SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use by the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
ADVANCED TISSUE SCIENCES, INC.
------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] Fee computed on table below per Exchange Act rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 011(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>
ADVANCED TISSUE SCIENCES, INC.
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1998
------------------------------
To the Stockholders of Advanced Tissue Sciences, Inc.:
Notice is hereby given that the 1998 Annual Meeting of Stockholders of
Advanced Tissue Sciences, Inc., a Delaware corporation (the "Company"), will
be held at the Sheraton Grande Torrey Pines, 10950 North Torrey Pines Road, La
Jolla, California 92037 on Wednesday, May 20, 1998 at 10:00 A.M. Pacific
Daylight Savings Time for the following purposes:
1. to elect eight directors to serve for the term of one year or
until their respective successors have been elected and qualified;
2. to approve the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31, 1998;
and
3. to transact such other business as may properly come before the
Annual Meeting.
The close of business on March 31, 1998 has been fixed as the record date
for the determination of stockholders entitled to notice of, and to vote at,
the Annual Meeting and any adjournment thereof and only stockholders of record
at such time will be so entitled to vote.
You are cordially invited to attend the Annual Meeting in person. Even
if you plan to attend the Annual Meeting, please promptly complete, sign, date
and return the enclosed proxy card in the enclosed self-addressed, stamped
envelope. It will assist us in keeping down the expenses of the Annual
Meeting if all stockholders return their signed proxies promptly, whether they
own a few shares or many shares.
A MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK ENTITLED
TO VOTE AT THE ANNUAL MEETING MUST BE REPRESENTED AT THE ANNUAL MEETING, IN
PERSON OR REPRESENTED IN PROXY, IN ORDER TO CONSTITUTE A QUORUM FOR THE
TRANSACTION OF BUSINESS AT THE ANNUAL MEETING. PLEASE RETURN YOUR PROXY CARD
IN ORDER TO ENSURE THAT A QUORUM IS OBTAINED AND TO AVOID THE ADDITIONAL COSTS
TO THE COMPANY OF ADJOURNING THE ANNUAL MEETING AND RESOLICITING PROXIES.
YOUR VOTE IS IMPORTANT.
BY ORDER OF THE BOARD OF DIRECTORS,
Richard A. Fink
Secretary
La Jolla, California
April 17, 1998
<PAGE>
ADVANCED TISSUE SCIENCES, INC.
-----------------------
PROXY STATEMENT
-----------------------
This proxy statement and the enclosed proxy card are furnished in
connection with the 1998 Annual Meeting of Stockholders (the "Annual Meeting")
of Advanced Tissue Sciences, Inc. (the "Company") which will be held at the
Sheraton Grande Torrey Pines, 10950 North Torrey Pines Road, La Jolla,
California, on Wednesday, May 20, 1998 at 10:00 A.M. Pacific Daylight Savings
Time. Stockholders of record at the close of business on March 31, 1998 are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof.
On March 31, 1998, there were 39,323,373 shares of Common Stock, $.01 par
value per share, issued and outstanding. Each share of Common Stock is
entitled to one vote. A majority of the shares of Common Stock entitled to
vote will constitute a quorum.
The enclosed proxy is being solicited by members of the Company's Board
of Directors and is revocable at any time prior to its exercise. A proxy may
be revoked by delivery of a written revocation to the Secretary of the
Company, by presentation of a subsequent proxy, properly signed, or by
attendance at the Annual Meeting and voting in person.
Proxies will be solicited by mail and telephone by the Company and Morrow
& Co., 909 Third Avenue, New York, New York 10022, which has been engaged by
the Company for a fee of $4,500, plus expenses, for this purpose. The Company
will request banks, brokerage houses and other institutions to forward the
soliciting material to persons for whom they hold shares and to obtain
authorization for the execution of proxies. The Company will reimburse banks,
brokerage houses and other institutions for their reasonable expenses in
forwarding the Company's proxy materials to beneficial owners. All costs
associated with the solicitation of proxies will be borne by the Company.
Proxies in the accompanying form that are properly executed, duly returned to
the management and not revoked will be voted as specified thereon.
This proxy statement, the enclosed proxy card and the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1997, are
scheduled to be mailed commencing on or about April 23, 1998 to stockholders
of record on March 31, 1998.
The principal executive offices of the Company are located at 10933 North
Torrey Pines Road, La Jolla, California 92037.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The enclosed proxy will be voted, unless authority is withheld or the
proxy is revoked, for the election of a Board of Directors consisting of the
eight nominees named herein to hold office as directors until the next annual
meeting or until their respective successors shall be elected and qualified.
If any nominee shall be unable to serve, the proxies will be voted for a
substitute person nominated by the directors. The holders of a majority of
shares of Common Stock voting at the Annual Meeting in person or by proxy,
assuming such shares constitute a quorum, will be able to elect all of the
directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES NAMED BELOW.
DIRECTORS AND NOMINEES
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Arthur J. Benvenuto 54 Chairman of the Board of Directors
and Chief Executive Officer
Dr. Gail K. Naughton 42 Director, President and Chief Operating
Officer
Jerome E. Groopman, M.D. 46 Director and Chairman of the Company's
Scientific Advisory Board
Jack L. Heckel 66 Director
Ronald L. Nelson 45 Director
Dayton Ogden 53 Director
David S. Tappan, Jr. 75 Director
Dr. Gail R. Wilensky 54 Director
</TABLE>
Arthur J. Benvenuto has been Chairman of the Board and Chief Executive
Officer since September 1995 and had been Chairman of the Board, President and
Chief Executive Officer of the Company since June 1988. Prior to joining the
Company, Mr. Benvenuto was associated with Eli Lilly & Company for more than
twenty years. Mr. Benvenuto served as President and General Manager of Eli
Lilly Canada, Inc. from October 1986 to June 1988 and was President and Chief
Executive Officer of IVAC Corporation, an Eli Lilly & Company medical device
subsidiary, from January 1982 to September 1986. Prior to January 1982, Mr.
Benvenuto was the Director and then the Vice President of Marketing and Sales
at IVAC Corporation. Mr. Benvenuto also held various positions in marketing
planning, human resources and sales management within the pharmaceutical
division of Eli Lilly & Company. He received his B.S. in Pharmacy from St.
John's University. Mr. Benvenuto currently serves as a director of Project
HOPE.
Gail K. Naughton, Ph.D., a co-founder of the Company and a co-inventor of
its core technology, has been a Director of the Company since its inception
and has been President and Chief Operating Officer of the Company since
September 1995. Prior to September 1995, Dr. Naughton had been Executive Vice
President and Chief Operating Officer of the Company since June 1991. Dr.
Naughton served as Senior Vice President and Chief Scientific Officer of the
Company from January 1989 to June 1991, and Principal Scientist of the Company
from its inception to December 1988. Dr. Naughton received her M.S. in
histology in 1978 and her Ph.D. in Basic Medical Sciences from New York
University Medical Center in 1981, and completed her post-doctoral training at
New York University Medical Center in the Department of Dermatology. Dr.
Naughton was an Assistant Professor of Research at New York University Medical
Center for two years prior to joining City University of New York in 1985.
Dr. Naughton's primary fields of research include cell and tissue culture
technology, dermatology and hematology. Dr. Naughton holds numerous issued
patents and has been extensively published in the field of tissue engineering.
Dr. Naughton is on the advisory boards of the Department of Bioengineering at
2
<PAGE>
Johns Hopkins University and The Georgia Institute of Technology, and is a
member of the industrial liaison board at the University of California, San
Diego, The Georgia Institute of Technology, The Massachusetts Institute of
Technology and the University of Washington. Dr. Naughton is a member of the
Board of Directors of Scripps Bank in La Jolla, California, the San Diego Burn
Institute and The Charles H. and Anna S. Stern Foundation.
Jerome E. Groopman, M.D. has been a Director of the Company since May
1993. Since October 1996, Dr. Groopman has been Chief, Division of
Experimental Medicine, Beth Israel Deaconess Medical Center, having been
Chief, Division of Hematology/Oncology, New England Deaconess Hospital since
1985. Dr. Groopman holds the Dina and Raphael Recanati Professorship in
Medicine at Harvard Medical School and has been a Professor of Medicine,
Harvard Medical School since 1993. Dr. Groopman's primary expertise is in
human retroviruses, specifically in the AIDS virus, and in cell communication.
Dr. Groopman has served on the Biological Response Modifers Advisory Committee
to the Food and Drug Administration and as an advisor to the National Heart
Lung Blood Institute.
Jack L. Heckel has been a Director of the Company since September 1990.
Mr. Heckel served as President and Chief Operating Officer of GenCorp Inc., a
technology-based company with strong positions in aerospace, automotive and
related polymer products from January 1987 until his retirement in November
1993. Mr. Heckel served as Chairman of the Board of Aerojet, a division of
GenCorp Inc., from 1985 to January 1987, and as President prior to 1985. Mr.
Heckel serves as a director of the WD-40 Company and Applied Power,
Incorporated.
Ronald L. Nelson became a Director of the Company in June 1997. Mr.
Nelson is a founding member of the senior management team of DreamWorks SKG, a
multi-media entertainment company. Mr. Nelson has served as head of finance
for DreamWorks since November 1994. Prior to joining DreamWorks, Mr. Nelson
was affiliated with Paramount Communications (formerly Gulf & Western, Inc.)
from 1979 to 1994, serving as Executive Vice President and Chief Financial
Officer from January 1990 to March 1994. In 1992, Mr. Nelson was elected to
the Paramount Communications Board of Directors and served as a Director until
March 1994.
Dayton Ogden became a Director of the Company in September 1996. Mr.
Ogden was named President of Spencer Stuart Worldwide, an international
executive search firm, in October 1996 after having previously served as Chief
Executive Officer of Spencer Stuart for nine years. Mr. Ogden serves as a
director of the American Business Conference, Project HOPE and the Directors'
Institute, an executive education joint venture between The Wharton School of
Business and Spencer Stuart, which trains new directors in corporate
governance. Mr. Ogden is a frequent contributor to the annual corporate
governance conference at the J.L. Kellogg Graduate School of Management at
Northwestern University.
David S. Tappan, Jr. has been a Director of the Company since October
1992. Mr. Tappan served as Chairman of the Board and Chief Executive Officer
of Fluor Corporation, an international engineering, construction and
technical services company, from 1984 until his retirement in 1990. Mr.
Tappan is a director of Genentech, Inc. and Allianz Insurance Company. Mr.
Tappan also is a trustee for the University of Southern California and The
Scripps Research Institute.
Gail R. Wilensky, Ph.D. has been a Director of the Company since January
1993. Since January 1993, Dr. Wilensky has been serving as a Senior Fellow at
Project HOPE. From March 1992 to January 1993, Dr. Wilensky served in the
Bush Administration as Deputy Assistant to the President for Policy
Development, responsible for advising the President on health and welfare
issues. Prior to her tenure in the White House, from January 1990 to March
1992, Dr. Wilensky served as the Administrator of the Health Care Financing
Administration (HCFA) in the Department of Health and Human Services, where
she directed the Medicare and Medicaid programs. From April 1983 to January
1990, Dr. Wilensky was Vice President, Division of Health Affairs at Project
HOPE. Dr. Wilensky is an elected member of the Institute of Medicine of the
National Academy of Sciences. Dr. Wilensky is currently chairperson of the
Medicare Payment Advisory Commission and has also served as a member of the
Physician Payment Review Commission and the Health Advisory Committee of the
General Accounting Office. Dr. Wilensky serves as a director of Pharmerica,
Inc. (formerly Capstone Pharmacy), NeoPath, Inc., Quest Diagnostics
Incorporated, Shared Medical Systems Corporation, St. Jude Medical, Inc.,
Syncor International Corporation and United HealthCare Corporation.
3
<PAGE>
Directors are elected by the Company's stockholders at each annual
meeting or, in the case of a vacancy, are appointed by the directors then in
office, to serve until the next annual meeting or until their successors are
elected and qualified.
On March 31, 1998, the directors and all officers of the Company
beneficially owned in the aggregate 4,569,364 shares of the Company's Common
Stock, including 2,973,932 shares subject to the exercise of stock options
exercisable or becoming exercisable within 60 days. This aggregate ownership
represents approximately 10.8% of the total outstanding shares, including
shares deemed to be beneficially owned. See "Principal Stockholders."
BOARD MEETINGS AND COMMITTEES
During the year ended December 31, 1997, the Board of Directors held six
meetings. All directors participated in at least 75% of the meetings of the
Board of Directors and the committees of the Board of Directors on which they
served, except for Dr. Wilensky who attended 73% of such meetings. The
committees of the Board of Directors include the Audit Committee, the
Compensation and Stock Option Committee (the "Compensation Committee") and the
Nominating and Corporate Governance Committee.
The Audit Committee recommends the appointment of the independent
auditors for the Company, reviews and approves the scope of the annual audit
undertaken by the independent auditors and reviews the independence of the
accounting firm. The Audit Committee also reviews the audit and non-audit
fees of the independent auditors and the adequacy of the Company's internal
control procedures. The Audit Committee met four times during the year ended
December 31, 1997. The current members of the Audit Committee are Jack L.
Heckel (Chairman), Ronald L. Nelson and Dr. Gail R. Wilensky.
The Compensation Committee reviews and recommends to the Board of
Directors remuneration arrangements for the Company's officers and key
employees and reviews and recommends compensation plans. In addition, the
Compensation Committee administers the Company's 1997 Stock Incentive Plan
(the "1997 Plan") and determines the key employees to be granted options under
such plan and the number of shares to be granted. The Compensation Committee
also determines the individuals and other entities to be granted warrants
which are issued other than pursuant to the Company's stock option plan,
including the number of shares, and the terms and conditions with respect to
which such warrants are granted. The Compensation Committee met four times
during the year ended December 31, 1997. The current members of the
Compensation Committee are David S. Tappan, Jr. (Chairman), Jack L. Heckel and
Dayton Ogden.
The Nominating and Corporate Governance Committee's primary function is
to assist the Board of Directors in identifying and recommending candidates
with the appropriate qualifications and experience to serve on the Company's
Board of Directors. In addition, the Nominating and Corporate Governance
Committee reviews and, as appropriate, makes recommendations with respect to
such topics as corporate governance and performance of the Board of Directors.
During 1997, meetings of the Nominating and Corporate Governance Committee
were held as part of the Board of Directors' regular quarterly meetings. The
full Board of Directors serves on the Nominating and Corporate Governance
Committee with Dayton Ogden as Chairman.
Director Compensation. Each member of the Board of Directors who is not an
- ----------------------
officer or employee of the Company receives travel and expense reimbursement
and $1,000 in connection with attending regular or special (except for
telephonic) meetings of the Board of Directors or Compensation, Audit or
Nominating and Corporate Governance Committees of the Board of Directors. Dr.
Groopman also receives $20,000 annually in connection with services rendered
to the Company as Chairman of the Scientific Advisory Board. In addition,
under the 1997 Plan, each non-employee member of the Board of Directors is
automatically granted a non-statutory stock option to purchase 50,000 shares
of Common Stock at an exercise price equal to 100% of the market price of the
Common Stock at the time of initial election or appointment to the Board of
Directors. The options are immediately exercisable for all the option shares,
but any purchased shares will be subject to repurchase by the Company, at the
exercise price paid per share, upon the non-employee director's cessation of
Board service prior to vesting in those shares. The shares subject to the
option become vested and the Company's repurchase rights lapse
4
<PAGE>
in three successive equal annual installments measured from the grant date.
Under the 1997 Plan, each non-employee director will receive an additional
50,000 share option grant upon re-election to the Board of Directors at each
Annual Meeting of Stockholders in the year during which the final installment
of his or her last previous grant vests. Upon his election to the Board of
Directors in 1997, Mr. Nelson received such an automatic 50,000 share option
grant. These options are exercisable at $11.31 per share and will vest in
annual equal installments over three years.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 31, 1998, certain information
as to the stock ownership of each of (a) the Company's directors and director
nominees, (b) the Named Executive Officers under "Executive Compensation -
Summary Compensation Table," (c) each person who is known by the Company to
own beneficially more than 5% of the Company's voting securities and (d) all
directors, nominees and executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP PERCENTAGE OF
NAME AND ADDRESS OF COMMON STOCK AS OF COMMON STOCK
BENEFICIAL OWNER POSITION MARCH 31, 1998 (1) OUTSTANDING (2)
- ----------------------------- ----------------------- --------------------- ---------------
<S> <C> <C> <C>
Arthur J. Benvenuto Chairman of the Board of 2,250,000 (3) 5.5%
Advanced Tissue Sciences, Inc. Directors and Chief
10933 North Torrey Pines Road Executive Officer
La Jolla, CA 92037
Dr. Gail K. Naughton Director, President and 1,560,000 (4) 3.9%
Advanced Tissue Sciences, Inc. Chief Operating Officer
10933 North Torrey Pines Road
La Jolla, CA 92037
Jerome E. Groopman, M.D. Director and Chairman of 103,333 (5) *
Beth Israel Deaconess Medical Company's Scientific
Center Advisory Board
One Deaconess Road
Boston, MA 02215
Jack L. Heckel Director 112,890 (6) *
27390 Oak Knoll Drive
Bonita Springs, FL 33923
Ronald L. Nelson Director 70,000 (7) *
DreamWorks SKG
100 Universal City Plaza
Universal City, CA 91608
Dayton Ogden Director 37,208 (8) *
Spencer Stuart
695 East Main Street
Stamford, CT 06901
David S. Tappan, Jr. Director 100,000 (9) *
620 Newport Center Drive
Newport Beach, CA 92660
Dr. Gail R. Wilensky Director 86,333 (10) *
Project HOPE
7500 Old Georgetown Road
Bethesda, MD 20814
</TABLE>
(Continued on following page)
5
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP PERCENTAGE OF
NAME AND ADDRESS OF COMMON STOCK AS OF COMMON STOCK
BENEFICIAL OWNER POSITION MARCH 31, 1998 (1) OUTSTANDING (2)
- ------------------------------ ------------------ --------------------- ---------------
<S> <C> <C> <C>
Terry E. Gibson Vice President, 75,000 (11) *
Advanced Tissue Sciences, Inc. Operations
10933 North Torrey Pines Road
La Jolla, CA 92037
Ellen G. Redding Vice President, 31,600 (12) *
Advanced Tissue Sciences, Inc. Regulatory Affairs
10933 North Torrey Pines Road and Quality Systems
La Jolla, CA 92037
Michael V. Swanson Vice President, 105,000 (11) *
Advanced Tissue Sciences, Inc. Finance and
10933 North Torrey Pines Road Administration
La Jolla, CA 92037
State of Wisconsin Investment Board 2,204,800 5.6%
P.O. Box 7842
Madison, WI 53707
Directors and executive officers 4,569,364 (13) 10.8%
as a group (consisting of 13 persons)
_________________
* Less than one percent.
</TABLE>
(1) Sole voting and investment power unless otherwise stated.
(2) Based on 39,323,373 shares of Common Stock outstanding, plus each
beneficial owner's options to purchase shares of Common Stock currently
exercisable or becoming exercisable within 60 days and any other benefi-
cially owned shares.
(3) Includes options to purchase 1,550,000 shares of Common Stock which
are currently exercisable.
(4) Includes 283,616 shares of Common Stock held as custodian for her
minor children; and options granted to purchase 725,000 shares of Common
Stock which are currently exercisable.
(5) Includes options to purchase (i) 86,666 shares of Common Stock which
are currently exercisable and (ii) 16,667 shares of Common Stock becoming
exercisable within sixty days.
(6) Includes 4,557 shares of Common Stock held by a trust and options to
purchase (i) 66,666 shares of Common Stock which are currently exercisable
and (ii) 16,667 shares of Common Stock becoming exercisable within sixty
days.
(7) Includes options exercisable to purchase 50,000 shares of Common Stock
subject to repurchase rights by the Company.
(8) Includes options to purchase (i) 16,666 shares of Common Stock which
are currently exercisable and (ii) 16,667 shares of Common Stock becoming
exercisable within sixty days.
(9) Includes options to purchase (i) 83,333 shares of Common Stock which
are currently exercisable and (ii) 16,667 shares of Common Stock becoming
exercisable within sixty days.
(10) Includes 3,000 shares of Common Stock held by Dr. Wilensky's spouse
in a retirement plan and options to purchase (i) 66,666 shares of Common
Stock which are currently exercisable and (ii) 16,667 shares of Common
Stock becoming exercisable within sixty days.
(11) Beneficial ownership consists of options granted to purchase shares
of Common Stock which are currently exercisable.
(12) Includes options to purchase (i) 25,600 shares of Common Stock which
are currently exercisable and (ii) 2,000 shares of Common Stock becoming
exercisable within sixty days.
(13) Includes options to purchase (i) 2,888,597 shares of Common Stock
which are currently exercisable and (ii) 85,335 shares of Common Stock
becoming exercisable within sixty days.
6
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires directors
and officers of the Company, and persons who own more than ten percent of a
registered class of the Company's equity securities ("Reporting Persons") to
file with the Securities and Exchange Commission (the "SEC") reports on Forms
3, 4 and 5 of initial ownership and of changes in beneficial ownership of
Common Stock. Based solely on the Company's review of the reporting forms
received by it, and written representations from certain persons that no
Form 5 reports were required to be filed by those persons, the Company
believes that all statements of beneficial ownership required to be filed
with the SEC in fiscal 1997 were timely filed.
EXECUTIVE OFFICERS
The following table names the Company's executive officers as of March
31, 1998. The officers of the Company serve at the discretion of the Board of
Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Arthur J. Benvenuto 54 Chairman of the Board of Directors and
Chief Executive Officer
Dr. Gail K. Naughton 42 Director, President and Chief Operating
Officer
David L. Horwitz, M.D., Ph.D. 55 Senior Vice President, Technology
Julie A. DeMeules 45 Vice President, Human Resources
Terry E. Gibson 57 Vice President, Operations
Ellen G. Redding 47 Vice President, Regulatory Affairs and
Quality Systems
Michael V. Swanson 43 Vice President, Finance and
Administration
</TABLE>
Information on the business backgrounds of Arthur J. Benvenuto and
Dr. Gail K. Naughton is set forth above under the heading "Directors and
Nominees."
David L. Horwitz, M.D., Ph.D. joined the Company as Senior Vice
President, Technology, in January 1998. Prior to joining the Company, Dr.
Horwitz served as Executive Vice President from March 1995 to September 1997
and Vice President of Medical and Regulatory Affairs from April 1992 to March
1995 at SciClone Pharmaceuticals, a bio-pharmaceutical company. Dr. Horwitz
spent ten years at Baxter Healthcare Corporation prior to 1992, most recently
as Vice President, Medical & Professional Affairs in the I.V. Systems
Division. From 1979 to 1992, Dr. Horwitz was on the faculty at the University
of Illinios at Chicago, and from 1972 to 1979 was a faculty member at the
University of Chicago. Dr. Horwitz holds an M.B.A. in general management from
Lake Forest Graduate School of Management, a Ph.D. in physiology and an M.D.
from the University of Chicago, and an undergraduate degree in chemistry and
physics from Harvard University.
Julie A. DeMeules was appointed Vice President, Human Resources, in March
1998, having previously served as Executive Director, Human Resources from
December 1992 to March 1998 and as Director, Human Resources from February
1991 to December 1992. Before joining the Company, Ms. DeMeules served as
Director, Human Resources at Square D, a producer of computer power supply
equipment, from 1990 to 1991 and as Vice President, Human Resources at Signet
Armorlite, an optical lens manufacturer, from 1984 to 1990. Prior to 1984,
Ms. DeMeules served in human resource positions for nine years in
manufacturing and the public sector. Ms. DeMeules holds an M.B.A. from San
Diego State University and a B.A. in Business Management from the University
of San Diego.
7
<PAGE>
Terry E. Gibson joined the Company as Vice President, Operations, in
April 1992. From October 1990 to April 1992, Mr. Gibson provided consulting
services in areas such as strategic planning, facilities planning, and
production and operating performance to biotechnology, diagnostic and
healthcare companies. Mr. Gibson served as Vice President, Operations for
Meridian Diagnostics, Inc., which develops, manufactures and markets
diagnostic products, from August 1988 to October 1990. From June 1986 to
August 1988, Mr. Gibson was Director of Manufacturing for Ortho Diagnostic
Systems Inc., a Johnson & Johnson Company, which produces a full line of
diagnostic and blood banking products. Prior to June 1986, he spent over
twelve years with Amersham Corporation, a diversified medical, research and
industrial products company. Mr. Gibson holds B.S. degrees in Chemistry and
Biological Sciences, and Pharmacy and an M.S. in Bionucleonics from Purdue
University.
Ellen G. Redding was appointed Vice President, Regulatory Affairs and
Quality Systems in September 1996, having previously served as Executive
Director, Regulatory Affairs and Quality Assurance (August 1995 to September
1996), Executive Director, Regulatory Affairs (May 1994 to August 1995),
Senior Director, Regulatory Affairs (December 1993 to May 1994), Director,
Regulatory Affairs and Quality Assurance (June 1991 to December 1993) and as
Senior Manager, Regulatory Affairs and Quality Assurance (September 1990 to
June 1991). Before joining the Company, Ms. Redding served as Manager,
Regulatory Affairs and Quality Assurance at Ioptex Research, Inc., a
manufacturer of implantable optical devices, from 1986 to 1990. From 1985 to
1986, she was a Clinical Research Associate at Intermedics Intraocular, Inc.,
a manufacturer of implantable optical devices. At Collagen Corporation, from
1984 to 1985, she was the Medical Monitor. Prior to 1984, Ms. Redding spent
over thirteen years in the nursing field. Ms. Redding holds an M.S. degree in
nursing from the University of Pennsylvania, a B.S. in nursing from Fitchburg
State College and a diploma in nursing from Children's Hospital School of
Nursing.
Michael V. Swanson was appointed Vice President, Finance and
Administration, of the Company in September 1992, having previously served as
Vice President, Finance from June 1991 and as Director of Finance from March
1990. Mr. Swanson served as Director of Finance of Fisher Scientific Group
Inc., a health and scientific technology holding company, from June 1987
through August 1989, and at its parent, The Henley Group, Inc., a widely
diversified holding company, from June 1986 to June 1987. From July 1977 to
June 1986, Mr. Swanson worked for the public accounting firm of Deloitte
Haskins & Sells (now Deloitte & Touche LLP) advancing to the position of audit
manager. Mr. Swanson received his B.S. in Business Administration from the
California Polytechnic State University at San Luis Obispo and received an
M.B.A. from the University of Southern California.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned, for services
rendered in all capacities to the Company, for each of the last three calendar
years by the Company's Chief Executive Officer and each of the four other
highest paid executive officers whose salary and bonus for calendar 1997 was
in excess of $100,000 (the "Named Executive Officers").
- ------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- LONG-
OTHER TERM
ANNUAL COMPEN- ALL OTHER
COMPEN- SATION - COMPEN-
NAME AND YEAR SALARY BONUS SATION OPTIONS SATION
PRINCIPAL POSITION (1) ($) (2) ($) (3) ($) (4) (shs) (5) ($) (6)
- ------------------ --------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Arthur J. Benvenuto 1997 367,028 102,900 1,829 0 1,380
Chairman and Chief 1996 348,750 129,500 1,728 500,000 1,380
Executive Officer 1995 310,000 95,000 1,354 0 1,380
Dr. Gail K. Naughton 1997 279,193 78,400 939 0 470
Director, President and 1996 249,039 92,500 408 500,000 470
Chief Operating Officer 1995 220,000 65,000 306 0 470
Terry E. Gibson 1997 162,163 24,375 1,013 60,000 0
Vice President, 1996 150,019 40,500 900 0 0
Operations 1995 132,500 23,188 675 0 0
Ellen G. Redding 1997 166,165 33,767 406 30,000 0
Vice President, Regu- 1996 144,615 39,150 331 20,000 0
latory Affairs and 1995 100,086 12,631 174 0 0
Quality Systems
Michael V. Swanson 1997 189,701 47,520 286 0 0
Vice President, Finance 1996 175,448 47,250 257 75,000 0
and Administration 1995 152,539 33,519 189 0 0
==================================================================================================
</TABLE>
(1) The periods presented are the calendar years ended December 31, 1997,
1996 and 1995.
(2) Consists of base salary earned (including amounts deferred pursuant to
plans established under sections 125 and 401(k) of the Internal Revenue
Code) by the Named Executive Officers for the periods presented.
(3) Includes bonuses earned, whether or not paid in such year, by the
Named Executive Officers. In addition, payment of the 1997 bonuses has
been deferred until such time as the Company's manufacturing
facility for Dermagraft(R) is approved by the U.S. Food and Drug
Administration.
(4) Amounts represent the compensation attributable to life insurance in
excess of $50,000 provided the Named Executive Officers under the Company's
group life insurance plan for all employees.
(5) During the periods presented, the only form of long-term compensation
utilized by the Company has been the grant of stock options. The Company
has not awarded restricted stock options or stock appreciation rights, or
made any long-term incentive payouts.
(6) Amounts represent the premium paid for term life insurance coverage
provided for the Named Executive Officers in addition to their coverage
under the Company's group life insurance plan for all employees.
9
<PAGE>
Options. The following table sets forth the details of options granted to the
- --------
Named Executive Officers listed in the Summary Compensation Table during
fiscal year 1997 under the Company's 1997 Stock Incentive Plan. No stock
appreciation rights (SARs) have been granted by the Company.
- ------------------------------------------------------------------------------
OPTIONS/SAR GRANTS IN FISCAL YEAR 1997
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE
---------------------------------------------------- ------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL POTENTIAL REALIZABLE
UNDERLYING OPTIONS VALUE AT ASSUMED
OPTIONS\ GRANTED TO EXERCISE ANNUAL RATE OF STOCK
SARS EMPLOYEES OR BASE PRICE APPRECIATION FOR
GRANTED IN FISCAL PRICE EXPIRATION OPTION TERM (3)
------------------------
NAME (#) (1)(2) YEAR ($/SH) DATE 5% ($) 10% ($)
---- ---------- ---------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Arthur J. Benvenuto 0 0.0% 0.00 0 0 0
Dr. Gail K. Naughton 0 0.0% 0.00 0 0 0
Terry E. Gibson 60,000 8.7% 16.56 9/8/07 624,983 1,583,829
Ellen G. Redding 30,000 4.3% 16.56 9/8/07 312,491 791,915
Michael V. Swanson 0 0.0% 0.00 0 0 0
=======================================================================================================
</TABLE>
(1) The exercise price of the options granted during fiscal year 1997 was
equal to the closing market price of the Company's Common Stock on the
date the option was granted. The options become exercisable in five
successive equal annual installments beginning on the first anniversary
of the grant date.
(2) All options granted in 1997 to the Named Executive Officers were under
the 1997 Plan. The grants are for incentive stock options, except for
29,815 shares to Mr. Gibson and for 14,916 shares to Ms. Redding which
are non-statutory stock options.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules
of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of future Common Stock prices.
Option Exercises and Holdings. The following table sets forth information
- ------------------------------
regarding the exercise of options in fiscal year 1997 and the number of
options held by the Named Executive Officers listed in the Summary
Compensation Table, including the value of such in-the-money options as of
December 31, 1997. The closing price of the Company's Common Stock on
December 31, 1997 used to calculate such values was $12.375 per share. No
SARs have ever been granted by the Company.
- ------------------------------------------------------------------------------
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1997
AND OPTION/SAR VALUES AS OF DECEMBER 31, 1997
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES NUMBER OF VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON VALUE AT YEAR END (#) AT YEAR END ($)
-------------------------- -------------------------
EXERCISE REALIZED EXERCIS- UNEXER- EXERCIS- UNEXER-
NAME (#) ($) ABLE CISABLE ABLE CISABLE
---- -------- -------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Arthur J. Benvenuto 0 0 1,450,000 400,000 11,243,250 0
Dr. Gail K. Naughton 0 0 625,000 400,000 3,679,125 0
Terry E. Gibson 0 0 75,000 60,000 103,125 0
Ellen G. Redding 0 0 27,600 50,000 128,100 26,000
Michael V. Swanson 0 0 90,000 60,000 498,750 0
======================================================================================================
</TABLE>
10
<PAGE>
Employment Agreements/Change in Control Arrangements. The Company has no
- -----------------------------------------------------
employment agreements with any of the Named Executive Officers or any of its
other employees. In the event the Company is acquired by merger,
consolidation or asset sale, outstanding options which are not assumed by the
successor corporation, or replaced with a comparable option to purchase shares
of the capital stock of the successor corporation, are to be automatically
accelerated in full, except to the extent such acceleration is otherwise
limited by the terms of the instrument evidencing such grant. The
Compensation Committee or the full Board of Directors has the discretionary
authority, exercisable either in advance or at the time of certain hostile
changes in control of the Company (whether effected through a tender offer for
outstanding shares of the Company's outstanding stock or a proxy contest for
Board of Directors membership), to provide for the automatic acceleration of
one or more such option grants outstanding at the time of such a hostile
change in control. They also have the authority to condition any such option
acceleration upon the subsequent termination of the optionee's service within
a specified period following the change in control. All outstanding options
held by the executive officers are either fully exercisable or provide for
automatic acceleration upon the involuntary termination of the officers'
employment following an acquisition of the Company by merger or asset sale or
upon a hostile change of control.
Compensation Committee Interlocks and Insider Participation. No member of the
- ------------------------------------------------------------
Compensation Committee is a former or current officer or employee of the
Company. See "Directors and Nominees" and "Board Meetings and Committees" for
a discussion of the Compensation Committee members' background and
relationship to the Company. No officers of the Company serve or have ever
served on compensation committees of entities at which Board members serve or
have served as officers.
COMPENSATION COMMITTEE REPORT
The report set forth below has been provided by the Compensation
Committee and describes the philosophy and process considered by the
Compensation Committee in administering the Company's executive compensation
program.
- ------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT*
- ------------------------------------------------------------------------------
The Company's executive compensation program is administered by the
Compensation and Stock Option Committee. The executive compensation program
is structured and administered to support the Company's mission, strategy and
values.
Compensation Philosophy
The Company's executive compensation program has been designed to enable
the Company to attract, motivate and retain senior management by providing
what the Company believes is a competitive total compensation package based on
performance. The executive compensation program is composed of three
principal elements: (1) competitive base salaries which reflect individual
performance, (2) annual performance-based incentive opportunities which are
variable and payable in cash for the achievement of corporate goals (as
discussed below under "Compensation of the Chief Executive Officer") approved
by the Compensation Committee and individual goals established in consultation
with the Chief Executive Officer, and (3) long-term stock-based incentive
opportunities pursuant to a stock option plan geared to strengthen the
mutuality of interests between senior management and the Company's
stockholders.
As an executive officer's level of responsibility increases, a greater
portion of his or her potential total compensation opportunity is based on
performance incentives, causing greater variability in the individual's
absolute compensation level from year to year. In addition, the higher that
one rises in the organization, the greater the mix of compensation shifts to
reliance on the value of the Company's Common Stock through stock-based
awards.
As a result of Section 162(m) of the Internal Revenue Code, which was
enacted into law in 1993, the Company will not be allowed a federal income tax
deduction for compensation paid to certain executive
11
<PAGE>
officers, to the extent that compensation exceeds $1 million per officer in
any one year. This limitation does not apply to compensation paid to the Named
Executive Officers which qualifies as performance-based compensation. The
Compensation Committee has not and does not intend to set compensation levels
which would exceed the $1 million limit in 1998. Any compensation deemed
paid in connection with the exercise of options granted under the Company's
1997 Stock Incentive Plan (the '1997 Plan") will qualify as performance-based
compensation.
The Compensation Process
Early in each fiscal year, the Compensation Committee reviews with the
Chief Executive Officer and the Vice President, Human Resources, an annual
salary plan for the Company's executive officers. This salary plan is based
on industry, peer group and national surveys conducted by a
nationally-recognized compensation consulting firm which specializes in the
biotechnology/biomedical industries, and performance evaluation based upon
past and expected future contributions of the individual executive officers.
In particular, the Compensation Committee obtains and reviews comparative
total compensation figures from (i) a group of approximately 60 diverse public
companies in the biomedical/biotechnology industries with greater than 150 but
less than 500 employees, (ii) a select group of approximately 44 companies
which are considered leaders in the biotechnology industry by virtue of their
market capitalization, and (iii) a select group of public biotechnology
companies at a similar stage of development.
Base salary levels for each of the Company's executive officers, with the
exception of the Chief Executive Officer, are established annually within
ranges determined by analysis of comparative compensation. The mid-point of
such ranges is designed to be comparable to the 50th percentile of survey data
obtained as set forth above. Under the Company's bonus program, each
executive officer may earn an annual targeted cash incentive which is
calculated as a percentage of such officer's base salary, 50% of which is
based on the accomplishment of corporate goals (which are the same as those
discussed below for the Chief Executive Officer) and 50% on the achievement of
individual goals set at the beginning of each year. Such targeted cash
incentive amounts range from approximately 27% to approximately 37% depending
on the level of the executive officer.
Long-term incentive compensation is provided through stock options which
are granted to executive officers of the Company upon hire. The amount of
stock options granted is a function of position and level of responsibility,
and options become exercisable in equal annual installments over a five-year
period. The Compensation Committee, in its discretion, may grant additional
options to executive officers, including the Chief Executive Officer, for
increases in level of responsibility and promotions, in recognition of
sustained exceptional performance or annually based upon company and
individual performance.
Each year, the Compensation Committee has retained an outside,
independent compensation consulting firm, which specializes in the
biotechnology/biomedical industries, to review and evaluate the Company's
process of establishing, reviewing and adjusting the compensation of the
Company's executive officers. After its most recent review, conducted in
March 1998, such consulting firm concluded that the process presently employed
by the Company in obtaining, analyzing and employing comparative data, and
implementing the Company's compensation programs for the Company's executive
officers and for the Chief Executive Officer, is consistent with industry
norms and appropriate and reasonable under the circumstances.
Compensation of the Chief Executive Officer
The Compensation Committee annually reviews and fixes the base salary of
the Chief Executive Officer based in part on the competitive compensation data
discussed above, and the Compensation Committee's assessment of his past
performance and its expectation as to his future contributions in leading the
Company and its development. As the Company has only during the past year
introduced its first therapeutic products, profitability of the Company has
not been considered in setting the Chief Executive Officer's compensation;
12
<PAGE>
however, the Committee does consider a number of financial factors, including
the Company's ability to secure financing, expense reduction and control, and
the efficient use of working capital to achieve corporate goals. In
determining the Chief Executive Officer's base salary for each year, the
Committee also considers significant accomplishments made by the Company
during the prior year and other performance factors, such as the effectiveness
of the Chief Executive Officer in establishing the Company's strategic
direction. The annual cash bonus paid to the Chief Executive Officer, if any,
is entirely dependent on the accomplishment by the Company of certain
corporate goals established by management and approved by the Board of
Directors near the commencement of each fiscal year. Factors considered by
the Compensation Committee in determining the Chief Executive Officer's annual
base salary and bonus, if any, are not subject to any specific weighting or
formula.
In determining the Chief Executive Officer's base salary for 1997 as
reported in the cash compensation table, the Compensation Committee considered
1996 accomplishments as well as the comparative competitive compensation data
and performance factors discussed above. The major accomplishments of the
Company in 1996 which the Committee considered included: (i) the
recommendation for approval of Dermagraft-TC(R), the Company's first
therapeutic product, by an independent advisory committee convened by the
U.S. Food and Drug Administration (the "FDA"); (ii) successful inspection of
the Company's manufacturing facility for Dermagraft-TC, which is required for
marketing approval; (iii) submission of a Premarket Approval ("PMA")
application for Dermagraft in the treatment of diabetic foot ulcers under the
FDA's expedited review process; (iv) submission of an Investigational Device
Exemption ("IDE") for a pilot clinical trial of tissue engineered articular
cartilage; (v) entering into agreement for a fifty-fifty joint venture with
a worldwide leader in wound care for the global commercialization of
Dermagraft in the treatment of diabetic foot ulcers; and (vi) obtaining
financing.
In determining the Chief Executive Officer's bonus eligibility for 1997,
the Committee considered the Chief Executive Officer's role in the Company's
achievement of corporate objectives, however, payment of 1997 bonuses for the
Chief Executive Officer and other executive officers has been deferred until
such time as the Company's manufacturing facility for Dermagraft is approved
by the FDA. The corporate objectives considered by the Committee in
determining the Chief Executive Officer's 1997 bonus were as follows: (i) the
approval and launch of Dermagraft-TC by the FDA for full-thickness burns;
(ii) filing and approval for the use of Dermagraft-TC in partial-thickness
burns (iii) completing the expansion and validation of the manufacturing
facility to support the launch of Dermagraft; (iv) approval and launch of
Dermagraft for treatment of diabetic foot ulcers in Canada and the United
Kingdom, respectively; (v) establishing systems and processes to support the
ongoing commercialization of products; (vi) advancing the development of
tissue engineered cartilage and cardiovascular products; (vii) progress in
developing and managing strategic relationships; and (viii) obtaining
financing.
David S. Tappan, Jr., Chairman Jack L. Heckel Dayton Ogden
==============================================================================
* The Compensation Committee Report is (i) not "soliciting material," (ii)
not deemed filed with the Securities and Exchange Commission and (iii) not
to be incorporated by reference in any filing of the Company under the
Securities Act of 1933, as amended (the "1933 Act") or the Securities
Exchange Act of 1934, as amended (the "1934 Act").
13
<PAGE>
The following chart compares the cumulative total stockholder return on
the Company's Common Stock over the five-year period ended December 31, 1997
with the cumulative total return for (i) the NASDAQ Stock Market (U.S.
Companies), (ii) the NASDAQ Pharmaceutical Index and (iii) the Chicago Board
of Exchange (CBOE) Biotech Index through 1996. The NASDAQ Pharmaceutical
index replaces the CBOE Biotech Index, used in this comparison in previous
years, which the CBOE stopped publishing during 1997. The CBOE index was a
price weighted, not a market weighted index. The chart assumes $100 invested
on January 1, 1992 and that dividends are reinvested.
- -------------------------------------------------------------------------------
COMMON STOCK PERFORMANCE
- -------------------------------------------------------------------------------
(Performance Graph appears here)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Advanced Tissue Sciences, Inc. $ 100 $ 59 $ 59 $ 72 $ 68 $ 88
NASDAQ Stock Market (US) $ 100 $ 115 $ 112 $ 159 $ 195 $ 240
NASDAQ Pharmaceutical Index $ 100 $ 89 $ 67 $ 123 $ 123 $ 127
Chicago Board of Exchange Biotech Index $ 100 $ 74 $ 65 $ 106 $ 100
</TABLE>
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the graph above.
The market price of the Company's stock in recent years has fluctuated
significantly and it is likely that the price of the stock will fluctuate in
the future. The Company does not make or endorse any prediction as to future
stock performance. In addition, the Common Stock Performance chart above is
(i) not "soliciting material," (ii) not deemed filed with the Securities and
Exchange Commission and (iii) not to be incorporated by reference in any
filing of the Company under the 1933 Act or the 1934 Act.
===============================================================================
CERTAIN TRANSACTIONS
The Company has entered into indemnification agreements with each of its
directors and officers which provide such individuals with indemnification
rights, which are in addition to those provided by the Company's Bylaws. One
significant difference between the indemnification rights provided under the
Company's Bylaws and those provided under the indemnification agreements is
that, under the Bylaws determinations are made on a case-by-case basis that
the individual claiming indemnity meets certain specified standards of
conduct. Under the indemnification agreements, a determination that a
director or officer has met these standards is not required for such
indemnity, although the agreements exclude indemnity for conduct which is
adjudged to be knowingly fraudulent, deliberately dishonest or to constitute
willful misconduct. The Company also currently maintains policies of
insurance under which its directors and officers are insured, within the
limits and subject to the limitations of the policies, against certain
expenses in connection with the defense of actions, suits or proceedings, and
certain liabilities which might be imposed as a result of such actions, suits
or proceedings, to which they are parties by reason of being or having been
such directors or officers.
On March 31, 1998, Arthur J. Benvenuto, Chairman of the Board and Chief
Executive Officer, and Dr. Gail K. Naughton, President and Chief Operating
Officer, were indebted to the Company in the amount of $1,110,058 (including
$191,558 representing accrued interest) and $413,005 (including $63,005
representing accrued interest), respectively. Mr. Benvenuto's loan was for
the exercise of an employee stock option and is
14
<PAGE>
evidenced by a promissory note bearing interest at the rate of 6.75% per
annum with principal and interest due in May 1999. Dr. Naughton's loan
bears interest at the rate of 6.75% per annum and is due in July 1999. Each
loan is secured by shares of Common Stock of the Company and becomes due and
payable within 180 days of termination (other than due to death or
disability). In addition, Mr. Benvenuto and Dr. Naughton must each use the
proceeds from the sale of shares of the Company's Common Stock securing such
loans to repay amounts owing under his or her loan.
PROPOSAL 2
SELECTION OF AUDITORS
Subject to stockholder approval at the Annual Meeting, the Board of
Directors has selected Ernst & Young LLP ("Ernst & Young") as the Company's
independent auditors for the fiscal year ending December 31, 1998. Ernst &
Young was first engaged as the Company's independent auditors for the fiscal
year ended January 31, 1991. The affirmative vote of a majority of the votes
cast on this Proposal 2 shall constitute approval of Ernst & Young as the
Company's independent auditors for calendar year 1998.
A representative of Ernst & Young is expected to be present at the Annual
Meeting. The representative will have an opportunity to make a statement and
will be available to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
PROPOSALS FOR THE 1999 ANNUAL MEETING
The next annual meeting of stockholders is scheduled to be held in May
1999. Stockholder proposals for inclusion in the Company's proxy statement
for that meeting must be received at the Company's principal office not later
than December 31, 1998. Stockholder proposals must be mailed to the Company's
principal executive office at 10933 North Torrey Pines Road, La Jolla,
California 92037 to the attention of the Corporate Secretary.
OTHER MATTERS
Management does not know of any other matters to be brought before the
Annual Meeting. If any other matter is properly presented for consideration
at the Annual Meeting, it is intended that the proxies will be voted by the
persons named therein in accordance with their judgment on such matters. The
Company's Annual Report to Stockholders for the year ended December 31, 1997
is enclosed herewith.
Your cooperation in giving this matter your immediate attention and
returning your proxies will be appreciated.
By Order of the Board of Directors,
Richard A. Fink
Secretary
La Jolla, California
April 17, 1998
15
<PAGE>
(Proxy Card - Front)
ADVANCED TISSUE SCIENCES, INC.
10933 NORTH TORREY PINES ROAD, LA JOLLA, CALIFORNIA 92037
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Arthur J. Benvenuto and Dr. Gail K.
Naughton, and each of them, with full power of substitution, the proxy or
proxies of the undersigned to vote all shares of Common Stock of Advanced
Tissue Sciences, Inc. (the "Company") which the undersigned is entitled to
vote at the 1998 Annual Meeting of Stockholders and at any adjournments or
postponements 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 following manner:
(continued and to be signed on the reverse side)
<PAGE>
(Proxy Card - Back)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
-------------------- ------------
ACCOUNT NUMBER COMMON
1. TO ELECT THE FOLLOWING EIGHT-MEMBER BOARD OF DIRECTORS to serve until
their successors have been duly elected and qualified: Arthur J.
Benvenuto; Dr. Gail K. Naughton; Jerome E. Groopman, M.D.; Jack L.
Heckel; Ronald L. Nelson; Dayton Ogden; David S. Tappan, Jr.; and
Dr. Gail R. Wilensky. (THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR)
[ ] FOR all nominees above [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for the nominees
contrary) listed above
To withhold authority to vote for any nominee, strike a line through the
nominee's name set forth above. In the event a nominee is unable or
declines to serve, this proxy will be voted in the election of directors
in the manner described in the Proxy Statement for the 1998 Annual
Meeting of Stockholders.
2. TO APPROVE THE APPOINTMENT OF ERNST & YOUNG LLP as independent auditors
of the Company for the fiscal year ending December 31, 1998. (THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and at any adjournment
or postponements thereof.
Please sign exactly as name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee, or
guardian, please give full title as such.
If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Dated: ___________________________, 1998
-----------------------------------------
(Signature)
-----------------------------------------
(Signature if held jointly)
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD USING THE ENCLOSED
SELF-ADDRESSED STAMPED ENVELOPE.
