<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
GENOME THERAPEUTICS CORP.
(Name of Registrant as Specified In Its Charter)
GENOME THERAPEUTICS CORP.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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 statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
GENOME THERAPEUTICS CORP.
--------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
IN LIEU OF AN ANNUAL MEETING
TO BE HELD ON FEBRUARY 22, 1999
To the Shareholders of
GENOME THERAPEUTICS CORP.
NOTICE IS HEREBY GIVEN that a Special Meeting in Lieu of an Annual Meeting
of Shareholders of Genome Therapeutics Corp. (the "Company") will be held on
February 22, 1999 at 10:00 a.m. at Ropes & Gray, One International Place, 36th
floor, Boston, Massachusetts, for the following purposes:
A. To elect six directors.
B. To ratify the selection of Arthur Andersen LLP as the Company's auditors
for the fiscal year ending August 31, 1999.
C. To transact such other business as may properly come before the meeting
or any adjournments of the meeting.
The Board of Directors has fixed the close of business on January 11, 1999
as the record date for the determination of shareholders entitled to notice of
and to vote at this meeting and at any adjourned session(s) thereof.
All shareholders are cordially invited to attend the meeting. However, to
assure your representation at the meeting, you are urged to mark, sign, date and
return the enclosed form of proxy as promptly as possible. Shareholders
attending the meeting may vote in person even if they have returned a proxy.
By Order of the Board of Directors,
DAVID C. CHAPIN, Clerk
January 21, 1999
Boston, Massachusetts
<PAGE> 3
GENOME THERAPEUTICS CORP.
PROXY STATEMENT
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited by the Board of Directors of Genome
Therapeutics Corp. (the "Company") for use at a Special Meeting in Lieu of an
Annual Meeting of Shareholders to be held on February 22, 1999 (the "Annual
Meeting"), or at any adjourned session(s) of that meeting, for the purposes set
forth in the foregoing Notice. The cost of solicitation of proxies, including
expenses in connection with preparing and mailing this Proxy Statement, will be
borne by the Company. This solicitation of proxies is being made by mail,
although it may be supplemented by telephone, facsimile or personal solicitation
by directors, officers, or other employees of the Company. No additional
compensation will be paid to such individuals for such services. This Proxy
Statement and accompanying proxy will be mailed on or about January 21, 1999, to
all shareholders entitled to vote at the meeting. The address of the Company is
100 Beaver Street, Waltham, Massachusetts, 02154.
Only shareholders of record at the close of business on January 11, 1999,
will be entitled to notice of and to vote at the meeting. As of December 21,
1998 the Company had outstanding 18,348,646 shares of Common Stock, $.10 par
value (the "Common Stock"). Each share of Common Stock is entitled to one vote.
Any shareholder giving a proxy has the power to revoke it at any time
before it is exercised. It may be revoked by filing with the Clerk of the
Company an instrument of revocation or a duly executed proxy bearing a later
date. It may also be revoked by attending the meeting and electing to vote in
person.
A copy of the Company's 1998 Annual Report to Shareholders, including
financial statements, is being mailed concurrently with this Proxy Statement to
each shareholder entitled to vote at the meeting. THE COMPANY WILL PROVIDE,
WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED AUGUST 31, 1998 AND RELATED FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES TO EACH SHAREHOLDER ENTITLED TO VOTE AT THIS MEETING WHO
REQUESTS A COPY OF SUCH IN WRITING. REQUESTS SHOULD BE SENT TO GENOME
THERAPEUTICS CORP. 100 BEAVER STREET, WALTHAM MASSACHUSETTS, 02154, ATTENTION:
FENEL M. ELOI, SR. VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER.
QUORUM, REQUIRED VOTES AND METHOD OF TABULATION
Consistent with Massachusetts law and under the Company's 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. Votes
cast by proxy or in person at the Annual Meeting will be counted by persons
appointed by the Company to act as election inspectors for the Annual Meeting.
The Company 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 and nominees as to which instructions have not been received from the
beneficial owners or persons entitled to vote, and the broker or nominee does
not have the discretionary voting power in the particular matter) on any other
matter, only as shares that are present and entitled to vote for purposes of
determining the presence of a quorum, but none of the withheld votes,
abstentions, or broker non-votes will be
<PAGE> 4
counted as "cast" or have any effect on the outcome of voting on the particular
matter, even though persons analyzing the results of the voting may interpret
the results differently.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 21, 1998, certain
information regarding all shareholders known by the Company to be the beneficial
owners of more than 5% of the Company's Common Stock, and the stock ownership of
the Company's current directors and nominees, and of all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP OF CLASS
- --------------------------------------- ---------- --------
<S> <C> <C>
Marc B. Garnick..................................... 25,000(2) *
Robert J. Hennessey................................. 1,445,000(3) 7.3%
Philip Leder........................................ 222,631(4) 1.2%
Lawrence Levy....................................... 20,800(4) *
Steven M. Rauscher.................................. 76,631(4) *
Norbert G. Riedel................................... 25,000(2) *
Fenel M. Eloi....................................... 38,205(4) *
Christopher T. Kelly................................ 14,939(4) *
Orrie M. Friedman................................... 2,129,965 11.6%
All directors and officers as a group (8 persons)... 1,818,206(5) 9.1%
</TABLE>
- ---------------
* Less than 1%
(1) The address of all such persons is c/o the Company, 100 Beaver Street,
Waltham, Massachusetts, 02154, except Dr. Friedman, whose address is c/o
Grenfell Development Corp., One Kendall Square, Suite 2200, Cambridge, MA
02139.
(2) These shares are issuable upon exercise of options granted on January 11,
1999 to Dr. Garnick and Dr. Riedel who were elected as directors by the
Board of Directors on January 11, 1999 and are standing for election by the
shareholders. The options will vest in four equal installments over the next
four years on the anniversary of the date of grant.
(3) Includes 1,405,000 shares which are issuable upon the exercise of vested
options.
(4) Includes 220,000 shares for Dr. Leder, 20,000 shares for Mr. Levy, 70,000
shares for Mr. Rauscher, 15,561 shares for Mr. Eloi and 8,439 shares for Mr.
Kelly which shares are issuable upon the exercise of vested options or
options which are to become vested within 60 days following December
21,1998. Includes 2,631 shares for Dr. Leder, 800 shares for Mr. Levy and
2,631 shares for Mr. Rauscher which shares are deferred and issuable upon
the earlier of three years from the grant date or the date upon which the
grantee ceases to be a director of the Company. Excludes options which have
been granted to directors and officers but which will not become vested
within 60 days following December 21, 1998.
(5) Includes a total of 1,739,000 shares which may be issuable upon the exercise
of vested options or options which are to become vested within 60 days
following December 21, 1998. Includes 6,062 shares which are deferred and
issuable upon the earlier of three years from the grant date or the date
upon which the grantee ceases to be a director of the Company. Excludes
options which have been granted to directors and officers but which will not
become vested within 60 days following December 21, 1998.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than ten
percent of the Company's stock, to file initial
2
<PAGE> 5
reports of ownership and reports of changes in ownership with the Securities and
Exchange Commission and the National Association of Securities Dealers.
Executive officers, directors and greater than ten percent beneficial owners are
required by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that during fiscal 1998 all Section 16(a) filing
requirements applicable to its executive officers, directors and greater than
ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the Company to
its Chief Executive Officer and other executive officers who earned more than
$100,000 for the fiscal year ended August 31, 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
--------------------------
ANNUAL COMPENSATION ALL
------------------- STOCK OTHER
FISCAL SALARY BONUS OPTIONS/ COMPENSATION(1)
NAME AND PRINCIPAL POSITION YEAR $ $ SARS# $
- --------------------------- ------ ------- ------ -------- ---------------
<S> <C> <C> <C> <C> <C>
Robert J. Hennessey..................... 1998 305,468(2) 20,625 -- 2,850
Chairman, President/CEO 1997 346,915(3) 40,000 -- 2,735
1996 313,661(4) 50,000 300,000 1,000
Fenel M. Eloi........................... 1998 158,461 21,000 25,100 3,000
Sr. Vice President, 1997 152,746(5) 24,000 15,100 2,846
CFO & Treasurer 1996 119,700 30,000 25,100 1,000
Christopher T. Kelly.................... 1998 204,959(6) 25,000 10,000 1,500
Sr. Vice President -- 1997 59,257(7) 15,000 165,000 --
Strategic Planning and 1996 -- -- -- --
Business Development
</TABLE>
- ---------------
(1) These amounts represent Company contributions to the Company's 401(k) Plan.
(2) This amount includes $6,885 for relocation expenses and $16,949 for other
compensation allowances.
(3) This amount includes $63,331 for relocation expenses and $16,949 for other
compensation allowances.
(4) This amount includes $67,123 for temporary housing.
(5) This amount includes $14,743 for relocation expenses.
(6) This amount includes $35,152 for relocation expenses.
(7) This amount includes $4,450 for temporary housing. Mr. Kelly's salary in
1997 reflects 4 months of employment.
EXECUTIVE EMPLOYMENT AGREEMENT
Robert J. Hennessey, Chairman of the Board, President and Chief Executive
Officer of the Company, has an employment agreement with the Company which
commenced March 15, 1996. The agreement is subject to automatic extension
annually thereafter unless prior written notice of nonrenewal is given.
3
<PAGE> 6
Mr. Hennessey's current base salary is $290,000, and is subject to increase each
year, as determined by the Board of Directors or Stock Option and Compensation
Committee. The percentage of the increase must be at least equal to the
percentage increase, if any, during the preceding year in the Consumer Price
Index -- Boston Region. The agreement entitles Mr. Hennessey to receive bonuses
based on the Company's achievement of certain operating and financial goals. The
amount of any bonus shall be determined by the Board (or a committee of the
Board) pursuant to the agreement. Mr. Hennessey also received certain other
compensation allowances, as approved by the Board, equal to $16, 949. Upon
hiring, Mr. Hennessey was awarded non-qualified stock options to purchase
1,600,000 shares of Common Stock at an exercise price of $1.625 per share, all
of which were vested as of August 31, 1998. In February, 1996, Mr. Hennessey was
also awarded non-qualified stock options to purchase up to 300,000 shares of
Common Stock, at an exercise price of $8.87 per share, the fair market value of
the Common Stock on the date of the grant. As of August 31, 1998, 175,000
options have vested and the balance of the 125,000 options by their terms vest
on December 21, 2005 or earlier if the average closing price of the Common Stock
for a period of 10 out of 20 consecutive trading days is $14.25 or higher.
Mr. Hennessey's options shall become fully vested upon the occurrence of a
change in control (as defined). In addition, the agreement provides for the
continuation of all compensation and benefits for a period equal to the lesser
of the remaining term of the agreement or 8 months in the event that Mr.
Hennessey's employment is terminated without cause (as defined) or terminates
with good reason (as defined). In the event that Mr. Hennessey's employment is
terminated by the Company within 12 months following a change in control (as
defined) for any reason other than cause, the Company will pay him a lump sum
cash payment equal to two times the base salary and bonus paid to Mr. Hennessey
for the calendar year preceding the year in which the change in control occurs,
and together with all accrued obligations (as defined). The agreement contains
customary confidentiality and non-competition clauses.
The following table reflects the stock options granted by the Company to
the named executive officers for the fiscal year ending August 31, 1998:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
% OF TOTAL RATES OF STOCK PRICE
OPTIONS/ OPTIONS/SARS EXERCISE APPRECIATION FOR
SARS GRANTED TO OR BASE OPTION TERM(1)
GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME # FISCAL YEAR ($/SHARE) DATE 5% 10%
---- -------- ------------ --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Hennessey....... -- -- -- -- -- --
Fenel M. Eloi............. 10,000(2) 2.1% $5.00 10/10/07 $101,182 $190,732
100(3) -- 9.50 10/20/07 597 1,514
15,000(4) 3.2% 4.875 07/27/08 45,988 116,542
Christopher T. Kelly...... 10,000(4) 2.1% 4.875 07/27/08 30,659 77,695
</TABLE>
- ---------------
(1) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10%, compounded annually from the date the respective options were granted
to their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise. Actual gains, if any, on stock option exercises will
4
<PAGE> 7
depend on the future performance of the Common Stock, the optionholders'
continued employment through the option period, and the date on which the
options are exercised.
(2) This non-qualified stock option was granted on October 10, 1997 and has a
term of ten years. The option vests in two equal installments over the next
two years on the anniversary of the date of grant.
(3) This incentive stock option was granted on October 10, 1997 and has a term
of ten years. The option vests in equal installments over the next four
years on the anniversary of the date of grant.
(4) These incentive stock options were granted on July 27, 1998 and have a term
of ten years. The option vests in four equal installments over the next four
years on the anniversary of the date of grant.
(4) These incentive stock options were granted on July 27, 1998 and have a term
of ten years. The option vests in four equal installments over the next four
years on the anniversary of the date of grant.
The following table sets forth the aggregate dollar value of all
Options/SARs exercised and the total number of unexercised Options/SARs held on
August 31, 1998 by each of the named executive officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END FISCAL YEAR-END
(#) ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---- --------------- ----------- ----------------- ----------------
<S> <C> <C> <C> <C>
Robert J. Hennessey........... 368,000 $2,511,625 1,405,000/125,000 $ 1,133,937/0
Fenel M. Eloi................. 26,375 123,456 23,963/ 57,712 0/2,003
Christopher T. Kelly.......... -- -- 22,500/162,500 0/0
</TABLE>
- ---------------
(1) The closing price of the Common Stock on August 31, 1998 was $2.5469 as
reported by NASDAQ National Market. Value is calculated on the basis of the
difference between the Option/SAR grant price and $2.5469 multiplied by the
number of shares of Common Stock underlying the Option/SAR.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934 that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following report and the Performance Graph
on page 7 shall not be incorporated by reference into any such filings.
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE
The Stock Option and Compensation Committee of the Board of Directors (the
"Compensation Committee") of the Company consists of Messrs. Rauscher and Levy
and Dr. Leder. The Committee's responsibilities include recommending to the
Board of Directors the compensation of the Company's executive officers,
administering the Company's stock option plans and approving the grant of stock
options to employees of, and consultants to, the Company. No member of the
Committee was an officer or employee of the Company during the year ended August
31, 1998.
The Company's executive compensation programs reflect input and
recommendations from the Company's Chief Executive Officer. The Compensation
Committee reviews his proposals concerning executive compensation and makes a
recommendation to the Board of Directors concerning the scope and nature of
5
<PAGE> 8
compensation arrangements. It is the Company's current policy to establish,
structure and administer compensation plans and arrangements so that the
deductibility to the Company of such compensation will not be limited under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Company and Mr. Hennessey are parties to an employment agreement.
During the year ended August 31, 1998 Mr. Hennessey received a salary of
$281,634, relocation and compensation allowances of $23,834 and a bonus of
$20,625 under the agreement. Pursuant to the agreement, in March 1993 and March
1996, Mr. Hennessey was granted an option to purchase up to 1,600,000 and
300,000 shares of the Company's Common Stock respectively. See "Executive
Compensation -- Executive Employment Agreements."
Mr. Hennessey's base salary and bonus reflect Mr. Hennessey's and the
Company's accomplishments since his employment with the Company began in March
1993 through fiscal 1998. During this period, Mr. Hennessey completed several
strategic alliances with pharmaceutical companies, initiated the Company's
PathoGenome(TM) database initiative, and completed a successful public offering.
No specific weight was assigned to any of these accomplishments by the
Committee.
EXECUTIVE OFFICER COMPENSATION
The Company maintains compensation and incentive programs designed to
motivate, retain and attract management. The compensation levels provided for
the Company's executive officers reflect consideration of the compensation
levels of comparable companies, and the performance and potential of the
officer.
Ongoing executive officer compensation is determined subjectively, in that
the Chief Executive Officer provides recommendations to the Compensation
Committee for the proposed remuneration of the Company's officers based on his
evaluation of those individuals' performance against objectives jointly
formulated by the Chief Executive Officer and the officers, any change in their
responsibilities, their potential to contribute to the success of the Company
and the compensation levels of similarly situated employees of comparable
companies. No specific weights have been assigned to these factors by the
Committee.
Officer compensation is generally composed of cash compensation and option
grants under the Company's stock option plans. The Company believes strongly in
the use of stock options to align the interests of its employees, particularly
its executive officers, with the interests of the Company's shareholders.
Options generally vest over a period of years, in order to serve as a future
incentive. There is no formula for the award of stock options to individual
executives. Factors considered in making option awards include the officer's
existing equity or stock option position, the importance to the Company of
retaining the officer's services, the officer's potential to contribute to the
success of the Company and the officer's past contributions to the Company.
STOCK OPTION AND COMPENSATION
COMMITTEE
Steven M. Rauscher
Philip Leder
Lawrence Levy
6
<PAGE> 9
PERFORMANCE GRAPH
NOTE: The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
The graph below compares the relative cumulative total returns to the
Company's shareholders with the cumulative total of the S&P 500 Index and the
Amex Biotechnology Index over the last five years.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN *
AMONG GENOME THERAPEUTICS CORP., THE S&P 500 INDEX
AND THE HAMBRECHT & QUIST BIOTECHNOLOGY INDEX
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
GENOME HAMBRECHT &
THERAPEUTICS QUIST
CORPORATION S&P 500 BIOTECHNOLOGY
<S> <C> <C> <C>
AUG-93 100 100 100
AUG-94 145 105 118
AUG-95 564 128 156
AUG-96 664 152 175
AUG-97 577 214 185
AUG-98 168 231 166
</TABLE>
* $100 invested on 8/31/93 in stock or Index, including reinvestment of
dividends. Fiscal year ending August 31.
7
<PAGE> 10
PROPOSAL A
ELECTION OF SIX DIRECTORS
The Board of Directors has fixed the number of directors at six. It is
intended that the enclosed proxy will be voted for the election of the four
persons named below unless such authority has been withheld in the proxy. Each
director will hold office until the next annual meeting and until his successor
is elected and shall have been qualified. In order to be elected a majority of
the shares entitled to vote must approve, or be deemed to have approved, the
election of each nominee for director. If any nominee should be unavailable for
election at the time of the meeting (which is not presently anticipated) the
persons named as proxies may vote for another person in their discretion or may
vote for fewer than four directors. All of the nominees are currently directors
of the Company and were elected at the 1998 Annual Meeting except for Messrs.
Norbert G. Riedel, Ph.D. and Marc B. Garnick, M.D. who were elected by the Board
of Directors on January 11, 1999 and are standing for election by the
shareholders. All have agreed to serve as directors if elected at the meeting.
Directors of the Company who are not also employees will receive
compensation under the 1997 Directors' Deferred Stock Plan.
The nominees for directors of the Company who are proposed for election at
the meeting, their ages, and a description of their principal occupations are
set forth in the following table. The principal occupations and business
experience of the nominees for the past five years have been with the employers
indicated, although in some cases they have held different positions with such
employers.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS SINCE
---- --- -------------------------------------------- --------
<S> <C> <C> <C>
Robert J. Hennessey............ 57 Mr. Hennessey became Chief Executive Officer and 1993
President of the Company in March 1993 and was
elected Chairman of the Board in May 1994. From 1990
to March 1993, Mr. Hennessey was President of
Hennessey & Associates, Ltd., a consulting firm, and
from 1980 to 1990 he was a Vice President of
Sterling Drug, Inc., a pharmaceutical company.
Philip Leder, M.D.............. 64 Dr. Leder, a director of the Company, has served as 1994
the John Emery Andrus Professor of Genetics and
Chairman of the Department of Genetics at Harvard
Medical School since 1980. He has also been a Senior
Investigator of the Howard Hughes Medical Institute
since 1986. Dr. Leder is a director of Monsanto
Company, Inc.
Lawrence Levy.................. 75 Mr. Levy , a director of the Company, is Chairman of 1986
the Board of Directors and President of Northern
Ventures Corporation, international management and
business consulting firm. He has held this position
since 1982.
Steven M. Rauscher............. 46 Mr. Rauscher is a director of the Company and has 1993
been the Chief Executive Officer and a director of
Affiliated Research Centers, Inc. since 1995. From
1993 to 1995 Mr. Rauscher was President and Chief
Executive Officer of Pharmedic Company, a
biopharmaceutical company and from 1976 to 1993 he
was Vice President of Abbott Laboratories, a
biopharmaceutical company.
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS SINCE
---- --- -------------------------------------------- --------
<S> <C> <C> <C>
Norbert G. Riedel, Ph.D........ 41 Dr. Riedel is currently President of the Recombinant 1999
Strategic Business Unit for Baxter Hyland Immuno, a
division of Baxter Healthcare Corp. From 1991 to
1998 Dr. Riedel served in various research and
management positions at Hoechst Marion Roussel, Inc.
where his most recent responsibility was Head of
Global Biotechnology and the Hoechst Ariad Genomic
Center. From 1984 to 1992 Dr. Riedel held various
academic appointments at Harvard University, Boston
University School of Medicine and Massachusetts
Institute of Technology.
Marc B. Garnick, M.D........... 52 Dr. Garnick is currently Executive Vice President 1999
and Chief Medical Officer at Praecis
Pharmaceuticals, Inc. and Clinical Professor of
Medicine at Harvard Medical School. From 1987 to
1994, Dr. Garnick was Vice President, Clinical
Development at Genetics Institute. From 1978 to
1998, Dr. Garnick held various academic and hospital
appointments at Harvard Medical School, the Dana
Farber Cancer Institute and the Brigham and Women's
Hospital.
</TABLE>
The Board of Directors held six meetings during fiscal 1998. Each member of
the Board of Directors attended at least 75% of the meetings of the Board of
Directors and of each committee on which they serve.
The Board of Directors has established an Audit Committee consisting of Mr.
Rauscher, Mr. Levy and Dr. Leder which held one meeting during fiscal 1998. The
duties of the Audit Committee consist of reviewing with the Company's
independent auditors and its management the scope and results of the annual
audit, the scope of other services provided by the Company's auditors, proposed
changes in the Company's financial and accounting standards and principles, the
Company's policies and procedures with respect to its internal accounting,
auditing and financial controls, and making recommendations to the Board of
Directors on the engagement of independent auditors.
The Board of Directors has established a Stock Option and Compensation
Committee, consisting of Messrs. Rauscher and Levy and Dr. Leder. The duties of
the Stock Option and Compensation Committee consist of determining the
compensation of the Company's executive officers, and administering the
Company's stock option plans and determining the grant of stock options to
employees of, and consultants to, the Company. During fiscal 1998, the Stock
Option and Compensation Committee held four meetings.
The Board of Directors has established a Nominating Committee, consisting
of Mr. Levy and Dr. Leder. The duties of the Nominating Committee consist of
considering and making recommendations to the Board of Directors. During fiscal
year 1998, the Nominating Committee had no meetings. The Nominating Committee
does not consider nominees recommended by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS ELECTION OF THE SIX NOMINEES DESCRIBED ABOVE.
9
<PAGE> 12
EXECUTIVE OFFICERS
The executive officers of the Company who are not also directors of the
Company are as follows.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Fenel M. Eloi...................... Senior Vice President, Treasurer
and Chief Financial Officer
Christopher T. Kelly............... Senior Vice President -- Strategic
Planning and Business Development
</TABLE>
Fenel M. Eloi joined the Company in September 1989 as Corporate Controller
and was promoted to his current position in September, 1991. Between 1984 and
1989, Mr. Eloi held various financial management positions at GTE Corp. where
his last responsibility was Business Unit Financial Manager. Prior to 1984, he
held various financial positions, both domestic and international, with
Haemonetics, Inc. and Simplex Time Recorder Co.
Christopher T. Kelly has been Senior Vice President -- Strategic Planning
and Business Development since March 1997. Prior to joining the Company, Mr.
Kelly served as President and Chief Executive Officer of Spectral
Pharmaceuticals, Inc., a company which he co-founded in 1993. Prior to Spectral,
he was Vice President of Commercial Development at Triplex Pharmaceutical
Corporation. From March 1986 to March 1992, Mr. Kelly held senior strategic
planning and business development positions at Sterling Drug, Inc., serving as
Vice President Business Development from March 1989 to March 1992. Mr. Kelly
previously held senior marketing positions with Boehringer Mannheim Corporation,
CooperBiomedical, Inc. and Hoffmann-La Roche Inc.
PROPOSAL B
RATIFICATION OF SELECTION OF AUDITORS
Arthur Andersen LLP, Boston, Massachusetts, has been selected by the Board
of Directors of the Company as auditors of the Company for the fiscal year
ending August 31, 1999. Unless otherwise indicated, proxies will be voted in
favor of ratifying the selection of Arthur Andersen as auditors. A
representative of Arthur Andersen will be present at the Annual Meeting if
requested by a shareholder (either in writing or by telephone) in advance of the
Annual Meeting. Such requests should be directed to the Clerk of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL B.
SHAREHOLDER PROPOSALS
In order for any proposal that a shareholder intends to present at next
year's annual meeting of shareholders to be eligible for inclusion in the
Company's proxy material for that meeting, it must be received by the Clerk of
the Company at the Company's offices in Waltham, Massachusetts, no later than
September 28, 1999.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
meeting, but if other matters do properly come before the meeting, it is
intended that the persons named in the proxy will vote in respect thereof in
accordance with their best judgment.
10
<PAGE> 13
In the event that sufficient votes in favor of any of the proposals set
forth in the accompanying Notice are not received by the time scheduled for the
meeting, the persons named as proxies may propose one or more adjournments of
such meeting for a period of not more than 60 days in the aggregate to permit
further solicitation of proxies with respect to any of such proposals. Any such
adjournments will require the affirmative vote of a majority of the votes cast
on the question in person or by proxy at the session of the meeting to be
adjourned. The persons named as proxies will vote in favor of such adjournment
those proxies that they are entitled to vote in favor of such proposals. They
will vote against any such adjournment those proxies required to be voted
against any of such proposals. The costs of any such additional solicitation and
of any adjourned session will be borne by the Company.
The Board of Directors encourages you to have your shares voted by signing
and returning the enclosed form of proxy. The fact that you will have returned
your proxy in advance will in no way affect your right to vote in person should
you find it possible to attend. However, by signing and returning the proxy you
have assured your representation at the meeting. Thank you for your cooperation.
11
<PAGE> 14
PROXY
GENOME THERAPEUTICS CORP.
SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 22, 1999
The undersigned hereby appoints Robert J. Hennessey and Fenel M. Eloi or either
of them, proxies with power of substitution to each, to vote at the Special
Meeting in Lieu of an Annual Meeting of Stockholders of Genome Therapeutics
Corp., to be held on February 22, 1999 at Ropes & Gray, One International
Place, 36th Floor, Boston, Massachusetts at 10:00 a.m., local time, or at any
adjournments thereof, all of the shares of Common Stock, par value $.10 per
share, of Genome Therapeutics Corp. that the undersigned would be entitled to
vote if personally present. The undersigned instructs such proxies or their
substitutes to act on the following matters as specified by the undersigned,
and to vote in such manner as they may determine on any other matters that may
properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
- ------------ -------------
SEE REVERSE CONTINUE AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------ -------------
<PAGE> 15
[x] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
This proxy when properly executed will be voted in the manner directed by the
undersigned stockholder. If no contrary direction is made, this proxy will be
voted for Proposals 1 and 2.
1. To Elect six directors.
NOMINEES: Philip Leder, Robert J. Hennessey, Lawrence Levy,
Marc B. Garnick, Steven M. Rauscher, Norbert G. Riedel
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ]________________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To ratify the selection of Arthur [ ] [ ] [ ]
Andersen LLP as the Company's
auditors for the fiscal year ending
August 31, 1999.
3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournments of the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE SIGN AND DATE.
NOTE: Please sign exactly as name appears on this card. All joint owners
should sign. When signing as executor, administrator, attorney or guardian or
as custodian for a minor, please give full title as such. If a corporation,
please sign in full corporate name and indicate the signer's office. If a
partner, sign in the partnership name.
Signature:_____________________________________________ Date__________________
Signature:_____________________________________________ Date__________________
