<PAGE>
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 of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Transkaryotic Therapies, 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/ No fee 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
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>
TRANSKARYOTIC THERAPIES, INC.
195 ALBANY STREET
CAMBRIDGE, MASSACHUSETTS 02139
(617) 349-0200
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 10, 1999
---------------------
The Annual Meeting of Stockholders of Transkaryotic Therapies, Inc. (the
"Company") will be held at The Harvard Club, 374 Commonwealth Avenue, Boston,
Massachusetts on Thursday, June 10, 1999 at 10:00 a.m., Eastern Standard Time,
to consider and act upon the following matters:
1. To elect five directors to serve until the 2000 Annual Meeting of
Stockholders.
2. To approve (i) the continuance of the Company's 1993 Long-Term Incentive
Plan, as amended (the "1993 Plan"), and (ii) the amendment and restatement of
the 1993 Plan increasing the number of shares of Common Stock of the Company by
2,000,000 shares (from 2,250,000 to 4,250,000 shares authorized for issuance
under such plan) and making certain other technical amendments to the 1993 Plan.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors presently has no knowledge of any other business to
be transacted at the meeting.
Stockholders of record at the close of business on April 21, 1999 will be
entitled to notice of and to vote at the meeting or any adjournment thereof. The
stock record books of the Company will remain open.
By Order of the Board of Directors,
Daniel E. Geffken, SECRETARY
Cambridge, Massachusetts
April 22, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY
IS MAILED IN THE UNITED STATES.
<PAGE>
TRANSKARYOTIC THERAPIES, INC.
195 ALBANY STREET
CAMBRIDGE, MASSACHUSETTS 02139
------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 10, 1999
------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Transkaryotic Therapies, Inc. (the
"Company") for use at the Annual Meeting of Stockholders of the Company to be
held on June 10, 1999 (the "Annual Meeting") and at any adjournment of the
Annual Meeting. All shares of common stock will be voted in accordance with the
stockholders' instructions. If no choice is specified, proxies will be voted in
favor of the matters set forth in the accompanying Notice of Meeting. Any proxy
may be revoked by a stockholder at any time before its exercise by delivery of a
written revocation or a subsequently dated proxy to the Secretary of the Company
or by voting in person at the Annual Meeting. Attendance at the Annual Meeting
will not itself be deemed to revoke a proxy unless the stockholder gives
affirmative notice at the Annual Meeting that the stockholder intends to revoke
the proxy and vote in person.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY AND THE
COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1998 ARE
BEING MAILED TO STOCKHOLDERS ON OR ABOUT APRIL 27, 1999. THE COMPANY WILL, UPON
WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-K (OTHER THAN EXHIBITS) FOR THE YEAR ENDED DECEMBER 31, 1998,
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). PLEASE ADDRESS
ALL SUCH REQUESTS TO THE COMPANY, ATTENTION OF CORPORATE COMMUNICATIONS, 195
ALBANY STREET, CAMBRIDGE, MASSACHUSETTS 02139.
VOTING SECURITIES AND VOTES REQUIRED
On April 21, 1999, the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting, there were outstanding
and entitled to vote an aggregate of 19,190,253 shares of Common Stock of the
Company, $.01 par value per share (the "Common Stock"). Stockholders are
entitled to one vote per share.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of common stock entitled to vote at the meeting shall be
necessary to constitute a quorum for the transaction of business. Abstentions
and broker non-votes will be considered as present for purposes of determining
whether a quorum is present.
The affirmative vote of the holders of a plurality of the shares of Common
Stock present or represented and voting at the meeting is required for the
election of directors. The affirmative vote of the holders of a majority of the
shares of Common Stock present or represented and voting at the meeting is
required for the approval of the amendment and restatement of the 1993 Long-Term
Incentive Plan.
Shares that abstain from voting as to a particular matter and shares held in
"street name" by brokers of nominees who indicate on their proxies that they do
not have discretionary authority to vote such shares as to a particular matter
will not be counted as votes in favor of such matter and will also not be
counted as votes cast or shares voting on such matter. Accordingly, abstentions
and "broker non-votes" will have no effect on the voting on matters, such as the
ones presented for stockholder approval at this Annual Meeting, that require the
affirmative vote of a certain percentage of the shares voting on the matter.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of January 31, 1999,
regarding the ownership of the Company's Common Stock by (i) each person known
by the Company to own more than 5% of the outstanding shares of Common Stock,
(ii) each of the directors of the Company, (iii) each of the executive officers
of the Company named in the Summary Compensation Table and (iv) all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES OF OF
COMMON STOCK COMMON
BENEFICIALLY STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OUTSTANDING(2)
- -------------------------------------------------- --------------------- -----------
<S> <C> <C>
Warburg, Pincus Capital Company, L.P. ............ 4,349,152(3) 22.7%
c/o E. M. Warburg, Pincus & Co. LLC
466 Lexington Avenue, 10th Floor
New York, NY 10017-3147
Biotech Target S.A. .............................. 2,811,500(4) 14.7%
c/o BB Biotech AG
Vordergasse 3
8200 Schaffhausen
CH/Switzerland
Hoechst Marion Roussel, Inc. ..................... 2,187,408(5) 11.4%
9300 Ward Parkway
Kansas City, MO 64114-1405
Putnam Investments, Inc. ......................... 2,170,372(6) 11.3%
One Post Office Square
Boston, MA 02109
Christoph M. Adams, Ph.D. ........................ 46,904(7) *
Daniel E. Geffken................................. 53,333(8) *
Kurt C. Gunter, M.D. ............................. 35,861(9) *
William R. Miller................................. 38,928(10) *
Rodman W. Moorhead, III........................... 4,366,152(11) 22.8%
c/o E. M. Warburg, Pincus & Co. LLC
466 Lexington Avenue, 10th Floor
New York, NY 10017-3147
Richard F Selden, M.D., Ph.D. .................... 758,494(12) 3.9%
James E. Thomas................................... 4,351,652(11) 22.7%
c/o E. M. Warburg, Pincus & Co. LLC
466 Lexington Avenue, 10th Floor
New York, NY 10017-3147
Douglas A. Treco, Ph.D. .......................... 254,261(13) 1.3%
Peter Wirth....................................... 10,000(14) *
All directors and executive officers as a group (9
individuals).................................... 5,565,933(11)(15) 28.6%
</TABLE>
- ------------------------
* Percentage is less than 1% of the total number of outstanding shares of
Common Stock of the Company.
2
<PAGE>
(1) The number of shares beneficially owned by each person is determined under
rules of the SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the person has the sole or shared
voting power or investment power and also any shares which the person has
the right to acquire within 60 days of January 31, 1999 through the exercise
of any stock option or other right. Unless otherwise indicated, each person
has sole investment and voting power (or shares such power with his or her
spouse) with respect to the shares set forth in the table. The inclusion
herein of any shares deemed beneficially owned does not constitute an
admission of beneficial ownership of such shares.
(2) The number of shares deemed outstanding with respect to a named person or
entity includes 19,135,993 shares outstanding as of January 31, 1999, plus
any shares subject to issuance upon exercise of options held by the person
or entity in question that were exercisable on or exercisable within 60 days
after January 31, 1999.
(3) The sole general partner of Warburg, Pincus Capital Company, L.P. ("WPCC" or
"Warburg") is Warburg, Pincus & Co., a New York general partnership ("WP").
E.M. Warburg, Pincus & Co., LLC, a New York limited liability company ("EMW
LLC"), manages WPCC. The members of EMW LLC are substantially the same as
the partners of WP. Lionel I. Pincus is the managing partner of WP and the
managing member of EMW LLC and may be deemed to control both WP and EMW LLC.
WP, as the sole general partner of WPCC, has a 20% interest in the profits
of WPCC. Rodman W. Moorhead, III, and James E. Thomas, directors of the
Company, are Managing Directors and members of EMW LLC and are general
partners of WP. As such, Messrs. Moorhead and Thomas may be deemed to have
an indirect pecuniary interest, within the meaning of Rule 16a-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in an
indeterminate portion of the shares beneficially owned by WPCC and WP. The
information presented herein is as reported in, and based in part upon, a
Schedule 13G filed with the SEC by WPCC, WP and EMW LLC on February 12,
1998. Each of WPCC, WP and EMW LLC reported beneficial ownership of and sole
voting and dispositive power with respect to all of the shares listed as
beneficially owned. These stockholders may be deemed to be a group for
purposes of Rule 13d-3 promulgated under the Exchange Act.
(4) The information presented herein is as reported in, and based in part upon,
a Schedule 13G/A filed with the SEC on August 28, 1998 by Biotech Target
S.A., a Panamanian corporation ("Biotech Target"), and BB Biotech AG, a
Swiss corporation ("BB Biotech"). Biotech Target is a wholly owned
subsidiary of BB Biotech. Each of Biotech Target and BB Biotech reported
beneficial ownership of and shared voting and dispositive power with respect
to all of the shares listed as beneficially owned. These stockholders may be
deemed to be a group for purposes of Rule 13d-3 promulgated under the
Exchange Act.
(5) The information presented herein is as reported in, and based in part upon,
a Schedule 13D/A filed with the SEC on April 1, 1998 by Hoechst Marion
Roussel, Inc., a Delaware corporation ("HMRI"), and HMR Pharma, Inc., a
Delaware corporation ("HMR Pharma"). HMR Pharma, a wholly owned subsidiary
of Hoechst Aktiengesellschaft, a German corporation, beneficially owns 98.2%
of the outstanding common stock of HMRI. HMRI reported beneficial ownership
of and sole voting and dispositive power with respect to all of the shares
listed as beneficially owned. HMR Pharma disclaims beneficial ownership of
all such shares within the meaning of Rule 13d-3 under the Exchange Act.
These stockholders may be deemed to be a group for purposes of Rule 13d-3
promulgated under the Exchange Act.
3
<PAGE>
(6) The information presented herein is as reported in, and based solely upon, a
Schedule 13G/A filed with the SEC on February 11, 1999 by Marsh & McLennan
Companies, a Delaware corporation ("M&MC"), Putnam Investments, Inc., a
Massachusetts corporation ("PI"), Putnam Investment Management, Inc., a
Massachusetts corporation ("PIM") and The Putnam Advisory Company, Inc., a
Massachusetts corporation ("PAC"). PI, which is a wholly-owned subsidiary of
M&MC, wholly owns PIM and PAC, each a registered investment adviser. PIM is
the investment adviser to the Putnam family of mutual funds, in which
capacity it has shared dispositive power with respect to 2,170,372 shares of
Common Stock. PAC is the investment adviser to PI's institutional clients,
in which capacity it has shared dispositive power with respect to 97,700
shares of Common Stock and shared voting power with respect to 38,200 shares
of Common Stock. PI and M&MC disclaim beneficial ownership of all of the
shares listed as beneficially owned.
(7) Consists of 46,904 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
(8) Consists of 53,333 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
(9) Includes 35,761 shares of Common Stock issuable upon exercise of outstanding
stock options granted under the Company's 1993 Long-Term Incentive Plan.
(10) Includes 10,000 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
(11) The shares indicated as owned by Messrs. Moorhead and Thomas include
4,349,152 shares owned directly by WPCC and are included herein because of
the affiliation of Messrs. Moorhead and Thomas with WPCC. Messrs. Moorhead
and Thomas disclaim beneficial ownership of these shares within the meaning
of Rule 13d-3 under the Exchange Act. See Note (3) above.
(12) Includes 122,618 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
(13) Includes 57,857 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
(14) Consists of 10,000 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
(15) Includes 336,473 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
ELECTION OF DIRECTORS
Directors are to be elected at the Annual Meeting. The Board of Directors
has fixed the number of directors at five for the coming year. The Company's
By-laws provide that the directors of the Company will be elected at each annual
meeting of the Company's stockholders to serve until the next annual meeting of
stockholders or until their successors are duly elected and qualified.
At each annual meeting of the Company's stockholders at which directors are
to be elected, the Company has agreed to nominate, recommend the election by the
Company's stockholders and use its best efforts to effect the election to the
Board of Directors of the Company of (i) two individuals designated by Warburg,
so long as Warburg beneficially owns at least 20% of the outstanding Common
Stock of the Company and (ii) one individual designated by Warburg, so long as
Warburg beneficially owns at least
4
<PAGE>
10%, but less than 20%, of the outstanding Common Stock of the Company. The two
individuals designated by Warburg for election to the Board of Directors of this
Annual Meeting are Messrs. Moorhead and Thomas.
The Board of Directors recommends that the nominees named below be elected
directors of the Company. The persons named in the enclosed proxy (Richard F
Selden and James E. Thomas) will vote to elect the five nominees named below as
Directors of the Company unless authority to vote for the election of any or all
of the nominees is withheld by marking the proxy to that effect. Each nominee is
presently serving as a director and has consented to being named in this Proxy
Statement and to serve if elected. If for any reason any nominee should become
unavailable for election prior to the Annual Meeting, the person acting under
the proxy may vote the proxy for the election of a substitute. It is not
presently expected that any of the nominees will be unavailable.
Set forth below are the name, age and length of service as a director for
each member of the Board of Directors and the positions and offices held by him,
his principal occupation and business experience during the past five years and
the names of other publicly-held companies of which he serves as a director.
Information with respect to the number of shares of Common Stock beneficially
owned by each director, as of January 31, 1999, appears under "Security
Ownership of Certain Beneficial Owners and Management."
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
WILLIAM R. MILLER, age 70, has served as a Director since September 1991. In
January 1991, he retired as Vice Chairman of the Board of Directors of
Bristol-Myers Squibb Company, which position he had held since 1985. Mr. Miller
is the Chairman of the Board of Directors of SIBIA Neurosciences, Inc. and Vion
Pharmaceuticals, Inc., a director of ImClone Systems, Inc., ISIS
Pharmaceuticals, Inc., Westvaco Corporation and Xomed Surgical Products, Inc.,
and serves as Chairman of the Board of Directors of Cold Spring Harbor
Laboratory.
RODMAN W. MOORHEAD, III, age 55, has served as Chairman of the Board of
Directors since May 1992. Since 1973, he has been with E.M. Warburg, Pincus &
Co. LLC, a specialized financial services firm, where he currently serves as a
Senior Managing Director. He is also a director of Coventry Corporation,
ElderTrust, NeXstar Inc. and Xomed Surgical Products, Inc.
RICHARD F SELDEN, M.D., PH.D., age 40, is the founder of the Company. He has
served as Chief Scientific Officer, Chairman of the Scientific Advisory Board
and a Director since the Company's inception in 1988 and as President and Chief
Executive Officer since June 1994. Prior to founding the Company, Dr. Selden was
an Instructor in Pediatrics at Harvard Medical School. He received an A.B. in
Biology from Harvard College, an A.M. in Biology from the Harvard University
Graduate School of Arts and Sciences, a Ph.D. in Genetics from the Division of
Medical Sciences at Harvard Medical School and an M.D. from Harvard Medical
School.
JAMES E. THOMAS, age 38, has served as a Director of the Company since May
1992. Mr. Thomas has served as a Managing Director of E.M. Warburg, Pincus & Co.
LLC since January 1994, and prior to that served as Vice President from 1991 to
1994 and Associate from 1989 to 1991. Mr. Thomas is also a director of Celtrix
Pharmaceuticals, Inc., Menley & James Laboratories, Inc. and Xomed Surgical
Products, Inc.
PETER WIRTH, age 48, has served as a Director since February 1997. Mr. Wirth
has served as Executive Vice President and Chief Legal Officer of Genzyme
Corporation since October 1996. From January 1996 to October 1996, Mr. Wirth
served as Senior Vice President and General Counsel of Genzyme. Mr. Wirth was a
partner of Palmer & Dodge LLP, a Boston, Massachusetts law firm, from 1982
through October 1996. Mr. Wirth remains Of Counsel to Palmer & Dodge LLP.
5
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF
THE FIVE NOMINEES DESCRIBED ABOVE.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
reviews the results and scope of the audit and other services provided by the
Company's independent public auditors. The Audit Committee met one time during
fiscal 1998 to review the effectiveness of the Company's public auditors during
the fiscal 1997 audit, to review the adequacy of the fiscal 1997 financial
statement disclosures, to review the 1998 audit plan, to discuss the Company's
internal control policies and procedures and to consider and recommend the
selection of the Company's independent public auditors. The members of the Audit
Committee are Messrs. Miller and Thomas.
The Company also has a standing Compensation Committee of the Board of
Directors, which makes recommendations concerning salaries of each employee of
the Company entitled to a salary in excess of $150,000 and which exercises the
authority of the Board with respect to all incentive or stock option plans or
arrangements established by the Company, including the grant of stock options
and the issuance of restricted shares to employees. The Compensation Committee
is also responsible for establishing and modifying the compensation of all
corporate officers of the Company (including compensation pursuant to stock
options and other employee benefit plans and arrangements), adoption and
amendment of all stock option and other employee benefit plans and arrangements
and the engagement of, terms of any employment agreements and arrangements with,
and termination of, all corporate officers of the Company. The Compensation
Committee met one time during fiscal 1998. The members of the Compensation
Committee are Messrs. Miller and Moorhead. See "Report of the Compensation
Committee."
The Company does not have a nominating committee or a committee serving a
similar function. Nominations are made by and through the full Board of
Directors.
The Board of Directors held four meetings during fiscal 1998. Each director
attended 100% of the meetings of the Board of Directors and all committees of
the Board on which he served during 1998.
DIRECTORS' COMPENSATION
In general, the Company does not compensate directors for service as
directors but reimburses them for expenses incurred in connection with
attendance at meetings of the Board of Directors and committees thereof. Mr.
Miller is paid $1,000 for attendance at each meeting of the Board, other than
telephonic meetings. For the fiscal year ended December 31, 1998, Mr. Miller
earned $4,000 in director's fees. Pursuant to the terms of an agreement with the
Company, Mr. Wirth received $50,000 for consulting services rendered to the
Company during the fiscal year ended December 31, 1998.
Directors who are not employees of the Company ("Non-employee Directors")
are entitled to participate in the Company's 1993 Non-employee Directors' Stock
Option Plan (the "1993 Directors' Plan") which is administered by the
Compensation Committee of the Board of Directors. The 1993 Directors' Plan
provides for an automatic option grant on the first business day immediately
following each annual meeting of stockholders to each director who (i) is not an
employee of the Company or of any subsidiary, affiliate or five or more percent
stockholder of the Company and (ii) does not own or hold any Common Stock which
was purchased prior to the approval of the 1993 Directors' Plan and which
remains, at the time the director is being considered for eligibility for any
specific grant under the 1993 Directors' Plan, subject to substantial risk of
forfeiture under an agreement entered into with the Company. Any
6
<PAGE>
director who becomes such an employee shall cease to be eligible for any further
option grants under the 1993 Directors' Plan while such an employee, but shall
not, by reason of becoming such an employee, cease to be eligible to retain
options previously granted under the 1993 Directors' Plan. The annual option
grant under the 1993 Directors' Plan is to purchase 6,750 shares of Common Stock
at an exercise price per share equal to the fair market value on the date of
grant.
As of January 31, 1999, no awards had been made under the 1993 Directors'
Plan. Currently, Messrs. Miller and Wirth are eligible to receive option grants
under the 1993 Directors' Plan. However, in lieu of option grants under the 1993
Directors' Plan, Mr. Miller was granted options under the Company's 1993
Long-Term Incentive Plan. In addition, in lieu of an option grant under the 1993
Directors' Plan, Mr. Wirth is compensated as a consultant to the Company.
CERTAIN TRANSACTIONS
In May 1991, Richard F Selden, the President and Chief Executive Officer of
the Company, borrowed $125,000 from the Company pursuant to a promissory note
(the "Note"). As amended in June 1993, interest accrues on the outstanding
principal balance at a rate equal to one percent above the average yield for
one-year United States Treasury Bills (approximately 5.52% during the year ended
December 31, 1998) and is due and payable in arrears. The Board of Directors has
deferred the payment of outstanding principal and interest accrued thereon since
1992. At December 31, 1998 and March 31, 1999, the outstanding principal balance
and interest accrued thereon was $152,502 and $153,982, respectively. Dr. Selden
has pledged 2,500 shares of the Company's Common Stock to the Company to secure
his obligations under the Note.
The Company is a party to license agreements with HMRI, whereby HMRI was
granted exclusive rights to make, use and sell, worldwide, two therapeutic
products produced under patent rights and technologies owned by the Company (the
"License Agreements"). The License Agreements provide for fees and milestone
payments to be paid by HMRI to the Company. During the fiscal year ended
December 31, 1998, HMRI paid $3,325,000 to the Company under the License
Agreements.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The table below sets forth certain compensation
information for the Chief Executive Officer of the Company and the four other
most highly compensated executive officers of the Company whose salary and bonus
for the fiscal year ended December 31, 1998 exceeded $100,000 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
RESTRICTED
OTHER ANNUAL STOCK SECURITIES
COMPENSATION AWARDS UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2) ($)(3) OPTION(#)(4)
- ----------------------------------- ------ --------- ----------- ------------ ---------- --------------
Richard F Selden, M.D., Ph.D. ..... 1998 $275,000 $100,000 $ 48,093(6) -- 25,000
President and Chief 1997 240,000 135,000 -- -- 50,000
Executive Officer 1996 210,000 100,000 -- -- 128,571
Douglas A. Treco, Ph.D. ........... 1998 220,000 40,000 -- -- 15,000
Senior Vice President, 1997 175,000 60,000 -- -- 40,000
Research and Development 1996 152,000 30,000 -- -- 25,714
Christoph M. Adams, Ph.D. ......... 1998 168,000 30,000 -- -- 10,000
Vice President, Business 1997 160,000 15,000 -- -- 5,000
Development 1996 152,000 6,000 -- -- 6,429
Daniel E. Geffken.................. 1998 190,000 25,000 -- -- 10,000
Vice President, Finance and 1997 146,244(7) 50,000 -- -- 120,000
Chief Financial Officer
Kurt C. Gunter, M.D. .............. 1998 165,000 30,000 -- -- 10,000
Vice President, Clinical and 1997 150,000 40,000 36,281(8) -- 20,000
Regulatory Affairs 1996 63,654(9) 35,000 115,686(8) -- 64,286
<CAPTION>
<S> <C>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION ($)(5)
- ----------------------------------- ------------
Richard F Selden, M.D., Ph.D. ..... $ 5,346
President and Chief 4,945
Executive Officer 3,945
Douglas A. Treco, Ph.D. ........... 5,346
Senior Vice President, 3,810
Research and Development 3,945
Christoph M. Adams, Ph.D. ......... 5,346
Vice President, Business 5,096
Development 4,096
Daniel E. Geffken.................. 5,346
Vice President, Finance and 3,274
Chief Financial Officer
Kurt C. Gunter, M.D. .............. 4,746
Vice President, Clinical and 4,533
Regulatory Affairs 15,173
</TABLE>
- ------------------------
(1) Bonuses indicated as earned in any fiscal year were generally paid early in
the following fiscal year.
(2) In accordance with the rules of the SEC, Other Annual Compensation in the
form of perquisites and other personal benefits has been omitted in those
instances where the aggregate amount of such perquisites and other personal
benefits constituted less than the lesser of $50,000 or 10% of the total
amount of annual salary and bonus for the executive officer for the fiscal
year indicated.
(3) No shares of restricted stock were awarded in the years ended December 31,
1998, 1997 and 1996. As of December 31, 1998, Dr. Treco held an aggregate of
5,786 shares of unvested restricted stock valued at $146,820. The value of
the restricted stock held by Dr. Treco at December 31, 1998 was determined
by multiplying the last reported sales price of the Company's Common Stock
as reported by the Nasdaq National Market on December 31, 1998 ($25.375) by
the number of shares held and subtracting the aggregate purchase price paid
by Dr. Treco for such shares. No dividends were paid in 1998, 1997 or 1996
on the outstanding shares of restricted stock.
(4) Option grants reflect elements of compensation earned during the fiscal year
indicated. However, in certain instances, such options were not granted
until the beginning of the next fiscal year.
(5) All Other Compensation in 1998 includes the following: (a) the Company's
contributions under the Company's 401(k) Plan in the amount of $5,000 for
Drs. Selden, Treco, Adams and Mr. Geffken and $4,400 for Dr. Gunter; and (b)
the taxable portion of group term life insurance premiums paid by the
Company for each named executive of $346.
(6) Includes $14,927 for the payment of certain travel related expenses and also
includes amounts for the payment of insurance premiums and certain financial
planning services for Dr. Selden and the reimbursement of the related tax
liability for such expenses.
(7) Mr. Geffken commenced employment with the Company in February 1997.
(8) Consists of $19,229 and $61,314, in 1997 and 1996, respectively, for
relocation expenses paid to Dr. Gunter and $17,052 and $54,372, in 1997 and
1996, respectively, for reimbursement of the related tax liability for such
relocation expenses.
(9) Dr. Gunter commenced employment with the Company in July 1996.
8
<PAGE>
OPTION GRANT TABLE. The following table sets forth certain information
regarding options granted during the fiscal year ended December 31, 1998 by the
Company to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POTENTIAL REALIZABLE
PERCENT OF VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION
OPTIONS EMPLOYEES OR BASE FOR OPTION TERM(1)
GRANTED IN FISCAL PRICE EXPIRATION ------------------------
NAME (#) YEAR(2) ($/SHARE) DATE 5%($) 10%($)
- ----------------------------------- ----------- ----------------- ----------- ----------- ---------- ------------
Richard F Selden, M.D., Ph.D....... 50,000 10% $ 31.75 1/22/08 $ 998,370 $ 2,530,066
Douglas A. Treco, Ph.D............. 40,000 8% 31.75 1/22/08 798,696 2,024,053
Christoph M. Adams, Ph.D........... 5,000 1% 31.75 1/22/08 99,837 253,007
Daniel E. Geffken.................. 20,000 4% 31.75 1/22/08 399,348 1,012,026
Kurt C. Gunter, M.D................ 20,000 4% 31.75 1/22/08 399,348 1,012,026
</TABLE>
- ------------------------
(1) Potential realizable value is based on an assumption that the market price
of the stock will appreciate at the stated rate, compounded annually, from
the date of grant until the end of the 10-year term. These values are
calculated based on rules promulgated by the SEC and do not reflect the
Company's estimate or projection of future stock prices. Actual gains, if
any, on stock option exercises will be dependent upon the future performance
of the price of the Company's Common Stock, which will benefit all
stockholders proportionately.
(2) Calculated based on an aggregate of 501,880 options granted under the
Company's 1993 Long-Term Incentive Plan to employees during the fiscal year
ended December 31, 1998.
OPTION EXERCISES AND YEAR-END VALUES. The following table sets forth
certain information concerning option exercises by Named Executive Officers
during the fiscal year ended December 31, 1998 and exercisable and unexercisable
stock options held by the Named Executive Officers as of December 31, 1998:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING VALUE OF UNEXERCISED
ON VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
EXERCISE REALIZED AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
NAME (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------------- ----------- ---------- ----------------------- ------------------------
<S> <C> <C> <C> <C>
Richard F Selden, M.D., Ph.D............ -- -- 92,857/85,714 $1,087,163/$2,174,326
Douglas A. Treco, Ph.D.................. -- -- 48,571/17,143 217,422/434,870
Christoph M. Adams, Ph.D................ 3,000 $ 100,477 33,929/21,429 733,848/543,594
Daniel E. Geffken....................... -- -- 35,000/75,000 110,625/553,125
Kurt C. Gunter, M.D..................... 6,000 161,203 32,428/42,858 315,264/1,087,188
</TABLE>
- ------------------------
(1) Value Realized represents the difference between the aggregate exercise
price of the option and the aggregate fair market value of the underlying
Common Stock on the date of exercise.
(2) Value of Unexercised In-the-Money Options represents the difference between
the last reported sales price of the Company's Common Stock as reported by
the Nasdaq National Market on December 31, 1998 ($25.375) and the exercise
price of the option, multiplied by the number of shares subject to the
option.
9
<PAGE>
EMPLOYMENT AGREEMENTS
The Company is a party to employment agreements with each of the Named
Executive Officers. Each employment agreement contains provisions for
establishing the annual base salary and bonus for each such executive officer.
Pursuant to the terms of the employment agreements, the 1999 annual base salary
for each of Drs. Selden, Treco and Adams, Mr. Geffken and Dr. Gunter has been
established at $290,000, $231,000, $178,000, $200,000 and $173,000,
respectively. In addition, each of the Named Executive Officers is eligible to
receive an annual bonus based upon the achievement of individual and Company
goals. The employment agreements may be terminated by the executive or by the
Company. Under the terms of each such employment agreement, if the Company
terminates the executive's employment without cause (as defined therein), or, in
some cases, if the executive terminates his employment for certain reasons, the
Company is required to pay to such executive severance payments at the
executive's base salary rate for 12 months (18 months in the case of Dr. Selden)
(the "Severance Period"), to be reduced by an amount equal to the amount of any
other compensation earned by such individual during such Severance Period.
Certain of the employment agreements also provide for payments to be made to the
executive in the event of cessation of employment as a result of a disability.
Under each of the employment agreements, the executive shall be bound by certain
non-compete obligations for two years after termination of employment (one year
if the Company terminates such executive's employment other than for cause).
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors is
responsible for establishing compensation policies with respect to the Company's
executive officers. The objectives of the Company's executive compensation
program are to establish compensation levels designed to enable the Company to
attract, retain and reward executive officers who contribute to the long-term
success of the Company so as to enhance stockholder value. The Compensation
Committee makes decisions each year regarding executive compensation, including
annual base salaries, bonus awards, stock option grants and restricted stock
awards. Stock option grants and restricted stock awards are key components of
the executive compensation program and are intended to provide executives with
an equity interest in the Company so as to link a meaningful portion of the
compensation of the Company's executives with the performance of the Company's
Common Stock. This report is submitted by the Compensation Committee and
addresses the compensation policies for fiscal 1998 as they affected Dr. Selden,
in his capacity as President and Chief Executive Officer of the Company, and the
Named Executive Officers.
COMPENSATION PHILOSOPHY
The Company's executive compensation philosophy is based on the belief that
competitive compensation is essential to attract, motivate and retain highly
qualified and industrious employees. The Company's policy is to provide total
compensation that is competitive for comparable work and comparable corporate
performance. The compensation program includes both motivational and
retention-related compensation components. Bonuses are included to encourage
effective performance relative to current plans and objectives. Stock options
are included to help retain productive people and to more closely align their
interests with those of stockholders.
In executing its compensation policy, the Company seeks to relate
compensation with the Company's financial performance and business objectives,
reward high levels of individual performance and tie a significant portion of
total executive compensation to both the annual and long-term performance of the
Company. While compensation survey data are useful guides for comparative
purposes, the Company
10
<PAGE>
believes that a successful compensation program also requires the application of
judgment and subjective determinations of individual performance, and to that
extent the Compensation Committee applies judgment in reconciling the program's
objectives with the realities of retaining valued employees.
EXECUTIVE COMPENSATION PROGRAM
Annual compensation for the Company's executives consists of three principal
elements: base salary, cash bonus and stock options and restricted stock awards.
BASE SALARY AND CASH BONUS
In setting the annual base salaries for the Company's executives, the
Compensation Committee reviews the aggregate salary and bonus compensation for
individuals in comparable positions with other companies, including competitors
of the Company, and adjusts such amounts to reflect individual performance. Many
of these companies are biotechnology and pharmaceutical companies, some of which
are engaged in the research, development, manufacture and sale of therapeutic
proteins. The Company also regularly compares the salary levels of its executive
officers with other leading companies through reviews of survey and proxy
statement data.
Increases in annual base salary are based on a review and evaluation of the
performance of the department or activity for which the executive has
responsibility, the impact of that department or activity on the Company and the
skills and experience required for the job, coupled with a comparison of these
elements with similar elements for other executives both inside and outside the
Company.
Cash bonuses are tied directly to the Company's achievement of its goals and
objectives and the contribution of the executive to such achievements.
EQUITY OWNERSHIP
Executive officer compensation also includes long-term incentives afforded
by options to purchase shares of Common Stock and restricted stock awards. The
purposes of the Company's stock ownership program are (i) to highlight and
reinforce the mutuality of long-term interests between employees and the
stockholders and (ii) to assist in the attraction and retention of critically
important key executives, managers and individual contributors who are essential
to the Company's growth and development.
The Company's stock programs include long vesting periods to optimize the
retention value of these options and to orient the Company's executive officers
to longer term success. Generally, stock options vest in equal annual
installments over six years commencing on the first anniversary of the date of
grant, and, if employees leave the Company before these vesting periods, they
forfeit the unvested portions of these awards.
The number of shares of Common Stock subject to stock option grants is
generally intended to reflect the significance of the executive's current and
anticipated contributions to the Company. Since November 1996, the exercise
price of options granted by the Company has been determined at the discretion of
the Compensation Committee, although it has generally been set at 100% of the
fair market value per share on the date of grant. The value realizable from
exercisable options is dependent upon the extent to which the Company's
performance is reflected in the price of the Company's Common Stock at any
particular point in time. However, the decision as to whether such value will be
realized through the
11
<PAGE>
exercise of an option in any particular year is primarily determined by each
individual within the limits of the vesting schedule and not by the Compensation
Committee.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee has set Dr. Selden's total annual compensation,
including compensation derived from the Company's cash bonus and stock option
programs, at a level it believes to be competitive with the chief executive
officers of similarly capitalized biotechnology and pharmaceutical companies.
Dr. Selden, in his capacity as President and Chief Executive Officer, is
eligible to participate in the same executive compensation program available to
the Company's other senior executives.
During fiscal 1998, Dr. Selden's annual base salary was increased $35,000,
from $240,000 to $275,000. For fiscal 1999, Dr. Selden's base salary has been
set at $290,000. For fiscal 1998, Dr. Selden was also awarded a bonus of
$100,000 and, in January 1999, was granted an option to purchase 25,000 shares
of Common Stock at the then fair market value of $28.75 per share, which
compensation was based, in part, upon advances in the Company's Gene
Activated-TM- protein, Niche Protein-TM- products and Gene Therapy platforms,
and progress in corporate collaborations.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to public companies for
compensation over $1 million paid to its chief executive officer and its four
other most highly compensated executive officers. However, qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. The Company currently intends to structure its
stock option grants in a manner that complies prospectively with these
performance-based requirements.
COMPENSATION COMMITTEE
William R. Miller
Rodman W. Moorhead, III
12
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed by individuals
required to make filings ("Reporting Persons") pursuant to Section 16(a) of the
Exchange Act or written representations from certain Reporting Persons that no
Form 5 filing was required for such persons, the Company believes that, except
as follows, during fiscal 1998 all filings required to be made by its Reporting
Persons were timely made in accordance with the requirements of the Exchange
Act. Option grants in January 1998 to each of Drs. Richard F Selden, Douglas A.
Treco, Christoph M. Adams, Kurt C. Gunter and Messrs. Daniel E. Geffken and
William R. Miller, required to be reported on Form 4 (Statement of Changes in
Beneficial Ownership) by February 10, 1998, were reported on June 6, 1998.
STOCK PERFORMANCE GRAPH
The following graph compares cumulative total stockholder return on the
Company's Common Stock since October 17, 1996, the date of the Company's initial
public offering, with the cumulative total return for the Nasdaq Composite Index
and the Nasdaq Pharmaceutical Index. This graph assumes the investment of $100
on October 17, 1996 in the Company's Common Stock, the Nasdaq Composite Index
and the Nasdaq Pharmaceutical Index and assumes dividends are reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRANSKARYOTIC THERAPIES,
INC. NASDAQ COMPOSITE--U.S. NASDAQ PHARMACEUTICAL
<S> <C> <C> <C>
10/17/96 $100 $100 $100
12/31/96 $123 $104 $100
12/31/97 $234 $127 $103
12/31/98 $169 $179 $132
</TABLE>
<TABLE>
<CAPTION>
10/17/96 12/31/96 12/31/97 12/31/98
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Transkaryotic Therapies, Inc.............................................. $ 100 $ 123 $ 234 $ 169
Nasdaq Composite--U.S..................................................... 100 104 127 179
Nasdaq Pharmaceutical..................................................... 100 100 103 132
</TABLE>
13
<PAGE>
APPROVAL OF CONTINUANCE AND AMENDMENT OF AMENDED AND RESTATED
1993 LONG-TERM INCENTIVE PLAN
The Board of Directors believes that the continued growth and profitability
of the Company depends, in large part, upon the ability of the Company to
maintain a competitive position in attracting and retaining key personnel. The
Company is currently authorized to issue a total of 2,250,000 shares of Common
Stock (subject to adjustment for certain changes in the Company's
capitalization) under its 1993 Long-Term Incentive Plan (the "1993 Plan"). As of
March 1, 1999, the number of shares available for future grant under the 1993
Plan was 653,000. Accordingly, on January 27, 1999 the Board adopted, subject to
stockholder approval, an amendment to the 1993 Plan increasing the number of
shares of Common Stock available for issuance under the 1993 Plan by 2,000,000
(from 2,250,000 to 4,250,000) shares (subject to adjustment for certain changes
in the Company's capitalization). In addition, the Board adopted, subject to
stockholder approval, certain technical amendments to and the restatement of the
1993 Plan so that the 1993 Plan complies with the requirements of Section 162(m)
of the Code.
In order for options and restricted stock awarded under the 1993 Plan, as
amended, by the amendment described hereunder, to comply with Section 162(m)
after the Annual Meeting, the continuance of the 1993 Plan must be approved by
the stockholders.
The following is a brief summary of the provisions of the 1993 Plan, as
amended and restated. This summary is qualified in all respects by reference to
the full text of the 1993 Plan, a copy of which is attached to the electronic
copy of this Proxy Statement filed with the SEC and may be accessed from the
SEC's web site (www.sec.gov). In addition, a copy of the 1993 Plan is available
upon request to Corporate Communications at the Company.
ADMINISTRATION.
The 1993 Plan is administered by the Compensation Committee, which has
complete authority to make awards thereunder. The Compensation Committee has the
authority to, among other things, select the recipients of Awards (as defined
below) and determine (i) the number of shares of Common Stock covered by options
and the dates upon which such options become exercisable, (ii) the exercise
price of options, (iii) the duration of options and (iv) the number of shares of
Common Stock subject to any restricted stock or other stock-based Awards and the
terms and conditions of such Awards, including conditions for repurchase, issue
price and repurchase price.
DESCRIPTION OF AWARDS.
The 1993 Plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Code, nonstatutory stock options, restricted
stock, stock appreciation rights, long-term performance awards and stock grants
(collectively, "Awards").
INCENTIVE STOCK OPTIONS AND NON-STATUTORY STOCK OPTIONS. Optionees receive
the right to purchase a specified number of shares of Common Stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. Options may be granted at an
exercise price which may be less than, equal to or greater than the fair market
value of the Common Stock on the date of grant. Under present law, however,
incentive stock options and options intended to qualify as performance-based
compensation under Section 162(m) of the Code may not be granted at an exercise
price less than the fair market value of the Common Stock on the date of grant
(or less than 110% of the fair market value in the case of incentive stock
options granted to optionees holding more than 10% of the
14
<PAGE>
voting power of the Company). The 1993 Plan permits the Compensation Committee
to determine the manner of payment of the exercise price of options, including
through payment by cash, check or in connection with a "cashless exercise"
through a broker, by surrender to the Company of shares of Common Stock, by
delivery to the Company of a promissory note, or by any other lawful means.
RESTRICTED STOCK AWARDS. Restricted Stock Awards entitle recipients to
acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part of such shares from the recipient in the event that the
conditions specified in the applicable Award are not satisfied prior to the end
of the applicable restriction period established for such Award.
OTHER STOCK-BASED AWARDS. Under the 1993 Plan, the Board has the right to
grant other Awards having such terms and conditions as the Compensation
Committee may determine, including the grant of long-term performance awards
based on performance objectives payable in cash or stock, the issuance stock
("Stock Grants") and the grant of stock appreciation rights.
GENERAL PROVISIONS APPLICABLE TO AWARDS.
The 1993 Plan authorizes the Compensation Committee to provide for
transferable Awards, provided, however, that options intended to qualify as
incentive stock options may not be transferable otherwise than by will or by the
laws of descent and distribution. In addition, if authorized by the Compensation
Committee, participants may satisfy withholding tax requirements by delivery of
shares of Common Stock, including shares retained from the Award creating the
tax obligation.
ELIGIBILITY TO RECEIVE AWARDS.
All of the Company's employees, officers, consultants and advisors (and any
individuals who have accepted an offer for employment) are eligible to
participate in the 1993 Plan. Under present law, however, incentive stock
options may only be granted to employees. The maximum number of shares of Common
Stock with respect to which an Award may be granted to any Participant under the
1993 Plan shall be 250,000 per calendar year.
As of December 31, 1998, the Company had 178 employees. On April 12, 1999,
the closing sale price of the Company's Common Stock on the Nasdaq National
Market was $32.125.
The granting of Awards under the 1993 Plan is discretionary, and the Company
cannot now determine the number or type of Awards to be granted in the future to
any particular person or group. The following table, however, sets forth the
benefits received under the 1993 Plan during 1998 by (i) each Named Executive
Officer, (ii) all current executive officers as a group (the "Executive Group")
and (iii) all employees, including all current officers who are not executive
officers, as a group (the "Employee Group (other than executive officers").
15
<PAGE>
1998 PLAN BENEFITS
UNDER THE 1993 PLAN
<TABLE>
<CAPTION>
NAME VALUE ($)(1) NUMBER OF SHARES(#)
- ------------------------------------------------------------------------------- --------------- --------------------
<S> <C> <C>
Richard F Selden, M.D., Ph.D. ................................................. $ 0 50,000
Douglas A. Treco, Ph.D. ....................................................... 0 40,000
Christoph M. Adams, Ph.D. ..................................................... 0 5,000
Daniel E. Geffken.............................................................. 0 20,000
Kurt C. Gunter, M.D............................................................ 0 20,000
Executive Group................................................................ 0 135,000
Employee Group (other than executive officers)................................. 0 366,880
</TABLE>
- ------------------------------
(1) Represents the difference between the fair market value of the underlying
shares of Common Stock on the date of grant and the exercise price of the
Award.
ADJUSTMENTS.
The Compensation Committee is required to make appropriate adjustments in
connection with the 1993 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events.
AMENDMENT OR TERMINATION.
No Award may be made under the 1993 Plan after June 16, 2003, but Awards
previously granted may extend beyond that date. The Board of Directors may at
any time amend or terminate the 1993 Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1993 Plan and with respect to the sale of Common Stock acquired under the 1993
Plan.
TAX CONSEQUENCES TO PARTICIPANT--INCENTIVE STOCK OPTIONS.
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Stock"). The
exercise of an incentive stock option, however, may subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior to
having owned it for at least two years from the Grant Date and one year from the
Exercise Date (a "Disqualifying Disposition"), then all or a portion of the gain
recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
16
<PAGE>
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
TAX CONSEQUENCES TO PARTICIPANT--NONSTATUTORY STOCK OPTIONS.
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Stock") on the Exercise Date
over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will be
a long-term gain or loss if the participant has held the NSO Stock for more than
one year prior to the date of the sale.
TAX CONSEQUENCES TO PARTICIPANT--RESTRICTED STOCK AWARDS.
A participant will not recognize taxable income upon the grant of a
Restricted Stock Award, unless the participant makes an election under Section
83(b) of the Code (a "Section 83(b) Election"). If the participant makes a
Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary compensation income, for the year in which
the Award is granted, in an amount equal to the difference between the fair
market value of the Common Stock at the time the Award is granted and the
purchase price paid for the Common Stock. If a Section 83(b) Election is not
made, then the participant will recognize ordinary compensation income at the
time that the forfeiture provisions or restrictions on transfer lapse in an
amount equal to the difference between the fair market value of the Common Stock
at the time of such lapse and the original purchase price paid for the Common
Stock. The participant will have a tax basis in the Common Stock acquired equal
to the sum of the price paid and the amount of ordinary compensation income
recognized.
Upon the disposition of the Common Stock acquired pursuant to a Restricted
Stock Award, the participant will recognize a capital gain or loss equal to the
difference between the sale price of the Common Stock and the participant's tax
basis in the Common Stock. The gain or loss will be a long-term gain or loss if
the shares are held for more than one year. For this purpose, the holding period
shall begin just after the date on which the forfeiture provisions or
restrictions lapse if a Section 83(b) Election is not made, or just after the
Award is granted if a Section 83(b) Election is made.
TAX CONSEQUENCES TO PARTICIPANT--OTHER STOCK-BASED AWARDS.
The tax consequences associated with any other stock-based Award granted
under the 1993 Plan will vary depending on the specific terms of such Award.
Among the relevant factors are whether or not the Award has a readily
ascertainable fair market value, whether or not the Award is subject to
forfeiture provisions or restrictions on transfer, the nature of the property to
be received by the participant under the Award, and the participant's holding
period and tax basis for the Award or underlying Common Stock.
17
<PAGE>
TAX CONSEQUENCES TO THE COMPANY.
The grant of an Award under the 1993 Plan will have no tax consequences to
the Company. Moreover, in general, neither the exercise of an incentive stock
option nor the sale of any Common Stock acquired under the 1993 Plan will have
any tax consequences to the Company. The Company generally will be entitled to a
business expense deduction, however, with respect to any ordinary compensation
income recognized by a participant under the 1993 Plan, including as a result of
the exercise of a nonstatutory stock option, a Disqualifying Disposition, or a
Section 83(b) Election. Any such deduction will be subject to the limitations of
Section 162(m) of the Code.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
AMENDMENT AND RESTATEMENT OF THE 1993 PLAN.
OTHER INFORMATION
ACCOUNTING MATTERS
The Board of Directors has selected the independent accounting firm of Ernst
& Young LLP to audit the accounts of the Company for the year ended December 31,
1999.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
OTHER MATTERS
Management does not know of any other matters which may come before the
meeting. However, if any other matters are properly presented to the meeting, it
is the intention of persons named in the accompanying proxy to vote, or
otherwise act, in accordance with their judgment on such matters.
All costs of solicitations of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names, and the Company will reimburse them for their out-of-pocket
expenses in this connection.
18
<PAGE>
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Cambridge, Massachusetts not later than December 27, 1999 for inclusion in
the proxy statement for that meeting.
If a stockholder of the Company wishes to present a proposal before the 2000
Annual Meeting of Stockholders, but does not wish to have the proposal
considered for inclusion in the Company's proxy statement and proxy card, such
stockholder must also give written notice to Corporate Communications at the
Company at its principal office in Cambridge, Massachusetts. The Company must
receive such notice no later than March 9, 2000. If a stockholder fails to
provide timely notice of a proposal to be presented at the 2000 Annual Meeting,
the proxies designated by the Board of Directors of the Company will have
discretionary authority to vote on any such proposal.
By Order of the Board of Directors,
Daniel E. Geffken, SECRETARY
April 22, 1999
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED.
19
<PAGE>
PROXY
TRANSKARYOTIC THERAPIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoints Richard F
Selden and James E. Thomas, and each of them, with full power of
substitution, as Proxies to represent and vote as designated hereon all
shares of stock of Transkaryotic Therapies, Inc. (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held on Thursday, June 10, 1999,
at 10:00 a.m., Eastern Standard Time, at The Harvard Club, 374 Commonwealth
Avenue, Boston, Massachusetts and at any adjournment thereof, with respect to
the matters set forth on the reverse side thereof.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED RETURN ENVELOPE.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
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PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
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IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL DIRECTOR NOMINEES
<S> <C>
1. To elect the following five Directors for the 2. To approve (i) the continuance of the
ensuing year. Nominees: William R. Miller, Company's 1993 Long-Term Incentive FOR AGAINST ABSTAIN
Rodman W. Moorhead, III, Richard F Selden, Plan, as amended (the "1993 Plan"),
James E. Thomas and Peter Wirth and (ii) the amendment and restatement / / / / / /
of the 1993 Plan increasing the number
FOR WITHHOLD of shares of Common Stock authorized
MARK HERE for issuance under such plan by
/ / / / IF YOU PLAN TO / / 2,000,000 shares from 2,250,000 to
ATTEND THE 4,250,000 shares and making certain
MEETING other technical amendments to the
1993 Plan.
MARK HERE
FOR ADDRESS / /
CHANGE AND
/ / ______________________________________ NOTE BELOW
For all nominees except as noted above IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
Please sign exactly as name appears hereon. If the stock is
registered in the names of two or more persons, each should sign.
When signing as an executor, administrator, trustee, guardian, or
attorney, please give full corporate name by an authorized
officer. If a partnership, please sign in full partnership name
by an authorized person.
Signature: _______________________________ Date: _____________ Signature: _______________________________ Date: _____________
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