<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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14a-6(e)(2))
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GENZYME CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Item 22(a)(2) of Schedule 14A.
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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:
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<PAGE> 2
GENZYME CORPORATION
ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139
(617) 252-7500
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of the stockholders of Genzyme Corporation, a Massachusetts
corporation, will be held at the Harrison Conference Center at the Bank of
Boston, 100 Federal Street, Boston, Massachusetts, at 2:00 p.m. on Thursday, May
16, 1996 for the following purposes:
1. To elect three directors of the Company.
2. To vote on a proposed amendment to the Company's 1990 Equity
Incentive Plan that would increase the number of shares of General
Division Common Stock covered by the Plan from 7,600,000 to
9,900,000.
3. To vote on a proposed amendment to the Company's 1990 Equity
Incentive Plan that would increase the number of shares of Tissue
Repair Division Common Stock covered by the Plan from 2,000,000 to
3,300,000.
4. To vote on a proposed amendment to the Company's 1988 Director Stock
Option Plan that would increase the size of annual option grants to
directors under the Plan.
5. To vote on a proposal to approve the Genzyme Corporation Directors'
Deferred Compensation Plan.
6. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on March 28, 1996 will
be entitled to vote at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THEREFORE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOUR PROXY
WILL NOT BE USED.
By order of the Board of Directors,
Peter Wirth
Clerk
Dated: April 12, 1996
<PAGE> 3
GENZYME CORPORATION
ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139
TELEPHONE (617) 252-7500
---------------
PROXY STATEMENT
---------------
GENERAL INFORMATION
The enclosed proxy is solicited on behalf of the Board of Directors of
Genzyme Corporation (the "Company" or "Genzyme") for use at the annual meeting
of stockholders to be held on Thursday, May 16, 1996, and at any adjournments
thereof.
The authority granted by an executed proxy may be revoked at any time
before its exercise by filing with the Clerk of the Company a written revocation
or a duly executed proxy bearing a later date or by voting in person at the
meeting. Shares represented by valid proxies will be voted in accordance with
the specifications in the proxies. If no specifications are made, the proxies
will be voted to elect the directors nominated by the Board of Directors and to
approve the other proposals listed in the notice on the cover page of this proxy
statement.
On March 28, 1996, the Company had outstanding 33,875,298 shares of General
Division Common Stock, $.01 par value (the "General Division Stock"), and
12,379,007 shares of Tissue Repair Division Common Stock, $.01 par value (the
"TR Stock"), which are its only outstanding classes of voting stock. The holders
of General Division Stock and TR Stock will vote together as a single class of
stock on all matters that will be presented for consideration at the meeting.
Each share of General Division Stock entitles the holder thereof to one vote and
each share of TR Stock entitles the holder thereof to .29 votes. Only
stockholders of record at the close of business on March 28, 1996 will be
entitled to vote at the meeting. A majority in interest of the outstanding
General Division Stock and TR Stock considered together as a single class,
represented at the meeting in person or by proxy, constitutes a quorum for the
transaction of business.
The approximate date on which this proxy statement and accompanying proxy
are first being sent or given to stockholders is April 12, 1996.
Dated: April 12, 1996
<PAGE> 4
SHARE OWNERSHIP
<TABLE>
The following table and footnotes set forth certain information regarding
the ownership of the Company's General Division Stock and TR Stock, and the
common stock of Genzyme Transgenics Corporation ("GTC"), an affiliate of the
Company, as of April 1, 1996 by (i) persons known by the Company to be
beneficial owners of more than 5% of its General Division Stock or TR Stock,
(ii) the Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company, (iii) each director of the
Company, and (iv) all current executive officers and directors of the Company as
a group:
<CAPTION>
Number of Shares
Beneficially Owned (1)
----------------------
Beneficial Owner Shares Percent
---------------- ------ -------
<S> <C> <C>
Twentieth Century Companies, Inc. (2)
4500 Main Street, P.O. Box 41820
Kansas City, Missouri 64141
General Division Stock...................... 2,170,000 6.4
TR Stock.................................... 800,000 6.5
State of Wisconsin Investment Board (3)
121 East Wilson Avenue
Madison, Wisconsin 53702
General Division Stock...................... 325,000 1.0
TR Stock.................................... 651,189 5.3
Henri A. Termeer (4)
General Division Stock...................... 444,441 1.3
TR Stock.................................... 98,614 *
Geoffrey F. Cox (5)
General Division Stock...................... 76,880 *
TR Stock.................................... 32,074 *
Gregory D. Phelps (6)
General Division Stock...................... 82,166 *
TR Stock.................................... 41,321 *
Alan E. Smith (7)
General Division Stock...................... 71,139 *
TR Stock.................................... 17,206 *
G. Jan van Heek (8)
General Division Stock...................... 27,479 *
TR Stock.................................... 15,167 *
Henry E. Blair (9)
General Division Stock...................... 20,100 *
TR Stock.................................... 11,736 *
Robert J. Carpenter (10)
General Division Stock...................... 12,680 *
TR Stock.................................... 23,630 *
</TABLE>
-2-
<PAGE> 5
<TABLE>
<S> <C> <C>
Charles L. Cooney (11)
General Division Stock...................... 17,340 *
TR Stock.................................... 7,689 *
Constantine E. Anagnostopoulos (12)
General Division Stock...................... 15,000 *
TR Stock.................................... 7,430 *
Henry R. Lewis (13)
General Division Stock...................... 15,300 *
TR Stock.................................... 7,085 *
Douglas A. Berthiaume (14)
General Division Stock...................... 16,850 *
TR Stock.................................... 11,015 *
All current executive officers and directors
as a group (21 persons) (15)
General Division Stock...................... 1,367,088 3.9
TR Stock.................................... 432,527 3.4
- --------------------
<FN>
* Indicates less than 1%
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares listed in the table.
Shares acquired for the account of any officer under the Genzyme 1990 Employee
Stock Purchase Plan after December 31, 1995 are not included in the table.
(2) Represents shares held by entities or managed accounts over which Twentieth
Century Companies, Inc. has investment discretion. Based on the Schedule 13G for
the year ended December 31, 1995 filed with the Securities and Exchange
Commission by Twentieth Century Companies, Inc.
(3) Based on the Schedule 13G for the year ended December 31, 1995 filed with
the Securities and Exchange Commission for the State of Wisconsin Investment
Board.
(4) The stock beneficially owned by Mr. Termeer includes 428,250 and 82,925
shares of General Division Stock and TR Stock, respectively, subject to stock
options exercisable within the 60-day period following April 1, 1996 and 3,350
and 452 shares of General Division Stock and TR Stock, respectively, subject to
currently exercisable warrants. In addition, Mr. Termeer owns 9,500 shares of
GTC common stock and holds options to purchase 8,000 shares of GTC common stock
that are exercisable within the 60-day period following April 1, 1996.
(5) The stock beneficially owned by Dr. Cox includes 73,286 and 19,588 shares of
General Division Stock and TR Stock, respectively, subject to stock options
exercisable within the 60-day period following April 1, 1996 and 3,594 and
12,155 shares of General Division Stock and TR Stock, respectively, held jointly
with his wife.
(6) The stock beneficially owned by Mr. Phelps includes 78,766 and 30,500 shares
of General Division Stock and TR Stock, respectively, subject to stock options
exercisable within the 60-day period following April 1, 1996.
(7) The stock beneficially owned by Dr. Smith includes 68,286 and 16,051 shares
of General Division Stock and TR Stock, respectively, subject to stock options
exercisable within the 60-day period following April 1, 1996. In addition, Dr.
Smith holds options to purchase 8,000 shares of GTC common stock that are
exercisable within the 60-day period following April 1, 1996.
</TABLE>
-3-
<PAGE> 6
(8) The stock beneficially owned by Mr. van Heek includes 27,153 and 12,246
shares of General Division Stock and TR Stock, respectively, subject to stock
options exercisable within the 60-day period following April 1, 1996.
(9) The stock beneficially owned by Mr. Blair includes 7,600 and 8,402 shares
of General Division Stock and TR Stock, respectively, subject to stock options
exercisable within the 60-day period following April 1, 1996. In addition, Mr.
Blair owns 1,000 shares of GTC common stock and holds options to purchase 6,000
shares of GTC common stock that are exercisable within the 60-day period
following April 1, 1996.
(10) The stock beneficially owned by Mr. Carpenter includes 3,200 and 5,800
shares of General Division Stock and TR Stock, respectively, subject to stock
options exercisable within the 60-day period following April 1, 1996 and 1,000
and 135 shares of General Division Stock and TR Stock, respectively, subject to
currently exercisable warrants. Also included are 246 and 33 shares of General
Division Stock and TR Stock, respectively, held by his wife, and 1,000 and 135
shares of General Division Stock and TR Stock, respectively, subject to
currently exercisable warrants held by his wife. Mr. Carpenter disclaims
beneficial ownership of all shares held by his wife.
(11) The stock beneficially owned by Dr. Cooney includes 6,000 and 6,080 shares
of General Division Stock and TR Stock, respectively, subject to stock options
exercisable within the 60-day period following April 1, 1996 and 60 shares of
General Division Stock held jointly with his wife.
(12) The stock beneficially owned by Dr. Anagnostopoulos includes 14,000 and
6,890 shares of General Division Stock and TR Stock, respectively, subject to
stock options exercisable within the 60-day period following April 1, 1996.
(13) The stock beneficially owned by Mr. Lewis includes 14,000 and 6,890 shares
of General Division Stock and TR Stock, respectively, subject to stock options
exercisable within the 60-day period following April 1, 1996.
(14) The stock beneficially owned by Mr. Berthiaume includes 15,600 and 9,482
shares of General Division Stock and TR Stock, respectively, subject to stock
options exercisable within the 60-day period following April 1, 1996. Also
included are 1,000 and 1,500 shares of General Division Stock and TR Stock,
respectively, held by his wife. Mr. Berthiaume disclaims beneficial ownership of
all shares held by his wife.
(15) Includes 1,281,105 and 357,952 shares of General Division Stock and TR
Stock, respectively, that are subject to outstanding stock options exercisable
within the 60-day period following April 1, 1996 and 6,350 and 857 shares of
General Division Stock and TR Stock, respectively, subject to currently
exercisable warrants. Also includes 3,654 and 12,155 shares of General Division
Stock and TR Stock, respectively, held jointly by officers and directors of
Genzyme with their respective spouses. Also includes 1,330 and 1,544 shares of
General Division Stock and TR Stock, respectively, held by the spouses of
officers, 1,000 and 135 shares of General Division Stock and TR Stock,
respectively, subject to currently exercisable warrants held by the spouse of a
director, and 2,631 and 382 shares of General Division Stock and TR Stock,
respectively, held by the spouses of officers for the benefit of the children of
such officers. All such shares subject to warrants and stock options are treated
as outstanding for the purpose of computing the stated percentage.
Genzyme's officers and directors as a group own beneficially an aggregate
of 32,500 shares of common stock, less than 1% of the shares outstanding, of
GTC, including 22,000 shares subject to stock options exercisable within the
60-day period following April 1, 1996.
ELECTION OF DIRECTORS
-4-
<PAGE> 7
The Board of Directors has fixed the number of directors at seven for the
coming year. Pursuant to the Company's Articles of Organization, the Board of
Directors of the Company is divided into three classes, with each class being as
nearly equal in number of directors as possible. The term of one class expires,
and their successors are elected for a term of three years, at each annual
meeting of the Company's stockholders.
At the annual meeting of stockholders to be held on May 16, 1996, three
directors will be elected to hold office for three years and until their
successors are elected and qualified. Constantine E. Anagnostopoulos, Robert J.
Carpenter and Charles L. Cooney have been nominated for re-election to a term of
office expiring in 1999, and each has consented to serve if elected. If any
nominee is unable to serve, proxies will be voted for such other candidates as
may be nominated by the Board of Directors.
Pursuant to the Company's By-laws, directors will be elected by a plurality
of the votes properly cast at the meeting. Abstentions, votes withheld and
broker non-votes will not be treated as votes cast and will not affect the
outcome of the election. A "broker non-vote" occurs when a registered broker
holding a customer's shares in the name of the broker has not received voting
instructions on a matter from the customer, is barred by applicable rules from
exercising discretionary authority to vote on the matter, and so indicates on
the proxy.
-5-
<PAGE> 8
<TABLE>
The following table contains certain information about the nominees for
election as a director and each other person whose term of office as a director
will continue after the meeting.
<CAPTION>
PRESENT
BUSINESS EXPERIENCE DURING PAST FIVE DIRECTOR TERM
NAME AND AGE YEARS AND OTHER DIRECTORSHIPS SINCE EXPIRES
------------ ------------------------------------ -------- -------
<S> <C> <C> <C>
Henri A. Termeer Mr. Termeer has served as President of 1983 1997
Age: 50 Genzyme since October 1983, Chief
Executive Officer since December 1985 and
Chairman of the Board since May 1988.
For ten years prior to joining Genzyme,
Mr. Termeer worked for Baxter Travenol
Laboratories, Inc., a manufacturer of
human health care products. Mr. Termeer
is Chairman of the Boards of Genzyme
Transgenics Corporation ("GTC") and
Neozyme II Corporation. Mr.Termeer is
also a director of Abiomed, Inc.,
AutoImmune Inc., GelTex Pharmaceuticals,
Inc. and Xenova Ltd., and a trustee of
Hambrecht & Quist Healthcare Investors
and of Hambrecht & Quist Life Sciences
Investors.
Henry E. Blair Mr. Blair is a consultant to several 1981 1998
Age: 52 companies, including Genzyme. Prior to
January 1990, Mr. Blair was Senior Vice
President, Scientific Affairs of Genzyme.
Before joining Genzyme in 1981, he was
Associate Director of the New England
Enzyme Center at Tufts University School
of Medicine. Mr. Blair is also a director
of GTC, Dynagen, Inc. and Celtrix
Pharmaceuticals, Inc.
*Charles L. Dr. Cooney is a Professor of Chemical and 1983 1996
Cooney Biochemical Engineering and Co-Director
Age: 51 of the Program on the Pharmaceutical
Industry at Massachusetts Institute of
Technology ("MIT"). Dr. Cooney joined
the MIT faculty as an Assistant Professor
in 1970 and became a Professor in 1982.
Dr. Cooney is also a principal of
BioInformation Associates, Inc., a
consulting company.
*Constantine E. Dr. Anagnostopoulos is Managing General 1986 1996
Anagnostopoulos Partner of Gateway Associates, which is
Age: 73 the general partner of Gateway Venture
Partners III, L.P., a venture capital
partnership. From January 1986 to April
1987, Dr. Anagnostopoulos was a consultant
to Monsanto Company, a producer of
pharmaceuticals, chemicals, plastics and
textiles, and to Alafi Capital, a venture
capital firm. From 1982 through 1985, he
served as Corporate Vice President of
Monsanto Company.
</TABLE>
-6-
<PAGE> 9
<TABLE>
<CAPTION>
PRESENT
BUSINESS EXPERIENCE DURING PAST FIVE DIRECTOR TERM
NAME AND AGE YEARS AND OTHER DIRECTORSHIPS SINCE EXPIRES
------------ ------------------------------------ -------- -------
<S> <C> <C> <C>
Henry R. Lewis Mr. Lewis is a consultant to several 1987 1997
Age: 70 companies and Chairman of the Board of
Delphax Systems, a manufacturer of high
speed non-impact printers, and a member
of the Board of Dyax Corp., a
bioseparation, pharmaceutical discovery
and development company. From 1986 to
February 1991, Mr. Lewis was the Vice
Chairman of the Board of Dennison
Manufacturing Company, a manufacturer
and distributor of products for the
stationery, technical paper, and
industrial and retail systems markets.
From 1982 to 1986, Mr. Lewis was a
Senior Vice President of Dennison
Manufacturing Company.
Douglas A. Mr. Berthiaume is Chairman, President and 1988 1998
Berthiaume Chief Executive Officer of Waters
Age: 47 Corporation, a high technology manufacturer
of products used for analysis and
purification, formerly a division of
Millipore Corporation. From May 1991 to
August 1994, he was President of the
Waters Division of Millipore Corporation
and from 1988 to 1991, he was Chief
Financial Officer of Millipore Corporation.
*Robert J. Mr. Carpenter is President and Chief 1994 1996
Carpenter Executive Officer of VacTex, Inc., a
Age: 51 privately held biotechnology company
which he co-founded in November 1995, and
Chairman of GelTex Pharmaceuticals, Inc.,
a publicly held pharmaceutical development
company which he co-founded in November
1991 and where he served as President and
Chief Executive Office until May 1993.
Mr. Carpenter was Chairman of the Board,
President, and Chief Executive Officer of
Integrated Genetics, Inc., a biotechnology
company that merged with Genzyme in 1989.
Following the merger and until 1991, Mr.
Carpenter was Executive Vice President of
Genzyme, and Chief Executive Officer and
Chairman of the Board of IG Laboratories,
Inc. Mr. Carpenter is also a director of
Apex BioSciences, Inc. and Neozyme II
Corporation.
- ------------------------
<FN>
* Nominee for election as director
</TABLE>
The Board of Directors held six meetings during 1995, and each director
attended at least 75% of the aggregate of all meetings of the Board and all
committees of the Board on which he served.
-7-
<PAGE> 10
The Company has standing Audit and Compensation Committees of the Board of
Directors but does not have a Nominating Committee. The Audit Committee, which
consisted of Messrs. Lewis (Chairman), Anagnostopoulos, Berthiaume and
Carpenter, held three meetings in 1995. The primary function of the Audit
Committee is to assist the Board of Directors in the discharge of its duties and
responsibilities by assuring that the financial information which will be
provided to the stockholders and others is reliable and that the systems of
control which management has established effectively safeguard the assets of the
Company. The committee reviews the general scope and results of the Company's
annual audit, the fee charged by the Company's independent accountants and other
matters relating to internal control systems. For information about the
Compensation Committee, see the "Compensation Committee Report on Executive
Compensation" below.
DIRECTOR COMPENSATION
Director Fees. Directors who are not employees of the Company, other than
Mr. Blair, receive a quarterly retainer of $6,250.
Consulting Agreements. Since January 1, 1990, the Company has entered into
an annual consulting agreement with Mr. Blair under which he provides consulting
services to the Company for a minimum of 50 and a maximum of 100 days during the
year for an annual fee of $100,000. The agreement has been renewed for 1996. The
Company also has a consulting relationship with Dr. Cooney. See "Compensation
Committee Interlocks and Insider Participation."
1988 Director Stock Option Plan. All of the directors who are not employees
of the Company (the "Eligible Directors") are currently eligible to participate
in the 1988 Director Stock Option Plan. Options under the Plan are automatically
granted once a year at the annual meeting of the stockholders of the Company to
Eligible Directors elected or re-elected at the meeting. Each such Eligible
Director receives, for each year of the term of office to which he is elected,
an option to purchase (i) 1,600 shares of General Division Stock and (ii) a
number of shares of TR Stock equal to 400 times a fraction, the numerator of
which is the fair market value of the General Division Stock and the denominator
of which is the fair market value of the TR Stock on the date of such grant,
with the fair market value for the General Division Stock and the TR Stock equal
to the last sale price for the General Division Stock and the TR Stock,
respectively, on the date of grant of such options. Upon the election of an
Eligible Director under the Plan other than at an annual meeting of stockholders
(whether by the Board of Directors or the stockholders and whether to fill a
vacancy or otherwise), such Director is automatically granted options to
purchase the number of shares of General Division Stock and TR Stock described
in the preceding sentence for each year or portion thereof of the term of office
to which he or she is elected.
If the proposal to increase the size of annual option grants under this
Plan is approved, the annual option grants will be increased to 2,000 shares of
General Division Stock and the number of shares of TR Stock equal to 500 times
the fraction referred to above.
Options granted under this Plan at an annual meeting of stockholders become
exercisable with respect to one-third of the total number of shares of General
Division Stock and TR Stock on the date of each annual meeting of stockholders
following their date of grant, if and only if the option holder is a member of
the Board of Directors of the Company at the opening of business on that date.
Options granted under the Plan have a term of ten years from their date of grant
and an exercise price equal to the fair market value of the class of common
stock on the date of grant.
EXECUTIVE COMPENSATION
The Compensation Committee Report set forth below describes the Company's
compensation policies applicable to executive officers and the Compensation
Committee's bases for Mr. Termeer's compensation as Chief
-8-
<PAGE> 11
Executive Officer during 1995. The following graph shows a comparison of
cumulative total shareholder returns for each of the two classes of the
Company's common stock to that of the S&P 500 Composite Index and the Coopers
& Lybrand Biotech Index.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
GENZYME CORPORATION GENERAL DIVISION STOCK (1),
S&P 500 INDEX, AND THE COOPERS & LYBRAND BIOTECH INDEX
Data Points for Coopers & Lybrand Biotech Index Table
<CAPTION>
Genzyme Corp. 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/29/95
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
General Division 1.00 2.05 1.58 0.96 1.10 2.18
- --------------------------------------------------------------------------------------
S & P 500 1.00 1.30 1.40 1.55 1.55 2.15
- --------------------------------------------------------------------------------------
CooperLybrand 1.00 1.80 2.95 2.92 2.65 4.03
- --------------------------------------------------------------------------------------
- ----------------
<FN>
(1) On December 16, 1994, the Company's Articles of Organization were amended to
redesignate the Company's then existing common stock as General Division Common
Stock (the "General Division Stock") and to create a new class of common stock
designated Tissue Repair Division Common Stock (the "TR Stock"). On December 23,
1994, the Company made a pro rata distribution to all holders of General
Division Stock as of the close of business on December 16, 1994 equal to .135 of
one share of TR Stock for each share of General Division Stock. The graph
depicts the cumulative returns calculated on an annual basis on $100 invested in
the Company's former single class of common stock, the S&P 500 Index and the
Coopers & Lybrand Biotech Index on January 1, 1991, with all dividends,
including the TR Stock dividend, being reinvested.
</TABLE>
-9-
<PAGE> 12
<TABLE>
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
GENZYME CORPORATION TR STOCK (2),
S&P 500 INDEX, AND THE COOPERS & LYBRAND BIOTECH INDEX
<CAPTION>
Genzyme Corp. 12/16/94 12/29/95
--------------------------------------------------
<S> <C> <C>
Tissue Repair 1.00 3.34
--------------------------------------------------
S & P 500 1.00 1.39
--------------------------------------------------
CooperLybrand 1.00 1.46
--------------------------------------------------
- ----------------
<FN>
(2) The Company's TR Stock was first issued on December 16, 1994. The graph
depicts cumulative returns calculated on an annual basis on $100 invested in TR
Stock, the S&P 500 Index and the Coopers & Lybrand Biotech Index on December 16,
1994, with all dividends being reinvested.
</TABLE>
-10-
<PAGE> 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors determines the
compensation to be paid to all executive officers of the Company, including the
Chief Executive Officer and the other executive officers named in the Summary
Compensation Table set forth below. The Committee also administers the Company's
equity incentive plan (the "Equity Plan"), including the grant of stock options
under the Equity Plan. The Compensation Committee met eight times in 1995 and is
currently composed of Messrs. Cooney (Chairman), Anagnostopoulos and Lewis.
The Company's executive compensation policy is designed to attract, retain
and reward executive officers who contribute to the long-term success of the
Company by maintaining a competitive salary structure as compared with other
large biotechnology companies and by aligning compensation with the achievement
of business objectives and individual and corporate performance.
The Company's executive compensation package is composed of three elements:
base salary, annual incentive bonuses based on corporate, divisional and
individual performance and initial, annual and other periodic special grants of
stock options under the Equity Plan. For 1995, the Committee sought to achieve a
total salary, bonus and stock option package for each officer that is above the
40th percentile (and between the 75th and 90th percentile for the Chief
Executive Officer) of the total compensation paid to officers in comparable
positions at other companies in the biotechnology industry.
Section 162(m) of the Internal Revenue Code limits a publicly held
company's tax deduction for compensation paid to the chief executive officer and
the other four most highly paid officers. Generally, amounts paid in excess of
$1,000,000 to a covered executive in any year cannot be deducted. Certain
performance based compensation that has been approved by stockholders is not
subject to the limit. At the 1995 Annual Meeting, the Company's stockholders
approved an amendment to the Equity Plan designed to maximize the deductibility
of certain awards under such plan. The Committee will consider as appropriate
other ways to maximize the deductibility of executive compensation, while
retaining the discretion to compensate executive officers in a manner
commensurate with performance and the competitive environment for executive
talent without regard to deductibility.
Base Salary. For 1995, the Chief Executive Officer recommended the base
salary amount for each officer other than himself based on his assessment of the
officer's individual performance. The Committee evaluated and approved the
recommendation in light of the Company's analysis of compensation data gathered
from three surveys prepared by independent compensation consultants. Two of the
three independent surveys focused on biotechnology companies generally and the
third focused on health industry manufacturing companies with revenues
comparable to the Company's.
Base salary ranges were established for each officer based on the survey
information for comparable executive positions. The performance of the companies
surveyed was not considered by the Committee. Nor did the Committee seek to set
each officer's salary at the same percentile within the range. Rather, the
Committee evaluated the Chief Executive Officer's recommendation regarding each
officer's base salary in light of the range established for the officer's
position, taking into account the officer's tenure in the position and the
Committee's subjective assessment of individual performance. For 1995, the
officers' base salaries ranged from the first to the third quartile of the
ranges developed from the survey data.
In fixing Mr. Termeer's base salary for 1995, the Committee considered
chief executive officer compensation data contained in the two independent
surveys of biotechnology companies used in setting the base salaries for the
other officers and one additional survey prepared by the Company of total cash
compensation paid to the chief executive officers of the nine biotechnology
companies that the Company considers to be its closest peers. The companies in
the peer group survey are all included in the Coopers & Lybrand Biotech Index
shown in the performance graph above. The Committee fixed Mr. Termeer's 1995
base salary at the 88th percentile of the range established by the survey data
based on the same factors
-11-
<PAGE> 14
considered in setting the base salaries for the other officers. In addition,
the Committee considered several quantitative and qualitative corporate
performance measures. During 1994, the Company received FDA marketing approval
for Cerezyme[registered trademark] enzyme, the recombinant form of
Ceredase[registered trademark], while increasing supplies of
Ceredase[registered trademark] enzyme in a challenging manufacturing
environment. Through a corporate partnering arrangement and an acquisition,
the Company established a leading position in the field of tissue repair. The
Committee also noted that the Company had been positioned for continued
substantial growth in the future, particularly with the creation of the Tissue
Repair Division.
Incentive Bonuses. A significant portion of the direct pay of executive
officers consists of annual incentive bonuses. A bonus target was established
for each officer prior to the beginning of 1995 using the same survey data
considered in setting base salaries. As with base salaries, the bonus targets
were recommended by the Chief Executive Officer for all officers other than
himself and the Committee evaluated and approved the targets in light of the
appropriate percentile of the salary ranges determined for each officer, taking
into account the Committee's goal stated above for the total compensation
package paid to Company officers.
The bonus targets included both a corporate performance component and an
individual performance component for all officers and a divisional performance
component for those officers with operating responsibility for a specific
business unit. The corporate performance component of the annual bonus was
payable at the discretion of the Compensation Committee based on the extent to
which the Company achieved the operating income goals approved by the Board of
Directors in connection with setting the 1995 annual budget. The individual
performance component was payable at the discretion of the Chief Executive
Officer based on his evaluation of the executive officer's qualitative
performance for the year. The divisional performance component was payable
one-half at the discretion of the Compensation Committee based on the extent to
which the business unit achieved the operating income goals approved by the
Board of Directors in connection with setting the 1995 annual budget and
one-half at the discretion of the Chief Executive Officer based on his
evaluation of the executive officer's qualitative performance for the year.
For the Company's executive officers other than Mr. Termeer, the 1995
combined bonus targets represented from 44% to 69% of base salary with the
amount payable based on corporate and divisional performance ranging from 22% to
43% of the total amount payable. Mr. Termeer's 1995 bonus target was set at 81%
of his base salary, reflecting the Committee's belief that a greater portion of
the Chief Executive Officer's cash compensation should be tied to performance.
Approximately 58% of Mr. Termeer's bonus target was payable based on individual
performance and 42% was payable based on corporate performance.
For 1995, the Company surpassed its budgeted operating income and,
therefore, each officer received 100% of his targeted corporate bonus under the
formula previously established by the Committee. The Committee awarded Mr.
Termeer 100% of his targeted individual bonus based on several achievements
during the year. The Company substantially increased its total revenues from
1994 to 1995, reflecting increased sales in each of the Company's major
business units and particularly increased sales of Ceredase[registered
trademark] enzyme. In addition, the Company made significant scientific and
clinical progress in several of its product development programs, notably the
successful completion of clinical trials for Seprafilm[trademark].
Stock Options. Annual stock option awards were made to executive officers
in May 1995, the same time that stock option awards were made to all other
qualified employees of the Company. Mr. Termeer was granted options to purchase
22,500 shares of General Division Stock and 22,500 shares of TR Stock and each
other officer was granted options to purchase between 4,250 and 7,650 shares of
General Division Stock and between 2,550 and 12,750 shares of TR Stock. The size
of each officer's award for 1995 was determined based on an analysis of the
present value (using the Black-Scholes option valuation model) of option grants
by other companies in the biotechnology industry to employees at comparable
salary levels to the Company's officers, taking into account the Committee's
goal stated above for the total compensation package paid to each officer. The
number of options previously granted to each officer was not specifically
considered by the Committee.
-12-
<PAGE> 15
The Committee has periodically awarded executive officers special stock
options, the exercisability of which may be accelerated upon the Company's
achievement of specified revenue and profitability targets or specified
increases in the Company's stock price within a certain time period. In December
1995, the Committee granted such special stock options to purchase General
Division Stock and TR Stock to each officer. These options will become
exercisable in full on June 30, 2005, but may be accelerated, separately with
respect to each class of common stock, at the discretion of the Committee if the
average closing price of shares of the General Division Stock for any period of
ninety (90) consecutive trading days during the Measurement Period (as defined
below) is equal to or greater than $100.00 per share (the "General Target
Price") or if the average closing price of shares of the TR Stock for any period
of ninety (90) consecutive trading days during the Measurement Period is equal
to or greater than $40.00 per share (the "TR Target Price"). The "Measurement
Period" will be from January 1, 1998 through and including December 31, 1998 if
the average closing price for General Division Stock for the 90-day period
starting 45 calendar days prior to December 31, 1996 and ending 45 calendar days
after such date is greater than or equal to $67.26 per share plus the closing
price of .136 share of TR Stock over such period, and otherwise the Measurement
Period will be from April 1, 1998 through and including March 31, 1999. The
General Target Price and the TR Target Price will be equitably adjusted by the
Committee in the event of stock splits, dividends or combinations and other
corporate transactions affecting the Company's outstanding common stock. These
options were granted at fair market value on the date of grant.
In May 1995, the Committee voted to accelerate the exercisability of the
special stock options granted to each of the Company's officers in 1991 so that
all of such options became exercisable immediately. This decision was based on
the fact that the Company had achieved by the end of 1994 substantially all of
the Company's financial goals for 1995 and that the Company's performance
through April 1995 indicated that the Company's financial goals originally set
for 1995 would have been met absent the creation of the Tissue Repair Division.
By the Compensation Committee,
Charles L. Cooney, Chairman
Constantine E. Anagnostopoulos
Henry R. Lewis
-13-
<PAGE> 16
<TABLE>
The following tables set forth certain compensation information for the
Chief Executive Officer of Genzyme and each of the four other most highly
compensated executive officers of Genzyme.
SUMMARY COMPENSATION TABLE
<CAPTION> LONG-TERM
COMPENSATION
AWARDS
------ ALL
ANNUAL OTHER
COMPENSATION Options(#) COMPENSATION
------------ ---------- ------------
General
Name and Principal Division
Position Year Salary($) Bonus($) Stock TR Stock GTC ($)(1)
-------- ---- --------- -------- ----- -------- --- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Henri A. Termeer 1995 549,039 450,000 50,910 78,055 10,000 15,234
Chief Executive Officer 1994 499,231 387,500 60,000 66,000 --- 14,640
1993 459,462 225,000 105,000 --- --- 14,388
Geoffrey F. Cox 1995 197,654 133,000 18,164 27,322 --- 1,875
Senior Vice President, 1994 179,808 100,000 18,500 15,000 --- 1,875
Operations 1993 167,846 40,000 33,500 --- --- 2,123
Gregory D. Phelps 1995 212,365 138,000 15,614 34,972 --- 1,875
Senior Vice President 1994 179,712 100,000 18,500 37,500 2,000 1,875
1993 164,846 46,000 33,500 --- 2,000 13,568
Alan E. Smith 1995 225,539 100,000 22,709 18,433 --- 1,875
Senior Vice President, 1994 201,788 81,500 18,500 15,000 4,000 1,875
Research 1993 190,831 50,000 33,500 --- 2,000 2,249
G. Jan van Heek 1995 209,000 102,500 18,164 27,322 --- ---
Vice President 1994 190,000 75,000 18,500 15,000 --- ---
1993 174,000 35,000 28,000 --- ---
- ---------------
<FN>
(1) The reported amounts consist of employer contributions under the Genzyme Corporation Retirement
Savings Plan, a 401(k) plan. For Mr. Termeer, the reported amounts also include insurance premiums
of $13,359, $12,765 and $12,139 paid by Genzyme on his behalf in 1995, 1994 and 1993, respectively,
for life and disability insurance benefits. For Mr. Phelps, the reported amount for 1993 also
includes $11,508 for reimbursement of relocation expenses.
</TABLE>
-14-
<PAGE> 17
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
-----------------
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of Stock
Securities Options Exercise or Price Appreciation for Option Term
Underlying Granted to Base Price ----------------------------------
Options Employees in ($/Share) Expiration
Name Granted(#)(1) Fiscal 1995 (1) Date 0%($) 5%($)(2) 10%($)(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C><C> <C>
Henri A. Termeer
Genzyme (TR) 22,500 1.4 6.00 5/18/2005 0 84,901 215,155
Genzyme (TR) 55,555 3.5 17.50 12/15/2005 0 611,419 1,549,456
Genzyme (General) 22,500 0.4 38.875 5/18/2005 0 550,086 1,394,027
Genzyme (General) 28,410 0.5 56.00 12/15/2005 0 907,992 2,388,204
Geoffrey F. Cox
Genzyme (TR) 5,100 0.9 6.00 5/18/2005 0 19,244 48,769
Genzyme (TR) 22,222 1.4 17.50 12/15/2005 0 244,568 619,783
Genzyme (General) 6,800 0.1 38.875 5/18/2005 0 166,248 421,306
Genzyme (General) 11,364 0.2 56.00 12/15/2005 0 363,197 955,282
Gregory D. Phelps
Genzyme (TR) 12,750 2.4 6.00 5/18/2005 0 48,110 121,921
Genzyme (TR) 22,222 1.4 17.50 12/15/2005 0 244,568 619,783
Genzyme (General) 4,250 0.1 38.875 5/18/2005 0 103,905 263,316
Genzyme (General) 11,364 0.2 56.00 12/15/2005 0 363,197 955,282
Alan E. Smith
Genzyme (TR) 5,100 0.9 6.00 5/18/2005 0 19,244 48,769
Genzyme (TR) 13,333 0.8 17.50 12/15/2005 0 146,738 371,864
Genzyme (General) 6,800 0.1 38.875 5/18/2005 0 166,248 421,306
Genzyme (General) 15,909 0.3 56.00 12/15/2005 0 508,457 1,337,344
G. Jan van Heek
Genzyme (TR) 5,100 0.9 6.00 5/18/2005 0 19,244 48,769
Genzyme (TR) 22,222 1.4 17.50 12/15/2005 0 244,568 619,783
Genzyme (General) 6,800 0.1 38.875 5/18/2005 0 166,248 421,306
Genzyme (General) 11,364 0.2 56.00 12/15/2005 0 363,197 955,282
All Genzyme Stockholders
Genzyme (TR) -- -- 6.00 -- 0 46,792,628 118,095,679
Genzyme (TR) -- -- 17.50 -- 0 136,540,392 344,507,626
Genzyme (General) -- -- 38.875 -- 0 834,010,231 2,098,236,949
Genzyme *General) -- -- 56.00 -- 0 1,195,121,078 3,016,257,959
- ---------------
<FN>
(1) The TR Stock and General Division Stock options shown on the first and third lines for each officer were
granted on May 18, 1995, were exercisable with respect to 20% of such shares on the date of grant, will
become exercisable with respect to an additional 20% of such shares on each of the next four anniversaries
of the grant date, and were granted at fair market value on the date of grant. The TR Stock and General
Division Stock options shown on the second and fourth lines for each officer were granted on December 15,
1995. These options will become exercisable in full on June 30, 2005, but may be accelerated, separately
with respect to each class of common stock, at the discretion of the Compensation Committee if the average
closing price of shares of the General Division Stock for any period of ninety (90) consecutive trading days
during the Measurement Period (as defined below) is equal to or greater than $100.00 per share (the "General
Target Price") or if the average closing price of shares of the TR Stock for any period of ninety (90)
consecutive trading days during the Measurement Period is equal to or greater than $40.00 per share (the
"TR Target Price"). The "Measurement Period" will be from January 1, 1998 through and including December 31,
1998 if the average closing price for General Division Stock for the 90-day period starting 45 calendar days
prior to December 31, 1996 and ending 45 calendar days after such date is greater than or equal to $67.26
</TABLE>
-15-
<PAGE> 18
per share plus the closing price of .136 share of TR Stock over such period,
and otherwise the Measurement Period will be from April 1, 1998 through and
including March 31, 1999. The General Target Price and the TR Target Price will
be equitably adjusted by the Compensation Committee in the event of stock
splits, dividends or combinations and other corporate transactions affecting
the Company's outstanding common stock. These options were granted at fair
market value on the date of grant.
(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and, therefore,
are not intended to forecast possible future appreciation, if any, in the price
of the underlying TR Stock or General Division Stock. No gain to the optionees
is possible without an increase in the price of the underlying stock, which will
benefit all shareholders proportionately. In order to realize the potential
values set forth in the 5% and 10% columns of this table, the trading price of
General Division Stock and TR Stock would have to be approximately 63% and 159%
above the respective exercise prices for each option, or approximately $9.78 and
$15.54 for the TR Stock options with a $6.00 exercise price and $28.53 and
$45.33 for the TR Stock options with a $17.50 exercise price, or approximately
$63.37 and $100.69 for the General Division Stock options with a $38.875
exercise price and $91.28 and $145.04 for the General Division Stock options
with a $56.00 exercise price. The amounts shown for all Genzyme stockholders
reflect the potential value to all stockholders if the TR Stock or the General
Division Stock appreciates at the rates shown over the term of the options,
assuming a purchase in 1995 at the option exercise prices shown.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Securities Values of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Shares December 31, 1995(#) December 31, 1995($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized(#) Unexercisable Unexercisable(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Henri A. Termeer
Genzyme (General) -- -- 425,750/177,410 $18,693,739/4,776,251
Genzyme (TR) -- -- 75,093/129,496 882,188/790,664
Geoffrey F. Cox
Genzyme (General) 32,550 1,431,949 73,493/58,671 $ 2,797,627/1,544,527
Genzyme (TR) -- -- 17,429/40,956 200,392/200,338
Gregory D. Phelps
Genzyme (General) -- -- 69,483/56,631 $ 1,309,811/1,496,587
Genzyme (TR) -- -- 26,811/60,576 268,715/410,961
Alan E. Smith
Genzyme (General) 20,350 894,595 68,493/63,216 $ 2,485,805/1,571,042
Genzyme (TR) -- -- 17,518/31,738 206,147/197,581
G. Jan van Heek
Genzyme (General) -- -- 26,493/55,171 $ 792,204/1,471,422
Genzyme (TR) -- -- 10,412/18,260 111,676/196,241
- ---------------------
<FN>
(1) Based on the difference between the option exercise price and the closing price of the
underlying common stock on December 29, 1995, which closing price was $62.375 in the case of
General Division Stock and $15.875 in the case of TR Stock.
</TABLE>
-16-
<PAGE> 19
EXECUTIVE EMPLOYMENT AGREEMENTS
Henri A. Termeer, President and Chief Executive Officer of Genzyme, has an
employment agreement with Genzyme that renews automatically each January 1 for
an additional one year period, unless prior written notice of nonrenewal is
given. The agreement provided for an initial annual base salary in 1990 of
$300,000, subject to increase in subsequent years as determined by the Board of
Directors or Compensation Committee, as well as certain life and disability
insurance benefits. The agreement entitles Mr. Termeer to participate in
Genzyme's cash bonus plan and in any equity incentive plans established by
Genzyme. In addition, the agreement provides for a lump sum payment of two times
annual salary and bonus and full vesting of all rights and options (other than
certain performance options) under stock or other equity incentive plans in the
event that Mr. Termeer's employment is terminated by Genzyme without cause (as
defined). If Mr. Termeer's employment is terminated by Genzyme without cause or
by Mr. Termeer for good reason (as defined) following a change in control of
Genzyme, Genzyme will make a lump sum severance payment to him of three times
annual salary and bonus. Upon such termination, the agreement also provides for
(i) a cash payment equal to the additional retirement benefit that would have
been earned under any retirement plan of Genzyme if employment had continued for
three years, (ii) continuation of his life, accident and health insurance
coverage for three years, except to the extent comparable benefits are provided
by a subsequent employer and (iii) in certain circumstances, legal costs and
relocation expenses associated with such termination. The agreement contains
customary confidentiality, non-competition and ownership of inventions
provisions.
EXECUTIVE SEVERANCE AGREEMENTS
Genzyme has Executive Severance Agreements with its executive officers
other than Mr. Termeer, pursuant to which payments will be made under certain
circumstances following a change in control of the Company. The Agreements are
automatically renewed for successive one year terms each January 1 unless prior
written notice of nonrenewal is given. These agreements provide that in the
event the officer's employment is terminated by Genzyme without cause or by the
officer for good reason following a change in control, Genzyme will make a lump
sum severance payment to the officer of two times (in the case of David J.
McLachlan, Genzyme's Chief Financial Officer, three times) annual salary and
bonus. Upon such termination, the Agreements also provide for (i) a cash payment
equal to the additional retirement benefit which would have been earned under
Genzyme's retirement plans if employment had continued for two years (in the
case of Mr. McLachlan, three years) following the date of termination, (ii)
participation in the life, accident and health insurance plans of Genzyme for
such period except to the extent such benefits are provided by a subsequent
employer and (iii) in certain circumstances, legal costs and relocation expenses
associated with such termination.
COMPENSATION FROM THIRD PARTIES
Peter Wirth, Senior Vice President and General Counsel of the Company, is a
partner of Palmer & Dodge, outside counsel to Genzyme, Neozyme II Corporation
("Neozyme II") and GTC. Mr. Wirth participates as a partner of Palmer & Dodge in
revenues for legal services rendered to Genzyme, Neozyme II and GTC.
-17
<PAGE> 20
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Cooney has provided consulting services to Genzyme since 1983. Dr.
Cooney received $30,000 in 1995 and will receive $30,000 in 1996 for a
minimum of 20 days per year of consulting services.
PROPOSALS TO AMEND THE 1990 EQUITY INCENTIVE PLAN
GENERAL
The purpose of the Genzyme Corporation 1990 Equity Incentive Plan (the
"Equity Plan") is to attract and retain key employees and consultants of the
Company, to provide an incentive for them to achieve long-range performance
goals, and to enable them to participate in the long-term growth of the Company.
The Equity Plan provides for the grant of stock options (incentive and
nonstatutory), stock appreciation rights, performance shares, restricted stock
and stock units (the "Awards") to employees and consultants of the Company and
its affiliates ("Eligible Persons").
Currently, Awards may be made under the Equity Plan for up to 7,600,000
shares of General Division Stock and up to 2,000,000 shares of TR Stock, subject
to adjustment for stock splits, stock dividends and certain transactions
affecting the Company's capital stock. In addition, shares may be issued under
the Equity Plan through the assumption or substitution of outstanding grants
from an acquired company without reducing the number of shares available for
award under the Equity Plan.
As of March 29, 1996, approximately 2,365 employees were eligible to
participate in the Equity Plan. The closing price of the Company's General
Division Stock and TR Stock as reported by the Nasdaq National Market System on
March 29, 1996 was $55.00 and $16.375, respectively.
ADMINISTRATION AND ELIGIBILITY
Awards under the Equity Plan are granted at the discretion of the
Compensation Committee which determines the recipients and establishes the terms
and conditions of each award, including the exercise price, the form of payment
of the exercise price, the number of shares subject to options or other equity
rights and the time at which such options become exercisable. The exercise price
of any incentive stock option or non-statutory stock option granted under the
Equity Plan may not be less than the fair market value of the General Division
Stock or TR Stock, as the case may be, on the date of grant.
The Compensation Committee has adopted standards for the number of options
that may be awarded to all employees other than executive officers upon joining
the Company (the "New Hire Grant Matrix") and to qualified employees other than
executive officers on an annual basis (the "Annual Grant Matrix"). Awards made
under the New Hire Grant Matrix are based on the salary grade of the employee at
his or her date of hire and generally increase commensurate with the level of
responsibility associated with the salary grade. Awards under the Annual Grant
Matrix are based upon an assessment of an employee's performance during the
prior year. In order to qualify to receive an annual award, an employee's
performance must be rated as having "fully met expectations" for his or her
position by the Senior Vice President responsible for the division to which the
employee is assigned. The Compensation Committee has delegated to the Senior
Vice President, Human Resources, the power to administer the standards and make
awards in amounts consistent with the standards and the recommendations provided
by the Senior Vice Presidents.
The standards may be changed at any time by the Compensation Committee. In
addition, the Committee periodically reviews the standards to determine whether
the levels of awards appropriately reflect the growth of the Company and the
-18-
<PAGE> 21
value of its common stock. As a result of such reviews, the standards have been
adjusted in each of the last three years to reduce the number of shares awarded
at each salary grade to levels commensurate with the Company's growth and the
increases in the value of its common stock.
As of March 29, 1996, options to purchase an aggregate of 7,513,358 shares
of General Division Stock and 1,776,467 shares of TR Stock had been granted
under the Equity Plan. Of the foregoing, options to purchase an aggregate of
2,484,036 shares of General Division Stock and 922,246 shares of TR Stock had
been granted to current executive officers and options to purchase an aggregate
of 5,029,322 shares of General Division Stock and 854,221 shares of TR Stock had
been granted to all other employees. After taking into account shares available
as a result of cancellation of options granted under the Equity Plan, 128,027
shares of General Division Stock and 202,905 shares of TR Stock remain available
for Awards under the Equity Plan. No stock appreciation rights, performance
shares, restricted stock, stock units or other stock-based awards have been
granted under the Equity Plan.
PROPOSED AMENDMENTS TO THE EQUITY PLAN
The Board of Directors has voted, subject in each case to the approval of
the stockholders, to increase the aggregate number of shares of General Division
Stock that may be subject to grants under the Equity Plan from 7,600,000 to
9,900,000 and the aggregate number of shares of TR Stock that may be subject to
grants under the Equity Plan from 2,000,000 to 3,300,000, subject to adjustment
for stock splits, stock dividends and certain transactions affecting the
Company's capital stock. The Company believes that this increase is necessary
and appropriate for the following reasons:
- - It remains the policy of the Company to grant stock options to all
employees, not just executive officers, on their hire date and annually
thereafter to all employees who are rated as having "fully met
expectations." The Company believes that this policy is a critical factor
in its ability to attract and retain qualified employees since a majority
of biotechnology companies have similar policies. Moreover, the Company
believes that this policy has had a beneficial effect on maintaining its
employee turnover rate of 7% over the past four years as compared to an
industry average of 20%.
- - Since May 1995, the last time the stockholders approved an increase in the
number of shares of General Division Stock available under the Equity Plan,
the number of people employed by the Company has grown by 15%. In addition,
the number of people employed by the Company has increased 29% since
December 1994, the last time the stockholders approved an increase in the
number of shares of TR Stock available under the Equity Plan.
- - The Company's own analysis indicates that the value of the regular annual
stock options granted to its five most highly compensated executives in
1995 was below the average of similar grants reported for 1994 by the 10
largest biotechnology companies. In addition, the value of the regular
annual stock options granted to the Company's Senior Vice Presidents in
1995 ranked approximately in the 45th percentile of the 27 largest
biotechnology companies. The Company has also granted special stock
options to its executive officers that are tied specifically to the
Company's performance. Historically, these performance objectives have
been based on achieving specific revenue, profitability or stock price
goals within relatively short periods of time, all of which are consistent
with increasing shareholder value.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO STOCK OPTIONS
Incentive Stock Options. An optionee does not realize taxable income upon
the grant or exercise of an incentive stock option ("ISO") under the Equity
Plan.
If no disposition of shares issued to an optionee pursuant to the exercise
of an ISO is made by the optionee within two years from the date of grant or
within one year from the date of exercise, then (a) upon sale of such shares,
any amount
-19-
<PAGE> 22
realized in excess of the option price (the amount paid for the shares) is
taxed to the optionee as long-term capital gain and any loss sustained will be
a long-term capital loss and (b) no deduction is allowed to the Company for
Federal income tax purposes. The exercise of ISOs gives rise to an adjustment
in computing alternative minimum taxable income that may result in alternative
minimum tax liability for the optionee.
If shares acquired upon the exercise of an ISO are disposed of prior to the
expiration of the two-year and one-year holding periods described above (a
"disqualifying disposition") then (a) the optionee realizes ordinary income in
the year of disposition in an amount equal to the excess (if any) of the fair
market value of the shares at exercise (or, if less, the amount realized on a
sale of such shares) over the option price thereof and (b) the Company is
entitled to deduct such amount. Any further gain realized is taxed as a
short-term or long-term capital gain and does not result in any deduction to the
Company. A disqualifying disposition in the year of exercise will generally
avoid the alternative minimum tax consequences of the exercise of an ISO.
Nonstatutory Stock Options. No income is realized by the optionee at the
time a nonstatutory option is granted. Upon exercise, (a) ordinary income is
realized by the optionee in an amount equal to the difference between the option
price and the fair market value of the shares on the date of exercise and (b)
the Company receives a tax deduction for the same amount. Upon disposition of
the shares, appreciation or depreciation after the date of exercise is treated
as a short-term or long-term capital gain or loss and will not result in any
deduction by the Company.
VOTES REQUIRED
The affirmative vote of the holders of a majority in interest of the
General Division Stock and TR Stock present, or represented, and entitled to
vote at the meeting is required to approve the two proposed amendments to the
Equity Plan. Broker non-votes will not be counted as present or represented for
this purpose. Abstentions will be counted as present and entitled to vote and,
accordingly, will have the effect of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THESE PROPOSALS
---
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<PAGE> 23
PROPOSAL TO AMEND THE 1988 DIRECTOR STOCK OPTION PLAN
GENERAL
The purpose of the Genzyme 1988 Director Stock Option Plan (the "Director
Plan") is to attract and retain qualified persons, who are not also officers or
employees of Genzyme, to serve as directors of Genzyme and to encourage stock
ownership in Genzyme by such directors so as to provide additional incentives to
promote the success of Genzyme. The Director Plan authorizes the grant of
nonstatutory stock options for the purchase of a maximum of 100,000 shares of
General Division Stock and 70,000 shares of TR Stock (subject in each case to
adjustment for stock splits and similar capital changes) to Eligible Directors
as defined below. As of the date hereof, options to purchase an aggregate of
80,800 shares of General Division Stock and 49,052 shares of TR Stock had been
granted under the Director Plan.
All directors of Genzyme who are not employees of Genzyme ("Eligible
Directors") are eligible to participate in the Director Plan, unless such
director irrevocably elects not to participate. Currently, six of Genzyme's
seven directors are Eligible Directors.
For a description of the Director Plan, see "Election of Directors-Director
Compensation."
DESCRIPTION OF AMENDMENT TO DIRECTOR PLAN
The Board of Directors has voted, subject to the approval of the
stockholders, to increase the size of annual grants to Directors under the
Director Plan. Under the Director Plan as amended, upon election at an annual
meeting of the stockholders, Eligible Directors would be awarded, for each year
of the term of office to which the director is elected, (i) an option to
purchase 2,000 shares of General Division Stock and (ii) an option to purchase a
number of shares of TR Stock equal to 500 times a fraction, the numerator of
which is the fair market value of General Division Stock and the denominator of
which is the fair market value of TR Stock. Thus, an Eligible Director would
receive, for each year of the term of office to which the director is elected,
an option to purchase an amount of TR Stock with a market value equal to 500
shares of General Division Stock.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO DIRECTOR PLAN
Options granted under the Director Plan are nonstatutory stock options. No
income is realized by the director at the time a nonstatutory option is granted.
Upon exercise, (a) ordinary income is realized by the director in an amount
equal to the difference between the option price and the fair market value of
the shares on the date of exercise and (b) Genzyme receives a tax deduction for
the same amount. Upon disposition of the shares, appreciation or depreciation
after the date of exercise is treated as a short-term or long-term capital gain
or loss and will not result in any deduction by Genzyme.
VOTE REQUIRED
The affirmative vote of the holders of a majority in interest of General
Division Stock and TR Stock present, or represented, and entitled to vote at the
meeting is required to approve the proposed amendment to the Director Plan.
Broker non-votes will not be counted as present or represented for this purpose.
Abstentions will be counted as present and entitled to vote and, accordingly,
will have the effect of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
---
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<PAGE> 24
PROPOSAL TO ADOPT THE GENZYME CORPORATION
DIRECTORS' DEFERRED COMPENSATION PLAN
PLAN DESCRIPTION
On March 14, 1996, the Board of Directors of the Company adopted the
Genzyme Corporation Directors' Deferred Compensation Plan (the "Deferred
Compensation Plan"), subject to stockholder approval. The Deferred Compensation
Plan allows each member of the Genzyme Board of Directors who is not also an
officer or employee of Genzyme to defer receipt of all or a portion of the cash
compensation payable to him or her as a director of Genzyme. See "Election of
Directors - Director Compensation - Director Fees." Compensation may be deferred
until termination of service as a director or, subject to certain restrictions,
such other date as may be specified by the director. All of the current
directors of the Company other than Mr. Termeer are eligible to participate in
the Deferred Compensation Plan. This summary of the Deferred Compensation Plan
is qualified in its entirety by reference to the full text of the Deferred
Compensation Plan, which is attached hereto and incorporated herein by
reference.
Under the terms of the Deferred Compensation Plan, a deferral account will
be established for each participating director. The deferral account will
consist of a subaccount for amounts earning interest, which will be denominated
on a dollar basis (the "cash account"), and a subaccount for amounts invested in
hypothetical shares of General Division Stock or TR Stock, which will be
denominated on a share basis (the "stock account"). Pursuant to a deferral
agreement with the Company, each participant will indicate the percentage of
future deferrals to be invested in the cash account and the stock account and,
for deferrals to be invested in the stock account, the allocation of such
deferrals between General Division Stock and TR Stock. Amounts deferred to the
cash account will bear interest at the rate paid on 90-day Treasury bills. Such
interest will be credited on a quarterly basis and, following credit to the cash
account, will be included in the balance upon which interest is paid in
subsequent quarters. Amounts deferred to the stock account will be converted on
a quarterly basis into a number of shares of General Division Stock and/or a
number of shares of TR Stock equal to the amount of compensation which the
participant has elected to defer and invest in each such class of stock divided
by the applicable stock price for such class. The applicable stock price for
each of the General Division Stock and the TR Stock means the average of the
closing price of each such class for all trading days during the calendar
quarter preceding the conversion date as reported by the Nasdaq National Market.
Distributions from the deferral account may be paid in a lump sum or in
annual installments for a period of up to five years and will commence in the
calendar year following a participant's termination of service as a director or,
subject to certain restrictions, such other calendar year as may be specified by
the participant. Distributions will consist of (a) cash in the amount credited
to the participant's account (pro rated, if paid in installments) and (b) the
number of shares of General Division Stock and/or TR Stock credited to his or
her stock account (pro rated, if paid in installments). However, if a
distribution is made while a participant is subject to the reporting
requirements of Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act"), distributions from the stock account will be in cash. Prior to
distribution, shares credited to a participant's stock account are not
considered actual shares of common stock of Genzyme for any purpose and a
participant will have no rights as a stockholder with respect to such shares.
Genzyme has reserved 25,000 shares of General Division Stock and 100,000
shares of TR Stock to cover distributions of shares credited to stock accounts
under the Deferred Compensation Plan. In the event of any stock dividend,
split-up, combination or reclassification of shares, recapitalization or similar
capital change relating to the General Division Stock or the TR Stock, the
maximum aggregate number and kind of shares or securities of Genzyme that may be
issued under the Deferred Compensation Plan shall be appropriately adjusted by
the Board of Directors.
VOTE REQUIRED
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<PAGE> 25
The affirmative vote of the holders of a majority in interest of General
Division Stock and TR Stock present, or represented, and entitled to vote at the
meeting is required to approve the proposed amendment to the Deferred
Compensation Plan. Broker non-votes will not be counted as present or
represented for this purpose. Abstentions will be counted as present and
entitled to vote and, accordingly, will have the effect of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
---
CERTAIN TRANSACTIONS
IG. On October 2, 1995, IG Laboratories, Inc. ("IG") was merged with and
into Genzyme and became part of the diagnostic services unit of the General
Division. Prior to the merger, Henri A. Termeer was Chairman of the IG Board.
Genzyme and IG were parties to a Service Agreement under which IG paid
Genzyme a monthly fee for certain basic services provided by Genzyme, such as
treasury, data processing and laboratory support services. Genzyme and IG were
also parties to a sublease agreement pursuant to which Genzyme sublet a portion
of one of its facilities in Framingham, Massachusetts to IG and a credit
agreement pursuant to which Genzyme extended to IG an unsecured line of credit
of up to $9 million at an annual interest rate of 6.2%. Pursuant to the
services, sublease and credit agreements, Genzyme received $2.2 million from IG
in 1995. In connection with Genzyme's acquisition in October 1992 of Vivigen,
Inc., a genetic diagnostic services company, Genzyme entered into a management
agreement with IG under which IG managed all aspects of the business of Vivigen
in exchange for an annual fee in the amount of 3% of Vivigen's net service
revenues and an annual incentive fee in the event that Vivigen's annual
operating cash flow exceeded its operating cash flow for 1992. Genzyme paid an
aggregate of $3.3 million in management fees to IG in 1995.
NEOZYME II. In May 1992, Genzyme and Neozyme II completed a public offering
of 2,415,000 units, each unit consisting of one share of Neozyme II callable
common stock, one Series N warrant to purchase a share of Genzyme common stock
and one callable warrant to purchase a share of Genzyme common stock, which
resulted in gross proceeds to Neozyme II of approximately $85 million. Under the
terms of the agreements between Genzyme and Neozyme II, Genzyme licensed to
Neozyme II all technology owned or controlled and sublicensable by it that may
be useful in developing products for the treatment of cystic fibrosis and
Neozyme II agreed to utilize substantially all of the net proceeds of the
offering to engage Genzyme to perform research, development and clinical testing
of products for the treatment of cystic fibrosis. In 1995, Genzyme received an
aggregate of $22.3 million from Neozyme II under the agreements between the
companies. Mr. Termeer is Chairman of the Board of Neozyme II.
GTC. Genzyme currently holds approximately 48.2% of the outstanding common
stock of GTC, a company engaged in the application of transgenic technology to
the development and production of recombinant proteins for therapeutic and
diagnostic uses. GTC, through its wholly-owned subsidiary TSI Corporation, is
also a leading provider of preclinical efficacy and toxicology testing, in vitro
testing, and production of biologics for the pharmaceutical, biotechnology and
chemical industries. Mr. Termeer is Chairman of the Board of GTC. Genzyme and
GTC are parties to a services agreement under which GTC pays Genzyme for certain
basic services provided by Genzyme, such as treasury, data processing and
laboratory support services, a sublease agreement pursuant to which Genzyme
subleases a portion of one of its facilities in Framingham, Massachusetts to GTC
and a research and development agreement pursuant to which Genzyme and GTC each
perform certain research services for each other. During 1995, Genzyme received
approximately $2.8 million from GTC pursuant to the three agreements between the
companies and GTC received approximately $0.7 million from Genzyme pursuant to
the research and development agreement.
On February 10, 1995, GTC sold 500,000 shares of its common stock to
Genzyme at a purchase price of $8.00 per share, or an aggregate purchase price
of $4 million, pursuant to a common stock put agreement between GTC and Genzyme
entered into at the time of GTC's initial public offering.
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<PAGE> 26
On May 23, 1995, GTC entered into an agreement to acquire all of the
outstanding stock of Biodevelopment Laboratories, Inc., a privately-held
laboratory ("BDL"), in exchange for shares of GTC common stock. In connection
with this acquisition, Genzyme entered into a Securities Exchange Agreement with
GTC pursuant to which Genzyme issued 33,945 shares of Genzyme General Division
Stock to BDL stockholders in exchange for 475,467 shares of GTC common stock on
July 3, 1995.
On June 8, 1995, GTC sold 1,333,333 shares of its common stock to Genzyme
in exchange for the cancellation of $3,999,999 of GTC's indebtedness under a
line of credit and term loan agreement (the "GTC Loan Agreement") entered into
in July 1994. The largest amount outstanding under the GTC Loan Agreement during
the fiscal year ended December 31, 1995 was $6.0 million. The GTC Loan Agreement
was terminated in December 1995 and replaced with $1.0 million of bank financing
which is guaranteed by Genzyme. In exchange for this guaranty, Genzyme received
a warrant to purchase 145,000 shares of GTC Common Stock at a price of $2.4375
per share.
On March 29, 1996, Genzyme and GTC entered into a Convertible Debt and
Development Funding Agreement under which (i) Genzyme has made available to GTC
a $10 million credit line of 7% debt payable on March 31, 1998 and convertible,
at the option of Genzyme and, in certain circumstances, GTC, into shares of GTC
Common Stock, (ii) Genzyme has agreed to fund the development costs associated
with transgenic recombinant antithrombin III ("ATIII") and (iii) in exchange for
funding such development costs and for making available the credit line, Genzyme
has received the right to co-market ATIII with GTC throughout the world, other
than Asia.
SECURITIES EXCHANGE ACT REPORTING
The Company's executive officers and directors are required under Section
16(a) of the Exchange Act to file reports of ownership of Company securities and
changes in ownership with the Securities and Exchange Commission. Copies of
those reports must also be furnished to the Company.
Based solely on a review of the copies of reports furnished to the Company
and written representations that no other reports were required, the Company
believes that during 1995 the executive officers and directors of the Company
complied with all applicable Section 16(a) filing requirements, except that
Messrs. McLachlan and Rasmussen, executive officers of the Company, reported on
May 11, 1995 the sale of shares of General Division Stock purchased under the
Company's Employee Stock Purchase Plan, the reports for which were due on April
10, 1995.
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<PAGE> 27
INFORMATION CONCERNING AUDITORS
The firm of Coopers & Lybrand L.L.P., independent accountants, audited the
Company's financial statements for the years ending December 31, 1995, 1994 and
1993. The Board of Directors has appointed Coopers & Lybrand L.L.P. to serve as
the Company's auditors for its fiscal year ending December 31, 1996.
Representatives of Coopers & Lybrand L.L.P. are expected to attend the annual
meeting to respond to appropriate questions and will have the opportunity to
make a statement if they desire.
DEADLINE FOR STOCKHOLDER PROPOSALS
In order for a stockholder proposal to be considered for inclusion in the
Company's proxy materials for the 1997 annual meeting, it must be received by
the Company at One Kendall Square, Cambridge, Massachusetts 02139, Attention:
David J. McLachlan, no later than December 13, 1996.
ADVANCE NOTICE PROVISIONS FOR
STOCKHOLDER PROPOSALS AND NOMINATIONS
The By-laws of the Company provide that in order for a stockholder to bring
business before or propose director nominations at an annual meeting, the
stockholder must give written notice to the Clerk of the Company not less than
50 days nor more than 75 days prior to the meeting. The notice must contain
specified information about the proposed business or each nominee and the
stockholder making the proposal or nomination. If the annual meeting is
scheduled for a date other than the third Thursday in May and notice thereof is
mailed to stockholders or publicly disclosed less than 65 days in advance, the
notice given by the stockholder must be received not later than the 15th day
following the day on which the notice of such annual meeting date was mailed or
public disclosure made, whichever first occurs.
EXPENSES OF SOLICITATION
The Company will bear the cost of the solicitation of proxies on behalf of
the Board of Directors, including the charges and expenses of brokerage firms
and others of forwarding solicitation material to beneficial owners of stock. In
addition to use of the mails, proxies may be solicited by officers and employees
of the Company in person or by telephone. Genzyme has retained a professional
proxy solicitation firm to assist in the solicitation of proxies at a cost that
Genzyme anticipates will not exceed $12,000.
OTHER MATTERS
The Board of Directors does not know of any business to come before the
meeting other than the matters described in the notice. If other business is
properly presented for consideration at the meeting, the enclosed proxy
authorizes the persons named therein to vote the shares in their discretion.
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<PAGE> 28
APPENDIX A
Adopted by directors on March 14, 1996
GENZYME CORPORATION DIRECTORS' DEFERRED
COMPENSATION PLAN
ARTICLE I
---------
GENERAL
-------
1.1 ESTABLISHMENT OF PLAN. Genzyme Corporation ("Genzyme") hereby
establishes the Genzyme Directors' Deferred Compensation Plan (the "plan"),
effective as of May 16, 1996, to allow each member of the Genzyme Board of
Directors who is not also an officer or employee of Genzyme to defer receipt of
all or a portion of the cash compensation payable to him or her as a director of
Genzyme until his or her termination of service as a director or, subject to
requirements set forth in Section 3.1, such other date as may be specified by
him or her.
1.2 NO RIGHT TO CORPORATE ASSETS. This plan is unfunded and Genzyme will
not be required to set aside, segregate, or deposit any funds or assets of any
kind to meet its obligations hereunder. Nothing in this plan will give a
participant, a participant's beneficiary or any other person any equity or other
interest in the assets of Genzyme, or create a trust of any kind or a fiduciary
relationship of any kind between Genzyme and any such person. Any rights that a
participant, beneficiary or other person may have under this plan will be solely
those of a general unsecured creditor of Genzyme.
1.3 LIMITATION ON RIGHTS CREATED BY PLAN. Nothing in this plan will give a
participant any right to continue as a director of Genzyme.
1.4 NONALIENATION OF BENEFITS. The rights and benefits of a participant in
this plan are personal to the participant. No interest, right or claim under
this plan and no distribution therefrom will be assignable, transferable or
subject to sale, mortgage, pledge, hypothecation, anticipation, garnishment,
attachment, execution or levy, except by designation of beneficiaries as
provided in Section 3.6.
1.5 BINDING EFFECT OF PLAN. This plan will be binding upon and inure to the
benefit of participants and designated beneficiaries and their heirs, executors
and administrators, and to the benefit of Genzyme and its assigns and successors
in interest.
1.6 ADMINISTRATION. This plan will be administered by the Clerk of Genzyme
who will have sole responsibility for its interpretation.
1.7 INTERPRETATION. This plan will be construed, enforced and administered
according to the laws of the Commonwealth of Massachusetts.
ARTICLE II
----------
DEFERRAL OF COMPENSATION
------------------------
2.1 DEFERRAL AGREEMENT. Any active member of the Board of Directors of
Genzyme who is not an officer or employee of Genzyme or its subsidiaries (an
"outside director") is eligible to participate in this plan. An outside director
may participate in the plan by executing an agreement before the first day of
any calendar quarter in which such agreement will take effect authorizing
Genzyme to defer all or a portion of his
<PAGE> 29
or her compensation as director (the "deferral agreement"). A deferral
agreement will remain in effect for each succeeding calendar quarter unless the
participant files a written revocation or superseding deferral agreement with
the Clerk. A deferral agreement for any particular quarter is irrevocable after
the last day of the immediately preceding calendar quarter.
2.2 AMOUNT OF DEFERRAL. Each participant may elect in his or her deferral
agreement to defer 25 percent, 50 percent, 75 percent or 100 percent of the
total cash compensation paid to the participant as an outside director of
Genzyme.
2.3 DEFERRAL ACCOUNT. For bookkeeping purposes only, the Clerk will
establish and maintain an account (the "deferral account") for each participant
which documents the compensation deferred by the participant, earnings credited
to the account and payments from the account. The deferral account will consist
of a subaccount for amounts earning interest, which will be denominated on a
dollar basis (the "cash account"), and a subaccount for amounts invested in
hypothetical shares of Genzyme General Division Common Stock, $0.01 par value
("General Stock"), or Genzyme Tissue Repair Division Common Stock, $0.01 par
value ("TR Stock"), which will be denominated on a share basis (the "stock
account"). Each participant will indicate in his or her deferral agreement the
percentage of future deferrals to be invested in the cash account and the stock
account and, for deferrals to be invested in the stock account, the allocation
of such deferrals between General Stock and TR Stock. Amounts may not be
transferred between the cash account and the stock account.
2.4 CASH ACCOUNT. As of the first day of each calendar quarter, the Clerk
will credit to the participant's cash account an amount equal to the amount of
compensation otherwise payable to the participant in the preceding calendar
quarter which the participant has elected to defer and invest in the cash
account. As of the last day of each calendar quarter, the Clerk will credit
interest on the balance in the cash account on that date at the rate paid on
90-day Treasury bills hypothetically purchased on the first day of such calendar
quarter. For a participant receiving installment payments, interest will be
credited on the balance from time to time remaining in the cash account until
the account has been completely paid.
2.5 STOCK ACCOUNT. As of the first day of each calendar quarter, the Clerk
will credit to the participant's stock account a number of shares of General
Stock and/or a number of shares of TR Stock, in each case equal to the amount of
compensation otherwise payable to the participant in the preceding calendar
quarter which the participant has elected to defer and invest in each such class
of common stock divided by the applicable stock price for such class of common
stock. The applicable stock price for each of the General Stock and the TR Stock
shall mean the average of the closing price of each such class of stock for all
trading days during the applicable calendar quarter as reported by the Nasdaq
National Market. As of the date of payment of any cash dividend on either class
of common stock, the Clerk will credit to the stock account a number of shares
of the class of common stock upon which such dividend was declared equal to (i)
the cash dividend per share times the number of shares of such class credited to
the stock account as of the dividend record date divided by (ii) the closing
price for such class of common stock on the date of payment of the dividend. As
of the date of payment of any stock dividend on either class of common stock,
the Clerk will credit to the stock account a number of shares equal to the stock
dividend declared times the number of shares of the class of common stock upon
which such dividend was declared credited to the stock account as of the
dividend record date. In the event of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, exchange of shares or
similar change affecting either class of common stock, appropriate adjustment
will be made in the number and/or kind of shares credited to the stock account.
The stock account is maintained for bookkeeping purposes only. Prior to
distribution to a participant under Section 3.3 or 3.4, shares credited to the
stock account are not considered actual shares of common stock of Genzyme for
any purpose and a participant will have no rights as a stockholder with respect
to such shares. Shares will include fractional shares computed to three decimal
places.
2
<PAGE> 30
2.6 SHARES SUBJECT TO THE PLAN. The aggregate number of shares of General
Stock and TR Stock which may be issued under the plan is 25,000 shares and
100,000 shares, respectively. In the event of any stock dividend, split-up,
combination or reclassification of shares, recapitalization or similar capital
change relating to the General Stock or the TR Stock, the maximum aggregate
number and kind of shares or securities of Genzyme that may be issued under the
plan shall be appropriately adjusted by the Genzyme Board of Directors (whose
determination shall be conclusive).
ARTICLE III
-----------
PAYMENT OF DEFERRED COMPENSATION
--------------------------------
3.1 COMMENCEMENT OF PAYMENT. Each participant will elect in his or her
deferral agreement to have payments commence in the calendar year following his
or her termination of service as a director or such other calendar year as may
be specified; provided, however, that if a participant elects to have payments
commence in a calendar year other than the calendar year following his or her
termination of service as a director, the earliest calendar year that a
participant may elect to have payments commence shall be the second calendar
year following the date of such election. For example, a deferral agreement
executed in 1996 may not specify a payment commencement date earlier than 1998.
Such election will be irrevocable.
3.2 ELECTION OF FORM OF PAYMENT. Each participant will elect in his or her
deferral agreement to have his or her deferral account paid in either a lump sum
or in annual installments for a period specified by the participant, which
period may not exceed five years.
3.3 LUMP SUM PAYMENTS. A participant who elects to have his or her deferral
account paid in a lump sum will receive the lump sum payment on or before March
1 of the year specified in the deferral agreement for commencement of payment.
The lump sum payment will consist of (a) cash in the amount credited to his or
her cash account, and (b) subject to Section 3.5, the number of shares of
General Stock and TR Stock credited to his or her stock account; provided,
however, that no fractional shares will be issued under the plan and the number
of shares issued will be rounded down to the nearest full share.
3.4 INSTALLMENT PAYMENTS. A participant who elects to have his or her
deferral account paid in annual installments will receive an installment payment
on or before March 1 of each year that installments are due commencing with the
year specified in his or her deferral agreement. Each installment payment will
consist of (a) cash in the amount credited to his or her cash account on the
date of payment divided by the number of annual installments remaining to be
paid, and (b) subject to Section 3.5, the number of shares of General Stock and
TR Stock, respectively, credited to his or her stock account divided by the
number of annual installments remaining to be paid; provided, however, that no
fractional shares will be issued under the plan and the number of shares issued
will be rounded down to the nearest full share.
3.5 LIMITATION ON STOCK DISTRIBUTIONS. If a participant would receive any
payment from his or her stock account before the end of the period during which
his or her transactions in Genzyme's equity securities are subject to reporting
under Section 16 of the Securities Act of 1933, such payments shall be made in
accordance with Section 3.3 or 3.4, as applicable, except that in lieu of
shares, the participant shall receive cash in an amount equal to the number of
shares of each class of common stock in his or her stock account times the
closing price for each class as of the trading day preceding the date of
distribution.
3.6 BENEFICIARIES. A participant may designate in his or her deferral
agreement a beneficiary or beneficiaries (which may be an entity other than a
natural person) to receive any payments to be made upon
3
<PAGE> 31
his or her death. A participant may elect to have payments to beneficiaries
paid in a lump sum or in annual installments for a period not to exceed five
years. At any time, and from time to time, a participant may change or revoke
his or her designation of beneficiary or form of payment without the consent of
any beneficiary. Any such designation, change or revocation must be made in
writing and filed with the Clerk. If the participant designates more than one
beneficiary, any payments to beneficiaries will be made in equal percentages
unless the participant designates otherwise. Any portion of a participant's
deferral account that is not disposed of by designation of beneficiary upon the
participant's death will be paid to his or her estate.
3.7 PAYMENTS ON DEATH. If a participant dies before full payment of his or
her deferral account, Genzyme will make payments to the participant's designated
beneficiary or beneficiaries, or to his or her estate, of the amount remaining
in the deceased participant's deferral account. Such payments will be in the
form designated by the participant and will commence on the first day of the
calendar quarter following the death of the participant (or as soon thereafter
as practicable) and, in the case of annual installments, will be paid on or
before March 1 of each succeeding year.
3.8 HARDSHIP DISTRIBUTIONS FROM ACCOUNTS. The Clerk may, in his discretion,
distribute a portion or all of a participant's cash account in case of the
participant's financial hardship. The Clerk will determine the date of payment
of the distribution. Hardship distributions are not permitted from a
participant's stock account.
ARTICLE IV
----------
AMENDMENT AND TERMINATION
-------------------------
4.1 AMENDMENT. Genzyme may, without the consent of any participant,
beneficiary or other person, amend the plan at any time and from time to time;
provided, however, that no amendment will reduce the amount credited to the
deferral account of any participant.
4.2 TERMINATION. Genzyme may terminate the plan at any time. Upon
termination of the plan, payments from a participant's deferral account shall be
made in the manner and at the time prescribed in Article III; provided, however,
that Genzyme may, in its discretion, distribute a participant's deferral account
in a lump sum as soon as practicable after the date the plan is terminated.
4
<PAGE> 32
APPENDIX B
Adopted by directors on March 15, 1990
Approved by shareholders on May 17, 1990
Amended by directors on March 14, 1991
Approved by shareholders on May 16, 1991
Amended by directors on March 17, 1993
Approved by shareholders on May 21, 1993
Amended and restated by directors on August 25, 1994
Approved by shareholders on December 12, 1994
Amended by directors on March 10, 1995
Approved by shareholders on May 18, 1995
Amended by directors on March 14, 1996
GENZYME CORPORATION
1990 EQUITY INCENTIVE PLAN
--------------------------
SECTION 1. PURPOSE
-------
The purpose of the Genzyme Corporation 1990 Equity Incentive Plan (the
"Plan") is to attract and retain key employees and consultants to provide an
incentive for them to assist the Company to achieve long-range performance
goals, and to enable them to participate in the long-term growth of the Company.
The Plan constitutes an amendment and restatement of the Company's 1983
Stock Option Plan, 1985 U.K. Stock Option Scheme, 1988 Officer Stock Option Plan
and 1989 Stock Option Plan (collectively, the "Prior Plans"), which are hereby
merged with and into the Plan, and the separate existence of the Prior Plans
shall terminate on the effective date of the Plan. The rights and privileges of
holders of outstanding options and rights under the Prior Plans shall not be
adversely affected by the foregoing action.
SECTION 2. DEFINITIONS
-----------
"Affiliate" means any business entity in which the Company owns
directly or indirectly 50% or more of the total combined voting power or has a
significant financial interest as determined by the Committee.
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock or Stock Unit awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means a committee of not less than three members of the
Board appointed by the Board to administer the Plan, each of whom is a
"disinterested person" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, or any successor provision.
"General Stock" means the General Division Common Stock, $0.01 par
value, of the Company.
"Company" means Genzyme Corporation.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, designated Beneficiary
shall mean the Participant's estate.
1
<PAGE> 33
"Fair Market Value" means, with respect to General Stock, TR Stock or
any other property, the fair market value of such property as determined by the
Committee in good faith or in the manner established by the Committee from time
to time.
"Incentive Stock Option" means an option to purchase shares of General
Stock or TR Stock awarded to a Participant under Section 6 which is intended to
meet the requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of
General Stock or TR Stock awarded to a Participant under Section 6 which is not
intended to be an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock
Option.
"Participant" means a person selected by the Committee to receive an
Award under the Plan.
"Performance Cycle" or "Cycle" means the period of time selected by the
Committee during which performance is measured for the purpose of determining
the extent to which an award of Performance Shares has been earned.
"Performance Shares" mean shares of General Stock or TR Stock which may
be earned by the achievement of performance goals awarded to a Participant under
Section 8.
"Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time selected by the Committee
during which an award of Restricted Stock may be forfeited to the Company.
"Restricted Stock" means shares of General Stock or TR Stock subject to
forfeiture awarded to a Participant under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess
in value of shares of General Stock or TR Stock over the exercise price awarded
to a Participant under Section 7.
"Stock Unit" means an award of General Stock or TR Stock or units that
are valued in whole or in part by reference to, or otherwise based on, the value
of General Stock or TR Stock, respectively, awarded to a Participant under
Section 10.
"TR Stock" means the Tissue Repair Division Common Stock, $0.01 par
value, of the Company.
SECTION 3. ADMINISTRATION
--------------
The Plan shall be administered by the Committee. The Committee shall
have authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing the operation of the Plan as it shall from time to time
consider advisable, and to interpret the provisions of the Plan. The Committee's
decisions shall be final and binding. To the extent permitted by applicable law,
the Committee may delegate to one or more executive officers of the Company the
power to make Awards to Participants who are not Reporting Persons and all
determinations under the Plan with respect thereto, provided that the Committee
shall fix the maximum amount of such Awards for the group and a maximum for any
one Participant.
2
<PAGE> 34
SECTION 4. ELIGIBILITY
-----------
All employees, and in the case of Awards other than Incentive Stock
Options, consultants of the Company or any Affiliate capable of contributing
significantly to the successful performance of the Company, other than a person
who has irrevocably elected not to be eligible, are eligible to be Participants
in the Plan.
SECTION 5. STOCK AVAILABLE FOR AWARDS
--------------------------
(a) Subject to adjustment under subsection (b), Awards may be made
under the Plan for up to 9,900,000 shares of General Stock (including
outstanding Awards under the Prior Plans) and up to 3,300,000 shares of TR
Stock. If any Award in respect of shares of General Stock or TR Stock expires or
is terminated unexercised or is forfeited for any reason or settled in a manner
that results in fewer shares outstanding than were initially awarded, including
without limitation the surrender of shares in payment for the Award or any tax
obligation thereon, the shares subject to such Award or so surrendered, as the
case may be, to the extent of such expiration, termination, forfeiture or
decrease, shall again be available for award under the Plan, subject, however,
in the case of Incentive Stock Options, to any limitation required under the
Code. General Stock or TR Stock issued through the assumption or substitution of
outstanding grants from an acquired company shall not reduce the shares
available for Awards under the Plan. Shares issued under the Plan may consist in
whole or in part of authorized but unissued shares or treasury shares.
(b) In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase General
Stock or TR Stock at a price substantially below fair market value, or other
similar transaction affects the General Stock or TR Stock such that an
adjustment is required in order to preserve the benefits or potential benefits
intended to be made available under the Plan, then the Committee, subject, in
the case of Incentive Stock Options, to any limitation required under the Code,
shall equitably adjust any or all of (i) the number and kind of shares in
respect of which Awards may be made under the Plan, (ii) the number and kind of
shares subject to outstanding Awards, and (iii) the award, exercise or
conversion price with respect to any of the foregoing, and if considered
appropriate, the Committee may make provision for a cash payment with respect to
an outstanding Award, provided that the number of shares subject to any Award
shall always be a whole number.
SECTION 6. STOCK OPTIONS
-------------
(a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Nonstatutory Stock Options relating to either
General Stock or TR Stock and determine the number of shares to be covered by
each Option, the option price therefor and the conditions and limitations
applicable to the exercise of the Option. The terms and conditions of Incentive
Stock Options shall be subject to and comply with Section 422 of the Code, or
any successor provision, and any regulations thereunder.
(b) The Committee shall establish the option price at the time each
Option is awarded, which price shall not be less than 100% of the Fair Market
Value of the General Stock or TR Stock, as the case may be, on the date of
award.
(c) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may specify in the applicable Award or
thereafter. The Committee may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or, to the extent permitted
by the Committee at or after the award of the Option, by delivery of a note or
shares of General Stock or TR Stock owned by the optionee, including Restricted
Stock, valued at their Fair Market Value on the date of delivery, or such other
lawful consideration as the Committee may determine.
3
<PAGE> 35
(e) The Committee may provide for the automatic award of an Option upon
the delivery of shares to the Company in payment of an Option for up to the
number of shares so delivered.
SECTION 7. STOCK APPRECIATION RIGHTS
-------------------------
(a) Subject to the provisions of the Plan, the Committee may award SARs
in tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option. SARs in tandem with an Option shall terminate to the
extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised. SARs shall have an
exercise price of not less than the Fair Market Value of the General Stock or TR
Stock, as the case may be, on the date of award, or in the case of SARs in
tandem with Options, the exercise price of the related Option.
(b) An SAR related to an Option which can only be exercised during
limited periods following a change in control of the Company, may entitle the
Participant to receive an amount based upon the highest price paid or offered
for General Stock or TR Stock, as the case may be, in any transaction relating
to the change in control or paid during the thirty-day period immediately
preceding the occurrence of the change in control in any transaction reported in
the stock market in which the General Stock or TR Stock is normally traded.
SECTION 8. PERFORMANCE SHARES
------------------
(a) Subject to the provisions of the Plan, the Committee may award
Performance Shares and determine the number of such shares for each Performance
Cycle and the duration of each Performance Cycle. There may be more than one
Performance Cycle in existence at any one time, and the duration of Performance
Cycles may differ from each other. The payment value of Performance Shares shall
be equal to the Fair Market Value of the General Stock or TR Stock, as the case
may be, on the date the Performance Shares are earned or, in the discretion of
the Committee, on the date the Committee determines that the Performance Shares
have been earned.
(b) The Committee shall establish performance goals for each Cycle, for
the purpose of determining the extent to which Performance Shares awarded for
such Cycle are earned, on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. During any Cycle, the
Committee may adjust the performance goals for such Cycle as it deems equitable
in recognition of unusual or non-recurring events affecting the Company, changes
in applicable tax laws or accounting principles, or such other factors as the
Committee may determine.
(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares which have been
earned on the basis of performance in relation to the established performance
goals. The payment values of earned Performance Shares shall be distributed to
the Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable thereafter. The Committee shall determine,
at or after the time of award, whether payment values will be settled in whole
or in part in cash or other property, including General Stock, TR Stock or
Awards.
SECTION 9. RESTRICTED STOCK
----------------
(a) Subject to the provisions of the Plan, the Committee may award
shares of Restricted Stock and determine the duration of the Restricted Period
during which, and the conditions under which, the shares may be forfeited to the
Company and the other terms and conditions of such Awards. Shares of Restricted
Stock shall be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Shares of Restricted Stock shall be evidenced in such
manner as the Committee may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and unless otherwise determined by the Committee, deposited by the
4
<PAGE> 36
Participant, together with a stock power endorsed in blank, with the Company. At
the expiration of the Restricted Period, the Company shall deliver such
certificates to the Participant or if the Participant has died, to the
Participant's Designated Beneficiary.
SECTION 10. STOCK UNITS
-----------
(a) Subject to the provisions of the Plan, the Committee may award
Stock Units subject to such terms, restrictions, conditions, performance
criteria, vesting requirements and payment rules as the Committee shall
determine.
(b) Shares of General Stock or TR Stock awarded in connection with a
Stock Unit Award shall be issued for no cash consideration or such minimum
consideration as may be required by applicable law.
SECTION 11. GENERAL PROVISIONS APPLICABLE TO AWARDS
---------------------------------------
(a) LIMITATIONS ON GRANTS OF OPTIONS AND SARS. Subject to adjustment
under Section 5(b), the number of shares subject to Options and SARs granted to
any one individual during any fiscal year may not exceed 200,000 shares of
General Stock and 300,000 shares of TR Stock.
(b) REPORTING PERSON LIMITATIONS. Notwithstanding any other provision
of the Plan, to the extent required to qualify for the exemption provided by
Rule 16b-3 under the Securities Exchange Act of 1934, and any successor
provision, (i) any General Stock, TR Stock or other equity security offered
under the Plan to a Reporting Person may not be sold for at least six months
after acquisition, except in case of death or disability and (ii) any Option,
SAR or other similar right related to an equity security, issued under the Plan
to a Reporting Person shall not be transferable other than by will or the laws
of descent and distribution, shall not be exercisable for at least six months
except in the case of death or disability, and shall be exercisable during the
Participant's lifetime only by the Participant or the Participant's guardian or
legal representative.
(c) DOCUMENTATION. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or comply with applicable tax and regulatory
laws and accounting principles.
(d) COMMITTEE DISCRETION. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type of
Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of award or at any time thereafter.
(e) SETTLEMENT. The Committee shall determine whether Awards are
settled in whole or in part in cash, General Stock, TR Stock, other securities
of the Company, Awards or other property. The Committee may permit a Participant
to defer all or any portion of a payment under the Plan, including the crediting
of interest on deferred amounts denominated in cash and dividend equivalents on
amounts denominated in General Stock or TR Stock.
(f) DIVIDENDS AND CASH AWARDS In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest, and (ii)
cash payments in lieu of or in addition to an Award.
(g) TERMINATION OF EMPLOYMENT. The Committee shall determine the effect
on an Award of the disability, death, retirement or other termination of
employment of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may receive payment of an Award or exercise rights thereunder.
5
<PAGE> 37
(h) CHANGE IN CONTROL. In order to preserve a Participant's rights
under an Award in the event of a change in control of the Company, the Committee
in its discretion may, at the time an Award is made or at any time thereafter,
take one or more of the following actions: (i) provide for the acceleration of
any time period relating to the exercise or realization of the Award, (ii)
provide for the purchase of the Award upon the Participant's request for an
amount of cash or other property that could have been received upon the exercise
or realization of the Award had the Award been currently exercisable or payable,
(iii) adjust the terms of the Award in a manner determined by the Committee to
reflect the change in control, (iv) cause the Award to be assumed, or new rights
substituted therefor, by another entity, or (v) make such other provision as the
Committee may consider equitable and in the best interests of the Company.
(i) WITHHOLDING. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date of
the event creating the tax liability. In the Committee's discretion, such tax
obligations may be paid in whole or in part in shares of General Stock or TR
Stock, including shares retained from the Award creating the tax obligation,
valued at their Fair Market Value on the date of delivery. The Company and its
Affiliates may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to the Participant.
(j) FOREIGN NATIONALS. Awards may be made to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws. In this connection, the provisions of the 1985 U.K. Stock
Option Scheme shall remain in effect to govern Awards to Participants in the
United Kingdom until otherwise determined by the Committee.
(k) AMENDMENT OF AWARD. The Committee may amend, modify or terminate
any outstanding Award, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization and converting
an Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
SECTION 12. MISCELLANEOUS
-------------
(a) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right to
be granted an Award, and the grant of an Award shall not be construed as giving
a Participant the right to continued employment. The Company expressly reserves
the right at any time to dismiss a Participant free from any liability or claim
under the Plan, except as expressly provided in the applicable Award.
(b) NO RIGHTS AS SHAREHOLDER. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a shareholder with respect to any shares of General Stock or TR Stock to be
distributed under the Plan until he or she becomes the holder thereof. A
Participant to whom General Stock or TR Stock is awarded shall be considered the
holder of the Stock at the time of the Award except as otherwise provided in the
applicable Award.
(c) EFFECTIVE DATE. Subject to the approval of the shareholders of the
Company, the Plan shall be effective on March 15, 1990. Prior to such approval,
Awards may be made under the Plan expressly subject to such approval.
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that no amendment shall be
made without shareholder approval if such approval is necessary to comply with
any applicable tax or regulatory requirement, including any requirement for
exemptive relief under Section 16(b) of the Securities Exchange Act of 1934,
or any successor provision.
(e) GOVERNING LAW. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of Massachusetts.
6
<PAGE> 38
APPENDIX C
Adopted by directors on December 15, 1988
Approved by shareholders on May 18, 1989
Amended by directors on March 17, 1993
Approved by shareholders on May 21, 1993
Amended and restated by directors on August 25, 1994
Adopted by shareholders on December 12, 1994
Amended by directors on March 14, 1996
GENZYME CORPORATION
1988 DIRECTOR STOCK OPTION PLAN
-------------------------------
This 1988 Director Stock Option Plan dated December 15, 1988 (the
"Plan") governs options to purchase General Division Common Stock, $0.01 par
value ("General Stock"), and Tissue Repair Division Common Stock, $0.01 par
value ("TR Stock"), of Genzyme Corporation (the "Company") granted on or after
the date hereof by the Company to members of the Board of Directors of the
Company who are not also officers or employees of the Company. The purpose of
the Plan is to attract and retain qualified persons to serve as Directors of the
Company and to encourage ownership of stock of the Company by such Directors so
as to provide additional incentives to promote the success of the Company.
1. ADMINISTRATION OF THE PLAN.
--------------------------
Grants of stock options under the Plan shall be automatic as provided
in Section 6. However, all questions of interpretation with respect to the Plan
and options granted under it shall be determined by a committee consisting of
all Directors of the Company who are not eligible to participate in the Plan,
and such determination shall be final and binding upon all persons having an
interest in the Plan.
2. PERSONS ELIGIBLE TO PARTICIPATE IN THE PLAN.
-------------------------------------------
Members of the Board of Directors of the Company (the "Board") who are
not also officers or employees of the Company shall be eligible to participate
in the Plan.
3. SHARES SUBJECT TO THE PLAN.
--------------------------
(a) The aggregate number of shares of General Stock and TR Stock of the
Company which may be optioned under this Plan is 100,000 shares and 70,000
shares, respectively. In the event of a stock dividend, split-up, combination or
reclassification of shares, recapitalization or other similar capital change
relating to the General Stock or the TR Stock, the maximum aggregate number and
kind of shares or securities of the Company as to which options may be granted
under this Plan and as to which options then outstanding shall be exercisable,
and the option price of such options, shall be appropriately adjusted by the
Board (whose determination shall be conclusive) so as to preserve the value of
the option.
(b) In the event of a consolidation or merger of the Company with
another corporation where the Company's stockholders do not own a majority in
interest of the surviving or resulting corporation, or the sale or exchange of
all or substantially all of the assets of the Company, or a reorganization or
liquidation of the Company, any deferred exercise period shall be automatically
accelerated and each holder of an outstanding option shall be entitled to
receive upon exercise and payment in accordance with the terms of the option
the same
<PAGE> 39
shares, securities or property as he would have been entitled to receive upon
the occurrence of such event if he had been, immediately prior to such event,
the holder of the number of shares of General Stock or TR Stock purchasable
under his or her option or, if another corporation shall be the survivor, such
corporation shall substitute therefor substantially equivalent shares,
securities or property of such other corporation; provided, however, that in
lieu of the foregoing the Board may upon written notice to each holder of an
outstanding option or right provide that such option or right shall terminate on
a date not less than 20 days after the date of such notice unless theretofore
exercised.
(c) Whenever options under this Plan lapse or terminate or otherwise
become unexercisable the shares of General Stock or TR Stock which were subject
to such options may again be subjected to options under this Plan. The Company
shall at all times while this Plan is in force reserve such number of shares of
Stock as will be sufficient to satisfy the requirements of this Plan.
4. NON-STATUTORY STOCK OPTIONS
---------------------------
All options granted under this Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
5. FORM OF OPTIONS
---------------
Options granted hereunder shall be in substantially the form of the
attached Exhibit A or in such other form as the Board may from time to time
determine.
6. GRANT OF OPTIONS AND OPTION TERMS.
---------------------------------
<TABLE>
(a) INITIAL GRANT OF GENERAL STOCK OPTIONS. Upon the original adoption
of this Plan by the Board of Directors of the Company, initial options to
purchase General Stock were automatically granted to the following Directors in
the amounts set forth opposite their respective names:
<CAPTION>
Name of Director Number of Shares
---------------- ----------------
<S> <C>
Constantine E. Anagnostopoulos 2,000
Charles L. Cooney 4,000
Eileen M. More 2,000
Henry R. Lewis 4,000
Douglas A. Berthiaume 2,000
</TABLE>
(b) INITIAL GRANT OF TR STOCK OPTIONS. Upon the effective date of the
Company's acquisition of BioSurface Technology, Inc., initial options to
purchase 5,000 shares of TR Stock shall be automatically granted to each
Director then in office who is not also an officer or employee of the Company.
(c) AUTOMATIC GRANT OF OPTIONS. At each annual meeting of the
stockholders of the Company, those Directors to be elected or re-elected at that
meeting who are eligible to receive options under the Plan shall automatically
be granted, for each year of the term of office to which they are elected,
options to purchase (i) 2,000 shares of General Stock and (i) a number of shares
of TR Stock equal to 500 times a fraction, the numerator of which is the Fair
Market Value of the General Stock and the denominator of which is the Fair
Market Value of the TR Stock. In addition, upon the election of an eligible
Director under the Plan other than at an annual meeting of stockholders (whether
by the Board of Directors or the stockholders and whether to fill a vacancy or
otherwise), such Director shall automatically be granted options to purchase the
number of shares of General Stock and TR Stock described in the preceding
sentence for each year or portion thereof of the term of office to which he or
she is elected. The "Date of Grant" for options granted under this Plan shall be
(i) the date this Plan is initially adopted by the Board of Directors for the
initial options to purchase General Stock, (ii) the effective date of the
Company's acquisition of BioSurface Technology, Inc. for the initial options to
purchase TR Stock and (iii) the date of election or re-election as a Director,
as the case may be, for all subsequent options. No options shall be granted
hereunder after ten years from the date on which this Plan was initially
approved and adopted by the Board of Directors. As used herein, "Fair Market
Value" for the General Stock and the TR Stock shall mean the last sale price for
the General Stock and the TR Stock, respectively, as reported by the National
<PAGE> 40
Association of Securities Dealers Automated Quotations National Market System on
the Date of Grant of such options.
(d) OPTION PRICE. The option price for each option granted under this
Plan shall equal to the Fair Market Value of the class of common stock with
respect to which the option is exercisable.
(e) TERM OF OPTION. The term of each option granted under this Plan
shall be ten years from the Date of Grant.
(f) PERIOD OF EXERCISE.
<TABLE>
(i) Options to purchase General Stock initially granted upon
adoption of this Plan by the Board of Directors became exercisable with respect
to the number of shares indicated below on the date of the annual meetings of
stockholders of the Company set forth opposite the number of shares if and only
if the option holder was a member of the Board of Directors of the Company at
the opening of business on that date:
<CAPTION>
Name of Director Number of Shares Annual Meeting
---------------- ---------------- --------------
<S> <C> <C>
Constantine E. Anagnostopoulous 2,000 1990
Charles L. Cooney 2,000 1989
Charles L. Cooney 2,000 1990
Eileen M. Moore 2,000 1989
Henry R. Lewis 2,000 1990
Henry R. Lewis 2,000 1991
Douglas A. Berthiaume 2,000 1989
</TABLE>
(ii) Options to purchase TR Stock initially granted upon the
effective date of the Company's acquisition of BioSurface Technology, Inc. shall
be exercisable in full on their Date of Grant.
(iii) Options granted under this Plan at an annual meeting of
stockholders shall become exercisable with respect to one-third of the total
number of shares of General Stock and TR Stock on the date of each annual
meeting of stockholders following their Date of Grant, if and only if the option
holder is a member of the Board of Directors of the Company at the opening of
business on that date (for example, if options to purchase a total of 6,000
shares of General Stock and 1,500 shares of TR Stock are granted to a Director
at the 1996 annual meeting, the options will become exercisable with respect to
2,000 shares of General Stock and 500 shares of TR Stock at each of the 1996,
1997 and 1998 annual meetings). Directors holding exercisable options under this
Plan who cease to serve as members of the Board of Directors of the Company may,
during their lifetime, exercise the rights they had under such options at the
time they ceased being a Director for the full unexpired term of such option.
Upon the death of a Director, those entitled to do so under the Director's will
or the laws of descent and distribution shall have the right, at any time within
twelve months after the date of death, to exercise in whole or in part any
rights which were available to the Director at the time of his or her death.
Options granted under the Plan shall terminate, and no rights thereunder may be
exercised, after the expiration of the applicable exercise period.
Notwithstanding the foregoing provisions of this section, no rights under any
options may be exercised after the expiration of ten years from their Date of
Grant.
(g) METHOD OF EXERCISE AND PAYMENT. Options may be exercised only by
written notice to the Company at its head office accompanied by payment of the
full option price for the shares of Stock as to which they are exercised. The
option price shall be paid in cash or by check. Upon receipt of such notice and
payment, the Company shall promptly issue and deliver to the optionee (or other
person entitled to exercise the option) a certificate or certificates for the
number of shares as to which the exercise is made.
(h) NON-TRANSFERABILITY. Options granted under this Plan shall not be
transferable by the holder thereof otherwise than by will or the laws of descent
and distribution, and shall be exercisable, during the holder's lifetime, only
by him or her.
- 3 -
<PAGE> 41
7. LIMITATION OF RIGHTS.
--------------------
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the
granting of an option or any other action taken pursuant to the Plan, shall
constitute an agreement or understanding, express or implied, that the Company
will retain an optionee as a Director for any period of time or at any
particular rate of compensation.
(b) NO STOCKHOLDERS' RIGHTS FOR OPTIONS. Directors shall have no rights
as a stockholder with respect to the shares covered by their options until the
date they exercise such options and pay the option price to the Company, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such option is exercised and paid for.
8. AMENDMENT OR TERMINATION.
------------------------
The Company's Board may amend or terminate this Plan at any time,
provided that (i) an increase of the aggregate number of shares of General Stock
or TR Stock which may be optioned under this Plan (except as permitted by
Section 2 of the Plan), (ii) material modification of the requirements as to
eligibility for participation under this Plan, and (iii) a material increase in
benefits to participants under this Plan are subject to approval by stockholders
of the Company within 12 months from the date of such amendment by the
affirmative vote of the holders of a majority of the shares of Stock of the
Company present, or represented and entitled to vote at a meeting duly held in
accordance with the laws of Massachusetts. In the event such approval is not
obtained, options granted subsequent to any such amendment shall not be entitled
to the benefit thereof, or if the amendment increases the aggregate number of
shares of the Company which may be optioned under this plan and sufficient
shares are not otherwise available under this Plan, shall be void and without
effect.
- 4 -
<PAGE> 42
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 16, 1996
GENZYME CORPORATION
General Division Common Stock
The undersigned stockholder of Genzyme Corporation (the "Company")
hereby appoints Henri A. Termeer, David J. McLachlan and Peter Wirth, and each
of them acting singly, the attorneys and proxies of the undersigned, with full
power of substitution, to vote on behalf of the undersigned all the shares of
General Division Common Stock of the Company that the undersigned is entitled
to vote at the Annual Meeting of Stockholders of the Company to be held on
May 16, 1996, and at all adjournments thereof, hereby revoking any proxy
heretofore given with respect to such shares.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 THROUGH 5. IN THEIR DISCRETION, THE PROXIES ARE
ALSO AUTHORIZED TO VOTE UPON SUCH MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
Mark Here For
PLEASE SIGN AND MAIL PROXY TODAY Address Change / /
and Note on Reverse
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
-----------
SEE REVERSE
SIDE
-----------
<PAGE> 43
<TABLE>
<S> <C>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE. FOR AGAINST ABSTAIN
FOR WITHHELD 2. Proposal to amend the Company's 1990 / / / / / /
all nominees for all nominees Equity Incentive Plan to increase the
1. Proposal to number of shares of General Division
elect directors. / / / / Common Stock covered by the Plan to
9,900,000.
NOMINEES: Constantine E. Anagnostopoulos
Robert J. Carpenter 3. Proposal to amend the Company's 1990 / / / / / /
Charles L. Cooney Equity Incentive Plan to increase the
number of shares of Tissue Repair
FOR, except vote withheld from the following nominee(s): Division Common Stock covered by the
Plan to 3,300,000.
- ------------------------------------------------------
4. Proposal to amend the / / / / / /
Company's 1988 Director Stock
Option Plan to increase the
size of annual option grants
to directors under the Plan.
5. Proposal to approve the Genzyme / / / / / /
Corporation Directors'
Deferred Compensation Plan.
Signature: Date: Signature: Date:
-------------------------- ------------- ------------------------ -------------
(if held jointly)
NOTE: Please sign exactly as name appears on stock certificate. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a partner, please sign in partnership name by
authorized person.
</TABLE>
<PAGE> 44
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 16, 1996
GENZYME CORPORATION
Tissue Repair Division Common Stock
The undersigned stockholder of Genzyme Corporation (the "Company")
hereby appoints Henri A. Termeer, David J. McLachlan and Peter Wirth, and each
of them acting singly, the attorneys and proxies of the undersigned, with full
power of substitution, to vote on behalf of the undersigned all the shares of
Tissue Repair Division Common Stock of the Company that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be held
on May 16, 1996, and at all adjournments thereof, hereby revoking any proxy
heretofore given with respect to such shares.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 THROUGH 5. IN THEIR DISCRETION, THE PROXIES ARE
ALSO AUTHORIZED TO VOTE UPON SUCH MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
Mark Here For
PLEASE SIGN AND MAIL PROXY TODAY Address Change / /
and Note on Reverse
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
-----------
SEE REVERSE
SIDE
-----------
<PAGE> 45
<TABLE>
<S> <C>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE. FOR AGAINST ABSTAIN
FOR WITHHELD 2. Proposal to amend the Company's 1990 / / / / / /
all nominees for all nominees Equity Incentive Plan to increase the
1. Proposal to number of shares of General Division
elect directors. / / / / Common Stock covered by the Plan to
9,900,000.
NOMINEES: Constantine E. Anagnostopoulos
Robert J. Carpenter 3. Proposal to amend the Company's 1990 / / / / / /
Charles L. Cooney Equity Incentive Plan to increase the
number of shares of Tissue Repair
FOR, except vote withheld from the following nominee(s): Division Common Stock covered by the
Plan to 3,300,000.
- ------------------------------------------------------
4. Proposal to amend the / / / / / /
Company's 1988 Director Stock
Option Plan to increase the
size of annual option grants
to directors under the Plan.
5. Proposal to adopt the Genzyme / / / / / /
Corporation Directors'
Deferred Compensation Plan.
Signature: Date: Signature: Date:
-------------------------- ------------- ------------------------ -------------
(if held jointly)
NOTE: Please sign exactly as name appears on stock certificate. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a partner, please sign in partnership name by
authorized person.
</TABLE>
<PAGE> 46
ATTACHMENT
April 12, 1996
[name]
[company]
[address]
[city], [state] [zip]
Dear [title]:
This year the shareholders of Genzyme Corporation will be asked to increase
the number of shares available for granting of stock options in the General
Division and the Tissue Repair Division. Genzyme Corporation has two classes of
stock, known as "tracking stock," which track the financial performance of each
of the two businesses. Consequently, there are stock options for each division
within the Genzyme Corporation 1990 Equity Incentive Plan.
All shareholders of Genzyme Corporation, those with an ownership position
in the General Division and those with a position in the Tissue Repair Division,
generally vote on all issues brought before the shareholders. Each share of the
General Division has one vote and each share of the Tissue Repair Division has
.29 votes. The relative voting power of each stock was set in 1994 and will be
revalued every two years based upon the relative market value of each stock.
Since there is no single common stock representing Genzyme Corporation you
must look at the total shares and options outstanding for each class of stock
separately rather than in the aggregate.
As a policy the Company grants stock options to all its employees, not just
executive officers. This policy has been critical in attracting and retaining
qualified employees and has had a beneficial effect on maintaining an employment
turnover of only 7% over the past four years as compared to an industry average
of 20%.
The Company has consistently granted fewer options to its five most highly
compensated executives than the average of the 10 largest biotechnology
companies. The Company has reduced the number of options to be granted to
non-executive employees by approximately 50%, a recognition of the growing
maturity of the Company.
The utilization of stock options has been a positive force in the
motivation of the Company's work force to build a diversified, rapidly growing
and successful biotechnology company.
Your favorable vote on questions 2 and 3 is requested.
Sincerely,
David J. McLachlan
Senior Vice President - Finance
