<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
GENETICS INSTITUTE, 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):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
[ ] 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
GENETICS INSTITUTE, INC.
87 CAMBRIDGEPARK DRIVE
CAMBRIDGE, MASSACHUSETTS 02140
(617) 876-1170
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
MAY 16, 1995
The Annual Meeting of Stockholders of Genetics Institute, Inc. (the
"Company") will be held at The Charles Hotel, One Bennett Street, Cambridge,
Massachusetts on Tuesday, May 16, 1995 at 9:00 a.m., local time, to consider and
act upon the following matters:
1. To elect three Class II directors to serve for the ensuing three
years.
2. To approve an amendment to the Company's 1991 Stock Option Plan to
increase the aggregate number of the Company's Depositary Shares covered by
such Plan from 4,400,000 to 5,700,000.
3. To ratify the selection by the Board of Directors of Arthur
Andersen LLP as the Company's independent public accountants for the
current fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 24, 1995 will be
entitled to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
LAWRENCE V. STEIN, Secretary
Cambridge, Massachusetts
April 6, 1995
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY OR VOTING INSTRUCTION CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE
NEED BE AFFIXED IF THE PROXY OR VOTING INSTRUCTION CARD IS MAILED IN THE UNITED
STATES.
<PAGE> 3
GENETICS INSTITUTE, INC.
87 CAMBRIDGEPARK DRIVE
CAMBRIDGE, MASSACHUSETTS 02140
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies and voting instructions by the Board of Directors of Genetics Institute,
Inc. (the "Company") for use at the Annual Meeting of Stockholders to be held on
May 16, 1995 and at any adjournment of that meeting. All shares of Common Stock
will be voted in accordance with the stockholders' instructions. Any proxy or
voting instructions may be revoked by a stockholder at any time before its
exercise by delivery of written revocation to The First National Bank of Boston,
Shareholder Services Division, P. O. Box 1628, Boston, Massachusetts 02105-9903.
The Company's Annual Report for the fiscal year ended December 31, 1994 is
being mailed to stockholders with the mailing of this Notice and Proxy Statement
on or about April 6, 1995.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1994 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
EXCEPT FOR EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON
WRITTEN REQUEST TO THE DIRECTOR OF CORPORATE COMMUNICATIONS, GENETICS INSTITUTE,
INC., 87 CAMBRIDGEPARK DRIVE, CAMBRIDGE, MASSACHUSETTS 02140. EXHIBITS WILL BE
PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
TRANSACTION WITH AMERICAN HOME PRODUCTS CORPORATION
On January 16, 1992, the Company's Common Stock stockholders approved the
Agreement and Plan of Merger, dated as of September 19, 1991 and amended as of
December 9, 1991 (the "Merger Agreement"), among the Company, American Home
Products Corporation ("AHP"), and an AHP affiliate, AHP Biotech Holdings, Inc.
("Holdings"), pursuant to which, among other things, (i) each share of Common
Stock then outstanding was converted into the right to receive $20.00 in cash
and six-tenths of a depositary share (a "Depositary Share"), each Depositary
Share representing one share of Common Stock subject to an AHP call option (the
"Call Option") and evidenced by a depositary receipt (a "Depositary Receipt"),
(ii) AHP acquired 40% of the Company's then outstanding Common Stock and (iii)
AHP purchased 9,466,709 shares of newly issued Common Stock (the "Additional
Shares") from the Company for $300 million in cash. As a result of the foregoing
transactions, subsequent open market purchases by AHP, and conversion of the
Company's Convertible Exchangeable Preferred Stock, effective July 15, 1993, AHP
owned, at January 31, 1995, approximately 64% of the outstanding shares of
Common Stock. In addition, in connection with the merger, the Company, AHP and
Holdings entered into a Governance Agreement (the "Governance Agreement")
summarized under "Election of Directors -- Certain Transactions." The merger,
the sale of Additional Shares and all related actions between the Company and
AHP contemplated by the Merger Agreement are collectively referred to herein as
the "AHP Transaction."
Independent of its right to call the Depository Shares, AHP may acquire
additional shares of Genetics Institute stock, provided that its aggregate
holdings do not exceed 75% of the Company's stock outstanding, subject to
certain exceptions. Under the terms of the Call Option, AHP has the right, but
not the obligation, to purchase the shares of Common Stock represented by the
Depositary Shares and held by The First National Bank of Boston, as depositary
(the "Depositary"), in whole but not in part at any time on or prior to December
31, 1996, at per share call prices increasing by approximately $1.84 per share
per quarter from
<PAGE> 4
$72.11 per share for the period from January 1, 1995 through March 31, 1995 to
$85.00 per share for the period from October 1, 1996 through December 31, 1996.
In the event that AHP elects to call any shares of Common Stock, AHP must
purchase all of the shares that it does not already own. Accordingly, if the
Call Option is exercised, AHP will own 100% of the outstanding shares of Common
Stock of the Company, and all other stockholders of the Company will cease to
have any equity interest in the Company.
VOTING SECURITIES AND VOTES REQUIRED
The Board of Directors has fixed March 24, 1995 as the record date (the
"Record Date") for determining stockholders who are entitled to vote at the
meeting. At the close of business on March 24, 1995, there were outstanding and
entitled to vote 26,637,273 shares of Common Stock, of which 10,636,532 are
represented by Depositary Shares outstanding on the Record Date. Each share of
Common Stock is entitled to one vote.
The holders of Depositary Shares are entitled to one vote per Depositary
Share on all matters to be voted on by stockholders of the Company, in the same
manner and subject to the same limitations as any holder of shares of Common
Stock. The record holders of Depositary Shares on the Record Date will be
entitled to instruct the Depositary as to the exercise of the voting rights
pertaining to the number of shares of Common Stock represented by their
respective Depositary Shares by completing, dating and signing the enclosed
Voting Instruction Card. The Depositary will endeavor, insofar as practicable,
to vote the number of shares of Common Stock represented by such Depositary
Shares in accordance with such instructions, and the Company has agreed to take
all action that may be deemed necessary by the Depositary in order to enable the
Depositary to do so. The Depositary will abstain from voting shares of Common
Stock to the extent it does not receive specific instructions from the owners of
Depositary Shares.
Pursuant to the Governance Agreement, AHP and Holdings have agreed to vote
their shares of Common Stock and Depositary Shares in any election of directors
for all nominees in proportion to the votes cast by the other holders of
Depositary Shares; provided that they may cast all of their votes (i) in favor
of any nominee designated by Holdings pursuant to the provisions of the
Governance Agreement and (ii) in their sole discretion in connection with any
election contest to which Rule 14a-11 under the Securities Exchange Act of 1934,
as amended, applies. Pursuant to the Governance Agreement, Holdings has agreed
to vote its Depositary Shares in proportion to the votes cast by other holders
of Depositary Shares in any vote to amend the terms of the Depositary Shares.
The affirmative vote of the holders of a plurality of the shares of Common
Stock present or represented at the meeting is required for the election of
Class II directors. The affirmative vote of the holders of a majority of the
shares of Common Stock present or represented at the meeting is required for the
approval of the amendment to the 1991 Stock Option Plan and the ratification of
the selection of Arthur Andersen LLP as the Company's independent accountants
for the current fiscal year. Shares of Common Stock represented by executed
Voting Instruction Cards and proxies will be counted for purposes of
establishing a quorum at the Annual Meeting, regardless of how or whether such
shares are voted on any specific proposal. With respect to the required vote on
any particular matter, abstentions will be treated as votes cast or shares
present and represented, while votes withheld by nominee recordholders who did
not receive specific instructions from the beneficial owners of such shares will
not be treated as votes cast or as shares present or represented.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of January 31, 1995,
regarding the ownership of the Company's equity securities by (i) the only
persons known by the Company to own more than five percent of the outstanding
shares, (ii) all directors and nominees, (iii) each of the executive officers
named in the Summary Compensation Table (the "Named Executive Officers") and
(iv) all directors and executive
2
<PAGE> 5
officers as a group. The number of shares beneficially owned by each director or
executive officer is determined under rules of the Securities and Exchange
Commission, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership includes
any shares as to which the individual has sole or shared voting power or
investment power and also any shares which the individual has the right to
acquire within 60 days of January 31, 1995 through the exercise of any stock
option or other right. Unless otherwise indicated, each person has sole
investment and voting power (or shares such power with his or her spouse) with
respect to the shares set forth in the following table. The inclusion herein of
any Depositary Shares deemed beneficially owned does not constitute an admission
of beneficial ownership of those Depositary Shares.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF SHARES PERCENTAGE OF COMMON
NAMES AND ADDRESSES BENEFICIALLY OWNED CLASS(1) OF CLASS STOCK(2)
- ---------------------------------- ------------------ ------------------ ---------- ----------
<S> <C> <C> <C> <C>
5% Stockholders
AHP Biotech Holdings, Inc......... 16,000,741(3) Common Stock 60.1% 60.1%
Five Giralda Farms 947,000 Depositary Shares 8.9% 3.6%
Madison, NJ 07940
Spears, Benzak, Salomon & Farrell,
Inc............................. 1,686,851(4) Depositary Shares 15.9% 6.3%
45 Rockefeller Plaza
33rd Floor
New York, NY 10111
Wellington Management Company..... 778,932(5) Depositary Shares 7.3% 2.9%
75 State Street
Boston, MA 02109
Capital Research and Management
Company......................... 673,000(6) Depositary Shares 6.3% 2.5%
333 South Hope Street
Los Angeles, CA 90071
Directors and Executive Officers
James G. Andress.................. 6,000(7) Depositary Shares * *
J. Richard Crout, M.D............. 0 -- --
Anthony B. Evnin.................. 73,221(8) Depositary Shares * *
Fred Hassan....................... 0(9) -- --
Robert I. Levy, M.D............... 0(10) -- --
Thomas P. Maniatis, Ph.D.......... 229,000(11) Depositary Shares 2.2% *
Gabriel Schmergel................. 242,245(12) Depositary Shares 2.2% *
Benno C. Schmidt.................. 57,638(13) Depositary Shares * *
Tuan Ha-Ngoc...................... 117,813(14) Depositary Shares 1.1% *
Patrick Gage, Ph.D................ 115,840(15) Depositary Shares 1.1% *
Garen G. Bohlin................... 109,817(16) Depositary Shares 1.0% *
Lawrence V. Stein................. 26,027(17) Depositary Shares * *
All directors and executive (18)
officers as a group (15 1,125,459 Depositary Shares 10.0% 4.1%
persons)........................
<FN>
- ---------------
* Represents holding of less than one percent.
(1) While the Depositary Shares are a separate class of securities, they represent shares of Common
Stock held by the Depositary and are therefore a subset of the total outstanding shares of Common
Stock.
</TABLE>
3
<PAGE> 6
(2) The percentages set forth in this column are based on the total outstanding
shares of Common Stock as of January 31, 1995, including shares of Common
Stock held by the Depositary subject to the Call Option, but excluding
shares of Common Stock represented by Depositary Shares issuable upon
exercise of options or warrants not exercisable within 60 days of January
31, 1995.
(3) Does not include the outstanding shares of Common Stock subject to the Call
Option represented by Depositary Shares which Holdings may be deemed to
beneficially own as a result of its ability to exercise the Call Option at
any time.
(4) Spears, Benzak, Salomon & Farrell, Inc. filed a Schedule 13G pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended, and the
rules promulgated thereunder reporting its beneficial ownership of
Depositary Shares of the Company as of February 6, 1995. Spears, Benzak,
Salomon & Farrell, Inc. has no voting power and has shared dispositive
power with respect to all Depositary Shares of the Company reported
therein.
(5) Wellington Management Company filed a Schedule 13G pursuant to Section 13
of the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder reporting its beneficial ownership of Depositary
Shares of the Company as of February 3, 1995. Wellington Management Company
has shared voting power with respect to 420,500 of such Depositary Shares,
and shared dispositive power with respect to all Depositary Shares of the
Company reported therein.
(6) The information presented herein is as reported in, and based solely upon,
a Schedule 13F for the quarter ended December 31, 1994. Capital Research
and Management Company had shared investment power and had no voting power
with respect to all Depositary Shares reported therein.
(7) Represents 6,000 Depositary Shares which Mr. Andress has the right to
acquire under outstanding stock options exercisable within 60 days after
January 31, 1995.
(8) Includes 400 Depositary Shares held by Mr. Evnin's wife, as to which Mr.
Evnin disclaims beneficial ownership. Also includes 45,729 Depositary
Shares held by Venrock Associates, of which Mr. Evnin is a General Partner.
Mr. Evnin shares voting and investment power with respect to the Depositary
Shares held by Venrock Associates and disclaims beneficial ownership
thereof. Also includes 14,000 Depositary Shares which Mr. Evnin has the
right to acquire under outstanding stock options exercisable within 60 days
after January 31, 1995.
(9) Mr. Hassan has been designated as Holdings' nominee pursuant to the
provisions of the Governance Agreement. Does not include shares of Common
Stock and Depositary Shares held by Holdings. Also does not include the
outstanding shares of Common Stock subject to the Call Option represented
by Depositary Shares which Holdings may be deemed to beneficially own as a
result of its ability to exercise the Call Option at any time. Mr. Hassan
became a director, effective February 1, 1995, and is an officer of AHP and
disclaims beneficial ownership of any such shares.
(10) Dr. Levy has been designated as Holdings' nominee pursuant to the
provisions of the Governance Agreement.
(11) Includes 29,000 Depositary Shares which Dr. Maniatis has the right to
acquire under outstanding stock options exercisable within 60 days after
January 31, 1995.
(12) Includes 164,600 Depositary Shares which Mr. Schmergel has the right to
acquire under outstanding stock options exercisable within 60 days after
January 31, 1995.
(13) Includes 10,000 Depositary Shares which Mr. Schmidt has the right to
acquire under outstanding stock options exercisable within 60 days after
January 31, 1995. Also includes 15,900 Depositary Shares owned by Mr.
Schmidt's spouse, as to which Mr. Schmidt disclaims beneficial ownership.
(14) Includes 105,500 Depositary Shares which Mr. Ha-Ngoc has the right to
acquire under outstanding stock options exercisable within 60 days after
January 31, 1995. Also includes 5,548 Depositary Shares
4
<PAGE> 7
owned by Mr. Ha-Ngoc's spouse and minor children, as to which Mr. Ha-Ngoc
disclaims beneficial ownership.
(15) Includes 107,000 Depositary Shares which Dr. Gage has the right to acquire
under outstanding stock options exercisable within 60 days after January
31, 1995. Also includes 200 Depositary Shares held in trust for the benefit
of Dr. Gage's child, as to which Dr. Gage disclaims beneficial ownership.
(16) Includes 101,100 Depositary Shares which Mr. Bohlin has the right to
acquire under outstanding stock options exercisable within 60 days after
January 31, 1995. Also includes 1,017 Depositary Shares held in trust for
the benefit of Mr. Bohlin's minor child, as to which Mr. Bohlin disclaims
beneficial ownership.
(17) Includes 21,000 Depositary Shares which Mr. Stein has the right to acquire
under outstanding stock options exercisable within 60 days after January
31, 1995.
(18) Includes a total of 652,500 Depositary Shares which directors and executive
officers have the right to acquire under outstanding stock options
exercisable within 60 days after January 31, 1995. Also includes Depositary
Shares held by Venrock Associates.
ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of two Class I
directors, three Class II directors and three Class III directors. Subject to
the terms of the Governance Agreement, the Class I, Class II and Class III
directors will serve until the annual meetings of stockholders to be held in
1997, 1998 and 1996, respectively, and until their respective successors are
duly elected and qualified. At each annual meeting of stockholders, directors
are elected for a full term of three years to succeed those whose terms are
expiring.
If a stockholder returns a proxy or Voting Instruction Card without
contrary instructions, the persons named as proxies or the Depositary, as the
case may be, will vote to elect as directors the three Class II director
nominees named below, each of whom is currently a member of the Board of
Directors of the Company.
Each Class II director will be elected to hold office until the 1998 annual
meeting of stockholders and until his successor is duly elected and qualified.
All nominees have indicated their willingness to serve, if elected; however, if
any nominee should be unable to serve, the shares of Common Stock represented by
proxies or Voting Instruction Cards may be voted for a substitute nominee
designated by the Board of Directors, subject to the terms of the Governance
Agreement.
The following table sets forth the name, age and length of service as a
director for each member of the Board of Directors, including the nominees for
election as Class II directors. It also includes information given by each
concerning all positions he holds with the Company, his principal occupation and
business experience for the past five years, the names of other publicly-held
companies of which he serves as a director and the year of the commencement of
his term as a director of the Company. Information with respect to the number of
shares of Common Stock beneficially owned by each director, directly or
indirectly, as of January 31, 1995, appears under "Stock Ownership of Certain
Beneficial Owners and Management."
NOMINEES FOR TERMS EXPIRING IN 1998 (CLASS II DIRECTORS)
ANTHONY B. EVNIN, age 54, became a director in 1980.
Mr. Evnin has served as a General Partner of Venrock Associates, a venture
capital partnership, since 1975. He is also a Director of AgriDyne
Technologies Inc., Arris Pharmaceutical Corporation, Athena Neurosciences,
Inc., Centocor, Inc., IDEXX Laboratories, Inc., Intelligent Surgical
Lasers, Inc., Kopin Corporation, Opta Food Ingredients, Inc. and SUGEN,
Inc.
5
<PAGE> 8
ROBERT I. LEVY, M.D., age 57, became a director in 1994.
Dr. Levy has served since March 1992 as the President of Wyeth-Ayerst
Research where he directs research and development for Wyeth-Ayerst, the
pharmaceutical division of AHP. Previously, Dr. Levy served as the
President of the Sandoz Research Institute from 1988 to 1992.
THOMAS P. MANIATIS, PH.D., age 51, became a director in 1980.
Dr. Maniatis has served as Professor of Biochemistry and Molecular Biology
at Harvard University since 1981. Dr. Maniatis is a founder of the Company.
DIRECTORS WHOSE TERMS EXPIRE IN 1997 (CLASS I DIRECTORS)
JAMES G. ANDRESS, age 56, became a director in 1991.
Mr. Andress has served as Chief Executive Officer, President and Director
of Information Resources Inc. since 1989; Chairman Healthcare Products and
Services for SmithKline Beecham PLC and Chairman Beecham Pharmaceuticals
from 1988 to 1989; and President and Chief Operating Officer, and before
such positions Vice President International, of Sterling Drug Company from
1984 to 1988. He also serves as a Director of America On-Line, Inc.,
Genelabs, Inc., The Liposome Company, Inc., NeoRx Corporation, OptionCare,
Inc. and Sepracor, Inc.
BENNO C. SCHMIDT, age 82, became a director in 1980.
Mr. Schmidt has served as Chairman of the Board of the Company since 1990;
Senior Partner since January 1993 and Managing Partner from 1960 through
1992 of J.H. Whitney & Co., a private venture capital investment firm, and
a General Partner of J.H. Whitney & Co. since 1946. He also serves as a
Director of Freeport-McMoRan Inc., Gilead Sciences, Inc., McMoRan Oil & Gas
Co. and Vertex Pharmaceuticals, Incorporated. Mr. Schmidt was a director
and officer of Vitarine Pharmaceuticals, Inc. which filed a voluntary
petition under Chapter 11 of the Bankruptcy Code on May 24, 1991.
DIRECTORS WHOSE TERMS EXPIRE IN 1996 (CLASS III DIRECTORS)
J. RICHARD CROUT, M.D., age 65, became a director in 1994.
Dr. Crout is President of a private consulting firm in Bethesda, Maryland.
Previously, he served as Vice President, Medical and Scientific Affairs at
Boehringer Mannheim Pharmaceuticals Corporation from 1984 through 1993 and
as a Scholar-in-Residence at the Institute of Medicine/National Academy of
Sciences in Washington, D.C. during 1994. Dr. Crout also served as the
Director and a Deputy Director of the Bureau of Drugs in the Food and Drug
Administration, Department of Health and Human Services, from 1971 to 1982.
FRED HASSAN, age 49, became a director in 1992.
Mr. Hassan has been a Senior Vice President of AHP since May 1993, after
serving as Group Vice President of AHP since March 1993. He served as the
President of the Wyeth-Ayerst Laboratories Division of AHP from 1989 to
1993. Mr. Hassan previously served as Corporate Vice President, Chief
Operating Officer and, subsequently, Chief Executive Officer, of Sandoz
Pharmaceuticals Corporation from 1986 to 1989. Mr. Hassan became a director
of AHP effective February 1, 1995.
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<PAGE> 9
GABRIEL SCHMERGEL, age 54, became a director in 1981.
Mr. Schmergel has served as the President and Chief Executive Officer of
the Company since 1981.
The following table sets forth certain information as of January 31, 1995
regarding the beneficial ownership of the equity securities of American Home
Products Corporation by each director of the Company and by all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME BENEFICIALLY OWNED CLASS OF CLASS
- ------------------------------------------------ ------------------ ------------- ----------
<S> <C> <C> <C>
Mr. Andress..................................... -- -- --
Dr. Crout....................................... -- -- --
Mr. Evnin....................................... -- -- --
Mr. Hassan...................................... 108,141(1) Common Stock *
Dr. Levy........................................ 51,168(2) Common Stock *
Dr. Maniatis.................................... -- -- --
Mr. Schmergel................................... -- -- --
Mr. Schmidt..................................... -- -- --
All directors and executive officers as a group
(15 persons).................................. 159,309 Common Stock *
<FN>
- ---------------
* Represents holding of less than one percent.
(1) Includes 104,100 shares of Common Stock of AHP which Mr. Hassan has the
right to acquire under outstanding stock options exercisable within 60 days
after January 31, 1995. Also includes 3,966 shares of Common Stock of AHP
owned by Mr. Hassan's wife, as to which Mr. Hassan disclaims beneficial
ownership.
(2) Includes 50,000 shares of Common Stock of AHP which Dr. Levy has the right
to acquire under outstanding stock options exercisable within 60 days after
January 31, 1995.
</TABLE>
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
provides the opportunity for direct contact between the Company's independent
public accountants and the Board. The Audit Committee met one time during fiscal
1994 to review the effectiveness of the auditors during the fiscal 1993 audit,
to review the adequacy of the fiscal 1993 financial statement disclosures, to
discuss the Company's internal control policies and procedures and to consider
and recommend the selection of the Company's independent accountants. The
members of the Audit Committee are Messrs. Evnin and Hassan. Pursuant to the
provisions of the Governance Agreement, the Audit Committee must include at
least one director designated by Holdings.
The Company also has a standing Compensation Committee of the Board of
Directors, which provides recommendations to the Board regarding compensation
programs of the Company and administers the Company's 1991 Stock Option Plan,
1991 Employee Stock Purchase Plan and 1991 Restricted Stock Plan, including the
grant of stock options and the issuance of restricted shares to employees. The
Compensation Committee is also responsible for establishing and modifying the
compensation of all corporate officers of the Company (including compensation
pursuant to stock options and other employee benefit plans and arrangements),
adoption and amendment of all stock option and other employee benefit plans and
arrangements and the engagement of, terms of any employment agreements and
arrangements with, and termination of, all corporate officers of the Company.
The Compensation Committee met four times during fiscal 1994. The
7
<PAGE> 10
members of the Compensation Committee are Messrs. Andress, Evnin and Hassan. See
"Report of the Compensation Committee." Pursuant to the provisions of the
Governance Agreement, the Compensation Committee must consist of one director
designated by Holdings and two other non-Holdings directors who are not officers
of the Company. In addition, the Compensation Committee may act only upon the
unanimous vote of all of its members.
Pursuant to the Governance Agreement, the Company has also created an
Intellectual Property Committee and a Scientific Affairs Committee of the Board
of Directors, each of which must consist of two directors designated by Holdings
and two other non-Holdings directors. The members of the Intellectual Property
Committee are Messrs. Andress and Hassan and Drs. Maniatis and Levy. The
Intellectual Property Committee is responsible for the general review of the
Company's patent application strategy and for the approval of material decisions
regarding the Company's patent litigation strategy, including litigation
commencement, defense, prosecution and settlement. The Intellectual Property
Committee met three times during fiscal 1994.
The members of the Scientific Affairs Committee are Messrs. Evnin and
Hassan and Drs. Maniatis and Levy. The Scientific Affairs Committee is
responsible for the general review of the Company's research programs and for
the approval of the Company's research budget. The Scientific Affairs Committee
met three times during fiscal 1994.
Pursuant to the Governance Agreement, the Company also created a Nominating
Committee of the Board of Directors, which met one time during fiscal 1994. The
members of the Nominating Committee are Messrs. Schmergel and Schmidt and Dr.
Levy. The Nominating Committee has the exclusive authority to nominate
individuals to fill all Board positions except for the directors designated by
Holdings pursuant to the provisions of the Governance Agreement. The Nominating
Committee will consider nominees recommended by the Company's stockholders.
Stockholders wishing to nominate a person for election to the Board of Directors
should send a letter to the Secretary of the Company stating the name and
qualifications of the proposed nominee. The letter must be received 30 days
prior to the one-year anniversary of the date of the notice for the previous
year's Annual Meeting of Stockholders. Pursuant to the provisions of the
Governance Agreement, the Nominating Committee must consist of one director
designated by Holdings and two other non-Holdings directors. With respect to any
election of directors occurring prior to January 1, 1997, the Governance
Agreement provides that any nomination of a person not then serving as a
director or nominated or designated by Holdings shall require the unanimous
approval of the Nominating Committee.
The Governance Agreement provides that each committee of the Board of
Directors (other than any special committee or committee of independent
directors or directors not designated by Holdings constituted for the purpose of
making any determination that is to be made by such a committee under the terms
of the Governance Agreement or otherwise) shall at all times include at least
one director designated by Holdings. The director designated by Holdings to
serve on any committee may designate as his alternate another director
designated by Holdings.
The Board of Directors held six meetings during fiscal 1994. Each director
attended at least 75% of the total number of meetings of the Board of Directors
and the committees of the Board on which he served, except for Dr. Levy.
COMPENSATION FOR DIRECTORS -- STANDARD ARRANGEMENTS
For their services to the Company, non-employee directors of the Company
receive cash payments in the amount of $2,000 for personally attending each
Board meeting, $500 for participating in each telephonic Board meeting, $1,000
for personally attending each committee meeting and $250 for participating in
each telephonic committee meeting. Directors who are employed by the Company do
not receive compensation for
8
<PAGE> 11
attendance at Board or committee meetings. Directors are reimbursed for any
expenses attendant to Board membership. For services rendered during the fiscal
year ended December 31, 1994, Mr. Andress earned $11,500, Mr. Evnin earned
$16,250, Mr. Hassan earned $15,250, Dr. Maniatis earned $15,000 and Dr. Levy
earned $8,500 in director's fees.
COMPENSATION FOR DIRECTORS -- OTHER ARRANGEMENTS
Mr. Schmidt, the Chairman of the Board, received in the year ended December
31, 1994, in lieu of the payments described in the preceding paragraph, an
annual retainer of $100,000 and is entitled to continue to receive such a
retainer so long as he is performing services on behalf of the Company. Dr.
Maniatis received annual consulting fees of $57,000 in connection with his
services to the Company as a consultant and as a member of the Company's
Scientific Advisory Board.
Pursuant to the Company's 1990 Director Stock Option Plan (the "1990
Plan"), each non-employee director was granted an option for the purchase of
10,000 shares, exercisable over the five years following the date of grant.
Except for the option granted to Mr. Andress on October 22, 1991, all options
granted under the 1990 Plan were accelerated and became fully exercisable on
January 16, 1992, the date on which the AHP Transaction was consummated.
Directors of the Company who (a) are not employees of the Company or AHP or
any subsidiary of the Company or AHP and (b) have not, since October 1, 1991,
received any stock option grant from the Company solely in their capacity as
directors are eligible to participate in the 1993 Director Option Plan (the
"1993 Plan"). Under the 1993 Plan, eligible directors of the Company
automatically received non-statutory options to purchase 10,000 Depositary
Shares of the Company at an exercise price equal to the fair market value of
such shares on the date of grant. The 1993 Plan also provides that options to
purchase 10,000 Depositary Shares shall be granted automatically to each person
who becomes an eligible director on the close of business on the date of his or
her initial election or appointment to the Board of Directors. The term of the
1993 Plan is five years.
In 1994, Dr. Crout was granted an option to purchase 10,000 Depositary
Shares pursuant to the 1993 Plan at an exercise price of $41.75 per share. In
1993, pursuant to the 1993 Plan, each of Dr. Maniatis, Mr. Evnin and Mr. Schmidt
were granted options to purchase 10,000 Depositary Shares at an exercise price
of $27.75 per Depositary Share. Each such option is exercisable on a cumulative
basis in annual installments of 20% each on the succeeding five anniversaries of
the date of grant. Service as a director must be continuous for such vesting to
occur. If AHP exercises the Call Option prior to its expiration date, each
outstanding option shall automatically accelerate in part and become exercisable
as to that number of additional shares that would otherwise vest and be
purchasable on the next succeeding anniversary of the option grant date.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table. The following table sets forth certain
information concerning the compensation for each of the last three fiscal years
of the Company's Chief Executive Officer and the
9
<PAGE> 12
Company's four other most highly compensated executive officers who were serving
as executive officers on December 31, 1994 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
AWARDS
----------------------
ANNUAL COMPENSATION RESTRICTED
----------------------------- STOCK OPTIONS/ ALL OTHER
NAME AND SALARY BONUS AWARDS SARS COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($)(2) (#) ($)(3)
- ----------------------------------- ----- -------- ------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gabriel Schmergel.................. 1994 410,000 105,000 0 50,000 10,026(4)
Chief Executive Officer 1993 380,000 80,000 0 30,000 12,139(4)
1992 355,000 55,000 624,800 45,000 10,640(4)
Patrick Gage, Ph.D................. 1994 316,000 90,000 0 0 6,750
Chief Operating Officer 1993 278,417 60,000 0 60,000 8,932
1992 253,000 50,000 468,600 35,000 4,661
Tuan Ha-Ngoc....................... 1994 245,000 62,000 0 30,000 6,750
Executive Vice President 1993 225,000 75,000 0 15,000 8,198
1992 190,000 50,000 312,400 15,000 6,575
Garen G. Bohlin.................... 1994 242,000 62,000 0 30,000 6,750
Executive Vice President and 1993 225,000 50,000 0 15,000 7,587
Chief Financial Officer 1992 203,000 40,000 312,400 15,000 6,433
Lawrence V. Stein.................. 1994 215,000 62,000 0 5,000 6,750(5)
Senior Vice President, 1993 190,000 20,000 0 0 188,098
General Counsel and Secretary 1992 17,307 0 138,700 50,000 0
<FN>
- ---------------
(1) Amounts shown represent cash compensation earned by the Named Executive Officers for the fiscal years presented.
(2) The value of the unvested restricted stock awards shown in the table is based on the market value of the Depositary Shares
on the date of grant of the award, less the purchase price ($.01 per share). As of December 31, 1994, the number and value of
aggregate restricted stock holdings were as follows: 10,000 shares ($359,900) by Mr. Schmergel; 7,500 shares ($269,925) by Dr.
Gage; 5,000 shares ($179,950) by Mr. Ha-Ngoc; 5,000 shares ($179,950) by Mr. Bohlin and 2,500 shares ($89,975) by Mr. Stein. The
value of unvested restricted stock holdings on December 31, 1994 was determined by multiplying the closing price of the Common
Stock on that date ($36.00) by the number of shares held and subtracting the aggregate purchase price paid by each Named
Executive Officer for such shares. No dividends were paid in 1994 on the restricted stock reported in this column.
(3) Amounts shown as "All Other Compensation" are amounts contributed or accrued by the Company for each fiscal year for the
Named Executive Officers under the Company's 401(k) Plan, except as set forth in note (4) below.
(4) Includes term life insurance premiums paid by the Company for the Named Executive Officer's benefit in the amounts of $3,276
for 1994, $3,056 for 1993 and $2,836 for 1992. Also includes amounts contributed or accrued by the Company under the Company's
401(k) Plan of $6,750 in 1994, $9,083 in 1993 and $7,804 in 1992.
(5) Includes $181,348 in relocation related compensation and $6,750 contributed or accrued by the Company under the Company's
401(k) Plan.
</TABLE>
10
<PAGE> 13
Option Grant Table. The following table sets forth certain information
regarding options granted during the fiscal year ended December 31, 1994 by the
Company to the Named Executive Officers:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS/
UNDERLYING SARS GRANTED EXERCISE OR GRANT DATE
OPTIONS/SARS TO EMPLOYEES BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED(#)(1) IN FISCAL YEAR ($/SH)(2) DATE ($)(3)
- -------------------------- ------------- -------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Gabriel Schmergel......... 50,000 5.0% 48.75 01/18/04 1,191,300
Patrick Gage, Ph.D........ 0 0.0% -- -- --
Tuan Ha-Ngoc.............. 30,000 3.0% 48.75 01/18/04 714,780
Garen G. Bohlin........... 30,000 3.0% 48.75 01/18/04 714,780
Lawrence V. Stein......... 5,000 0.5% 48.75 01/18/04 119,130
- ---------------
<FN>
(1) Options become exercisable generally in five equal annual installments commencing on the first anniversary of the date of
grant. In the event that Holdings exercises the Call Option on the Depositary Shares, the options fully vest.
(2) The exercise price is equal to the fair market value of the Company's Common Stock on the date of grant.
(3) The Black-Scholes valuation model assumes: (a) an expected option term of 10 years; (b) an interest rate that represents the
interest rate on the 10-year U.S. Treasury Bond at the time of grant (5.692% for options granted on January 18, 1994);
(c) volatility calculated using weekly stock prices since the AHP Transaction (22% for options granted on January 18, 1994);
(d) no dividends will be paid; and (e) no adjustments for forfeitures or nontransferability.
</TABLE>
Option Exercises and Year-End Values. The following table sets forth
certain information concerning each exercise of stock options during the fiscal
year ended December 31, 1994 by each of the Named Executive Officers and the
number and value of unexercised options held by each of the Named Executive
Officers on December 31, 1994:
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS
ON VALUE YEAR-END (#) AT FISCAL YEAR-END ($)(1)
EXERCISE REALIZED -------------------------- ---------------------------
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------- -------- -------- -------------------------- ---------------------------
<S> <C> <C> <C> <C>
Gabriel Schmergel.......... 0 0 132,600/112,000 881,600/228,750
Patrick Gage, Ph.D......... 0 0 93,000/ 74,000 317,200/141,125
Tuan Ha-Ngoc............... 0 0 90,000/ 57,000 703,500/ 92,250
Garen G. Bohlin............ 0 0 84,600/ 58,000 700,100/ 93,750
Lawrence V. Stein.......... 0 0 20,000/ 35,000 130,000/195,000
- ---------------
<FN>
(1) Based on the fair market value of the Common Stock on December 31, 1994 ($36.00) less the option exercise price.
</TABLE>
11
<PAGE> 14
COMPENSATION ARRANGEMENTS AND EMPLOYMENT AGREEMENTS
Under the terms of its employment arrangements with certain key employees,
the Company loaned varying amounts of money to such employees in order to assist
them in establishing residences in Massachusetts. Generally, such loans are
subject to repayment at the earlier of sale of the residence or within 180 days
following termination of employment with the Company and are secured by a
mortgage on the residence. Upon repayment, the Company is entitled to receive
the entire outstanding principal balance plus the lesser of interest accrued on
the loan at a rate equal to 3% per annum or 20% of the net appreciation in the
value of the residence. During the Company's fiscal year 1994, and as of
December 31, 1994, Dr. Gage, Mr. Stein and Mr. Jack Morgan were indebted to the
Company under the terms of such loan agreements in the principal amounts
outstanding of $300,000, $200,000 and $110,000, respectively.
All executive officers and employees of the Company are required to enter
into an invention and non-disclosure agreement, which includes certain
non-competition restrictions.
In connection with, and as a condition to, the Merger, the Company entered
into employment agreements with certain of its executive officers and employees,
including Messrs. Schmergel, Bohlin and Ha-Ngoc and Dr. Gage. While these
employment agreements have expired, under the terms of his employment agreement
with the Company, Dr. Gage continues to be entitled to receive severance
payments for a period of twelve months following termination of employment in
certain circumstances at his then-existing annual base salary rate. As of
December 31, 1994, Dr. Gage's annual base salary was $316,000. The employment
agreement does not impose a duty on Dr. Gage to mitigate or offset other income.
Dr. Gage is, however, bound by certain non-compete obligations during such
twelve-month period.
In November 1992, the Company entered into an employment agreement with Mr.
Stein. The employment agreement is for a term of three years and commenced on
November 16, 1992. Pursuant to the employment agreement, and as more fully
described above and under "Compensation of Executive Officers -- Summary
Compensation Table," Mr. Stein received a starting bonus of $10,000 and certain
relocation compensation and was granted certain stock options and restricted
stock which vest over time. The employment agreement also entitles Mr. Stein to
receive severance payments for a period of twelve months following termination
of employment in certain circumstances at his then-existing annual base salary
rate. As of December 31, 1994, Mr. Stein's annual base salary was $225,000. In
addition, if Mr. Stein's employment is terminated prior to the end of the
three-year term of his employment agreement in connection with a circumstance
which entitles him to receive severance payments, Mr. Stein's initial stock
options and restricted stock will continue to vest through November 16, 1995.
The employment agreement does not impose a duty on Mr. Stein to mitigate or
offset other income. Mr. Stein is, however, bound by certain non-compete
obligations during such twelve-month period.
REPORT OF THE COMPENSATION COMMITTEE
The Company's executive compensation program is administered by the
Compensation Committee. Pursuant to the Governance Agreement between the Company
and AHP, membership of the Compensation Committee consists of three directors
who are not employees, one of whom is designated by Holdings. The Committee may
act only upon the unanimous vote of all members of the Committee.
The Company's executive compensation program is designed to retain and
reward executives who are capable of leading the Company in achieving its
business objectives in the competitive and rapidly changing biotechnology
industry. All decisions by the Compensation Committee relating to the
compensation of the Company's executive officers are reviewed by the full Board,
except for decisions about awards under certain of the Company's stock-based
compensation plans, which must be made solely by the Committee in order for
12
<PAGE> 15
the grants or awards under such plans to satisfy Securities Exchange Act Rule
16b-3. This report is submitted by the Compensation Committee and addresses the
Company's compensation policies for 1994 as they affected Gabriel Schmergel, the
President and Chief Executive Officer of the Company, and the four executive
officers other than Mr. Schmergel who, for 1994, were the Company's most highly
paid executives (collectively with Mr. Schmergel, the "Named Executives").
COMPENSATION PHILOSOPHY
The objectives of the executive compensation program are to align
compensation with business objectives and individual performance, and to enable
the Company to attract, retain and reward executive officers who contribute to
the long-term success of the Company. The Company's executive compensation
philosophy is based on the following principles:
- COMPETITIVE AND FAIR COMPENSATION
The Company is committed to providing an executive compensation program
that helps attract and retain highly qualified executives. To ensure that
compensation is competitive, the Company regularly compares its
compensation practices with those of other companies in the industry and
sets its compensation guidelines based on this review. The Company also
seeks to achieve a balance of the compensation paid to a particular
individual and the compensation paid to other executives both inside the
Company and at comparable companies.
- SUSTAINED PERFORMANCE
Executive officers are rewarded based upon corporate performance,
business group performance and individual performance. Corporate
performance and business group performance are evaluated by reviewing the
extent to which strategic and business plan goals are met, including such
factors as achievement of operating budgets, timely development and
introduction of new products and performance relative to competitors.
Individual performance is evaluated by reviewing attainment of specified
individual objectives and the degree to which teamwork and Company values
are fostered.
In evaluating each Named Executive's performance, the Company generally
conforms to the following process:
- Company and individual goals and objectives are set at the beginning of
each annual performance cycle.
- At the end of each annual performance cycle, the executive's manager or,
in the case of the Chief Executive Officer, the Compensation Committee,
evaluates accomplishment of the executive's goals and objectives and his
contributions to the Company.
- The executive's performance is then compared with peers within the
Company and the results are communicated to the executive.
- The comparative results, combined with comparative compensation practices
of other leading companies in the industry, are then used to determine
salary, bonus and stock compensation levels.
Annual compensation for the Company's executives consists of salary, cash
bonus, stock options and/or restricted stock. The Compensation Committee sets
the base salary for executives by reviewing compensation for competitive
positions in the market and the historical compensation levels of the
executives. Increases in annual salaries are based on merit ratings measured by
actual individual performance against targeted performance and various
subjective performance criteria.
13
<PAGE> 16
The Company's bonus pool for executives other than Mr. Schmergel is
established at the beginning of each performance cycle. For fiscal 1994, the
bonus pool for all executives excluding Mr. Schmergel was fixed at a maximum of
$750,000 (approximately 23% of the aggregate officer base salary payroll), of
which $500,000 was tied specifically to the achievement of product development
and manufacturing goals for six projects, $125,000 was to be available based on
other accomplishments in the Company, and the remaining $125,000 was to be
available only if the Company met its budgeted financial target. Target product
development goals and target annual operating budgets used for purposes of
evaluating annual bonuses are based on business plans developed by management,
including Mr. Schmergel. Based on performance, $601,000 of the $750,000 bonus
pool was awarded. Total bonuses of $706,000 were awarded by the Compensation
Committee for 1994 performance, of which Mr. Schmergel received $105,000 and the
other four Named Executives received $276,000.
Total compensation at the senior executive level also includes the
long-term incentives afforded by stock options and restricted stock awards. The
stock incentive programs are designed to promote the identity of long-term
interests between the Company's employees and its stockholders and assist in the
retention of key executives. In the case of stock options, the size of option
grants is generally intended by the Compensation Committee to reflect the
executive's position with the Company and his contributions to the Company.
Three of the five Named Executives of the Company have received a stock option
grant in each of the last three fiscal years (1992, 1993 and 1994). The option
program also uses a five-year vesting period to encourage key employees to
continue in the employ of the Company. In the event that Holdings exercises the
Call Option on the Depositary Shares, the stock options fully vest.
The Compensation Committee surveyed employee stock option programs of
companies with similar capitalizations to the Company prior to determining
whether and to what extent it should grant options to the Named Executives for
fiscal 1994. While the value realizable from exercisable options is dependent
upon the extent to which the Company's performance is reflected in the market
price of the Company's Common Stock at any particular point in time, the
decision as to whether such value will be realized through the exercise of an
option in any particular year is primarily determined by each individual
executive and not by the Compensation Committee.
The 1991 Restricted Stock Plan ("Plan") was designed to retain key
employees in the employ of the Company by providing the opportunity for
supplementary compensation based on continued employment and attainment of
certain performance goals. Of the 300,000 restricted shares reserved for
issuance under the Plan, 150,000 have been awarded to 31 key employees,
including 60,000 shares to the Named Executives. One half of these shares vest,
as to most recipients, two years after award and the remaining one half vest 10
years after award, subject however to acceleration of vesting if the Company
achieves certain financial and product development targets determined by the
Compensation Committee. Since restricted shares are issued at nominal
consideration ($.01 per share), the entire value of the shares will constitute
additional compensation at the time of vesting. Generally, unvested shares shall
be returned to the Company if the recipient leaves the employment of the Company
before vesting takes place.
The Employee Stock Purchase Plan is available to all employees of the
Company, and generally permits employees to purchase shares at a discount of
approximately 15% from the fair market value at the beginning or end of the
applicable purchase period.
MR. SCHMERGEL'S 1994 COMPENSATION
Mr. Schmergel is eligible to participate in the same executive compensation
plans available to the other Named Executives. The Compensation Committee has
set Mr. Schmergel's annual compensation at a level it
14
<PAGE> 17
believes is competitive with other companies in the industry, including a
significant portion of his compensation based upon the Company's stock-based
program.
Mr. Schmergel's salary for fiscal 1994 was increased $30,000 from $380,000
to $410,000. The Compensation Committee has accepted the recommendations of Mr.
Schmergel and the four Named Executives to freeze their base salaries at the
fiscal 1994 level for fiscal 1995. Mr. Schmergel's bonus award of $105,000 for
fiscal 1994 performance reflected attainment of his principal individual 1994
performance goals established by the Compensation Committee and was the highest
annual bonus paid to any Named Executive. In 1994, the Compensation Committee
also granted Mr. Schmergel an option for the purchase of 50,000 shares at an
exercise price equal to the fair market value per share at the date of grant. In
determining the number of shares covered by the option granted to Mr. Schmergel,
the Compensation Committee evaluated Mr. Schmergel's cash compensation relative
to that of other chief executives in the Company's industry, past option grants
and the number of restricted shares previously awarded to Mr. Schmergel under
the 1991 Restricted Stock Plan. The options are exercisable ratably over the
five years following the date of grant subject to Mr. Schmergel's employment
with the Company and such options vest fully in the event that Holdings
exercises the Call Option on the Depositary Shares. This option grant, together
with prior option grants and restricted stock, reflect the Compensation
Committee's policy of encouraging long-term performance and promoting retention
while further aligning stockholders' and management's interests in the
performance of the Company's Common Stock.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Code, enacted in 1993, generally disallows a tax
deduction to public companies for compensation over $1 million paid to its chief
executive officer and its four other most highly compensated executive officers.
Qualifying performance-based compensation will not be subject to the deduction
limit if certain requirements are met. The Company currently intends to
structure its stock options granted to executive officers in a manner that
complies with the performance-based requirements of the new statute.
Compensation Committee
ANTHONY B. EVNIN, Chairman
JAMES ANDRESS
FRED HASSAN
COMPENSATION COMMITTEE AND INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Andress, Evnin and
Hassan. No executive officer of the Company is a member of the Compensation
Committee. Messrs. Andress and Evnin have each been granted options to purchase
Depositary Shares under the Company's 1990 Plan and Mr. Evnin has been granted
an option to purchase 10,000 Depositary Shares under the 1993 Plan. Pursuant to
the Call Option, Holdings has the right, but not the obligation, to purchase all
of the outstanding Common Stock of the Company. In addition, the Company has
entered into certain collaboration agreements with AHP. See "Transaction with
American Home Products Corporation" and "Certain Transactions."
15
<PAGE> 18
<TABLE>
STOCK PERFORMANCE GRAPH
[PASTE UP C/R/C GRAPH]
<CAPTION>
- -------------------------------------------------------------------------------------------------
Nov-89 Nov-90 Nov-91 Nov-92 Nov-93 Dec-93 Dec-94
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Company 100 126 120 120 179 189 141
S&P 500 Index 100 93 108 125 133 135 133
DJ Medical & Biotechnology Index 100 131 258 283 230 243 277
- -------------------------------------------------------------------------------------------------
</TABLE>
In January 1992, the Company consummated the AHP Transaction. As a result, each
shareholder of the Company received $20 in cash and 0.6 Depositary Shares for
each share of Common Stock previously held. The above table and chart assume the
shareholder reinvested such $20 in additional Depositary Shares.
The above table and chart assume $100 invested on November 30, 1989 in the
Company's Common Stock, S&P 500 Index and Dow Jones Medical and Biotechnology
Index. Total Return assumes reinvestment of dividends. The Company's fiscal
year-end up to and including the end of the 1993 fiscal year was November 30.
Effective January 1, 1994, the Company changed its fiscal year-end to December
31. Data for the day preceding the commencement of the 1994 fiscal year is
depicted separately.
CERTAIN TRANSACTIONS
In July 1994, the Company and Wyeth-Ayerst Laboratories, the pharmaceutical
division of AHP ("Wyeth-Ayerst"), agreed to form a 50/50 joint venture ("IL-12
Partners") to develop and commercialize rhIL-12 on a worldwide basis, except for
Japan. Mr. Hassan, a director of the Company, is a director and Senior Vice
President of AHP. Dr. Levy, also a director of the Company, is the President of
Wyeth-Ayerst Research where he directs the research and development for
Wyeth-Ayerst. IL-12 Partners has a joint project team and steering committee to
oversee current and future clinical trials and other development activities.
16
<PAGE> 19
These activities will be funded equally by the partners. The arrangement also
provides for certain payments to the Company. In 1994, reimbursement for rhIL-12
research and development expenses by IL-12 Partners and initial milestone
payments by AHP to the Company were approximately $23.1 million. Future
milestone payments will become due upon achievement of certain clinical outcomes
and submission or approval of specific regulatory filings -- the exact value of
such payments is contingent upon rhIL-12's success in various therapeutic areas.
In addition, in 1994, reimbursable rhIL-12 research and development expenses by
IL-12 Partners which are payable to Wyeth-Ayerst were approximately $0.3
million, fifty percent of which was funded by the Company. The Company has the
right to supply rhIL-12 to the joint venture and will receive royalties based on
the joint venture's sales of rhIL-12. The Company will have marketing rights in
North America; Wyeth-Ayerst International will have marketing rights outside
North America and Japan.
The Company has entered into various agreements with Wyeth-Ayerst related
to the commencement of a research and development collaboration in the area of
cellular adhesion proteins. Pursuant to these agreements, the Company recorded
revenues of $5.8 million during fiscal 1994. During fiscal 1994, Athena
Neurosciences, Inc. ("Athena") was also a participant in this research
collaboration. Mr. Evnin, a director of the Company, is also a director of
Athena. The Company provides no funding to, and receives no funding from, Athena
under the research collaboration.
During fiscal 1993, the Company entered into a license agreement with AHP
pursuant to which it licensed to AHP certain rights to develop, use and market
the Company's recombinant human Interleukin-11 product in the Pacific Basin
(excluding Japan), Australia and New Zealand. The Company received no revenues
from this license agreement during fiscal 1994.
The Company's affiliate, the GI-Yamanouchi European Partnership (the
"Partnership") entered into a sales and distribution agreement with Wyeth-Ayerst
International Inc. ("WAI"), an affiliate of AHP, under which WAI obtained
certain rights to distribute future products of the Partnership in Europe in the
field of localized bone repair. The Company holds the rights to supply the
Partnership with bulk protein for such products. In fiscal 1994, the Partnership
received no revenue under this agreement.
The Company has several agreements with Wyeth-Ayerst and WAI under which
Wyeth-Ayerst and WAI have agreed to assist the Company in conducting clinical
trials of certain of the Company's products in Europe and the United States and
to perform fill and finish activities. During fiscal 1994, the Company made
payments of $0.8 million to either Wyeth-Ayerst or WAI pursuant to these
agreements.
Under the terms of the Call Option granted pursuant to the AHP Transaction,
Holdings has the right, but not the obligation, to purchase the shares of Common
Stock represented by the Depositary Shares and held by the Depositary, at any
time on or prior to December 31, 1996, at per share call prices increasing by
approximately $1.84 per share per quarter from $72.11 per share for the period
from January 1, 1995 through March 31, 1995 to $85.00 per share for the period
from October 1, 1996 through December 31, 1996. In the event that Holdings
elects to call any shares of Common Stock, Holdings must purchase all of the
shares of Common Stock not owned by AHP or Holdings. Accordingly, if the Call
Option is exercised, Holdings will own 100% of the outstanding shares of Common
Stock of the Company, and all other stockholders of the Company will cease to
have any equity interest in the Company.
The Governance Agreement provides, among other things, for (i) the
inclusion of nominees designated by Holdings on, and the change in composition
on January 1, 1997 of, an expanded Board of Directors of the Company, (ii) the
establishment of committees of the Board of Directors addressing compensation,
scientific affairs and intellectual property rights and the membership of the
directors designated by Holdings thereon, (iii) approval rights on the part of
the directors designated by Holdings with respect to material acquisitions by
the Company, dispositions of all or any substantial portion of its business or
assets, issuances and repurchases of equity securities, amendments to the
Certificate of Incorporation or By-laws of the Company
17
<PAGE> 20
and any action otherwise within the purview of the intellectual property,
scientific affairs or compensation committees of the Board of Directors
established pursuant to the Governance Agreement which is presented to the full
Board for action, (iv) certain rights of first refusal granted to AHP with
respect to material licensing and marketing arrangements with third parties, (v)
certain restrictions on acquisitions and dispositions of shares of Common Stock
by AHP and its affiliates and (vi) certain agreements as to Holdings' voting of
its shares of Common Stock with respect to elections of directors and amendments
to the terms of the Depositary Shares. Independent of its right to call the
Depositary Shares, AHP is permitted by the terms of the Governance Agreement to
acquire additional shares of the Company's stock through open market purchases
or privately negotiated purchases, provided that its aggregate holdings do not
exceed 75% of the Company's stock outstanding subject to certain exceptions.
APPROVAL OF AMENDMENT TO THE 1991 STOCK OPTION PLAN
Under the Company's 1991 Stock Option Plan (the "1991 Option Plan"), the
Company is currently authorized to grant options to purchase up to an aggregate
of 4,400,000 Depositary Shares. To ensure that the Company may continue to
attract and retain key employees, the Board of Directors adopted, subject to the
approval of the stockholders, an amendment to the 1991 Option Plan increasing
from 4,400,000 to 5,700,000 the number of Depositary Shares available for
issuance under the 1991 Option Plan.
ADMINISTRATION AND ELIGIBILITY
The 1991 Option Plan is administered by the Compensation Committee of the
Board of Directors. Both incentive options and non-statutory stock options may
be granted under the 1991 Option Plan. All employees, officers or directors of,
or consultants or advisors to, the Company are eligible to receive options under
the 1991 Option Plan. However, only employees of the Company are eligible to
receive incentive options.
OPTION TERMS AND PURCHASE PRICE
The Compensation Committee, based on recommendations of management, selects
the optionees and determines (i) the number of shares subject to each option,
(ii) when the option becomes exercisable (generally in five equal annual
installments commencing on the first anniversary of the date of grant), (iii)
the exercise price, which cannot be less than 100% of the fair market value for
incentive options (or 110%, if the employee receiving such option is an owner of
10% or more of the total combined voting power of all classes of stock of the
Company) and cannot be less than 85% of the fair market value for non-statutory
options and (iv) the duration of the option, which cannot exceed ten years.
Options granted to officers and directors shall be made in compliance with Rule
16b-3.
Payment of the option exercise price may be made in cash, Depositary Shares
or a combination of both. All options are nontransferable other than by will or
the laws of descent and distribution, and generally vested options are
exercisable during the lifetime of the optionee only while the optionee is in
the employ of the Company or within 90 days after termination of employment. In
the event that termination of employment is due to death, the vested option is
exercisable for a six-month period thereafter.
AMENDMENT AND TERMINATION
The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect, except that if at any time the approval of the
stockholders of the Company is required under Section 422 of the Code or any
successor provision with respect to incentive options, or under Rule 16b-3, the
Board of Directors may not effect such modification or amendment without such
approval. The 1991 Option Plan will terminate
18
<PAGE> 21
on the earlier of (i) September 19, 2001 or (ii) the date on which all
Depositary Shares available for issuance under the 1991 Option Plan shall have
been issued.
CALL OPTION
If Holdings exercises the Call Option on or prior to December 31, 1996, all
outstanding options granted pursuant to the 1991 Option Plan will automatically
accelerate and become fully vested and exercisable. Upon such purchase the
holders of such options shall promptly be paid for each such option an amount
equal to the product of (i) the excess of the Call Price over the exercise price
per Share, times (ii) the number of Depositary Shares covered by such option. If
the Call Option expires unexercised, all outstanding and unexercised options
granted under the 1991 Option Plan will automatically become options to purchase
shares of Common Stock, and any subsequent option grants under the 1991 Option
Plan will be for shares of Common Stock.
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the 1991 Option Plan may be either incentive options
or non-statutory options. The following is a summary of the United States
federal income tax treatment of each of these types of options.
Incentive Options. No taxable income will be recognized by the optionee
upon the grant of an incentive option under the 1991 Option Plan, and no taxable
income will generally be recognized upon exercise of the incentive option. The
optionee will, however, recognize taxable income in the year in which the
Depositary Shares acquired upon the exercise of the option are sold or otherwise
made the subject of a disposition.
Generally, if the optionee holds Depositary Shares acquired upon the
exercise of incentive options until the later of (i) two years from the grant of
the option and (ii) one year from the date of transfer of the purchased
Depositary Shares to him or her (the "Statutory Holding Period"), any gain
recognized by the optionee on a sale or other disposition of the Depositary
Shares will be treated as long-term capital gain. The amount of gain recognized
will be equal to the excess of the amount realized upon the sale or other
disposition over the option price paid for the Depositary Shares.
If the optionee sells or disposes of the stock prior to the expiration of
the Statutory Holding Period (a "disqualifying disposition"), he or she will
realize taxable income at ordinary income tax rates in an amount equal to the
lesser of (i) the excess of the fair market value of the Depositary Shares on
the date of exercise over the option price, or (ii) the amount realized upon
sale or other disposition less the option price. However, special rules may
apply to persons required to file reports under Section 16(b) of the Exchange
Act. Any additional gain will be treated as long-term capital gain if the
Depositary Shares are held for one year or more prior to the sale and as
short-term capital gain if the Depositary Shares are held for a shorter period.
If the optionee makes a disqualifying disposition of the purchased
Depositary Shares, then the Company will be entitled to an income tax deduction,
for the taxable year in which such disposition occurs, equal in amount to the
ordinary income recognized by the optionee in connection with such disposition.
In no other instance will the Company be allowed a deduction with respect to the
optionee's acquisition or disposition of Depositary Shares pursuant to an
incentive option.
Non-Statutory Options. No taxable income is recognized by the optionee
upon the grant of a non-statutory option. The optionee will recognize ordinary
income, in the year in which the option is exercised, in an amount equal to the
excess of the fair market value of the purchased Depositary Shares on the date
of exercise over the option price, and the optionee will be required to satisfy
the tax withholding requirements applicable to such income. However, special
rules apply to persons required to file reports under Section 16(b) of the
Exchange Act. Any additional gain or any loss recognized upon the subsequent
disposition of the purchased Depositary Shares will be a capital gain or loss,
and will be a long-term gain or loss if the Depositary Shares are held for one
year or more.
19
<PAGE> 22
The Company will be entitled to a business expense deduction equal to the
amount of ordinary income recognized by the optionee.
BOARD RECOMMENDATION
The Board of Directors believes that the adoption and approval of the
amendment to the 1991 Stock Option Plan is in the best interests of the Company
and its stockholders and recommends a vote FOR this proposal.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, on the recommendation of its Audit Committee, has
selected the firm of Arthur Andersen LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1995. Although stockholder
approval of the Board of Directors' selection of Arthur Andersen LLP is not
required by law, the Board of Directors believes that it is advisable to give
stockholders an opportunity to ratify this selection. If this proposal is not
approved at the Annual Meeting, the Board of Directors will reconsider its
selection of Arthur Andersen LLP.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
OTHER MATTERS
Management does not know of any other matters which may come before the
meeting. However, if any other matters are properly presented to the meeting, it
is the intention of persons named in the accompanying proxy to vote, or
otherwise act, in accordance with their judgment on such matters.
All costs of solicitations of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names, and the Company will reimburse them for their out-of-pocket
expenses in this connection.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1996 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Cambridge, Massachusetts no later than December 6, 1995 for inclusion in the
proxy statement for that meeting.
By Order of the Board of Directors,
LAWRENCE V. STEIN, Secretary
April 6, 1995
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY OR VOTING INSTRUCTION CARD IN THE ACCOMPANYING ENVELOPE. PROMPT
RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR
COOPERATION WILL BE APPRECIATED.
20
<PAGE> 23
GENETICS INSTITUTE, INC.
1991 STOCK OPTION PLAN
1. Purpose.
-------
The purpose of this plan (the "Plan") is to secure for
Genetics Institute, Inc. (the "Company") and its shareholders the
benefits arising from capital stock ownership by employees,
officers and directors of, and consultants or advisors to, the
Company and its parent and subsidiary corporations who are ex-
pected to contribute to the Company's future growth and success.
Except where the context otherwise requires, the term "Company"
shall include the parent and all present and future subsidiaries
of the Company as defined in Sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended or replaced from time to
time (the "Code"). Those provisions of the Plan which make
express reference to Section 422 shall apply only to Incentive
Stock Options (as that term is defined in the Plan).
Concurrently with adoption of the Plan, the Company is
terminating the 1982 Incentive Stock Option Plan and the 1982 Non-
Qualified Stock Option Plan (collectively, the "Prior Plans").
Notwithstanding the aforesaid, the termination of the Prior Plans
shall not affect the rights of the holder of any options granted
under the Prior Plans.
2. Type of Options and Administration.
----------------------------------
(a) TYPES OF OPTIONS. Options granted pursuant to the Plan
shall be authorized by action of the Board of Directors of the
Company (or a Committee designated by the Board of Directors) and
may be either incentive stock options ("Incentive Stock Options")
meeting the requirements of Section 422 of the Code or non-
statutory options which are not intended to meet the requirements
of Section 422 of the Code.
(b) ADMINISTRATION. The Plan will be administered by the
Board of Directors of the Company, whose construction and
interpretation of the terms and provisions of the Plan shall be
final and conclusive. The Board of Directors may in its sole
discretion grant options to purchase shares of the Company's
Common Stock ("Common Stock") and issue shares upon exercise of
such options as provided in the Plan. The Board shall have
authority, subject to the express provisions of the Plan, to
construe the respective option agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of the respective
<PAGE> 24
option agreements, which need not be identical, and to make all
other determinations in the judgment of the Board of Directors
necessary or desirable for the administration of the Plan. The
Board of Directors may correct any defect or supply any omission
or reconcile any inconsistency in the Plan or in any option
agreement in the manner and to the extent it shall deem expedient
to carry the Plan into effect and it shall be the sole and final
judge of such expediency. No director or person acting pursuant
to authority delegated by the Board of Directors shall be liable
for any action or determination under the Plan made in good faith.
The Board of Directors may, to the full extent permitted by or
consistent with applicable laws or regulations (including, without
limitation, applicable state law and Rule 16b-3 promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act"), or any
successor rule ("Rule 16b-3")), delegate any or all of its powers
under the Plan to a committee (the "Committee") appointed by the
Board of Directors, and if the Committee is so appointed all
references to the Board of Directors in the Plan shall mean and
relate to such Committee.
(c) APPLICABILITY OF RULE 16B-3. Those provisions of the
Plan which make express reference to Rule 16b-3 shall apply only
to such persons as are required to file reports under
Section 16(a) of the Exchange Act (a "Reporting Person").
3. Eligibility.
-----------
(a) GENERAL. Options may be granted to persons who are, at
the time of grant, employees, officers or directors of, or
consultants or advisors to, the Company; PROVIDED, that the class
of employees to whom Incentive Stock Options may be granted shall
be limited to all employees of the Company. A person who has been
granted an option may, if he or she is otherwise eligible, be
granted additional options if the Board of Directors shall so
determine.
(B) GRANT OF OPTIONS TO DIRECTORS AND OFFICERS. From and
after the registration of the Common Stock of the Company under
the Exchange Act, the selection of a director or an officer (as
the terms "director" and "officer" are defined for purposes of
Rule 16b-3) as a recipient of an option, the timing of the option
grant, the exercise price of the option and the number of shares
subject to the option shall be determined either (i) by the Board
of Directors, of which all members shall be "disinterested
persons" (as hereinafter defined), or (ii) by two or more
directors having full authority to act in the matter, each of whom
shall be a "disinterested person." For the purposes of the Plan,
a director shall be deemed to be a "disinterested person" only if
-2-
<PAGE> 25
such person qualifies as a "disinterested person" within the
meaning of Rule 16b-3, as such term is interpreted from time to
time.
4. Stock Subject to Plan.
---------------------
Subject to adjustment as provided in Section 14 below, the
maximum number of shares of Common Stock of the Company which may
be issued and sold under the Plan is 1,800,000 shares. If an
option granted under the Plan shall expire or terminate for any
reason without having been exercised in full, the unpurchased
shares subject to such option shall again be available for sub-
sequent option grants under the Plan. If shares issued upon
exercise of an option under the Plan are tendered to the Company
in payment of the exercise price of an option granted under the
Plan, such tendered shares shall again be available for subsequent
option grants under the Plan; provided, that in no event shall
(i) the total number of shares issued pursuant to the exercise of
Incentive Stock Options under the Plan, on a cumulative basis,
exceed the maximum number of shares authorized for issuance under
the Plan exclusive of shares made available for issuance pursuant
to this sentence or (ii) the total number of shares issued
pursuant to the exercise of options by Reporting Persons, on a
cumulative basis, exceed the maximum number of shares authorized
for issuance under the Plan exclusive of shares made available for
issuance pursuant to this sentence.
5. Forms of Option Agreements.
--------------------------
As a condition to the grant of an option under the Plan, each
recipient of an option shall execute an option agreement in such
form not inconsistent with the Plan as may be approved by the
Board of Directors. Such option agreements may differ among
recipients.
6. Purchase Price.
--------------
(a) GENERAL. The purchase price per share of stock deliver-
able upon the exercise of an option shall be determined by the
Board of Directors, PROVIDED, HOWEVER, that in the case of an
Incentive Stock Option, the exercise price shall not be less than
100% of the fair market value of such stock, as determined by the
Board of Directors, at the time of grant of such option, or less
than 110% of such fair market value in the case of options
described in Section 11(b).
(b) PAYMENT OF PURCHASE PRICE. Options granted under the
Plan may provide for the payment of the exercise price by delivery
of cash or a check to the order of the Company in an amount equal
to the exercise price of such options, or, to the extent provided
-3-
<PAGE> 26
in the applicable option agreement, (i) by delivery to the Company
of shares of Common Stock of the Company already owned by the
optionee having a fair market value equal in amount to the
exercise price of the options being exercised, (ii) by any other
means (including, without limitation, by delivery of a promissory
note of the optionee payable on such terms as are specified by the
Board of Directors) which the Board of Directors determines are
consistent with the purpose of the Plan and with applicable laws
and regulations (including, without limitation, the provisions of
Rule 16b-3 and Regulation T promulgated by the Federal Reserve
Board) or (iii) by any combination of such methods of payment.
The fair market value of any shares of the Company's Common Stock
or other non-cash consideration which may be delivered upon
exercise of an option shall be determined by the Board of
Directors.
7. Option Period.
-------------
Each option and all rights thereunder shall expire on such
date as shall be set forth in the applicable option agreement,
except that, in the case of an Incentive Stock Option, such date
shall not be later than ten years after the date on which the
option is granted and, in all cases, options shall be subject to
earlier termination as provided in the Plan.
8. Exercise of Options.
-------------------
Each option granted under the Plan shall be exercisable
either in full or in installments at such time or times and during
such period as shall be set forth in the agreement evidencing such
option, subject to the provisions of the Plan.
9. Nontransferability of Options.
-----------------------------
Incentive Stock Options, and all options granted to Reporting
Persons, shall not be assignable or transferable by the person to
whom they are granted, either voluntarily or by operation of law,
except by will or the laws of descent and distribution, and,
during the life of the optionee, shall be exercisable only by the
optionee; provided, however, that non-statutory options may be
transferred pursuant to a qualified domestic relations order (as
defined in Rule 16b-3).
10. Effect of Termination of Employment or Other Relationship.
---------------------------------------------------------
Except as provided in Section 11(d) with respect to Incentive
Stock Options, and subject to the provisions of the Plan, the
Board of Directors shall determine the period of time during which
an optionee may exercise an option following (i) the termination
of the optionee's employment or other relationship with the
-4-
<PAGE> 27
Company or (ii) the death or disability of the optionee. Such
periods shall be set forth in the agreement evidencing such
option.
11. Incentive Stock Options.
-----------------------
Options granted under the Plan which are intended to be
Incentive Stock Options shall be subject to the following
additional terms and conditions:
(a) EXPRESS DESIGNATION. All Incentive Stock Options
granted under the Plan shall, at the time of grant, be
specifically designated as such in the option agreement covering
such Incentive Stock Options.
(b) 10% SHAREHOLDER. If any employee to whom an Incentive
Stock Option is to be granted under the Plan is, at the time of
the grant of such option, the owner of stock possessing more than
10% of the total combined voting power of all classes of stock of
the Company (after taking into account the attribution of stock
ownership rules of Section 424(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock
Option granted to such individual:
(i) The purchase price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than
110% of the fair market value of one share of Common Stock at
the time of grant; and
(ii) the option exercise period shall not exceed five
years from the date of grant.
(c) DOLLAR LIMITATION. For so long as the Code shall so
provide, options granted to any employee under the Plan (and any
other incentive stock option plans of the Company) which are
intended to constitute Incentive Stock Options shall not
constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first time
in any one calendar year for shares of Common Stock with an
aggregate fair market value (determined as of the respective date
or dates of grant) of more than $100,000.
(D) TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY. No
Incentive Stock Option may be exercised unless, at the time of
such exercise, the optionee is, and has been continuously since
the date of grant of his or her option, employed by the Company,
except that:
-5-
<PAGE> 28
(i) an Incentive Stock Option may be exercised within
the period of three months after the date the optionee ceases
to be an employee of the Company (or within such lesser
period as may be specified in the applicable option
agreement), PROVIDED, that the agreement with respect to such
option may designate a longer exercise period and that the
exercise after such three-month period shall be treated as
the exercise of a non-statutory option under the Plan;
(ii) if the optionee dies while in the employ of the
Company, or within three months after the optionee ceases to
be such an employee, the Incentive Stock Option may be
exercised by the person to whom it is transferred by will or
the laws of descent and distribution within the period of one
year after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the
meaning of Section 22(e)(3) of the Code or any successor
provision thereto) while in the employ of the Company, the
Incentive Stock Option may be exercised within the period of
one year after the date the optionee ceases to be such an
employee because of such disability (or within such lesser
period as may be specified in the applicable option
agreement).
For all purposes of the Plan and any option granted hereunder,
"employment" shall be defined in accordance with the provisions of
Section 1.421-7(h) of the Income Tax Regulations (or any successor
regulations). Notwithstanding the foregoing provisions, no
Incentive Stock Option may be exercised after its expiration date.
12. Additional Provisions.
---------------------
(a) ADDITIONAL OPTION PROVISIONS. The Board of Directors
may, in its sole discretion, include additional provisions in
option agreements covering options granted under the Plan,
including without limitation restrictions on transfer, repurchase
rights, commitments to pay cash bonuses, to make, arrange for or
guaranty loans or to transfer other property to optionees upon
exercise of options, or such other provisions as shall be
determined by the Board of Directors; PROVIDED THAT such
additional provisions shall not be inconsistent with any other
term or condition of the Plan and such additional provisions shall
not cause any Incentive Stock Option granted under the Plan to
fail to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code.
-6-
<PAGE> 29
(b) ACCELERATION, EXTENSION, ETC. The Board of Directors
may, in its sole discretion, (i) accelerate the date or dates on
which all or any particular option or options granted under the
Plan may be exercised or (ii) extend the dates during which all,
or any particular, option or options granted under the Plan may be
exercised; PROVIDED, HOWEVER, that no such extension shall be
permitted if it would cause the Plan to fail to comply with
Section 422 of the Code or with Rule 16b-3.
13. Rights as a Shareholder.
-----------------------
The holder of an option shall have no rights as a shareholder
with respect to any shares covered by the option (including,
without limitation, any rights to receive dividends or non-cash
distributions with respect to such shares) until the date of issue
of a stock certificate to him or her for such shares. No adjust-
ment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
14. Adjustment Provisions for Recapitalizations and Related
-------------------------------------------------------
Transactions.
------------
(a) GENERAL. Except as provided for in Section 23, if,
through or as a result of any merger, consolidation, sale of all
or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, (i) the
outstanding shares of Common Stock are increased, decreased or
exchanged for a different number or kind of shares or other
securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of
Common Stock or other securities, an appropriate and proportionate
adjustment may be made in (x) the maximum number and kind of
shares reserved for issuance under the Plan, (y) the number and
kind of shares or other securities subject to any then outstanding
options under the Plan, and (z) the price for each share subject
to any then outstanding options under the Plan, without changing
the aggregate purchase price as to which such options remain
exercisable. Notwithstanding the foregoing, no adjustment shall
be made pursuant to this Section 14 if such adjustment would cause
the Plan to fail to comply with Section 422 of the Code or with
Rule 16b-3.
(b) Board Authority to Make Adjustments. Any adjustments
under this Section 14 will be made by the Board of Directors,
whose determination as to what adjustments, if any, will be made
and the extent thereof will be final, binding and conclusive. No
fractional shares will be issued under the Plan on account of any
such adjustments.
-7-
<PAGE> 30
15. Merger, Consolidation, Asset Sale, Liquidation, etc.
---------------------------------------------------
(a) GENERAL. Except as provided for in Section 23, in the
event of a consolidation or merger or sale of all or substantially
all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property
of any other corporation or business entity or in the event of a
liquidation of the Company, the Board of Directors of the Company,
or the board of directors of any corporation assuming the
obligations of the Company, may, in its discretion, take any one
or more of the following actions, as to outstanding options:
(i) provide that such options shall be assumed, or equivalent
options shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof), PROVIDED that any such
options substituted for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code, (ii) upon written
notice to the optionees, provide that all unexercised options will
terminate immediately prior to the consummation of such
transaction unless exercised by the optionee within a specified
period following the date of such notice, (iii) in the event of a
merger under the terms of which holders of the Common Stock of the
Company will receive upon consummation thereof a cash payment for
each share surrendered in the merger (the "Merger Price"), make or
provide for a cash payment to the optionees equal to the
difference between (A) the Merger Price times the number of shares
of Common Stock subject to such outstanding options (to the extent
then exercisable at prices not in excess of the Merger Price) and
(B) the aggregate exercise price of all such outstanding options
in exchange for the termination of such options, and (iv) provide
that all or any outstanding options shall become exercisable in
full immediately prior to such event.
(b) SUBSTITUTE OPTIONS. The Company may grant options under
the Plan in substitution for options held by employees of another
corporation who become employees of the Company, or a subsidiary
of the Company, as the result of a merger or consolidation of the
employing corporation with the Company or a subsidiary of the
Company, or as a result of the acquisition by the Company, or one
of its subsidiaries, of property or stock of the employing
corporation. The Company may direct that substitute options be
granted on such terms and conditions as the Board of Directors
considers appropriate in the circumstances.
16. No Special Employment Rights.
----------------------------
Nothing contained in the Plan or in any option shall confer
upon any optionee any right with respect to the continuation of
his or her employment by the Company or interfere in any way with
the right of the Company at any time to terminate such employment
or to increase or decrease the compensation of the optionee.
-8-
<PAGE> 31
17. Other Employee Benefits.
-----------------------
Except as to plans which by their terms include such amounts
as compensation, the amount of any compensation deemed to be
received by an employee as a result of the exercise of an option
or the sale of shares received upon such exercise will not
constitute compensation with respect to which any other employee
benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing,
life insurance or salary continuation plan, except as otherwise
specifically determined by the Board of Directors.
18. Amendment of the Plan.
---------------------
(a) The Board of Directors may at any time, and from time to
time, modify or amend the Plan in any respect, except that if at
any time the approval of the shareholders of the Company is
required under Section 422 of the Code or any successor provision
with respect to Incentive Stock Options, or under Rule 16b-3, the
Board of Directors may not effect such modification or amendment
without such approval.
(b) The termination or any modification or amendment of the
Plan shall not, without the consent of an optionee, affect his or
her rights under an option previously granted to him or her. With
the consent of the optionee affected, the Board of Directors may
amend outstanding option agreements in a manner not inconsistent
with the Plan. The Board of Directors shall have the right to
amend or modify (i) the terms and provisions of the Plan and of
any outstanding Incentive Stock Options granted under the Plan to
the extent necessary to qualify any or all such options for such
favorable federal income tax treatment (including deferral of
taxation upon exercise) as may be afforded incentive stock options
under Section 422 of the Code and (ii) the terms and provisions of
the Plan and of any outstanding option to the extent necessary to
ensure the qualification of the Plan under Rule 16b-3.
19. Withholding.
-----------
(a) The Company shall have the right to deduct from payments
of any kind otherwise due to the optionee any federal, state or
local taxes of any kind required by law to be withheld with
respect to any shares issued upon exercise of options under the
Plan. Subject to the prior approval of the Company, which may be
withheld by the Company in its sole discretion, the optionee may
elect to satisfy such obligations, in whole or in part, (i) by
causing the Company to withhold shares of Common Stock otherwise
issuable pursuant to the exercise of an option or (ii) by
delivering to the Company shares of Common Stock already owned by
the optionee. The shares so delivered or withheld shall have a
-9-
<PAGE> 32
fair market value equal to such withholding obligation. The fair
market value of the shares used to satisfy such withholding
obligation shall be determined by the Company as of the date that
the amount of tax to be withheld is to be determined. An optionee
who has made an election pursuant to this Section 19(a) may only
satisfy his or her withholding obligation with shares of Common
Stock which are not subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements.
(b) Notwithstanding the foregoing, in the case of a
Reporting Person, no election to use shares for the payment of
withholding taxes shall be effective unless made in compliance
with any applicable requirements of Rule 16b-3.
20. Cancellation and New Grant of Options, Etc.
------------------------------------------
The Board of Directors shall have the authority to effect, at
any time and from time to time, with the consent of the affected
optionees, (i) the cancellation of any or all outstanding options
under the Plan and the grant in substitution therefor of new
options under the Plan covering the same or different numbers of
shares of Common Stock and having an option exercise price per
share which may be lower or higher than the exercise price per
share of the cancelled options or (ii) the amendment of the terms
of any and all outstanding options under the Plan to provide an
option exercise price per share which is higher or lower than the
then-current exercise price per share of such outstanding options.
21. Effective Date and Duration of the Plan.
---------------------------------------
(a) EFFECTIVE DATE. The Plan shall become effective when
adopted by the Board of Directors, but no Incentive Stock Option
granted under the Plan shall become exercisable unless and until
the Plan shall have been approved by the Company's shareholders.
If such shareholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, no options
previously granted under the Plan shall be deemed to be Incentive
Stock Options and no Incentive Stock Options shall be granted
thereafter. Amendments to the Plan not requiring shareholder
approval shall become effective when adopted by the Board of
Directors; amendments requiring shareholder approval (as provided
in Section 19) shall become effective when adopted by the Board of
Directors, but no Incentive Stock Option granted after the date of
such amendment shall become exercisable (to the extent that such
amendment to the Plan was required to enable the Company to grant
such Incentive Stock Option to a particular optionee) unless and
until such amendment shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any
Incentive Stock Options granted on or after the date of such
-10-
<PAGE> 33
amendment shall terminate to the extent that such amendment to the
Plan was required to enable the Company to grant such option to a
particular optionee. Subject to this limitation, options may be
granted under the Plan at any time after the effective date and
before the date fixed for termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance
with Section 15, the Plan shall terminate, with respect to
Incentive Stock Options, upon the earlier of (i) the close of
business on the day next preceding the tenth anniversary of the
date of its adoption by the Board of Directors, or (ii) the date
on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise or cancellation of
options granted under the Plan. Unless sooner terminated in
accordance with Section 15, the Plan shall terminate with respect
to options which are not Incentive Stock Options on the date
specified in (ii) above. If the date of termination is determined
under (i) above, then options outstanding on such date shall
continue to have force and effect in accordance with the
provisions of the instruments evidencing such options.
22. Provision for Foreign Participants.
----------------------------------
The Board of Directors may, without amending the Plan, modify
awards or options granted to participants who are foreign
nationals or employed outside the United States to recognize
differences in laws, rules, regulations or customs of such foreign
jurisdictions with respect to tax, securities, currency, employee
benefit or other matters.
23. Special Merger Provisions.
-------------------------
(a) PRIORITY. The provisions of this Section 23 shall
govern any and all options under this Plan (referred to in this
Section 23 as "Plan Options") which have been granted prior to, or
are granted following, the effective date of the merger of the
Company with and into AHP Merger Subsidiary Corporation (the
"Merger") pursuant to that certain Agreement and Plan of Merger
("Merger Agreement") dated September 19, 1991 among the Company,
American Home Products Corporation ("AHP"), AHP Biotech
Holdings, Inc. ("Holdings") and AHP Merger Subsidiary Corporation.
To the extent there is a conflict between any of the provisions of
this Section 23 and any other provision of the Plan, the specific
provisions of this Section 23 shall be controlling and shall
govern the disposition of all Plan Options outstanding at the time
of the Merger. Unless defined elsewhere in the Plan, capitalized
terms used in this Section 23 shall have the meaning ascribed to
them in the Merger Agreement.
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<PAGE> 34
(b) Option Adjustments
------------------
(i) The exercisability of any installment of Plan
Options granted prior to the Effective Time of the Merger
shall not be accelerated in whole or in part as a result of
the Merger.
(ii) None of the Plan Options granted prior to the
Effective Time of the Merger shall be entitled to a Cash-Out
Election pursuant to the Merger Agreement.
(iii) Each Plan Option granted prior to the Effective
Time of the Merger shall remain in effect after the Merger
upon the same terms and conditions (including, without
limitation, the exercise price per share and the number of
shares) in effect for such Plan Option immediately prior to
the Merger, except that the shares purchasable under each
such continuing Plan Option shall be for Common Stock subject
to the AHP Option as represented by Depositary Shares
(evidenced by Depositary Receipts issued in accordance with
the terms of the Depositary Agreement). Each such continuing
Plan Option will become exercisable, and the Depositary
Shares purchasable thereunder shall vest, in accordance with
the same installment dates such Plan Option would have become
exercisable, and such shares would have vested, under the
vesting schedule specified for that Plan Option at the time
of grant.
(c) Plan Adjustments
----------------
(i) After the Effective Time of the Merger, all
references in the Plan to Common Stock shall (pursuant to
this Section 23 and the Merger Agreement) automatically
become references to Common Stock subject to the AHP Option
as represented by Depositary Shares (evidenced by Depositary
Receipts issued in accordance with the terms of the
Depositary Agreement).
(ii) If Holdings exercises the AHP Option, then all
outstanding Plan Options granted hereunder shall
automatically accelerate and become fully exercisable and
vested immediately prior to the date fixed for purchase of
the outstanding shares pursuant to the AHP Option, and upon
such purchase the holder of such Plan Option shall promptly
be paid for each such Plan Option an amount equal to the
product of (i) the excess of the applicable AHP Option
exercise price per share fixed in the Merger Agreement over
the exercise price per share, times (ii) the number of
Depositary Shares covered by such Plan Option. Such Plan
Option shall terminate upon such payment.
-12-
<PAGE> 35
(iii) Upon the expiration of the AHP Option, all
references in the Plan to Common Stock subject to the AHP
Option as represented by Depositary Shares (evidenced by
Depositary Receipts issued in accordance with the terms of
the Depositary Agreement) (as provided in Subsection
24(c)(i)) shall automatically revert to references to Common
Stock. Each Plan Option granted under this Plan prior to
such expiration shall remain in effect after such expiration
upon the same terms and conditions (including, without
limitation, the exercise price per share and the number of
shares) in effect for such Plan Option immediately prior to
such expiration, except that the shares purchasable under
each such continuing Plan Option shall be shares of Common
Stock. Each such continuing Plan Option will become
exercisable, and the shares purchasable thereunder shall
vest, in accordance with the same installment dates such Plan
Option would have become exercisable, and such shares would
have vested, under the vesting schedule specified for that
Plan Option at the time of grant.
Adopted by the Board of Directors on
September 19, 1991.
-13-
<PAGE> 36
GENETICS INSTITUTE, INC.
First Amendment to 1991 Stock Option Plan
-----------------------------------------
The 1991 Stock Option Plan (the "Plan") of Genetics
Institute, Inc. (the "Company"), pursuant to Section 18 thereof,
is hereby amended as follows:
Section 4 of the Plan is amended to increase the number of
shares of Genetics Institute, Inc. Common Stock, $.01 par value,
subject to the Plan, so that as amended (and taking into account
all stock splits and stock dividends distributed through
January 14, 1993), the first sentence of said Section 4 shall read
as follows:
"Subject to adjustment as provided in Section 14 below,
the maximum number of shares of Common Stock of the Company
which may be issued and sold under the Plan is 4,400,000
shares."
The foregoing amendment shall take effect upon the date
approved by the Board of Directors, subject to ratification and
approval by the stockholders of Genetic Institute, Inc. Except as
so amended, the Plan shall remain in full force and effect.
Adopted by the Board of Directors
January 14, 1993
Approved by the Stockholders
April 13, 1993
<PAGE> 37
GENETICS INSTITUTE, INC.
Second Amendment to 1991 Stock Option Plan
------------------------------------------
The 1991 Stock Option Plan (the "Plan") of Genetics
Institute, Inc. (the "Company"), pursuant to Section 18 thereof,
is hereby amended as follows:
Section 4 of the Plan is amended to increase the number of
shares of Genetics Institute, Inc. Common Stock, $.01 par value,
subject to the Plan, so that as amended (and taking into account
all stock splits and stock dividends distributed through March 6,
1995), the first sentence of said Section 4 shall read as follows:
"Subject to adjustment as provided in Section 14 below,
the maximum number of shares of Common Stock of the Company
which may be issued and sold under the Plan is 5,700,000
shares."
The foregoing amendment shall take effect upon the date
approved by the Board of Directors, subject to ratification and
approval by the stockholders of Genetic Institute, Inc. Except as
so amended, the Plan shall remain in full force and effect.
Adopted by the Board of Directors on
March 24, 1995.
<PAGE> 38
PROXY GENETICS INSTITUTE, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS - MAY 16, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY
The undersigned, having received notice of the meeting and the proxy
statement therefor, and revoking all prior proxies, hereby appoint(s) Gabriel
Schmergel, Patrick Gage, Garen G. Bohlin and Tuan Ha-Ngoc and each of them,
attorneys or attorney of the undersigned (with full power of substitution in
them and each of them) for and in the name(s) of the undersigned to attend the
Annual Meeting of Stockholders of Genetics Institute, Inc. (the "Company") to
be held at The Charles Hotel, One Bennett Street, Cambridge, Massachusetts at
9:00 a.m. (local time), on Tuesday, May 16, 1995 and any adjourned sessions
therof, and there to vote and act upon the following matters in respect of
shares of Common Stock of the Company which the undersigned will be entitled to
vote or act upon, with all powers the undersigned would possess if personally
present.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY ADJOURNMENT THEREOF.
1. Election of Class II directors.
Nominees: Anthony B. Evnin, Robert I. Levy, M.D. and
Thomas P. Maniatis, Ph.D.
Pursuant to Section 3.06 of the Governance Agreement among the Company,
American Home Products Corporation and AHP Biotech Holdings, Inc., dated as
of January 16, 1992, the undersigned hereby directs the proxies to vote
its shares of Common Stock for Anthony B. Evnin, Robert I. Levy, M.D. and
Thomas P. Maniatis, Ph.D. in proportion to the votes cast by the holders of
the Company's Depositary Shares (other than the undersigned and its
affiliates).
2. To approve an amendment to the Company's 1991 Stock Option Plan to increase
the aggregate number of the Company's Depositary Shares covered by such Plan
from 4,400,000 to 5,700,000.
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of the selection of Arthur Andersen LLP.
/ / FOR / / AGAINST / / ABSTAIN
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
/ / FOR / / AGAINST / / ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY ELECTION TO OFFICE
OR PROPOSAL SPECIFIED ABOVE, THIS PROXY WILL BE VOTED FOR SUCH ELECTION TO
OFFICE OR PROPOSAL.
Attendance of the undersigned at the meeting or at any adjourned session
thereof will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate thereat the intention of the undersigned to vote said
shares in person. If the undersigned hold(s) any of the shares of the Company
in a fiduciary, custodial or joint capacity or capacities, this proxy is signed
by the undersigned in every such capacity as well as individually.
Number of Shares Represented AHP BIOTECH HOLDINGS, INC.
by this Proxy
____________________________
Dated: _______________, 1995 By: ________________________
____________________________
Signature(s)
Please sign name(s) exactly as
appearing hereon. When signing as
attorney, executor, administrator
or other fiduciary, please give your
full title as such. Joint owners
should each sign personally.
-1-
<PAGE> 39
VOTING INSTRUCTION CARD
-----------------------
GENETICS INSTITUTE, INC.
ANNUAL MEETING OF STOCKHOLDERS - MAY 16, 1995
THESE VOTING INSTRUCTIONS ARE SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY
The undersigned, having received notice of the meeting and the proxy
statement therefor, and revoking all prior voting instructions, hereby
direct(s) The First National Bank of Boston, as Depositary (the "Depositary"),
to vote and act upon the following matters in accordance with the instructions
indicated on the reverse side in respect of all shares of Common Stock of
Genetics Institute, Inc. (the "Company") represented by Depositary Shares held
by the undersigned. In addition, the undersigned authorize(s) the Depositary
to appoint Gabriel Schmergel, Patrick Gage, Garen G. Bohlin and Tuan Ha-Ngoc and
each of them, attorneys or attorney of the Depositary (with full power of
substitution in them and each of them) for and in the name of the Depositary to
attend the Annual Meeting of Stockholders of the Company to be held at The
Charles Hotel, One Bennett Street, Cambridge, Massachusetts at 9:00 a.m. (local
time), on Tuesday, May 16, 1995 and any adjourned sessions thereof, and there
to vote and act upon the following matters in respect of all shares of Common
Stock of the Company which the Depositary will be entitled to vote or act upon,
with all powers the Depositary would possess if personally present, including
the power to vote upon such other matters as may properly come before the
meeting, or any adjournment therof.
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE> 40
/X/ Please mark
votes as in
this example
The shares represented by this voting instruction card will be voted by
the Depositary as directed by the undersigned. If no direction is given with
respect to any election to office or proposal specified below, the undersigned
specifically instructs the Depositary to vote in favor of such election to
office or proposal.
<TABLE>
<S> <C>
1. Election of Class II directors (for all nominees 2. Approval of an amendment to the
except as marked below: Company's 1991 Stock Option
Plan to increase the aggregate
Nominees: Anthony B. Evnin, Robert I. Levy, M.D. number of the Company's
and Thomas P. Maniatis, Ph.D. Depositary Shares covered by
such Plan from 4,400,000 to
FOR WITHHELD 5,700,000.
/ / / /
FOR AGAINST ABSTAIN
________________________________________ / / / / / /
For all nominees except as noted above
3. Ratification of the selection
of Arthur Anderson LLP.
MARK HERE IF YOU PLAN / /
TO ATTEND THE MEETING FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE FOR ADDRESS / / 4. To transact such other business
CHANGE AND NOTE BELOW as may properly come before the
meeting or any adjournment
thereof.
Please sign name(s) exactly as appearing herein.
When signing as attorney, executor, administrator FOR AGAINST ABSTAIN
or other fiduciary, please give your full title / / / / / /
as such. Joint owners should each sign personally.
Attendance of the undersigned at the
meeting or at any adjourned session
thereof will not be deemed to revoke
these voting instructions. The voting
instructions may only be revoked by
delivery of a written revocation to
the Depositary prior to the Depositary's
exercise of these voting instructions.
If the undersigned hold(s) any of the
Depositary Shares of the Company in a
fiduciary, custodial or joint
capacity or capacities, this voting
instruction card is signed by the
undersigned in every such capacity
as well as individually.
Sigature Date
-------- ----
Sigature Date
-------- ----
</TABLE>
