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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Cerus Corporation
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(Name of Registrant as Specified In Its Charter)
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CERUS CORPORATION
2525 STANWELL DRIVE, SUITE 300
CONCORD, CA 94520
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 16, 1998
TO THE STOCKHOLDERS OF CERUS CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CERUS
CORPORATION, a Delaware corporation (the "Company"), will be held on Tuesday,
June 16, 1998 at 11:00 a.m., local time, at the Concord Hilton, 1970 Diamond
Boulevard, Concord, California 94520 for the following purposes:
1. To elect two directors to hold office until the 2001 Annual Meeting of
Stockholders.
2. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 1998.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 30, 1998,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ Lori L. Roll, C.P.A.
Corporate Secretary
Concord, California
May 12, 1998
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT
THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED
STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY
STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF
YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH
TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN
YOUR NAME.
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CERUS CORPORATION
2525 STANWELL DRIVE, SUITE 300
CONCORD, CA 94520
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 16, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Cerus Corporation, a Delaware corporation ("Cerus" or the "Company"), for use at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held on June 16,
1998, at 11:00 a.m., local time, or at any adjournment or postponement thereof,
for the purposes set forth herein and in the accompanying Notice of Annual
Meeting. The Annual Meeting will be held at the Concord Hilton, 1970 Diamond
Boulevard, Concord, California 94520. The Company intends to mail this proxy
statement and accompanying proxy card on or about May 12, 1998 to all
stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of common stock of the Company (the "Common
Stock") for their costs of forwarding solicitation materials to such beneficial
owners. Original solicitation of proxies by mail may be supplemented by
telephone, telegram or personal solicitation by directors, officers or other
regular employees of the Company. No additional compensation will be paid to
directors, officers or other regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April
30, 1998 will be entitled to notice of and to vote at the Annual Meeting. On
April 30, 1998, the Company had outstanding and entitled to vote 9,243,443
shares of Common Stock. Each holder of record of Common Stock on such date will
be entitled to one vote for each share held on all matters to be voted upon at
the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 2525
Stanwell Drive, Suite 300, Concord, California 94520, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
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STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 annual meeting of stockholders must be received by the Company
not later than January 12, 1999, in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and By-laws provide
that the Board of Directors shall be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board may
be filled only by persons elected by a majority of the remaining directors. A
director elected by the Board to fill a vacancy (including a vacancy created by
an increase in the Board of Directors) shall serve for the remainder of the full
term of the class of directors in which the vacancy occurred and until such
director's successor is elected and qualified.
The Board of Directors is presently composed of six members. There are two
directors in the class whose term of office expires in 1998. Each of the
nominees for election to this class is currently a director of the Company who
was previously elected by the stockholders. If elected at the Annual Meeting,
each of the nominees would serve until the 2001 annual meeting of stockholders
and until his or her successor is elected and has qualified, or until such
director's earlier death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the two nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
John E. Hearst, Ph.D., D.Sc., 62, is a co-founder of the Company, and he
has been its Vice President, New Science Opportunities since July 1996. From
January 1996 until July 1996, Dr. Hearst served as Director, New Science
Opportunities. He has served as a member of the Board of Directors of the
Company since September 1991. Dr. Hearst has been a Professor of Chemistry at
the University of California at Berkeley since 1972. In 1984, Dr. Hearst
co-founded HRI, a research and development company.
Henry E. Stickney, 65, has served as a member of the Board of Directors of
the Company since January 1992. In 1988, Mr. Stickney founded Health IQ
Corporation (formerly, Reimbursement Dynamics, Inc.), a medical consulting
company specializing in health care economics and reimbursement issues, and has
served as its chief executive officer since that time.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
Stephen T. Isaacs, 49, founded the Company in September 1991 and has served
as President, Chief Executive Officer and a member of the Board of Directors
since that time. Mr. Isaacs was previously President and Chief Executive Officer
of HRI, a research and development company, from September 1984 to December
1996. From 1975 to 1986, Mr. Isaacs held a faculty research position at the
University of California at Berkeley.
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Dale A. Smith, 66, has served as a member of the Board of Directors of the
Company since March 1994. From 1978 to July 1995, Mr. Smith was Group Vice
President of Baxter Healthcare Corporation. Mr. Smith serves as a director of
Vical, Inc.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
B. J. Cassin, 64, has served as Chairman of the Board of the Company since
January 1992. Mr. Cassin has been a private venture capitalist since 1979.
Previously, Mr. Cassin co-founded Xidex Corporation, a manufacturer of data
storage media, in 1969. Mr. Cassin is currently a director of Advanced Fibre
Communications and a number of private companies.
Peter H. McNerney, 47, has served as a member of the Board of Directors of
the Company since October 1992. Mr. McNerney has been a General Partner of Coral
Ventures, a venture capital investment firm, since 1992. Prior to that, Mr.
McNerney was a Managing Partner of Kensington Group, a management consulting
firm, from 1989 to 1992. Mr. McNerney serves as a director for Aksys, Ltd. and
Biomira, Inc.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1997, the Board of Directors held
eight meetings. The Board has an Audit Committee and a Compensation Committee.
The Board does not have a standing nominating committee.
The Audit Committee meets with the Company's independent auditors at least
once annually to review the results of the annual audit and discuss the
financial statements; recommends to the Board the independent auditors to be
retained; and receives and considers the auditors' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee, which is currently composed
of two non-employee directors, Messrs. Cassin and Stickney, met once during the
fiscal year ended December 31, 1997.
The Compensation Committee sets the Company's compensation policies,
evaluates the performance and determines the compensation of executive officers
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee also administers the issuance of stock
options and other awards under the Company's 1996 Equity Incentive Plan and
Employee Stock Purchase Plan. The Compensation Committee, which is currently
composed of two non-employee directors, Messrs. Cassin and McNerney, met four
times during the fiscal year ended December 31, 1997.
During the fiscal year ended December 31, 1997, each Board member attended
at least 75% or more of the aggregate of the meetings of the Board and of the
committees on which he served that were held during the period for which he was
a director or committee member, respectively.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since its inception in 1991.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
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appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of May 5, 1998 by: (i) each director; (ii) each
of the executive officers named in the Summary Compensation Table; (iii) all
executive officers and directors of the Company as a group; and (iv) all those
known by the Company to be beneficial owners of more than five percent of its
Common Stock.
BENEFICIAL OWNERSHIP(1)
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BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF TOTAL(%)
---------------- ---------------- -------------------
Baxter Healthcare Corporation...................... 1,457,830 15.8
One Baxter Parkway
Deerfield, IL 60015
Coral Partners II, a limited partnership(2)........ 1,326,914 14.3
60 South Sixth Street
Suite 3510
Minneapolis, MN 55402
Stephen T. Isaacs(3)............................... 350,931 3.8
David S. Clayton(4)................................ 60,845 *
Laurence M. Corash(5).............................. 260,925 2.8
John E. Hearst(6).................................. 249,475 2.7
B.J. Cassin(7)..................................... 365,913 4.0
Peter H. McNerney(2)............................... 1,326,914 14.3
Coral Group, Inc.
60 South Sixth Street Suite 3510
Minneapolis, MN 55402
Dale A. Smith(8)................................... 14,700 *
Henry E. Stickney(9)............................... 112,102 1.2
All directors and executive officers as a group (8
persons)(10)..................................... 2,741,805 29.3
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* Less than one percent (1%).
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Beneficial ownership also includes 102,900
shares of stock subject to options and warrants currently exercisable or
convertible within 60 days of the date of this table. Applicable
percentages are based on 9,243,443 shares outstanding on May 5, 1998,
adjusted as required by rules promulgated by the SEC.
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(2) Includes 852,429 shares held by Coral Partners II, 463,749 shares held by
Coral Partners IV and 10,736 shares held by Peter H. McNerney. Mr. McNerney
is a General Partner of Coral Partners II and Coral Partners IV and
disclaims beneficial ownership of the shares held by such entities except
to the extent of his proportionate partnership interest therein.
(3) Includes 7,350 shares held by Stephen T. Isaacs and Kathryn Macbride as
trustees for the Alexandra Isaacs Irrevocable Trust and 7,350 shares held
by Stephen T. Isaacs and Kathryn Macbride as trustees for the Megan Isaacs
Irrevocable Trust. Includes 36,750 shares underlying currently exercisable
stock options. If exercised in full within 60 days of the date of this
table, 17,610 shares would be subject to a right of repurchase in favor of
the Company.
(4) Includes 17,640 shares which are subject to a right of repurchase in favor
of the Company that will expire in increments during Mr. Clayton's
consultancy.
(5) Includes 29,400 shares underlying currently exercisable stock options. If
exercised in full within 60 days of the date of this table, 14,088 shares
would be subject to a right of repurchase in favor of the Company.
(6) Includes 209,474 shares held by the Hearst Revocable Trust, 14,700 shares
held by the David Paul Hearst Irrevocable Trust and 14,700 shares held by
the Leslie Jean Hearst Irrevocable Trust. Includes 7,350 shares underlying
currently exercisable stock options. If exercised in full within 60 days of
the date of this table, 3,522 shares would be subject to a right of
repurchase in favor of the Company.
(7) Includes 306,372 shares held by Brendan Joseph Cassin and Isabel B. Cassin,
Trustees of the Cassin Family Trust, 44,841 shares held by Cassin Family
Partners, a California Limited Partnership, and 14,700 shares underlying
currently exercisable stock options. If exercised in full within 60 days of
the date of this table, 7,044 shares would be subject to a right of
repurchase in favor of the Company.
(8) Includes 14,700 shares underlying currently exercisable stock options. If
exercised in full within 60 days of the date of this table, 4,594 shares
would be subject to a right of repurchase in favor of the Company.
(9) Includes 18,302 shares held by Mr. Stickney as Trustee of the Stickney
Family Trust and 7,657 shares which are subject to a right of repurchase by
the Company that expires ratably through May 2000.
(10) Includes information contained in the notes above, as applicable.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section
16(a)"), requires the Company's directors and executive officers, and persons
who own more than 10 percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Officers, directors
and greater than 10 percent stockholders are required by Commission regulation
to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its directors, officers and
greater than 10 percent beneficial owners were complied with except that Mr.
Stickney filed one Form 4 late in connection with an option exercise in November
1997.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors currently do not receive any cash compensation for their services
as members of the Board of Directors, although they are reimbursed for certain
expenses in connection with attendance at Board and Committee meetings. There
are no standard arrangements pursuant to which directors receive equity
compensation, although they are eligible to receive awards under the Company's
1996 Equity Incentive Plan (the "Plan").
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The Plan provides for the grant of incentive stock options and stock
appreciation rights appurtenant thereto to employees (including officers and
employee-directors) and nonstatutory stock options, stock appreciation rights,
restricted stock purchase awards and stock bonuses to employees, directors and
consultants. The Plan is administered by the Board of Directors, or a committee
appointed by the Board, which determines recipients and types of awards to be
granted, including the exercise price, number of shares subject to the award and
the exercisability thereof. The terms of stock options granted under the Plan
generally may not exceed 10 years. The exercise price of options granted under
the Plan is determined by the Board of Directors, provided that the exercise
price of an incentive stock option cannot be less than 100% of the fair market
value of the Common Stock on the date of the option grant and the exercise price
of a nonstatutory stock option cannot be less than 85% of the fair market value
of the Common Stock on the date of the option grant. Options granted under the
Plan vest at the rate specified in the option agreement. Restricted stock
purchase awards granted under the Plan may be granted pursuant to a repurchase
option in favor of the Company in accordance with a vesting schedule and at a
price determined by the Board of Directors. Restricted stock purchases must be
at a price equal to at least 85% of the stock's fair market value on the award
date, but stock bonuses may be awarded in consideration of past services without
a purchase payment. Upon certain changes in control of the Company, all
outstanding awards under the Plan will either be assumed, continued or
substituted by the surviving entity. If the surviving entity determines not to
assume, continue or substitute such awards, with respect to persons then
performing services as employees, directors or consultants, the time during
which such awards may be exercised will be accelerated and the awards terminated
if not exercised prior to such change in control. There were no awards to
directors under the Plan in 1997. During 1997, Mr. Stickney exercised options
for 29,400 shares of Common Stock.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the fiscal years ended December 31,
1996 and 1997, the compensation awarded to or earned by the Company's Chief
Executive Officer and the other executive officers whose combined salary and
bonus for the year ended December 31, 1997 was in excess of $100,000
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE(1)
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------- SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(2)
--------------------------- ------ --------- -------- ------------ ------------------
Stephen T. Isaacs................ 1997 260,000 60,000 -- --
President and Chief 1996 230,833 61,290(3) 36,750 1,110
Executive Officer
David S. Clayton(4).............. 1997 101,168(5) 22,500 -- --
Vice President, Finance 1996 160,200(6) 41,677 67,179 --
and Chief Financial Officer
Laurence M. Corash............... 1997 235,000 35,000 -- --
Vice President, 1996 179,870 26,945(7) 29,400 813
Medical Affairs
John E. Hearst................... 1997 153,000(8) 20,000 -- --
Vice President, New 1996 138,958(8) 15,839(9) 7,530 722
Science Opportunities
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(1) In accordance with the rules of the Commission, the compensation described
in this table does not include medical, group life insurance or other
benefits received by the Named Executive Officers which are available
generally to all salaried employees of the Company, and certain perquisites
and other personal benefits received by the Named Executive Officers which
do not exceed the lesser of $50,000 or 10% of any such officer's salary and
bonus disclosed in this table.
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(2) Reflects reimbursement for the amount of taxes payable in connection with
forgiveness of interest.
(3) Includes $1,290 of interest forgiven.
(4) Mr. Clayton has advised the Company that, effective June 16, 1998, he will
return to his consulting practice, and that he intends to provide services
to the Company as a consultant until such time as a permanent chief
financial officer is engaged.
(5) Based on an annual salary of $165,000. Mr. Clayton was on medical leave,
during which he worked part time, from June to November.
(6) Includes amounts paid as consulting fees prior to commencement of full-time
employment in May 1996.
(7) Includes $945 of interest forgiven.
(8) Reflects salary for employment at 80% of full time.
(9) Includes $839 of interest forgiven.
STOCK OPTION GRANTS AND EXERCISES
The Company did not grant any stock options to the Named Executive Officers
during the fiscal year ended December 31, 1997. The Named Executive Officers did
not exercise any stock options during the fiscal year ended December 31, 1997.
The following table sets forth for each of the Named Executive Officers the
number and value of securities underlying unexercised options held by the Named
Executive Officers at December 31, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FY-END(#) IN-THE-MONEY OPTIONS
EXERCISABLE/ AT FY-END($)
NAME UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
Stephen T. Isaacs.................................. 36,750/0 270,890/0
President and Chief Executive Officer
David S. Clayton................................... 0/0 0/0
Vice President, Finance and Chief Financial
Officer
Laurence M. Corash................................. 29,400/0 219,912/0
Vice President, Medical Affairs
John E. Hearst..................................... 7,350/0 54,978/0
Vice President, New Science Opportunities
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(1) Value realized and value of unexercised in-the-money options are based on
the per share deemed values at the exercise date and at year end,
respectively, determined after the date of grant solely for financial
accounting purposes, less the exercise price payable for such shares.
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REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION(1)
The Compensation Committee (the "Committee") of the Board of Directors is
composed of two non-employee directors. The Committee is responsible for
developing the Company's compensation policies and for fixing the compensation
levels of the Company's officers and employees. The Company's management
compensation program is designed to reward outstanding performance and results.
The Company's compensation philosophy and program objectives are directed by two
primary guiding principles. First, the program is intended to provide fully
competitive levels of compensation-at expected levels of performance-in order to
attract, motivate and retain talented executives. To this end, the Company
strives to align its executive compensation with the mid- to high-range of
compensation programs of comparable development-stage companies in the medical
device industry. Second, the program is intended to create an alignment of
interests between the Company's executives and stockholders such that a
significant portion of each executive's compensation is directly linked to
maximizing stockholder value.
In support of this philosophy, the executive compensation program is
designed to reward performance that is directly relevant to the Company's
short-term and long-term success. As such, the Company attempts to provide both
short-term and long-term incentive compensation that varies based on corporate
and individual performance. To accomplish these objectives, the Compensation
Committee has structured the executive compensation program with three
components: base salary; annual bonuses; and long-term incentives (typically
stock options). The following sections describe these elements of compensation
and how each component relates to the Company's overall compensation philosophy.
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of no more than $1 million of
compensation paid to certain Named Executive Officers in a taxable year.
Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code. The Compensation Committee has
determined that stock options granted under the Company's 1996 Equity Incentive
Plan with an exercise price at least equal to the fair market value of the
Company's common stock on the date of grant shall be treated as
"performance-based compensation."
BASE SALARY
The Company's base salary program is based on a philosophy of providing
base pay levels that are in the mid- to high-range of comparable
development-stage companies in the biotechnology industry. The Company
periodically reviews its executive pay levels to ensure consistency with
similarly positioned companies in such industry. These companies may, but need
not, be included in the Nasdaq Pharmaceutical Index.
Annual salary adjustments are based on a subjective assessment of several
factors: individual performance and long-term value to the Company; competitive
base salary levels; and the Company's overall progress in advancing the
Company's lead products through development and clinical testing and developing
new technologies. The weight of these factors in the case of a particular
individual's compensation may vary.
ANNUAL BONUS
Annual bonuses are intended to reward key employees based on Company and
individual performance, motivate key employees and provide pay-for-performance
cash compensation opportunities. The criteria for bonus payments to the
Company's Executive Officers were based on the achievement of the specific
development and Company milestones established by the Compensation Committee at
the beginning of the fiscal year. For fiscal year 1997, these goals included
corporate earnings targets, completing Phase 2a and 2b clinical trials of the
platelet program, receiving regulatory approval to begin Phase 3 clinical trials
for the platelet program triggering a milestone-based equity investment from the
Company's corporate partner, commencing Phase 2 clinical trials for the plasma
program and the completion of an initial public offering.
LONG-TERM INCENTIVES
Long-term incentives are designed to focus the efforts of key employees on
the long-term goals of the Company and to maximize total return to the
stockholders of the Company. The Committee has relied solely on stock option
awards to provide long-term incentive opportunities. Stock options align the
interests of key
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(1) The material in this report is not "soliciting material," is not deemed
"filed" with the SEC and is not to be incorporated by reference into any filing
of the Company under the Securities Act or the Exchange Act, whether made before
or after the date hereof and irrespective of any general incorporation language
in any such filing.
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employees and stockholders by providing value to the key employee through stock
price appreciation only. Stock options issued to employees generally have a
ten-year term before expiration and are fully exercisable within four years of
the grant date. The Company typically grants options at the time of commencement
of employment and on a periodic basis thereafter. In awarding stock options, the
Company considers individual performance, overall contribution to the Company,
officer retention, the number of unvested stock options and the total number of
stock options to be awarded. No stock awards were granted to the Company's
Executive Officers in fiscal year 1997.
FISCAL 1997 ACTIONS
The compensation for the Executive Officers for fiscal 1997 was determined
in the manner described above, and no particular quantitative measures were used
by the Compensation Committee in determining their compensation except as so
described.
The 1997 compensation of the Company's Chief Executive Officer, Stephen T.
Isaacs, was based largely on 1996 performance. Achievements in 1996 included
obtaining allowance of an IND for the Company's plasma system, completion of a
development and commercialization agreement for the Company's plasma and red
blood cell systems with Baxter Healthcare, and completion of preclinical studies
of the Company's platelet system. Accordingly, the Committee deemed it
appropriate and consistent with these accomplishments to increase Mr. Isaacs'
base salary from $230,833 to $260,000 for 1997. Similarly Mr. Isaacs received a
cash bonus of $60,000 in 1997 for his contribution to these achievements. Mr.
Isaacs was not granted options in 1997.
B.J. Cassin
Peter H. McNerney
PERFORMANCE MEASUREMENT COMPARISON(2)
The following graph shows the total stockholder return of an investment of
$100 in cash on January 31, 1997 for (i) the Company's Common Stock, (ii) the
Nasdaq Stock Market (U.S.) Index and (iii) the Nasdaq Pharmaceutical Stocks
Index. All values assume reinvestment of the full amount of all dividends.
Measurement Period
(Fiscal year ended
December 31, 1997 and
three month period
ended March 31, 1998 covered) Cerus Nasdaq US Pharm
1/31/97 100.00 100.00 100.00
2/28/97 81.4433 94.4715 100.65
3/31/97 89.69 88.3044 87.6017
4/30/97 92.7835 91.0651 82.41
5/30/97 97.9381 101.39 94.83
6/30/97 76.2887 104.491 94.5675
7/31/97 115.464 115.52 97.27
8/29/97 137.633 115.35 96.1114
9/30/97 143.299 122.166 106.092
10/31/97 173.196 115.85 100.69
11/28/97 189.691 116.43 97.55
12/31/97 181.443 114.60 95.24
1/30/98 140.21 118.24 94.37
2/27/98 132.99 129.34 97.44
3/31/98 136.08 134.12 104.78
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(2) The material in this report is not "soliciting material," is not deemed
"filed" with the SEC and is not to be incorporated by reference into any
filing of the Company under the Securities Act or the Exchange Act, whether
made before or after the date hereof and irrespective of any general
incorporation language in any such filing.
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CERTAIN TRANSACTIONS
BAXTER HEALTHCARE CORPORATION
The Company is a party to agreements with Baxter Healthcare Corporation
("Baxter") for the development and commercialization of platelet, FFP and red
cell inactivation systems, and has sold and issued to Baxter shares of the
Company's capital stock pursuant to certain stock purchase agreements. In
October 1997, the Company issued 217,202 shares of Common Stock to Baxter at
$23.02 per share for a total consideration of approximately $5.0 million. Baxter
currently holds approximately 1,457,830 shares of the Company's Common Stock, or
15.8%, and has paid the Company an aggregate of approximately $36.8 million,
consisting of $17.5 million in equity investments and $19.3 million in
development and milestone payments under various development and
commercialization agreements.
INDEMNIFICATION AND LIMITATION OF DIRECTOR AND OFFICER LIABILITY
In July 1996, the Board authorized the Company to enter into indemnity
agreements with each of the Company's directors, executive officers, Controller
and Director of Finance. The form of indemnity agreement provides that the
Company will indemnify against any and all expenses of the director or executive
officer who incurred such expenses because of his or her status as a director or
executive officer, to the fullest extent permitted by the Company's Bylaws and
Delaware law. In addition, the Company's Bylaws provide that the Company shall
indemnify its directors and executive officers to the fullest extent permitted
by Delaware law, subject to certain limitations, and may also secure insurance,
to the fullest extent permitted by Delaware law, on behalf of any director,
officer, employee or agent against any expense, liability or loss arising out of
his or her actions in such capacity.
The Company's Restated Certificate contains certain provisions relating to
the limitation of liability of directors. The Company's Restated Certificate
provides that a director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for unlawful payment of dividends or unlawful stock
repurchases or redemptions, or (iv) for any transaction from which the director
derived an improper benefit. If the Delaware General Corporation Law is amended
to authorize corporate action further eliminating or limiting the personal
liability of a director, then the liability of a Company director shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. The provision in the Restated Certificate does
not eliminate the duty of care and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors,
/s/ Lori L. Roll, C.P.A.
Corporate Secretary
May 12, 1998
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CERUS CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 16, 1998
The undersigned hereby appoints STEPHEN T. ISAACS and LORI L. ROLL, and each
of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Cerus Corporation which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
Cerus Corporation to be held at the Concord Hilton located at 1970 Diamond
Boulevard, Concord, California at 11:00 a.m., local time, and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2 AS MORE SPECIFICALLY DESCRIBED
IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL
BE VOTED IN ACCORDANCE THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
PROPOSAL 1: To elect two directors to hold office until the 2001 Annual
Meeting of Stockholders.
[ ] FOR all the nominees listed below (except as marked to [ ] WITHOLD AUTHORITY to vote
the contrary below) for all the nominees
listed below.
AUTHORITY TO VOTE FOR ANY NOMINEE MAY BE WITHHELD BY LINING THROUGH SUCH
NOMINEE'S NAME BELOW:
JOHN E. HEARST, PH.D., D.SC. AND HENRY E. STICKNEY
(continued on reverse side)
14
(continued from other side)
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 2: To ratify the selection of Ernst & Young LLP as independent auditors
of the Company for its fiscal year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
DATED , 1998
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SIGNATURE(S)
Please sign exactly as your name
appears on this proxy. If the
stock is registered in the names
of two or more persons, each
should sign. Executors,
administrators, trustees,
guardians and attorneys-in-fact
should add their titles. If
signer is a corporation, please
give full corporate name and
have a duly authorized officer
sign, stating title. If signer
is a partnership, please sign in
partnership name by authorized
person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.