<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
GENZYME CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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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
29, 1997 for the following purposes:
1. To elect two directors of the Company.
2. To vote on a proposed amendment to the Company's 1990 Employee
Stock Purchase Plan to increase the number of shares of
General Division Common Stock available for issuance under the
Plan from 1,500,000 to 2,000,000.
3. To vote on a proposed amendment to the Company's 1990 Employee
Stock Purchase Plan to increase the number of shares of Tissue
Repair Division Common Stock available for issuance under the
Plan from 600,000 to 1,100,000.
4. To vote on a proposed amendment to the Company's 1988 Director
Stock Option Plan to increase the number of shares of General
Division Common Stock covered by the Plan from 200,000 to
233,600.
5. To vote on a proposed amendment to the Company's 1988 Director
Stock Option Plan to increase the number of shares of Tissue
Repair Division Common Stock covered by the Plan from 70,000
to 100,000.
6. To transact such other business as may properly come before
the meeting.
Only stockholders of record at the close of business on March 31, 1997
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
Dated: April 24, 1997 Clerk
<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 29, 1997, at the time and place set
forth in the foregoing notice 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 31, 1997, the Company had outstanding 75,712,374 shares of
General Division Common Stock, $.01 par value (the "GGD Stock"), and 13,195,946
shares of Tissue Repair Division Common Stock, $.01 par value (the "GTR Stock"),
which are its only outstanding classes of voting stock. The holders of GGD Stock
and GTR 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 GGD Stock
entitles the holder thereof to one vote and each share of GTR Stock entitles the
holder thereof to .33 votes. Only stockholders of record at the close of
business on March 31, 1997 will be entitled to vote at the meeting. A majority
in interest of the outstanding GGD Stock and GTR Stock considered together as a
single class, represented at the meeting in person or by proxy, constitutes a
quorum for the transaction of business.
Genzyme is expecting to hold a special meeting of stockholders (the
"Special Meeting") in late May or early June where stockholders will be asked
to approve (i) a merger agreement between Genzyme and PharmaGenics, Inc.,
providing for the acquisition of PharmaGenics, Inc. in exchange for shares of a
new Genzyme security ("GMO Stock") that is intended to reflect the value and
track the performance of the Molecular Oncology Division ("GMO"), a new
division to be established by the Company, (ii) the redesignation of
outstanding common stock, and (iii) amendments to the Company's benefit plans
to allow for the issuance of GMO Stock. A Prospectus/Proxy Statement relating
to these proposals is expected to be mailed to stockholders in late April or
early May.
The approximate date on which this proxy statement and accompanying
proxy are first being sent or given to stockholders is April 24, 1997.
Dated: April 24, 1997
<PAGE> 4
SHARE OWNERSHIP
The following table and footnotes set forth certain information
regarding the ownership of the Company's GGD Stock and GTR Stock, and the common
stock of Genzyme Transgenics Corporation ("GTC"), an affiliate of the Company,
as of April 1, 1997 by (i) persons known by the Company to be beneficial owners
of more than 5% of its GGD Stock or GTR Stock, (ii) the Chief Executive Officer
and each of the five 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:
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned (1)
----------------------
Beneficial Owner Shares Percent
---------------- ------ -------
<S> <C> <C>
State of Wisconsin Investment Board (2)
121 East Wilson Avenue
Madison, Wisconsin 53702
GGD Stock ................... 3,276,000 4.3
GTR Stock ................... 1,214,000 9.2
Henri A. Termeer (3)
GGD Stock ................... 960,782 1.3
GTR Stock ................... 135,348 *
Geoffrey F. Cox (4)
GGD Stock ................... 177,048 *
GTR Stock ................... 40,773 *
Gregory D. Phelps (5)
GGD Stock ................... 183,411 *
GTR Stock ................... 58,919 *
Alan E. Smith (6)
GGD Stock ................... 163,906 *
GTR Stock ................... 24,098 *
G. Jan van Heek (7)
GGD Stock ................... 75,716 *
GTR Stock ................... 23,806 *
Peter Wirth (8)
GGD Stock ................... 39,420 *
GTR Stock ................... 9,540 *
Constantine E. Anagnostopoulos (9)
GGD Stock ................... 34,000 *
GTR Stock ................... 9,900 *
Douglas A. Berthiaume (10)
GGD Stock ................... 39,900 *
GTR Stock ................... 22,607 *
Henry E. Blair (11)
GGD Stock ................... 43,400 *
GTR Stock ................... 14,328 *
Robert J. Carpenter (12)
GGD Stock ................... 25,256 *
GTR Stock ................... 25,830 *
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
Charles L. Cooney (13)
GGD Stock ............................. 39,184 *
GTR Stock ............................. 10,023 *
Henry R. Lewis (14)
GGD Stock ............................. 34,600 *
GTR Stock ............................. 7,335 *
All current executive officers and directors
as a group (16 persons) (15)
GGD Stock ............................. 2,458,582 3.2
GTR Stock ............................. 484,868 3.7
</TABLE>
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* 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.
(2) The State of Wisconsin Investment Board ("SWIB") is a government agency that
manages public pension funds. SWIB retains sole voting and dispositive power for
all of the shares shown. The foregoing information is based on the Form 13F for
the quarter ended December 31, 1996 for GGD Stock, and the Schedule 13G for the
year ended December 31, 1996 for the GTR Stock, filed by SWIB with the
Securities and Exchange Commission.
(3) The stock beneficially owned by Mr. Termeer includes 927,500 and 112,147
shares of GGD Stock and GTR Stock, respectively, subject to stock options
exercisable within the 60-day period following April 1, 1997. In addition, Mr.
Termeer owns 9,500 shares of GTC common stock and holds options to purchase
10,000 shares of GTC common stock that are exercisable within the 60-day period
following April 1, 1997.
(4) The stock beneficially owned by Dr. Cox includes 168,200 and 26,558 shares
of GGD Stock and GTR Stock, respectively, subject to stock options exercisable
within the 60-day period following April 1, 1997 and 7,188 and 12,155 shares of
GGD Stock and GTR Stock, respectively, held jointly with his wife.
(5) The stock beneficially owned by Mr. Phelps includes 176,100 and 46,560
shares of GGD Stock and GTR Stock, respectively, subject to stock options
exercisable within the 60-day period following April 1, 1997.
(6) The stock beneficially owned by Dr. Smith includes 158,200 and 22,943 shares
of GGD Stock and GTR Stock, respectively, subject to stock options exercisable
within the 60-day period following April 1, 1997. 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, 1997.
(7) The stock beneficially owned by Mr. van Heek includes 73,734 and 19,067
shares of GGD Stock and GTR Stock, respectively, subject to stock options
exercisable within the 60-day period following April 1, 1997.
(8) The stock beneficially owned by Mr. Wirth includes 39,106 and 9,540 shares
of GGD Stock and GTR Stock, respectively, subject to stock options exercisable
within the 60-day period following April 1, 1997.
(9) The stock beneficially owned by Dr. Anagnostopoulos includes 32,000 and
9,360 shares of GGD Stock and GTR Stock, respectively, subject to stock options
exercisable within the 60-day period following April 1, 1997.
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<PAGE> 6
(10) The stock beneficially owned by Mr. Berthiaume includes 34,400 and 12,074
shares of GGD Stock and GTR Stock, respectively, subject to stock options
exercisable within the 60-day period following April 1, 1997. Also included are
2,000 and 1,500 shares of GGD Stock and GTR Stock, respectively, held by his
wife. Mr. Berthiaume disclaims beneficial ownership of all shares held by his
wife.
(11) The stock beneficially owned by Mr. Blair includes 18,400 and 10,994 shares
of GGD Stock and GTR Stock, respectively, subject to stock options exercisable
within the 60-day period following April 1, 1997. In addition, Mr. Blair owns
1,000 shares of GTC common stock and holds options to purchase 10,000 shares of
GTC common stock that are exercisable within the 60-day period following April
1, 1997.
(12) The stock beneficially owned by Mr. Carpenter includes 10,400 and 8,270
shares of GGD Stock and GTR Stock, respectively, subject to stock options
exercisable within the 60-day period following April 1, 1997. Also includes 388
and 33 shares of GGD Stock and GTR Stock, respectively, held by his wife. Mr.
Carpenter disclaims beneficial ownership of all shares held by his wife.
(13) The stock beneficially owned by Dr. Cooney includes 16,000 and 8,550 shares
of GGD Stock and GTR Stock, respectively, subject to stock options exercisable
within the 60-day period following April 1, 1997. Also includes 22,686 and 1,473
shares of GGD Stock and GTR Stock, respectively, held jointly with his wife, 120
shares of GGD Stock held by his wife and 320 shares of GGD Stock held by his
son. Dr. Cooney disclaims beneficial ownership of all shares held by his wife
and son.
(14) The stock beneficially owned by Mr. Lewis includes 32,000 and 7,160 shares
of GGD Stock and GTR Stock, respectively, subject to stock options exercisable
within the 60-day period following April 1, 1997.
(15) Includes 2,299,873 and 384,870 shares of GGD Stock and GTR Stock,
respectively, that are subject to outstanding stock options exercisable within
the 60-day period following April 1, 1997. Also includes 7,188 and 12,155 shares
of GGD Stock and GTR Stock, respectively, held jointly by officers and directors
of Genzyme with their respective spouses. Also includes 2,508 and 1,533 shares
of GGD Stock and GTR Stock, respectively, held by the spouses of officers, 4,786
and 320 shares of GGD Stock and GTR Stock, respectively, held by the spouses of
officers for the benefit of the children of such officers, and 320 shares of GGD
Stock held by the son of a director. All such shares subject to 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 40,500 shares of common stock, less than 1% of the shares outstanding, of
GTC, including 28,000 shares subject to stock options exercisable within the
60-day period following April 1, 1997.
ELECTION OF DIRECTORS
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 29, 1997, Henry
R. Lewis and Henri A. Termeer have been nominated for re-election to a term of
office expiring in 2000 and until their successors are elected and qualified,
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
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<PAGE> 7
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.
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.
<TABLE>
<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 Genzyme since October 1983 1997
Age: 51 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 Board of Genzyme Transgenics Corporation ("GTC")
and, until its acquisition by Genzyme in December
1996, was Chairman of the Board of Neozyme II
Corporation ("Neozyme II"). Mr. Termeer is also a
director of Abiomed, Inc., AutoImmune Inc., Diacrin,
Inc. and GelTex Pharmaceuticals, Inc., and a trustee
of Hambrecht & Quist Healthcare Investors and of
Hambrecht & Quist Life Sciences Investors.
Henry E. Blair Mr. Blair is the Chief Executive Officer of Dyax Corp. 1981 1998
Age: 53 ("Dyax"), a privately-held bioseparation, pharmaceutical
discovery and development company, and a consultant to
several 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 and Celtrix Pharmaceuticals, Inc.
Charles L. Cooney Dr. Cooney is a Professor of Chemical and Biochemical 1983 1999
Age: 52 Engineering and Co-Director 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 Partner of Gateway 1986 1999
Anagnostopoulos Associates, which is the general partner of Gateway Venture
Age: 74 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>
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<PAGE> 8
<TABLE>
<CAPTION>
<S> <C> <C> <C>
*Henry R. Lewis Mr. Lewis is a consultant to several companies and a member 1987 1997
Age: 71 of the Board of Directors of Delphax Systems, a manufacturer
of high speed non-impact printers. 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 Chief Executive 1988 1998
Berthiaume Officer of Waters Corporation, a high technology
Age: 48 manufacturer of products used for analysis and purification,
formerly a division of Millipore Corporation. From
November 1990 to August 1994, he was President of the
Waters Division of Millipore Corporation.
Robert J. Mr. Carpenter is President and Chief Executive Officer of 1994 1999
Carpenter VacTex, Inc., a privately held biotechnology company which
Age: 52 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 Officer 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, prior to its acquisition by Genzyme in December
1996, was a director of Neozyme II.
</TABLE>
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* Nominee for election as director
The Board of Directors held 13 meetings during 1996, 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.
The Company has standing Audit, Compensation, and Equity Plan
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 1996. 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 that 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 and Equity Plan Committees, see the
"Joint Compensation Committee and Equity Plan Committee Report on Executive
Compensation" below.
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<PAGE> 9
DIRECTOR COMPENSATION
Director Fees. Directors who are not employees of the Company, other
than Mr. Blair, receive a quarterly retainer of $6,250.
Directors' Deferred Compensation Plan. In 1996, the Company established
a deferred compensation plan (the "Deferred Compensation Plan") that allows each
director 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. Amounts deferred under the Deferred Compensation Plan may be allocated
into cash and/or stock accounts for shares of GGD Stock and/or GTR Stock.
Compensation may be deferred until the termination of service as a director or,
subject to certain restrictions, such other date as may be specified by the
director. If the Deferred Compensation Plan proposal related to the
establishment of GMO is approved at the Special Meeting, a total of 50,000
shares of GMO Stock will be reserved for issuance under the Deferred
Compensation Plan. All of the current directors of Genzyme other than Mr.
Termeer and Mr. Blair are eligible to participate in the Deferred Compensation
Plan. As of March 31, 1997, two of the five eligible directors have elected to
participate in the Deferred Compensation Plan.
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 1997. 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 (the "Director Plan").
Options under the Director 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)
4,000 shares of GGD Stock and (ii) a number of shares of GTR Stock equal to
1,000 times a fraction, the numerator of which is the fair market value of the
GGD Stock and the denominator of which is the fair market value of the GTR Stock
on the date of such grant (i.e., options to purchase amounts of GTR Stock with a
market value equal to one-quarter of the market value of the stock subject to
the General Division option). The fair market value for the GGD Stock and the
GTR Stock is equal to the last sale price for the GGD Stock and the GTR Stock,
respectively, on the date of grant of such options. Under the Director Plan,
upon the election of an Eligible Director 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 GGD Stock and GTR Stock described in the
preceding sentence for each year or portion thereof for the term of office to
which he or she is elected.
Options granted under the Director Plan at an annual meeting of
stockholders become exercisable with respect to one-third of the total number of
shares of GGD Stock and GTR 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 Director 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.
If the Director Plan proposal related to the establishment of GMO is
approved at the Special Meeting, then, 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, an option to purchase a number of
shares of GMO Stock equal to 1,000 times a fraction, the numerator of which is
the fair market value of the GGD Stock and the denominator of which is the fair
market value of the GMO Stock on the date of such grant. Thus, an Eligible
Director would receive, in addition to options to purchase GGD Stock and GTR
Stock, an option to purchase an
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<PAGE> 10
amount of GMO Stock with a market value equal to one-quarter of the market value
of the stock subject to the GGD Stock option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Cooney has provided consulting services to Genzyme since 1983. Dr.
Cooney received $30,000 in 1996 and will receive $30,000 in 1997 for a minimum
of 20 days per year of consulting services.
EXECUTIVE COMPENSATION
The Joint Compensation Committee and Equity Plan 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 Executive Officer during 1996.
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<PAGE> 11
JOINT COMPENSATION COMMITTEE AND EQUITY PLAN 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 Equity Plan Committee administers the
Company's equity incentive plan (the "Equity Plan"), including the grant of
stock options under the Equity Plan. The Compensation Committee met three times
in 1996 and is currently composed of Messrs. Cooney (Chairman), Anagnostopoulos
and Lewis. The Equity Plan Committee met four times in 1996 and is currently
composed of Messrs. Berthiaume (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 1996, the Committee sought to
achieve a total salary, bonus and stock option package for each officer that is
between the 40th and 60th percentile (and at approximately the 55th percentile
for the Chief Executive Officer) of a blended market rate of total compensation
paid to officers in comparable positions at other companies in the
pharmaceutical and biotechnology industries. The change to a blended market
rate, weighted 40% toward large biotechnology companies and 60% toward
pharmaceutical companies (50/50 in the case of the Chief Executive Officer), was
deemed to be an appropriate measure of cash compensation in light of the fact
that the Company was now regarded in the employment market as a growing small
pharmaceutical company and the Company needed to move to an appropriate salary
scale to attract the people needed to manage its next phase of growth.
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. The Company's stockholders have 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 1996, 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 two surveys prepared by independent compensation consultants. One of the
independent surveys focused on the fifteen biotechnology companies with the
highest 1995 revenues and the other focused on an industry grouping including 34
pharmaceutical, biotechnology and health care products companies with revenues
comparable to those of the Company. The Company was one of the companies
included in each such survey.
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 1996, the
officers' base salaries ranged from the first to the third quartile of the
ranges developed from the blended survey data.
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<PAGE> 12
In fixing Mr. Termeer's base salary for 1996, the Committee considered
chief executive officer compensation data contained in the two independent
surveys of biotechnology and pharmaceutical 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 and the Nasdaq Pharmaceutical Index shown in the performance
graphs below. The Committee fixed Mr. Termeer's 1996 base salary at the 55th
percentile of the range established by the survey data based on the same factors
considered in setting the base salaries for the other officers. In addition, the
Committee considered several quantitative and qualitative corporate performance
measures. During 1995, sales of the General Division increased by 22% while
gross profit increased by 26%, the Company achieved positive results in pivotal
clinical trials of Seprafilm bioresorbable membrane and Sepracoat coating
solution, started marketing Seprafilm in Europe, launched the Carticel(R)
cartilage cell culturing service and raised more than $180 million in equity
capital.
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 1996 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 1996 annual budget for the General
Division. 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 1996 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 1996
combined bonus targets represented from 44% to 71% of base salary with the
amount payable based on corporate and divisional performance ranging from 42% to
53% of the total bonus payable. Mr. Termeer's 1996 bonus target was set at 90%
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 52% of Mr. Termeer's bonus target was payable based on individual
performance and 48% was payable based on corporate performance.
For 1996, the General Division 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
1995 to 1996, reflecting increased sales in each of the Company's major business
units and particularly increased sales of Ceredase(R) enzyme and Cerezyme(R)
enzyme. In addition, the Company made significant progress in several of its
programs, notably the receipt of Food and Drug Administration approval of its
recombinant protein manufacturing plant used to produce Cerezyme(R) enzyme, the
acquisition of surgical product manufacturer Deknatel Snowden Pencer, Inc., the
launch of Seprafilm anti-adhesion products in the United States and Europe, and
substantial progress in establishing Carticel(R) cartilage cell culturing
service as the new standard of care for a common type of knee injury.
-10-
<PAGE> 13
Stock Options. Annual stock option awards were made to executive
officers in May 1996, the same time that stock option awards were made to all
other qualified employees of the Company. Mr. Termeer was granted options to
purchase 45,000 shares of GGD Stock and 22,500 shares of GTR Stock and each
other officer was granted options to purchase between 8,500 and 15,300 shares of
GGD Stock and between 2,550 and 12,750 shares of GTR Stock. The size of each
officer's award for 1996 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.
In May 1996, the Committee voted to accelerate the exercisability of
one-third of the special nonstatutory stock options granted to each of the
Company's officers under the December 1994 Key Executive Stock Option Program so
that such options became exercisable immediately. This decision was based on the
fact that the Company had achieved its operating income goals established in the
1995 budget and accordingly the participants were entitled to have the
exercisability of one-third of their options granted under that program
accelerated.
By the Equity Plan Committee, By the Compensation Committee,
Douglas A. Berthiaume, Chairman Charles L. Cooney, Chairman
Constantine E. Anagnostopoulos Constantine E. Anagnostopoulos
Henry R. Lewis Henry R. Lewis
-11-
<PAGE> 14
COMPENSATION OF GENZYME'S EXECUTIVE OFFICERS
The following tables set forth certain compensation information for the
Chief Executive Officer of Genzyme and each of the five other most highly
compensated executive officers of Genzyme.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM ALL
--------- ---
ANNUAL COMPENSATION OTHER
------ ------------ -----
COMPENSATION AWARDS COMPENSATION
------------ ------ ------------
Securities Underlying
Options(#)
--------------------------------------
Name and Principal
- ------------------
Position Year Salary($) Bonus($) GGD Stock GTR Stock GTC ($)(1)
-------- ---- --------- -------- --------- --------- --- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Henri A. Termeer 1996 603,942 545,000 45,000 22,500 -- 15,564
Chief Executive 1995 549,039 450,000 50,910 78,055 10,000 15,234
Officer 1994 499,231 387,500 60,000 66,000 -- 14,640
Geoffrey F. Cox 1996 220,558 150,000 13,600 5,100 -- 1,875
Executive Vice 1995 197,654 133,000 18,164 27,322 -- 1,875
President 1994 179,808 100,000 18,500 15,000 -- 1,875
Gregory D. Phelps 1996 264,981 150,000 8,500 12,750 -- 1,875
Executive Vice 1995 212,365 138,000 15,614 34,972 -- 1,875
President 1994 179,712 100,000 18,500 37,500 2,000 1,875
Alan E. Smith 1996 259,346 110,000 13,600 5,100 -- 1,875
Senior Vice 1995 225,539 100,000 22,709 18,433 -- 1,875
President, 1994 201,788 81,500 18,500 15,000 4,000 1,875
Research; Chief
Scientific
Officer
G. Jan van Heek 1996 250,000 120,000 13,600 5,100 -- --
Group Senior 1995 209,000 102,500 18,164 27,322 -- --
Vice 1994 190,000 75,000 18,500 15,000 -- --
President,
Therapeutics
Peter Wirth 1996 256,281 128,000 58,600 17,600 -- 1,875
Executive Vice 1995 -- -- -- -- -- --
President 1994 -- -- -- -- -- --
</TABLE>
- ---------------
(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 $13,689, $13,359 and $12,765
paid by Genzyme on his behalf in 1996, 1995 and 1994, respectively, for life and
disability insurance benefits.
-12-
<PAGE> 15
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------
Number of % of Total Potential Realizable Value at
Securities Options Exercise or Assumed Annual Rates
Underlying Granted to Base Price of Stock Price Appreciation
Options Employees ($/Share) Expiration for Option Term
Name Granted(#)(1) in Fiscal 1996 (1) Date 5%($)(2) 10%($)(2)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Henri A. Termeer
GGD Stock 45,000 1.3 30.25 5/16/2006 856,083 2,169,482
GTR Stock 22,500 2.8 12.25 5/16/2006 173,339 439,275
Geoffrey F. Cox
GGD Stock 13,600 0.4 30.25 5/16/2006 258,727 655,666
GTR Stock 5,100 0.6 12.25 5/16/2006 39,290 99,569
Gregory D. Phelps
GGD Stock 8,500 0.3 30.25 5/16/2006 161,705 409,791
GTR Stock 12,750 1.6 12.25 5/16/2006 98,225 248,923
Alan E. Smith
GGD Stock 13,600 0.4 30.25 5/16/2006 258,727
GTR Stock 5,100 0.6 12.25 5/16/2006 39,290 655,666
99,569
G. Jan van Heek
GGD Stock 13,600 0.4 30.25 5/16/2006 258,727 655,666
GTR Stock 5,100 0.6 12.25 5/16/2006 39,290 99,569
Peter Wirth
GGD Stock 13,600 0.4 30.25 5/16/2006 258,727 655,666
GGD Stock 45,000 1.3 24.88 10/1/2006 703,969 1,783,995
GTR Stock 5,100 0.6 12.25 5/16/2006 39,290 99,569
GTR Stock 12,500 1.6 10.00 10/1/2006 78,612 199,218
All Genzyme
Stockholders
GGD Stock -- -- 30.25 -- 1,443,077,848 3,641,765,189
GGD Stock -- -- 24.88 -- 1,186,412,901 2,994,424,392
GTR Stock -- -- 12.25 -- 101,872,703 257,057,028
GTR Stock -- -- 10.00 -- 83,134,460 209,815,541
</TABLE>
- ---------------
(1) Except with respect to the options shown on the second and fourth lines for
Mr. Wirth, the GGD Stock and GTR Stock options shown were granted on May 16,
1996, 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. With respect to the options shown on the
second and fourth lines for Mr. Wirth, these options were granted on October 1,
1996, 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 date of grant and 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 GGD Stock or GTR 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 GGD Stock and GTR
Stock would have to be approximately 63% and 159% above the
-13-
<PAGE> 16
respective exercise prices for each option, or approximately $49.31 and $78.35
for the GGD Stock options with a $30.25 exercise price and $40.55 and $64.43 for
the GGD Stock options with a $24.88 exercise price, or approximately $19.97 and
$31.73 for the GTR Stock options with a $12.25 exercise price and $16.30 and
$25.90 for the GTR Stock options with a $10.00 exercise price. The amounts shown
for all Genzyme stockholders reflect the potential value to all stockholders if
the GGD Stock or the GTR Stock appreciates at the rates shown over the term of
the options, assuming a purchase in 1996 at the option exercise prices shown.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Shares December 31, 1996(#) December 31, 1996($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable(1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Henri A. Termeer
GGD Stock 60,000 1,957,500 865,500/325,820 $9,984,930/1,506,909
GTR Stock -- -- 100,625/126,464 269,737/103,834
Geoffrey F. Cox
GGD Stock 20,000 653,060 149,293/108,635 $1,174,881/491,764
GTR Stock -- -- 23,608/39,877 58,897/26,756
Gregory D. Phelps
GGD Stock -- -- 159,233/101,495 $227,205/484,687
GTR Stock -- -- 40,550/59,587 63,187/53,295
Alan E Smith
GGD Stock 20,000 620,300 139,293/117,725 $983,422/491,251
GTR Stock 3,375 74,831 20,071/30,910 44,721/26,715
G. Jan van Heek
GGD Stock 13,466 299,807 57,027/106,435 $284,522/485,559
GTR Stock -- -- 16,266/39,728 30,677/26,678
Peter Wirth
GGD Stock -- -- 29,720/128,274 $0/0
GTR Stock -- -- 8,520/43,802 0/0
</TABLE>
- --------------------
(1) Based on the difference between the option exercise price and the closing
price of the underlying common stock on December 31, 1996, which closing price
was $21.75 in the case of GGD Stock and $7.125 in the case of GTR Stock.
-14-
<PAGE> 17
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.
Peter Wirth, Executive Vice President and Chief Legal Officer of
Genzyme, has a three year 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 Mr. Wirth's
employment in a half-time capacity for an initial base salary in 1996 of
$225,000. Upon Mr. Wirth's transition to full-time employment in October 1996,
his annual base salary was increased to $380,000 and is subject to increase in
subsequent years as determined by the Board of Directors or the Compensation
Committee of the Board of Directors, and includes certain life and disability
insurance benefits. The agreement entitles Mr. Wirth 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. Wirth's employment is terminated by Genzyme without cause (as defined).
If Mr. Wirth's employment is terminated by Genzyme without cause or by Mr. Wirth
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 (the "Agreements") with its
executive officers other than Messrs. Termeer and Wirth, 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,
-15-
<PAGE> 18
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
Until October 1, 1996, Mr. Wirth was a partner of Palmer & Dodge LLP,
outside counsel to Genzyme, Neozyme II and GTC. During such period, Mr. Wirth
participated as a partner of Palmer & Dodge LLP in revenues for legal services
rendered to Genzyme, Neozyme II and GTC.
-16-
<PAGE> 19
STOCK PERFORMANCE GRAPH
The following graphs show 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, the Nasdaq Pharmaceutical Index and the Coopers &
Lybrand Biotech Index. In prior years, the Company compared the cumulative total
shareholder return on its common stock with the cumulative total return of the
Coopers & Lybrand Biotech Index. The Company believes the Nasdaq Pharmaceutical
Index, which includes a larger group of biotechnology companies than the Coopers
& Lybrand Biotech Index, is more representative of how the biotechnology
industry sector performs as a group and has adopted this index for future use.
Because this is a transition year for adopting the Nasdaq Pharmaceutical Index,
the Company is required, under the rules of the Securities and Exchange
Commission, to also include the Coopers & Lybrand Biotech Index for the 1996
fiscal year.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
GENZYME CORPORATION GGD STOCK (1),
S&P 500 INDEX, THE NASDAQ PHARMACEUTICAL INDEX
AND THE COOPERS & LYBRAND BIOTECH INDEX
<TABLE>
<CAPTION>
Nasdaq Coopers &
Measurement Period Pharmaceutical Lybrand
(Fiscal Year Covered) GGD Stock S&P 500 Index Biotech Index
<S> <C> <C> <C> <C>
12/31/91 100 100 100 100
12/31/92 77 104 83 97
12/31/93 47 111 74 102
12/31/94 54 110 55 96
12/31/95 106 147 102 172
12/31/96 74 177 102 181
</TABLE>
- ----------------
(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 "GGD Stock") and to create a new class of common stock designated
Tissue Repair Division Common Stock (the "GTR Stock"). On December 23, 1994, the
Company made a pro rata distribution to all holders of GGD Stock as of the close
of business on December 16, 1994 of .0675 of one share of GTR Stock for each
share of GGD Stock (as adjusted for a 2-for-1 stock split of GGD Stock on July
25, 1996). 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, the Nasdaq Pharmaceutical Index and the Coopers & Lybrand Biotech
Index on January 1, 1991, with all dividends, including the GTR Stock dividend,
being reinvested.
-17-
<PAGE> 20
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
GENZYME CORPORATION GTR STOCK (2),
S&P 500 INDEX, THE NASDAQ PHARMACEUTICAL INDEX
AND THE COOPERS & LYBRAND BIOTECH INDEX
<TABLE>
<CAPTION>
Nasdaq Coopers &
Measurement Period Pharmaceutical Lybrand
(Fiscal Year Covered) GTR Stock S&P 500 Index Biotech Index
<S> <C> <C> <C> <C>
12/16/94 100 100 100 100
12/29/95 334 134 191 180
12/31/96 150 161 191 189
</TABLE>
- ----------------
(2) The Company's GTR Stock was first issued on December 16, 1994. The graph
depicts cumulative returns calculated on an annual basis on $100 invested in GTR
Stock, the S&P 500 Index, the Nasdaq Pharmaceutical Index and the Coopers &
Lybrand Biotech Index on December 16, 1994, with all dividends being reinvested.
-18-
<PAGE> 21
PROPOSALS TO AMEND THE 1990 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The purpose of the Genzyme Corporation 1990 Employee Stock Purchase
Plan (the "Purchase Plan") is to provide full-time employees of Genzyme and its
subsidiaries an opportunity to purchase the Company's common stock on favorable
terms. Under the Purchase Plan, a total of 1,500,000 shares of GGD Stock and
600,000 shares of GTR Stock are reserved for issuance, subject to adjustment for
stock splits, stock dividends and certain transactions affecting the Company's
capital stock. If the Purchase Plan proposal related to the establishment of GMO
is approved at the Special Meeting, a total of 500,000 shares of GMO Stock will
be reserved for issuance under the Purchase Plan. As of the date hereof,
approximately 3,065 employees were eligible to participate in the Purchase Plan.
The closing price of the GGD Stock and GTR Stock as reported by Nasdaq on March
31, 1997 was $22.50 and $9.875, respectively.
ADMINISTRATION AND ELIGIBILITY
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"). Rights to purchase Genzyme common stock under the plan are granted at
the discretion of Genzyme's Board of Directors, which, through an administrator,
determines the frequency and duration of individual offerings under the plan and
the date(s) when stock may be purchased. Eligible employees participate
voluntarily and may withdraw from any offering at any time before stock is
purchased. Participation terminates automatically upon termination of employment
for any reason. The purchase price per share of Genzyme common stock in an
offering is 85% of the lower of its fair market value on the first day of an
offering period or the applicable exercise date and may be paid through regular
payroll deductions, lump sum cash payments or a combination of both, as
determined by the Board of Directors. The Purchase Plan terminates on March 14,
2000.
In accordance with Section 423 of the Code, no employee may subscribe
for shares under the Purchase Plan if, immediately after having subscribed, the
employee would own 5% or more of the voting power or of the value of all classes
of stock of the Company (including stock which may be purchased through
subscriptions under the Purchase Plan or any other plans) nor may an employee
buy more than $25,000 worth of stock (determined by the fair market value of the
Genzyme common stock at the time the offering begins) through the Purchase Plan
in any calendar year. The Purchase Plan provides that no employee may allocate
more than 15%, or such lesser percentage as the Board of Directors may fix, of
the employee's annual rate of compensation to the purchase of stock through the
Purchase Plan.
In order to reduce the number of shares required under the Purchase
Plan, in December 1996 the Board of Directors authorized action to limit
participation in the purchase of GTR Stock. Specifically, no employee may buy
more than $8,333 worth of GTR Stock (determined by the fair market value of the
GTR Stock at the time the offering begins) through the Purchase Plan in any
calendar year. In addition, no employee may allocate more than 5% of the
employee's annual rate of compensation to the purchase of GTR Stock through the
Purchase Plan. If the Purchase Plan proposal related to the establishment of GMO
is approved at the Special Meeting, it is anticipated that the Board of
Directors will place limitations on the amount of GMO Stock that may be
purchased by an employee through the Purchase Plan that are similar to those
described above with respect to the purchase of GTR Stock through the Purchase
Plan.
As of March 31, 1997, 1,436,451 shares of GGD Stock and 599,126 shares
of GTR Stock had been purchased under the Purchase Plan leaving 63,549 shares of
GGD Stock and 874 shares of GTR Stock available for future purchase under the
Purchase Plan. During 1996, Mr Termeer purchased 1,740 and 3,011 shares of GGD
Stock and GTR Stock, respectively, Dr. Cox purchased 3,054 and 1,379 shares of
GGD Stock and GTR Stock, respectively, Mr. Phelps purchased 611 and 1,538 shares
of GGD Stock and GTR Stock, respectively, Dr. Smith purchased 1,368 shares of
GGD Stock, Mr. van Heek purchased 2,630 and 1,565 shares of GGD
-19-
<PAGE> 22
Stock and GTR Stock, respectively, Mr. Wirth purchased 314 and 1,391 shares of
GGD Stock and GTR Stock, respectively, and all current executive officers as a
group purchased 20,455 and 10,208 shares of GGD Stock and GTR Stock,
respectively, under the Purchase Plan. All other employees purchased an
aggregate of 270,598 shares of GGD Stock and 318,998 shares of GTR Stock during
1996.
DESCRIPTION OF AMENDMENTS TO THE PURCHASE PLAN
On December 5, 1996, the Board of Directors approved, subject to the
approval of the stockholders, an increase in the aggregate number of shares of
GTR Stock that may be purchased under the Purchase Plan from 600,000 to
1,100,000, in order to ensure that a sufficient number of shares of GTR Stock
are available to be issued in the future. In addition, on April 9, 1997, the
Board of Directors approved, subject to the approval of the stockholders, an
increase in the aggregate number of shares of GGD Stock that may be purchased
under the Purchase Plan from 1,500,000 to 2,000,000, in order to ensure that a
sufficient number of shares of GGD Stock are available to be issued in the
future.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO PURCHASE PLAN
Participants do not realize taxable income at the commencement of an
offering or at the time shares are purchased under the Purchase Plan.
If no disposition of shares purchased under the Purchase Plan is made
by the participant within two years from the offering commencement date or
within one year from the purchase date, then (a) upon sale of such shares, 15%
of the fair market value of the stock at the commencement of the offering period
(or, if less, the amount realized on sale of such shares in excess of the
purchase price) is taxed to the participant as ordinary income with any
additional gain taxed as a long-term capital gain and any loss sustained is
treated as a long-term capital loss and (b) no deduction is allowed to the
Company for Federal income tax purposes.
If shares purchased under the Purchase Plan are disposed of prior to
the expiration of the two-year and one-year holding periods described above,
then (a) the participant 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 on
the date of purchase (or, if less, the amount realized on sale of such shares)
over the purchase price thereof, and (b) Genzyme is entitled to deduct such
amount. Any further gain or loss realized is taxed 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 by the holders of a majority of the votes cast by
holders of GGD Stock and GTR Stock present, or represented, and entitled to vote
at the meeting is required to approve the proposed amendments to the Purchase
Plan. Abstentions and broker non-votes will not be counted as votes cast and
thus, will not affect the outcome of the voting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THESE PROPOSALS
-20-
<PAGE> 23
PROPOSALS 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 the Company 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 200,000 shares of GGD Stock and 70,000 shares of GTR Stock (subject in each
case to adjustment for stock splits and similar capital changes) to Eligible
Directors as defined below. If the Director Plan proposal related to the
establishment of GMO is approved at the Special Meeting, a total of 70,000
shares of GMO Stock will be authorized for grant under the Director Plan. As of
the date hereof, options to purchase an aggregate of 197,600 shares of GGD Stock
and 68,576 shares of GTR 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 AMENDMENTS TO DIRECTOR PLAN
The Board of Directors has approved, subject to the approval of the
stockholders, an increase in the aggregate number of shares of GGD Stock and GTR
Stock that may be purchased under the Director Plan from 200,000 to 233,600 for
GGD Stock and from 70,000 to 100,000 for GTR Stock. The Director Plan will
expire on December 15, 1998 and this increase will ensure that a sufficient
number of shares are available to be issued until the expiration of the Director
Plan.
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 the Company.
VOTE REQUIRED
The affirmative vote by the holders of a majority of the votes cast by
holders of GGD Stock and GTR Stock present, or represented, and entitled to vote
at the meeting is required to approve the proposed amendments to the Purchase
Plan. Abstentions and broker non-votes will not be counted as votes cast and
thus, will not affect the outcome of the voting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THESE PROPOSALS
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<PAGE> 24
CERTAIN TRANSACTIONS
NEOZYME II. In May 1992, Genzyme and Neozyme II completed a public
offering of units, 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 1996, Genzyme received an aggregate of $22.4 million from Neozyme
II under the agreements between the companies. In October 1996, Genzyme, through
a wholly-owned subsidiary, completed a tender offer for the outstanding units of
Neozyme II for $45 per unit in cash in which 98.8% of the units were tendered
and accepted for payment at an aggregate purchase price of $107.4 million. Each
unit consisted of one share of Neozyme II callable common stock and one callable
warrant to purchase two shares of GGD Stock and .135 share of GTR Stock.
In December 1996, Genzyme acquired the shares of Neozyme II callable
common stock that were not tendered in the tender offer at a price of $29 per
share through the merger of Neozyme II into a wholly-owned subsidiary of
Genzyme. Following completion of the merger, each of the agreements between
Genzyme and Neozyme II referred to above terminated in accordance with their
respective terms. Prior to the merger, Mr. Termeer was Chairman of the Board and
Mr. Carpenter was a director of Neozyme II.
GTC. Genzyme currently holds approximately 43.5% 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 and
Mr. Blair is a director 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 1996, Genzyme received approximately $4.0
million from GTC pursuant to the three agreements between the companies and GTC
received approximately $6.2 million from Genzyme pursuant to the research and
development agreement.
In December 1995, GTC refinanced its line of credit and term loan
agreement with a commercial bank, subject to Genzyme's continuing guaranty of a
total of $9.8 million of credit facilities provided to GTC by the commercial
bank. The largest amount outstanding under these facilities during the fiscal
year ended December 31, 1996 was $2.3 million. In exchange for its guaranty,
Genzyme received a warrant to purchase 145,000 shares of GTC common stock at a
price of $2.4375 per share.
On February 7, 1996, Genzyme advanced $950,000 to GTC, at an interest
rate of 6.5% per annum, under a short-term credit arrangement. Such amount
became due on March 31, 1996 and was repaid by GTC prior to such date.
On March 28, 1996, Genzyme entered into a Convertible Debt and
Development Funding Agreement with GTC pursuant to which Genzyme agreed to
provide a revolving line of credit in the amount of $10 million and agreed to
fund development costs of GTC's Antithrombin III ("AT-III") program through
March 31, 1997. Under this agreement, GTC granted Genzyme co-marketing rights to
AT-III in all territories other than Asia subject to negotiation and execution
of a development and supply agreement between the parties prior to March 31,
1997. Genzyme's AT-III funding commitment and the date by which the parties may
negotiate and execute a development and supply agreement have each been extended
to June 30, 1997. The line of credit carries an interest rate of 7% and is
convertible into GTC common stock (at the average market price for the 20-day
period ending two days before any conversion), at GTC's option to maintain its
tangible net worth at the end of each
-22-
<PAGE> 25
quarter at a level between $4.0 million and $4.2 million, or by Genzyme at any
time for up to the full amount outstanding. As of December 31, 1996, no amounts
were outstanding and $10.0 million was available under the revolving line of
credit, excluding an aggregate of $1,673,000 of debt previously converted into
26,244 and 193,321 shares of GTC common stock at a price of $5.7156 and $7.8781
per share, respectively. The largest amount outstanding under this line of
credit during the fiscal year ended December 31, 1996 was $3,650,000.
DYAX. In March 1996, Genzyme entered into two agreements (the "Dyax
Licenses") with Dyax and Protein Engineering Corporation, a wholly-owned
subsidiary of Dyax, in which Genzyme received licenses to Dyax's phage display
technology. Under the Dyax Licenses, Genzyme paid an initial license fee of
$53,700 and is required to pay annual license maintenance fees of $50,000. The
Dyax Licenses also require Genzyme to make milestone payments and pay royalties
on net sales of diagnostic and therapeutic products discovered, made or
developed using the licensed technology.
In September 1996, Dyax entered into an agreement with Genzyme pursuant
to which Dyax subleases from Genzyme, at a rate of $42,892 per month, office and
laboratory space in Cambridge, Massachusetts. Dyax made payments of
approximately $143,000 to Genzyme during 1996 in connection with such sublease.
Mr. Blair is Chief Executive Officer of Dyax and each of Mr. Blair, Dr.
Anagnostopoulos and Mr. Lewis are directors of Dyax.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers and directors are required under
Section 16(a) of the Securities Exchange Act of 1934 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 1996 the executive officers and directors of the
Company complied with all applicable Section 16(a) filing requirements, except
for the following: Mr. Heffernan, an executive officer of the Company, reported
on February 14, 1997 the sale of General Division shares, the reports for which
were due on February 10, 1995 and June 10, 1995; Dr. Smith reported on February
14, 1997 the sale of General Division shares, the report for which was due on
August 10, 1996; Mr. Wirth reported on February 14, 1997 the sale of Tissue
Repair shares, the report for which was due on August 10, 1996; Mr. Termeer
reported on February 14, 1997 the conversion of General Division warrants, the
report for which was due January 10, 1997; and Dr. Moscicki, an executive
officer of the Company, reported on February 14, 1997 the sale of General
Division shares, the report for which was due January 10, 1997.
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, 1996, 1995
and 1994. 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, 1997.
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.
-23-
<PAGE> 26
DEADLINE FOR STOCKHOLDER PROPOSALS
In order for a stockholder proposal to be considered for inclusion in
the Company's proxy materials for the 1998 annual meeting, it must be received
by the Company at One Kendall Square, Cambridge, Massachusetts 02139, Attention:
Chief Financial Officer, no later than December 13, 1997.
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 $15,000.
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.
-24-
<PAGE> 27
APPENDIX A
Adopted by directors on March 15, 1990
Approved by shareholders on May 17, 1990
Amended by directors on August 9, 1990
Amended by directors on March 17, 1992
Approved by shareholders on May 21, 1992
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 April 12, 1995
Approved by shareholders on May 18, 1995
Restated to reflect 2:1 stock split of the General Division Stock on
July 25, 1996
Amended and restated by directors on January 30, 1997
Amended by directors on April 9, 1997
GENZYME CORPORATION
1990 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose.
The purpose of this 1990 Employee Stock Purchase Plan (the "Plan") is
to provide employees of Genzyme Corporation (the "Company") and its subsidiaries
who wish to become shareholders of the Company an opportunity to purchase shares
of common stock, $0.01 par value, of the Company (the "Shares"). The Plan is
intended to qualify as an "employee stock purchase plan" within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
The Plan constitutes an amendment and restatement of the Company's 1988
Employee Stock Purchase Plan (the "1988 Plan"), which is hereby merged with and
into the Plan, and the separate existence of the 1988 Plan shall terminate on
the effective date of the Plan. The rights and privileges of the holders of
outstanding options or rights under the 1988 Plan shall not be adversely
affected by the foregoing action.
2. Eligible Employees.
Subject to the provisions of Sections 7, 8 and 9 below, any individual
who is in the full-time employment (as defined below) of the Company, or any of
its subsidiaries (as defined in Section 425(f) of the Code), the employees of
which are designated by the Board of Directors as eligible to participate in the
Plan, is eligible to participate in any Offering of Shares (as defined in
Section 3 below) made by the Company hereunder. Full-time employment shall
include all employees whose customary employment is:
(a) 20 hours or more per week and
(b) more than five months
A-1
<PAGE> 28
in the calendar year during which said Offering Date (as defined in Section 3
below) occurs or in the calendar year immediately preceding such year.
3. Offering Dates.
From time to time, the Company, by action of the Board of Directors,
will grant rights to purchase shares of the General Division Common Stock ("GGD
Stock"), the Tissue Repair Division Common Stock ("GTR Stock") and/or the
Genzyme Molecular Oncology Division Common Stock ("GMO Stock") to employees
eligible to participate in the Plan pursuant to one or more offerings (each of
which is an "Offering") on a date or series of dates (each of which is an
"Offering Date") designated for this purpose by the Board of Directors. The
Board or any Administrator designated pursuant to Section 17 shall determine the
proportion of each class of Common Stock that may be purchased in any Offering
by participating employees. A reference to a class of Shares also means each
separate series of a single class.
4. Prices.
The price per share for each grant of rights hereunder shall be the
lesser of:
(a) eighty-five percent (85%) of the fair market value on the Offering
Date on which such right was granted of a share of the class of Common Stock to
which the right relates; or
(b) eighty-five percent (85%) of the fair market value on the date such
right is exercised of a share of the class of Common Stock to which the right
relates. At its discretion, the Board of Directors may determine a higher price
for a grant of rights.
5. Exercise of Rights and Method of Payment.
(a) Rights granted under the Plan will be exercisable periodically on
specified dates as determined by the Board of Directors.
(b) The method of payment for Shares purchased upon exercise of rights
granted shall be through regular payroll deductions or by lump sum cash payment
or both, as determined by the Board of Directors. No interest shall be paid upon
payroll deductions unless specifically provided for by the Board of Directors.
(c) Any payments received by the Company from a participating employee
and not utilized for the purchase of Shares upon exercise of a right granted
hereunder shall be promptly returned to such employee by the Company after
termination of the right to which the payment relates.
6. Term of Rights.
The total period from an Offering Date to the last date on which rights
granted on that Offering Date are exercisable (the "Offering Period") shall in
no event be longer than twenty-seven (27) months. The Board of Directors when it
authorizes an Offering may designate one or more exercise periods during the
Offering Period. Rights granted on an Offering Date shall be exercisable in full
on the Offering Date or in such proportion on the last day of each exercise
period as the Board of Directors determines.
A-2
<PAGE> 29
7. Shares Subject to the Plan.
No more than Two Million (2,000,000) shares of GGD Stock, One Million
One Hundred Thousand (1,100,000) shares of GTR Stock and Five Hundred Thousand
(500,000) shares of GMO Stock may be sold pursuant to rights granted under the
Plan (including shares heretofore issued pursuant to or subject to outstanding
options or rights granted under the 1988 Plan). Appropriate adjustments in the
above amounts, in the number of Shares covered by outstanding rights granted
hereunder, in the exercise price of the rights and in the maximum number of
Shares which an employee may purchase (pursuant to Section 8 below) shall be
made to give effect to any mergers, consolidations, reorganizations,
recapitalizations, stock splits, stock dividends or other relevant changes in
the capitalization of the Company occurring after the effective date of the
Plan, provided that no fractional Shares shall be subject to a right and each
right shall be adjusted downward to the nearest full Share. Any agreement of
merger or consolidation shall include provisions for protection of the then
existing rights of participating employees under the Plan. Either authorized and
unissued Shares or issued Shares heretofore or hereafter reacquired by the
Company may be subject to rights under the Plan. If for any reason any right
under the Plan terminates in whole or in part, Shares subject to such terminated
right may be subject to a right under the Plan.
8. Limitations on Grants.
(a) No employee shall be granted a right hereunder if such employee,
immediately after the right is granted would own stock or rights to purchase
stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company, or of any subsidiary, computed in
accordance with Section 423(b)(3) of the Code.
(b) No employee shall be granted a right which permits his rights to
purchase shares under all employee stock purchase plans of the Company and its
subsidiaries to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) (or such other maximum as may be prescribed from time to time by the
Code) of the fair market value of such Shares (determined at the time such right
is granted) for each calendar year in which such right is outstanding at any
time in accordance with the provisions of Section 423(b)(8) of the Code.
(c) No right granted to any participating employee under an Offering,
when aggregated with rights granted under any other Offering still exercisable
by the participating employee, shall cover more shares than may be purchased at
an exercise price not to exceed fifteen percent (15%) of the employee's annual
rate of compensation on the date the employee elects to participate in the
Offering or such lesser percentage as the Board of Directors may determine.
9. Limit on Participation.
Participation in an Offering shall be limited to eligible employees who
elect to participate in such Offering in the manner, and within the time
limitations, established by the Board of Directors when it authorizes the
Offering.
10. Cancellation of Election to Participate.
An employee who has elected to participate in an Offering may cancel
such election as to all (but not part) of the unexercised rights granted under
such Offering by giving written notice of such cancellation to the Company
before
A-3
<PAGE> 30
the expiration of any exercise period. Any amounts paid by the employee for the
Shares or withheld for the purchase of Shares from the employee's compensation
through payroll deductions shall be paid to the employee, without interest
unless otherwise determined by the Board of Directors, upon such cancellation.
11. Termination of Employment.
Upon the termination of employment for any reason, including the death
of the employee, before the date on which any rights granted under the Plan are
exercisable, all such rights shall immediately terminate and amounts paid by the
employee for the Shares or withheld for the purchase of Shares from the
employee's compensation through payroll deductions shall be paid to the employee
or to the employee's estate, without interest unless otherwise determined by the
Board of Directors.
12. Employee's Rights as Shareholder.
No participating employee shall have any rights as a shareholder in the
Shares covered by a right granted hereunder until such right has been exercised,
full payment has been made for the corresponding Shares and the Shares
certificate is actually issued.
13. Rights Not Transferable.
Rights under the Plan are not assignable or transferable by a
participating employee and are exercisable only by the employee.
14. Amendments to or Discontinuation of the Plan.
The Board of Directors of the Company shall have the right to amend,
modify or terminate the Plan at any time without notice; provided, however, that
the then existing rights of all participating employees shall not be adversely
affected thereby, and provided further that, subject to the provisions of
Section 7 above, no such amendment to the Plan shall, without the approval of
the shareholders of the Company, increase the total number of shares of GGD
Stock, GTR Stock or GMO Stock which may be offered under the Plan.
15. Effective Date and Approvals.
Subject to the approval of the shareholders of the Company, this Plan
shall be effective on March 15, 1990, the date it was adopted by the Board of
Directors.
The Company's obligation to offer, sell and deliver its Shares under
the Plan is subject to (i) the approval of any governmental authority required
in connection with the authorization, issuance or sale of such Shares, (ii)
satisfaction of the listing requirements of any national securities exchange on
which the Shares are then listed and (iii) compliance, in the opinion of the
Company's counsel, with all applicable federal and state securities and other
laws.
16. Term of Plan.
No rights shall be granted under the Plan after March 14, 2000.
A-4
<PAGE> 31
17. Administration of the Plan.
The Board of Directors or any committee or person(s) to whom it
delegates its authority (the "Administrator") shall administer, interpret and
apply all provisions of the Plan as it deems necessary. Nothing contained in
this Section shall be deemed to authorize the Administrator to alter or
administer the provisions of the Plan in a manner inconsistent with the
provisions of Section 423 of the Code.
A-5
<PAGE> 32
APPENDIX B
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
Adopted by shareholders on May 16, 1996
Restated to reflect 2:1 stock split of the General Division Stock on
July 25, 1996
Amended and restated by directors on January 30, 1997
Amended by directors on April 9, 1997
GENZYME CORPORATION
1988 DIRECTOR STOCK OPTION PLAN
This 1988 Director Stock Option Plan dated December 15, 1988 (the
"Plan") governs options to purchase common stock, $0.01 par value ("Common
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 each class of Common
Stock which may be optioned under this plan is 233,600 shares of the General
Division Common Stock ("GGD Stock"), 100,000 shares of the Tissue Repair
Division Common Stock ("GTR Stock"), and 70,000 shares of the Genzyme Molecular
Oncology Division Common Stock ("GMO Stock"). A reference to a class of common
stock also means each separate series of a single class. In the event of a stock
dividend, split-up, combination or reclassification of shares, recapitalization
or other similar capital change relating to the Common 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-1
<PAGE> 33
(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 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 Common 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 Common 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
Common 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.
(a) Initial Grant of GGD Stock Options. Upon the original
adoption of this Plan by the Board of Directors of the Company, initial options
to purchase GGD Stock were automatically granted to the following Directors in
the amounts set forth opposite their respective names, giving effect to the 2:1
stock split of the GGD Stock on July 25, 1996:
<TABLE>
<CAPTION>
Name of Director Number of Shares
---------------- ----------------
<S> <C>
Constantine E. Anagnostopoulos 4,000
Charles L. Cooney 8,000
Eileen M. More 4,000
Henry R. Lewis 8,000
Douglas A. Berthiaume 4,000
</TABLE>
(b) Initial Grant of GTR Stock Options. Upon the effective
date of the Company's acquisition of BioSurface Technology, Inc., initial
options to purchase 5,000 shares of GTR Stock were automatically granted to each
Director then in office who is not also an officer or employee of the Company.
(c) Initial Grant of GMO Stock Options. Upon the effective
date of the Company's acquisition of PharmaGenics, Inc., initial options to
purchase [ ] shares of GMO Stock shall be automatically granted to each Director
then in office who is not also an officer or employee of the Company.
(d) 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) 4,000 shares of GGD Stock, (ii) a number of shares of
GTR Stock equal to 1,000 times a fraction, the numerator
B-2
<PAGE> 34
of which is the Fair Market Value of the GGD Stock and the denominator of which
is the Fair Market Value of the GTR Stock, and (iii) a number of shares of GMO
Stock equal to 1,000 times a fraction, the numerator of which is the Fair Market
Value of the GGD Stock and the denominator of which is the Fair Market Value of
the GMO 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 GGD Stock, GTR Stock and GMO 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 GGD Stock, (ii) the effective date of the Company's
acquisition of BioSurface Technology, Inc. for the initial options to purchase
GTR Stock, (iii) the effective date of the Company's acquisition of
PharmaGenics, Inc. for the initial options to purchase GMO Stock and (iv) 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 each class of the Common
Stock shall mean the last sale price for such class as reported by the National
Association of Securities Dealers Automated Quotations National Market System on
the Date of Grant of such options.
(e) 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.
(f) Term of Option. The term of each option granted under
this Plan shall be ten years from the Date of Grant.
(g) Period of Exercise.
(i) Options to purchase GGD 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
(giving effect to the 2:1 stock split of the GGD Stock on July 25, 1996) 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:
<TABLE>
<CAPTION>
Name of Director Number of Shares Annual Meeting
- ---------------- ---------------- --------------
<S> <C> <C>
Constantine E. Anagnostopoulous 4,000 1990
Charles L. Cooney 4,000 1989
Charles L. Cooney 4,000 1990
Eileen M. Moore 4,000 1989
Henry R. Lewis 4,000 1990
Henry R. Lewis 4,000 1991
Douglas A. Berthiaume 4,000 1989
</TABLE>
(ii) Options to purchase GTR Stock initially
granted upon the effective date of the Company's acquisition of BioSurface
Technology, Inc. were exercisable in full on their Date of Grant.
(iii) Options to purchase GMO Stock initially
granted upon the effective date of the Company's acquisition of PharmaGenics,
Inc. shall be exercisable in full on their Date of Grant.
(iv) 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 each class of Common 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
12,000 shares of GGD Stock and 1,500 shares of GTR Stock are granted to a
Director at the 1996 annual meeting, the options will become exercisable with
respect to 4,000 shares of GGD Stock and 500 shares of GTR Stock at each of the
1997, 1998 and 1999 annual meetings). Directors holding exercisable options
under this
B-3
<PAGE> 35
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.
(h) 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.
(i) 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.
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 GGD
Stock, GTR Stock or GMO 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.
B-4
<PAGE> 36
<TABLE>
<S> <C>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 29, 1997
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 29, 1997, 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 OTHER 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
-----------
</TABLE>
<PAGE> 37
<TABLE>
<S> <C>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD
all nominees for all nominees FOR AGAINST ABSTAIN
1. Proposal to [ ] [ ] 2. Proposal to amend the Company's 1990 Employee Stock [ ] [ ] [ ]
elect directors. Purchase Plan to increase the number of shares of General
Division Common Stock available for issuance under the
Plan from 1,500,000 to 2,000,000.
NOMINEES: Henri A. Termeer, 3. Proposal to amend the Company's 1990 Employee Stock [ ] [ ] [ ]
Henry R. Lewis Purchase Plan to increase the number of shares of Tissue
Repair Division Common Stock available under the Plan
from 600,000 to 1,100,000.
FOR, except vote withheld from the following nominees(s): 4. Proposal to amend the Company's 1988 [ ] [ ] [ ]
_________________________________________________________ Director Stock Option Plan to increase
the number of shares of General
Division Common Stock covered by the
Plan from 200,000 to 233,600.
5. Proposal to amend the Company's 1988 [ ] [ ] [ ]
Director Stock Option Plan to increase
the number of shares of Tissue Repair
Division Common Stock covered by the
Plan from 70,000 to 100,000
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> 38
<TABLE>
<S> <C>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 29, 1997
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 29, 1997, 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 OTHER 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
-----------
</TABLE>
<PAGE> 39
<TABLE>
<S> <C>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD
all nominees for all nominees FOR AGAINST ABSTAIN
1. Proposal to [ ] [ ] 2. Proposal to amend the Company's 1990 Employee Stock [ ] [ ] [ ]
elect directors. Purchase Plan to increase the number of shares of General
Division Common Stock available for issuance under the
Plan from 1,500,000 to 2,000,000.
NOMINEES: Henri A. Termeer, 3. Proposal to amend the Company's 1990 Employee Stock [ ] [ ] [ ]
Henry R. Lewis Purchase Plan to increase the number of shares of Tissue
Repair Division Common Stock available for issuance under
the Plan from 600,000 to 1,100,000.
FOR, except vote withheld from the following nominees(s): 4. Proposal to amend the Company's 1988 [ ] [ ] [ ]
_________________________________________________________ Director Stock Option Plan to increase
the number of shares of General
Division Common Stock covered by the
Plan from 200,000 to 233,600.
5. Proposal to amend the Company's 1988 [ ] [ ] [ ]
Director Stock Option Plan to increase
the number of shares of Tissue Repair
Division Common Stock covered by the
Plan from 70,000 to 100,000.
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>
