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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
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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þ No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
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2) Form, Schedule or Registration Statement No.: |
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SEC 1913 (02-02) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
TABLE OF CONTENTS
STEMCELLS, INC.
3155 Porter Drive
Palo Alto, CA 94304
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
To Be Held on June 21,
2006
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 June 21st, 2006 at
2 P.M. at 3155 Porter Drive, Palo Alto, CA 94304 for
the following purposes:
1. To elect Class III directors to serve until the
2009 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, 2006;
3. To consider and vote upon a proposal to adopt the 2006
Equity Incentive Plan as proposed;
4. 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
April 26, 2006 as the record date for determining those
Stockholders who are entitled to notice of and to vote at the
meeting. 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. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. Your proxy may be revoked at
any time prior to the time it is voted.
Please read the proxy material carefully. 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,
Iris Brest
Secretary
April 27, 2006
Palo Alto, California
PROXY
STATEMENT
ANNUAL
MEETING OF STOCKHOLDERS
OF
STEMCELLS, INC.
The enclosed form of proxy is solicited on behalf of the Board
of Directors of StemCells, Inc. (the company) for
use at the Annual Meeting of Stockholders (the Annual
Meeting) to be held on June 21, 2006 at 2 P.M.
at the companys headquarters at 3155 Porter Drive, Palo
Alto, California 94304. The cost of solicitation of proxies will
be borne by the company. 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, 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 April 26, 2006
as the record date for determining stockholders entitled to
notice of and to vote at the Annual Meeting or any adjournment
thereof. There were 77,733,866 shares of our Common Stock,
$.01 par value (the Common Stock), outstanding
on April 7, 2006, 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 therein by the stockholder.
In the absence of contrary instructions, or in instances where
no specification is made, the shares will be voted FOR the
election as directors of the nominees as described herein under
Proposal Number 1 Election of
Directors, FOR ratification of the selection of
accountants as described herein under Proposal Number
2 Ratification of Selection of Independent
Public Accountants, FOR adoption of the proposed 2006
Equity Incentive Plan as described herein under
Proposal 3 Adoption of the 2006
Equity Incentive Plan, and 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 Secretary of the company 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 or her proxy and vote his or her shares at
the Annual Meeting.
A copy of the companys Annual Report to Stockholders for
the fiscal year ended December 31, 2005 will be mailed,
along with this Proxy Statement, on or about May 7, 2006 to
all stockholders entitled to vote at the Annual Meeting.
QUORUM,
REQUIRED VOTES, AND METHOD OF TABULATION
Consistent with Delaware law and under the companys
Amended and Restated By-laws, a majority of the shares 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 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 present in person or represented by
proxy. The approval of the proposals to ratify the selection of
accountants and to adopt the companys 2006 Equity
Incentive Plan each requires 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 or
her proxy at any time before it is voted.
SHARE
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of our Common Stock as of April 7,
2006 by (i) each person known by us to be the beneficial
owner of more than 5% of our outstanding Common Stock,
(ii) each director and nominee for director,
(iii) each executive officer named in the Summary
Compensation Table and (iv) all executive officers and
directors of the company as a group. Except as otherwise
indicated, we believe that the beneficial owners of the Common
Stock listed below, based on information furnished by such
owners, have 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.
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Shares
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Percentage of
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Beneficially
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Class Beneficially
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Name and Address of Beneficial
Owner*
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Owned**
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Owned***
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Eric H. Bjerkholt(1)
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23,333
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***
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Ricardo Levy(2)
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82,165
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***
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Martin McGlynn(3)
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947,397
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1.1
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%
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Roger M. Perlmutter(4)
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98,503
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***
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John J. Schwartz(5)
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260,958
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***
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Irving Weissman(6)
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1,782,465
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2.1
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%
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Judi Lum(7)
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***
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Ann Tsukamoto(8)
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355,009
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***
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Rodney K.B. Young(9)
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601
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***
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All directors and executive
officers as a group
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3,549,830
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4.2
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%
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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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All numbers are based on information obtained by questionnaire
or filings on Forms 13D or 13G received by the company. |
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Less than 1% |
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(1) |
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Includes 23,333 shares issuable upon exercise of stock
options exercisable within 60 days. |
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(2) |
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Includes 82,165 shares issuable upon exercise of stock
options exercisable within 60 days. |
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(3) |
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Includes 928,125 shares issuable upon exercise of stock
options exercisable within 60 days. Includes
19,272 shares in 401(k) plan. |
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(4) |
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Includes 98,503 shares issuable upon exercise of stock
options exercisable within 60 days. |
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(5) |
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Includes 260,958 shares issuable upon exercise of stock
options exercisable within 60 days. |
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(6) |
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Includes 675,292 shares issuable upon exercise of stock
options exercisable within 60 days. Includes
14,511 shares in trust for Dr. Weissmans
children as to which he disclaims beneficial ownership. |
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(7) |
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Ms. Lum, former Chief Financial Officer and Vice President,
Finance, was no longer in the companys employ at
December 31, 2005, and no longer held stock or options at
that date. |
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Includes 305,437 shares issuable upon exercise of stock
options exercisable within 60 days. Includes
22,738 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. |
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(9) |
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Includes 601 shares in 401(k) plan. |
2
INFORMATION
CONCERNING THE BOARD AND ITS COMMITTEES
During 2005, the Board of Directors was composed of
Messrs. McGlynn and Bjerkholt and Drs. Levy,
Perlmutter, Schwartz and Weissman for the entire year. The
independent members of the Board, as defined by NASD rules, are
Mr. Bjerkholt and Drs. Levy, Perlmutter and Schwartz.
During 2005, 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 the Single Member
Committee established under the companys 2001 and 2004
Equity Incentive Plans. All members of the Compensation
Committee, the Audit Committee, and the Corporate Governance
Committee are, and are required by the charters of the
respective committees to be, independent as defined by NASD
rules.
The Corporate Governance Committee operates pursuant to a
written charter, a copy of which is available through the
companys website at www.stemcellsinc.com. It is composed
of Drs. Levy, Perlmutter and Schwartz, and held one meeting
in 2005. The Corporate Governance 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. At least one member of
the Board must be a financial expert (as defined in
Securities and Exchange Commission (SEC) and NASD
rules). The Corporate Governance Committee may identify
potential candidates through any reliable means available,
including without limitation 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 also available through the companys website
(www.stemcellsinc.com).
The Compensation Committee, which is composed of
Dr. Schwartz and Mr. Bjerkholt, held two meetings in
2005. The Compensation Committee makes recommendations to the
Board and the companys 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
company employees and consultants. The Compensation Committee
acts pursuant to a charter which is available through the
companys website at www.stemcellsinc.com.
The Audit Committee is composed of Mr. Bjerkholt and
Drs. Schwartz and Levy. The Audit Committee held five
meetings during 2005. The Committee acts pursuant to a charter
which was included as Appendix B to the companys
Proxy Statement for the 2004 Annual Meeting of Stockholders, and
which is also available through the companys website at
www.stemcellsinc.com. The primary function of the Audit
Committee is to assist the Board of Directors in fulfilling its
oversight responsibilities by reviewing financial reports and
other financial information provided by the company to any
governmental body or the public, the companys systems of
internal controls regarding finance, accounting, legal
compliance and ethics that management and the Board have
established, and the companys auditing, accounting and
financial processes generally. The Audit Committee meets
quarterly, and at such other times as it finds it necessary,
recommends to the 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 the
companys Annual Report to Stockholders 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 NASD rules.
Stockholders who wish to communicate with the Board of Directors
or with a particular director may send a letter to the Secretary
of the company at StemCells, Inc., 3155 Porter Drive, Palo
Alto, California 94304. 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). The Secretary of the
company will review all such correspondence and forward to the
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 she otherwise determines requires
their attention. The Secretary maintains a log of all
correspondence received by the company 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.
3
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 the Policy is available on the companys
website, www.stemcellsinc.com.
The company does not have a policy on director attendance at
Annual Meetings of shareholders. At the 2005 Annual Meeting,
Director Martin McGlynn, President and Chief Executive Officer
of the company, was present and presided.
Prior to September 20, 2004, non-employee directors
received an annual retainer of $18,000 ($35,000 for the
Chairman), payable quarterly, in addition to $1,500 for each
Board meeting attended ($500 for each meeting attended by
telephone) and $500 for each Committee meeting attended if not
contemporaneous with a Board meeting. In addition, upon
election, each such director also received an initial option to
purchase 20,000 shares of our Common Stock, and upon
re-election after their initial three-year term, each such
director received an additional option to purchase
15,000 shares of our Common Stock. Each of these options
was exercisable at the fair market value of the Common Stock at
the time of grant, and the shares vested in equal portions over
three years on the anniversaries of the respective grant dates.
Effective September 20, 2004, 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 now receive an
initial option of 20,000 shares at market value, vesting
ratably over three years, and an option for 10,000 shares
on 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.
The Board of Directors of StemCells held four regular and three
special meetings during the fiscal year ended December 31,
2005; a meeting of the outside directors without the Chief
Executive Officer present was held 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.
EXECUTIVE
OFFICERS
The current executive officers of the company who are not also
directors of the company are:
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Name
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Age
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Position
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Ann Tsukamoto, Ph.D.
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52
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Vice President, Research and
Development
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Rodney K.B. Young
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43
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Chief Financial Officer and Vice
President, Finance
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Ann Tsukamoto, Ph.D., joined the company in November 1997
as Senior Director, Scientific Operations, and was appointed
Vice President, Scientific Operations in June 1998 and Vice
President, Research and Development in February 2002. From 1989
until she joined StemCells, Dr. Tsukamoto was employed at
SyStemix, Inc., where she served in various research capacities
before transitioning to the position of Director of Clinical
Science. At SyStemix, Inc., Dr. Tsukamoto assisted in the
launch of its clinical research program for the hematopoietic
stem cell. She received her Ph.D. degree from the University of
California, Los Angeles and did postdoctoral research with
Dr. Harold Varmus at the University of California,
San Francisco. Dr. Tsukamoto is an inventor on six
issued U.S. Patents related to the human hematopoietic stem
cell.
Rodney K.B. Young joined the company in September 2005 as Chief
Financial Officer and Vice President, Finance. 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.
From 2000 to 2002, Mr. Young was Managing Director,
Healthcare Corporate Finance, and head of healthcare investment
banking for Europe at SG Cowen Securities Corp. From 1999 to
2000, Mr. Young was Executive Director, Global
Mergers & Acquisitions and head of the healthcare
mergers & acquisition team for Europe at Lehman
Brothers Inc.
4
From 1989 to 1999, Mr. Young was an investment banker in
the Global Healthcare group at Lehman Brothers Inc.
Mr. Young received both his BA and MBA degrees from the
University of Chicago.
Martin McGlynn, President and Chief Executive Officer of the
company, is its other executive officer; Mr. McGlynn is a
member of the Board of Directors.
All executive officers of the company are elected annually and
serve at the discretion of the Board of Directors.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2005, none of our executive officers served on the board
of directors of any entities that had one or more executive
officers serve on our Compensation Committee. No current or past
executive officers or employees of the company serve on our
Compensation Committee. The following directors served on the
Compensation Committee in 2005: Dr. Schwartz and
Mr. Bjerkholt.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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 granted him an option to purchase
500,000 shares of Common Stock for $5.25 per share, of
which 31,250 shares vested at the date of grant.
Originally, the remainder of the option would have vested upon
the occurrence of certain events, but we amended
Dr. Weissmans option on October 27, 2000 so that
the shares vested over the eight year period from the original
grant date. The option was fully vested as of September 25,
2005, remains exercisable, and has been expensed in full. Based
on the fair value of this option (which was determined using the
Black-Scholes method) and its vesting schedule, we recorded a
total expense of $1,262,443. 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 contains confidentiality, non-competition,
and assignment of invention provisions and is for a term of
fifteen years, subject to earlier termination by either party.
From October 1, 2002 through January 1, 2004, we made
the consulting payments in options exercisable at $0.10 per
share, the number of shares being determined by dividing
$12,500.00 by the difference between ten cents and the average
of the closing price of our common stock on each of the twenty
trading days preceding the date on which payment was due. As a
result of action taken by the Board of Directors on
March 11, 2004, Dr. Weissmans consulting fee has
since then been, and will continue to be, paid in cash.
In April 2000, we sold 750 shares of our 6% cumulative
convertible preferred stock plus a warrant to purchase
37,500 shares (subject to adjustment in number, exercise
price and duration) of our Common Stock to each of
Dr. Weissman and Mr. Mark Levin, also a member of the
Board at the time, for $750,000, for a total of $1,500,000, on
terms more favorable to us than we were able to obtain from
outside investors. The shares were convertible at the option of
the holders into common stock at the initial conversion price of
$3.77 per share (based on the face value of the preferred
shares), subject to adjustment upon the occurrence of certain
equity transactions. We valued the beneficial conversion feature
reflecting the April 13, 2000 commitment date and the most
beneficial per share discount available to the preferred
shareholders at $481,000; we treated that amount as a deemed
dividend as of the commitment date. The conversion price was
reduced a number of times as a result of equity transactions, as
provided in the terms of the preferred shares. On June 7,
2002, Mr. Levin converted his 750 shares of 6%
cumulative convertible preferred stock plus accumulated
dividends, at an effective conversion price of $1.94 per
share for 439,442 shares of common stock. On
October 4, 2002, the remaining 750 shares together
with accumulated dividends, which were held by
Dr. Weissman, converted automatically at the then-effective
conversion price of $1.07 to 812,802 shares of common
stock. On March 10, 2005, Mr. Levin exercised his
warrant, which then covered 72,252 shares at the adjusted
exercise price of $3.42 per share, for cash in the amount
of $247,102. On May 27, 2005, Dr. Weissman exercised
his warrant, also covering 72,252 shares at the adjusted
exercise price of $3.42 per share, in a cashless exchange
in which he received 10,784 shares.
5
Dr. Weissman is a member of the Board of Directors and
co-chairman of the Scientific Advisory Board of Cellerant
Therapeutics, Inc., 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
expires as of June 30, 2006.
EXECUTIVE
COMPENSATION
The following table sets forth the compensation paid by us to
our Chief Executive Officer, our Vice President, Research and
Development, and our current and former Chief Financial Officers
during the fiscal years ended December 31, 2005, 2004, and
2003. No other people served as executive officers during 2005.
Summary
Compensation Table
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Long Term
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Compensation Awards
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Annual Compensation
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Restricted
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Securities
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Other Annual
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Stock
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Underlying
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All Other
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Salary
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Bonus
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Compensation
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Awards
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Options
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Compensation
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Name and Principal
Position
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Year
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($)
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($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Martin McGlynn
|
|
|
2005
|
|
|
|
324,000
|
|
|
|
96,390
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
210,406
|
(5)
|
President and Chief
|
|
|
2004
|
|
|
|
310,000
|
|
|
|
113,101
|
(2)
|
|
|
|
|
|
|
|
|
|
|
350,000
|
|
|
|
209,407
|
(6)
|
Executive Officer
|
|
|
2003
|
|
|
|
272,250
|
|
|
|
71,500
|
(3)
|
|
|
30,000
|
(4)
|
|
|
|
|
|
|
300,000
|
|
|
|
205,935
|
(7)
|
Ann Tsukamoto, Ph.D.
|
|
|
2005
|
|
|
|
250,000
|
|
|
|
53,125
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,174
|
(8)
|
VP, Research and
|
|
|
2004
|
|
|
|
225,000
|
|
|
|
58,636
|
(2)
|
|
|
|
|
|
|
|
|
|
|
225,000
|
|
|
|
9,180
|
(8)
|
Development
|
|
|
2003
|
|
|
|
190,448
|
|
|
|
30,010
|
(3)
|
|
|
15,000
|
(4)
|
|
|
|
|
|
|
|
|
|
|
4,974
|
(8)
|
Rodney K.B. Young
|
|
|
2005
|
|
|
|
75,962
|
|
|
|
16,970
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,279
|
(10)
|
Chief Financial Officer and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice President, Finance (9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judi Lum
|
|
|
2005
|
|
|
|
219,829
|
(12)
|
|
|
24,368
|
(13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,660
|
(14)
|
Chief Financial Officer and
|
|
|
2004
|
|
|
|
28,942
|
|
|
|
10,000
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,168
|
(14)
|
Vice President, Finance(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Awarded by the Board in February 2006 for performance goals met
in 2005. |
|
(2) |
|
Awarded by the Board in February and March 2005 for performance
goals met in 2004. |
|
(3) |
|
Awarded by the Board in December 2003 for services rendered in
2003, but not paid until January 2004. |
|
(4) |
|
Special payment awarded by the Board in December 2003 for
services rendered in 2003, but not paid until January 2004. |
|
(5) |
|
Represents housing allowance of $201,406, and $9,000 of fair
market value of the company matching contributions of Common
Stock to Mr. McGlynns account in our 401(k) Plan. |
|
(6) |
|
Represents housing allowance of $201,407, and $8,000 of fair
market value of the company matching contributions of Common
Stock to Mr. McGlynns account in our 401(k) Plan. |
|
(7) |
|
Represents housing allowance of $201,406, and $4,529 of fair
market value of the company matching contributions of Common
Stock to Mr. McGlynns account in our 401(k) Plan. |
|
(8) |
|
Represents $7,994, $8,000, and $3,794 of fair market value of
the company matching contributions of Common Stock to
Dr. Tsukamotos account in our 401(k) Plan for the
years 2005, 2004, and 2003 respectively, plus $1,180 paid by the
company for term life insurance for Dr. Tsukamoto in each
such year. |
|
(9) |
|
Mr. Young became Chief Financial Officer and Vice
President, Finance, effective September 6, 2005. |
|
(10) |
|
Represents the fair market value of the company matching
contributions of Common Stock to Mr. Youngs account
in our 401(k) Plan for the year 2005. |
6
|
|
|
(11) |
|
Ms. Lum served as Chief Financial Officer and Vice
President, Finance, from November 8, 2004 through
September 5, 2005. |
|
(12) |
|
Includes $64,500 paid to Ms. Lum as a consultant in 2005
after her resignation from the position of Chief Financial
Officer and Vice President, Finance. |
|
(13) |
|
Awarded by the Board in February 2006 for performance goals met
in 2005, pro-rated for Ms. Lums tenure as Chief
Financial Officer and Vice President, Finance during 2005,
pursuant to agreement. |
|
(14) |
|
Represents the fair market value of the company matching
contributions of Common Stock to Ms. Lums account in
our 401(k) Plan for the years 2004 and 2005. |
|
(15) |
|
Sign-on bonus provided to Ms. Lum in accordance with terms
of offer of employment. |
The following table provides information on option grants in
2005 to the named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
Potential Realizable
Value at
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Assumed Annual
|
|
|
|
Number of
|
|
|
Options
|
|
|
Exercise
|
|
|
|
|
|
Rates of Stock Price
|
|
|
|
Securities
|
|
|
Granted to
|
|
|
of Base
|
|
|
|
|
|
Appreciation for Option
|
|
|
|
Underlying
|
|
|
Employees
|
|
|
Price
|
|
|
|
|
|
Term(3)
|
|
|
|
Options
|
|
|
in Fiscal
|
|
|
($/Share)
|
|
|
Expiration
|
|
|
5%
|
|
|
10%
|
|
Name
|
|
Granted
|
|
|
Year(1)
|
|
|
(2)
|
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
Martin McGlynn
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judi Lum
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ann Tsukamoto, Ph.D.
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney K.B. Young
|
|
|
450,000
|
|
|
|
48
|
%
|
|
$
|
5.43
|
|
|
|
9/06/2015
|
|
|
|
1,536,704
|
|
|
|
3,894,310
|
|
|
|
|
(1) |
|
The company granted options covering 935,000 shares of
Common Stock to employees in the fiscal year ended
December 31, 2005. |
|
(2) |
|
The exercise price may be paid by delivery of already-owned
shares and tax withholding obligations related to exercise may
be paid by offset of the underlying shares, subject to certain
conditions. |
|
(3) |
|
As required by the Commissions rules on executive
compensation disclosure, the company has presented option values
based on arbitrary growth rates, and this disclosure is not
intended to forecast future appreciation, if any, in our stock
price. |
The following table provides information about option exercises
in 2005 by the named executive officers and the value of such
officers unexercised options at December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
Value of Unexercised
|
|
|
|
Shares
|
|
|
|
|
|
Underlying Unexercised
|
|
|
in-the-Money Options
|
|
|
|
Acquired on
|
|
|
Value
|
|
|
Options at Fiscal Year
|
|
|
at Fiscal Year End ($)
|
|
|
|
Exercise
|
|
|
Realized
|
|
|
End (1) (#)
|
|
|
Exercisable/Unexercisable
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
Exercisable/Unexercisable
|
|
|
(2)
|
|
|
Martin McGlynn
|
|
|
0
|
|
|
|
|
|
|
|
844,791/330,209
|
|
|
|
1,121,590/683,635
|
|
Judi Lum(3)
|
|
|
106,250
|
|
|
$
|
129,005
|
|
|
|
0/0
|
|
|
|
0/0
|
|
Ann Tsukamoto, Ph.D.
|
|
|
0
|
|
|
|
|
|
|
|
271,062/167,188
|
|
|
|
308,206/332,501
|
|
Rodney K.B. Young
|
|
|
0
|
|
|
|
|
|
|
|
0/450,000
|
|
|
|
0/0
|
|
|
|
|
(1) |
|
December 31, 2005. |
|
(2) |
|
The closing price of the companys Common Stock on
December 30, 2005 (the last trading day of 2005) on the
NASDAQ National Market System was $3.45. The numbers shown
reflect the value of options accumulated over all years of
employment. |
|
(3) |
|
At the time of exercise, Ms. Lum was no longer an executive
officer or employee of the company. |
7
EMPLOYMENT
AND SEVERANCE AGREEMENTS
Martin McGlynn joined the company as President and Chief
Executive Officer on January 15, 2001. Under the terms of
an agreement between Mr. McGlynn and the company,
Mr. McGlynn is entitled to an 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. In December 2003, the Board set
Mr. McGlynns target bonus at 35% effective
January 1, 2004. 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 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 agreement
provides that the Board may, in its sole discretion, grant
Mr. McGlynn a bonus option to purchase up to an additional
25,000 shares. The vesting under the option is subject to
acceleration in the event of certain changes of control. We also
agreed to pay Mr. McGlynn a $50,000 relocation bonus and to
reimburse him for relocation expenses, and have done so. The
agreement with Mr. McGlynn provides that if his employment
is terminated by us without cause or by Mr. McGlynn for
good reason, he will be entitled to severance payments equal to
one years base salary and he will receive healthcare
benefits under our plans for one year after termination. If
Mr. McGlynns employment is terminated as a result of
his disability, he will receive up to six months base
salary. By virtue of an amendment to the agreement made in
April, 2004, if a change in control or similar event occurs and
is followed by a material change in his duties, or if we
terminate his employment without cause within twelve months
following such an event, he will be entitled to severance
payments equal to a proportional part of his target bonus plus
two times his base salary and the reasonably projected cost of
continuing his healthcare benefits for two years plus a cash
gross up to reflect the reasonably projected tax
consequences of the healthcare-related payment. If we terminate
Mr. McGlynns employment for cause or if he resigns,
he will not be entitled to any severance or other benefits.
Dr. Ann Tsukamoto, Ph.D., joined the company in
November 1997 as Senior Director, Scientific Operations, was
appointed Vice President, Scientific Operations in June 1998,
and Vice President, Research and Development in February 2002.
Under her employment agreement, the company provides
Dr. Tsukamoto with $750,000 of term life insurance during
her employment. Dr. Tsukamotos base salary is no
longer controlled by a formal agreement. In December 2003, the
Board set Dr. Tsukamotos target bonus at 25%
effective January 1, 2004. Any bonus is in the Boards
sole discretion. Our agreement with Dr. Tsukamoto, as
amended in July 2000, provides that if her employment is
terminated by us without cause at any time, she will be entitled
to severance payments of current salary and benefits
continuation under COBRA for a period of twelve months after the
effective date of termination and to accelerated vesting of
time-based options granted under our 1992 Equity Incentive Plan.
If we terminate Dr. Tsukamotos employment for cause
or if she resigns, she will not be entitled to any severance or
other benefits.
Rodney K.B. Young joined the company in September 2005 as Chief
Financial Officer and Vice President, Finance. Under the terms
of his agreement with the company, Mr. Youngs base
salary is $250,000 per year, with a target cash bonus of up
to twenty-five percent of base salary. Any bonus is in the
Boards sole discretion. Mr. Young was also granted
options to purchase 450,000 shares of the companys
common stock. The options will vest over 48 months, with
one-quarter of the shares vesting, subject to his continued
employment by the company, on the first anniversary of the date
on which Mr. Youngs employment began and the
remaining shares vesting at the rate of 1/48th per month on
the last day of each month during the ensuing 36 months. In
addition, on the first anniversary of his employment,
Mr. Young will be granted an option to acquire no less than
25,000 shares of the Common Stock of the company at the
closing price of the stock on the market on which they are
listed on the date of the grant, which, subject to his continued
employment by the company, will also vest over forty-eight
(48) months, one quarter of the shares on the first
anniversary of the grant and the remaining shares at the rate of
one forty-eighth (1/48) per month on the last day of each month
during the ensuing thirty-six months. In the event that
Mr. Youngs employment is terminated by the company
without Cause as defined or if he resigns for Good Reason as
defined, he will receive, as severance, six months of salary at
his base salary rate in effect at the time, and the company will
pay all premiums necessary to maintain his group health
insurance coverage in effect for 6 months after the
termination date if he makes the COBRA election. If such a
termination occurs within 12 months after a Change of
Control as defined, he will receive, as severance,
12 months of salary payments and 12 months of
company-paid COBRA health insurance coverage if he makes the
COBRA election, and the company will gross him up
for any tax impact associated with this health insurance
benefit. Mr. Youngs employment is at will.
8
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 those 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 2005, 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 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 2005 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 61 (Codification of Statements
on Auditing Standards, AU 380). The Audit Committee has also
discussed with Grant Thornton LLP its report on internal control
over financial reporting and its report on managements
assessment of internal control over financial reporting, has
received the written disclosures and the letter from Grant
Thornton LLP required by Independence Standards Board Standard
No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees), 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, 2005 for filing
with the SEC.
AUDIT COMMITTEE
Eric Bjerkholt, Chairman
Ricardo B. Levy, Ph.D.
John J. Schwartz, Ph.D.
Notwithstanding anything to the contrary set forth in any of the
companys previous filings under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, that might incorporate future filings, including this
Proxy Statement, in whole or in part, the following report and
the Performance Graph on page XX shall not be incorporated
by reference into any such filings.
REPORT OF
THE COMPENSATION AND STOCK OPTION COMMITTEE
The company continues to use its best efforts to apply a
consistent philosophy of compensation for all employees,
including executive officers. This philosophy is based on the
premise that the achievements of the company result from the
coordinated efforts of all individuals working toward common
objectives within each of the then-existing projects of the
companys respective business units. The company strives to
achieve those objectives through teamwork focused on meeting or
exceeding strategic, scientific and business goals and the
expectations of the companys shareholders.
9
Compensation
Philosophy for Executive Officers
|
|
|
|
|
We compensate our executive officers through a combination of
base salary combined with periodic awards of cash bonuses and
stock options. Our executive officers also participate in the
companys benefits programs, which are made available to
all employees of the company.
|
|
|
|
We are committed to a compensation program that helps attract
and retain the best people in the industry. To ensure that our
compensation is competitive, we regularly compare our
compensation levels with those companies we consider comparable
and set our compensation parameters based on this review. We use
the industry standard data from the Radford Biotechnology
Compensation Surveys and, from time to time, the advice of
consultants in evaluating our practice in the areas of base pay,
incentive pay, equity participation, and benefits.
|
|
|
|
We reward our executive officers for performance.
|
|
|
|
Executive officers are rewarded based upon both individual
contribution and the performance of the company as a whole.
Corporate performance is evaluated by reviewing the extent to
which scientific, financial, business and strategic goals are
met. Individual performance is evaluated by reviewing the
individuals role in the achievement of corporate goals,
ability to deal with unforeseeable problems and seize
unforeseeable opportunities, and the degree to which teamwork
and company values are fostered by the individuals actions.
|
In early stage biopharmaceutical companies, performance is best
judged by success in achievement of scientific and technical
milestones, product development progress (including progress
toward and through clinical trials), strategic human resources
development, capitalization and financing goals, and
commercialization goals.
We believe that all employees, including executive officers,
should understand and constructively participate in the
performance evaluation process, which operates as follows:
1. At the beginning of the performance cycle, the Chief
Executive Officer in conference with the companys
scientific leadership and other members of management proposes a
set of key objectives and goals for the year. These goals and
objectives are reviewed and approved by the Board of Directors.
Progress toward the accomplishment of these goals is reviewed by
the Board of Directors from time to time and adjustments may be
made to the goals pursuant to such review. The Board also
establishes a bonus pool of cash
and/or
equity (stock options) for achievement of the goals. The
companys budget and its conduct of affairs are, to a
significant extent, driven by these goals, as are the individual
goals of each employee.
2. At the end of the performance cycle, the Compensation
Committee determines whether and to what extent the goals have
been achieved and determines whether cash
and/or
equity bonuses are warranted. To the extent that bonuses are
approved, all employees participate in accordance with
established guidelines.
3. Managers evaluate the performance of employees reporting
to them, and performance is discussed with the Chief Executive
Officer. The evaluation of the Chief Executive Officer is
normally performed by the Compensation Committee and reported to
the Board, but may occasionally be performed by the full Board
in the first instance.
4. The performance of other executive officers is discussed
with the Compensation Committee, which reviews recommendations
for compensation made (subject to their review or to review by
the full Board) by the Chief Executive Officer.
Compensation
Vehicles
The company uses a simple total compensation program consisting
of cash and equity-based compensation. On occasion, to secure
the services of outstanding candidates who live elsewhere, the
company recognizes the high cost of housing in the
San Francisco Bay Area by providing a housing allowance,
sometimes including a tax gross-up. Having a compensation
program that allows the company to successfully attract and
retain executive officers
10
permits it to enhance shareholder value, motivate technological
innovation and foster teamwork. The vehicles used are:
Cash-Based
Compensation
Salary The company sets base salaries
for executive officers by reviewing the base salary for
individuals in competitive positions in the market and adjusting
annually with increases that reflect individual performance.
Annual Cash Bonus Executive officers and
the Chief Executive Officer, as well as all other employees, are
eligible to receive an annual cash bonus upon the attainment of
predetermined corporate objectives approved by the Compensation
Committee at the beginning of the year, with progress against
them reviewed at year-end to determine the appropriate bonus
payment. At full achievement of objectives, the Chief Executive
Officer would be targeted to receive a bonus of 35% of his
annual base salary; the Vice President, Research and Development
would be targeted to receive a bonus of 25% of her annual base
salary, and the Chief Financial Officer would be targeted to
receive a bonus of 25% of his annual base salary. The amount
actually paid in any one year may be more or less than the
targeted bonus based on over or under achievement of objectives
and the Board and Compensation Committees discretion.
Compensation
of Chief Executive Officer
For fiscal year 2005, Mr. McGlynn earned $324,000 in base
salary and a bonus of $96,390 that was paid after the end of the
fiscal year. His base salary was set after considering his
achievements in 2004, his experience, and the salaries of the
chief executive officers of comparable companies. The bonus
awarded Mr. McGlynn on account of his work in 2005 reflects
the Compensation Committees assessment of the
companys success in attaining specific objectives and
Mr. McGlynns contribution to that success, including
his leadership role in formulating and executing the
companys business strategy. The Committee took particular
note of Mr. McGlynns achievement in leading the
company toward the initiation of clinical development of its
lead product, including the successful attempt to obtain FDA
approval for its first clinical trial and strengthening the
companys liver program.
Equity-Based
Compensation
Stock Option Program The purpose of our
stock option program is to provide additional incentives to all
employees, including executive officers, to maximize shareholder
value. We believe strongly in the use of stock options because
they align employee interests directly with shareholder value.
The option program also utilizes vesting periods to encourage
executive officers to remain with the company and to encourage
long-term increases in company stock value. We grant stock
options to all employees upon hiring, and provide ongoing grants
when appropriate in the Boards judgment, as an incentive
vehicle to encourage employee equity participation in our future.
Although provided for under our incentive plans, we do not
currently use stock appreciation rights as a compensation
vehicle.
Compensation
of Executive Officers
The executive officers of the company for 2005 were Martin
McGlynn, who served as the companys President and Chief
Executive Officer, Ann Tsukamoto, who served as Vice President,
Research and Development, Judi Lum, who served as Chief
Financial Officer and Vice President, Finance from January 1 to
September 6, 2005 and Rodney Young, who served as Chief
Financial Officer and Vice President, Finance, beginning
September 6, 2005. Their compensation is described under
Employment and Severance Agreements above.
COMPENSATION AND STOCK OPTION COMMITTEE
John J. Schwartz, Ph.D., Chairman
Eric Bjerkholt
11
PERFORMANCE
GRAPH
Note: The stock price performance shown on the graph below is
not necessarily indicative of future stock price performance.
The graph below compares the cumulative total returns on the
companys Common Stock with the cumulative total returns of
the Amex Biotechnology Stock Index and the S&P 500 Index for
the period from December 31, 2000 until December 31,
2005. (1)
Comparison
of Cumulative Total Returns on Common Stock of StemCells,
Inc.,
the Amex Biotechnology Stock Index and S&P 500 Index
for the Period From December 31, 2000 Until
December 31, 2005
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December 31,
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December 31,
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December 31,
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December 31,
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December 31,
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December 31,
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2000
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2001
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2002
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2003
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2004
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2005
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COMPANY
|
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$
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100
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$
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139.60
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$
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43.60
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$
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79.20
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$
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169.20
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$
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138.00
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S&P 500 INDEX
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$
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100
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$
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86.96
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$
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66.64
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$
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84.22
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$
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91.79
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$
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94.55
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AMEX BIOTECH STOCK INDEX
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$
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100
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$
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53.32
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$
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77.26
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$
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85.80
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$
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107.34
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$
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107.34
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(1) |
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Based on the closing price of the companys Common Stock on
the first day of trading on the NASDAQ National Market System.
Cumulative total returns assume reinvestment of all dividends
and a hypothetical investment of $100 on December 31, 2000. |
PROPOSAL NUMBER
1
ELECTION OF DIRECTORS
The number of directors is currently fixed at six. Our
Certificate of Incorporation as amended and Amended and Restated
By-laws provide for the classification of the Board of Directors
into three classes, 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 III directors,
as Class III directors for a term of three years expiring
at the 2009 Annual Meeting of Stockholders and until their
successors are duly elected and qualified. 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
12
substitute nominee or nominees designated by the Board of
Directors. The nominees for election as Class III directors
and the incumbent Class I and II directors are as follows:
NOMINEES
FOR ELECTION AS CLASS III DIRECTORS TERMS
EXPIRE 2006
|
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|
|
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Name
|
|
Principal occupation
|
|
Age
|
|
Position
|
|
Martin McGlynn
|
|
President and Chief Executive
Officer, StemCells, Inc.
|
|
|
60
|
|
|
Director, Executive Officer
|
Roger Perlmutter,
M.D., Ph.D.
|
|
Executive Vice President, Research
and Development, Amgen, Inc.
|
|
|
53
|
|
|
Director
|
Martin M. 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 on
February 6, 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 General Manager, Abbott Ireland Ltd.,
President and General Manager of Abbott Canada Ltd. and Vice
President of Abbott International Ltd. In 1990, he joined the
BOC Group as President of Anaquest, Inc., a company focused on
anesthesia and acute care pharmaceuticals. From 1994 until he
joined the company, Mr. McGlynn was 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 M. Perlmutter, M.D., Ph.D., was elected to the
Board of Directors in December 2000. Dr. Perlmutter is
Executive Vice President, Research and Development, of Amgen,
Inc., a position he has held since January 2001. Prior to
joining Amgen, he was Executive Vice President, Worldwide Basic
Research and Preclinical Development, Merck Research
Laboratories, a division of Merck & Co., Inc., a
position he had held since August 1999. He joined Merck in
February 1997 as Senior Vice President, Merck Research
Laboratories, from February 1997 to December 1998 and as
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 since 1999. He is licensed to practice
medicine in the State of California and the State of Washington.
He was graduated from Reed College in 1973 and received his M.D.
and Ph.D. degrees from Washington University, St. Louis,
Missouri in 1979.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE ELECTION OF THE NOMINEES DESCRIBED ABOVE
INCUMBENT
CLASS I DIRECTORS TERMS EXPIRE
2007
|
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|
|
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Name
|
|
Principal Occupation
|
|
Age
|
|
Position
|
|
John J. Schwartz, Ph.D.
|
|
President, Quantum Strategies
Management Company.
|
|
|
71
|
|
|
Director, Chairman of the Board
|
Eric H. Bjerkholt
|
|
Senior Vice President and CFO,
Sunesis Pharmaceuticals, Inc.
|
|
|
46
|
|
|
Director
|
John J. Schwartz, Ph.D., was elected to the Board of
Directors of the company in December 1998 and was elected
Chairman of the Board at the same time. He is the former
President and Chief Executive Officer of SyStemix, Inc.
Dr. Schwartz is currently President of Quantum Strategies
Management Company, a registered
13
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 was graduated from Harvard Law
School in 1958 and received his Ph.D. degree in physics from the
University of Rochester in 1965.
Eric H. Bjerkholt was elected to the Board of Directors of the
company on March 1, 2004. He is Senior Vice President and
CFO of Sunesis Pharmaceuticals, Inc., a small molecule
biopharmaceutical company in South San Francisco, CA.
Before joining Sunesis, Mr. Bjerkholt served as Senior Vice
President and CFO of IntraBiotics Pharmaceuticals, Inc.
Previously, Mr. Bjerkholt co-founded LifeSpring Nutrition,
Inc., a privately held nutraceutical company, and served as its
CFO, 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.
INCUMBENT
CLASS II DIRECTORS TERM EXPIRES
2008
|
|
|
|
|
|
|
|
|
Name
|
|
Principal Occupation
|
|
Age
|
|
Position
|
|
Irving Weissman, M.D.
|
|
Professor, Stanford University
|
|
|
66
|
|
|
Director
|
Ricardo B. Levy, Ph.D.
|
|
Chairman of the Board, Catalytica
Energy Systems, Inc.
|
|
|
61
|
|
|
Director
|
Irving L. Weissman, M.D. was elected to the Board of
Directors of the company in September 1997. Dr. Weissman is
the Virginia and Daniel K. Ludwig Professor of Cancer Research,
Professor of Pathology and Professor of Developmental Biology at
Stanford University and is the Director of the new Stanford
Institute for Stem Cell Biology and Regenerative Medicine, and
Director of the Stanford Comprehensive Cancer Center.
Dr. Weissman is a cofounder and was a member of the
Scientific Advisory Board of SyStemix, Inc, and is Director,
founder, and chair of the Scientific Advisory Board of
Cellerant, Inc. He has also served on the Scientific Advisory
Boards of Amgen Inc., Cellerant, DNAX and T-Cell Sciences, Inc.,
all of which are biotechnology companies. Dr. Weissman is a
member of the National Academy of Sciences and also serves as
Chairman of the Scientific Advisory Board of the company.
Ricardo B. Levy, Ph.D., is Chairman of the Board of
Catalytica Energy Systems, Inc., and has been a member of its
Board of Directors since June 1995, when the company was formed
as a subsidiary of Catalytica, Inc. He also served as director
of Catalytica Pharmaceuticals Inc. from 1995 to 2000.
Dr. Levy was a founder of Catalytica, Inc. in 1974, serving
as Chief Operating Officer from 1974 until 1991 and President
and Chief Executive Officer until December 2000, when
Catalytica, Inc. and Catalytica Pharmaceuticals Inc. were sold
to DSM N.V. Before founding Catalytica, Inc., Dr. Levy was
a founding member of Exxons chemical physics research
team, and prior to that served as 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, a Ph.D. in chemical engineering from
Stanford University and is an alumnus of Harvard
Universitys Executive Management Program.
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, 2005.
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
14
engage another firm at any time if the Committee determines that
such a change would be necessary or desirable in the best
interests of the company and its stockholders.
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, 2006.
PROPOSAL NUMBER
3
Adoption of the 2006 Equity Incentive Plan
On April 7, 2006, the Board of Directors adopted the 2006
Equity Incentive Plan (the Plan), subject to
shareholder approval.
The purpose of the Plan is to advance the interests of the
company by enhancing its ability to attract and retain employees
and other persons or entities providing services to the company
who are in a position to make significant contributions to the
success of the company, and to reward participants for such
contributions, through the grant of equity awards under the
Plan. The Plan is intended to accomplish these goals by enabling
the company to grant awards in the form of stock options, stock
appreciation rights, restricted stock, unrestricted stock,
deferred stock, or performance awards (in cash or stock), or
combinations thereof, all as more fully described below. As of
April 24, 2006, only approximately 1,076,592, shares were
available for grant under all existing equity incentive plans.
OVERVIEW
The Plan will be administered by the Board of Directors (the
Board) or a committee appointed by the Board (the
Committee). The term Administrator is
used in this proxy statement to refer to the person (Board or
Committee, and their delegates) charged with administering the
Plan. Under the Plan, the Administrator may grant stock options,
stock appreciation rights, restricted stock, unrestricted stock,
deferred stock, and performance awards (in cash or stock), or
combinations thereof, may set the terms and conditions of any
such award subject to the terms of the Plan, and may waive the
terms and conditions of any award. A total of
6,000,000 shares of Common Stock may be issued under the
Plan. No awards may be granted under the Plan after
June 20, 2016, but awards previously granted may extend
beyond that date. Employees of the company, including executive
officers, directors and other persons or entities providing
services to the company or its subsidiaries who are in a
position to make a significant contribution to the success of
the company are eligible to receive awards under the Plan. As of
April 27, 2006, approximately 60 persons were in this
eligible class. StemCells expects that approximately 100 persons
will participate in the Plan annually.
Section 162(m) of the Code places annual limitations on the
deductibility by public companies of compensation in excess of
$1,000,000 paid to each of the chief executive officer and the
other four most highly compensated officers, unless, among other
things, the compensation is performance-based. For compensation
attributable to stock options and stock appreciation rights to
qualify as performance-based, the plan under which they are
granted must state a maximum number of shares with respect to
which options and rights may be granted to an individual during
a specified period and must be approved by the companys
shareholders. To comply with these requirements, the Plan
provides that the maximum number of shares as to which options
may be granted to any participant during any calendar year is
1,000,000 and the maximum number of shares as to which stock
appreciation rights may be granted to any participant during
that period is 1,000,000, and the Plan is being submitted for
shareholder approval.
Stock Options. The exercise price of any stock
option granted under the Plan shall be no less than 100% of the
fair market value of the Common Stock at the time of grant.
Subject to the foregoing, the Administrator determines the
exercise price of each option granted under the Plan. The
exercise price may be paid in cash or by check acceptable to the
Administrator. Subject to certain additional limitations, the
Administrator may also permit the exercise price to be paid by
tendering shares of Common Stock that have been outstanding for
at least six months, by
15
delivery of a promissory note, through a broker-assisted
exercise program or by other means acceptable to the
Administrator, or a combination of the foregoing, in each case
if permitted under applicable law.
Stock Appreciation Rights (SARs). Stock
appreciation rights (SARs) may be granted either
alone or in tandem with stock option grants. Each SAR entitles
the holder on exercise to receive an amount in cash or Common
Stock or a combination thereof (such form to be determined by
the Administrator) an amount equal to appreciation in the fair
market value of a share of Common Stock from the date of grant.
Stock Awards; Deferred Stock. The Plan
provides for awards of nontransferable shares of restricted
Common Stock subject to resale to the company for less than fair
market value or forfeiture (Restricted Stock), as
well as unrestricted shares of Common Stock. Shares of
Restricted Stock may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end
of the applicable period and the satisfaction of any other
conditions or restrictions established by the Administrator.
Except as the Administrator may otherwise determine, if a
participant dies or ceases to be an employee or ceases to
continue the consulting or other similar relationship engaged in
by such participant with the company for any reason during the
restricted period, the company may repurchase the shares of
Restricted Stock or the shares of Restricted Stock may be
forfeited to the company. The Plan also provides for deferred
grants entitling the recipient to receive shares of Common Stock
in the future at such times and on such conditions as the
Administrator may specify. The maximum number of shares subject
to stock-based awards other than stock options or SARs granted
to any person in any calendar year is 1,000,000.
Performance Awards. The Plan provides for
performance awards entitling the recipient to receive cash or
Common Stock following the attainment of performance goals
determined by the Administrator. Performance conditions may also
be attached to other awards under the Plan. In the case of any
performance award intended to qualify for the performance-based
remuneration exception described in Section 162(m) of the
Code (an Exempt Award), the Administrator will in
writing pre-establish specific performance goals that are based
upon any one or more of the following operational, result or
event-specific goals, or a combination thereof: sales; revenues;
assets; expenses; earnings before or after deduction for all or
any portion of interest, taxes, depreciation, or amortization,
whether or not on a continuing operations or an aggregate or per
share basis; return on equity, investment, capital or assets;
one or more operating ratios; borrowing levels, leverage ratios
or credit rating; market share; capital expenditures; cash flow;
stock price; stockholder return; sales of particular products or
services; customer acquisition or retention; acquisitions and
divestitures (in whole or in part); joint ventures and strategic
alliances; spin-offs, split-ups and the like; reorganizations;
or recapitalizations, restructurings, financings (issuance of
debt or equity) or refinancings.
Termination. Except as otherwise provided by
the Administrator, if a participant dies, stock options and SARs
exercisable immediately prior to death may be exercised by the
participants executor, administrator or transferee during
a period of one year following such death (or for the remainder
of their original term, if less). Options and SARs not
exercisable at a participants death terminate. In the case
of termination for reasons other than death, outstanding stock
options and SARs remain exercisable, to the extent they were
exercisable immediately prior to termination, for three months
(or for the remainder of their original term, if less); provided
that if in the Administrators judgment the reason for the
award holders termination casts discredit on the company
sufficient to justify immediate termination of the award, then
such award will immediately terminate.
Change of Control. In the case of certain
mergers, consolidations or other transactions in which StemCells
is acquired or is liquidated and there is a surviving or
acquiring corporation, the Plan permits the Board to arrange for
the assumption of awards outstanding under the Plan or the grant
to participants of replacement awards by the surviving
corporation. Alternatively, if the transaction is one in which
shareholders of the company will receive payment in cash or
otherwise, the Administrator may provide for a
cash-out with respect to some or all awards equal in
the case of each affected award to the excess of the fair market
value per share of Common Stock times the number of shares of
Common Stock subject to the Award, less the aggregate exercise
or purchase price, if any, under the award. All outstanding
awards not assumed by the surviving or acquiring corporation, or
cashed out, shall become exercisable immediately prior to the
consummation of such merger, consolidation or other transaction
and upon such consummation all outstanding awards that have not
been assumed or replaced will terminate.
Amendment. The Board may amend the Plan or any
outstanding award at any time, provided that no such amendment
will, without the approval of the shareholders of the company,
effectuate a change for which
16
shareholder approval is required under applicable law, including
the Code and applicable stock exchange requirements. Except in
connection with stock split, stock dividends or the like, there
will be no reduction in the exercise price of any option other
than in accordance with the applicable stockholder approval
requirements of Nasdaq.
Effective Date of the Plan. The Plan will
become effective as of June 21, 2006, provided that it is
approved by the shareholders at this meeting.
NEW PLAN
BENEFIT
The future benefits or amounts that would be received under the
Plan by the executive officers and the non-executive officer
employees are discretionary and are therefore not determinable
at this time. As noted under Information Concerning the
Board and Its Committees above, as part of their
compensation, directors receive an option to purchase
20,000 shares at fair market value upon election or
appointment to an initial term on the Board, vesting ratably
over 3 years, and an option for 10,000 shares on each
anniversary of the appointments, vesting one year after
issuance, all exercisable at the fair market value on the date
of the respective grant.
FEDERAL
TAX EFFECTS
The following discussion summarizes certain federal income tax
consequences of the issuance and receipt of options under the
Plan. The summary does not purport to cover federal employment
tax or other federal tax consequences that may be associated
with the Plan, nor does it cover state, local or
non-U.S. taxes.
Incentive Stock Options. In general, an
optionee realizes no taxable income upon the grant or exercise
of an ISO. However, the exercise of an ISO may result in an
alternative minimum tax liability to the optionee. With certain
exceptions, a disposition of shares purchased under an ISO
within two years from the date of grant or within one year after
exercise produces ordinary income to the optionee (and a
deduction to the company) equal to the value of the shares at
the time of exercise less the exercise price. Any additional
gain recognized in the disposition is treated as a capital gain
for which the company is not entitled to a deduction. If the
optionee does not dispose of the shares until after the
expiration of these one- and two-year holding periods, any gain
or loss recognized upon a subsequent sale is treated as a
long-term capital gain or loss for which the company is not
entitled to a deduction.
Nonstatutory (Non-ISO) Options. In general, in
the case of a non-ISO, the optionee has no taxable income at the
time of grant but realizes income in connection with exercise of
the option in an amount equal to the excess (at the time of
exercise) of the fair market value of the shares acquired upon
exercise over the exercise price. A corresponding deduction is
available to the company. Upon a subsequent sale or exchange of
the shares, appreciation or depreciation after the date of
exercise is treated as capital gain or loss for which the
company is not entitled to a deduction.
In general, an ISO that is exercised more than three months
after termination of employment (other than termination by
reason of death) is treated as a non-ISO. ISOs are also treated
as non-ISOs to the extent they first become exercisable by an
individual in any calendar year for shares having a fair market
value (determined as of the date of grant) in excess of $100,000.
Under the so-called golden parachute provisions of
the Code, the vesting or accelerated exercisability of awards in
connection with a change in control of the company may be
required to be valued and taken into account in determining
whether participants have received compensatory payments,
contingent on the change in control, in excess of certain
limits. If these limits are exceeded, a substantial portion of
amounts payable to the participant, including income recognized
by reason of the grant, vesting or exercise of awards under the
Plan, may be subject to an additional 20% federal tax and may
not be deductible to the company.
Awards that are subject to but fail to comply with
Section 409A would be exposed to a penalty tax of 20% in
addition to ordinary income tax, as well as to interest charges,
and may result in an acceleration of the timing of income
inclusion in respect of such awards for income tax purposes. The
stock options granted under the Plan are intended to be exempt
from the rules of Section 409A of the Code and guidance
issued thereunder and will be administered accordingly.
17
EQUITY
COMPENSATION PLAN INFORMATION
The following table provides certain information with respect to
all of the companys equity compensation plans in effect as
of December 31, 2005.
Equity
Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
(C)
|
|
|
|
Securities to be
|
|
|
(B)
|
|
|
Number of Securities
|
|
|
|
Issued Upon
|
|
|
Weighted-average
|
|
|
Remaining Available for
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Issuance under Equity
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Compensation Plans
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
(Excluding Securities
|
|
Plan Category
|
|
and Rights
|
|
|
and Rights
|
|
|
Reflected in Column
(A))
|
|
|
Equity compensation plans approved
by security holders
|
|
|
6,608,109
|
(1)
|
|
$
|
3.02
|
|
|
|
1,583,543
|
|
Equity compensation arrangements
not approved by security holders
|
|
|
100,000
|
(2)
|
|
$
|
1.20
|
|
|
|
N/a
|
|
Totals
|
|
|
6,708,109
|
|
|
$
|
2.88
|
|
|
|
958,631
|
|
|
|
|
(1) |
|
Consists of Incentive Stock Options issued to employees and
options issued as compensation to consultants for consultation
services. These options were issued under the companys
1992 Equity Incentive Plan, its Directors Stock Option
Plan, its StemCells, Inc. Stock Option Plan, its 2001 Equity
Incentive Plan, or its 2004 Equity Incentive Plan. |
|
(2) |
|
Consists of warrants outstanding that are fully vested to
purchase 100,000 shares of our common stock that was issued
in January 2003 fully vested with an exercise price of
$1.20 per share and exercisable, in whole or in part, for
five years from the date of issuance. These warrants, which
constitute the equity compensation arrangements not approved by
security holders, were all issued in exchange for advisory
services by non-employees. |
RECOMMENDATION
The Board of Directors of the company has unanimously approved a
proposal to adopt the Plan set forth herein as Appendix C
and recommended that the proposed Plan be submitted to the
companys stockholders for consideration and approval at
the Annual Meeting. The affirmative vote of a majority of all
votes entitled to be cast at the Annual Meeting will be required
to approve the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE ADOPTION OF THE 2006 EQUITY INCENTIVE PLAN AS SET
FORTH HEREIN AS APPENDIX A.
OTHER
INFORMATION
Accounting
Matters
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, 2006.
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, 2005.
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
18
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 2005, all services performed by our independent
auditors were pre-approved.
The Audit Committee received the following information
concerning the fees of the independent accountants for the years
ended December 31, 2003 and 2004, has considered whether
the provision of these services is compatible with independence
of the independent accountants, and concluded that it is:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
12/31/04
|
|
|
12/31/05
|
|
|
Audit Fees (including review of
10-Qs and
proxy filings)
|
|
$
|
131,405
|
|
|
$
|
142,045
|
|
Audit-Related Fees (Fees for
auditing managements assessment of internal controls
|
|
|
197,774
|
|
|
|
187,198
|
|
Tax Fees
|
|
|
20,464
|
|
|
|
22,470
|
|
All Other Fees (i.e., review of
other SEC filings)
|
|
|
41,498
|
|
|
|
61,466
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
391,141
|
|
|
$
|
413,179
|
|
A representative of Grant Thornton LLP who audited the accounts
of the company for the year ended December 31, 2005 is
expected to be present at the Annual Meeting of Stockholders and
will be afforded the opportunity to make a statement if he or
she desires to do so and is expected to be available to reply to
appropriate stockholder inquiries.
Stockholder
Proposals
Stockholders who wish to present proposals for inclusion in the
companys proxy materials for the 2007 Annual Meeting of
Stockholders may do so by following the procedures prescribed in
Rule 14a-8
under the Securities Exchange Act of 1934. To be eligible, the
stockholder proposals must be received by the Secretary of the
company on or before January 15, 2007.
Stockholders who wish to make a proposal at the 2007 annual
meeting, other than one that will be included in our proxy
materials, must notify us no later than March 31, 2007. If
a stockholder who wishes to present a proposal fails to notify
us by March 31, 2007, 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
The Corporate Governance Committee will consider and evaluate up
to two candidates recommended by 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 the Nominating Stockholder
submits a candidate (a Nominating Stockholder) 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 January 15, 2007 for
nominees to be considered for nomination at the 2007 Annual
Meeting. Submissions must include the name, address and number
of shares of common stock beneficially owned by the Nominating
Stockholder, a representation the Nominating Stockholder meets
the requirements described above 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 (or any participant in a 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, 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. The Committee
will consider and evaluate candidates recommended by
stockholders on the same basis as candidates recommended by
other sources.
19
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 corporation that shows the class and
number of shares held by each person and that represent in the
aggregate 1% of the outstanding shares entitled to vote in the
election of directors. To be timely, notice by the stockholder
must be received at the principal executive offices 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 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, 2005, as filed with
the SEC, is available without charge upon request by writing to
StemCells, Inc. at 3155 Porter Drive, Palo Alto, CA 94304,
Attention: Investor Relations.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the
companys officers and directors, and persons who own more
than ten percent of a registered class of the companys
Common Stock, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the SEC. Officers,
directors and greater than ten percent stockholders are required
by SEC regulations to furnish to the company copies of all
Forms 3, 4 and 5 they file.
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 shareholders
sharing the same address by delivering a single proxy statement
addressed to those shareholders. This process, which is commonly
referred to as householding, potentially provides
extra convenience for shareholders and cost savings for
companies. The company and some brokers household proxy
materials, delivering a single proxy statement to multiple
shareholders sharing an address unless contrary instructions
have been received from the affected shareholders. 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, CA 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
Iris Brest
Secretary
April 27, 2006
20
StemCells,
Inc.
2006
EQUITY INCENTIVE PLAN
Exhibit A, which is incorporated by reference, defines the
terms used in the Plan and sets forth certain operational rules
related to those terms.
The Plan has been established to advance the interests of the
Company by providing for the grant to Participants of
Stock-based and other incentive Awards.
The Administrator has discretionary authority, subject only to
the express provisions of the Plan, to interpret the Plan;
determine eligibility for and grant Awards; determine, modify or
waive the terms and conditions of any Award; prescribe forms,
rules and procedures; and otherwise do all things necessary to
carry out the purposes of the Plan. In the case of any Award
intended to be eligible for the performance-based compensation
exception under Section 162(m), the Administrator will
exercise its discretion consistent with qualifying the Award for
that exception. Determinations of the Administrator made under
the Plan will be conclusive and will bind all parties.
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4.
|
LIMITS ON
AWARDS UNDER THE PLAN
|
(a) Number of Shares. The maximum
number of shares of Stock that may be delivered in satisfaction
of Awards under the Plan is equal to six million (6,000,000).
The number of shares of Stock delivered in satisfaction of
Awards shall, for purposes of the preceding sentence, be
determined net of shares of Stock withheld by the Company in
payment of the exercise price of the Award or in satisfaction of
tax withholding requirements with respect to the Award. The
limit set forth in this Section 4(a) shall be construed to
comply with Section 422 of the Code and regulations
thereunder. To the extent consistent with the requirements of
Section 422 of the Code and regulations thereunder, and
with other applicable legal requirements (including applicable
stock exchange requirements), Stock issued under awards of an
acquired company that are converted, replaced, or adjusted in
connection with the acquisition shall not reduce the number of
shares available for Awards under the Plan.
(b) Type of Shares. Stock
delivered by the Company under the Plan may be authorized but
unissued Stock or previously issued Stock acquired by the
Company. No fractional shares of Stock will be delivered under
the Plan.
(c) Section 162(m)
Limits. The maximum number of shares of Stock
for which Stock Options may be granted to any person in any
calendar year and the maximum number of shares of Stock subject
to SARs granted to any person in any calendar year will each be
one million (1,000,000). The maximum number of shares subject to
other Awards granted to any person in any calendar year will be
one million (1,000,000). The maximum amount payable to any
person in any year under Cash Awards will be one million dollars
($1,000,000). The foregoing provisions will be construed in a
manner consistent with Section 162(m).
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5.
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ELIGIBILITY
AND PARTICIPATION
|
The Administrator will select Participants from among those
Employees and directors of, and consultants and advisors to, the
Company or its Affiliates who, in the opinion of the
Administrator, are in a position to make a significant
contribution to the success of the Company and its Affiliates.
Eligibility for ISOs is limited to employees of the Company or
of a parent corporation or subsidiary
corporation of the Company as those terms are defined in
Section 424 of the Code.
A-1
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6.
|
RULES APPLICABLE
TO AWARDS
|
(a) All Awards
(1) Award Provisions. The
Administrator will determine the terms of all Awards, subject to
the limitations provided herein. By accepting any Award granted
hereunder, the Participant agrees to the terms of the Award and
the Plan. Notwithstanding any provision of this Plan to the
contrary, awards of an acquired company that are converted,
replaced or adjusted in connection with the acquisition may
contain terms and conditions that are inconsistent with the
terms and conditions specified herein, as determined by the
Administrator.
(2) Term of Plan. No Awards may be
made after June 20, 2016, but previously granted Awards may
continue beyond that date in accordance with their terms.
(3) Transferability. Neither ISOs
nor, except as the Administrator otherwise expressly provides,
other Awards may be transferred other than by will or by the
laws of descent and distribution, and during a
Participants lifetime ISOs (and, except as the
Administrator otherwise expressly provides, other
non-transferable Awards requiring exercise) may be exercised
only by the Participant.
(4) Vesting, Etc. The
Administrator may determine the time or times at which an Award
will vest or become exercisable and the terms on which an Award
requiring exercise will remain exercisable. Without limiting the
foregoing, the Administrator may at any time accelerate the
vesting or exercisability of an Award, regardless of any adverse
or potentially adverse tax consequences resulting from such
acceleration. Unless the Administrator expressly provides
otherwise, however, the following rules will apply: immediately
upon the cessation of the Participants Employment, each
Award requiring exercise that is then held by the Participant or
by the Participants permitted transferees, if any, will
cease to be exercisable and will terminate, and all other Awards
that are then held by the Participant or by the
Participants permitted transferees, if any, to the extent
not already vested will be forfeited, except that:
(A) subject to (B) and (C) below, all Stock
Options and SARs held by the Participant or the
Participants permitted transferees, if any, immediately
prior to the cessation of the Participants Employment, to
the extent then exercisable, will remain exercisable for the
lesser of (i) a period of three months or (ii) the
period ending on the latest date on which such Stock Option or
SAR could have been exercised without regard to this
Section 6(a)(4), and will thereupon terminate;
(B) all Stock Options and SARs held by a Participant or the
Participants permitted transferees, if any, immediately
prior to the Participants death, to the extent then
exercisable, will remain exercisable for the lesser of
(i) the one year period ending with the first anniversary
of the Participants death or (ii) the period ending
on the latest date on which such Stock Option or SAR could have
been exercised without regard to this Section 6(a)(4), and
will thereupon terminate; and
(C) all Stock Options and SARs held by a Participant or the
Participants permitted transferees, if any, immediately
prior to the cessation of the Participants Employment will
immediately terminate upon such cessation if the Administrator
in its sole discretion determines that such cessation of
Employment has resulted for reasons which cast such discredit on
the Participant as to justify immediate termination of the Award.
(5) Taxes. The Administrator will
make such provision for the withholding of taxes as it deems
necessary. The Administrator may, but need not, hold back shares
of Stock from an Award or permit a Participant to tender
previously owned shares of Stock in satisfaction of tax
withholding requirements (but not in excess of the minimum
withholding required by law).
(6) Dividend Equivalents, Etc.
The Administrator may provide for the payment of amounts in lieu
of cash dividends or other cash distributions with respect to
Stock subject to an Award. Any entitlement to dividend
equivalents or similar entitlements shall be established and
administered consistent either with exemption from, or
compliance with, the requirements of Section 409A to the
extent applicable.
(7) Rights Limited. Nothing in the
Plan will be construed as giving any person the right to
continued employment or service with the Company or its
Affiliates, or any rights as a stockholder except as to shares
of Stock actually issued under the Plan. The loss of existing or
potential profit in Awards will not constitute an element of
A-2
damages in the event of termination of Employment for any
reason, even if the termination is in violation of an obligation
of the Company or Affiliate to the Participant.
(8) Section 162(m). This
Section 6(a)(8) applies to any Performance Award intended
to qualify as performance-based for the purposes of
Section 162(m) other than a Stock Option or SAR. In the
case of any Performance Award to which this Section 6(a)(8)
applies, the Plan and such Award will be construed to the
maximum extent permitted by law in a manner consistent with
qualifying the Award for such exception. With respect to such
Performance Awards, the Administrator will pre-establish, in
writing, one or more specific Performance Criteria no later than
90 days after the commencement of the period of service to
which the performance relates (or at such earlier time as is
required to qualify the Award as performance-based under
Section 162(m)). Prior to grant, vesting or payment of the
Performance Award, as the case may be, the Administrator will
certify whether the applicable Performance Criteria have been
attained and such determination will be final and conclusive. No
Performance Award to which this Section 6(a)(8) applies may
be granted after the first meeting of the stockholders of the
Company held in 2011 until the listed performance measures set
forth in the definition of Performance Criteria (as
originally approved or as subsequently amended) have been
resubmitted to and reapproved by the stockholders of the Company
in accordance with the requirements of Section 162(m) of
the Code, unless such grant is made contingent upon such
approval.
(b) Awards Requiring Exercise
(1) 409A Exemption. Except as the
Administrator otherwise determines, no Award requiring exercise
shall have deferral features, or shall be administered in a
manner, that would cause such Award to fail to qualify for
exemption from Section 409A.
(2) Time and Manner of
Exercise. Unless the Administrator expressly
provides otherwise, an Award requiring exercise by the holder
will not be deemed to have been exercised until the
Administrator receives a notice of exercise (in form acceptable
to the Administrator) signed by the appropriate person and
accompanied by any payment required under the Award. If the
Award is exercised by any person other than the Participant, the
Administrator may require satisfactory evidence that the person
exercising the Award has the right to do so.
(3) Exercise Price. The exercise
price (or the base value from which appreciation is to be
measured) of each Award requiring exercise shall be 100% (in the
case of an ISO granted to a ten-percent shareholder within the
meaning of Section 422(b)(6) of the Code, 110%) of the fair
market value of the Stock subject to the Award, determined as of
the date of grant, or such higher amount as the Administrator
may determine in connection with the grant. Fair market value
shall be determined by the Administrator consistent with the
requirements of Section 422 and Section 409A, as
applicable. No such Award, once granted, may be repriced other
than in accordance with the applicable stockholder approval
requirements of Nasdaq.
(4) Payment of Exercise
Price. Where the exercise of an Award is to
be accompanied by payment, the Administrator may determine the
required or permitted forms of payment, subject to the
following: all payments will be by cash or check acceptable to
the Administrator, or, if so permitted by the Administrator and
if legally permissible, (i) through the delivery of shares
of Stock that have been outstanding for at least six months
(unless the Administrator approves a shorter period) and that
have a fair market value equal to the exercise price,
(ii) by delivery to the Company of a promissory note of the
person exercising the Award, payable on such terms as are
specified by the Administrator, (iii) through a
broker-assisted exercise program acceptable to the
Administrator, (iv) by other means acceptable to the
Administrator, or (v) by any combination of the foregoing
permissible forms of payment. The delivery of shares in payment
of the exercise price under clause (a)(i) above may be
accomplished either by actual delivery or by constructive
delivery through attestation of ownership, subject to such rules
as the Administrator may prescribe.
(c) Awards Not Requiring Exercise
Restricted Stock and Unrestricted Stock, whether delivered
outright or under Awards of Stock Units or other Awards that do
not require exercise, may be made in exchange for such lawful
consideration, including services, as the Administrator
determines. Any Award resulting in a deferral of compensation
subject to Section 409A shall be construed to the maximum
extent possible, as determined by the Administrator, consistent
with the requirements of Section 409A.
A-3
|
|
7.
|
EFFECT OF
CERTAIN TRANSACTIONS
|
(a) Mergers, etc. Except as
otherwise provided in an Award, the following provisions shall
apply in the event of a Covered Transaction:
(1) Assumption or Substitution. If
the Covered Transaction is one in which there is an acquiring or
surviving entity, the Administrator may provide for the
assumption of some or all outstanding Awards or for the grant of
new awards in substitution therefor by the acquirer or survivor
or an affiliate of the acquirer or survivor.
(2) Cash-Out of Awards. If the
Covered Transaction is one in which holders of Stock will
receive upon consummation a payment (whether cash, non-cash or a
combination of the foregoing), the Administrator may provide for
payment (a cash-out), with respect to some or all
Awards, equal in the case of each affected Award to the excess,
if any, of (A) the fair market value of one share of Stock
(as determined by the Administrator in its reasonable
discretion) times the number of shares of Stock subject to the
Award, over (B) the aggregate exercise or purchase price,
if any, under the Award (in the case of an SAR, the aggregate
base price above which appreciation is measured), in each case
on such payment terms (which need not be the same as the terms
of payment to holders of Stock) and other terms, and subject to
such conditions, as the Administrator determines.
(3) Acceleration of Certain
Awards. If the Covered Transaction (whether
or not there is an acquiring or surviving entity) is one in
which there is no assumption, substitution or cash-out, each
Award requiring exercise will become fully exercisable, and the
delivery of shares of Stock deliverable under each outstanding
Award of Stock Units (including Restricted Stock Units and
Performance Awards to the extent consisting of Stock Units) will
be accelerated and such shares will be delivered, prior to the
Covered Transaction, in each case on a basis that gives the
holder of the Award a reasonable opportunity, as determined by
the Administrator, following exercise of the Award or the
delivery of the shares, as the case may be, to participate as a
stockholder in the Covered Transaction.
(4) Termination of Awards Upon Consummation of
Covered Transaction. Each Award (unless
assumed pursuant to Section 7(a)(1) above), other than
outstanding shares of Restricted Stock (which shall be treated
in the same manner as other shares of Stock, subject to
Section 7(a)(5) below), will terminate upon consummation of
the Covered Transaction.
(5) Additional Limitations. Any
share of Stock delivered pursuant to Section 7(a)(2) or
Section 7(a)(3) above with respect to an Award may, in the
discretion of the Administrator, contain such restrictions, if
any, as the Administrator deems appropriate to reflect any
performance or other vesting conditions to which the Award was
subject. In the case of Restricted Stock, the Administrator may
require that any amounts delivered, exchanged or otherwise paid
in respect of such Stock in connection with the Covered
Transaction be placed in escrow or otherwise made subject to
such restrictions as the Administrator deems appropriate to
carry out the intent of the Plan.
(b) Change in and Distributions With Respect to
Stock
(1) Basic Adjustment
Provisions. In the event of a stock dividend,
stock split or combination of shares (including a reverse stock
split), recapitalization or other change in the Companys
capital structure, the Administrator will make appropriate
adjustments to the maximum number of shares specified in
Section 4(a) that may be delivered under the Plan and to
the maximum share limits described in Section 4(c), and
will also make appropriate adjustments to the number and kind of
shares of stock or securities subject to Awards then outstanding
or subsequently granted, any exercise prices relating to Awards
and any other provision of Awards affected by such change.
(2) Certain Other Adjustments. The
Administrator may also make adjustments of the type described in
Section 7(b)(1) above to take into account distributions to
stockholders other than those provided for in Section 7(a)
and 7(b)(1), or any other event, if the Administrator determines
that adjustments are appropriate to avoid distortion in the
operation of the Plan and to preserve the value of Awards made
hereunder, having due
A-4
regard for the qualification of ISOs under Section 422 of
the Code, the requirements of Section 409A of the Code, and
for the performance-based compensation rules of
Section 162(m), where applicable.
(3) Continuing Application of Plan
Terms. References in the Plan to shares of
Stock will be construed to include any stock or securities
resulting from an adjustment pursuant to this Section 7.
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8.
|
LEGAL
CONDITIONS ON DELIVERY OF STOCK
|
The Company will not be obligated to deliver any shares of Stock
pursuant to the Plan or to remove any restriction from shares of
Stock previously delivered under the Plan until: (i) the
Company is satisfied that all legal matters in connection with
the issuance and delivery of such shares have been addressed and
resolved; (ii) if the outstanding Stock is at the time of
delivery listed on any stock exchange or national market system,
the shares to be delivered have been listed or authorized to be
listed on such exchange or system upon official notice of
issuance; and (iii) all conditions of the Award have been
satisfied or waived. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended, the
Company may require, as a condition to exercise of the Award,
such representations or agreements as counsel for the Company
may consider appropriate to avoid violation of such Act. The
Company may require that certificates evidencing Stock issued
under the Plan bear an appropriate legend reflecting any
restriction on transfer applicable to such Stock, and the
Company may hold the certificates pending lapse of the
applicable restrictions.
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9.
|
AMENDMENT
AND TERMINATION
|
The Administrator may at any time or times amend the Plan or any
outstanding Award for any purpose which may at the time be
permitted by law, and may at any time terminate the Plan as to
any future grants of Awards; provided, that except as otherwise
expressly provided in the Plan the Administrator may not,
without the Participants consent, alter the terms of an
Award so as to affect adversely the Participants rights
under the Award, unless the Administrator expressly reserved the
right to do so at the time of the Award. Any amendments to the
Plan shall be conditioned upon stockholder approval only to the
extent, if any, such approval is required by law (including the
Code and applicable stock exchange requirements), as determined
by the Administrator.
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10.
|
OTHER
COMPENSATION ARRANGEMENTS
|
The existence of the Plan or the grant of any Award will not in
any way affect the Companys right to Award a person
bonuses or other compensation in addition to Awards under the
Plan.
(a) Waiver of Jury Trial. By
accepting an Award under the Plan, each Participant waives any
right to a trial by jury in any action, proceeding or
counterclaim concerning any rights under the Plan and any Award,
or under any amendment, waiver, consent, instrument, document or
other agreement delivered or which in the future may be
delivered in connection therewith, and agrees that any such
action, proceedings or counterclaim shall be tried before a
court and not before a jury. By accepting an Award under the
Plan, each Participant certifies that no officer,
representative, or attorney of the Company has represented,
expressly or otherwise, that the Company would not, in the event
of any action, proceeding or counterclaim, seek to enforce the
foregoing waivers.
(b) Limitation of Liability.
Notwithstanding anything to the contrary in the Plan, neither
the Company, any Affiliate, nor the Administrator, nor any
person acting on behalf of the Company, any Affiliate, or the
Administrator, shall be liable to any Participant or to the
estate or beneficiary of any Participant or to any other holder
of an Award by reason of any acceleration of income, or any
additional tax, asserted by reason of the failure of an Award to
satisfy the requirements of Section 422 or
Section 409A or by reason of Section 4999 of the Code;
provided, that nothing in this Section 11(b) shall limit
the ability of the Administrator or the Company to provide by
separate express written agreement with a Participant for a
gross-up
payment or other payment in connection with any such tax or
additional tax.
A-5
EXHIBIT A
Definition
of Terms
The following terms, when used in the Plan, will have the
meanings and be subject to the provisions set forth below:
Administrator: The Compensation Committee,
except that the Compensation Committee may delegate (i) to
one or more of its members such of its duties, powers and
responsibilities as it may determine; (ii) to one or more
officers of the Company the power to grant rights or options to
the extent permitted by Section 157(c) of the Delaware
General Corporation Law; (iii) to one or more officers of
the Company the authority to allocate other Awards among such
persons (other than officers of the Company) eligible to receive
Awards under the Plan as such delegated officer or officers
determine consistent with such delegation; provided, that
with respect to any delegation described in this
clause (iii) the Compensation Committee (or a properly
delegated member or members of such Committee) shall have
authorized the issuance of a specified number of shares of Stock
under such Awards and shall have specified the consideration, if
any, to be paid therefor; and (iv) to such Employees or
other persons as it determines such ministerial tasks as it
deems appropriate. In the event of any delegation described in
the preceding sentence, the term Administrator shall
include the person or persons so delegated to the extent of such
delegation.
Affiliate: Any corporation or other entity
owning, directly or indirectly, 50% or more of the outstanding
Stock of the Company, or in which the Company or any such
corporation or other entity owns, directly or indirectly, 50% of
the outstanding capital stock (determined by aggregate voting
rights) or other voting interests. For purposes of determining
eligibility for the grant of a Stock Option or SAR by reason of
service with an Affiliate, the term Affiliate shall be limited
to persons that stand in a relationship to the Company that
would result in the Company and such person being treated as one
employer under Section 414(b) and Section 414(c) of
the Code except that at least 50% shall be
substituted for at least 805 under
Sections 1563(a)(1), (2), and (3) of the Code and
Treas. Reg.
Section 1.414(c)-2,
all in accordance with the definition of service
recipient under Section 409A of the Code.
Award: Any or a combination of the following:
(i) Stock Options.
(ii) SARs.
(iii) Restricted Stock.
(iv) Unrestricted Stock.
(v) Stock Units, including Restricted Stock Units.
(vi) Performance Awards.
(vii) Cash Awards.
(viii) Awards (other than Awards described in
(i) through (vii) above) that are convertible into or
otherwise based on Stock.
Board: The Board of Directors of the Company.
Cash Award: An Award denominated in cash.
Code: The U.S. Internal Revenue Code of
1986 as from time to time amended and in effect, or any
successor statute as from time to time in effect.
Compensation Committee: The Compensation and
Stock Option Committee of the Board.
Company: StemCells, Inc.
A-6
Covered Transaction: Any of (i) a
consolidation, merger, or similar transaction or series of
related transactions, including a sale or other disposition of
stock, in which the Company is not the surviving corporation or
which results in the acquisition of all or substantially all of
the Companys then outstanding common stock by a single
person or entity or by a group of persons
and/or
entities acting in concert, (ii) a sale or transfer of all
or substantially all the Companys assets, or (iii) a
dissolution or liquidation of the Company. Where a Covered
Transaction involves a tender offer that is reasonably expected
to be followed by a merger described in clause (i) (as
determined by the Administrator), the Covered Transaction shall
be deemed to have occurred upon consummation of the tender offer.
Employee: Any person who is employed by the
Company or an Affiliate.
Employment: A Participants employment
or other service relationship with the Company and its
Affiliates. Employment will be deemed to continue, unless the
Administrator expressly provides otherwise, so long as the
Participant is employed by, or otherwise is providing services
in a capacity described in Section 5 to the Company or its
Affiliates. If a Participants employment or other service
relationship is with an Affiliate and that entity ceases to be
an Affiliate, the Participants Employment will be deemed
to have terminated when the entity ceases to be an Affiliate
unless the Participant transfers Employment to the Company or
its remaining Affiliates.
ISO: A Stock Option intended to be an
incentive stock option within the meaning of
Section 422 of the Code. Each option granted pursuant to
the Plan will be treated as providing by its terms that it is to
be a non-incentive stock option unless, as of the date of grant,
it is expressly designated as an ISO.
Participant: A person who is granted an Award
under the Plan.
Performance Award: An Award subject to
Performance Criteria. The Committee in its discretion may grant
Performance Awards that are intended to qualify for the
performance-based compensation exception under
Section 162(m) and Performance Awards that are not intended
so to qualify.
Performance Criteria: Specified criteria,
other than the mere continuation of Employment or the mere
passage of time, the satisfaction of which is a condition for
the grant, exercisability, vesting or full enjoyment of an
Award. For purposes of Awards that are intended to qualify for
the performance-based compensation exception under
Section 162(m), a Performance Criterion will mean an
objectively determinable measure of performance relating to any
or any combination of the following (measured either absolutely
or by reference to an index or indices and determined either on
a consolidated basis or, as the context permits, on a
divisional, subsidiary, line of business, project or
geographical basis or in combinations thereof): sales; revenues;
assets; expenses; earnings before or after deduction for all or
any portion of interest, taxes, depreciation, or amortization,
whether or not on a continuing operations or an aggregate or per
share basis; return on equity, investment, capital or assets;
one or more operating ratios; borrowing levels, leverage ratios
or credit rating; market share; capital expenditures; cash flow;
stock price; stockholder return; sales of particular products or
services; customer acquisition or retention; acquisitions and
divestitures (in whole or in part); joint ventures and strategic
alliances; spin-offs, split-ups and the like; reorganizations;
or recapitalizations, restructurings, financings (issuance of
debt or equity) or refinancings. A Performance Criterion and any
targets with respect thereto determined by the Administrator
need not be based upon an increase, a positive or improved
result or avoidance of loss. To the extent consistent with the
requirements for satisfying the performance-based compensation
exception under Section 162(m), the Administrator may
provide in the case of any Award intended to qualify for such
exception that one or more of the Performance Criteria
applicable to such Award will be adjusted in an objectively
determinable manner to reflect events (for example, but without
limitation, acquisitions or dispositions) occurring during the
performance period that affect the applicable Performance
Criterion or Criteria.
Plan: The StemCells, Inc. 2006 Incentive Plan
as from time to time amended and in effect.
Restricted Stock: Stock subject to
restrictions requiring that it be redelivered or offered for
sale to the Company if specified conditions are not satisfied.
A-7
Restricted Stock Unit: A Stock Unit that is,
or as to which the delivery of Stock or cash in lieu of Stock
is, subject to the satisfaction of specified performance or
other vesting conditions.
Section 162(m): Section 162(m) of
the Code.
SAR: A right entitling the holder upon
exercise to receive an amount (payable in shares of Stock of
equivalent value or, at the election of the Administrator, in
cash or a combination of shares of Stock and cash) equal to the
excess of the fair market value of the shares of Stock subject
to the right over the fair market value of such shares at the
date of grant.
Stock: Common Stock of the Company, par value
$0.01 per share.
Stock Option: An option entitling the holder
to acquire shares of Stock upon payment of the exercise price.
Stock Unit: An unfunded and unsecured
promise, denominated in shares of Stock, to deliver Stock or
cash measured by the value of Stock in the future.
Unrestricted Stock: Stock not subject to any
restrictions under the terms of the Award.
A-8
PROXY
STEMCELLS, INC.
ANNUAL MEETING OF STOCKHOLDERS, JUNE 21, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder, by completing this proxy card, hereby appoints Martin McGlynn and Iris
Brest, 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 21, 2006 at 3155 Porter Drive,
Palo Alto, California at 2:00 p.m., local time, or at any 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 matters listed on the reverse side 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 Changes: _________________________________________________________________________________________
________________________________________________________________________________________________________
________________________________________________________________________________________________________
(If you noted any Address Changes above, please mark corresponding box on the reverse side.)
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
STEMCELLS, INC.
C/O COMPUTERSHARE
P.O. BOX 8694
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 cut-off date or 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 STOCKHOLDER
COMMUNICATIONS
If you would like to reduce the costs incurred by StemCells, Inc.
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
stockholder communications 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 cut-off date
or 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 StemCells, Inc.,
c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: STMCEL KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
STEMCELLS, INC.
THE BOARD OF DIRECTORS OF STEMCELLS, INC.
RECOMMENDS A VOTE FOR THE NOMINEES FOR
DIRECTOR LISTED BELOW AND A VOTE FOR
PROPOSALS 2 AND 3.
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any individual nominee, mark "For All Except" and |
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write that nominee's name in the space provided below.) |
Vote on Directors |
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To elect the following nominees as Class III directors:
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Nominees: |
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(01) Martin McGlynn |
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(02) Roger Perlmutter, M.D., Ph.D. |
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Vote on Proposals |
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To ratify the selection of Grant Thornton LLP as independent public accountants of the company for the fiscal year ending
December 31, 2006.
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To adopt the 2006 Equity Incentive Plan as proposed.
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By my signature below, I confer to the named proxies discretionary authority to vote upon such other business as may
properly come before the meeting or any continuations and adjournments thereof. |
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This proxy when properly executed will be voted in the manner specified by the undersigned
stockholder(s). If no contrary direction is made, this proxy will be voted FOR the election of the nominees for director named below
and FOR proposals 2 and 3, and in the discretion of the named proxies as to any other matter that may come before the meeting.
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For address changes, please check this box and write them on the
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back where indicated. |
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Note: Please sign exactly as name appears on this card. All joint
owners should sign. When signing as an executor, administrator,
attorney, or guardian or as a custodian for a minor, please give full
title as such. If a corporation, please sign in full corporate name
and indicate the signers title. If a partner, sign in partnership name.
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Signature [PLEASE SIGN WITHIN BOX]
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