<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)
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
DEAR STOCKHOLDERS:
We invite you to attend our Annual Meeting of Stockholders to be held on
Wednesday, May 26, 1999 at State Street Bank, 225 Franklin Street, Boston,
Massachusetts.
The enclosed proxy statement explains the agenda for the meeting and voting
information and procedures. It also includes information about our board of
directors and senior management. Please read this booklet carefully. Also
included with this proxy statement is a copy of our 1998 Annual Report and your
proxy card.
As we have done in the past, at the annual meeting we will review important
developments in our operations since our last stockholders meeting.
Whether or not you plan to attend, your vote is very important to us.
Information about voting procedures can be found in the proxy statement. Please
return a signed proxy card or give us instructions by telephone or over the
internet so that you can be sure your shares will be properly voted.
Sincerely,
Henri A. Termeer
Chairman and
Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF GENZYME CORPORATION
DATE:
Wednesday, May 26, 1999
TIME:
2:00 - 4:00 p.m.
PLACE:
State Street Bank
Enterprise Room, 5th floor
225 Franklin Street
Boston, Massachusetts
PURPOSE:
-- Re-elect three directors
-- Approve the 1999 Employee Stock Purchase Plan
-- Amend the 1990 Equity Incentive Plan to authorize the
grant of awards of GSP stock
-- Amend the director stock option plan to authorize the
grant of options to purchase GSP stock
-- Amend the directors deferred compensation plan to authorize
the grant of stock purchase rights for GSP stock
-- Act on any other matter that may be properly brought before
the meeting
Only stockholders of record at the close of business on March 31, 1999 will be
entitled to vote at the meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "IN FAVOR OF" ALL FIVE PROPOSALS.
PROPOSAL FOR TISSUE REPAIR STOCKHOLDERS ONLY:
-- Approve the transfer of the 50% interest in the joint venture
with Diacrin from Genzyme Tissue Repair to Genzyme General.
Only stockholders of record of Genzyme Tissue Repair at the close of business on
March 31, 1999 will be entitled to vote on the Tissue Repair proposal.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "IN FAVOR OF" THE PROPOSAL.
PROXY MATERIAL MAILING DATE:
April 16, 1999
By order of the Board of Directors
Peter Wirth, Clerk
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information Above Voting 3
Stock Ownership 5
ELECTION OF DIRECTORS 7
Directors Continuing in Office 8
Director Compensation 9
Executive Compensation 10
Compensation Committee Report on Executive Compensation 10
Summary Compensation Table 13
Option Grants in Last Fiscal Year 14
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values 15
Executive Employment Agreements 16
Executive Severance Agreements 16
Stock Performance Graphs 17
THE BENEFIT PLAN PROPOSALS 19
- --------------------------
PROPOSAL TO APPROVE THE 1999 EMPLOYEE STOCK PURCHASE PLAN 20
PROPOSAL TO AMEND THE 1990 EQUITY INCENTIVE PLAN 22
PROPOSAL TO AMEND THE DIRECTOR STOCK OPTION PLAN 24
PROPOSAL TO AMEND THE DIRECTOR DEFERRED COMPENSATION PLAN 25
THE GENZYME TISSUE REPAIR PROPOSAL
- -----------------------------------
PROPOSAL TO APPROVE THE TRANSFER OF THE 50% INTEREST IN
THE JOINT VENTURE WITH DIACRIN FROM
GENZYME TISSUE REPAIR TO GENZYME GENERAL 26
Certain Transactions 32
Section 16(a) Beneficial Ownership Reporting Compliance 33
Independent Accountants 33
Stockholder Proposals 33
Appendix A A-1
</TABLE>
<PAGE> 5
GENERAL INFORMATION ABOUT VOTING
Our Board of Directors is soliciting proxies for the 1999 Annual Meeting of
Stockholders. This proxy statement explains the agenda, voting information and
procedures. Please read it carefully.
In this proxy statement, references to "the company" or to Genzyme mean Genzyme
Corporation.
QUORUM. In order to hold and complete the business of the annual meeting, we
must have a majority of the outstanding shares of the three series of common
stock, voting together as a single class, represented at the meeting. In order
to approve the Genzyme Tissue Repair proposal, a majority of the outstanding
shares of GZTR stock must be represented at the meeting.
WHO CAN VOTE. Only stockholders of record of each series of Genzyme common stock
at the close of business on March 31, 1999 can vote at the meeting. We currently
have three series of common stock, and each is publicly traded on The Nasdaq
Stock Market(R). We refer to them in this document by their ticker symbols:
-- Genzyme General Division common stock is GENZ stock
-- Genzyme Tissue Repair Division common stock is GZTR stock
-- Genzyme Molecular Oncology Division common stock is GZMO stock
Our board of directors is considering designating a new series of stock for our
new Genzyme Surgical Products division. We refer to this stock as GSP stock.
There were no shares of GSP stock authorized, issued or outstanding as of March
31, 1999.
SHARES OUTSTANDING AND VOTING POWER.
<TABLE>
<CAPTION>
SHARES OUTSTANDING NUMBER OF TOTAL
COMMON STOCK MARCH 31, 1999 VOTES PER SHARE VOTING SHARES
- ------------ ------------------ ----------------- --------------
<S> <C> <C> <C>
GENZ stock 82,538,030 1.00 82,538,030
GZTR stock 22,367,116 0.06 1,342,027
GZMO stock 12,668,989 0.08 1,013,519
----------
Total 84,893,576
</TABLE>
The number of votes for each series of common stock was reset on January 1, 1999
and is reset every two years. It is based on an average closing stock price for
each series of stock over a defined period of time.
HOW TO VOTE YOUR SHARES. There are four ways you can vote your shares:
-- By mail
-- By telephone
-- On the Internet
-- In person, at the annual meeting
To vote by mail, simply complete the enclosed proxy card, sign and date it, and
return it in the enclosed self-addressed envelope. Instructions for voting by
telephone or on the internet can be found on your proxy card. If you hold your
shares through a bank, broker or other nominee, they will give you separate
instructions for voting your shares.
By signing a proxy, you are authorizing us to vote your shares at the meeting in
the manner you direct. If you return a signed proxy without specific voting
instructions, your shares will be voted in favor of the proposals recommended by
the board of directors. If any matters come before the meeting which
<PAGE> 6
are not described in this proxy statement, the proxies will use their own
judgment to determine how to vote your shares.
If your shares are held in a nominee name, you must request a legal proxy from
your nominee as proof of ownership in order to vote at the meeting.
HOW YOU MAY REVOKE YOUR PROXY INSTRUCTIONS. You may revoke or amend your proxy
before it is voted by writing to us directly, submitting a new proxy with a
later date, or by attending the meeting and voting in person.
WHAT IF YOU GET MORE THAN ONE PROXY CARD? This means that you have more than one
account at the transfer agent and/or with a nominee. It may also mean that you
hold stock in more than one series of Genzyme common stock. Your proxy card
lists the number of shares you are voting. Please sign and return all proxy
cards to be sure that all of your shares are voted.
We recommend you consolidate your holdings under the same name, address and tax
identification number as much as possible. This will eliminate some duplication
of mailings and costs. Please contact your nominee to consolidate accounts, or
our transfer agent, American Stock Transfer and Trust Co., Inc., at (212)
936-5100.
HOW THE SHARES ARE COUNTED. Approval of all of the proposals requires the
favorable vote of the majority of votes cast at the meeting. Abstentions and
broker non-votes are counted for determining a quorum but are not counted for
voting purposes. Broker non-votes occur when a broker returns a proxy but does
not have the authority to vote on a particular proposal without a specific
instruction from the owner of the shares.
Only stockholders of Genzyme Tissue Repair may vote on the proposal to transfer
the joint venture interest in Diacrin/Genzyme LLC from Genzyme Tissue Repair to
Genzyme General. Approval of the proposal requires the favorable vote of the
majority of Genzyme Tissue Repair votes cast at the meeting.
COSTS OF SOLICITATION. We are paying Corporate Investor Communications, a proxy
solicitation firm, $10,000 plus expenses to help us with the solicitation. Our
employees may solicit proxies personally, electronically, by telephone or by
mail. We also reimburse, on request, the fees and expenses of brokers and other
nominees for sending you the proxy material and sending in your vote.
RESULTS OF THE VOTING. We will announce the results of the voting at the annual
meeting. We will also publish the results in our quarterly report on Form 10-Q
that we will file with the Securities and Exchange Commission in August.
<PAGE> 7
STOCK OWNERSHIP
This table shows how many shares are held by anyone that owns more than 5% of
any series of our common stock. The information in this table is as of March 31,
1999 and is based on the most recent SEC filings by these entities as to their
ownership of our stock. Unless noted, each stockholder has sole voting and
investment power for the shares listed in the table.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED
(* INDICATES LESS THAN 1%)
GENZ GZTR GZMO
STOCK % STOCK % STOCK %
------ --- ----- --- ----- ---
<S> <C> <C> <C> <C> <C> <C>
FMR Corp. (1) 8,680,623 10.5 0 * 0 *
82 Devonshire Street
Boston, MA 02109
J.P. Morgan & Co., Inc. (2) 6,048,324 7.3 23,150 * 297,618 2.3
60 Wall Street
New York, NY 10260
State of Wisconsin Investment Board (3) 458,000 * 2,152,148 9.6 86,442 *
P.O. Box 7842
Madison, WI 53707
Wellington Management Co., L.L.P.(4) 10,111,899 12.3 35,502 1.5 987,018 7.8
75 State Street
Boston, MA 02109
- -----------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) FMR Corp. is a holding company and is reporting the shares listed for
several subsidiaries, who act as investment advisors. FMR has sole power to vote
446,670 shares of GENZ stock and sole power to dispose of all of the shares
listed. No single client of FMR or its subsidiaries owns more than 5% of the
shares listed.
(2) Includes the following:
-- Morgan Guaranty Trust Company of New York, a bank
-- J.P. Morgan Investment Management, Inc., an investment advisor
-- J.P. Morgan Florida Federal Savings Bank, an investment advisor
No single client of J.P. Morgan owns more than 5% of the shares listed. J.P.
Morgan has sole power to vote 4,598,146 shares of GENZ stock and shared power to
vote 15,370 shares of GENZ stock. J.P. Morgan has sole power to dispose of
6,000,654 shares of GENZ stock and shared power to dispose of 44,570 shares of
GENZ stock.
(3) The State of Wisconsin Investment Board is a government agency that manages
public pension funds.
(4) Wellington Management Co., L.L.P. is a registered investment advisor. Its
clients can receive or direct the receipt of dividends and proceeds from sales
of shares disposed of by Wellington Management. No single client owns more than
5% of the shares listed. Wellington Management has shared power to dispose or to
direct the disposition of 10,080,499 shares of GENZ stock and 987,018 shares of
GZMO stock, and has shared power to vote or to direct the vote with respect to
5,361,554 shares of GENZ stock and 587,641 shares of GZMO stock.
----------------
<PAGE> 8
This table shows how much of each series of our common stock is held by
the executive officers listed in the compensation table on page 13, our
directors, and all of our current executive officers and directors together. It
also includes information about the ownership of Genzyme Transgenics
Corporation, a 40% owned subsidiary of Genzyme, whose stock is referred to by
its stock symbol, GZTC. Unless otherwise noted, each director and officer has
sole voting and investment power for the shares listed. The information in this
table is as of March 31, 1999.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED
(* INDICATES LESS THAN 1%) (1)
GENZ GZTR GZMO GZTC
STOCK % STOCK % STOCK % STOCK %
----- -- ----- -- ----- -- ----- --
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Henri A. Termeer(2) 781,355 * 317,448 * 71,461 * 28,500 *
Earl M. Collier, Jr. 41,077 * 19,523 * 6,684 * 1,000 *
David J. McLachlan 198,918 * 56,181 * 12,695 * 1,600 *
Alan E. Smith 141,778 * 42,668 * 17,640 * 14,000 *
G. Jan van Heek(3) 85,477 * 48,933 * 6,392 * 1,300 *
Peter Wirth 108,241 * 35,122 * 20,613 * 800 *
Constantine E. Anagnostopoulos 42,000 * 15,018 * 2,916 * 0 *
Douglas A. Berthiaume(4) 44,100 * 31,755 * 7,340 * 0 *
Henry E. Blair 50,600 * 21,911 * 19,339 * 13,000 *
Robert J. Carpenter(5) 29,082 * 31,213 * 3,764 * 0 *
Charles L. Cooney(6) 27,880 * 16,769 * 4,478 * 0 *
Henry R. Lewis 34,600 * 12,057 * 2,980 * 0 *
All current officers and directors
as a group (17 people)(7) 1,820,446 2.2 776,071 3.5 208,774 1.6 60,200 *
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
(1) The shares listed include the following stock options exercisable within 60
days of March 31, 1999:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
GENZ GZTR GZMO GZTC
STOCK OPTIONS STOCK OPTIONS STOCK OPTIONS STOCK OPTIONS
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Henri A. Termeer 561,420 195,189 52,080 19,000
Earl M. Collier, Jr. 40,636 18,135 6,684 ---
David J. McLachlan 185,686 47,143 11,274 1,600
Alan E. Smith 141,490 39,822 17,618 14,000
G. Jan van Heek 83,478 39,072 6,350 800
Peter Wirth 106,391 32,463 20,442 800
Constantine E. Anagnostopoulos 36,000 14,028 2,700 ---
Douglas A. Berthiaume 37,600 18,637 6,638 ---
Henry E. Blair 25,600 17,827 6.638 12,000
Robert J. Carpenter 18,400 13,208 2,700 ---
Charles L. Cooney 12,000 13,488 2,700 ---
Henry R. Lewis 32,000 11,024 2,700 ---
All current officers and directors
as a group (17 people) 1,504,229 563,968 169,538 48,200
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The shares listed in this footnote for Mr. van Heek and for all current officers
and directors as a group include 19,620 shares of GENZ stock and 2,043 shares of
GZTR stock subject to stock options held by Mr. van Heek's wife. Mr. van Heek
disclaims beneficial ownership of shares held by his wife.
(2) The stock beneficially owned by Mr. Termeer includes:
<TABLE>
<CAPTION>
GENZ STOCK GZTR STOCK GZMO STOCK
---------- ---------- ----------
<S> <C> <C> <C>
-- shares held by his wife 1,123 6,900 120
-- shares held in a trust -- 8,648 --
</TABLE>
Shares held in trust are for the benefit of Mr. Termeer's son. Mr. Termeer
disclaims beneficial ownership of all shares held by his wife and the trust.
<PAGE> 9
(3) Mr. van Heek's wife owns 945 shares of GENZ stock, 379 shares of GZTR stock
and 42 shares of GZMO stock. Mr. van Heek disclaims beneficial ownership of all
shares held by his wife.
(4) Mr. Berthiaume's wife owns 2,000 shares of GENZ stock, 1,560 shares of GZTR
stock and 216 shares of GZMO stock. Mr. Berthiaume disclaims beneficial
ownership of all shares held by his wife.
(5) Mr. Carpenter's wife owns 348 shares of GENZ stock, 44 shares of GZTR stock
and 41 shares of GZMO stock. Mr. Carpenter disclaims beneficial ownership of all
shares held by his wife.
(6) The stock beneficially owned by Dr. Cooney includes:
<TABLE>
<CAPTION>
GENZ STOCK GZTR STOCK GZMO STOCK
---------- ---------- ----------
<S> <C> <C> <C>
-- held jointly with his wife 15,440 3,269 1,732
-- held by his wife 120 3 12
-- held by his son 320 9 34
</TABLE>
Dr. Cooney disclaims beneficial ownership of all shares held by his wife and by
his son.
(7) In addition to the shares listed in footnotes 1 through 6 above, the shares
listed include the following:
<TABLE>
<CAPTION>
GENZ STOCK GZTR STOCK GZMO STOCK
---------- ---------- ----------
<S> <C> <C> <C>
-- shares held jointly with the spouse
of an officer -- -- 71
-- shares held by the son of an
officer 2,757 242 297
</TABLE>
ELECTION OF DIRECTORS
We currently have seven directors. Our charter divides the board of
directors into three classes, with each class being as equal in size as
possible. Each class of directors is elected for a three-year term.
Three directors have been nominated for re-election to a term of office
expiring in 2002: Constantine E. Anagnostopoulos, Robert J. Carpenter and
Charles L. Cooney. Each of the nominees has agreed to serve as a director if he
is elected. If for some reason a nominee is unable to serve, the board will
propose a substitute nominee and the proxies will vote to approve the election
of the substitute nominee. The following biographies give you information about
each nominee followed by biographies of the directors who are continuing in
office.
CONSTANTINE E. ANAGNOSTOPOULOS, director since 1986
Dr. Anagnostopoulos, 76, is Managing General Partner of Gateway Associates,
which is the general partner of Gateway Venture Partners III, L.P., a venture
capital partnership. He is a retired corporate executive of Monsanto Company.
ROBERT J. CARPENTER, director since 1994
Mr. Carpenter, 54, is 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. He was
President and Chief Executive Officer of VacTex, Inc., a privately held
biotechnology company which he co-founded, from November 1995 until its
acquisition by Aquila Biopharmaceuticals, Inc. in April 1998. 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. He is also a director of Aquila Biopharmaceuticals.
<PAGE> 10
CHARLES L. COONEY, director since 1983
Dr. Cooney, 54, is a Professor of Chemical and Biochemical Engineering and
Co-Director of the Program on the Pharmaceutical Industry at Massachusetts
Institute of Technology. Dr. Cooney joined the MIT faculty as an Assistant
Professor in 1970 and became a Professor in 1982. Dr. Cooney is a director of
CUNO, Inc., a high technology manufacturer of filtration products for
separation, clarification and purification of liquids and gases. He is also a
director of Astra AB, an international pharmaceutical company, and a principal
of BioInformation Associates, Inc., a consulting company.
DIRECTORS CONTINUING IN OFFICE
The following directors were elected at our 1997 annual meeting for
terms ending in 2000:
HENRI A. TERMEER, director since 1983
Mr. Termeer, 53, has served as President of Genzyme since October 1983, Chief
Executive Officer since December 1985 and Chairman of the Board since May 1988.
For ten years prior to joining Genzyme, Mr. Termeer worked for Baxter Travenol
Laboratories, Inc., a manufacturer of human health care products. Mr. Termeer is
also a director of ABIOMED, Inc., AutoImmune Inc., Diacrin, Inc., GelTex
Pharmaceuticals and Genzyme Transgenics Corp., and a trustee of Hambrecht &
Quist Healthcare Investors and of Hambrecht & Quist Life Sciences Investors.
HENRY R. LEWIS, director since 1987
Mr. Lewis, 73, is a consultant to several companies. 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.
The following directors were elected at our 1998 annual meeting for
terms ending in 2001:
HENRY E. BLAIR, director since 1981
Mr. Blair, 55, is the Chief Executive Officer of Dyax Corp., 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 Genzyme
Transgenics and Celtrix Pharmaceuticals, Inc.
DOUGLAS A. BERTHIAUME, director since 1988
Mr. Berthiaume, 50, is Chairman, President and Chief Executive Officer of Waters
Corporation, a high technology 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.
----------------
The board of directors held eight meetings during 1998, and each
director attended at least 75% of all meetings of the board and all committees
of the board on which he served, except for Dr. Anagnostopoulos, who attended
63% of all board meetings and 67% of the meetings of all committees on which he
served. The board has audit and compensation committees, but does not have a
nominating committee.
<PAGE> 11
The audit committee held three meetings in 1998. Current members are
Messrs. Lewis (chairman), Berthiaume, Carpenter and Dr. Anagnostopoulos. The
purpose of the committee is to ensure that the financial information provided to
our stockholders and others is reliable and that the systems of control that we
have established effectively safeguard the assets of the company. The committee
reviews the general scope and results of our annual audit, the fee charged by
our independent accountants and issues relating to internal control systems.
The compensation committee was combined with the equity committee at the
1998 annual meeting. Together they held a total of five meetings in 1998.
Current members are Drs. Cooney (chairman) and Anagnostopoulos, and Messrs.
Berthiaume and Lewis. The committee determines the compensation to be paid to
all executive officers, including the chief executive officer, and administers
the company's equity incentive plans.
DIRECTOR COMPENSATION
Employee directors do not receive any additional compensation for their
service on the board of directors. Non-employee directors receive a quarterly
retainer of $6,250. Under our director deferred compensation plan, each director
can choose to defer his retainer fee:
-- in exchange for cash or a combination of cash and stock
-- into stock accounts allocated to GENZ stock, GZTR stock and/or GZMO stock
-- until his service as a director ends or until a specified date
Directors also receive stock option grants for each year (or partial year)
served on the board. Grants are made when a director is elected or re-elected to
the board. The terms of these grants include:
-- 4,000 shares of GENZ stock
-- a number of shares of GZTR stock with a market value equal to
one-quarter of the market value of the GENZ stock option grant
-- a number of shares of GZMO stock with a market value equal to
one-quarter of the market value of the GENZ stock option grant
-- exercise price equal to the closing price of each series of stock on the
date of grant
-- one-third of the shares become exercisable on each of the next three
annual meetings following the date of grant
-- have a term of ten years
As of March 31, 1999, one of the five eligible directors was participating in
the deferred compensation plan. Mr. Blair became eligible to receive the
retainer fee in June 1998.
Mr. Blair has provided consulting services to us since 1990. His current
agreement runs from June 1, 1998 through December 31, 1999 and requires a
minimum of 25 days of consulting services. He receives an annual fee of $50,000.
We paid Mr. Blair $100,000 in 1998 under this and a prior consulting agreement.
Dr. Cooney has provided consulting services to us since 1983. Dr. Cooney's
agreement covers 15 days of consulting services during the year, and for each
day he works in excess of 15 days he will be paid $2,000 per day or $250 per
hour. We paid Dr. Cooney $30,000 in 1998.
Mr. Carpenter entered into a consulting contract with us in 1998. Mr.
Carpenter will be paid $2,000 per day, and for partial days at a rate of $250
per hour. Mr. Carpenter received $10,000 for services performed during 1998.
<PAGE> 12
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Our executive compensation program is designed to attract, reward and
motivate executive officers who contribute to our long-term success. We also
seek to align executive compensation with the achievement of business objectives
and individual and corporate performance.
There are three elements to our executive compensation program:
-- base salary
-- annual incentive bonuses
-- stock option grants
For 1998, we sought to achieve a total compensation 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 blended market rate is weighted
40% toward large biotechnology companies and 60% toward pharmaceutical companies
(50/50 in the case of the chief executive officer). We believe this is an
appropriate measure of cash compensation because we are regarded in the
employment market as a growing small pharmaceutical company.
BASE SALARY. For 1998, Henri Termeer recommended merit increases and base
salary amounts for each officer other than himself based on his assessment of
each officer's individual performance. We approved his recommendations after
reviewing an analysis of compensation data gathered from two surveys prepared by
independent compensation consultants. These surveys focused on cash compensation
compiled for the biotechnology and pharmaceutical industries. Genzyme was one of
the companies included in each survey. These surveys were used to establish the
blended market rates used in our total compensation package.
We did not seek to set each officer's salary at the same percentile within
the established range. We evaluated Mr. Termeer's recommendation regarding each
officer's base salary in light of the range established for that officer's
position, taking into account the officer's tenure and our subjective assessment
of individual performance. For 1998, base salaries ranged from the first to the
third quartile of the ranges developed from the blended survey data.
INCENTIVE BONUSES. A significant portion of the direct pay of officers
consists of annual incentive bonuses. The bonus targets are closely tied to
performance measures, at both the corporate level and at individual areas of
responsibility. We established a bonus target for each officer prior to the
beginning of 1998 using the same survey data considered in setting base
salaries. Mr. Termeer recommended the bonus targets for all officers other than
himself and we evaluated and approved the targets.
The bonus targets included both a corporate performance component and an
individual performance component for all officers. There is also a divisional
performance component for those officers with operating responsibility for a
specific business unit. The corporate performance component was payable at our
discretion based on the extent to which Genzyme achieved the operating income
goals approved by the board of directors in connection with setting the 1998
annual budget. The individual performance component was payable at the
discretion Mr. Termeer based on his evaluation of each officer's performance for
the year. The divisional performance component was payable at our discretion
based on the extent to which the business unit achieved its operating income
goals for 1998.
<PAGE> 13
The 1998 combined bonus targets represented from 52% to 80% of base salary.
The amount payable based on corporate and divisional performance represented 55%
to 64% of the total bonus payable. For 1998, Genzyme exceeded the total
operating income goals established in the 1998 budget. Therefore, each officer
received 100% of his targeted corporate bonus.
STOCK OPTIONS. We made annual stock option awards to officers in May 1998,
at the same time that stock option awards were made to all other qualified
employees. We have established guidelines to limit the total number of options
that may be granted in a fiscal year to a stated percentage of shares
outstanding. The following range of option grants were made to officers:
<TABLE>
<CAPTION>
RANGE OF SHARES GRANTED
------------------------
<S> <C>
GENZ stock 4,844 - 23,804
GZTR stock 1,211 - 15,377
GZMO stock 1,211 - 13,602
</TABLE>
We determined the size of each officer's award 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 officers at comparable
salary levels. We did not consider the number of options previously granted to
each officer in determining the size of awards.
MR. TERMEER'S COMPENSATION. In fixing Mr. Termeer's base salary for 1998,
we considered chief executive officer compensation data contained in the same
surveys of biotechnology and pharmaceutical companies used in setting the base
salaries for the other officers. We fixed Mr. Termeer's 1998 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, we considered several corporate performance measures from 1997:
-- total revenues for Genzyme General increased 17% and net income
increased 16%
-- product and service revenues for Genzyme General increased 21% to
$586 million
-- sales of Cerezyme(R)enzyme and Ceredase(R)enzyme reached $333 million,
an increase of 26% over 1996
-- we completed the conversion of U.S. patients with Gaucher's disease
from tissue-derived Ceredase(R) enzyme to recombinant Cerezyme(R)
enzyme
-- we filed a new drug application for Thyrogen(R) recombinant human
thyroid stimulating hormone in the U.S.
-- we established a new division, Genzyme Molecular Oncology, to focus our
efforts in the area of molecular oncology and gene therapy for the
treatment of cancer
-- a new drug application for Renagel(R) Capsules was filed with the FDA
in November 1997 under a joint venture with GelTex Pharmaceuticals
-- we received approval from the FDA for a biologics license for our
Carticel(R) autologous cultured chondrocytes
We believe that a significant portion of Mr. Termeer's cash compensation
should be tied to performance. Therefore, we set Mr. Termeer's 1998 combined
bonus target at 90% of his base salary. Approximately 40% of Mr. Termeer's bonus
target was payable based on individual performance and 60% was payable based on
corporate performance. Mr. Termeer received 100% of his targeted corporate
bonus. We awarded Mr. Termeer 100% of his targeted individual performance bonus
based on several achievements during the year:
-- consolidated revenues increased 17% to $709.3 million
-- consolidated net income increased 59% to $62.6 million
-- sales of Cerezyme(R) enzyme and Ceredase(R) enzyme reached a record
$411.1 million, a 24% increase
<PAGE> 14
-- we received FDA marketing approval for Renagel(R) Capsules in November
-- we received FDA marketing approval for Thyrogen(R) hormone in December
-- sales of Carticel(R) chondrodytes increased 66% worldwide and 82% in
the U.S.
-- in November, GZMO stock began trading on Nasdaq following a
distribution of GZMO stock to GENZ stockholders
In May 1998, we granted Mr. Termeer options to purchase 72,800 shares of
GENZ stock, 31,200 shares of GZTR stock and 31,200 shares of GZMO stock based on
the same analysis used for granting options to the other officers.
TAX LAW LIMITS ON EXECUTIVE COMPENSATION. Section 162(m) of the Internal
Revenue Code limits the tax deduction available to Genzyme for compensation paid
to the chief executive officer and the other four most highly paid officers in
excess of $1,000,000 in any fiscal year. Certain performance based compensation
that has been approved by stockholders is not subject to the limit. Our
stockholders have approved an amendment to the 1990 Equity Plan designed to
maximize the deductibility of certain awards under that plan. We reserve the
authority to award compensation which is not fully deductible under the statute
if such an award is consistent with our compensation policies and is in the best
interests of the company and its stockholders.
By the Compensation Committee,
Charles L. Cooney, Chairman
Constantine E. Anagnostopoulos
Douglas A. Berthiaume
Henry R. Lewis
<PAGE> 15
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION AWARDS ALL OTHER
COMPENSATION SECURITIES UNDERLYING OPTIONS(#) COMPENSATION
-------------------- ------------------------------------- ------------
GENZ GZTR GZMO GZTC
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) STOCK STOCK STOCK STOCK ($)(1)
- ----------------------- ---- --------- -------- ----- ------ ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Henri A. Termeer 1998 803,223 698,670 72,800 31,200 31,200 9,000 16,932
Chief Executive 1997 688,697 526,397 78,000 52,000 66,000 3,000 17,742
Officer 1996 603,942 545,000 45,000 22,500 -- -- 15,564
Earl M. Collier, Jr. 1998 356,539 170,000 21,835 5,459 5,459 -- 3,296
Executive Vice 1997 296,635 100,000 84,987 39,918 7,500 -- 2,125
President (2) 1996 -- -- -- -- -- -- --
David J. McLachlan 1998 290,000 225,000 13,258 5,682 5,682 -- 2,500
Executive Vice 1997 259,365 169,400 13,169 6,585 15,000 -- 2,125
President; Chief 1996 226,269 120,000 13,600 5,100 -- 2,000 1,875
Alan E. Smith 1998 317,000 175,000 40,269 6,544 6,544 -- 2,500
Senior Vice 1997 285,500 127,050 13,169 6,585 25,000 6,000 2,116
President, 1996 259,346 110,000 13,600 5,100 -- -- 1,875
Research; Chief
Scientific Officer
G. Jan van Heek 1998 330,154 225,000 16,189 9,251 4,625 2,000 2,500
Executive Vice 1997 287,860 153,915 13,169 6,585 7,500 -- 1,367
President 1996 250,000 120,000 13,600 5,100 -- -- --
Peter Wirth
Executive Vice 1998 445,462 225,000 23,804 6,801 13,602 2,000 2,500
President; Chief 1997 401,564 169,400 27,205 13,602 25,000 -- 2,008
Legal Officer 1996 256,281 128,000 58,600 17,600 -- -- 1,875
</TABLE>
George Graboys
(1) Amounts consist of Genzyme contributions under our retirement savings plan,
a 401(k) plan. For Mr. Termeer, the reported amounts also include the
following insurance premiums we paid for life and disability insurance
benefits:
1998 $14,432
1997 $15,741
1996 $13,689
(2) Mr. Collier became an employee of the company in 1997.
<PAGE> 16
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------
% of Total
Number of Option Potential Realizable Value at
Securities Granted to Exercise or Assumed Annual Rates of Stock
Underlying Employees Based Price Appreciation for Option Term
Options In Fiscal ($/Share) Expiration ----------------------------------
Granted(#)(1) 1998 (1) Date %($)(4) 10%($)(4)
------------- -------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Henri A. Termeer
GENZ stock 72,800 3.0 27.56 5/28/08 1,261,931 3,197,982
GZTR stock 31,200 3.2 6.50 5/28/08 127,540 323,211
GZMO stock 31,200 8.5 7.00 5/28/08 137,351 348,073
GZTC stock(2) 9,000 1.5 9.19 5/27/08 51,085 130,324
Earl M. Collier, Jr.
GENZ stock 21,835 0.9 27.56 5/28/08 378,493 959,175
GZTR stock 5,459 0.6 6.50 5/28/08 22,315 56,552
GZMO stock 5,459 1.5 7.00 5/28/08 24,032 60,902
David J. McLachlan
GENZ stock 13,258 0.5 27.56 5/28/08 229,817 582,402
GZTR stock 5,682 0.6 6.50 5/28/08 23,227 58,862
GZMO stock 5,682 1.6 7.00 5/28/08 25,014 63,390
Alan E. Smith
GENZ stock 15,269 0.6 27.56 5/28/08 264,676 670,742
GENZ stock 25,000 1.0 41.50 12/01/08 652,478 1,653,508
GZTR stock 6,544 0.7 6.50 5/28/08 26,751 67,791
GZMO stock 6,544 1.8 7.00 5/28/08 28,808 73,006
G. Jan van Heek
GENZ stock 16,189 0.7 27.56 5/28/08 280,624 711,156
GZTR stock 9,251 1.0 6.50 5/28/08 37,816 95,834
GZMO stock 4,625 1.3 7.00 5/28/08 20,360 51,597
GZTC stock(3) 2,000 0.3 13.00 3/04/08 16,351 41,437
Peter Wirth
GENZ stock 23,804 1.0 27.56 5/28/08 412,624 1,045,670
GZTR stock 6,801 0.7 6.50 5/28/08 27,801 70,454
GZMO stock 13,602 3.7 7.00 5/28/08 59,880 151,747
GZTC stock (3) 2,000 0.3 13.00 3/04/08 16,351 41,437
All Genzyme
stockholders(5)
GENZ stock -- -- 27.56 -- 1,432,860,201 3,616,816,475
GENZ stock -- -- 41.50 -- 2,158,369,485 5,446,684,600
GZTR stock -- -- 6.50 -- 19,705,176 231,275,979
GZMO stock -- -- 7.00 -- 55,870,241 141,005,848
</TABLE>
- -----------
(1) Except for the GZTC stock options, which were granted by Genzyme
Transgenics, the options granted in 1998 were made under the 1990 Equity
Incentive Plan. These options are granted at fair market value on the date of
grant and have a ten year term. 20% of the shares were exercisable on the date
of grant and an additional 20% of the shares will vest annually over the next
four years on the anniversary of the date of grant.
(2) The GZTC stock options granted to Mr. Termeer were granted on May 27, 1998
at fair market value. One-third of the shares are exercisable on the date of
each of the next three annual meetings of the Genzyme Transgenics stockholders.
<PAGE> 17
(3) The GZTC stock options granted to Messrs. Van Heek and Wirth were granted on
March 4, 1998 at fair market value. 20% of the shares were exercisable on the
date of grant and an additional 20% of the shares will vest annually over the
next four years on the anniversary of the date of grant.
(4) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the SEC and are not intended to forecast future
appreciation, if any, in the price of the securities. No gain is possible
without an increase in the price of the underlying stock, which will benefit all
stockholders. In order to realize the potential values in the 5% and 10% columns
of this table, the trading price of the stocks would have to be approximately
63% and 159% above the respective exercise prices for each option, or:
<TABLE>
<CAPTION>
OPTION GRANT 63% PRICE 159% PRICE
EXERCISE PRICE INCREASE INCREASE
-------------- ---------- ----------
<S> <C> <C> <C> <C>
-- GENZ stock $27.56 $44.92 $71.38
-- GENZ stock $41.50 $67.65 $107.49
-- GZTR stock $6.50 $10.60 $16.84
-- GZMO stock $7.00 $11.41 $18.13
</TABLE>
- -----------
(5) The amounts shown for all our stockholders reflect the potential value if
the GENZ stock, the GZTR stock or the GZMO stock appreciates at the rates shown
over the term of the options, if stockholders bought the shares in 1998 at the
listed option exercise prices.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options at Options at
Acquired on Value December 31, 1998(#) December 31, 1998($)
Name Exercise(#) Realized($)(1) Exercisable/Unexercisable Exercisable/Unexercisable (2)
- ---- ----------- -------------- ------------------------- -----------------------------
<S> <C> <C> <C> <C>
Henri A. Termeer
GENZ stock 130,000 $3,163,810 873,260/338,860 $31,811,360/$9,329,418
GZTR stock -- -- 124,540/125,215 0/0
GZMO stock -- -- 32,640/64,560 0/0
GZTC stock -- -- 16,000/6,000 15,000/0
Earl M. Collier, Jr.
GENZ stock -- -- 25,635/81,187 $539,641/$1,755,642
GZTR stock -- -- 11,726/33,651 0/0
GZMO stock -- -- 4,092/8,867 0/0
David J. McLachlan
GENZ stock 100,000 $3,721,810 174,960/99,395 $5,798,238/$2,830,136
GZTR stock -- -- 25,911/33,778 0/0
GZMO stock -- -- 7,137/13,545 0/0
GZTC stock -- -- 1,200/800 0/0
Alan E. Smith
GENZ stock 30,000 $817,285 140,362/130,094 $4,304,347/$3,228,542
GZTR stock -- -- 26,083/25,579 0/0
GZMO stock -- -- 11,309/20,235 0/0
GZTC stock -- -- 12,000/12,000 0/0
G. Jan van Heek
GENZ stock 38,534 $1,126,380 52,546/101,740 $1,460,110/$2,882,164
GZTR stock -- -- 26,625/36,633 0/0
GZMO stock -- -- 3,925/8,200 0/0
GZTC stock -- -- 400/1,600 0/0
Peter Wirth
GENZ stock -- -- 93,469/115,534 $2,072,481/$2,522,348
GZTR stock -- -- 27,363/45,362 0/0
GZMO stock -- -- 12,721/25,881 0/0
GZTC stock -- -- 400/1,600 0/0
</TABLE>
<PAGE> 18
- ----------------
(1) This number is calculated by subtracting the option exercise price from
either the closing price of the stock on the date of exercise or the actual sale
price of the stock, then multiplying that number by the number of shares
exercised. The amounts in this column may not represent amounts actually
realized by the officer.
(2) This number is calculated by subtracting the option exercise price from the
closing price of the underlying common stock on December 31, 1998, then
multiplying that number by the number of shares under the option. The closing
prices on December 31, 1998 were:
-- GENZ stock $49.75
-- GZTR stock $2.25
-- GZMO stock $3.25
-- GZTC stock $5.13
EXECUTIVE EMPLOYMENT AGREEMENTS
Mr. Termeer has an employment agreement that renews automatically each
January 1 for an additional one year period, unless written notice of nonrenewal
is given. The agreement provided for an initial base salary in 1990 of $300,000,
and is subject to increases approved by the board or the compensation committee.
Mr. Wirth has a three year employment agreement that renews automatically
each January 1 for an additional one year period, unless written notice of
nonrenewal is given. The agreement provided for his employment in a half-time
capacity for an initial base salary in 1996 of $225,000. When he became a
full-time employee in October 1996, his base salary increased to $380,000 and is
subject to increases approved by the board or the compensation committee.
Both agreements provide for:
-- certain life and disability insurance benefits
-- participation in the cash bonus plan
-- participation in equity incentive plans
-- 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 employment is terminated without cause
-- a lump sum severance payment of three times annual salary and bonus
if employment is terminated by us without cause or by him for good
reason following a change in control
-- following termination due to a change in control:
-- a cash payment equal to the additional retirement benefit
that would have been earned under any retirement plan in
employment had continued for three years
-- continuation of the life, accident and health insurance
coverage for three years, unless comparable benefits are
provided by a new employer
-- in certain circumstances, legal costs and relocation
expenses associated with the termination
-- customary confidentiality, non-competition and ownership of
inventions provisions
EXECUTIVE SEVERANCE AGREEMENTS
We have severance agreements with all our executive officers other than
Messrs. Termeer and Wirth. Under these agreements, payments will be made under
certain circumstances following a change in control. The agreements provide for:
<PAGE> 19
-- automatic renewal each January 1 unless written notice of
nonrenewal is given
-- following termination due to a change in control:
-- a lump sum severance payment of two times (in the case Mr.
McLachlan, three times) annual salary and bonus
-- a cash payment equal to the additional retirement benefit
which would have been earned under our retirement plan if
employment had continued for two years (in the case of Mr.
McLachlan, three years) following the date of termination
-- participation in life, accident and health insurance plans
for such period, unless comparable benefits are provided by
a new employer
-- in certain circumstances, legal costs and relocation
expenses associated with such termination
STOCK PERFORMANCE GRAPHS
These graphs compare the five year cumulative total stockholder returns
for each of the three publicly traded series of Genzyme common stock to that of
the S&P 500 Composite Index and the Nasdaq Pharmaceutical Index.
GENZ STOCK (1)
<TABLE>
<CAPTION>
[CHART]
- ------------------------------------------------------------------------------------------------------------
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
GENZ stock $100 $115 $227 $158 $202 $362
S&P 500 100 98 132 159 208 264
Nasdaq Pharmaceutical Index 100 75 138 138 143 183
- ------------------------------------------------------------------------------------------------------------
</TABLE>
GZTR STOCK (2)
<TABLE>
<CAPTION>
[CHART]
- ------------------------------------------------------------------------------------------------------------
12/16/94 12/31/94 12/31/95 2/31/96 12/31/97 12/31/98
-------- ------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
GZTR stock $100 $ 79 $334 $150 $145 $ 47
S&P 500 100 100 134 161 212 268
Nasdaq Pharmaceutical Index 100 104 191 192 198 254
- ------------------------------------------------------------------------------------------------------------
</TABLE>
GZMO STOCK (3)
<TABLE>
<CAPTION>
[CHART]
11/16/98 12/31/98
-------- --------
<S> <C> <C>
GZMO stock $100 $42
S&P 500 100 108
Nasdaq Pharmaceutical Index 100 119
</TABLE>
- ------------
(1) All amounts reflect a 2-for-1 split of GENZ stock on July 25, 1996. We have
made the following dividends on shares of GENZ stock:
-- December 23, 1994 0.0675 share of GZTR stock for one share of GENZ stock
-- July 22, 1997 0.03 share of GZTR stock for one share of GENZ stock
-- November 16, 1998 0.10805 share of GZMO stock for one share of GENZ stock
The cumulative returns are based on a $100 investment on January 1, 1993, with
all dividends, including the GZTR and GZMO stock dividends, being reinvested.
(2) GZTR stock was first publicly traded on December 16, 1994. The cumulative
returns are based on a $100 investment made on that date, with all dividends
being reinvested.
<PAGE> 20
(3) GZMO stock was first publicly traded on November 16, 1998. The cumulative
returns are calculated based on a $100 investment made on that date, with all
dividends being reinvested.
THE BENEFIT PLAN PROPOSALS
Our board is considering designating a new series of stock intended to
reflect the value and track the performance of Genzyme Surgical Products, a new
division we are establishing. We refer to this stock as GSP stock. Genzyme
Surgical Products develops and markets biosurgery products primarily for the
treatment of cardiovascular disease. It has a portfolio of surgical instruments,
sutures and therapeutics for the cardiovascular surgery, general surgery and
plastic surgery markets. In addition to our new employee stock purchase plan, we
are proposing amendments to our 1990 Equity Incentive Plan, director stock
option plan, and director's deferred compensation plan. These proposals would
provide for the grant of awards, options and rights under the plans for GSP
stock in addition to the GENZ stock, GZTR stock and GZMO stock already
authorized under each plan. If you approve the proposals to include GSP stock in
these plans, they will be effective when the board designates shares of our
common stock as GSP stock.
Our equity plans are important components of our compensation program, and
are used to attract, retain and reward key employees, and to attract and retain
qualified directors. We believe it is important to maintain flexibility to
provide our directors and employees with the opportunity to purchase shares of
each series of our stock on favorable terms. Each of these plans is useful in
achieving our goals.
Specifically, we believe that options for GSP stock under the equity plan
will provide a more effective and direct incentive for the employees of our
Genzyme Surgical Products division instead of options for GENZ stock, GZTR stock
or GZMO stock alone. Similarly, options for specified combinations of GENZ
stock, GZTR stock, GZMO stock and GSP stock under the director plan and the
ability to credit GSP stock to directors' deferral accounts under the deferred
compensation plan will provide more effective and direct incentives for
directors to promote our success as a whole instead of allocations of each
series of stock alone.
Shares of GSP stock issued under the plans could be either authorized and
unissued shares or shares that we have repurchased. If an outstanding option or
right expires or is canceled or forfeited, the covered shares of GSP stock would
again be available for grant under the plans.
The proceeds received when options or rights are exercised under the plans
will be allocated to the division that the series of stock issued tracks. The
board can also choose to allocate proceeds from the exercise of GZTR, GZMO or
GSP stock options or rights to Genzyme General in exchange for a reduction in
corresponding Genzyme Tissue Repair, Genzyme Molecular Oncology or Genzyme
Surgical Products designated shares. Designated shares are authorized shares of
GZTR, GZMO and GSP stock which are not issued and outstanding, but which our
board may from time to time issue, sell or distribute without allocating the
proceeds or benefits to the division that the series of stock tracks. They are
created when cash or other assets are transferred from Genzyme General to
another Genzyme division.
The closing price of each series of our stock on March 31, 1999 was:
-- GENZ $50.438
-- GZTR $ 2.313
-- GZMO $ 3.750
<PAGE> 21
PROPOSAL TO APPROVE THE 1999 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
Our board has adopted the 1999 Employee Stock Purchase Plan subject to
stockholder approval. A copy of the plan is attached as Appendix A. The purpose
of the plan is to provide our full-time employees who wish to become
stockholders an opportunity to buy shares under the plan on favorable terms.
The plan is an amendment and replacement of the 1990 Employee Stock
Purchase Plan, which has been merged into the 1999 plan. The new plan includes
an increase in the aggregate number of shares that may be purchased so that a
sufficient number of shares of GENZ stock, GZTR stock, GZMO stock and, when the
board establishes GSP stock, that series of stock, are available to be issued in
the future. As of March 31, 1999, approximately 3,556 employees were eligible to
participate in the plan. The plan terminates on March 24, 2009.
ADMINISTRATION AND ELIGIBILITY
The plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the federal tax code. Our board grants rights to purchase stock
under the plan, and through an administrator, determines the frequency and
duration of enrollments and the date(s) when stock may be purchased. General
terms of participation include:
-- voluntary participation by employees, with the right to withdraw from
the program at any time before stock is purchased
-- automatic withdrawal on termination of employment
-- purchase price per share is 85% of the lower of the stock's fair market
value at the beginning of an enrollment period or on the exercise date
-- payment is made through payroll deductions, lump sum cash payments, or
both, if permitted by the board
-- no employee may subscribe if he or she would then own 5% or more of the
voting power or the value of all series of stock of the company
-- an employee may not buy more than $25,000 worth of stock in any
calendar year, based on the fair market value of the stock on the
enrollment date
-- no employee may allocate more than 15% of his or her annual salary to
the purchase of stock under the plan
In addition to these terms, we have imposed additional restrictions which
will help us to manage and control the dilutive effect of the plan to
stockholder interests:
-- no employee may buy more than $8,333 worth of GZTR stock or GZMO stock
in a calendar year, based on the fair market value of the stock on the
enrollment date
-- no employee may allocate more than 5% of his or her annual salary to
the purchase of GZTR stock or GZMO stock in a calendar year
-- for GZTR stock and GZMO stock, no more than 1.0% of the shares
outstanding at the end of the previous year can be issued in a calendar
year. For 1999, we will issue no more than 209,220 shares of GZTR stock
and 126,500 shares of GZMO stock
-- a limit to the number of shares of GENZ stock that can be purchased in
a calendar year to no more than 0.6% of the shares outstanding at the
end of the previous year
We anticipate that the board will place restrictions on the amount of GSP
stock that may be purchased by an employee that are similar to those in place
for the GZTR stock and the GZMO stock.
<PAGE> 22
Until there is a public trading market for the GSP stock, we do not plan to
offer it for purchase by employees.
SHARES SUBJECT TO THE PLAN
The aggregate number of shares of each series of stock that may be issued
under the plan are:
<TABLE>
<CAPTION>
GENZ GZTR GZMO GSP
STOCK STOCK STOCK STOCK
----- ----- ----- ------
<S> <C> <C> <C> <C>
New shares to be authorized
under the plan 500,000 500,000 -- 500,000
Authorized and available from
the 1990 plan 89,299 1 500,000 --
-------- ------- ------- -------
Total reserve 589,299 500,001 500,000 500,000
</TABLE>
This table shows the shares that were bought during 1998 by the executive
officers named in the compensation table on page 13, all current executive
officers as a group, and all other employees. No shares of GZMO stock have been
offered for sale to employees under the plan to date.
<TABLE>
<CAPTION>
NAME GENZ STOCK GZTR STOCK
- ---- ---------- -----------
<S> <C> <C>
Henri A. Termeer 641 1,403
Earl M. Collier, Jr. 755 1,411
David J. McLachlan 683 1,267
Alan E. Smith 1,081 --
G. Jan van Heek 806 1,441
Peter Wirth 721 1,149
All current executive officers as a group
(11 persons) 7,019 10,979
All other employees 381,029 504,957
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE PLAN
A U.S. employee does not realize taxable income either when participation
begins, the first day of an enrollment period, or at the time shares are
purchased. Federal income tax payments must be made when the shares are disposed
of. The tax treatment depends on the how long the shares are held before
disposition.
If an employee disposes of the shares both two years after the first day of
an enrollment period and one year after the purchase date, he or she will
recognize as ordinary income:
-- 15% of the fair market value of the stock on the first day of the
enrollment period, or if less,
-- the amount realized on the sale of the shares in excess of the purchase
price
Any additional gain will be treated as long-term capital gain or loss. We are
not allowed a tax deduction for any income realized by an employee who has met
the holding period requirements.
If an employee disposes of the shares before meeting the one-year and
two-year holding periods, known as a disqualifying disposition, he or she will
recognize as ordinary income:
-- an amount equal to the fair market value of the shares on the date of
purchase minus the purchase price, or if less,
-- the amount realized on the sale of the shares in excess of the
purchase price
<PAGE> 23
We are allowed a tax deduction for the income from a disqualifying disposition
that is included in an employee's compensation the year the shares are disposed
of.
Capital gain is short-term if the shares have been held one year or less,
and long-term if held more than one year. The holding period for shares acquired
under the plan begins on the purchase date.
PROPOSAL TO AMEND THE 1990 EQUITY INCENTIVE PLAN
GENERAL
The purpose of the 1990 Equity Incentive Plan is to:
-- attract and retain key employees and consultants
-- provide an incentive for them to achieve long-range performance goals
-- enable them to participate in our long-term growth
The plan provides for the grant of both incentive and nonstatutory stock
options, stock appreciation rights, performance shares, restricted stock and
stock units.
As of February 28, 1999, the following shares were authorized and available
to grant:
<TABLE>
<CAPTION>
AUTHORIZED AVAILABLE TO GRANT
---------- ------------------
<S> <C> <C>
-- GENZ stock: 19,800,000 893,981
-- GZTR stock: 3,300,000 285,643
-- GZMO stock: 1,500,000 550,609
</TABLE>
The shares are subject to adjustment for stock splits, stock dividends and
certain transactions affecting our capital stock. Shares may also be issued
through the assumption or substitution of outstanding grants from an acquired
company without reducing the number of shares available for award. As of March
31, 1999 approximately 3,556 employees were eligible for grants under the plan.
ADMINISTRATION AND ELIGIBILITY
The compensation committee has adopted standards for grants of awards under
the plan relating to all series of stock or any combination of each series to
eligible employees and consultants. The committee also periodically reviews the
standards to determine if the levels of awards appropriately reflect our growth
and the value of our stocks. The committee determines the terms and conditions
of each award, including:
-- who is eligible to receive awards
-- the form of payment of the exercise price
-- the number of shares subject to options or other equity rights
-- when the shares are exercisable
The exercise price of any stock option grant may not be less than the fair
market value of the GENZ, GZTR or GZMO stock, as the case may be, on the date of
grant.
The standards include a new hire grant matrix and an annual grant matrix.
The new hire grant matrix determines the number of options that may be awarded
to new employees, other than executive officers, when they are hired. The awards
are based on the employee's salary grade at his or her date of hire.
<PAGE> 24
The annual grant matrix is based on an employee's salary grade plus an
individual performance review for the prior year. An employee must have a rating
of "fully meets expectations" in order to qualify for an annual award. The
senior or executive vice president responsible for a division approves the
performance ratings for each employee in that division. The committee has
delegated to the Senior Vice President, Human Resources the power to administer
the standards and make awards in amounts consistent with the standards and the
recommendations provided by the senior management.
As of March 31, 1999, we have granted the following shares under the plan:
<TABLE>
<CAPTION>
NAME GENZ STOCK GZTR STOCK GZMO STOCK
- ---- ---------- ---------- -----------
<S> <C> <C> <C>
Henri A. Termeer 2,794,831 323,654 171,099
Earl M. Collier, Jr. 208,937 84,605 42,187
David J. McLachlan 710,211 71,700 32,693
Alan E. Smith 728,688 78,087 57,969
G. Jan van Heek 421,616 91,285 40,152
Peter Wirth 325,093 109,560 75,437
All current executive officers as a group
(11 persons) 6,872,076 968,729 541,415
All other employees 23,815,676 2,790,350 414,724
</TABLE>
We have not granted any stock appreciation rights, performance shares,
restricted stock, stock units or other stock-based awards under the plan.
DESCRIPTION OF AMENDMENT TO THE PLAN
On March 24, 1999 the board approved an amendment to the plan, subject to
stockholder approval, to authorize the issuance of up to 500,000 shares of GSP
stock under the plan. These shares are in addition to shares of GENZ stock, GZTR
stock and GZMO stock currently available for issuance. The amendment will be
effective when the board designates shares of our common stock as GSP stock.
The compensation committee has not made any option grants for GSP stock as
of the date of this proxy statement. However, GSP stock option grants will be
granted under the same terms and conditions as grants of GENZ stock, GZTR stock
and GZMO stock. They will:
-- have an exercise price equal to the fair market value of the GSP
stock on the date of grant
-- become exercisable generally over a four-year period
-- have a term of ten years
The GSP stock available for issuance under the plan would be subject to
adjustment under the same circumstances as the shares of GENZ stock, GZTR stock
and GZMO stock.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE PLAN
INCENTIVE STOCK OPTIONS. An optionee does not realize taxable income when
an incentive stock option is granted or exercised. A taxable event occurs when
the shares are disposed of. The tax treatment depends on the how long the shares
are held before disposition.
Incentive stock options can have beneficial tax treatment for an optionee
if certain holding period requirements are met. To qualify for this tax
treatment the shares must be held:
<PAGE> 25
-- two years from the date of grant, and
-- one year from the date of exercise
If these holding period requirements are met, then when the shares are disposed
of, the amount realized in excess of the amount paid for the shares is taxed to
the optionee as long-term capital gain and any loss will be a long-term capital
loss. We are not allowed a tax deduction for the amount realized by the
optionee.
If an optionee disposes of the shares before meeting the one-year and
two-year holding periods, known as a disqualifying disposition, the amount
realized in excess of the amount paid for the shares is taxed to the optionee as
ordinary income. We are allowed a tax deduction for the income realized by an
optionee in a disqualifying disposition.
NONSTATUTORY STOCK OPTIONS. An optionee does not realize taxable income
when a nonstatutory option is granted. When the option is exercised, the
optionee will recognize ordinary income in an amount equal to the difference
between the amount paid for the shares and the fair market value of the shares
on the date of exercise. We are allowed a tax deduction for the same amount.
When the shares are disposed of, any additional gain in excess of the market
value of the shares on the date of exercise is treated as short-term or
long-term capital gain or loss. We are not allowed any additional tax deduction.
Capital gain is short-term if the shares have been held one year or less, and
long-term if held more than one year.
PROPOSAL TO AMEND THE DIRECTOR STOCK OPTION PLAN
GENERAL
The purpose of the director stock option plan is to attract and retain
qualified persons, who are not also officers or employees of Genzyme, to serve
as directors. The plan is designed to encourage stock ownership in each series
of our stock by these directors and provide incentives for them to promote our
success as a whole. There are currently six members of the board who participate
in the plan. Mr. Termeer is not eligible to participate in the plan.
Directors receive a stock option grant for each year (or partial year)
served on the board. The terms for these grants are explained on page 9 under
"Director Compensation." The plan expires on March 6, 2008.
The total shares currently authorized and available under the plan are:
-- GENZ stock 340,000 shares
-- GZTR stock 200,000 shares
-- GZMO stock 140,000 shares
The shares are subject to adjustment for stock splits, stock dividends and
certain transactions affecting our capital stock. As of March 31, 1999, we have
granted 209,600 shares of GENZ stock, 100,624 shares of GZTR stock and 39,824
shares of GZMO stock under the plan.
DESCRIPTION OF AMENDMENTS TO THE PLAN
On March 24, 1999 the board approved an amendment to the plan, subject to
stockholder approval, to authorize the issuance of up to 100,000 shares of GSP
stock under the plan. These shares are in addition to shares of GENZ stock, GZTR
stock and GZMO stock currently available for issuance. The amendment will be
effective when the board designates shares of our common stock as GSP stock.
<PAGE> 26
Under the amended plan, directors will receive stock option grants for GSP
stock under the same terms and conditions as our other series of stock. The
number of shares granted will have a market value equal to one-quarter of the
market value of the GENZ stock option grant. Until the stock is listed for
trading on an exchange or on Nasdaq, the board will determine the fair market
value of the GSP stock. Once there is a public market for the stock, the fair
market value will be the last sale price for the GSP stock on the date of grant.
The GSP stock available for issuance would be subject to adjustment under
the same circumstances as the GENZ stock, GZTR stock and GZMO stock.
If the plan amendments are approved, the directors may receive initial
option grants for GSP stock when the board designates GSP stock. The number of
shares of GSP stock to be granted will be determined at the time of grant.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE PLAN
Options granted under the plan are nonstatutory stock options. A director
does not realize taxable income when a nonstatutory option is granted. When the
option is exercised, the director will recognize ordinary income in an amount
equal to the difference between the amount paid for the shares and the fair
market value of the shares on the date of exercise. We are allowed a tax
deduction for the same amount. When the shares are disposed of, any additional
gain in excess of the market value of the shares on the date of exercise is
treated as short-term or long-term capital gain or loss. We are not allowed any
additional tax deduction. Capital gain is short-term if the shares have been
held one year or less, and long-term if held more than one year.
PROPOSAL TO AMEND THE DIRECTOR'S DEFERRED COMPENSATION PLAN
GENERAL
The deferred compensation plan allows a board member to defer receipt of
all or a portion of the cash compensation payable to him or her as a director.
Compensation can be deferred:
-- in exchange for cash or a combination of cash and stock
-- into stock accounts allocated to GENZ stock, GZTR stock and/or
GZMO stock
-- until service as a director ends or until a specified date
Mr. Termeer is the only director not eligible to participate in the plan. Dr.
Cooney is the only director currently participating in the plan.
Under a deferral agreement, a participant indicates the percentage of
deferral to allocate to cash and stock. We have set up a deferral account for
each participant which has two subaccounts. One is a cash account, and bears
interest at the rate paid on 90-day Treasury bills. Interest is credited
quarterly on the total cash balance in the account.
The second account is a stock account, for amounts invested in hypothetical
shares of GENZ stock, GZTR stock or GZMO stock. Under the deferral agreement, a
participant directs us how to allocate amounts among each series of stock. These
amounts will be converted into shares quarterly at the average closing price of
the stock for all trading days during the quarter, for each series of stock.
Distributions are paid in a lump sum or in annual installments for up to
five years. Payments begin the year following a director's termination of
service or, subject to certain restrictions, a year elected by the participant.
Before distributions of stock are made, the shares credited to a
<PAGE> 27
participant's account are not actual shares of stock and a participant has no
rights as a stockholder for those shares.
The total shares currently authorized under the plan are:
-- GENZ stock 50,000 shares
-- GZTR stock 100,000 shares
-- GZMO stock 50,000 shares
DESCRIPTION OF AMENDMENT TO THE PLAN
On March 24, 1999, the board approved an amendment to the plan, subject to
stockholder approval, to authorize the issuance of up to 50,000 shares of GSP
stock under the plan. These shares are in addition to shares of GENZ stock, GZTR
stock and GZMO stock currently available for issuance. The amendment will be
effective when the board designates shares of our common stock as GSP stock.
----------------
FOR GENZYME TISSUE REPAIR STOCKHOLDERS ONLY
PROPOSAL TO APPROVE THE TRANSFER OF THE 50% INTEREST IN THE JOINT VENTURE WITH
DIACRIN FROM GENZYME TISSUE REPAIR TO GENZYME GENERAL
GENERAL
Our Board of Directors has approved the transfer of our 50% ownership
interest in Diacrin/Genzyme LLC from Genzyme Tissue Repair to Genzyme General.
Diacrin/Genzyme LLC was formed in 1996 as a vehicle for a joint venture between
Genzyme and Diacrin, Inc. to develop and commercialize two cell therapies for
neurodegenerative diseases -- NeuroCell(TM)-PD for Parkinson's disease and
NeuroCell(TM)-HD for Huntington's disease.
Genzyme General's principal offices are located at One Kendall Square,
Cambridge, Massachusetts 02139. Genzyme Tissue Repair's principal offices are
located at 38 Sidney Street, Cambridge, Massachusetts 02139. Diacrin/Genzyme LLC
is a Massachusetts limited liability company with its principal offices at One
Kendall Square, Cambridge, Massachusetts 02139.
Genzyme General and Genzyme Tissue Repair are divisions of Genzyme. Genzyme
Molecular Oncology is our third division. Each division has its own series of
common stock that is intended to reflect the value and track the performance
of the division. We allocate all of our programs and products, assets and
liabilities to Genzyme General, Genzyme Tissue Repair or Genzyme Molecular
Oncology for financial statement reporting purposes. However, Genzyme
Corporation continues to hold title to all of the assets and is responsible for
all of the liabilities allocated to each of the divisions. Holders of the
outstanding common stock have no specific claim against the assets attributed to
the division whose performance is associated with the series of stock they hold.
We have management and accounting polices governing the relationship of Genzyme
divisions which do not allow us to transfer what is known as a "Key GTR Program"
out of Genzyme Tissue Repair or a "Key GMO Program" out of Genzyme Molecular
Oncology without a class vote of the stockholders of the affected division. The
NeuroCell(TM) program is considered a Key GTR Program under the policies because
Genzyme Tissue Repair has made a cumulative investment of over $8 million in
research and development expenses for the program. Therefore, our ownership
interest in Diacrin/Genzyme LLC can not be transferred from Genzyme Tissue
Repair to Genzyme General without the approval of the holders of GZTR stock.
<PAGE> 28
TERMS OF THE TRANSFER
If you approve the transfer, Genzyme Tissue Repair will enter into an
agreement with Genzyme General which has the following important terms and
conditions:
-- Genzyme General will assume all future funding obligations associated
with Diacrin/Genzyme LLC
-- Genzyme General will pay Genzyme Tissue Repair $25 million in cash
when the joint venture interest is transferred, of which $5 million is
non-refundable. If the following milestones are not met, up to $20
million is refundable and will be repaid to Genzyme General:
-- If Diacrin/Genzyme LLC does not initiate a Phase III clinical trial
of NeuroCell(TM)-PD by June 30, 2000, Genzyme Tissue Repair can
either pay Genzyme General $20 million in cash plus accrued
interest at 13.5% per annum or have designated shares of GZTR stock
with a fair market value of the same amount created for the benefit
of Genzyme General. Designated shares are authorized shares of GZTR
stock which are not issued and outstanding, but which the board may
from time to time issue, sell or otherwise distribute for the
benefit of Genzyme General and without allocating the proceeds or
benefits to Genzyme Tissue Repair, at which time the shares will
become issued and outstanding
-- If a Phase III clinical trial of NeuroCell(TM)-PD is initiated by
June 30, 2000 but NeuroCell(TM)-PD does not receive final marketing
approval from the Food and Drug Administration by June 30, 2004,
then Genzyme Tissue Repair can either pay Genzyme General $15
million in cash plus accrued interest at 13.5% per annum or have
designated shares of GZTR stock with a fair market value of the
same amount created for the benefit of Genzyme General
-- Genzyme General will pay Genzyme Tissue Repair a 3% royalty on
worldwide sales of any products commercialized by Diacrin/Genzyme LLC.
This royalty will be paid regardless of whether or not Diacrin/Genzyme
LLC ever has profitable operations
-- As a result of the $25 million payment from Genzyme General and the
elimination of future Diacrin/Genzyme LLC funding requirements,
Genzyme Tissue Repair's expected future capital requirements will be
reduced. Therefore, the amount available under Genzyme Tissue Repair's
equity line of credit with Genzyme General will be reduced from $50
million to $25 million. As of March 31, 1999, Genzyme Tissue Repair
has drawn $5 million under this line of credit, leaving an available
balance of $20 million.
This payment structure is intended to provide a reasonable allocation of
the risks associated with the NeuroCell(TM) program between Genzyme General and
Genzyme Tissue Repair while providing Genzyme Tissue Repair with a substantial
upfront cash payment. This structure also allows Genzyme Tissue Repair to
participate in any commercial success of any NeuroCell(TM) products developed by
Diacrin/Genzyme LLC. However, if the joint venture interest is transferred to
Genzyme General and the NeuroCell(TM) products are successfully developed and
commercialized, the income Genzyme Tissue Repair could receive from the joint
venture will be significantly less than if the joint venture interest had not
been transferred to Genzyme General. There is no guarantee that any
NeuroCell(TM) product will be successfully developed or commercialized.
THE VALUATION PROCESS; FAIRNESS OF THE CONSIDERATION
Genzyme personnel with experience in the valuation of research programs,
including members of our management and corporate development department with
general responsibility for the analysis of acquisition and partnering
opportunities, prepared the valuation of our ownership interest in
Diacrin/Genzyme LLC. To begin preparing the valuation, the management of Genzyme
Tissue Repair and Genzyme General met with members of Genzyme's corporate
development department to review:
-- the financial analysis of the NeuroCell(TM) program that was prepared
in connection with the formation of the joint venture in 1996
-- the current status of the NeuroCell(TM) program
-- the projected cost and time involved in completing development of the
NeuroCell(TM) products and bringing them to the market
-- Genzyme Tissue Repair's assessment of the market opportunity of
NeuroCell(TM)-PD in the U.S.
<PAGE> 29
The original business model used in 1996 was based in part on certain
assumptions and projections about the NeuroCell(TM) products, including
assumptions about target patient populations, the availability of reimbursement,
pricing, and potential competition for the NeuroCell(TM) products from
alternative surgical procedures and therapies. In preparing the new valuation,
our corporate development department reexamined, updated and gathered additional
relevant information to test and refine these assumptions and projections,
including interviews with Parkinson's disease thought leaders throughout the
U.S. and current data on the existing market in the U.S. for surgical procedures
and therapies designed to treat Parkinson's disease.
After gathering and reviewing this updated information, our corporate
development department determined, and the managements of Genzyme Tissue Repair
and Genzyme General agreed, that the primary factors which would influence the
value of the joint venture interest were:
-- the status of clinical development of NeuroCell(TM)-PD and the
clinical trial results obtained to date
-- the estimated future development and commercialization expenses
associated with bringing NeuroCell(TM)-PD to market in the U.S.
-- the likelihood of and estimated time before any revenues could be
realized from the NeuroCell(TM) program
-- the estimated U.S. market penetration rate for NeuroCell(TM)-PD if it
is successfully developed
-- the availability of reimbursement for and pricing assumptions with
respect to NeuroCell(TM)-PD
-- the total number of Parkinson's disease patients in the U.S. which
would be deemed eligible for NeuroCell(TM)-PD therapy
-- competitive surgical procedures and treatments for Parkinson's disease
which are now available or may become available in the future
With respect to these primary factors which affect valuation, the valuation
model on which the final negotiations were based assumed:
-- the probability of the program successfully moving through various
stages of development was similar to the probability of progression
shown for biological products generally
-- reimbursement would be available without undue delay
-- the procedure would be priced in the top quartile of what was deemed
to be a probable range of acceptable pricing for a product which
demonstrated strong efficacy
-- the rate of market penetration would be similar to that
experienced by innovative surgical devices generally
-- the eligible patient population would be in the top half of what
was deemed to be a probable range of eligible patients
-- competitive procedures would appear which would affect the
residual value of NeuroCell(TM)-PD after its initial market
penetration period
<PAGE> 30
Other factors considered which did not significantly affect the valuation model
included:
-- Orphan Drug designation granted in 1996 to NeuroCell(TM)-PD for use in
advanced Parkinson's disease patients
-- no therapeutic product based on xenotransplantation -- the
transplantation of cells obtained from animals -- has been approved for
marketing by the FDA to date
-- the risk of unintentional transmission of porcine endogenous
retroviruses or other animal viruses and pathogens associated with
xenotransplantation
The valuation focused primarily on NeuroCell(TM)-PD in the U.S. market because
of the current development status of NeuroCell(TM)-HD, as discussed on page 32
below. Our corporate development department did not obtain or consider
information about the European market for therapies for Parkinson's disease
because the current regulatory scheme in the European Union does not allow
xenotransplanted products to be marketed in Europe.
Our corporate development department prepared an updated valuation model
for the joint venture interest based on a risk-adjusted cash flow analysis. This
updated model reflected the information gathered concerning the primary factors
affecting the valuation described above and included a "Monte Carlo" simulation
and sensitivity analysis of the potential financial performance of
Diacrin/Genzyme LLC over a range of potential scenarios. The results obtained
using the updated valuation model were presented to the management of Genzyme
Tissue Repair and Genzyme General and the updated valuation model was then
revised further based on feedback from this meeting.
After running the final valuation model and considering the business
objectives articulated by Genzyme Tissue Repair and Genzyme General, our
corporate development department developed and proposed a deal structure which
they presented to the management of Genzyme Tissue Repair and Genzyme General,
who then negotiated the deal structure. Our management then presented the
valuation model and the proposed terms of the transfer to our board for their
consideration and approval. The presentation included a review of the valuation
process and the underlying assumptions and projections. After discussing the
valuation and the proposed terms of the transfer, our board determined that the
fair market value of the consideration to be paid by Genzyme General to Genzyme
Tissue Repair was equal to the fair market value of Genzyme's ownership interest
in Diacrin/Genzyme LLC and that the terms of the transfer were fair and
equitable to both divisions.
This discussion about the factors considered in determining the fair market
value of the joint venture interest is not intended to be exhaustive, although
it does describe the material factors considered by our board in determining the
fairness of the consideration. In light of the variety of factors considered,
our board did not find it practicable to, and did not, quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. In addition, individual members of our board might have given
different weights to different factors.
The methods and assumptions used in preparing the valuation involved
significant elements of judgment that may or may not prove to be correct. The
financial assumptions used in the valuation may or may not be indicative of
future performance of Diacrin/Genzyme LLC, which may be significantly more or
less favorable than projected.
REASONS FOR THE TRANSFER
Over the past year Genzyme Tissue Repair has become increasingly focused on
the long term potential created by the continuing growth of its Carticel(R)
autologous cultured chondrocytes business. Although the Carticel(R) business has
not yet reached profitability, it has highlighted the potential to create value
by bringing new biotechnology solutions to unmet needs in orthopedic surgery.
Genzyme Tissue Repair believes that there is an opportunity to create
significant value by identifying and developing other products which meet needs
of orthopedic surgeons, especially in the sports medicine arena. Genzyme Tissue
Repair's strategy is to take full advantage of the broad technologies available
within Genzyme to serve the large and rapidly growing orthopedic market.
<PAGE> 31
Genzyme Tissue Repair also intends to maintain its Epicel(TM) skin grafts
business for the treatment of severe burns. Although the burn care marketplace
is smaller than the orthopedic marketplace, there may be opportunities to
selectively expand its burn care product portfolio.
At the same time, it has become more difficult to fund biotechnology
companies with smaller capitalizations without incurring substantial dilution.
As a result of these factors, Genzyme Tissue Repair has undertaken to
reduce its need for external capital while continuing to aggressively pursue the
development of the Carticel(R) business and future orthopedic opportunities.
During 1998, Genzyme Tissue Repair sold its excess manufacturing facilities,
reduced its spending on early stage research and development, reduced its
general and administrative spending, and initiated efforts to outlicense its
TGF-(beta)2 program for chronic ulcers.
Consistent with these efforts, Genzyme Tissue Repair decided to look for
another way to fund the NeuroCell(TM) program. The NeuroCell(TM) program uses a
substantial portion of Genzyme Tissue Repair's financial resources and would
continue to do so if the joint venture interest is not transferred. To date,
Genzyme Tissue Repair has realized the following net losses from the joint
venture:
-- 1998 $7.7 million
-- 1997 $6.7 million
-- 1996 $1.6 million
Genzyme Tissue Repair expects that substantial additional funding will be needed
to fully develop and commercialize the NeuroCell(TM) products.
After evaluating a number of financing alternatives, Genzyme Tissue Repair
and Genzyme General developed a proposal to transfer the program to Genzyme
General. Our board has approved this plan, which holders of GZTR stock are now
being asked to approve. We believe the advantages of this proposal for Genzyme
Tissue Repair stockholders are as follows:
-- Genzyme Tissue Repair will maintain a future interest in the success
of the NeuroCell(TM) program but will not have any future funding
commitments to Diacrin/Genzyme LLC. This will result in an immediate
improvement in the profitability of Genzyme Tissue Repair
-- The $25 million up-front payment from Genzyme General will provide a
significant portion of the capital required to move the Carticel(R)
business toward profitability during 1999. Genzyme Tissue Repair
currently anticipates that it will not need to make draws on the
equity line of credit in the near term. Therefore, even if Genzyme
Tissue Repair must ultimately repay a portion of the $25 million to
Genzyme General, based on its expected capital needs, the terms of the
transfer allow it to avoid creating additional GZTR designated shares
for at least one year and for up to four years
-- Genzyme Tissue Repair will receive a 3% royalty on product sales by
Diacrin/Genzyme LLC. This royalty will be payable whether or not the
joint venture ever becomes profitable. This would generate an earlier
cash flow for Genzyme Tissue Repair if any products are successfully
developed and commercialized by Diacrin/Genzyme LLC
-- Transferring the joint venture interest will allow Genzyme Tissue
Repair to dedicate its resources to programs that fall within its
strategic business focus, including:
-- developing devices and techniques to enable surgeons to perform
the Carticel(R) autologous cultured chondrocyte procedure faster
and less invasively
-- developing additional products and devices for orthopedic surgery
such as the proprietary light-activated tissue welding technology
licensed from PhotoBioMed Corporation in 1998
<PAGE> 32
-- continuing commercialization activities for Carticel(R)
autologous cultured chondrocytes and Epicel(TM) skin grafts
Genzyme General is interested in acquiring the joint venture interest
because it believes that the NeuroCell(TM) program complements its specialty
therapeutic product pipeline. We considered selling the joint venture interest
to a third party or obtaining financing from a third party by adding a third
member to the joint venture. However, we decided that transferring the interest
to Genzyme General is the best alternative because it:
-- enables us to continue to support and invest in the NeuroCell(TM)
products
-- avoids dilution of our ownership interest in the joint venture
-- allows us to recognize a return on our investment if any
NeuroCell(TM) product is successfully developed and receives
marketing approval
DIACRIN/GENZYME LLC
Under the terms of the Diacrin/Genzyme LLC joint venture agreement, Genzyme
Tissue Repair provided 100% of the initial $10 million of the funding
requirements and is obligated to provide 75% of the next $40 million of funding
requirements for projects to be developed by the joint venture. Thereafter, all
costs will be shared equally between the parties. Generally, we will share
profits from the joint venture with Diacrin based on our respective ownership
interests, which are currently equal.
Both Diacrin and Genzyme perform development activities on behalf of
Diacrin/Genzyme LLC. We will market and sell the NeuroCell(TM) products on a
cost reimbursement basis on behalf of the joint venture. The NeuroCell(TM)
products will be produced in our cell culture facilities under the management of
Genzyme Tissue Repair. When Diacrin/Genzyme LLC was formed, Diacrin granted the
joint venture an exclusive license under its patent rights, technology and
manufacturing know-how to develop and commercialize the NeuroCell(TM) products
for the fields of Parkinson's and Huntington's disease. Diacrin/Genzyme LLC also
has a sublicense from Massachusetts General Hospital for certain proprietary
antibody masking technology. If the joint venture interest is transferred, all
of Genzyme Tissue Repair's payment and other obligations under the joint
venture, as well as its right to receive a share of the profits, will be assumed
by Genzyme General.
For more information about the joint venture and the operation of
Diacrin/Genzyme LLC, you can read the Collaboration Agreement between Genzyme
and Diacrin and the Operating Agreement of Diacrin/Genzyme LLC, which are filed
with the SEC as Exhibits 10.18 and 10.19 to Diacrin's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996. We incorporate these documents by
reference.
THE NEUROCELL(TM) PROGRAMS
The NeuroCell(TM) products involve implanting fetal porcine cells into the
brains of Parkinson's disease and Huntington's disease patients to replace
damaged brain tissue. Current transplantation technology generally requires the
patient's immune system to be suppressed to prevent graft rejection. With both
of the NeuroCell(TM) products, rejection of the porcine cells may be prevented
with cyclosporine, a commonly used immunosuppressive drug. Diacrin/Genzyme LLC
also has a sublicense to use patented antibody masking technology developed at
Massachusetts General Hospital. This technology is designed to protect the
NeuroCell(TM) products from the patient's immune system without the need for
chronic, lifetime administration of immunosuppressive drugs.
NEUROCELL(TM)-PD. Parkinson's disease is a neurodegenerative disease
characterized by the death of the nerve cells in the brain that normally produce
dopamine, a substance that helps smooth and coordinate movement. The loss of
those nerve cells results in a variety of motor symptoms such
<PAGE> 33
as rigidity and slow movement, tremors, falls and difficulty with speech and
swallowing. The symptoms are chronic and progressive, and may lead to premature
death. The most common treatment is administration of the drug levodopa, which
the brain converts into dopamine. Therapy with levodopa is initially effective
but often loses its efficacy in 6 to 12 years and provides little benefit in the
late states of the disease. We are designing NeuroCell(TM)-PD for use in
advanced cases of Parkinson's disease, where levodopa therapy has begun to fail.
We are collecting safety and efficacy data for NeuroCell(TM)-PD for up to
three years under a Phase I clinical study protocol, and for an additional two
years under an extension protocol. All 11 patients enrolled in the study will be
followed for safety in a life-long registry. Based on the early results of the
Phase I study, we initiated two Phase II clinical trials of NeuroCell(TM)-PD.
One trial, designed to evaluate the safety and efficacy of NeuroCell(TM)-PD, is
ongoing. In this trial, patients receiving cyclosporine will be compared to a
control group, in which patients undergo surgery but do not receive
NeuroCell(TM)-PD. Each patient will be followed for 12 months. The other trial
started in early 1999 and is designed to evaluate the safety and efficacy of the
product using the antibody masking method licensed from Massachusetts General
Hospital. This method may permit implantation of the porcine cells without
co-administration of cyclosporine. Both Phase II trials are bilateral studies
(implanting cells in both sides of the brain) and involve higher dose levels
than used in the Phase I study. If satisfactory results are obtained from the
Phase II trials, a single product, either NeuroCell(TM)-PD administered with
cyclosporine or NeuroCell(TM)-PD manufactured using the antibody masking method,
will be selected for a pivotal trial.
NEUROCELL(TM)-HD. Huntington's disease is a fatal genetic disorder that is
often not evident until middle age. The genetic defect causes the loss of
neurons in the brain which are important to the performance of rapid,
coordinated movements and certain aspects of cognition. The disease is generally
characterized by uncontrolled movements, gait and postural defects, personality
change and dementia. It is a progressive disease often leading to
institutionalized care and, ultimately, death. Currently, there is no effective
therapy for Huntington's disease. To lessen the severity of symptoms and to make
them more bearable, patients are treated with tranquilizers and anti-psychotic
drugs.
Diacrin/Genzyme LLC has enrolled 12 patients in a Phase I clinical trial of
NeuroCell(TM)-HD. All 12 patients were implanted with 24 million cells each by
March 1997 and are being followed for safety and by clinical ratings and two
kinds of PET scans. The results at 12 months showed no improvement in symptoms
and some evidence of worsening in motor scores. No significant benefit has
emerged to date. To date there have been no serious adverse affects related to
NeuroCell(TM)-HD.
It is possible that bilateral implantation will be required to affect
disease progression. Since there has never been an effective intervention in
Huntington's disease, it is unclear what the appropriate response parameters
would be for a clinical trial. There are several clinical scales (which were
used in the Phase I clinical trial and include the Unified Huntington's Disease
Rating Scale and the Total Functional Capacity) that have been shown to detect
disease progression. However, clinical trial design is difficult because
progression in these scales is relatively slow. Demonstrating prevention of
progression of the disease may require large, long-term studies.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
The discussion in this proposal contains forward-looking statements,
including statements concerning potential royalty payments to Genzyme Tissue
Repair, the anticipated level of funding required for the NeuroCell(TM)
products, the expected timing of future draws by Genzyme Tissue Repair on the
equity line of credit from Genzyme General, the potential impact of the transfer
on Genzyme Tissue Repair's Carticel(R) business and other activities, and the
ability of Genzyme to recognize a return on its investment in the joint venture.
Actual results may differ materially depending on many factors, including the
enrollment rate for clinical trials, the timing and results of clinical trials,
the ability to demonstrate long-term safety and efficacy of the NeuroCell(TM)
products, the timing and content of decisions made by the FDA and other
regulatory authorities, the availability of reimbursement from third-party
payers for products, market acceptance of products, the accuracy of Genzyme's
information about the markets for treatments for Parkinson's and Huntington's
diseases, the competitive environment for products in the orthopedics and burn
care markets and the market for treatments for Parkinson's and Huntington's
diseases and Genzyme Tissue Repair's actual cash requirements.
----------------
CERTAIN TRANSACTIONS
GELTEX. In June 1997, Genzyme and GelTex Pharmaceuticals established
RenaGel LLC, a joint venture to complete the development and commercialization
of Renagel(R) Capsules. Renagel(R) Capsules are prescribed to control the
elevated serum phosphate levels that cause serious complications in chronic
kidney failure patients. Genzyme and GelTex each hold a 50% ownership interest
in RenaGel LLC. Each is funding half of the joint venture's costs and expenses,
and will share equally in the profits. If either one fails to fund its share of
costs and expenses,
<PAGE> 34
the profit sharing interests and the future funding obligations may be
proportionately adjusted. GelTex contributed Renagel(R) Capsules and its
underlying patents and technologies to the joint venture. Under the joint
venture agreement, we:
-- purchased 100,000 shares of GelTex common stock at $25.00 per share in
June 1997. This represents less than 1% ownership in GelTex
-- made a $15 million payment to GelTex in November 1998 when
Renagel(R) Capsules received FDA marketing approval
-- will make a $10 million payment to GelTex on November 2, 1999, one
year after Renagel(R) Capsules received marketing approval
The joint venture has rights to commercialize Renagel(R) Capsules worldwide,
except in Japan and Pacific Rim countries. We will market and sell products for
the joint venture as exclusive distributor. Mr. Carpenter is chairman of the
board of directors and Mr. Termeer is a director of GelTex.
DYAX. In March 1996, we entered into two license agreements with Dyax and
Protein Engineering Corporation, a wholly-owned subsidiary of Dyax, for Dyax's
phage display technology. We paid an initial license fee of $53,700 and pay
annual license maintenance fees of $50,000. We will also 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, we subleased office and laboratory space in Cambridge,
Massachusetts to Dyax. Fees were $42,893 per month through May 1997 and since
then $51,246 per month. Dyax paid approximately $614,952 in sublease fees to us
during 1998. Mr. Blair is chief executive officer of Dyax and each of Mr. Blair,
Dr. Anagnostopoulos and Mr. Lewis are directors of Dyax.
In October 1998, we entered into a collaboration agreement with Dyax to
develop and commercialize one of Dyax's proprietary compounds for the treatment
of chronic inflammatory diseases. Dyax will fund the first $6 million in
development costs, and the parties will split all subsequent development costs
equally. In connection with that agreement, we made an investment of $3 million
in the convertible preferred stock of Dyax and made a $3 million line of credit
available to help Dyax fund its operations. To date, Dyax has not borrowed any
money under the line of credit. We will make milestone payments to Dyax upon FDA
approval of products that arise out of the collaboration, and we will share
equally with Dyax all profits from the sale of these products.
GDP. In September 1989, we sponsored Genzyme Development Partners, L.P., a
research and development limited partnership. We entered into a development
contract with the partnership to perform research and development of certain
products based on hyaluronic acid. In December 1997, we made a $1.5 million
capital contribution to the partnership through Genzyme Development Corporation
II, a wholly-owned subsidiary of Genzyme and the general partner of the
partnership. We have funded, and intend to fund through 1999, the partnership's
research and development activities. Mr. Termeer is the president and a
director, and Mr. McLachlan is treasurer, of Genzyme Development Corporation II.
Mr. Termeer and Mr. McLachlan receive no compensation from either Genzyme
Development Corporation II or the partnership.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our executive officers and directors are required under Section 16(a) of
the Securities Exchange Act of 1934 to file reports of ownership and changes in
ownership of Genzyme securities with the SEC. Based on a review of the copies of
reports furnished to us and written representations that no other reports were
required, we believe that during 1998 our executive officers and directors
complied with all Section 16(a) filing requirements.
<PAGE> 35
INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP, independent accountants, audited
our financial statements for the years ending December 31, 1998, 1997 and 1996.
The board of directors has appointed them to serve as our auditors for the
fiscal year ending December 31, 1999. Representatives of PricewaterhouseCoopers
are expected to attend the annual meeting to answer any questions.
STOCKHOLDER PROPOSALS
If you want to include a proposal in our proxy materials for our 2000 proxy
statement, you must deliver it to us no later than December 18, 1999. Our
by-laws permit you to bring business before or propose director nominations to
be considered at an annual meeting. The notice must contain specified
information about you and the proposed business or nomination. If you are
interested in the procedures required to submit a proposal, please contact:
Peter Wirth, Clerk
Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
(617) 252-7500
----------------
APPENDIX A
GENZYME CORPORATION 1999 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose.
The purpose of this 1999 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 1990
Employee Stock Purchase Plan (the "1990 Plan"), which is hereby merged with and
into the Plan, and the separate existence of the 1990 Plan shall terminate on
the effective date of the Plan. The rights and privileges of the holders of
outstanding rights under the 1990 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
<PAGE> 36
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
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 Genzyme General Division Common Stock
("GENZ stock"), the Genzyme Tissue Repair Division Common Stock ("GZTR stock"),
the Genzyme Molecular Oncology Division Common Stock ("GZMO stock"), and/or the
Genzyme Surgical Products Division Common Stock ("GSP 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 series 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 series 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
<PAGE> 37
period 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.
7. Shares Subject to the Plan.
GENZ stock, GZTR stock, GZMO stock and GSP stock are series of the
Company's Common Stock that may be granted under this Plan. The aggregate number
of shares of each series of Common Stock that may be issued upon exercise of
options granted under this Plan is:
<TABLE>
<CAPTION>
GENZ GZTR GZMO GSP
STOCK STOCK STOCK STOCK
----- ----- ------ -----
<S> <C> <C> <C> <C>
New shares to be authorized under
the plan 500,000 500,000 -- 500,000
Authorized and available from the
1990 plan 89,299 1 500,000 --
-------- ------- ------- -------
Total reserve 589,299 500,001 500,000 500,000
</TABLE>
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 series of common 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 the employee's
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.
<PAGE> 38
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 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 Share and the Share 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 GENZ
stock, GZTR stock or GZMO 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 24, 1999, 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
<PAGE> 39
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 24, 2009.
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.
<PAGE> 40
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 26, 1999
GENZYME CORPORATION
General Division Common Stock
By signing this proxy, I appoint Henri A. Termeer, David J. McLachlan and Peter
Wirth, and each of them acting singly, my attorney and proxy, with full power of
substitution, to vote on my behalf all of the shares of Genzyme General Division
common stock that I am entitled to vote at the Annual Meeting of Stockholders to
be held on May 26, 1999, and at any adjournments of the meeting. This proxy
revokes any earlier proxy I have signed with respect to these shares.
If properly executed, this proxy will be voted in the manner you specify. If no
specification is made, your shares of Genzyme General stock will be voted FOR
each of the proposals. The proxies are authorized to vote your shares, in their
discretion, on any other matter that is properly brought before the meeting.
PLEASE SIGN AND MAIL YOUR PROXY TODAY.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Proposal to elect directors. [ ] FOR all nominees [ ] WITHHELD for all nominees
NOMINEES: Constantine E. Anagnostopoulos, Robert J. Carpenter and Charles L. Cooney
FOR, except vote withheld from the following nominees(s):
-------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
2. Proposal to approve the 1999 Employee Stock Purchase Plan [ ] [ ] [ ]
3. Proposal to amend the 1990 Equity Incentive Plan to authorize [ ] [ ] [ ]
the grant of awards of Genzyme Surgical Products common stock
4. Proposal to amend the director stock option plan to authorize [ ] [ ] [ ]
the grant of options to purchase Genzyme Surgical Products
common stock
5. Proposal to amend the directors deferred compensation plan to [ ] [ ] [ ]
authorize the grant of stock purchase rights for Genzyme Surgical
Products common stock
Signature: Date: Signature: Date:
------------------- -------- ------------------- --------
(if held jointly)
</TABLE>
NOTE: Please sign exactly as your name appears on your 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 authorized officer. If a
partnership, please sign in partnership name by authorized person.
<PAGE> 41
ANNUAL MEETING OF STOCKHOLDERS OF GENZYME CORPORATION
General Division Common Stock
WEDNESDAY, MAY 26, 1999
- --------------------------------------------------------------------------------
PROXY VOTING INSTRUCTIONS
- --------------------------------------------------------------------------------
TO VOTE BY MAIL
- ---------------
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- --------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
- -------------------
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
- --------------------------------------------------------------------------------
YOUR CONTROL NUMBER IS:
- --------------------------------------------------------------------------------
<PAGE> 42
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 26, 1999
GENZYME CORPORATION
Tissue Repair Division Common Stock
By signing this proxy, I appoint Henri A. Termeer, David J. McLachlan and Peter
Wirth, and each of them acting singly, my attorney and proxy, with full power of
substitution, to vote on my behalf all of the shares of Genzyme Tissue Repair
Division common stock that I am entitled to vote at the Annual Meeting of
Stockholders to be held on May 26, 1999, and at any adjournments of the meeting.
This proxy revokes any earlier proxy I have signed with respect to these shares.
If properly executed, this proxy will be voted in the manner you specify. If no
specification is made, your shares of Genzyme Tissue Repair stock will be voted
FOR each of the proposals. The proxies are authorized to vote your shares, in
their discretion, on any other matter that is properly brought before the
meeting. PLEASE SIGN AND MAIL YOUR PROXY TODAY.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Proposal to elect directors. [ ] FOR all nominees [ ] WITHHELD for all nominees
NOMINEES: Constantine E. Anagnostopoulos, Robert J. Carpenter and Charles L. Cooney
FOR, except vote withheld from the following nominees(s):
-------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
2. Proposal to approve the 1999 Employee Stock Purchase Plan [ ] [ ] [ ]
3. Proposal to amend the 1990 Equity Incentive Plan to authorize [ ] [ ] [ ]
the grant of awards of Genzyme Surgical Products common stock
4. Proposal to amend the director stock option plan to authorize [ ] [ ] [ ]
the grant of options to purchase Genzyme Surgical Products
common stock
5. Proposal to amend the directors deferred compensation plan to [ ] [ ] [ ]
authorize the grant of stock purchase rights for Genzyme Surgical
Products common stock
6. Proposal to approve the transfer of the 50% interest in the joint [ ] [ ] [ ]
venture with Diacrin from Genzyme Tissue Repair to Genzyme General
Signature: Date: Signature: Date:
------------------- -------- ------------------- --------
(if held jointly)
</TABLE>
NOTE: Please sign exactly as your name appears on your 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 authorized officer. If a
partnership, please sign in partnership name by authorized person.
<PAGE> 43
ANNUAL MEETING OF STOCKHOLDERS OF GENZYME CORPORATION
Tissue Repair Division Common Stock
WEDNESDAY, MAY 26, 1999
- --------------------------------------------------------------------------------
PROXY VOTING INSTRUCTIONS
- --------------------------------------------------------------------------------
TO VOTE BY MAIL
- ---------------
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- -------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
- -------------------
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
- --------------------------------------------------------------------------------
YOUR CONTROL NUMBER IS:
- --------------------------------------------------------------------------------
<PAGE> 44
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 26, 1999
GENZYME CORPORATION
Molecular Oncology Division Common Stock
By signing this proxy, I appoint Henri A. Termeer, David J. McLachlan and Peter
Wirth, and each of them acting singly, my attorney and proxy, with full power of
substitution, to vote on my behalf all of the shares of Genzyme Molecular
Oncology Division common stock that I am entitled to vote at the Annual Meeting
of Stockholders to be held on May 26, 1999, and at any adjournments of the
meeting. This proxy revokes any earlier proxy I have signed with respect to
these shares.
If properly executed, this proxy will be voted in the manner you specify. If no
specification is made, your shares of Genzyme Molecular Oncology stock will be
voted FOR each of the proposals. The proxies are authorized to vote your shares,
in their discretion, on any other matter that is properly brought before the
meeting. PLEASE SIGN AND MAIL YOUR PROXY TODAY.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Proposal to elect directors. [ ] FOR all nominees [ ] WITHHELD for all nominees
NOMINEES: Constantine E. Anagnostopoulos, Robert J. Carpenter and Charles L. Cooney
FOR, except vote withheld from the following nominees(s):
-------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
2. Proposal to approve the 1999 Employee Stock Purchase Plan [ ] [ ] [ ]
3. Proposal to amend the 1990 Equity Incentive Plan to authorize [ ] [ ] [ ]
the grant of awards of Genzyme Surgical Products common stock
4. Proposal to amend the director stock option plan to authorize [ ] [ ] [ ]
the grant of options to purchase Genzyme Surgical Products
common stock
5. Proposal to amend the directors deferred compensation plan to [ ] [ ] [ ]
authorize the grant of stock purchase rights for Genzyme Surgical
Products common stock
Signature: Date: Signature: Date:
------------------- -------- ------------------- --------
(if held jointly)
</TABLE>
NOTE: Please sign exactly as your name appears on your 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 authorized officer. If a
partnership, please sign in partnership name by authorized person.
<PAGE> 45
ANNUAL MEETING OF STOCKHOLDERS OF GENZYME CORPORATION
Molecular Oncology Division Common Stock
WEDNESDAY, MAY 26, 1999
- --------------------------------------------------------------------------------
PROXY VOTING INSTRUCTIONS
- --------------------------------------------------------------------------------
TO VOTE BY MAIL
- ---------------
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- -------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
- -------------------
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
- --------------------------------------------------------------------------------
YOUR CONTROL NUMBER IS:
- --------------------------------------------------------------------------------
