 2007 Year-End
The following table shows equity awards held by our named executive officers as of December
31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
SARs Awards |
|
|
|
|
|
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
|
Number of |
|
|
|
|
|
|
|
|
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying |
|
Securities |
|
SAR |
|
|
|
|
|
|
|
|
Unexercised |
|
Unexercised |
|
Option |
|
|
|
|
|
|
|
|
|
Unexercised |
|
Underlying |
|
Exercis |
|
|
|
|
|
|
|
|
Options |
|
Options |
|
Exercise |
|
Option |
|
|
|
|
|
SARs |
|
Unexercised |
|
e |
|
SAR |
|
|
Option 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 |
|
|
|
|
|
|
$ |
2.87 |
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/5/2003 |
|
|
|
57,000 |
|
|
|
|
|
|
$ |
0.94 |
|
|
|
2/5/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/2/2004 |
|
|
|
284,374 |
|
|
|
65,626 |
|
|
$ |
1.53 |
|
|
|
9/2/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/21/2006 |
|
|
|
434,430 |
|
|
|
238,235 |
|
|
$ |
2.00 |
|
|
|
7/21/2016 |
|
|
|
7/21/2006 |
|
|
|
269,993 |
|
|
|
492,342 |
|
|
$ |
2.00 |
|
|
|
7/21/2016 |
|
|
|
|
8/23/2007 |
|
|
|
|
|
|
|
450,000 |
|
|
$ |
2.21 |
|
|
|
8/23/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ann Tsukamoto, Ph. D. |
|
|
2/2/1998 |
|
|
|
60,000 |
|
|
|
|
|
|
$ |
2.94 |
|
|
|
2/2/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COO |
|
|
7/10/1998 |
|
|
|
22,500 |
|
|
|
|
|
|
$ |
1.28 |
|
|
|
7/10/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/1/1999 |
|
|
|
25,000 |
|
|
|
|
|
|
$ |
1.19 |
|
|
|
9/1/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/1999 |
|
|
|
3,750 |
|
|
|
|
|
|
$ |
1.28 |
|
|
|
10/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/26/2001 |
(3) |
|
|
12,000 |
|
|
|
|
|
|
$ |
3.10 |
|
|
|
6/26/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/22/2001 |
|
|
|
30,000 |
|
|
|
|
|
|
$ |
2.62 |
|
|
|
10/22/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/7/2002 |
|
|
|
60.000 |
|
|
|
|
|
|
$ |
0.61 |
|
|
|
10/7/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/3/2004 |
|
|
|
182,812 |
|
|
|
42,188 |
|
|
$ |
1.53 |
|
|
|
9/3/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/21/2006 |
|
|
|
65,512 |
|
|
|
119,464 |
|
|
$ |
2.00 |
|
|
|
7/21/2016 |
|
|
|
7/21/2006 |
|
|
|
51,663 |
|
|
|
94,211 |
|
|
$ |
2.00 |
|
|
|
7/21/2016 |
|
|
|
|
8/23/2007 |
|
|
|
|
|
|
|
150,000 |
|
|
$ |
2.21 |
|
|
|
8/23/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney K.B.. Young |
|
|
9/6/2005 |
|
|
|
253,124 |
|
|
|
196,876 |
|
|
$ |
5.43 |
|
|
|
9/6/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CFO |
|
|
7/21/2006 |
|
|
|
28,333 |
|
|
|
51,667 |
|
|
$ |
2.00 |
|
|
|
7/21/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/6/2006 |
|
|
|
7,812 |
|
|
|
17,188 |
|
|
$ |
2.28 |
|
|
|
9/6/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/23/2007 |
|
|
|
|
|
|
|
150,000 |
|
|
$ |
2.21 |
|
|
|
8/23/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 is closed on the grant date); they vest over a period of four
years as follows: twenty-five percent (25%) of the option vests on the
first anniversary of the grant date and 1/48 of the original grant
vests each additional month of service. |
|
(2) |
|
SARs were granted to certain employees on July 21, 2006 to redress
certain perceived inequities as described in the in the Compensation
Discussion and Analysis, above. The terms of the SARs are essentially
identical to those of the options granted on the same date; they have
the same vesting schedule and same exercise price. |
|
(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 value 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 $19,375 of
compensation expense in 2001 in respect of this award. |
18
Option Exercises
The following table shows option and stock exercises during the fiscal year ended December 31,
2007 by our named executive officers:
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Number of |
|
|
|
|
Shares |
|
|
|
|
Acquired on |
|
Value Realized |
|
|
Exercise |
|
on Exercise |
Name & Principal Position |
|
(#) |
|
($) |
Martin McGlynn President and CEO |
|
|
146,000 |
|
|
$ |
376,680 |
(1) |
Ann Tsukamoto, Ph.D. COO |
|
|
|
|
|
|
|
|
Rodney K.B. Young CFO |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represent the excess of the fair market value of the shares exercised
on the exercise date over the aggregate exercise price of such shares. |
Director Compensation
Non-employee directors receive quarterly retainers of $4,500 ($8,750 for the chairman); the
chairs of the standing committees receive quarterly stipends of $1,000 (Audit Committee) or $500
(Compensation and Corporate Governance Committees). Non-employee directors also receive $1,500 for
each board meeting, and $1,000 for each standing committee meeting, attended in person or by
videoconference ($500 for each meeting attended by telephone). All dollar amounts are paid in
cash. Non-employee directors receive an initial option to purchase 20,000 shares, with one third
of these option shares vesting on each of the three anniversaries following the grant, and an
option to purchase 10,000 shares upon each anniversary of their appointments, vesting one year
after issuance, each exercisable at the fair market value of the stock on the date of the
respective grant. Directors are reimbursed for their expenses in attending meetings of the Board
of Directors and meetings of committees of the Board of Directors.
Director Compensation Table
The following table summarizes compensation paid to our non-employee directors, including
annual Board and committee retainer fees and meeting attendance fees, for the year ended December
31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees |
|
|
|
|
|
|
|
|
Earned |
|
Stock |
|
|
|
|
|
|
or Paid |
|
Option |
|
All Other |
|
|
|
|
in Cash |
|
Awards(1) |
|
Compensation |
|
Total |
Name |
|
($) |
|
($) |
|
($) |
|
($) |
Eric Bjerkholt |
|
|
34,000 |
(2) |
|
|
32,655 |
(3) |
|
|
|
|
|
|
66,655 |
|
Ricardo Levy, Ph.D. |
|
|
31,000 |
(4) |
|
|
17,267 |
(5) |
|
|
|
|
|
|
48,267 |
|
Desmond OConnell |
|
|
26,833 |
(6) |
|
|
15,836 |
(7) |
|
|
|
|
|
|
42,669 |
|
Roger Perlmutter, M.D., Ph.D. |
|
|
25,500 |
(8) |
|
|
24,521 |
(9) |
|
|
|
|
|
|
50,021 |
|
John Schwartz, Ph.D. |
|
|
50,500 |
(10) |
|
|
27,308 |
(11) |
|
|
|
|
|
|
77,808 |
|
Irving Weissman, M.D. |
|
|
25,500 |
(12) |
|
|
16,173 |
(13) |
|
|
50,000 |
(14) |
|
|
91,673 |
|
|
|
|
(1) |
|
These amounts reflect expense recognized by us in 2007 for a portion
of the current and prior year option awards to directors. Reference
is made to Note 6 Stock-Based Compensation which identifies
assumptions made in the valuation of option awards in accordance with
Financial Accounting Standards No. 123R (SFAS 123R). The companys
stock-based compensation expense |
19
|
|
|
|
|
recognized under SFAS 123R reflects
an estimated forfeiture rate of 13.06% in 2007. The values
recognized in the Option Awards column above do not reflect such
expected forfeitures. Since September 2004, each non-employee
director is granted, after an initial grant of an option to purchase
20,000 shares upon appointment, with one third of these option shares
vesting on each of the three anniversaries following the grant, and
an option to purchase 10,000 shares upon each anniversary of their
appointments, vesting one year after issuance. The exercise price is
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 over three years on the 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, a fee for Mr. Bjerkholts role
on the Compensation Committee of $2,000, and additional fees of
$10,000 for Board and committee meetings attended. Also, includes
$9,500 earned in 2007 but paid in 2008. |
|
(3) |
|
Mr. Bjerkholt was granted an option to purchase 10,000 shares of
common stock on March 1, 2007. The fair value of this option
computed in accordance with SFAS 123R was $20,917. As of December
31, 2007, Mr. Bjerkholt had options outstanding for the purchase of
50,000 shares. |
|
(4) |
|
Includes an annual retainer of $18,000, a fee for Dr. Levys role on
the Audit Committee of $4,000, a fee for Dr. Levys role on the
Corporate Governance Committee of $2,000, and additional fees of
$7,000 for Board and committee meetings attended. Also includes
$9,000 earned in 2007 but paid in 2008. |
|
(5) |
|
Dr. Levy was granted an option to purchase 10,000 shares of common
stock on September 26, 2007. The fair value of this option computed
in accordance with SFAS 123R was $16,927. As of December 31, 2007,
Dr. Levy had options outstanding for the purchase of 112,165 shares. |
|
(6) |
|
Includes an annual retainer of $18,000, a fee for Mr. OConnells
role on the Compensation Committee of $1,833, and additional fees of
$7,000 for Board and committee meetings attended. Also includes
$13,000 earned in 2007 but paid in 2008. |
|
(7) |
|
Mr. OConnell was granted an option to purchase 20,000 shares of
common stock on January 10, 2007. The fair value of this option
computed in accordance with SFAS 123R was $56,000. As of December
31, 2007, Mr. OConnell had options outstanding for the purchase of
20,000 shares. |
|
(8) |
|
Includes an annual retainer of $18,000, a fee for Dr. Perlmutters
role on the Corporate Governance Committee of $2,000, and additional
fees of $5,500 for Board and committee meetings attended. Also
includes $5,500 earned in 2007 but paid in 2008. |
|
(9) |
|
Dr. Perlmutter was granted an option to purchase 10,000 shares of
common stock on December 14, 2007. The fair value of this option
computed in accordance with SFAS 123R was $13,483. As of December
31, 2007, Dr. Perlmutter had options outstanding for the purchase of
133,503 shares. |
|
(10) |
|
Includes an annual retainer of $35,000, a fee for Dr. Schwartzs role
on the Audit Committee of $4,000, a fee for Dr. Schwartzs role on
the Corporate Governance Committee of $2,000, a fee for Dr.
Schwartzs role on the Compensation Committee of $2,000, and
additional fees of $7,500 for Board and committee meetings attended.
Also includes $13,250 earned in 2007 but paid in 2008. |
20
|
|
|
(11) |
|
Dr. Schwartz was granted an option to purchase 10,000 shares of
common stock on April 18, 2007. The fair value of this option
computed in accordance with SFAS 123R was $22,083. As of December
31, 2007, Dr. Schwartz had options outstanding for the purchase of
290,958 shares. |
|
(12) |
|
Includes an annual retainer of $18,000 and additional fees of $7,500
for Board and committee meetings attended. Also includes $6,000
earned in 2007 but paid in 2008. |
|
(13) |
|
Dr. Weissman was granted an option to purchase 10,000 shares of
common stock on October 1, 2007. The fair value of this option
computed in accordance with SFAS 123R was $16,088. As of December
31, 2007, Dr. Weissman had options outstanding for the purchase of
210,292 shares. |
|
(14) |
|
Dr. Weissman receives $50,000 per year for his services as a
consultant and as the chairman of our Scientific Advisory Board. |
|
|
|
Item 12. |
|
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
March 1, 2008, by (i) each shareholder known by us to beneficially own more than 5% of our
outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and
(iv) our directors and executive officers as a group. 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 with 60 days of March 1,
2008. 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, and that there are no other affiliations among
the stockholders listed in the table. We calculated percentage ownership using the total number of
shares outstanding as of March 1, 2008, 80,810,302 shares.
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Percentage of |
|
|
Beneficially |
|
Class Beneficially |
Name and Address of Beneficial Owner* |
|
Owned |
|
Owned*** |
Eric H. Bjerkholt(1) |
|
|
50,000 |
|
|
|
* |
* |
Ricardo Levy(2) |
|
|
102,165 |
|
|
|
* |
* |
Martin McGlynn (3) |
|
|
1,218,539 |
|
|
|
1.5 |
% |
Desmond OConnell(4) |
|
|
17,166 |
|
|
|
* |
* |
Roger M. Perlmutter(5) |
|
|
123,503 |
|
|
|
* |
* |
John J. Schwartz(6) |
|
|
290,958 |
|
|
|
* |
* |
Ann Tsukamoto (7) |
|
|
484,841 |
|
|
|
* |
* |
Irving Weissman(8) |
|
|
1,198,541 |
|
|
|
1.5 |
% |
Rodney K.B. Young(9) |
|
|
344,216 |
|
|
|
* |
* |
All directors and executive officers as a group |
|
|
3,829,929 |
|
|
|
4.7 |
% |
|
|
|
* |
|
The address of all persons listed in the table is c/o StemCells, Inc., 3155 Porter Drive, Palo
Alto, California 94304. |
|
** |
|
Less than 1% |
|
(1) |
|
Includes 50,000 shares issuable upon exercise of stock options exercisable within 60 days of
March 1, 2008. |
21
|
|
|
(2) |
|
Includes 102,165 shares issuable upon exercise of stock options exercisable within 60 days of
March 1, 2008. |
|
(3) |
|
Includes 1,189,831 shares issuable upon exercise of stock options exercisable within 60 days
of March 1, 2008. Includes 28,708 shares included in Mr. McGlynns 401(k) plan. |
|
(4) |
|
Includes 6,666 shares issuable upon exercise of stock options exercisable within 60 days of
March 1, 2008. Includes 500 shares owned by a family member, as to which Mr. OConnell
disclaims beneficial ownership. |
|
(5) |
|
Includes 123,503 shares issuable upon exercise of stock options exercisable within 60 days of
March 1, 2008. |
|
(6) |
|
Includes 290,958 shares issuable upon exercise of stock options exercisable within 60 days of
March 1, 2008. |
|
(7) |
|
Includes 424,489 shares issuable upon exercise of stock options exercisable within 60 days of
March 1, 2008. Includes 33,518 shares included in Dr. Tsukamotos 401(k) plan. Includes a
total of 26,834 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. |
|
(8) |
|
Includes 200,292 shares issuable upon exercise of stock options exercisable within 60 days of
March 1, 2008. Includes 24,187 shares held in trust for Dr. Weissmans children as to which
he disclaims beneficial ownership. |
|
(9) |
|
Includes 335,519 shares issuable upon exercise of stock options exercisable within 60 days of
March 1, 2008. Includes 8,697 shares included in Mr. Youngs 401(k) plan. |
|
|
|
Item 13. |
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
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 ethics code 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
22
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.
In 2007, Dr. Weissman was a member of the board of directors and co-chairman of the scientific
advisory board of Cellerant Therapeutics, Inc. (Cellerant), a privately-owned biotechnology
company that was a tenant in the building in which we are located. (Cellerant was formerly known
as Celtrans, LLC, and Dr. Weissman was at one time its interim chief executive officer and a member
of its board of managers.) We have also provided Cellerant use of part of our animal facility and
access to our irradiator under space-sharing and other agreements. The last of these agreements
expired as of June 30, 2006. Dr. Weissman resigned from Cellerants board of directors and its
scientific advisory board in January 2008.
|
|
|
Item 14. |
|
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, 2008.
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, 2007.
The Audit Committee received the following information concerning the fees of the independent
accountants for the years ended December 31, 2006 and 2007, has considered whether the provision of
these services is compatible with independence of the independent accountants, and concluded that
it is:
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
12/31/07 |
|
12/31/06 |
Audit fees(1) |
|
$ |
480,029 |
|
|
$ |
425,630 |
|
|
|
|
|
|
|
|
|
|
Tax fees |
|
$ |
31,376 |
|
|
$ |
21,000 |
|
|
|
|
(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 2007 and fees for auditing managements assessment of internal controls in
2006. 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
23
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 2007 and 2006, all services performed by our independent auditors were
pre-approved.
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
STEMCELLS, INC.
|
|
|
By: |
/s/ Martin McGlynn |
|
|
|
Martin McGlynn |
|
|
|
PRESIDENT AND CHIEF EXECUTIVE OFFICER |
|
Dated: April 29, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
Signature |
|
Capacity |
|
Date |
|
|
|
|
|
/s/ Martin McGlynn |
|
President and Chief Executive Officer
|
|
April 29, 2008 |
|
|
and
Director (principal executive
officer)
|
|
|
|
|
|
|
|
/s/ Rodney K.B. Young |
|
Chief Financial Officer
|
|
April 29, 2008 |
|
|
(principal
financial officer)
|
|
|
|
|
|
|
April 29, 2008 |
/s/ George Koshy |
|
Chief Accounting Officer
|
|
|
|
|
(principal
accounting officer)
|
|
|
|
|
|
|
|
|
|
|
|
April 25, 2008 |
/s/ Eric Bjerkholt |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 25, 2008 |
/s/ Ricardo B. Levy, Ph.D. |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 25, 2008 |
/s/ Desmond H. OConnell, Jr. |
|
Director |
|
|
Desmond H. OConnell, Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
April 25, 2008 |
/s/ Roger M. Perlmutter, M.D. |
|
Director |
|
|
Roger M. Perlmutter, M.D. |
|
|
|
|
|
|
|
|
|
|
|
|
|
April 25, 2008 |
/s/ John J. Schwartz, Ph.D. |
|
Director, Chairman of the Board |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 25, 2008 |
/s/ Irving L. Weissman, M.D. |
|
Director |
|
|
|
|
|
|
|
25
Exhibit Index
|
|
|
31.1 |
|
Certification Pursuant to Securities Exchange Act
Rule 13(a)-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Martin McGlynn, Chief Executive Officer) |
|
31.2 |
|
Certification Pursuant to Securities Exchange Act
Rule 13(a)-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Rodney K.B. Young, Chief Financial
Officer) |
exv31w1
EXHIBIT 31.1
Certification of Chief Executive Officer
under Section 302 of the Sarbanes-Oxley Act
I, Martin McGlynn, certify that:
|
(1) |
|
I have reviewed this annual report on Form 10-K of StemCells, Inc.; |
|
|
(2) |
|
Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
|
|
(3) |
|
Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this report; |
|
|
(4) |
|
The registrants other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have: |
|
a. |
|
Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared; |
|
|
b. |
|
Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles; |
|
|
c. |
|
Evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and |
|
|
d. |
|
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred
during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and |
|
(5) |
|
The registrants other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent
functions): |
|
a. |
|
all significant deficiencies and material weaknesses in the
design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize, and
report financial information; and |
|
|
b. |
|
any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrants internal control over financial
reporting. |
Date:
April 29, 2008
|
|
|
|
|
/s/ Martin McGlynn
|
|
|
Martin McGlynn |
|
|
President and Chief Executive Officer |
|
|
|
exv31w2
EXHIBIT 31.2
Certification of Chief Financial Officer
under Section 302 of the Sarbanes-Oxley Act
I, Rodney K.B. Young, certify that:
|
(1) |
|
I have reviewed this annual report on Form 10-K of StemCells, Inc.; |
|
|
(2) |
|
Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
|
|
(3) |
|
Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this report; |
|
|
(4) |
|
The registrants other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have: |
|
a. |
|
Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared; |
|
|
a. |
|
Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles; |
|
|
b. |
|
Evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and |
|
|
c. |
|
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred
during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and |
|
(5) |
|
The registrants other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent
functions): |
|
a. |
|
all significant deficiencies and material weaknesses in the
design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize, and
report financial information; and |
|
|
b. |
|
any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrants internal control over financial
reporting. |
Date: April 29, 2008
|
|
|
|
|
/s/ Rodney K.B. Young
|
|
|
Rodney K.B. Young |
|
|
Chief Financial Officer |
|
|
|