<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(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 Rule 14a-11(c) or Rule 14a-12
GALAGEN 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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
--------------------------------------------------------------------
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:
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4) Date Filed:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
GALAGEN INC.
4001 LEXINGTON AVENUE NORTH
ARDEN HILLS, MINNESOTA 55126
(612) 481-2105
March 30, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of GalaGen Inc. to be held at Land O'Lakes, Inc., 4001 Lexington Avenue
North, Arden Hills, Minnesota, commencing at 10:30 a.m., Central Daylight
Time, on Wednesday, May 13, 1998.
The Secretary's Notice of Annual Meeting and the Proxy Statement which
follow describe the matters to come before the meeting. During the meeting,
we will also review the activities of the past year and items of general
interest about the Company.
We hope that you will be able to attend the meeting in person and we
look forward to seeing you. Please mark, date and sign the enclosed proxy
and return it in the accompanying envelope as quickly as possible, even if
you plan to attend the meeting. If you later desire to revoke the proxy, you
may do so at any time before it is exercised.
Sincerely,
/s/ Robert A. Hoerr
-------------------------------------
Robert A. Hoerr, M.D., Ph.D.
CHIEF EXECUTIVE OFFICER AND PRESIDENT
<PAGE>
GALAGEN INC.
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 13, 1998
------------------------------
The Annual Meeting of Stockholders of GalaGen Inc. (the "Company") will
be held at Land O'Lakes, Inc., 4001 Lexington Avenue North, Arden Hills,
Minnesota, on Wednesday, May 13, 1998, commencing at 10:30 a.m., Central
Daylight Time, for the following purposes:
1. To elect five directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and
qualified.
2. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31,
1998.
3. To transact such other business as may properly be brought before
the meeting.
The Board of Directors of the Company has fixed March 19, 1998 as the
record date for the meeting and only stockholders of record at the close of
business on that date are entitled to receive notice of and vote at the
meeting.
YOUR PROXY IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. EVEN IF YOU
OWN ONLY A FEW SHARES, AND WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING, PLEASE MARK, DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE
ACCOMPANYING POSTAGE-PAID ENVELOPE. THE PROXY MAY BE REVOKED BY YOU AT ANY
TIME PRIOR TO BEING EXERCISED, AND RETURNING YOUR PROXY WILL NOT AFFECT YOUR
RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING AND REVOKE THE PROXY.
By Order of the Board of Directors,
/s/ Gregg A. Waldon
-----------------------------------
Gregg A. Waldon
SECRETARY
Arden Hills, Minnesota
March 30, 1998
<PAGE>
--------------------
PROXY STATEMENT
--------------------
GENERAL INFORMATION
The enclosed proxy is being solicited by the Board of Directors (the
"Board of Directors" or "Board") of GalaGen Inc., a Delaware corporation (the
"Company"), for use in connection with the Annual Meeting of Stockholders to
be held on Wednesday, May 13, 1998, at Land O'Lakes, Inc., 4001 Lexington
Avenue North, Arden Hills, Minnesota, commencing at 10:30 a.m., Central
Daylight Time, and at any adjournments thereof. Only stockholders of record
at the close of business on March 19, 1998 will be entitled to vote at such
meeting or adjournments. Proxies in the accompanying form which are properly
signed, duly returned to the Company and not revoked will be voted in the
manner specified. If no instructions are indicated, properly executed proxies
will be voted for the proposals set forth in this Proxy Statement. As of the
date of this Proxy Statement, the Board of Directors of the Company does not
know of any matters, other than those described in the Notice of Annual
Meeting and this Proxy Statement, that are to come before the meeting. If
any other matters are properly presented at the meeting for action, the
persons named in the enclosed form of proxy and acting thereunder will have
the discretion to vote on such matters in accordance with their best
judgment. A stockholder executing a proxy retains the right to revoke it at
any time before it is exercised by notice in writing to the Secretary of the
Company of termination of the proxy's authority or by properly signing and
duly returning a proxy bearing a later date.
The address of the principal executive office of the Company is 4001
Lexington Avenue North, Arden Hills, Minnesota 55126 and the Company's
telephone number is 612-481-2105. The mailing of this Proxy Statement and
form of proxy to stockholders will commence on or about April 9, 1998.
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by the use of the mails, certain
directors, officers and employees of the Company may solicit proxies by
telephone, telecopier, telegram or personal contact, and have requested
brokerage firms and custodians, nominees and other record holders to forward
soliciting materials to the beneficial owners of stock of the Company and
will reimburse them for their reasonable out-of-pocket expenses in so
forwarding such materials.
The Common Stock of the Company, par value $.01 per share, is the only
authorized and issued voting security of the Company. At the close of
business on March 19, 1998, there were 7,962,198 shares of Common Stock of
the Company issued and outstanding, each of which is entitled to one vote.
Holders of Common Stock are not entitled to cumulate their votes for the
election of directors.
Provided a quorum is present at the meeting, directors shall be elected
by a plurality of the votes present in person or represented by proxy at the
meeting and entitled to vote and any other matters considered at the meeting
shall be decided by an affirmative vote of a majority of the shares present
in person or represented by proxy at the meeting and entitled to vote with
respect to such matters. Proxies marked to abstain with respect to a
proposal have the same effect as shares submitted with a "withhold" or
"against" vote for such proposal. Broker non-votes are not considered as
votes for or against a proposal.
A majority of the shares of the Common Stock of the Company entitled to
vote shall constitute a quorum for purposes of the meeting. Abstentions and
broker non-votes are counted as being present in person or represented by
proxy at the meeting and entitled to vote for purposes of determining the
presence or absence of a quorum for the transaction of business. If a quorum
is not present at the meeting, the stockholders present, by vote of a
majority of the votes cast by stockholders present in person or represented
by proxy and entitled to vote, may adjourn the meeting, and at any such
adjourned meeting at which a quorum is present any business may be transacted
which might have been transacted at the meeting as originally called.
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of February 28, 1998, the beneficial
ownership of the Common Stock by (i) each person known by the Company to
beneficially hold more than 5% of the outstanding Common Stock, (ii) each
director or nominee for director of the Company, (iii) each officer of the
Company named in the Summary Compensation Table on page 10, and (iv) all
executive officers and directors of the Company as a group. Except as
otherwise noted, the address of the listed beneficial owner is that of the
Company and the listed beneficial owner has sole voting and investment power
with respect to the listed shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENTAGE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OUTSTANDING SHARES
------------------- ----------------------- ------------------
<S> <C> <C>
Chiron Corporation (2) 3,203,387 30.0%
4560 Horton Street
Emeryville, CA 94608
Land O'Lakes, Inc. 1,215,868 16.0%
4001 Lexington Ave. N.
Arden Hills, MN 55126
Investment Advisers, Inc. 692,728 9.1%
3700 First Bank Place
Minneapolis, MN 55402
John Pappajohn (3) 590,913 7.8%
2116 Financial Center
Des Moines, IA 50309
Arthur D. Collins, Jr. 19,206 *
Stanley Falkow, Ph.D. 35,873 *
Ronald O. Ostby (4) 1,225,868 16.1%
R. David Spreng (5) 712,728 9.3%
Winston R. Wallin (6) 44,063 *
Robert A. Hoerr, M.D., Ph.D. 102,831 1.3%
John G. Watson 28,000 *
Michael E. Cady 41,780 *
Francois Lebel, M.D., FRCPC 11,000 *
Gregg A. Waldon 36,222 *
All executive officers and
directors as a group (11 persons) 2,288,551 28.6%
</TABLE>
- ----------------------
* Represents less than 1%.
(1) The number of shares listed for the following beneficial owners includes
the following numbers of shares issuable under options and warrants
exercisable within 60 days of February 28, 1998: Chiron Corporation
("Chiron"), 3,117,672 shares; Land O'Lakes, Inc. ("Land O'Lakes"), 57,264
shares; funds controlled by Investment Advisers, Inc. ("IAI"), 64,120
shares; John Pappajohn, 64,213 shares; Arthur D. Collins, Jr., 19,206
shares; Stanley Falkow, Ph.D., 35,873 shares; Ronald O. Ostby, 67,264
shares; R. David Spreng, 74,120 shares; Winston R. Wallin, 26,428 shares;
Robert A. Hoerr, M.D., Ph.D., 101,227 shares; John G. Watson, 28,000
shares; Michael E. Cady, 27,602 shares; Francois Lebel, M.D., FRCPC, 11,000
shares; Gregg A. Waldon, 28,686 shares; and all executive officers and
directors as a group, 442,842 shares.
(2) Based on a Statement on Schedule 13G filed by Chiron dated February 13,
1998. Includes shares issuable upon exercise of three warrants. Each such
warrant provides that if the exercise price for the warrant is greater than
the average of the high and low sale prices of a share of Common Stock for
the 20 trading days prior to the date of exercise, then the exercise price
is reduced to such average price and the number of shares covered by the
warrant are proportionately increased. Assuming the warrants were all
exercised on December 31, 1997, when the average trading price was equal to
$1.93 per share, the warrants would have been exercisable for an aggregate
of 3,117,672 shares.
2
<PAGE>
(3) Based on a Statement on Schedule 13G filed by John Pappajohn dated January
28, 1998. Includes 54,166 shares held directly by Mr. Pappajohn's spouse
and 54,166 shares held by a proprietorship owned solely by his spouse.
Mr. Pappajohn disclaims beneficial ownership of such shares.
(4) Mr. Ostby is the Land O'Lakes representative serving on the Board. The
shares listed as being beneficially owned by Mr. Ostby include 1,215,868
shares held by Land O'Lakes, which are the same shares listed as being
owned by Land O'Lakes. Mr. Ostby disclaims beneficial ownership of such
shares. The shares listed also include 10,000 shares issuable under
options exercisable within 60 days of February 28, 1998 held by Mr. Ostby
for being the Land O'Lakes representative.
(5) Mr. Spreng is the IAI representative serving on the Board. The shares
listed as being beneficially owned by Mr. Spreng include 692,728 shares
held by investment funds controlled by IAI, which are the same shares
listed as being owned by IAI. Mr. Spreng disclaims beneficial ownership of
such shares. The shares listed also include 10,000 shares issuable under
options exercisable within 60 days of February 28, 1998 held by Mr. Spreng
for being the IAI representative.
(6) Includes a warrant to purchase 1,805 shares beneficially owned by The
Wallin Foundation. Mr. Wallin disclaims beneficial ownership of such
shares.
3
<PAGE>
ELECTION OF DIRECTORS
The Company's By-Laws provide that the number of directors constituting
the Board of Directors shall be fixed from time to time by resolution of the
Board. The Board of Directors has fixed the size of the Board to be elected
at the meeting at five and has nominated the five current members of the
Board named below. Arthur D. Collins, a director since May 1994, is not
standing for re-election at the meeting. Proxies solicited by the Board of
Directors will, unless otherwise directed, be voted to elect the five
nominees named below to constitute the entire Board.
Directors elected at the meeting will serve until the next annual
meeting of stockholders or until their successors are elected and qualified.
Each nominee named below has indicated a willingness to serve as a director
for the ensuing year. In case any nominee is not a candidate at the meeting
for any reason, the proxies named in the enclosed form of proxy may vote for
a substitute nominee in their discretion.
Information regarding the nominees is set forth below.
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
- ---- --- --------------
<S> <C> <C>
R. David Spreng (1)(2) 36 February 1993
Stanley Falkow, Ph.D (3) 64 August 1994
Robert A. Hoerr, M.D., Ph.D 48 August 1996
Ronald O. Ostby (1)(2) 60 August 1994
Winston R. Wallin (3) 72 April 1993
</TABLE>
- -------------------------
(1) Member of Audit Committee
(2) Member of Stock Committee
(3) Member of Compensation Committee
R. David Spreng was elected as Chairman of the Board of Directors in
December 1993. Mr. Spreng is currently President of IAI Ventures Inc., an
asset management firm based in Minneapolis, Minnesota. Prior to joining IAI
in 1989, Mr. Spreng was a member of the corporate finance departments of
Salomon Brothers Inc, New York and Dain Bosworth Incorporated, Minneapolis.
Mr. Spreng also serves as a director of PACE Health Management Systems, Inc.
and a number of privately-held companies.
Stanley Falkow, Ph.D. has been a Professor of Microbiology and
Immunology and Medicine at Stanford University School of Medicine since 1981,
and from 1981 to 1985 served as Chairman of his department. Before moving to
Stanford University, he served on the faculties of Georgetown University
Medical School and the University of Washington School of Medicine. In 1984,
Dr. Falkow was elected to the National Academy of Sciences. Dr. Falkow
received his B.S. from the University of Maine and his Ph.D. in Biology from
Brown University. Dr. Falkow also serves as a director of Protein Design Labs
Inc.
Robert A. Hoerr, M.D., Ph.D., was named President and Chief Operating
Officer of the Company in February 1994 and became President and Chief
Executive Officer in September 1994. He served as Vice President, Medical
and Regulatory Affairs of the Company from January 1993 to December 1993 and
Senior Vice President from December 1993 to February 1994. Dr. Hoerr was
Director of Medical Affairs for Sandoz Nutrition Corporation, a
research-based nutrition company, from March 1990 to January 1993. From 1986
to 1990, Dr. Hoerr was Research Scientist and Assistant Program Director at
the Clinical Research Center, Massachusetts Institute of Technology ("MIT").
Dr. Hoerr received his A.B. in Biology from Indiana University, his M.D. from
Indiana University School of Medicine and his Ph.D. in Nutritional
Biochemistry and Metabolism from MIT.
4
<PAGE>
Ronald O. Ostby has served as Group Vice President and Chief Financial
Officer of Land O'Lakes, a Minnesota-based dairy cooperative, since 1986. He
served in various capacities at The Pillsbury Company, an international food
company, from 1961 until 1984, most recently as Vice President of Finance and
Planning. Mr. Ostby was Vice President of Finance and Chief Financial
Officer of Ag Processing, Inc., an oil seed processing company, from 1984 to
1986.
Winston R. Wallin served as Chairman of the Board of Directors of
Medtronic, Inc., the world's leading manufacturer of cardiac pacemakers, from
January 1986 to August 1996. Mr. Wallin also served as Chief Executive
Officer of Medtronic from June 1985 to April 1991 and as President of
Medtronic from June 1985 to March 1989. He has served as Chairman Emeritus
of the Board of Directors of Medtronic since August 1996. Prior to joining
Medtronic, Mr. Wallin was with The Pillsbury Company for 37 years, last
serving as its President, Chief Operating Officer and Vice Chairman. Mr.
Wallin also serves as a director of Bemis Company, Inc., Integ Incorporated
and McGlynn Bakeries, Inc.
Land O'Lakes and IAI have an understanding with the Company that the
Company will nominate a representative of each for election to the Board of
Directors so long as they remain significant stockholders. Mr. Ostby is the
current Land O'Lakes representative on the Board, and Mr. Spreng is the
current IAI representative.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has appointed an Audit Committee, a Compensation
Committee and a Stock Committee. The Board has not appointed a nominating
committee. The Audit Committee, among other duties, reviews and evaluates
significant matters relating to the audit and internal controls of the
Company, reviews the scope and results of audits by, and the recommendations
of, the Company's independent auditors and approves additional services to be
provided by the auditors. The Audit Committee also reviews the activities of
the Company's accounting staff and reviews audited financial statements of
the Company. The Compensation Committee reviews and makes recommendations to
the Board of Directors regarding salaries, compensation and benefits of
officers and key employees. The Stock Committee is responsible for
determining the consideration to be received for stock issued by the Company
in any private or public offering by the Company.
BOARD AND COMMITTEE MEETINGS AND MEETING ATTENDANCE
The Board of Directors met three times and took action in writing in
lieu of meeting on one occasion during 1997. The Audit Committee met twice
during 1997; the Stock Committee took action in writing in lieu of meeting on
one occasion during 1997; and the Compensation Committee did not meet during
1997. Each director attended more than 75% of the meetings of the Board of
Directors and Board committees on which he serves, with the exception of
Messrs. Ostby and Wallin. Mr. Ostby and Mr. Wallin attended 60% and 67%,
respectively, of the meetings of the Board of Directors and Board committees
on which they serve.
DIRECTOR COMPENSATION
The 1992 Stock Plan formerly provided that, upon election or appointment
to the Board of Directors, each non-employee director (other than the
representatives of Land O'Lakes and IAI) was automatically granted a
non-qualified option to purchase 13,541 shares of Common Stock at its fair
market value on the date of grant. The options were to have terms of five
years and three months and become exercisable as to 2,708 shares on and after
each anniversary of the option. Each non-employee director of the Company
(other than the representatives of Land O'Lakes and IAI) has received such an
option. Land O'Lakes and IAI have each been granted a non-qualified option to
purchase 13,541 shares of Common Stock outside of the 1992 Stock Plan, in
lieu of the automatic grant to the director serving as their respective
representative on the Board of Directors. These options have similar terms
and conditions as the automatic grant to non-employee directors. The 1992
Plan was amended in December 1996 to eliminate the automatic grants for
non-employee directors and to provide that directors could receive
discretionary grants of options under the 1992 Stock Plan.
5
<PAGE>
In December 1995, each non-employee director was granted an option
outside of the 1992 Stock Plan to purchase 2,708 shares of Common Stock at
its fair market value on the date of grant. These options have a term of
five years and three months and vest ratably over five years at the end of
each year.
Directors are also eligible to receive discretionary grants of options
under the 1997 Incentive Plan. In December 1996, each non-employee director
was granted an option under the 1997 Incentive Plan to purchase 30,000 shares
of Common Stock at its fair market value on the date of grant. These options
have a term of ten years and vest ratably over three years at the end of each
year.
Dr. Falkow receives additional compensation for providing consulting
services to the Company. Dr. Falkow was granted an option under the 1992
Stock Plan in December 1996 to purchase 50,000 shares of Common Stock at fair
market value on the date of grant. This option has a term of five years and
three months and vests ratably over three years at the end of each year.
Additionally, Dr. Falkow is reimbursed for all expenses associated with
providing consulting services.
Each director is reimbursed for expenses for attending Board of
Directors meetings. Other than the foregoing, the Company has no regular
compensation arrangements with its directors.
6
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The general compensation policies of the Company and the specific
compensation for each of the Company's executive officers are established by
the Compensation Committee, comprised entirely of non-employee directors.
The Company's executive compensation program for executive officers is
designed to attract, retain and reward executives who are capable of leading
the Company in the achievement of its business objectives. All decisions by
the Compensation Committee relating to the compensation of the Company's
officers are reviewed and approved by the Board.
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's compensation program for executive officers is designed to
promote the financial performance, business strategies and other values and
objectives of the Company. This program seeks to enhance stockholder value
by linking the financial interests of the Company's executives with those of
its stockholders. Under the guidance of the Compensation Committee, the
Company has developed and implemented an executive compensation program to
achieve the following objectives:
- To provide formal performance appraisals as measured against
objectives.
- To provide compensation that will attract, retain and reward
executives of superior talent who will contribute to the success of
the Company.
- To align executives' interests with the Company's by linking a portion
of compensation to the long-term success of the Company by providing
executives with equity ownership in the Company.
The Company's executive compensation program consists of the following
elements:
- BASE SALARY determined by individual contributions and sustained
performance within an established competitive salary range.
- INCENTIVE COMPENSATION which rewards executives for attaining pre-
determined Company goals which create stockholder value through an
increase in the market value of the Company's Common Stock.
- OTHER COMPENSATION which includes certain benefits, such as employee
relocation, medical benefits, a 401(k) Savings Plan and an Employee
Stock Purchase Plan, most of which are generally available to all
employees of the Company.
THE COMPENSATION PROCESS
BASE SALARY. Base salaries for executive officers, with the exception
of the Chief Executive Officer, are determined by reviewing and comparing
salaries, and the corresponding job descriptions, offered for similar
positions reported by the Radford Biotechnology Survey and by reviewing
salaries of persons with comparable qualifications, experience and
responsibilities at other companies of comparable size in the biotechnology
industry. After reviewing these salaries and job descriptions, the Company
establishes a range of salaries paid for various executive positions. The
Company's executive base salaries are set at approximately equal to or less
than the 50th percentile of a particular executive's position range when
adjusted for other duties that the Company's executives may or may not be
performing compared to the Radford Biotechnology Survey's job description for
the same executive's position. The Compensation Committee believes that the
Company's executive base salaries should be set at no greater than the 50th
percentile of the salary ranges described above but that the overall
executive compensation package should be comparable or higher than other
executive compensation packages if overall Company goals, described below,
and individual objectives are met. As an executive officer's level of
responsibility increases, a greater portion of the total compensation package
is based on incentive compensation, described below, which may cause greater
variability in the individual's overall compensation package from year to
7
<PAGE>
year. In addition, the higher that an executive officer rises in the
organization, the more the compensation package shifts to reliance on
appreciation of the value of the Company's stock through stock options. The
Company also strives to achieve equitable relationships both among the
compensation of individual executives and between the compensation of
executives and other employees throughout the organization.
INCENTIVE COMPENSATION. Short-term cash incentive compensation for each
executive officer, with the exception of the Chief Executive Officer, is
determined based upon the executive's annual performance, as measured against
pre-determined Company and individual goals. Under this short-term cash
incentive bonus program, a bonus pool is established by the Compensation
Committee from which all employees are eligible to receive bonuses at the
discretion of the Compensation Committee. The amount of the pool is based
upon a percentage of the total annualized base salaries of eligible employees
and the achievement of corporate goals approved by the Board of Directors,
which are the same goals as those discussed below for the Chief Executive
Officer. Each executive officer may earn an annual targeted cash incentive
from the bonus pool based upon the accomplishment of corporate goals, the
achievement of individual goals set at the beginning of each year and on
other subjective factors. Subjective performance criteria include an
executive's ability to motivate others, develop the skills necessary to grow
as the Company matures, recognize and pursue new business opportunities and
initiate programs to enhance the Company's growth and success. The
Compensation Committee does not use a specific formula based on these
subjective criteria, but makes an evaluation of each executive officer's
contributions in light of all such criteria. Such targeted cash incentive
amounts range up to 45% of base salary depending upon the level of the
executive officer. Long-term incentive compensation, in the form of stock
options, is used to align the interests of officers and stockholders and
enables executives to develop a long-term stock ownership position in the
Company. Stock option grants are intended to focus executives on managing
the Company from the perspective of an owner with an equity position in the
business. Executives, including the Chief Executive Officer, are granted
options to purchase shares of the Common Stock upon commencement of
employment and are eligible for consideration of additional annual option
grants at the discretion of the Compensation Committee and the Board.
Factors considered (which are not given a particular relative weighting)
include increases in the level of responsibility, promotions, sustained
exceptional performance over a period of years and overall stock performance.
In granting new options, the Compensation Committee takes into account the
number of options already granted to an officer. Stock options are granted
at an option price equal to the fair market value of the Common Stock on the
date of grant and generally vest over a five-year period. Although an
executive's past performance is considered when awarding incentive
compensation, the Company's desire to retain an individual is also a
consideration in this determination.
OTHER COMPENSATION. The Company's executives are entitled to relocation
benefits upon commencement of employment. They also receive medical benefits
and participate in the Company's 401(k) Savings Plan on the same basis as
other full-time employees of the Company. Executive officers of the Company
are also eligible to participate in the Company's Employee Stock Purchase
Plan. The plan is available to virtually all employees of the Company and
generally permits participants to purchase Common Stock at a discount of 15%
from fair market value at the beginning or end of the applicable purchase
period.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee evaluates the performance and fixes the base
salary of the Chief Executive Officer on an annual basis based in part on the
compensation package 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. Because the
Company is in the development stage, the profitability of the Company is not
considered in setting the Chief Executive Officer's compensation; however,
the Compensation 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 goals. In
addition, the Compensation 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, if
any, is entirely dependent on the accomplishment by the Company of certain
corporate goals approved by the Board and the Company's ability to pay.
Factors considered by the Compensation Committee in determining the Chief
Executive Officer's base salary and cash bonus, if any, are not subject to
any specific weighting factor or formula.
8
<PAGE>
In determining the Chief Executive Officer's base salary for 1997 as
reported in the summary compensation table on page 10, the Committee
considered 1996 accomplishments as well as the comparative compensation data
and performance factors discussed above. The major accomplishments of the
Company in 1996 which the Committee considered included: (i) the successful
completion of the Company's initial public offering (the "Offering"), (ii)
the commencement of the Sporidin-G double blind placebo controlled Phase
II/III clinical trial, (iii) the commencement of the Company's Candistat-G
bone marrow pilot clinical trial, (iv) the commencement of a bioavailability
study for Diffistat-G, (v) the commencement of a Phase I/II clinical trial
for Diffistat-G, (vi) the successful pre-clinical testing of antigens for
development of PylorImune-G and (vii) the completion of the Company's pilot
plant manufacturing facility. No annual cash bonuses were paid to the Chief
Executive Officer or to any of the other executive officers for 1997.
COMPENSATION REVIEW
In November 1996, the Compensation Committee retained the services of an
outside independent compensation consulting firm which specializes in the
field of biotechnology. This firm has reviewed and evaluated the Company's
process of establishing, reviewing and adjusting the compensation of the
Company's executive officers. After this review was completed, the 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 reasonable under the
circumstances.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to the
corporation's chief executive officer or any of the four other most highly
compensated executive officers. Compensation is not subject to the deduction
limit if certain requirements are met, including that the compensation be
performance-based. The Company intends to structure the performance-based
portion of the compensation of its executive officers in a manner that
complies with the statute to mitigate any disallowance of deductions.
COMPENSATION COMMITTEE
----------------------
Winston Wallin, Chairman
Stanley Falkow
9
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the years ended
December 31, 1997, 1996 and 1995 of the Chief Executive Officer of the
Company and the four other executive officers of the Company earning salary
and bonus compensation in excess of $100,000 for 1997 (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
--------------------- ----------------
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options (Shares) Compensation
--------------------------- ---- -------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Robert A. Hoerr, M.D., Ph.D. 1997 $200,000 $ -0- 73,000(1) $10,411(2)
President and Chief 1996 150,000 25,000 77,000 8,973(3)
Executive Officer 1995 150,000 -0- 108,332 7,207(3)
John G. Watson 1997 175,000 -0- 7,300(1) 51,015(4)
Chief Operating Officer 1996 42,249(5) -0- 132,700 -0-
Michael E. Cady 1997 115,000 -0- 24,300(1) 3,012(6)
Vice President, 1996 95,000 10,000 25,700 2,255(7)
Manufacturing and 1995 95,000 -0- 28,436 2,185(7)
Engineering
Francois Lebel, M.D., FRCPC 1997 150,000 -0- -0- 4,961(4)
Vice President, 1996 1,156(8) -0- 55,000 95,663(4)
Scientific and Regulatory
Affairs
Gregg A. Waldon 1997 115,000 -0- 24,300(1) 7,198(9)
Vice President, 1996 75,000 10,000 25,700 6,472(10)
Chief Financial Officer, 1995 75,000 -0- 28,436 5,000(10)
Treasurer and Secretary
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Amount reflects options for shares of Common Stock granted in December 1996
under the 1997 Incentive Plan, which 1997 Incentive Plan was approved by
shareholders in May 1997.
(2) Amount reflects payment by the Company of premiums for a life insurance
policy and premium payments of group life insurance in excess of $50,000
the proceeds of which are both payable to a beneficiary chosen by Dr.
Hoerr. Also includes payment by the Company of premiums for long-term
disability policies the proceeds of which are payable to Dr. Hoerr.
(3) Amount reflects payment by the Company of premiums for a life insurance
policy the proceeds of which are payable to a beneficiary chosen by Dr.
Hoerr. Also includes payment by the Company of premiums for long-term
disability policies the proceeds of which are payable to Dr. Hoerr.
(4) Amount reflects moving expense payments by the Company for employee
relocation.
(5) Amount reflects salary for partial year. Mr. Watson started employment
with the Company on September 30, 1996.
(6) Amount reflects payment by the Company of premiums for a life insurance
policy of which one-half of the proceeds are payable to a beneficiary
chosen by Mr. Cady and premium payments of group life insurance in
10
<PAGE>
excess of $50,000 the proceeds of which are payable to a beneficiary chosen
by Mr. Cady. Also includes payment by the Company of premiums for long-
term disability policies the proceeds of which are payable to Mr. Cady.
(7) Amount reflects payment by the Company of premiums for a life insurance
policy of which one-half of the proceeds are payable to a beneficiary
chosen by Mr. Cady. Also includes payment by the Company of premiums for
long-term disability policies the proceeds of which are payable to Mr.
Cady.
(8) Amount reflects salary for partial year. Dr. Lebel started employment with
the Company on December 17, 1996.
(9) Amount reflects payment by the Company of premiums for a life insurance
policy and premium payments of group life insurance in excess of $50,000
the proceeds of which are both payable to a beneficiary chosen by Mr.
Waldon.
(10) Amount reflects payment by the Company of premiums for a life insurance
policy the proceeds of which are payable to a beneficiary chosen by Mr.
Waldon.
11
<PAGE>
STOCK OPTIONS
The following table provides certain information concerning grants of
stock options during the fiscal year ended December 31, 1997 to the Named
Executive Officers. In accordance with the rules of the Securities and
Exchange Commission (the "Commission"), the table sets forth the potential
realizable value over the terms of the options (the period from the grant
date to the expiration date) based on assumed rates of stock appreciation of
five percent and ten percent, compounded annually. These amounts do not
represent the Company's estimate of future stock price. Actual realizable
values, if any, of stock options will depend on the future performance of the
Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Individual Grants Potential Realizable
------------------------------------------------------------------ Value at Assumed
% of Total Annual Rates of Stock Price
Options Appreciation for Option
Number of Shares Granted to Exercise Term (1)
Underlying Options Employees in Price Per Expiration ---------------------------
Name Granted Fiscal Year Share Date 5% 10%
- --------------------- ------------------ ------------ --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Hoerr, 73,000(2)(3) 19.2% $4.00 12/30/06 $183,637 $465,373
M.D., Ph.D.
John G. Watson 7,300(2)(3) 1.9 4.00 12/30/06 18,364 46,537
Michael E. Cady 24,300(2)(3) 6.4 4.00 12/30/06 61,129 154,912
Francois Lebel, -- -- -- -- -- --
M.D., FRCPC
Gregg A. Waldon 24,300(2)(3) 6.4 4.00 12/30/06 61,129 154,912
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The potential realizable value is based on the term of the option at the
time of grant (ten years) and on the assumption that the fair value of the
Common Stock appreciates at the indicated rate for the entire term of the
option and that the option is exercised at the exercise price and sold on
the last day of its term at the appreciated price.
(2) Represents options to purchase shares of Common Stock granted in December
1996 under the 1997 Incentive Plan which 1997 Incentive Plan shareholders
approved in May 1997.
(3) The listed options become exercisable with respect to one-fifth of the
shares covered thereby on each of the first five anniversaries of the date
of grant. The options each have a maximum term of ten years, subject to
earlier termination in the event of the optionee's cessation of service
with the Company. In the event of (i) a dissolution or liquidation of the
Company, (ii) a merger, consolidation of the Company with or into any other
entity, regardless of whether the Company is a surviving corporation, or a
proposed statutory share exchange with any other entity, or (iii) a sale of
substantially all of the assets of the Company, the listed options granted
under the 1997 Incentive Plan will either be replaced with substitute
options or become exercisable in full, and upon an event changing control
of the Company (as defined in the 1997 Incentive Plan), the listed options
granted under the 1997 Incentive Plan will become exercisable in full.
12
<PAGE>
The following table summarizes option exercises during the year ended
December 31, 1997 and provides information regarding the number of all
unexercised stock options held by the Named Executive Officers as of December
31, 1997, the end of the Company's last fiscal year:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Acquired Options at Fiscal Year-End Fiscal Year-End (2)
on Value ---------------------------- -------------------------------
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Hoerr, -- -- 101,227 157,105 $-0- $-0-
M.D., Ph.D.
John G. Watson -- -- 28,000 112,000 -0- -0-
Michael E. Cady 3,770 $4,313 27,602 50,834 -0- -0-
Francois Lebel, -- -- 11,000 44,000 -0- -0-
M.D., FRCPC
Gregg A. Waldon 3,385 4,296 28,686 49,750 -0- -0-
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated on the basis of the fair market value of the underlying shares
of Common Stock on the date of exercise minus the exercise price.
(2) Calculated on the basis of the fair market value of the underlying shares
of Common Stock at December 31, 1997, as reported by The Nasdaq Stock
Market, of $1.875 per share, minus the per share exercise price, multiplied
by the number of shares underlying the option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee was at any time during 1997, or
formerly, an officer or employee of the Company or any subsidiary of the
Company. During 1997, no executive officer of the Company served as a
director or member of the Compensation Committee (or other committee serving
an equivalent function) of any other entity, one of whose executive officers
served as a director of or member of the Compensation Committee of the
Company.
13
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The comparative stock performance graph below compares the cumulative
stockholder return on the Common Stock of the Company for the period from
April 1, 1996 (the effective date of the Offering of the Company's Common
Stock) through December 31, 1997 with the cumulative total return on (i) the
CRSP Total Return Index for the Nasdaq Stock Market (US) and (ii) the Nasdaq
Pharmaceutical Stocks Index. The table assumes the investment of $100 in the
Company's Common Stock, the CRSP Total Return Index for the Nasdaq Stock
Market (US) and the Nasdaq Pharmaceutical Stocks Index on April 1, 1996, and
the reinvestment of all dividends through the last trading day of the years
ended December 31, 1996 and December 31, 1997.
<TABLE>
<CAPTION>
April 1, December 31, December 31,
1996 1996 1997
-------- ----------- ------------
<S> <C> <C> <C>
GalaGen Inc. $100 $ 43.750 $ 18.750
CRSP Total Return Index for the
Nasdaq Stock Market (US) $100 $116.884 $143.494
Nasdaq Pharmaceutical Stocks Index $100 $ 95.870 $ 99.243
</TABLE>
14
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's directors and executive officers
file initial reports of ownership and reports of changes in ownership with
the Commission. Directors and executive officers are required to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on a
review of the copies of such forms furnished to the Company and written
representations from the Company's directors and executive officers, the
Company makes the following disclosure. Messrs. Hoerr, Cady, Waldon, Watson
and Falkow each inadvertently failed to make a timely filing of his statement
of beneficial ownership with respect to a stock option grant by the Company
and Ms. Bostwick inadvertently failed to make a timely filing of her
statement of beneficial ownership with respect to a stock option exercise.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is party to a number of agreements with Land O'Lakes, a
16.0% stockholder of the Company, including a supply agreement, a license
agreement, a royalty agreement and a master services agreement. Mr. Ostby, a
director of the Company, is an executive officer of Land O'Lakes.
Under the supply agreement, the Company will purchase and Land O'Lakes
will supply, at their option, all of the Company's commercial requirements
for colostrum and milk through May 7, 2002 (with an option to extend the
right of first refusal for an additional ten years at the discretion of Land
O'Lakes). Additionally, Land O'Lakes will provide expertise in dairy herd
selection, on-farm management, membership relations and procurement to the
Company for the manufacture of antibody material.
Under the license agreement, Land O'Lakes received a perpetual, paid-up,
worldwide license from the Company to use then-existing polyclonal antibody
technology and future improvements (defined to include such technology
developed or acquired) for animal products, functional foods (food or food
supplements providing medical or nutritional benefits which are not regulated
by the FDA) and infant formula. Land O'Lakes has the right to sublicense the
polyclonal antibody technology and future improvements for use in animal
products, functional foods and infant formula. If Land O'Lakes sublicenses
any Company technology improvements for use in functional foods, a royalty on
such functional foods must be paid to the Company. If the Company desires to
distribute or market any animal products for use by farm animals and that are
based on new technologies or animal products for use by other than farm
animals that are based on Company technology improvements, the Company must
give Land O'Lakes a right of first refusal to distribute or market such
products, and Land O'Lakes will pay the Company a license fee. No royalties
have accrued under this license agreement. The Company agreed not to compete
for 15 years in the area of animal products and functional foods based on
polyclonal antibody technology. Land O'Lakes did not receive a license and
specifically agreed not to compete, directly or indirectly, for 15 years in
the areas of prescription drugs and over-the-counter drugs regulated by the
FDA for humans. However, as described below, under the royalty agreement the
Company is required to pay Land O'Lakes a royalty on all such prescription
drugs and other drugs regulated by the FDA. Land O'Lakes automatically
receives, in connection with any license acquired by the Company, a
sublicense to the same technology for application to animal products,
functional foods and infant formula.
In March 1997, Land O'Lakes granted the Company a license to use
existing polyclonal antibody technology and future improvements in the
development, formulation, manufacture, marketing, distribution and sale of
kefir-based products, as defined in the granted license. In consideration of
granting the Company this license, Land O'Lakes will receive a royalty of
five percent from food components or ingredients sold by the Company to be
included in a kefir-based product and one percent of net receipts from a
kefir-based finished product sold by the Company.
In March 1998, the Company and Land O'Lakes signed an amended and
restated license agreement (the "Restated License") in which the Company has
significantly broadened its rights to develop and market functional foods.
Under the Restated License, the Company can use, improve, exploit, license or
share existing Procor technology, Procor technology improvements and new
technologies, as defined, in all areas of functional foods except under
certain "reserved food product" and "first refusal food product" categories.
If the Company intends to engage in manufacturing or marketing any "first
refusal food product" as defined, the Company must give Land O'Lakes notice
of its intent, in
15
<PAGE>
which case Land O'Lakes can negotiate with the Company, in good faith and
within a defined period of time, to undertake any part of the manufacturing
or marketing areas. If the Company intends to engage in manufacturing or
marketing any "reserved food product" as defined, the Company must give Land
O'Lakes notice of its intent and must work only with Land O'Lakes to
undertake the manufacturing or marketing of such products.
Under the royalty agreement, the Company is required to pay Land O'Lakes
a royalty on net receipts from any product which is based on its polyclonal
antibody technology, including future improvements thereon, as defined by the
royalty agreement. Additionally, the Company must pay a royalty on net
receipts from infant formula based on new technology, as defined by the
agreement. The royalty agreement continues until terminated by both parties.
The Company has paid no royalty fees to Land O'Lakes to date under this
agreement.
Under the master services agreement, the Company may purchase services
from Land O'Lakes for certain office, technology and research and development
activities. The services agreement enables the Company to access expertise,
on an as-needed basis, from Land O'Lakes. The cost to the Company for these
services is the pro rata share of Land O'Lakes' cost. In 1997, the Company
rented approximately 4,500 square feet of administrative and laboratory space
from Land O'Lakes. The Company was charged approximately $442,000 for these
services and space in 1997. The services agreement has been extended through
December 31, 1998, and may be terminated by either party upon a one-month
notice. In June 1996, the Company entered into a five-year lease agreement
with Land O'Lakes in connection with the Company's pilot plant manufacturing
facility. The lease calls for annual payments of approximately $86,000,
which amount the Company paid in 1997 under such lease.
In March 1995, the Company entered into a License and Collaboration
Agreement with Chiron, a beneficial owner of more than 5% of the Company's
outstanding capital stock. Under the agreement, the Company received an
exclusive worldwide license for a proprietary Chiron adjuvant for use in the
production of up to three pharmaceutical polyclonal antibody products
processed from bovine colostrum and any number of functional food products
containing polyclonal antibodies processed from bovine colostrum. Because
the Company agreed not to compete for 15 years in the area of functional food
under the license agreement with Land O'Lakes described above, the Company's
development of any functional food products requires the consent of Land
O'Lakes. In connection with the Company's agreement with Chiron, Land
O'Lakes consented to the Company's development of food applications of an H.
PYLORI product and also waived its right under its license agreement with the
Company to access the technology licensed by the Company from Chiron. In
addition to paying royalties under the agreement, the Company must pay a
license fee with respect to the use of the Chiron adjuvant for each of the
three pharmaceutical products. The Company issued 17,143 shares of Series
F-1 Preferred Stock (which converted into 42,857 shares of Common Stock upon
the consummation of the Company's Offering) in payment of the license fee for
the initial pharmaceutical product in development, SPORIDIN-G. License fees
for the remaining products are due within a specified period after the
disease targets for such products have been identified. Under the agreement,
the Company and Chiron are also to collaborate on the development and
evaluation of polyclonal antibody products processed from bovine colostrum
and targeting infections in humans caused by H. PYLORI, the bacterium
associated with ulcers and gastritis. The agreement included licenses by
Chiron to the Company to certain Chiron proprietary H. PYLORI-associated
technology, including H. PYLORI antigens and the Chiron adjuvant, and
licenses by the Company to Chiron to certain Company proprietary H.
PYLORI-associated technology, including H. PYLORI antigens, for use in the
development and commercialization of an H. PYLORI product. Under the
agreement, Chiron purchased an option to acquire an exclusive license to
market any H. PYLORI product developed as a result of the collaboration. If
Chiron exercises such option, the agreement provides for a division of the
profits and losses from the development and commercialization of the H.
PYLORI product. If Chiron does not exercise its option to market the
product, the Company would have the right to market any such product itself
or through third parties if royalties are paid to Chiron for any use of
Chiron technology in the product. As part of the arrangement, Chiron also
purchased four warrants to purchase an additional 17,144 shares of Series F-1
Preferred Stock, 42,856 shares of Series F-2 Preferred Stock and 140,000
shares of Series F-3 Preferred Stock. On March 22, 1996, Chiron exercised
its warrant to purchase 17,144 shares of Series F-1 Preferred Stock at the
price of $17.50 per share, which converted into 42,860 shares of Common Stock
upon the consummation of the Offering. Each of the remaining three warrants
provides that if the exercise price for the warrant is greater than the
average of the high and low sale prices of a share of Common Stock for the 20
trading days prior to the date of exercise, then the exercise price is
reduced to such average price and the number of shares covered by the warrant
are proportionately increased. Assuming the warrants were all exercised on
December 31, 1997, when the average trading price was equal to $1.93 per
share, the warrants would have been exercisable for an aggregate of 3,117,672
shares.
16
<PAGE>
In December 1996, the Company entered into an operating lease with
Cargill Leasing Corporation for $835,393 of manufacturing equipment for the
Company's pilot plant facility. Lease payments continue for a period of
seven years with the Company's option to extend for an additional 12 months.
The lease is guaranteed by Land O'Lakes.
APPOINTMENT OF AUDITORS
Ernst & Young LLP, independent public accountants, have been the
auditors for the Company since 1992. Upon recommendation of the Audit
Committee, the Board of Directors again has selected Ernst & Young LLP to
serve as the Company's auditors for the year ending December 31, 1998,
subject to ratification by the stockholders. While it is not required to do
so, the Board of Directors is submitting the selection of that firm for
ratification in order to ascertain the view of the stockholders. If the
selection is not ratified, the Board of Directors will reconsider its
selection.
A representative of Ernst & Young LLP will be present at the meeting and
will be afforded an opportunity to make a statement if such representative so
desires and will be available to respond to appropriate questions during the
meeting.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Secretary of the Company,
4001 Lexington Avenue North, Arden Hills, Minnesota 55126, no later than
December 1, 1998 for inclusion in the Proxy Statement for such meeting.
ADDITIONAL MATTERS
The Annual Report to Stockholders of the Company for 1997 is being
mailed with this Proxy Statement.
As of the date of this Proxy Statement, management knows of no matters
that will be presented for determination at the meeting other than those
referred to herein. If any other matters properly come before the meeting
calling for a vote of stockholders, it is intended that the shares
represented by the proxies solicited by the Board of Directors will be voted
by the proxies named therein in accordance with their best judgment.
By Order of the Board of Directors,
/s/ Gregg A. Waldon
-----------------------------------
Gregg A. Waldon
SECRETARY
Dated: March 30, 1998
17
<PAGE>
GALAGEN INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - MAY 13, 1998
The undersigned, revoking any proxy heretofore given, hereby appoints Robert
A. Hoerr, M.D., Ph.D. and Gregg A. Waldon, or either of them, as Proxies, each
with full power of substitution, and hereby authorizes them to represent and to
vote, as designated herein, all the shares of Common Stock of GalaGen Inc. held
of record by the undersigned at the close of business on March 19, 1998, upon
the following matters more fully described in the Notice of and Proxy Statement
for the Annual Meeting of Stockholders to be held on May 13, 1998, and at any
adjournment or adjournments thereof.
1. ELECTION OF DIRECTORS. Nominees of the Board of Directors are: Stanley
Falkow, Ph.D., Robert A. Hoerr, M.D., Ph.D., Ronald O. Ostby, R. David
Spreng and Winston R. Wallin.
<TABLE>
<S> <C>
/ / VOTE FOR all nominees / / WITHHOLD AUTHORITY
except those listed below: to vote for all nominees listed above.
</TABLE>
- --------------------------------------------------------------------------------
2. Ratify the appointment of Ernst & Young LLP as independent auditors for the
1998 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
(Continued, and to be signed and dated, on reverse side)
<PAGE>
(Continued from reverse side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S), BUT IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR
DISCRETION UPON SUCH OTHER BUSINESS, IF ANY, AS MAY PROPERLY COME BEFORE THE
MEETING.
I plan to attend the meeting. / /
Please sign exactly as name
appears hereon. Joint owners
should each 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.
----------------------------------
----------------------------------
SIGNATURE(S) DATE
