SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant / X /
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
/ X / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
Somatix Therapy Corporation
- ----------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Somatix Therapy Corporation
- ----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/ X / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2), or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules
14a(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
- ----------------------------------------------------------------
(2) Aggregate number of securities to which transactions
applies:
- ----------------------------------------------------------------
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (Set
forth the amount on which the filing fee is calculated and state
how it was determined):
- ----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ----------------------------------------------------------------
(5) Total fee paid:
- ----------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- ----------------------------------------------------------------
/ / Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
- ----------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- ----------------------------------------------------------------
(3) Filing Party:
- ----------------------------------------------------------------
(4) Date Filed:
<PAGE>
SOMATIX THERAPY CORPORATION
850 Marina Village Parkway
Alameda, California 94501
October 16, 1995
Dear Stockholder:
You are cordially invited to attend the Annual Meeting
of Stockholders ("Annual Meeting") of Somatix Therapy Corporation
(the "Company") which will be held at 10:00 a.m. on November 16,
1995, at the principal executive offices of the Company at 850
Marina Village Parkway, Alameda, California 94501.
At the Annual Meeting, you will be asked to consider and
vote upon the following proposals: (i) to elect a Board of
Directors of ten directors to serve for the ensuing year or until
their successors are elected; (ii) to approve an amendment to the
Company's 1992 Stock Option Plan (the "Option Plan") to render
non-employee members of the Board of Directors, other than those
individuals who are also at the time serving on the Compensation
Committee which administers the Option Plan, eligible to
participate in the Discretionary Option Grant Program in effect
under the Option Plan so that they may receive option grants
under both the Discretionary Option Grant Program and the
Automatic Option Grant Program; and (iii) to ratify the
appointment of Ernst & Young LLP as independent accountants of
the Company for the fiscal year ending June 30, 1996.
The enclosed Proxy Statement more fully describes the
details of the business to be conducted at the Annual Meeting.
After careful consideration, the Company's Board of
Directors has unanimously approved the proposals and recommends
that you vote IN FAVOR OF each such proposal.
After reading the Proxy Statement, please mark, date,
sign and return by no later than November 10, 1995, the enclosed
proxy card in the accompanying reply envelope. If you decide to
attend the Annual Meeting, please notify the Secretary of the
Company that you wish to vote in person and your proxy will not
be voted. YOUR SHARES CANNOT BE VOTED UNLESS YOU MARK, DATE,
SIGN AND RETURN THE ENCLOSED PROXY, OR ATTEND THE ANNUAL MEETING
IN PERSON.
A copy of the Somatix Therapy Corporation 1995 Annual
Report is also enclosed.
We look forward to seeing you at the Annual Meeting.
Sincerely,
David W. Carter,
Chairman of the Board,
President and Chief Executive Officer
________________________________________________________________
| IMPORTANT |
| Please mark, date, sign and return the enclosed proxy |
| promptly in the enclosed postage-paid return envelope so |
| that if you are unable to attend the Annual Meeting your |
| shares may be voted. |
|______________________________________________________________|
<PAGE>
SOMATIX THERAPY CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 16, 1995
TO THE STOCKHOLDERS OF SOMATIX THERAPY CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders ("Annual Meeting") of Somatix Therapy Corporation, a
Delaware corporation (the "Company"), will be held at 10:00 a.m.
local time on Thursday, November 16, 1995, at the Company's
offices, 850 Marina Village Parkway, Alameda, California 94501,
for the following purposes:
1. To elect a Board of Directors of ten directors
to serve for the ensuing year or until their respective
successors are elected and qualified.
2. To approve an amendment to the Company's 1992
Stock Option Plan (the "Option Plan") to render non-employee
members of the Board of Directors, other than those individuals
who are also at the time serving on the Compensation Committee
which administers the Option Plan, eligible to participate in the
Discretionary Option Grant Program in effect under the Option
Plan so that they may receive option grants under both the
Discretionary Option Grant Program and the Automatic Option Grant
Program.
3. To ratify the appointment of Ernst & Young LLP
as the Company's independent accountants for the fiscal year
ending June 30, 1996.
4. To transact such other business as may properly
come before the Annual Meeting and any adjournment or
adjournments thereof.
The foregoing items of business are more fully described
in the Proxy Statement accompanying this Notice.
Stockholders of record at the close of business on
September 25, 1995 are entitled to receive notice of and to vote
at the Annual Meeting and any adjournment thereof. A list of the
stockholders entitled to vote at the Annual Meeting will be
available for inspection at the Company's offices for ten days
prior to the Annual Meeting.
All stockholders are cordially invited to attend the
Annual Meeting. However, to assure your representation at the
meeting, please carefully read the accompanying Proxy Statement,
which describes the matters to be voted upon at the Annual
Meeting, and mark, date, sign and return the enclosed proxy card
in the reply envelope provided. Should you receive more than one
proxy because your shares are registered in different names and
addresses, each proxy should be returned to ensure that all your
shares will be voted. If you attend the Annual Meeting and vote
by ballot, your proxy vote will be revoked automatically and only
your vote at the Annual Meeting will be counted. The prompt
return of your proxy card will assist us in preparing for the
Annual Meeting.
<PAGE>
YOUR VOTE IS VERY IMPORTANT. PLEASE READ THE ATTACHED PROXY
STATEMENT CAREFULLY. WHETHER OR NOT YOU EXPECT TO ATTEND THE
ANNUAL MEETING IN PERSON, PLEASE COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED AS PROMPTLY AS
POSSIBLE. THE PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT
TO VOTE IN PERSON IN THE EVENT YOU ATTEND THE MEETING.
Sincerely,
David W. Carter
Chairman of the Board of Directors,
President and Chief Executive Officer
Alameda, California
October 16, 1995
<PAGE>
SOMATIX THERAPY CORPORATION
850 Marina Village Parkway
Alameda, California 94501
_______________________________
PROXY STATEMENT
_______________________________
For the Annual Meeting of Stockholders
To Be Held on November 16, 1995
GENERAL INFORMATION FOR STOCKHOLDERS
THE ENCLOSED PROXY ("PROXY") IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF SOMATIX THERAPY CORPORATION, A DELAWARE
CORPORATION (THE "COMPANY" OR "SOMATIX"), FOR USE AT THE 1995
ANNUAL MEETING OF STOCKHOLDERS (THE "ANNUAL MEETING") TO BE HELD
AT 10:00 A.M. ON NOVEMBER 16, 1995, AT THE COMPANY'S PRINCIPAL
EXECUTIVE OFFICES, 850 MARINA VILLAGE PARKWAY, ALAMEDA,
CALIFORNIA 94501 AND AT ANY ADJOURNMENT THEREOF.
This Proxy Statement and the accompanying form of Proxy
was first mailed to the stockholders entitled to vote at the
Annual Meeting on or about October 16, 1995.
RECORD DATE AND VOTING
Stockholders of record at the close of business on
September 25, 1995, are entitled to notice of and to vote at the
Annual Meeting. As of the close of business on such date, there
were 22,689,470 shares of the Company's common stock (the "Common
Stock") outstanding and entitled to vote, held by 1,025
stockholders of record. Also, 254,148 */ shares of the Company's
Series A Preferred Stock (the "Preferred Stock") were outstanding
and entitled to vote, and held by 11 stockholders of record.
Each stockholder is entitled to one vote for each share of Common
Stock held by such stockholder as of the record date. Each
stockholder holding Preferred Stock as of the record date is also
entitled to one vote for each share of Common Stock into which
such Preferred Stock is convertible as of the record date. As of
the record date, one share of Preferred Stock is currently
convertible into 6.25 shares of Common Stock. If a choice as to
the matters coming before the Annual Meeting has been specified
by a stockholder on the Proxy, the shares will be voted
accordingly. If no choice is specified, the shares will be voted
IN FAVOR OF the approval of the proposals described in the Notice
of Annual Meeting of Stockholders and in this Proxy Statement.
Abstentions and broker non-votes (i.e., where a broker or nominee
submits a Proxy specifically indicating the lack of discretionary
authority to vote on the matter) are counted for purposes of
determining the presence or absence of a quorum for the
transaction of business. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes,
whereas broker non-votes will not be counted for purposes of
determining whether a proposal has been approved or not.
- --------------------------------
*/ Currently convertible into 1,588,425 shares of the Company
Stock.
1.
<PAGE>
REVOCABILITY OF PROXIES
Any stockholder giving a Proxy pursuant to this
solicitation may revoke such Proxy at any time prior to its
exercise by filing with the Secretary of the Company at its
principal executive offices at 850 Marina Village Parkway,
Alameda, California 94501, a written notice of such revocation
or a duly executed Proxy bearing a later date, or by attending
the Annual Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation,
including the preparation, assembly, printing and mailing of the
Notice of Annual Meeting, this Proxy Statement, the Proxy and any
additional soliciting materials furnished to stockholders.
Copies of solicitation materials will be furnished to brokerage
houses, fiduciaries and custodians holding shares in their names
that are beneficially owned by others so that they may forward
this solicitation material to such beneficial owners. To assure that
a quorum will be present in person or by proxy at the Annual
Meeting, it may be necessary for certain officers, directors,
employees or other agents of the Company to solicit proxies by
telephone, facsimile or other means or in person. The Company
will not compensate such individuals for any such services. The
Company does not presently intend to solicit proxies other than
by mail.
IMPORTANT
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY
IN THE POSTAGE-PREPAID, RETURN ENVELOPE PROVIDED BY NO LATER
THAN NOVEMBER 10, 1995, SO THAT IF YOU ARE UNABLE TO ATTEND THE
ANNUAL MEETING, YOUR SHARES MAY BE VOTED.
THE ANNUAL REPORT OF THE COMPANY FOR THE FISCAL YEAR
ENDED JUNE 30, 1995 IS BEING MAILED CONCURRENTLY WITH THE
MAILING OF THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT TO
ALL STOCKHOLDERS ENTITLED TO NOTICE OF AND TO VOTE AT THE ANNUAL
MEETING. THE ANNUAL REPORT IS NOT INCORPORATED INTO THIS PROXY
STATEMENT AND IS NOT CONSIDERED PROXY SOLICITING MATERIAL.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL ONE - ELECTION OF DIRECTORS
On September 14, 1995 the Board of Directors amended the
Bylaws to provide for not less than six directors and not more
than eleven directors. The number of directors as of the date of
the Annual Meeting is fixed at ten. At the Annual Meeting, a
Board of Directors of ten directors will be elected, to serve
until the Company's next Annual Meeting, until their successors
shall have been duly elected and qualified or until their death,
resignation or removal. The Board of Directors has selected ten
nominees, nine of whom are current directors of the Company and
one is a new nominee. Each person nominated for election has
agreed to serve if elected, and management has no reason to
believe that any nominee will be unavailable to serve. Unless
otherwise instructed, the Proxy holders will vote the Proxies
received by them IN FAVOR OF the nominees named below. The ten
candidates receiving the highest number of affirmative votes of
the shares entitled to vote at the Annual Meeting will be
elected. If any nominee is unable to or declines to serve as a
director, the Proxies may be voted for a substitute nominee
designated by the current Board of Directors. As of the date of
this Proxy Statement, the Board of Directors is not aware of any
nominee who is unable or will decline to serve as a director.
2.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE IN FAVOR OF THE ELECTION OF EACH OF THE FOLLOWING NOMINEES
TO SERVE AS DIRECTORS OF THE COMPANY UNTIL THE NEXT ANNUAL
MEETING, UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND
QUALIFIED OR UNTIL THEIR DEATH, RESIGNATION OR REMOVAL.
INFORMATION WITH RESPECT TO NOMINEES
Set forth below is information regarding the nominees,
including information furnished by them as to principal
occupations, certain other directorships held by them, any
arrangements pursuant to which they were selected as directors or
nominees and their ages as of June 30, 1995.
<TABLE>
<CAPTION>
Name Position(s) with the Company Age Director Since
<S> <C> <C> <C>
CONTINUING DIRECTORS FOR REELECTION
David W. Carter . . . . . . . . . Chairman of the Board of Directors, 56 1988
President and Chief Executive Officer
Karen Davis, Ph.D. . . . . . . . Director 52 1992
Michael R. Eisenson . . . . . . . Director 40 1988
Fred H. Gage, Ph.D. . . . . . . . Director 44 1993
Harry F. Hixson, Jr., Ph.D. . . . Director 56 1992
Richard C. Mulligan, Ph.D. . . . Director, Executive Vice President, Research 40 1991
and Chief Scientific Officer
John T. Potts, Jr., M.D. . . . . Director 63 1995
Thomas E. Shenk, Ph.D. . . . . . Director 48 1995
Samuel D. Waksal, Ph.D. . . . . . Director 48 1995
DIRECTOR NOMINEE FOR ELECTION
Leon E. Rosenberg, M.D . . . . . -- 62 --
</TABLE>
BUSINESS EXPERIENCE OF NOMINEES
MR. CARTER has served as President and Chief Executive
Officer of the Company since September 1991 and as a
director of the Company since 1988. In September 1994,
Mr. Carter was appointed Chairman of the Board of Directors of
the Company. Prior to joining the Company, he was President and
Chief Operating Officer of Northfield Laboratories, a
company developing an artificial blood product. Mr. Carter
currently serves as a member of the Board of Directors for
Northfield Laboratories.
DR. DAVIS has served as a director of the Company since
1992. She is President of The Commonwealth Fund, a
philanthropic foundation in the health care field, which she
joined in July 1992 as Executive Vice President. Dr. Davis is
also an Adjunct Professor of Health Policy and Management at The
Johns Hopkins University School of Hygiene and Public Health.
From 1982 until 1992, Dr. Davis was Chairman of the Department of
Health Policy and Management in The Johns Hopkins University
School of Hygiene and Public Health. Dr. Davis sits on several
boards and committees concerned with health policy issues and is
the author of numerous books and articles on health economics and
policy analysis. Dr. Davis currently serves as a director for
Primary Care Development Corporation.
3.
<PAGE>
MR. EISENSON has served as a director of the Company
since 1988. He joined Harvard Private Capital Group,
Inc., an investment affiliate of Harvard University in 1986, and
is President and CEO. Mr. Eisenson presently serves on
the Board of Directors of ImmunoGen, Inc., Harken Energy
Corporation, NHP Incorporated, and several privately-held
companies.
DR. GAGE is Professor of Neuroscience at the Salk
Institute. He was a founder of GeneSys Therapeutics
Corporation ("GeneSys") and has served as a consultant to the
Company since the acquisition of GeneSys in January 1992.
Dr. Gage was appointed a director of the Company in September
1993. Dr. Gage was a member of the faculty at the
University of California, San Diego, from 1985 to 1995.
DR. HIXSON is Chairman of the Board of Directors of
Neurocrine Biosciences, Inc. He was President, Chief
Executive Officer, and a director of GeneSys from July 1991 until
the acquisition of GeneSys by the Company in January 1992. Dr.
Hixson served as Chairman of the Board of Directors from January
1992 to September 1994. From October 1988 until his resignation
in February 1991, Dr. Hixson served as President, Chief Operating
Officer and member of the Board of Directors of Amgen, Inc., a
publicly held biotechnology company. Dr. Hixson is a director of
Biocircuits, Inc., a publicly held biotechnology company, as well
as Neurocrine Biosciences and Signal Pharmaceuticals, both
privately held biotechnology companies.
DR. MULLIGAN was a founder and director of Somatix
Corporation from its formation in January 1988 until the
merger with Hana Biologics, Inc. in March 1991. Since that time,
he has been a director and consultant to the Company,
and has served as Chairman of the Scientific Advisory Board. Dr.
Mulligan has been a member of the faculty of the Massachusetts
Institute of Technology ("MIT") since 1981, where he currently
holds the position of Professor of Molecular Biology. He is also
a member of the Whitehead Institute for Biomedical Research, a
research affiliate of MIT. Dr. Mulligan has been Executive Vice
President of Research and Chief Scientific Officer of the Company
since June 1, 1994.
DR. POTTS was appointed to the Board of Directors in
March 1995. His career spans 40 years of distinguished
service in science and medicine. He earned his M.D. in 1957 from
University of Pennsylvania, then trained at Massachusetts General
Hospital and National Heart Institute. At National Institutes of
Health, he became head of the Section on Polypeptide Hormones
prior to becoming Chief of Endocrinology at Massachusetts General
Hospital in 1968. Currently, he serves as Physician-in-Chief at
Massachusetts General Hospital and Jackson Professor of Clinical
Medicine at Harvard Medical School, positions he has held since
1981. He is also a member of the board of directors of
Genentech, Inc.
DR. SHENK joined the Board of Directors in conjunction
with Somatix's acquisition of Merlin Pharmaceutical Corporation
("Merlin") in February 1995. Dr. Shenk, a Merlin founder, is
Howard Hughes Professor of Molecular Biology at Princeton
University. He has done extensive work with adenovirus, and is
the author of numerous articles on the subject.
DR. WAKSAL also joined Somatix's Board of Directors
concurrent with the Merlin acquisition. He is president
and chief executive officer in Imclone Systems, Incorporated, a
New York-based biotechnology company. He has taught at Mount
Sinai School of Medicine and conducted research at the National
Cancer Institute, Stanford University Medical School and Tufts
University School of Medicine. He is author of numerous
articles, and also serves as chairman of the board of Cadus
Pharmaceutical Corporation.
DR. ROSENBERG is the President of Bristol-Myers
Pharmaceutical Research Institute. Dr. Rosenberg was nominated
to the Board of Directors on August 15, 1995. He has been the
President of Bristol-Myers Squibb Pharmaceutical Research
Institute since September 1991. Prior to joining Bristol-Myers
Squibb, Dr. Rosenberg was the dean of the Yale University School
of Medicine, a position he had held since 1984. During his 29
year affiliation with Yale, he worked as a research geneticist,
teacher, and clinician. Dr. Rosenberg is a member of the Board
of Directors of Research America and the Whitehead Institute for
Biomedical Research.
4.
<PAGE>
There are no family relationships among executive
officers or directors of the Company.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held five meetings during the
fiscal year ended June 30, 1995. The Board of Directors
has an Audit Committee and a Compensation Committee, but does not
have a standing Nominating Committee. Of the nine
directors, eight participated in or attended at least 75% of the
aggregate number of meetings of the Board of Directors
and meetings of the Audit Committee and Compensation Committee,
respectively, on which such directors serve. In two
instances Dr. Potts was unable to attend meetings of the Board of
Directors.
The Audit Committee is primarily responsible for
approving the services performed by the Company's independent
accountants and reviewing reports of the Company's internal and
external auditors regarding the Company's accounting
practices and systems of internal accounting controls. The Audit
Committee includes three directors, Dr. Hixson, Dr.
Davis and Mr. Eisenson. The Audit Committee held two meetings
during the fiscal year ended June 30, 1995, at which each
member was in attendance.
The Compensation Committee, which includes Dr. Hixson,
Mr. Eisenson and (since February 1995) Dr. Waksal, reviews and
approves the Company's general compensation policies, sets
compensation levels for the Company's executive officers and
administers the Company's 1992 Stock Option Plan and other
employee benefit programs. During the fiscal year ended June 30,
1995, the Compensation Committee met three times and each member
was in attendance. On one occasion the Compensation Committee
took action by unanimous written consent.
DIRECTOR COMPENSATION
Drs. Davis, Hixson, Potts, Shenk and Waksal each
received $2,000 for each Board of Directors meeting attended
during the 1995 fiscal year and were also reimbursed for
associated travel expenses. Mr. Eisenson received $2,000 for
each Board of Directors meeting attended in order to defray his
travel expenses.
Dr. Waksal earned $9,000 and Dr. Shenk earned $42,000
for consulting services rendered to the Company pursuant
to consulting agreements entered into in connection with the
Merlin acquisition. The fees earned were applied to the
repayment of short-term loans granted to Dr. Waksal and Dr.
Shenk.
In November 1991, in connection with the Company's
acquisition of GeneSys, the Company entered into a
consulting agreement with Dr. Fred Gage, a founder and consultant
of GeneSys and a current member of the Company's Board
of Directors. The terms of the agreement require the Company to
pay Dr. Gage $100,000 per year for his consulting services,
provided he renders at least four working days of such service
per month, and to reimburse him for reasonable expenses directly
incurred in connection with such services. The agreement
provides that Dr. Gage's consulting services in the field of gene
therapy be rendered exclusively for the Company. For the 1995
fiscal year, Dr. Gage received $100,000 for services rendered
pursuant to this consulting agreement.
Dr. Gage was also granted, under the Discretionary
Option Grant Program in effect under the Company's 1992
Stock Option Plan, an option in March, 1995 to purchase 25,000
shares of Common Stock at an exercise price of $3.50 per
share, the fair market value per share on that date. The option
will become immediately exercisable for all the option
shares upon stockholders' approval of the amendment to the 1992
Stock Option Plan described in Proposal Two below, and
will have a maximum term of ten years, subject to earlier
termination following Dr. Gage's cessation of service with the
Company. The shares purchasable under the option will vest in a
series of 16 successive equal quarterly installments upon
Dr. Gage's completion of each full calendar quarter of service
with the Company, either as a consultant or non-employee member
of the Board of Directors, measured from the grant date.
However, full and immediate vesting of the option shares will
occur in the event the Company should be acquired by merger or
asset sale. For further information concerning this
5.
<PAGE>
option grant, see "Proposal Two - Approval of Amendment to 1992
Stock Option Plan; Discretionary Option Grant Program."
During the 1995 fiscal year, Drs. Potts, Shenk and
Waksal each received an option grant to purchase 25,000 shares of
Common Stock pursuant to the automatic option grant program in
effect under the Company's 1992 Stock Option Plan. The grant was
made to each such individual at the time he first joined the
Board of Directors a non-employee director, and the exercise
price per share in effect under each option is equal to the fair
market value of the Common Stock on the grant date: $3.063 for
Dr. Potts, $4.25 for Dr. Shenk and $4.25 for Dr. Waksal. Each
option is immediately exercisable for all the option shares.
However, any shares purchased under the option will be subject to
repurchase by the Company, at the option exercise price paid per
share, upon the optionee's cessation of Board of Director service
prior to vesting in those shares. The repurchase right will
lapse, and the optionee shall acquire a vested interest in
the option shares, in a series of 16 successive equal quarterly
installments over the optionee's period of Board of
Director service. For further information concerning the terms
of these automatic option grants, see "Proposal Two -
Approval of Amendment to 1992 Stock Option Plan; Automatic Option
Grant Program."
No other compensation was paid to directors of the
Company in respect of their services as directors or
consultants.
PROPOSAL TWO - APPROVAL OF
AMENDMENT TO 1992 STOCK OPTION PLAN
INTRODUCTION
The stockholders are being asked to vote on a proposal
to approve an amendment to the Company's 1992 Stock
Option Plan (the "Option Plan") which was approved by the Board
of Directors in March, 1995, subject to stockholder
approval at the Annual Meeting. The amendment will effect the
following principal change to the existing provisions of
the Option Plan:
Non-employee members of the Company's Board of
Directors, other than those individuals who are also at
the time serving on the Compensation Committee which administers
the Option Plan, will now be eligible to participate in
the Discretionary Option Grant Program in effect under the Option
Plan so that they may receive option grants under both
the Discretionary Option Grant and Automatic Option Grant
Programs.
The affirmative vote of the holders of a majority of the
Common Stock present or represented by Proxy and entitled to vote
is required for approval of the amendment to the Option Plan at
the Annual Meeting.
The Option Plan became effective on September 15, 1992
as the successor to the 1983 Stock Option Plan (the "Predecessor
Plan"). All outstanding options under the Predecessor Plan were
incorporated into the Option Plan at that time, and no further
option grants are to made under the Predecessor Plan.
The purpose of the Option Plan is to provide a means
whereby key employees, officers and non-employee directors
and consultants of the Company and its parent or subsidiary
corporations may be given an opportunity to purchase shares
of Common Stock pursuant to options granted under the Option
Plan. The Board of Directors believes that option grants
under the Option Plan are critical to the Company's efforts to
attract, employ and retain employees, directors and consultants
of outstanding ability, and the Board of Directors accordingly
recommends that the stockholders vote IN FAVOR OF the amendment.
6.
<PAGE>
The principal terms and provisions of the Option Plan as
modified by the recent amendment are summarized below. The
summary is not, however, intended to be a complete description of
all the terms of the Option Plan. A copy of the Option Plan as
amended will be furnished without charge to any stockholder upon
written request to the Corporate Secretary of the Company.
DESCRIPTION OF THE OPTION PLAN
Structure. The Option Plan is divided into two
separate equity incentive programs: (i) a Discretionary
Option Grant Program under which key employees, consultants and
non-employee members of the Board of Directors, other than those
individuals who are also at the time serving on the Compensation
Committee which administers the Option Plan, may be granted
options to purchase shares of Common Stock; and (ii) an Automatic
Option Grant Program under which eligible non-employee members of
the Board of Directors will automatically receive a special
option grant to purchase shares of Common Stock during their
period of service as a member of the Board of Directors.
Options granted under the Discretionary Option Grant
Program may be either incentive stock options designed to
meet the requirements of Section 422 of the Internal Revenue Code
or non-statutory options not intended to satisfy such
requirements. All grants under the Automatic Option Grant
Program will be non-statutory options.
Administration. The Discretionary Option Grant Program
is administered by the Compensation Committee of the Board of
Directors (the "Committee" or the "Plan Administrator").
Committee members are appointed by, and serve for such period
of time as determined by, the Board of Directors. No member of
the Board of Directors may serve on the Committee if he or she
has, during the 12-month period preceding his or her appointment
to the Committee, received an option grant or stock award under
the Option Plan, other than pursuant to the Automatic Option
Grant Program, or under any other stock plan of the Company or
its parent or subsidiary corporations.
The Plan Administrator has full authority (subject to
the express provisions of the Option Plan) to determine
the eligible individuals who are to receive grants under the
Discretionary Option Grant Program, the number of shares to
be covered by each granted option, the date or dates on which the
option is to become exercisable, the vesting schedule for the
option shares, the maximum term for which the option is to remain
outstanding and the remaining provisions of the option grant.
All grants under the Automatic Option Grant Program are
made in strict compliance with the express provisions of that
program, and no administrative discretion is exercised by the
Plan Administrator.
Eligibility. Key employees (including officers) and
independent consultants in the service of the Company or its
parent or subsidiary corporations (whether now existing or
subsequently established) and non-employee members of the Board
of Directors, other than those individuals who are also at the
time serving on the Compensation Committee which administers the
Option Plan, are eligible to receive option grants under the
Discretionary Option Grant Program. Only non-employee members of
the Board of Directors are eligible to participate in the
Automatic Option Grant Program.
As of September 15, 1995, approximately 120 persons
(including five executive officers and five non-employee
members of the Board of Directors) were eligible to participate
in the Discretionary Option Grant Program, and seven
non-employee members of the Board of Directors were eligible to
participate in the Automatic Option Grant Program.
7.
<PAGE>
Securities Subject to Option Plan. The maximum number
of shares of Common Stock issuable over the term of the
Option Plan may not exceed 3,200,000 shares */. Such share
reserve will be subject to further adjustment in the event of
subsequent changes to the capital structure of the Company. The
shares may be made available either from the Company's
authorized but unissued Common Stock or from Common Stock
reacquired by the Company, including shares purchased on the
open market.
In no event may any one individual participating in the
Option Plan be granted stock options or separately exercisable
stock appreciation rights after August 31, 1994 for more than 25%
of the total number of shares of Common Stock available for
issuance under the Option Plan from and after that date,
including any other share increases to the Option Plan
subsequently approved by the stockholders.
Should an option expire or terminate for any reason
prior to exercise in full (including options canceled in
accordance with the cancellation-regrant provisions described in
the "Cancellation and Regrant of Options" section below), the
shares subject to the portion of the option not so exercised will
be available for subsequent grant under the Option Plan. Shares
subject to any option surrendered or canceled in accordance with
the stock appreciation right provisions of the Option Plan will
not be available for subsequent grants.
DISCRETIONARY OPTION GRANT PROGRAM
Price and Exercisability. The option exercise price per
share for an incentive stock option under the Federal tax laws
may not be less than the fair market value of the Common Stock on
the grant date. The exercise price per share for any
non-statutory options may not be less than 85% of such fair
market value. Options granted under the Discretionary Option
Grant Program will become exercisable in periodic installments
over the optionee's period of service as established by the Plan
Administrator and set forth in the instrument evidencing the
option grant. No granted option will have a term in excess of
ten years.
The exercise price may be paid in cash or in shares of
Common Stock. Options may also be exercised through a
same-day sale program, pursuant to which a designated brokerage
firm effects the immediate sale of the shares purchased
under the option and pays over to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to
cover the exercise price for the purchased shares plus all
applicable withholding taxes. The Plan Administrator may also
assist any optionee (including an officer) in the exercise of his
or her outstanding options by (a) authorizing a Company loan to
the optionee or (b) permitting the optionee to pay the exercise
price in installments over a period of years. The terms and
conditions of any such loan or installment payment will be
established by the Plan Administrator in its sole discretion, but
in no event may the maximum credit extended to the optionee
exceed the aggregate exercise price payable for the purchased
shares, plus any federal or state income or employment taxes
incurred in connection with the purchase.
Valuation. For purposes of establishing the exercise
price and for all other valuation purposes under the
Option Plan, the fair market value per share of Common Stock on
any relevant date will be the closing selling price per
share on that date, as such price is reported on the Nasdaq
National Market. If there is no closing selling price for
the Common Stock on the date in question, then the closing
selling price on the last previous date for which such
quotation exists will be determinative of fair market value. The
closing selling price of the Common Stock on September 15, 1995
was $6.625 per share.
Termination of Service. Any option held by the optionee
at the time of cessation of service will not remain exercisable
beyond the limited post-service period designated by the Plan
Administrator at the time of
*/ From and after September 15, 1995 not more than 2,937,635
shares may be issued under the Option Plan.
8.
<PAGE>
the option grant. Under no circumstances, however, may any
option be exercised after the specified expiration date of
the option term. Each such option will, during such limited
period, normally be exercisable only to the extent of the
number of shares of Common Stock in which the optionee is vested
at the time of cessation of service. The optionee will
be deemed to continue in service for so long as such individual
performs services for the Company (or any parent or
subsidiary corporation), whether as an employee, a non-employee
member of the Board of Directors or an independent consultant or
advisor.
The Plan Administrator has complete discretion to extend
the period following the optionee's cessation of service during
which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole
or in part. Such discretion may be exercised at any time while
the options remain outstanding, whether before or after the
optionee's actual cessation of service.
Stockholder Rights. No optionee is to have any
stockholder rights with respect to the option shares until the
optionee has exercised the option and paid the exercise price for
the purchased shares. Options are not assignable or transferable
other than by will or the laws of descent and distribution, and
during the optionee's lifetime the option may be exercised only
by the optionee.
Stock Appreciation Rights. At the discretion of the
Plan Administrator, options may be granted with stock
appreciation rights. Two types of stock appreciation rights are
authorized for issuance under the Discretionary Option Grant
Program: (i) tandem rights which require the option holder to
elect between the exercise of the underlying option for shares of
Common Stock and the surrender of such option for an appreciation
distribution from the Company; and (ii) limited rights which are
automatically exercised upon the occurrence of a hostile
take-over.
The appreciation distribution payable by the Company
upon the exercise of a tandem stock appreciation right
will be equal in amount to the excess of (i) the fair market
value (on the exercise date) of the shares of Common Stock
in which the optionee is at the time vested under the surrendered
option over (ii) the aggregate exercise price payable
for such shares. Such appreciation distribution may, at the Plan
Administrator's discretion, be made in shares of Common Stock
valued at fair market value on the exercise date, in cash or in a
combination of cash and Common Stock.
One or more officers of the Company subject to the
short-swing profit restrictions of the federal securities
laws may, at the discretion of the Plan Administrator, be granted
limited stock appreciation rights in connection with their option
grants under the Discretionary Option Grant Program. Any option
with such a limited stock appreciation right in effect for at
least six months will automatically be canceled, to the extent
exercisable for one or more vested option shares, upon the
successful completion of a hostile tender offer for more than 50%
of the Company's outstanding voting stock. In return, the officer
will be entitled to a cash distribution from the Company in an
amount per canceled option share equal to the excess of (i) the
highest price per share of Common Stock paid in the tender offer
over (ii) the option exercise price payable per share.
Certain options granted under the predecessor 1983 Stock
Option Plan and incorporated into the Option Plan contain a
different form of limited stock appreciation right, pursuant to
which the option holder will have the right to surrender the
underlying option to the Company for a cash distribution,
calculated in the same manner indicated above, should 25% or more
of the Company's outstanding voting securities be acquired
through a hostile tender offer or should there occur a change in
the majority of the Board of Directors as a result of one or more
proxy contests.
Cancellation and New Grant of Options. The Plan
Administrator has the authority to effect, at any time and
from time to time, with the consent of the affected optionees,
the cancellation of any or all options outstanding under the
Discretionary Option Grant Program and to grant in substitution
thereof new options covering the same or different numbers of
shares of Common Stock but with an exercise price per share not
less
9.
<PAGE>
than 85% of the fair market value of the Common Stock on the new
grant date (in the case of an incentive stock option,
100% on the new grant date).
Acceleration of Options. Upon the occurrence of any of
the following transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which the
Company is not the surviving entity, except for a transaction
the principal purpose of which is to change the state of the
Company's incorporation;
(ii) the sale, transfer, or other disposition of
all, or substantially all, of the Company's assets in complete
liquidation or dissolution of the Company; or
(iii) any reverse merger in which the Company is
the surviving entity, but in which securities possessing more
than 50% of the total combined voting power of the Company's
outstanding securities are transferred to a person or
persons different from the persons holding those securities
immediately prior to such merger;
each outstanding option under the Discretionary Option Grant
Program will, immediately prior to the effective date of
the Corporate Transaction, become fully exercisable for all of
the shares at the time subject to such option and may be
exercised for any or all of such shares as fully-vested shares.
No such acceleration will occur, however, if (i) the option is
either to be assumed by the successor corporation or replaced
with a comparable option to purchase shares of the capital stock
of the successor corporation, (ii) replaced with a cash
incentive program of the successor corporation based on the
option spread at the time of the Corporate Transaction or (iii)
the acceleration of the option is subject to other limitations
imposed by the Plan Administrator at the time of grant.
Immediately following the consummation of the Corporate
Transaction, all outstanding options will terminate and cease to
be exercisable, except to the extent assumed by the successor
corporation.
The Plan Administrator will also have full power and
authority to provide for the automatic acceleration of one
or more outstanding options under the Discretionary Option Grant
Program upon the occurrence of any hostile take-over of the
Company, whether effected through a tender offer for securities
possessing more than 50% of the total combined voting power of
the Company's outstanding securities or through a change in the
majority of the Board of Directors as a result of one or more
contested elections for membership on the Board of Directors.
Alternatively, the Plan Administrator may condition any such
option acceleration upon the optionee's cessation of service
within a specified period following such hostile take-over.
The acceleration of options in the event of a Corporate
Transaction or hostile take-over event may be seen as an
anti--takeover provision and may have the effect of discouraging
a merger proposal, a takeover attempt or other efforts to gain
control of the Company.
Special Tax Withholding Election. The Plan
Administrator may, in its discretion and upon such terms and
conditions as it may deem appropriate, provide one or more option
holders under the Discretionary Option Grant Program with the
election to have the Company withhold, from the shares of Common
Stock otherwise issuable upon the exercise of their options, a
portion of those shares with an aggregate fair market value
equal to the designated percentage (up to 100% as specified by
the option holder) of the federal, state and local income
and employment tax liability incurred by such option holder in
connection with the exercise of the option. Any election so made
will be subject to the approval of the Plan Administrator, and no
shares will actually be withheld in satisfaction of such taxes
except to the extent approved by the Plan Administrator. One or
more option holder may also be granted the alternative right,
subject to approval by the Plan Administrator, to deliver
previously-issued shares of Common Stock in satisfaction of such
tax liability.
10.
<PAGE>
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each
non-employee member of the Board of Directors will automatically
be granted, upon his or her initial election or appointment to
the Board of Directors after June 9, 1994, a stock option to
purchase 25,000 shares of Common Stock, unless that individual
has previously received an option grant from the Company while
serving as a non-employee member of the Board of Directors or an
independent consultant. In addition, each individual who was
serving as a non-employee member of the Board of Directors on the
June 9, 1994 effective date of such Automatic Option Grant
Program and who had not otherwise previously received an option
grant from the Company in the capacity of a non-employee member
of the Board of Directors or independent consultant was
automatically granted on that date a stock option for 25,000
shares of Common Stock. In no event, however, will any option
grant be made under the Automatic Option Grant Program to a
non-employee member of the Board of Directors who has previously
been in the Company's employ.
The option price per share for each automatic grant will
be the fair market value per share of Common Stock on the date of
grant, and the option price for purchased shares will be payable
in cash or shares of Common Stock. The options may also be
exercised through a same-day sale program, pursuant to which a
designated brokerage firm effects the immediate sale of the
shares purchased under the option and pays over to the Company,
out of the sale proceeds available on the settlement date,
sufficient funds to cover the exercise price for the purchased
shares.
Each automatic option grant will have a term of ten
years and will be immediately exercisable for any or all of
the option shares. Any shares purchased under the option will be
subject to repurchase by the Company, at the exercise price paid
per share, upon the optionee's cessation of service as a member
of the Board of Directors prior to vesting in those shares. The
optionee will vest in the option shares in a series of 16
successive equal quarterly installments upon his or her
completion of each full calendar quarter of continued service as
a member of the Board of Directors over the 48 month period
measured from the first day of the first calendar quarter
following the grant date. However, the option shares will
automatically vest in full upon the occurrence of a Corporate
Transaction. Immediately following the consummation of such
Corporate Transaction, all automatic option grants will terminate
except to the extent such grants are assumed by the successor
entity or its parent corporation.
The options held by a non-employee member of the Board
of Directors at the time of his or her cessation of Board of
Director service will for a three month period remain exercisable
for any shares of Common Stock in which the member of the Board
of Directors is vested at the time of such cessation of service
as a member of the Board of Directors. Should the optionee
die while serving as a member of the Board of Directors or during
the three month period following his or her cessation of service
as a member of the Board of Directors, then the option may
subsequently be exercised, for any or all of the shares of Common
Stock in which the optionee is vested at the time of such
cessation of service as a member of the Board of Directors,
within 12 months after the date of the optionee's death by the
personal representative of the optionee's estate or by the
persons to whom such options are transferred by the optionee's
will or by the laws of inheritance. Should the optionee become
permanently disabled while serving as a member of the Board of
Directors, he or she will have a 12 month period following
cessation of service as a member of the Board of Directors to
exercise his or her outstanding automatic grant for any or all of
the shares of Common Stock in which he or she is vested at time
of such cessation of service as a member of the Board of
Directors.
GENERAL PROVISIONS
Changes in Capitalization. In the event any change is
made to the Common Stock issuable under the Option Plan
by reason of any stock split, stock dividend, combination of
shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Company's receipt
of consideration,
11.
<PAGE>
appropriate adjustments will be made to (i) the maximum number
and/or class of securities issuable under the Option Plan, (ii)
the maximum number and/or class of securities for which any one
individual may be granted stock options and separately
exercisable stock appreciation rights under the Option Plan after
August 31, 1994, (iii) the number and/or class of securities for
which option grants will subsequently be made under the Automatic
Option Grant Program to newly-elected non-employee members of the
Board of Directors and (iv) the class and/or number of securities
and exercise price per share in effect under each outstanding
option.
Each outstanding option that is assumed in connection
with a Corporate Transaction will be appropriately adjusted to
apply and pertain to the number and class of securities which
would otherwise have been issued, in consummation of such
Corporate Transaction, to the option holder had the option been
exercised immediately prior to the Corporate Transaction.
Appropriate adjustments will also be made to the exercise price
payable per share and to the class and number of securities
available for future issuance under the Option Plan on both an
aggregate and per participant basis.
Option Plan Amendments. The Board of Directors may
amend or modify the Option Plan in any or all respects.
However, the Board of Directors may not, without the approval of
the Company's stockholders, (i) materially increase the
maximum number of shares issuable under the Option Plan (except
in connection with certain changes in capitalization), (ii)
materially modify the eligibility requirements for option grants,
or (iii) otherwise materially increase the benefits accruing to
participants under the Option Plan.
Unless sooner terminated by the Board of Directors, the
Option Plan terminates on August 31, 2004. Any options
outstanding at the time of such termination will remain in force
in accordance with the provisions of the instruments evidencing
such grants.
OPTION GRANTS
The table below shows, as to each of the executive
officers named in the Summary Compensation Table below and
the various other indicated persons and groups, the following
information with respect to stock option grants effected during
the period from July 1, 1994 to September 15, 1995: (i) the
number of shares of Common Stock subject to options granted under
the Option Plan during that period; and (ii) the weighted average
exercise price payable per share under such options. This table
excludes all options initially granted in prior fiscal years and
regranted in fiscal 1995 pursuant to the option regrant program
effected on December 14, 1994. For further information on the
option regrants, see "Executive Compensation and Other
Information; Special Option Regrant Program" section.
12.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF OPTION PRICE
NAME AND POSITION SHARES ($)
David W. Carter 150,000 $3.00
Chairman of the Board of Directors,
President
and Chief Executive Officer
Mark N.K. Bagnall 20,000 $3.00
Vice President, Chief
Financial Officer and
Corporate Secretary
Jan I. Drayer, M.D., Ph.D. 150,000 $3.625
Executive Vice President, Gene
Therapy Development
Richard C. Mulligan, Ph.D. 100,000 $3.00
Executive Vice President,
Research and Chief
Scientific Officer
All current executive officers 450,000 $3.327
as a group
(4 persons)
Fred H. Gage, Ph.D. 25,000 $3.50
Director
Thomas Shenk, Ph.D. 25,000 $4.25
Director
John T. Potts, Jr., M.D. 25,000 $3.063
Director
Samuel D. Waksal, Ph.D. 25,000 $4.25
Director
All current directors (other 100,000 $3.765
than executive officers) as a
group (4 persons)
All employees, including 269,000 $4.539
current officers who are not
executive officers, as a group
(110 persons)
</TABLE>
As of September 15, 1995, options covering 2,320,830
shares were outstanding under the Option Plan, 616,805
shares remained available for future option grant and 262,365
shares of stock have been issued pursuant to the exercise
of options granted under the Option Plan.
NEW PLAN BENEFITS
On March 15, 1995, an option for 25,000 shares of Common
Stock was granted to Dr. Gage under the Discretionary Option
Grant Program at an exercise price of $3.50 per share. This
option will not become exercisable in whole or in part unless the
stockholders approve the amendment to the Option Plan under this
Proposal Two which will render the non-employee members of the
Board of Directors eligible to receive grants
13.
<PAGE>
under the Discretionary Option Grant Program during their period
of service on the Board of Directors, other than during their
period of service on the Compensation Committee.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS GRANTED UNDER THE
OPTION PLAN
Options granted under the Option Plan may be either
incentive stock options which satisfy the requirements of Section
422 of the Internal Revenue Code or non-statutory options which
are not intended to meet such requirements. The Federal income
tax treatment for the two types of options differs as follows:
Incentive Stock Options. No taxable income is
recognized by the optionee at the time of the option grant and
no taxable income is generally recognized at the time the option
is exercised. The optionee will, however, recognize taxable
income in the year in which the shares purchased upon exercise of
the option are sold or otherwise made the subject of disposition.
For Federal tax purposes, dispositions are divided into
two categories: (i) qualifying and (ii) disqualifying. The
optionee will make a qualifying disposition of the purchased
shares if the sale or other disposition of such shares is made
after the optionee has held the shares for more than two years
after the grant date of the option and more than one year after
the exercise date. If the optionee fails to satisfy either of
these two holding periods prior to the sale or other disposition
of the purchased shares, then a disqualifying disposition will
result.
Upon a qualifying disposition of the shares, the
optionee will recognize long-term capital gain in an amount
equal to the excess of (i) the amount realized upon the sale or
other disposition of the purchased shares over (ii) the exercise
price paid for such shares. If there is a disqualifying
disposition of the shares, then the excess of (x) the fair market
value of those shares on the date the option was exercised over
(y) the exercise price paid for the shares will be taxable as
ordinary income. Any additional gain recognized upon the
disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the
purchased shares, then the Company will be entitled to an income
tax deduction, for the taxable year in which such disposition
occurs, equal to the excess of (i) the fair market value of such
shares on the date the option was exercised over (ii) the
exercise price paid for the shares. In no other instance will
the Company be allowed a deduction with respect to the optionee's
disposition of the purchased shares. The Company anticipates
that any compensation deemed paid by the Company upon one or more
disqualifying dispositions of incentive stock option shares by
the Company's executive officers will remain deductible by the
Company and will not have to be taken into account for purposes
of the $1 million limitation per covered individual on the
deductibility of the compensation paid to certain executive
officers of the Company.
Non-Statutory Options. No taxable income is recognized
by an optionee upon the grant of a non-statutory option.
The optionee will in general recognize ordinary income,
in the year in which the option is exercised, equal to the excess
of the fair market value of the purchased shares on the exercise
date over the exercise price paid for the shares, and the
optionee will be required to satisfy the tax withholding
requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to
the acquisition of Common Stock under a non-statutory option, if
the purchased shares are subject to repurchase by the Company.
These special provisions may be summarized as follows:
14.
<PAGE>
(i) If the shares acquired upon exercise of the
non-statutory option are subject to repurchase by the Company at
the original exercise price in the event of the optionee's
termination of service prior to vesting in such shares, the
optionee will not recognize any taxable income at the time of
exercise but will have to report as ordinary income, as and when
the Company's repurchase right lapses, an amount equal to the
excess of (a) the fair market value of the shares on the date
such repurchase right lapses with respect to such shares over (b)
the exercise price paid for the shares; or
(ii) The optionee may, however, elect under
Section 83(b) of the Internal Revenue Code to include as ordinary
income in the year of exercise of the non-statutory option an
amount equal to the excess of (a) the fair market value of the
purchased shares on the exercise date (determined as if the
shares were not subject to the Company's repurchase right) over
(b) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any
additional income as and when the repurchase right lapses.
The Company will be entitled to a business expense
deduction equal to the amount of ordinary income recognized by
the optionee with respect to the exercised non-statutory option.
The deduction will in general be allowed for the taxable year of
the Company in which such ordinary income is recognized by the
optionee. The Company anticipates that the compensation deemed
paid by the Company upon the exercise of non-statutory options
with exercise prices equal to the fair market value of the option
shares on the grant date will remain deductible by the Company
and will not have to be taken into account for purposes of the $1
million limitation per covered individual on the deductibility of
the compensation paid to certain executive officers of the
Company.
Stock Appreciation Rights. An optionee who is granted a
stock appreciation right will recognize ordinary income in the
year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to a business expense
deduction equal to the appreciation distribution for the taxable
year of the Company in which the ordinary income is recognized by
the optionee.
ACCOUNTING TREATMENT
Under present accounting principles, neither the grant
nor the exercise of options issued with an exercise
price equal to the fair market value of the option shares on the
grant date will result in any charge to the Company's earnings.
However, the grant of options with exercise prices less than such
fair market value will result in a compensation expense to the
Company equal to the discount at the time of grant. The Company
must amortize such expense over the period the optionee is to
vest in the shares purchasable under the option. Whether or not
granted at a discount, the number of outstanding options may be a
factor in determining the Company's reported earnings per share.
Should one or more optionees be granted stock
appreciation rights that have no conditions upon exercisability
other than a service or employment requirement, then such rights
will result in a compensation expense to be charged periodically
against the Company's earnings. Accordingly, at the end of each
fiscal quarter, the amount (if any) by which the fair market
value of the shares of Common Stock subject to such outstanding
stock appreciation rights has increased from prior quarter-end
will be accrued as compensation expense, to the extent such
fair market value is in excess of the aggregate exercise price in
effect for such rights.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of the holders of a majority of the
shares of Common Stock present or represented by proxy at the
Annual Meeting and entitled to vote is required for approval of
Proposal Two. If such stockholder approval is not obtained, then
any options granted on the basis of the amendment to the Option
Plan
15.
<PAGE>
which allows non-employee members of the Board of Directors to
receive grants under the Discretionary Option Grant Program
will terminate without becoming exercisable for the shares of
Common Stock subject to those options.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE IN FAVOR OF THE APPROVAL OF THE AMENDMENT TO THE OPTION
PLAN.
PROPOSAL THREE - RATIFICATION OF SELECTION
OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed the firm of Ernst &
Young LLP, independent accountants, to audit the financial
statements of the Company for the fiscal year ending June 30,
1996, and is asking the stockholders to ratify this appointment.
Ernst & Young LLP has audited the Company's financial
statements annually since 1981. A representative of Ernst &
Young LLP is expected to be present at the Annual Meeting to
respond to appropriate questions, and will be given the
opportunity to make a statement if he so desires.
In the event the stockholders fail to ratify the
appointment, the Board of Directors will reconsider its
selection. Even if the selection is ratified, the Board of
Directors in its discretion may direct the appointment of a
different independent accounting firm at any time during the year
if the Board of Directors feels that such a change would be in
the best interests of the Company and its stockholders. The
affirmative vote of the holders of a majority of the Company's
Common Stock present or represented by Proxy and entitled to vote
is required to ratify the selection of Ernst & Young LLP at the
Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE IN FAVOR OF THE RATIFICATION OF THE SELECTION OF ERNST &
YOUNG LLP TO SERVE AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR
THE FISCAL YEAR ENDING JUNE 30, 1996.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION COMMITTEE REPORT
EXECUTIVE COMPENSATION
Decisions on compensation matters relating to the
Company's Chief Executive Officer, David W. Carter, and the
Company's other executive officers are generally made by the
Compensation Committee, which currently consists of Mr. Eisenson,
Dr. Waksal and Dr. Hixson, three of the Company's non-employee
directors. The Compensation Committee sets the base salary of
the Company's executive officers, approves individual bonus
programs for executive officers and administers the Option Plan
under which grants may be made to executive officers and other
employees. The Compensation Committee has furnished the
following report on the compensation established for Mr. Carter
and the Company's other executive officers for the fiscal year
ended June 30, 1995.
The Compensation Committee set the compensation payable
to Mr. Carter for fiscal 1995. Mr. Carter in turn established,
subject to the Compensation Committee's review and approval, the
compensation payable for such fiscal year to the Company's other
executive officers. For these executive officers, the
Compensation
16.
<PAGE>
Committee had established performance factors to be considered by
Mr. Carter in setting their individual compensation. Mr. Carter
reported to the Compensation Committee his view of the
performance of each officer with respect to such factors and his
recommendation as to such individual's compensation based
thereon. The Compensation Committee discussed, and with some
modifications approved, the recommendations of Mr. Carter.
General Compensation Policy. The Compensation
Committee's overall policy is to offer the Company's executive
officers competitive compensation opportunities based upon
personal performance, the performance of the Company and the
individual's contribution to that performance, all with a view to
attracting and retaining qualified key executive officers for the
Company. One of the Compensation Committee's primary objectives
is to have a substantial portion of each officer's compensation
contingent upon the Company's performance as well as upon his or
her own level of performance. Accordingly, each executive
officer's compensation package is generally comprised of three
elements: (i) base salary that reflects individual performance
and is designed primarily to be competitive with salary levels in
the industry; (ii) annual variable performance awards payable in
cash and tied to the achievement of annual strategic performance
goals established by the Compensation Committee; and (iii) stock-
based incentive awards designed to strengthen the mutuality of
interests between the executive officers and the Company's
stockholders. Generally, as an officer's level of responsibility
increases, a greater portion of his or her total compensation
will be dependent upon Company performance and stock price
appreciation rather than base salary.
Factors. Because the Company is in the development
phase, the use of certain traditional performance standards
(such as profit levels and return on equity) are not appropriate
in evaluating the performance of the Company's executive
officers. The principal factors considered in establishing the
components of each executive officer's compensation package for
fiscal 1995 are summarized below. Additional factors were taken
into account to a lesser degree. The Compensation Committee may
in its discretion apply entirely different factors, such as
different measures of strategic performance, for future fiscal
years.
- BASE SALARY. The base salary for each officer
is set on the basis of personal performance, the
salary levels in effect for comparable positions with the
Company's principal competitors, and internal comparability
considerations. In addition, the Company reviews salary surveys
for officers of companies in comparable industries and
geographic locations as the Company. The level of base salary
set for the Company's executive officers for fiscal 1995
was within twenty percent (20%) of the average surveyed salary
for comparable companies.
For the purposes of the stock price performance graph
which appears later in this Proxy Statement, the Company has
selected the Nasdaq Pharmaceutical Index as the peer group index.
Fifteen of the companies included in that peer group index were
also among the companies that the Compensation Committee surveyed
for compensation data. However, in selecting companies to survey
for compensation data, the Compensation Committee focused
primarily on whether those companies were actually competitive
with the Company in seeking executive talent and whether those
companies had a management style and corporate culture similar to
the Company's. For this reason, the number of companies surveyed
for compensation data was substantially less than the number of
companies included in the Nasdaq Pharmaceutical Index.
- ANNUAL INCENTIVE COMPENSATION. An annual
bonus, set as a targeted percentage of salary based on position,
may be earned by each executive officer on the basis of the
Company's achievement of corporate performance targets
established by the Compensation Committee at the start of the
fiscal year. For fiscal 1995, these performance targets
reflected a combination of factors, including the achievement of
the Company's annual strategic objectives plus key functional
performance objectives related to pre-clinical and clinical
trials, strategic alliances and financing activities. For the
Chairman of the Board of Directors, President and Chief Executive
Officer, Mr. Carter, a bonus equal to 54.6% of his base salary
was earned as a result of the Company's achievement of the
established targets. This bonus level is the result of
structuring Mr. Carter's compensation
17.
<PAGE>
package to include a substantial component based upon incentive
performance rather than base salary. For the other executive
officers who were eligible to participate, the bonus was equal to
26.3% of their base salary.
- STOCK-BASED INCENTIVE COMPENSATION. The
Compensation Committee approves periodic grants of stock options
to each of the Company's executive officers under the Option
Plan. Generally, the size of each grant is set at a level that
the Compensation Committee deems appropriate to create a
meaningful opportunity for stock ownership based upon the
individual's current position with the Company, but there is also
taken into account comparable awards made to individuals in
similar positions in the industry as reflected in external
surveys, the individual's potential for future responsibility and
promotion, the individual's performance in the recent period and
the number of unvested options held by the individual at the time
of the new grant. The relative weight given to each of these
factors varies from individual to individual in the Compensation
Committee's discretion.
The grants are designed to align the interests of the
executive officer with those of the stockholders and provide each
individual with a significant incentive to manage the Company
from the perspective of an owner with an equity stake in the
business. Each grant allows the officer to acquire shares of the
Common Stock at a fixed price per share (the market price on the
grant date) over a specified period of time (up to ten years).
The option vests in periodic installments over a four-year
period, contingent upon the executive officer's continued
employment with the Company. Accordingly, the option will
provide a return to the executive officer only if he or she
remains in the Company's employ, and then only if the market
price of the Common Stock appreciates over the option term.
The Compensation Committee granted Dr. Drayer a
150,000-share option grant at the time he commenced his service
with the Company. Mr. Bagnall was granted an option to purchase
20,000 shares in order to maintain a comparable stock option
position when compared to similarly situated officers at other
companies in the industry. Mr. Carter and Dr. Mulligan were
granted options to purchase 150,000 and 100,000 shares,
respectively, to recognize their efforts in connection with the
Company's acquisition of Merlin Pharmaceutical Corporation.
CEO Compensation. In setting the compensation payable
to the Company's Chairman of the Board of Directors, President
and Chief Executive Officer, Mr. Carter, the Compensation
Committee sought to be competitive with other companies in the
industry, while at the same time tying a significant percentage
of such compensation to Company performance and stock price
appreciation. There was no increase in Mr. Carter's base salary
for fiscal 1995.
The Compensation Committee also established a maximum
bonus target for Mr. Carter for fiscal 1995 equal to 40% of his
base salary, payable upon the Company's achieving fiscal 1995
plan and commercialization milestones. In fiscal 1995, the
Compensation Committee awarded Mr. Carter an actual bonus equal
to 54.7% of his base salary which will be paid in October 1995.
Such amount exceeded the 40% maximum bonus provided under Mr.
Carter's employment contract. The Compensation Committee
determined that such higher bonus was appropriate in light of its
decision not to increase Mr. Carter's base salary for fiscal 1995
and to tie more of his total annual compensation to Company
performance.
SPECIAL OPTION REGRANT PROGRAM
During the 1995 fiscal year, the Compensation Committee
felt that circumstances had made it necessary for the Company to
implement an option cancellation/regrant program pursuant to
which outstanding options held by the Company's executive
officers and other employees under the Option Plan were canceled,
and new options for the same number of shares were granted with a
lower exercise price per share equal to the market price of the
Company's Common Stock on the regrant date.
18.
<PAGE>
The Compensation Committee determined that this program
was necessary because equity incentives are a significant
component of the total compensation package of each Company
employee and play a substantial role in the Company's ability to
retain the services of individuals essential to the Company's
long-term financial success. Prior to the implementation of the
program, the market price of the Company's Common Stock had
fallen as a result of market factors which affected stock prices
throughout the biopharmaceutical and biotechnology industries and
which did not necessarily reflect the market's particular
assessment of the Company's progress in product development and
clinical testing. The Compensation Committee felt that the
Company's ability to retain key employees would be significantly
impaired, unless value were restored to their options in the form
of regranted options at the current market price of the Company's
Common Stock. However, in order for the regranted options to
serve their primary purpose of assuring the continued service of
each optionee, a new vesting schedule was imposed with respect to
all option shares in which the optionee was vested at the time of
the regrant so that the optionee would only have the opportunity
to acquire the option shares at the lower exercise price if he or
she remained in the Company's employ.
Accordingly, on December 14, 1994, each employee of the
Company, including the Company's executive officers, who held an
outstanding stock option with an exercise price in excess of
$3.00 per share was granted a new option with an exercise price
of $3.00 per share, the market price of the Common Stock on that
date, in cancellation of his or her higher-priced option. Each
regranted option consists of two components. The number of
shares subject to the first component is equal to the number of
shares in which the optionee was vested under the higher-priced
option on September 30, 1994. This component will now become
exercisable in a series of eight successive equal quarterly
installments as the optionee continues in the Company's service
over the two-year period measured from October 1, 1994 to
September 30, 1996. The second component covers the shares in
which the optionee was not vested under the higher-priced option
on September 30, 1994. This component will become exercisable
for those shares in a series of successive equal quarterly
installments at the same time those installments were to become
exercisable under the higher-priced option.
As a result of the amended vesting schedules imposed on
the regranted options, the Compensation Committee believes that
the program strikes an appropriate balance between the interests
of the option holders and those of the stockholders. The lower
exercise prices in effect under the regranted options make those
options valuable once again to the executive officers and key
employees critical to the Company's financial performance.
However, those individuals will enjoy the benefits of the
regranted options only if they in fact remain in the Company's
employ and contribute to the Company's financial success.
Compliance with Internal Revenue Code Section 162(m).
As a result of Section 162(m) of the Internal Revenue Code, which
was enacted into law in 1993, the Company may not take a federal
income tax deduction for compensation paid to certain executive
officers, to the extent that compensation exceeds $1 million per
officer in any one year. This limitation became effective for
each fiscal year of the Company beginning after December 31, 1993
and applies to all compensation paid to the covered executive
officers which is not considered to be performance-based.
Compensation which does qualify as performance-based compensation
will not have to be taken into account for purposes of this
limitation. At the 1994 Annual Meeting of Stockholders, the
Company obtained stockholder approval for certain amendments to
the Option Plan which were intended to assure that any
compensation deemed paid in connection with the exercise of stock
options granted under that plan with an exercise price equal to
the fair market value of the option shares on the grant date will
qualify as performance-based compensation.
Compensation to be paid to the Company's executive
officers for the 1996 fiscal year is not expected to exceed the
$1 million limit per officer. Accordingly, until final Treasury
regulations are issued with respect to the new $1 million
limitation, any decision on whether or not to restructure one or
more components of the compensation paid to the executive
officers so as to qualify those components as performance-based
compensation that will not be subject to the $1 million
limitation will be deferred.
19.
<PAGE>
The foregoing report has been submitted by the
undersigned in our capacity as members of the Compensation
Committee of the Company's Board of Directors.
Michael R. Eisenson, Chairperson
Harry F. Hixson, Jr., Ph.D., Member
Samuel D. Waksal, Ph.D., Member
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is
comprised of Mr. Eisenson, Dr. Waksal and Dr. Hixson. None of
these individuals is a former or current officer or employee of
the Company or any of its subsidiaries. However, as a condition
to the acquisition of GeneSys on November 13, 1991, the Company
entered into a two-year consulting agreement with Dr. Hixson,
pursuant to which the Company agreed to use its best efforts to
have Dr. Hixson re-elected to the Board of Directors during the
four-year period following such acquisition and to have him
elected as Chairman of the Board of Directors during the first
two years of that period. Dr. Hixson has received a consulting
fee of $100,000 per year pursuant to his consulting agreement,
although this fee was reduced to $25,000 per year after November
1993. During fiscal year 1995, Dr. Hixson did not receive any
consulting fees. As a condition to the Merlin acquisition the
Company entered into a three-year consulting agreement with Dr.
Waksal. Pursuant to the agreement, Dr. Waksal receives a
consulting fee of $24,000 per year. In addition, the Company
granted Dr. Waksal a loan in the amount of $226,000, with an
annual interest rate of 8 1/2%. The remaining balance of Dr.
Waksal's loan at June 30, 1995 was $217,000.
No executive officer of the Company served on the board
of directors or compensation committee of any entity which has
one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.
20.
<PAGE>
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG SOMATIX THERAPY CORPORATION, THE NASDAQ
STOCK MARKET-US INDEX AND THE NASDAQ PHARMACEUTICAL INDEX
CUMULATIVE TOTAL RETURN
<S> <C> <C> <C> <C> <C> <C>
______________________________________________________________________
6/90 6/91 6/92 6/93 6/94 6/95 0656HSOM
Somatix Therapy Corp SOMA 100 33 109 95 65 57 08/14/95
NASDAQ STOCK MARKET - US INAS 100 106 127 160 162 215 06566NAS
NASDAQ PHARMACEUTICAL INAP 100 160 199 173 145 194 06566NAP
</TABLE>
* $100 INVESTED ON 06/30/90 IN STOCK OR INDEX - INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
Notwithstanding anything to the contrary set forth in
any of the Company's previous filings under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, which might incorporate future filings made by the
Company under those statutes, the preceding Compensation
Committee Report on Executive Compensation and the Company Stock
Performance Graph will not be incorporated by reference into any
of those prior filings, nor will such report or graph be
incorporated by reference into any future filings made by the
Company under those statutes.
21.
<PAGE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned,
for services rendered in all capacities to the Company and its
subsidiaries, for each of the last three fiscal years by the
Company's Chief Executive Officer and the four other highest paid
executive officers whose compensation for fiscal 1995 was in
excess of $100,000. No executive officer who would have
otherwise been included in such table on the basis of salary and
bonus earned for fiscal 1995 resigned or terminated employment
during that fiscal year. The individuals named in the table will
be hereinafter referred to as the "Named Officers."
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compen-
Annual Compensation sation
-------------------------------------------------------
Awards
Other -------------
Annual Securities All Other
Bonus Compen- Underlying Compen-
Name and Principal Year Salary ($) <F2> sation ($) Options (#) sations ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David W. Carter 1995 245,000 133,800 6,470 <F3> 270,000 <F6> 75,000 <F7>
Chairman of the Board of 1994 245,000 108,200 -- -- 75,000
Directors, President and 1993 225,000 41,400 -- 20,000 32,357
Chief Executive Officer
Mark N.K. Bagnall 1995 120,000 31,600 -- 120,000 <F6> --
Vice President, Chief 1994 110,500 39,835 -- -- --
Financial Officer and 1993 103,500 13,905 -- 40,000 --
Corporate Secretary
Jan I. Drayer, M.D., Ph.D. <F1> 1995 64,461 45,350 -- 150,000 69,065 <F8>
Executive Vice President, 1994 -- -- -- -- --
Gene Therapy Development 1993 -- -- -- -- --
Edward O. Lanphier II 1995 187,616 51,560 23,694 <F4> 175,000 <F6> 11,500 <F9>
Executive Vice President, 1994 160,500 58,335 17,711 25,000 12,000
Commercial Development 1993 150,000 20,250 -- -- 21,493
Richard C. 1995 195,000 35,100 60,000 <F5> 294,327 <F6> 19,367 <10>
Mulligan, Ph.D. 1994 21,500 25,000 8,333 150,000 137,500
Executive Vice President 1993 -- -- -- __ __
Research and Chief Scientific
Officer
<FN>
<F1> Dr. Drayer's employment with the Company began on March
21, 1995. His annual salary for fiscal 1996 is $230,000.
<F2> The amounts shown in the Bonus column include cash bonuses
earned for fiscal 1995 and paid in October 1995.
<F3> Represents car allowance paid for Mr. Carter.
<F4> Represents the forgiveness of an outstanding indebtedness
owed by Mr. Lanphier to the Company.
<F5> Represents housing allowance paid to Dr. Mulligan.
<F6> Includes options regranted on December 14, 1994 in exchange
for the cancellation of pre-existing options with a higher
exercise price per share.
<PAGE> 22.
<F7> Represents the premium paid by the Company on the
split-dollar life insurance policy maintained for Mr.
Carter. The Company is entitled to a portion of the cash
surrender value of the policy upon his termination of
employment.
<F8> Represents relocation expense reimbursement paid to
Dr. Drayer.
<F9> Represents the premium paid by the Company on the
split-dollar life insurance policy maintained for
Mr. Lanphier. The Company is entitled to a portion of the
cash surrender value of the policy upon his termination of
employment.
<F10> Represents the premium paid by the Company on the split-
dollar life insurance policy maintained for Dr. Mulligan.
The Company is entitled to a portion of the cash surrender
value of the policy upon his termination of employment.
</FN>
</TABLE>
STOCK OPTIONS
The following table provides information with respect to
the stock option grants made during fiscal 1995 under the Option
Plan to the Named Officers. Except for the limited stock
appreciation rights described in footnote (2) below, no stock
appreciation rights were granted during such fiscal year to the
Named Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
___________________________________________________________________________________________________________________________
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term <F6>
____________________________________________________________________________________________________________________________
Percent of
Number of Total
Securities Options
Underlying Granted to Exercise
Options Employees Price <F5> Expiration
Name Granted in Fiscal ($ Share) Date 5% ($) 10% ($)
(#) <F1> Year
____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
David W. Carter 150,000 <F2> 6.8 $3.00 12/13/04 283,050 717,150
120,000 <F3> 5.4 $3.00 12/13/04 226,440 573,720
Mark N.K. Bagnall 20,000 <F4> 0.9 $5.188 -- -- --
100,000 <F3> 4.5 $3.00 12/13/04 188,700 478,100
Jan I. Drayer, M.D., PhD. 150,000 <F2> 6.8 $3.625 03/19/05 342,000 866,550
Edward O. Lanphier II 175,000 <F3> 7.9 $3.00 12/13/04 330,225 836,675
Richard C. Mulligan, Ph.D. 100,000 <F2> 4.5 $3.00 12/13/04 188,700 478,100
194,327 <F3> 8.8 $3.00 12/13/04 366,695 929,027
___________________________________________________________________________________________________________________________
<FN>
<F1> Each option includes a limited stock appreciation right that
will result in the automatic cancellation of that option, to the
extent exercisable for vested shares of Common Stock, upon the
successful completion of a hostile tender offer for more than 50%
of the Company's outstanding securities. The optionee will be
entitled to a cash distribution from the Company in an amount per
canceled option share equal to the highest price per share of
Common Stock paid in the tender offer less the exercise price
payable per share. In addition, each optionee has the right,
subject to the approval of the Compensation Committee, to have a
portion of the shares purchased under the option applied to the
payment of the withholding taxes incurred in connection with the
exercise of that option.
23.
<PAGE>
<F2> The dates on which the fiscal 1995 options ("New Options")
were granted are as follows:
Name Grant Date
---- ----------
David W. Carter December 14, 1994
Jan I. Drayer, M.D., Ph.D. March 20, 1995
Richard C. Mulligan, Ph.D. December 14, 1994
The New Option granted to Mr. Carter will become exercisable in a
series 16 successive equal quarterly installments upon his
completion of each calendar quarter of service with the Company
measured from January 1, 1995.
The New Option granted to Dr. Drayer will become exercisable in a
series of 16 successive equal quarterly installments upon his
completion of each calendar quarter of service with the Company
measured from April 1, 1995.
The New Option granted to Dr. Mulligan will become exercisable in
a series of 16 successive equal installments upon his completion
of each calendar quarter of service with the Company measured
from January 1, 1995.
Each of the New Options will automatically become exercisable for
all of the option shares in the event the Company is acquired by
a merger or asset sale, unless those options are assumed by the
acquiring entity. Each New Option has a maximum term of ten
years, subject to earlier termination in the event of the
optionee's cessation of service with the Company.
<F3> Represents options regranted on December 14, 1994 to each
Named Officer in exchange for the cancellation of pre-existing
options with a higher exercise price per share. Each regranted
option consists of two components. The number of shares subject
to the first component is equal to the number of shares in which
the optionee was vested under the higher-priced option on
September 30, 1994. This component will now become exercisable
in a series of eight successive equal quarterly installments as
the optionee continues in the Company's service over the two-year
period measured from October 1, 1994 to September 30, 1996. The
second component covers the shares in which the optionee was
not vested under the higher-priced option on September 30, 1994.
This component will become exercisable for those shares in a
series of successive equal quarterly installments at the same
time those installments were to become exercisable under the
higher-priced option. For further information concerning these
regranted options, see the Option Repricing information below.
<F4> This option was originally granted on September 29, 1994
with an exercise price of $5.188 and was canceled on December 14,
1994 in exchange for a new option for the same number of shares
with an exercise price of $3.00 per share. See Footnote 3 above.
<F5> The exercise price may be paid in cash, in shares of the
Company's Common Stock valued at fair market value on the
exercise date or through a cashless exercise procedure involving
a same-day sale of the purchased shares. The Company may also
finance the option exercise by loaning the optionee sufficient
funds to pay the exercise price for the purchased shares and the
Federal and state income tax liability incurred by the optionee
in connection with such exercise.
<F6> There is no assurance provided to any executive officer or
any other holder of the Company's securities that the actual
stock price appreciation over the ten year option term will be at
the assumed five percent and ten percent levels or at any other
defined level. Unless the market price of the Common Stock
appreciates over the option term, no value will be realized from
the option grants made to the executive officers.
</FN>
</TABLE>
24.
<PAGE>
OPTION EXERCISES AND HOLDINGS
The table below sets forth information concerning the
exercise of options during the fiscal year ended June 30, 1995 by
the Named Officers and unexercised options held as of the end of
such year by such individuals. No stock appreciation rights were
exercised during such fiscal year, and except for the limited
stock appreciation rights described in footnote (2) to the Option
Grant table above, no stock appreciation rights were
outstanding at the end of such fiscal year.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1994
AND 1994 FISCAL YEAR-END OPTION VALUES
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
Number June 30, 1995 (#) at June 30, 1995 <F1>
of Shares ____________________________________________________________________
Name Acquired On Value Exercis- Unexercis- Exercis- Unexercis-
Exercise Realized able able able able
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David W. Carter N/A N/A 317,656 202,344 $537,070 $252,930
Mark N.K. Bagnall N/A N/A 32,363 67,637 $ 40,454 $ 84,546
Jan I. Drayer, M.D., Ph.D. N/A N/A -- 150,000 -- $ 93,750
Edward O. Lanphier II N/A N/A 67,384 107,616 $ 84,230 $134,520
Richard C. Mulligan, Ph.D. N/A N/A 53,468 240,859 $ 66,835 $301,704
<FN>
<F1> Determined by subtracting the exercise price from the market price
of the Common Stock on June 30, 1995 ($4.25 per share).
</FN>
</TABLE>
OPTION REPRICING
As discussed in the Compensation Committee Report on
Executive Compensation, the Company implemented an option
cancellation/regrant program for executive officers and all other
employees holding stock options with an exercise price per share
in excess of the market price of the Company's Common Stock at
the time the cancellation/regrant occurred. For all employees,
including the Company's executive officers, the cancellation/
regrant was effected on December 14, 1994 and each option held by
those employees with an exercise price in excess of $3.00 was
canceled and two new options for the same aggregate number of
shares were granted with an exercise price of $3.00.
The following table sets forth (i) information with
respect to each of the Company's executive officers concerning
his or her participation in the option cancellation/regrant
program which was effected on December 14, 1994 and (ii)
information with respect to all former or current executive
officers of the Company concerning their participation in other
option repricing programs implemented by the Company during the
period commencing June 5, 1986, the date the Company completed
the initial public offering of the Common Stock, and ending
June 30, 1995.
25.
<PAGE>
<TABLE>
<CAPTION>
Number of Length of
Securities Market Price Option Term
Underlying of Stock at Exercise Price Remaining
Options Time of at time of New at Date of
Name and Repricing Repriced or Repricing or Repricing or Exercise Repricing or
Principal Position Date Amended Amendment Amendment Price Amendment
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David W. Carter 12/14/94 93,750 <F1> $3.00 $4.00 $3.00 6.50 Years
Chairman of the Board, 12/14/94 6,250 $3.00 $4.00 $3.00 6.50 Years
President and Chief 12/14/94 20,000 <F1> $3.00 $6.25 $3.00 8.00 Years
Executive Officer
1/17/90 <F2> 7,500 $6.00 $18.72 $6.00 9.75 Years
Mark N.K. Bagnall 12/14/94 7,000 <F1> $3.00 $6.00 $3.00 6.50 Years
Vice President, Chief 12/14/94 6,900 $3.00 $5.375 $3.00 6.50 Years
Financial Officer and 12/14/94 16,100 <F1> $3.00 $5.375 $3.00 6.50 Years
Secretary 12/14/94 5,000 <F1> $3.00 $8.50 $3.00 7.50 Years
12/14/94 5,000 $3.00 $8.50 $3.00 7.50 Years
12/14/94 15,000 <F1> $3.00 $5.75 $3.00 8.50 Years
12/14/94 25,000 $3.00 $5.75 $3.00 8.50 Years
12/14/94 20,000 $3.00 $5.188 $3.00 10.00 Years
1/17/90 <F2> 875 $6.00 $15.32 $6.00 8.00 Years
1/17/90 <F2> 2,125 $6.00 $18.72 $6.00 9.25 Years
12/15/88 <F2> 125 $18.00 $23.36 $15.32 9.75 Years
Jan I. Drayer, M.D., Ph.D. N/A
Executive Vice President,
Gene Therapy Development
Edward O. Lanphier II 12/14/94 84,375 <F1> $3.00 $6.75 $3.00 7.75 Years
Executive Vice President, 12/14/94 65,625 $3.00 $6.75 $3.00 7.75 Years
Commercial Development 12/14/94 7,812 <F1> $3.00 $6.875 $3.00 8.75 Years
12/14/94 17,188 $3.00 $6.875 $3.00 8.75 Years
Richard C. Mulligan, Ph.D. 12/14/94 39,709 <F1> $3.00 $6.25 $3.00 6.50 Years
Executive Vice President, 12/14/94 4,618 $3.00 $6.25 $3.00 6.50 Years
Research and Chief Scientific 12/14/94 58,733 <F1> $3.00 $6.25 $3.00 8.75 Years
Officer 12/14/94 91,267 $3.00 $6.25 $3.00 8.75 Years
John M. Archer 1/17/90 <F2> 13,900 $6.00 $15.32 $6.00 8.00 Years
(Former President) 1/17/90 <F2> 17,400 $6.00 $18.72 $6.00 9.25 Years
12/15/88 <F2> 1,500 $18.00 $30.52 $15.32 9.00 Years
12/15/88 <F2> 8,000 $18.00 $27.00 $15.32 8.75 Years
12/15/88 <F2> 800 $18.00 $25.00 $15.32 4.75 Years
12/15/88 <F2> 1,200 $18.00 $25.00 $15.32 5.75 Years
12/15/88 <F2> 2,400 $18.00 $25.00 $15.32 6.75 Years
Austin D. Brewin, M.D. 1/17/90 <F2> 10,700 $6.00 $15.32 $6.00 8.00 Years
(Former VP, Medical 1/17/90 <F2> 8,050 $6.00 $18.72 $6.00 9.25 Years
Affairs) 12/15/88 <F2> 1,200 $18.00 $31.24 $15.32 7.25 Years
12/15/88 <F2> 1,500 $18.00 $41.00 $15.32 8.50 Years
12/15/88 <F2> 8,000 $18.00 $27.00 $15.32 8.75 Years
Dennis Costello 12/15/88 <F2> 7,500 $18.00 $33.52 $15.32 9.25 Years
(Former VP, Marketing)
26.
<PAGE>
Craig R. McMullen 12/15/88 <F2> 8,800 $18.00 $25.00 $15.32 5.25 Years
(Former President) 12/15/88 <F2> 2,400 $18.00 $25.00 $15.32 6.25 Years
12/15/88 <F2> 5,000 $18.00 $30.52 $15.32 8.00 Years
12/15/88 <F2> 28,750 $18.00 $27.00 $15.32 8.75 Years
H. Fred Voss, Ph.D. 12/15/88 <F2> 2,500 $18.00 $30.52 $15.32 8.00 Years
(Former VP, R&D) 12/15/88 <F2> 22,500 $18.00 $27.00 $15.32 8.75 Years
12/15/88 <F2> 2,000 $18.00 $25.00 $15.32 6.00 Years
12/15/88 <F2> 2,400 $18.00 $25.00 $15.32 5.50 Years
<FN>
<F1> These vested options were required to re-vest over a
two-year period measured from October 1, 1994.
<F2> The share and price information given for these options
have been adjusted to reflect a 1-for-4 reverse stock
split which occurred on March 18, 1991.
</FN>
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Except as set forth below, the Company presently has no
employment contracts in effect for executive officers, and no
severance arrangements in connection with their resignation or
termination or following a change in control or ownership of
the Company. However, the Compensation Committee has the
authority as administrator of the Option Plan to provide for the
accelerated vesting of the shares of Common Stock subject to
outstanding options held by the Chief Executive Officer and the
Company's other executive officers or any unvested shares
actually held by those individuals under the Option Plan or the
predecessor 1983 Stock Option Plan, in the event their employment
were to be terminated (whether involuntarily or through a forced
resignation) following a hostile take-over of the Company
effected through a successful tender for more than 50% of the
Company's outstanding voting securities or through a change in
the majority of the Board of Directors as a result of one or more
contested elections for Board of Directors membership.
On July 1, 1993, the Company entered into an employment
agreement with David W. Carter pursuant to which Mr. Carter
receives an annual base salary of $245,000 with periodic
adjustments. Mr. Carter is also entitled to a performance-based
bonus not to exceed 40% of his base salary based upon the
Company's achievement of targets established by the Compensation
Committee, and a one-time bonus equal to $50,000 plus 12,500
shares of Common Stock if the Company completes an equity
financing of at least $10 million at a price equal to or
exceeding $18.00 per share or a price agreed to by the Board of
Directors. In addition, Mr. Carter is entitled to certain
benefits, including the benefits of a split-dollar life insurance
arrangement, pursuant to which the Company will advance the
annual premiums and Mr. Carter is required to repay the premiums
out of policy proceeds or the cash surrender value of the policy
following his termination of employment. In the event
Mr. Carter's employment is terminated without cause or the
Company undergoes a change in control, Mr. Carter will be
entitled to 18 months severance pay.
On June 24, 1992, the Company entered into an employment
agreement with Edward O. Lanphier II, when he joined the Company
as Executive Vice President, Commercial Development. The
employment agreement provided for an annual base salary of
$150,000, plus an annual bonus not to exceed 30% of his base
salary and an option to purchase 150,000 shares of Common Stock
at a price of $6.75 per share, the fair market value on the grant
date. In connection with the special option regrant program
previously described, this option was regranted as two separate
options with an exercise price of $3.00, the fair market value of
the Common Stock on the date of regrant. In addition, the
Company agreed to loan Mr. Lanphier $51,000, which was to be
forgiven over a three-year period, provided he continued in the
Company's employ. In addition, upon the termination of his
employment by the Company, any unpaid balance of the loan made on
his behalf to Celtrix Corporation as part of his original
employment agreement with Somatix was to be forgiven. This
loan was forgiven in its entirety on July 13, 1995. The
employment agreement also provided for a severance payment to Mr.
Lanphier equal to six months base salary if his employment were
terminated without cause or if his employment were to terminate
in connection with Mr. Carter's cessation of service as the Chief
Executive Officer. In addition, Mr. Lanphier was to vest in 50%
of the vested shares subject to his option should he resign after
24 months of service. On November 9, 1993, Mr. Lanphier entered
into a new employment agreement with
27.
<PAGE>
the Company. That new agreement provides for an annual base
salary of $160,500, subject to review and adjustment annually by
the Compensation Committee, plus annual bonuses not to exceed 30%
of his base salary. In addition, the agreement provides for a
severance payment to Mr. Lanphier equal to 12 months base salary
if his employment is terminated without cause and six months base
salary should he resign. Mr. Lanphier's unvested stock options
will also accelerate by eight additional quarters should he be
terminated without cause and by two additional quarters should he
resign. The employment agreement also provides for a
split-dollar life insurance arrangement and a disability
insurance policy for Mr. Lanphier.
On November 11, 1993, the Company entered into an
employment agreement with Richard C. Mulligan, Ph.D., pursuant to
which he was employed as Executive Vice President of Research and
Chief Scientific Officer for the period June 1, 1994 through
September 5, 1995. The agreement provides for an annual base
salary of $195,000, a sign-on bonus of $25,000, plus an annual
bonus not to exceed 30% of his base salary. Dr. Mulligan has
continued as an employee consultant following the termination of
that agreement. On December 16, 1993, Dr. Mulligan was granted
an option to purchase 150,000 shares of the Common Stock at $6.25
per share, the fair market value on the grant date, in connection
with the services he was to render the Company either as a
consultant or executive officer. In connection with the special
option regrant program previously described, this option was
regranted as two separate options with an exercise price of
$3.00, the fair market value of the Common Stock on the date of
regrant. Dr. Mulligan's employment agreement also provides for a
monthly housing allowance of $5,000 and certain benefits,
including the benefits of a split-dollar life insurance
arrangement.
On December 30, 1993, the Company entered into an
employment agreement with Mark N.K. Bagnall, Vice President,
Chief Financial Officer and Corporate Secretary. The employment
agreement provides for an annual base salary of $110,500, subject
to review and adjustment annually by the Compensation Committee,
plus annual bonuses not to exceed 30% of his base salary. In
addition, the employment agreement also provides for a severance
payment to Mr. Bagnall equal to 12 months base salary if his
employment is terminated without cause. Mr. Bagnall's unvested
stock options will also accelerate by eight additional quarters
should his employment be terminated without cause.
In March, 1995, the Company entered into an employment
agreement with Jan I. Drayer, M.D., when he joined the Company as
Executive Vice President, Gene Therapy Development. The
employment agreement provides for an annual base salary of
$230,000, plus bonuses of up to 30% of his annual salary and an
option to purchase 150,000 shares of the Company's Common Stock
at a price of $3.625 per share, the fair market value on the date
Dr. Drayer's employment began.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Restated Certificate of Incorporation and
Bylaws provide for indemnification of directors, officers and
other agents of the Company. Each of the current directors, and
certain officers and agents of the Company have entered into
separate indemnification agreements with the Company.
As a condition to the acquisition of Merlin
Pharmaceutical Corporation, in February 1995, (the "Merlin
Acquisition") the Company entered into a three-year consulting
agreement with Dr. Shenk. The agreement provides for compensation
in the amount of $3,000 per day for consulting services.
Pursuant to the terms of the agreement, the Company may require
Dr. Shenk to provide up to ten working days of service per year.
In addition, the Company granted a short-term loan in the amount
of $39,447.10 to Dr. Shenk in conjunction with the Merlin
Acquisition. Dr. Shenk's loan was paid in full in June, 1995.
The Company also agreed, as a condition to a corporate
partnering arrangement with Bristol-Myers Squibb, to use its best
efforts to secure the nomination and election of Leon E.
Rosenberg, M.D, the President of Bristol-Myers Pharmaceutical
Research Institute, to the Company's Board of Directors.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
28.
<PAGE>
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's officers and directors, and
persons who own more than ten percent of the Common Stock, to
file initial reports of ownership and reports of changes in
ownership of the Common Stock with the United States Securities
and Exchange Commission ("SEC"). Officers, directors and greater
than ten percent stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms
furnished to the Company, and written representations that no
other reports were required, the Company believes that during the
period from July 1, 1994 to June 30, 1995, all officers,
directors and holders of more than ten percent of the Common
Stock complied with all Section 16(a) requirements, except that
Dr. Potts, a director, did not timely file a Form 3 report
indicating he had become a member of the Company's Board of
Directors.
29.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information known
to the Company with respect to the beneficial ownership of the
Common Stock as of September 15, 1995 by (i) all persons who are
beneficial owners of five percent or more of the Common Stock,
(ii) each director and nominee, (iii) the Named Officers in the
Summary Compensation Table above and (iv) all current directors
and executive officers as a group. The number of shares
beneficially owned by each director or executive officer is
determined under rules of the SEC and the information is not
necessarily indicative of beneficial ownership for any other
purpose. Shares of Common Stock subject to options or warrants
currently exercisable or exercisable within 60 days are deemed to
be beneficially owned by the person holding such option or
warrant for computing the percentage ownership of such person,
but are not treated as outstanding for computing the percentage
of any other person. Except as otherwise indicated, the Company
believes that the beneficial owners of the Common Stock listed
below, based upon such information furnished by such owners, have
sole investment power with respect to such shares, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
Number Percent of Total
Name and Address of Shares Shares Outstanding <F1>
---------------- --------- -----------------------
<S> <C> <C>
Aeneas Venture Corporation <F2> . . . . . 2,203,945 9.1%
600 Atlantic Avenue
Boston, MA 02210
Legg Mason, Inc. . . . . . . . . . . . . . 2,073,574 8.5%
111 South Calvert Street
Baltimore, MD 21202
Samuel D. Waksal, Ph.D. <F3> . . . . . . . 427,360 1.8%
Thomas E. Shenk, Ph.D.<F4> . . . . . . . . 430,716 1.8%
David W. Carter <F5> . . . . . . . . . . . 389,650 1.6%
Richard C. Mulligan, Ph.D. <F6>. . . . . . 277,506 1.1%
Harry F. Hixson, Jr., Ph.D. <F7> 371,806 1.5%
Fred H. Gage, Ph.D. <F8> . . . . . . . . . 253,551 1.0%
John T. Potts, Jr., M.D. <F9>. . . . . . . 25,000 *
Karen Davis, Ph.D. <F10> . . . . . . . . . 25,500 *
Mark N.K. Bagnall <F11> . . . . . . . . . 43,873 *
Jan I. Drayer, M.D., Ph.D. . . . . . . . . -- *
Edward O. Lanphier II <F12> . . . . . . . 89,844 *
All directors and executive
officers as a group (12 persons) <F13> . . 4,538,751 18.7%
- ----------------------------
* Less than 1.0%
30.
<PAGE>
<FN>
<F1> Includes securities subject to options, warrants, and
conversion privileges deemed outstanding for the beneficial owner
for whom the percentage is being calculated.
<F2> Mr. Eisenson, a director of the Company, is a Vice
President and member of the investment committee of Aeneas
Venture Corporation. He may be deemed the beneficial owner of
1,593,726 shares of Common Stock, 60,035 shares of preferred
stock which is convertible into 375,219 shares of Common Stock,
warrants to purchase 210,000 shares of Common Stock; and options
to purchase 25,000 shares of Common Stock which are immediately
exercisable, of which a portion is subject to repurchase rights,
held by Aeneas Venture Corporation with shared voting and
investment power with respect thereto. Mr. Eisenson disclaims
beneficial ownership of such shares.
<F3> Includes options to purchase 25,000 shares of Common Stock
which are immediately exercisable, of which a portion is subject
to repurchase rights. Also includes 18,000 shares held by Dr.
Waksal's children for which Dr. Waksal disclaims beneficial
ownership and 236,433 shares of Common Stock held by Sudbury
Partners I. Dr. Waksal disclaims beneficial ownership of the
shares held by Sudbury, except to the extent of his pecuniary
interest arising from his partnership interests.
<F4> Includes options to purchase 25,000 shares of Common Stock
which are immediately exercisable, of which a portion is subject
to repurchase rights. Also includes 42,986 shares held by Dr.
Shenk's children for which Dr. Shenk disclaims beneficial
ownership and 42,988 warrants to purchase shares of Common Stock
held by his wife for which Dr. Shenk disclaims beneficial
ownership.
<F5> Includes options to purchase 257,500 shares of Common Stock
which are immediately exercisable, of which a portion is subject
to repurchase rights. He also holds options to purchase 91,250
shares which are or will be vested and purchasable within 60
days.
<F6> Includes options to purchase 71,833 shares which are or
will be vested and purchasable within 60 days.
<F7> Includes 346,806 shares of Common Stock owned by the Hixson
Family Trust. Dr. Hixson, a director of the Company, is the
trustee of such trust and may be deemed the beneficial owner of
these shares with shared voting and investment power with respect
thereto. Also includes options to purchase 25,000 shares of the
Company's Common Stock which are immediately exercisable, of
which a portion is subject to repurchase rights.
<F8> Includes options to purchase 148,705 shares of Common Stock
which are immediately exercisable, of which a portion is subject
to repurchase rights. Also includes 104,846 shares of Common
Stock owned by the Gage Trust. Dr. Gage, a director of the
Company, is the trustee of such trust and may be deemed the
beneficial owner of these shares with shared voting and
investment power with respect thereto.
<F9> Includes options to purchase 25,000 shares of Common Stock
which are immediately exercisable, of which a portion is subject
to repurchase rights.
<F10> Includes options to purchase 25,000 shares of Common Stock
which are immediately exercisable, of which a portion is subject
to repurchase rights.
<F11> Includes options to purchase 43,473 shares which are or
will be vested and purchasable within 60 days.
<F12> Includes options to purchase 89,844 shares which are or
will be vested and purchasable within 60 days.
<F13> This number includes options to purchase 475,500 shares of
Common Stock held by officers and directors of the Company some
of which are immediately exercisable, of which a portion is
subject to repurchase rights, and options and warrants to
purchase 339,388 shares which are or will be vested and
purchasable within 60 days.
To the Company's knowledge, each beneficial owner of
more than ten percent capital stock filed all reports and
reported all transactions on a timely basis with the SEC,
National Association of Securities Dealers, Inc. and the Company.
</FN>
</TABLE>
31.
<PAGE>
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are
intended to be presented by such stockholders at the Company's
1996 Annual Meeting must be received by the Company no later than
June 20, 1996 in order that they may be included in the proxy
statement and form of proxy relating to that meeting.
ANNUAL REPORT
A copy of the Annual Report of the Company for the
fiscal year ended June 30, 1995 has been mailed concurrently with
this Proxy Statement to all stockholders entitled to notice of
and to vote at the Annual Meeting. The Annual Report is not
incorporated into this Proxy Statement and is not considered
proxy soliciting material.
FORM 10-K
THE COMPANY FILED AN ANNUAL REPORT ON FORM 10-K WITH THE
SECURITIES AND EXCHANGE COMMISSION. STOCKHOLDERS MAY OBTAIN A
COPY OF THIS REPORT, INCLUDING FINANCIAL STATEMENTS, SCHEDULES
AND A LIST OF EXHIBITS, WITHOUT CHARGE, BY WRITING TO INVESTOR
RELATIONS, SOMATIX THERAPY CORPORATION, 850 MARINA VILLAGE
PARKWAY, ALAMEDA, CALIFORNIA 94501.
OTHER MATTERS
The Company knows of no other matters that will be
presented for consideration at the Annual Meeting. If any
other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed form of
Proxy to vote the shares they represent as the Board of Directors
may recommend. Discretionary authority with respect
to such other matters is granted by the execution of the enclosed
Proxy.
THE BOARD OF DIRECTORS
Dated: October 16, 1995
32.
<PAGE>
SOMATIX THERAPY CORPORATION
PROXY
Annual Meeting of Stockholders, November 16, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF SOMATIX THERAPY CORPORATION
The undersigned revokes all previous proxies,
acknowledges receipt of the Notice of the Annual Meeting of
Stockholders to be held November 16, 1995 and the Proxy Statement
and appoints David W. Carter and Harry F. Hixson, Jr., Ph.D., and
each of them, the Proxy of the undersigned, with full power of
substitution, to vote all shares of Common Stock of Somatix
Therapy Corporation (the "Company") which the undersigned is
entitled to vote, either on his or her own behalf or on behalf of
any entity or entities, at the Annual Meeting of Stockholders of
the Company to be held at the Company's offices at 850 Marina
Village Parkway, Alameda, CA 94501 on Thursday, November 16,
1995 at 10:00 a.m. (the "Annual Meeting"), and at any adjournment
or postponement thereof, with the same force and effect as the
undersigned might or could do if personally present thereat. The
shares represented by this Proxy shall be voted in the manner set
forth on the reverse side.
1. To elect the following directors to serve until the
next annual meeting of stockholders and until their successors
are elected and qualified:
WITHHOLD
AUTHORITY
FOR TO VOTE
David W. Carter _____ _____
Karen Davis, Ph.D. _____ _____
Michael R. Eisenson _____ _____
Fred H. Gage, Ph.D. _____ _____
Harry F. Hixson, Jr., Ph.D. _____ _____
Richard C. Mulligan, Ph.D. _____ _____
John T. Potts, Jr., M.D. _____ _____
Thomas E. Shenk, Ph.D. _____ _____
Samuel D. Waksal, Ph.D. _____ _____
Leon E. Rosenberg, M.D. _____ _____
2. FOR AGAINST ABSTAIN
To approve an amendment to the Company's 1992 Stock Option
Plan to render non-employee members of the Company's Board of
Directors, other than those individuals who are also at the time
serving on the Compensation Committee which administers the
Option Plan, eligible to participate in the Discretionary Option
Grant Program in effect under the Option Plan; and
3. FOR AGAINST ABSTAIN
To ratify the Board of Director's selection of Ernst & Young
LLP to serve as the Company's independent accountants for the
fiscal year ending June 30, 1996.
The Board of Directors recommends a vote FOR each of the
directors listed above and a vote FOR the other proposals. This
Proxy, when properly executed, will be voted as specified above.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF
THE ELECTION OF THE DIRECTORS LISTED ABOVE AND IN FAVOR OF THE
OTHER PROPOSALS.
Please print the name(s) appearing on each share
certificate(s) over which you have voting authority:
________________________________________________________________
(Print name(s) on certificate)
Please sign your name:
________________________________________________________________
(Authorized Signature(s))
Date: __________________________________________________________
