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
[x] Definitive proxy statement Commission Only (as permitted
[ ] Definitive additional materials by Rule 14a-6(e)(2))
[ ] Soliciting material pursuant to Rule
14a-11(c) or Rule 14a-12
Genzyme Transgenics Corporation
- --------------------------------------------------------------------------------
(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 transactions applies:
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
________________________________________________________________________________
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________________________________________________________________________________
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________________________________________________________________________________
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________________________________________________________________________________
[ ] 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:
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- ----------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
GENZYME TRANSGENICS CORPORATION
Five Mountain Road, Framingham, Massachusetts 01701
(508) 872-8400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of the stockholders of Genzyme Transgenics Corporation,
a Massachusetts corporation, will be held at The First National Bank of Boston,
100 Federal Street, Second Floor, Boston, Massachusetts, at 1:00 p.m. on
Wednesday, May 28, 1997 for the following purposes:
1. To elect one director of the Company.
2. To vote on a proposed amendment to the Company's 1993 Employee Stock
Purchase Plan to increase the number of shares of Common Stock
covered by the plan by 600,000 shares.
3. To vote on a proposed amendment to the Company's 1993 Equity
Incentive Plan to increase the number of shares of Common Stock
covered by the plan by 500,000 shares.
4. To vote on a proposed amendment to the Company's 1993 Director Stock
Option Plan to increase the number of shares of Common Stock covered
by the plan by 50,000 shares.
5. To vote on a proposed amendment to the Company's Restated Articles
of Organization to increase the number of shares of Common Stock
issuable by the Company by 16,000,000 shares.
6. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on April 1, 1997 will
be entitled to vote at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THEREFORE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOUR PROXY
WILL NOT BE USED.
By order of the Board of Directors,
Peter Wirth
Clerk
Dated: April 27, 1997
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<PAGE>
GENZYME TRANSGENICS CORPORATION
Five Mountain Road, Framingham, Massachusetts 01701
Telephone (508) 872-8400
---------------
Proxy Statement
---------------
GENERAL INFORMATION
The enclosed proxy is solicited on behalf of the Board of Directors of
Genzyme Transgenics Corporation (the "Company") for use at the annual meeting of
stockholders to be held on Wednesday, May 28, 1997, and at any adjournments
thereof.
The authority granted by an executed proxy may be revoked at any time
before its exercise by filing with the Clerk of the Company a written revocation
or a duly executed proxy bearing a later date, or by voting in person at the
meeting. Shares represented by valid proxies will be voted in accordance with
the specifications in the proxies. If no specifications are made, the proxies
will be voted in favor of the proposals set forth in the accompanying Notice of
Annual Meeting of Stockholders.
On April 1, 1997, the Company had outstanding 17,198,532 shares of common
stock, $.01 par value (the "Common Stock"), which is its only outstanding class
of voting stock. Only stockholders of record at the close of business on April
1, 1997 will be entitled to vote at the meeting. A majority in interest of all
stock issued, outstanding and entitled to vote at the meeting, represented at
the meeting, in person or by proxy, constitutes a quorum for the transaction of
business.
The approximate date on which this proxy statement and accompanying proxy
are first being sent or given to stockholders is April 27, 1997.
Dated: April 27, 1997
<PAGE>
SHARE OWNERSHIP
The following table and footnotes set forth certain information regarding
the beneficial ownership of the Company's Common Stock, and the General Division
Common Stock ("General Division Stock") and the Tissue Repair Division Common
Stock ("TR Stock") of Genzyme Corporation ("Genzyme"), as of April 1, 1997 by
(i) persons known by the Company to be beneficial owners of more than 5% of its
Common Stock, (ii) the Chief Executive Officer and the three named executive
officers, other than the Chief Executive Officer, of the Company, (iii) each
director of the Company, and (iv) all current executive officers and directors
of the Company as a group:
Shares of Common Stock
Beneficially Owned (1)
----------------------
Beneficial Owner Shares Percent
---------------- ------ -------
Henri A. Termeer............................... 7,592,865(2) 43.8%
c/o Genzyme Corporation
One Kendall Square
Cambridge, MA 02139
Genzyme Corporation............................ 7,573,365(3) 43.7%
One Kendall Square
Cambridge, MA 02139
James A. Geraghty.............................. 150,993(4) *
Peter H. Glick................................. 51,441(5) *
John B. Green.................................. 47,867(6) *
Harry M. Meade ................................ 71,203(7) *
Robert W. Baldridge............................ 62,075(8) *
Henry E. Blair................................. 11,000(9) *
Francis J. Bullock............................. 13,000(10) *
Alan E. Smith.................................. 8,000(11) *
Alan W. Tuck................................... 11,000(12) *
All current executive officers and directors as
a group (11 persons)........................ 8,020,244(13) 45.2%
- ----------
* Indicates less than 1%
-2-
<PAGE>
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares listed in the table.
Except as described with respect to Mr. Termeer, ownership of shares of
General Division Stock and TR Stock set forth in these footnotes
represents, with respect to each named person, less than one percent of the
outstanding shares of each class of stock.
(2) Includes 10,000 shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1997. Also includes
7,573,365 shares beneficially owned by Genzyme, including 145,000 shares
subject to a currently-exercisable common stock warrant, as to all of which
Mr. Termeer disclaims beneficial ownership. Mr. Termeer is President, Chief
Executive Officer and Chairman of the Board of Genzyme. Mr. Termeer also
beneficially owns 960,782 and 135,348 shares of General Division Stock and
TR Stock, respectively, which figures include options to purchase 927,500
and 112,147 shares of General Division Stock and TR Stock, respectively,
that are exercisable within the 60-day period following April 1, 1997. In
the aggregate, such ownership represents 1.3% of the outstanding shares of
General Division Stock and less than one percent of the outstanding shares
of TR Stock.
(3) Includes 145,000 shares subject to a common stock purchase warrant which is
currently exercisable.
(4) Includes 143,891 shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1997. Mr. Geraghty
also beneficially owns 19,400 and 1,755 shares of General Division Stock
and TR Stock, respectively, which consist of options to purchase such
shares that are currently exercisable or exercisable within the 60-day
period following April 1, 1997.
(5) Includes 36,668 shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1997.
(6) Includes 42,808 shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1997.
(7) Includes 63,288 shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1997. Dr. Meade
also beneficially owns 11,900 and 1,126 shares of General Division Stock
and TR Stock, respectively, which consist of options to purchase such
shares that are currently exercisable or exercisable within the 60-day
period following April 1, 1997.
(8) Includes 59,000 shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1997.
(9) Includes 10,000 shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1997. Mr. Blair
also beneficially owns 43,400 and 14,328 shares of General Division Stock
and TR Stock, respectively, which include options to purchase 18,400 and
10,994 shares of General Division Stock and TR Stock, respectively, that
are currently exercisable or exercisable within the 60-day period following
April 1, 1997.
(10) Consists of shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1997.
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<PAGE>
(11) Consists of shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1997. Dr. Smith
also beneficially owns 163,906 and 24,098 shares of General Division Stock
and TR Stock, respectively, which include options to purchase 158,200 and
22,943 shares of General Division Stock and TR Stock, respectively, that
are currently exercisable or exercisable within the 60-day period following
April 1, 1997.
(12) Consists of 10,000 shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1997 and 1,000
shares as to which Mr. Tuck shares voting and investment power with his
wife.
(13) Includes 397,455 shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1997 and 7,573,365
shares owned by Genzyme, a corporation of which Mr. Termeer and Mr. Blair
are directors and of which Mr. Termeer and Dr. Smith are officers. The
Company's current directors and executive officers as a group beneficially
own an aggregate of 1,199,388 and 176,655 shares of General Division Stock
and TR Stock, respectively, which figures include options to purchase
1,135,400 and 148,965 shares of General Division Stock and TR Stock,
respectively, that are currently exercisable or exercisable within the
60-day period following April 1, 1997. Such ownership represents 1.6% and
1.3% of the outstanding shares of General Division Stock and TR Stock,
respectively.
-4-
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of directors at seven for the
coming year. Pursuant to the Company's Restated Articles of Organization, the
Board of Directors of the Company is divided into three classes, with each class
being as nearly equal in number of directors as possible. The term of one class
expires, and their successors are elected for a term of three years, at each
annual meeting of the Company's stockholders. At the annual meeting of
stockholders to be held on May 28, 1997, one director will be elected to hold
office for a term of three years and until his successor is elected and
qualified. The Board of Directors' nominee, Alan E. Smith, has consented to
serve if elected. However, if he is unable to serve, proxies will be voted for
such other candidate as may be nominated by the Board of Directors.
Pursuant to the Company's by-laws, directors must be elected by a
plurality of the votes properly cast at the meeting. Abstentions, votes withheld
and broker non-votes will not be treated as votes properly cast and will not
affect the outcome of the election. A "broker non-vote" occurs when a registered
broker holding a customer's shares in the name of the broker has not received
voting instructions on a matter from the customer, is barred by applicable rules
from exercising discretionary authority to vote on the matter and so indicates
on the proxy.
The following table contains certain information about the nominees for
director and each other person whose term of office as a director will continue
after the meeting.
Present
Business Experience During Past Five Director Term
Name and Age Years and Other Directorships Since Expires
- ------------ ------------------------------------ -------- -------
Henri A. Termeer Mr. Termeer is Chairman of the Board of 1993 1998
Age: 51 Directors. He has served as President of
Genzyme Corporation since October 1983,
Chief Executive Officer of Genzyme since
December 1985 and Chairman of the Board
of Genzyme since May 1988. Mr. Termeer
is a director of Abiomed, Inc.,
AutoImmune Inc., Geltex, Inc., and
Diacrin, Inc., as well as a trustee of
Hambrecht & Quist Healthcare Investors
and Hambrecht & Quist Healthcare Life
Sciences Investors.
Robert W. Baldridge Mr. Baldridge is Vice Chairman of the 1994 1998
Age: 62 Board of Directors of the Company. Mr.
Baldridge served as a director of TSI
Corporation from November 1990 until its
acquisition by the Company in October
1994, and was Chairman and Chief
Executive Officer of TSI from April 1993
to October 1994. He has served as an
independent financial consultant and
investment banker since June 1988, in
which capacity he was affiliated with
Downer & Company, investment bankers,
between June 1990 and September 1995.
-5-
<PAGE>
Present
Business Experience During Past Five Director Term
Name and Age Years and Other Directorships Since Expires
- ------------ ------------------------------------ -------- -------
Henry E. Blair Mr. Blair is a consultant to several 1993 1999
Age: 53 companies, including Genzyme. Prior to
January 1990, Mr. Blair was Senior Vice
President, Scientific Affairs of
Genzyme. Before joining Genzyme in 1981,
he was Associate Director of the New
England Enzyme Center at Tufts
University School of Medicine. Mr. Blair
is also a director of Genzyme, Dynagen,
Inc. and Celtrix Pharmaceuticals, Inc.
Francis J. Bullock Dr. Bullock has been a senior consultant 1994 1999
Age: 60 with Arthur D. Little, Inc. since
September 1993, prior to which he was
Senior Vice President, Research
Operations, of Schering-Plough Research
Institute, a position he held from 1981
until August 1993.
James A. Geraghty Mr. Geraghty has been the President, 1993 1998
Age: 42 Chief Executive Officer and a director
of the Company since its incorporation
in February 1993. Mr. Geraghty joined
Genzyme in September 1992, where he was
a Vice President for Corporate
Development and the General Manager of
the transgenics business unit until the
incorporation of the Company. Mr.
Geraghty was Vice President of the
Prescription Services Division of
Caremark International from June to
September 1992, which was then a unit of
Baxter International. Prior to that, he
held a variety of general management and
strategy consulting positions with Bain
and Company and with companies in the
Bain Venture Capital portfolio.
*Alan E. Smith Dr. Smith has been the Senior Vice 1993 1997
Age: 51 President, Research of Genzyme since
August 1989 and its Chief Scientific
Officer since September 1996. Prior to
joining Genzyme, he was Vice
President-Scientific Director of
Integrated Genetics, Inc., a
biotechnology company, from November
1984 until its acquisition by Genzyme in
August 1989. From October 1980 to
October 1984, Dr. Smith was head of the
Biochemistry Division of the National
Institute for Medical Research in
London.
-6-
<PAGE>
Present
Business Experience During Past Five Director Term
Name and Age Years and Other Directorships Since Expires
- ------------ ------------------------------------ -------- -------
Alan W. Tuck Mr. Tuck is Executive Vice President and 1993 1999
Age: 48 Chief Strategic Officer of Biocode,
Inc., a privately-held biotechnology
company focused on covert product
marking and is Chief Strategic Officer
of Immulogic Pharmaceutical Corporation,
a publicly-held biotechnology company
focused on diseases of the immune
system. From February 1992 through May
1996, Mr. Tuck was President and Chief
Executive Officer of T Cell Sciences,
Inc. Mr. Tuck joined T Cell Sciences
after four years as Vice President,
Marketing and Business Development of
Biogen, Inc.
- ----------
* Indicates a nominee for election as director
The Board of Directors held four meetings during fiscal year 1996, and
each director attended more than 75% of the aggregate of (1) the total number of
meetings of the Board held during 1996 and (2) the total number of meetings held
in 1996 by all committees of the Board on which he then served.
The Company has standing Audit and Compensation Committees of the Board of
Directors but does not have a Nominating Committee. The Audit Committee,
consisting of Messrs. Baldridge, Blair and Tuck, held three meetings in 1996.
The primary function of the Audit Committee is to assist the Board of Directors
in the discharge of its duties and responsibilities by providing the Board with
an independent review of the financial health of the Company and of the
reliability of the Company's financial controls and financial reporting systems.
The committee reviews the general scope of the Company's annual audit, the fee
charged by the Company's independent accountants and other matters relating to
internal control systems. For information about the Compensation Committee, see
the "Compensation Committee Report on Executive Compensation" below.
Director Compensation
Director Fees. All directors not employed by the Company or Genzyme
receive $1,000 for each meeting of the Board of Directors attended in person,
$400 for each meeting of the Board of Directors attended by telephone conference
call and $400 for each committee meeting attended in person.
1993 Director Stock Option Plan. All of the directors who are not
employees of the Company (the "Eligible Directors") are currently eligible to
participate in the Company's 1993 Director Stock Option Plan (the "Director
Plan"), except for Mr. Termeer who has irrevocably elected not to participate in
the Director Plan. Options under the Director Plan are automatically granted
once a year, at the annual meeting of stockholders of the Company, to Eligible
Directors elected or reelected at the meeting. Each such Eligible Director
receives an option to purchase 2,000 shares of Common Stock for each year of the
term of office to which the director is elected (normally 6,000 shares for
election to a three-year term of office). In addition, upon the election of an
Eligible Director other than at an annual meeting, such director is
automatically granted
-7-
<PAGE>
an option to purchase 2,000 shares of Common Stock for each year or portion
thereof of the term of office to which he or she is elected. Options become
exercisable with respect to 2,000 shares on the date on which the option was
granted and on the date of each annual meeting of stockholders thereafter, so
long as the optionee is then a director of the Company. The options have a term
of ten years and an exercise price, payable in cash or shares of Common Stock,
equal to the last sale price for the Common Stock on the business day
immediately preceding the date of grant, as reported by the Nasdaq National
Market System.
Grant of Stock Option. On February 7, 1995, the Board of Directors voted
to grant Mr. Termeer a non-qualified stock option to purchase 10,000 shares of
Common Stock. The option became exercisable as to 6,000 shares on the date of
the 1995 annual meeting of stockholders and as to 2,000 shares on the date of
the 1996 annual meeting of the stockholders, and will become exercisable with
respect to an additional 2,000 shares on the date of the 1997 annual meeting of
stockholders, provided that Mr. Termeer is a member of the Board of Directors at
the opening of business on that date. The option has a term of ten years and an
exercise price of $3.625, payable in cash or shares of Common Stock.
Consulting Agreement. Under the terms of an Employment and Consulting
Agreement dated October 1, 1994 among the Company, TSI and Mr. Baldridge, Mr.
Baldridge agreed to provide full-time services to the Company for a one-year
term that expired on October 1, 1995 and part-time consulting services to the
Company and Genzyme during the five-year period thereafter. During the current
five-year consulting term, Mr. Baldridge receives a consulting fee equal to
$132,000 per year. Pursuant to the Employment and Consulting Agreement, Mr.
Baldridge was granted an option to purchase 35,000 shares of Common Stock. By
its terms, such option became exercisable with respect to 20% of such shares on
the date of grant and with respect to an additional 20% in each of October 1995
and 1996. Such option will become exercisable with respect to an additional 20%
of such shares in each of October 1997 and 1998.
-8-
<PAGE>
EXECUTIVE COMPENSATION
The Compensation Committee Report set forth below describes the
compensation policies applicable to executive officers and the bases for Mr.
Geraghty's compensation as Chief Executive Officer. The following graph shows
the cumulative total shareholder return on the Company's Common Stock over the
period from July 30, 1993 (the end of the first trading month of the Company's
Common Stock) to December 31, 1996, as compared with that of the S&P 500
Composite Index and the Coopers & Lybrand Biotech Index.
Comparison of the Cumulative Total Return Among
Genzyme Transgenics Corporation, the S&P 500 Index, and
the Coopers & Lybrand Biotech Index *
7/9/93 12/31/93 12/30/94 12/29/95 12/31/96
100 83* 25 54 75
100 105 106 146 180
100 122 115 208 216
- ----------
* Assumes $100 invested on July 29, 1993 in Genzyme Transgenics Corporation
Common Stock, the S&P 500 Index and the Coopers & Lybrand Biotech Index, with
all dividends, if any, being reinvested.
Compensation Committee Report on Executive Compensation
Two of the Company's executive officers, Henri A. Termeer, Chairman of the
Board, and Evan M. Lebson, Treasurer, are officers of Genzyme and are
compensated by Genzyme, although the Company has reimbursed Genzyme for a part
of Mr. Lebson's cash compensation under the Services Agreement between the
Company and Genzyme. See "Compensation Committee Interlocks and Insider
Participation -- Services Agreement."
-9-
<PAGE>
The Compensation Committee of the Board of Directors determines the
compensation to be paid to all other executive officers of the Company,
including the Chief Executive Officer. The Compensation Committee also
administers the Company's 1993 Equity Incentive Plan (the "Equity Plan"),
including the grant of stock options and other awards under the Equity Plan. The
Compensation Committee, which held four meetings during 1996, is currently
composed of Messrs. Bullock (Chairman), Blair and Tuck.
The Company's executive compensation policy is designed to attract, retain
and reward executive officers who contribute to the long-term success of the
Company by maintaining a competitive salary structure as compared with other
biotechnology and contract research companies and by aligning compensation with
the achievement of business objectives and individual and corporate performance.
The Company's executive compensation package is composed of three elements: base
salary, annual incentive bonuses based on corporate and individual performance,
and initial, annual and other periodic grants of stock options under the Equity
Plan.
Base Salary and Bonus Compensation.
Executive Officers Other than Mr. Geraghty. The 1996 base salary and
maximum potential bonus for Mr. Glick, Mr. Green and Dr. Meade were fixed by the
Committee, based on each executive's prior performance, tenure and
responsibility, as well as independent compensation data. The Committee
established a maximum bonus opportunity for each such executive equal to 25% of
his base salary. Pursuant to the Company's 1996 Executive Bonus Program, adopted
by the Committee in March 1996, the determination of the achievement of 1996
bonuses to executive officers was based 50% on certain quantitative criteria
(company-wide revenue and loss before tax in the case of Mr. Green; revenue and
profit for the testing unit in the case of Mr. Glick; and transgenic research
and development revenue and loss in the case of Dr. Meade), each as compared to
budget projections. Achievement of the remaining 50% of each executive's maximum
bonus opportunity was to be determined on the basis of qualitative criteria, as
evaluated by the Chief Executive Officer. Since the testing unit failed to meet
its projected profit levels for 1996, Mr. Green and Mr. Glick received less than
their maximum bonus opportunities under the 1996 Executive Bonus Program. Dr.
Meade received the maximum bonus payment.
Chief Executive Officer. In light of the Company's analysis of
compensation data for comparable executive positions gathered from surveys
prepared by independent compensation consultants, the Committee set Mr.
Geraghty's 1996 base salary at $190,000, to be increased to $205,000 effective
July 1, 1996, and fixed a maximum bonus opportunity of 40% of his 1996 base
salary. The Committee also considered Mr. Geraghty's penetration into the salary
range indicated by the compensation survey data in relation to his length of
service with the Company, his overall job performance, the desirability of
making a greater portion of overall cash compensation depend on
performance-based bonuses rather than base salary, the need to achieve the
Company's corporate budget, as well as the long-term intangible objectives that
the Committee expects to provide a future competitive advantage for the Company,
including the manufacture and delivery of high-quality products and services,
increased productivity, increased market share in strategic markets, management
development and executive continuity.
Pursuant to the 1996 Executive Bonus Program, the Committee established a
maximum bonus opportunity for Mr. Geraghty of 40% of his base salary,
achievement of which was based 50% on company-wide revenue and loss before tax
and 50% of which was based on the Committee's qualitative evaluation of Mr.
Geraghty's performance. In March 1997, the Committee awarded Mr. Geraghty a
bonus of $71,750 under the 1996 Executive Bonus Program, representing less than
Mr. Geraghty's maximum bonus opportunity for 1996 since,
-10-
<PAGE>
although company-wide revenue exceeded the 1996 target, the Company failed to
meet its 1996 profit/loss targets.
In addition, the Committee decided to pay Mr. Geraghty a one-time bonus of
$7,500 in July 1996, based on the Committee's qualitative assessment of his
performance during the first half of the year.
Stock Options.
In March 1996, the Committee approved an annual option grant to purchase
13,853 shares of Common Stock to Mr. Geraghty. The decision to do so was made in
light of the number and percentage of outstanding stock options currently held
by Mr. Geraghty and in light of the size of the annual stock option grants to
the other executive officers. The Committee concluded that such a grant,
considered with prior grants, was in keeping with ranges for equity compensation
for Chief Executive Officers of similar companies. Also in March 1996, the
Committee approved annual option grants covering 6,220 shares to each of the
Company's other executive officers. The option exercise price for each of these
annual option grants is $8.875 per share.
In addition to the annual grants described above, the Committee also adopted,
in March 1996, the Company's 1996 Executive Officer Option Program pursuant to
which Mr. Geraghty received an additional stock option covering 18,250 shares
and the other executive officers of the Company each received additional options
to purchase 6,500 shares. Each such option becomes exercisable in September
2005, subject to acceleration upon the attainment of an average closing price of
the Company's Common Stock, over any thirty consecutive trading days, in excess
of any of (i) $9.12 prior to March 31, 1997, (ii) $13.68 prior to March 31,
1998, (iii) $20.52 prior to March 31, 1999, (iv) $30.78 prior to March 31, 2000,
or (v) $46.17 prior to March 31, 2001. The exercise price for each of the
options granted pursuant to the 1996 Executive Officer Option Program is $6.08
per share.
Compensation Deductibility.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
denies a tax deduction to a public corporation for annual compensation in excess
of one million dollars paid to its chief executive officer and its other four
highest compensated officers. This provision excludes certain forms of
"performance based compensation" from the compensation taken into account for
purposes of that limit. Although the Company currently does not expect to have
compensation exceeding this one-million-dollar limit, the Equity Plan contains
an individual annual limit on the number of stock options and stock appreciation
rights that may be granted thereunder to permit such awards to qualify for the
exclusion from the limitation on deductibility for performance-based
compensation. The Compensation Committee will continue to assess the impact of
Section 162(m) on its compensation practices and determine what further action,
if any, is appropriate.
By the Compensation Committee,
Francis J. Bullock
Henry E. Blair
Alan W. Tuck
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<PAGE>
The following tables set forth certain compensation information for the Chief
Executive Officer of the Company and the three named executive officers of the
Company, other than the Chief Executive Officer, during the fiscal year ended
December 29, 1996.
Summary Compensation Table
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- ---------------------
Securities Underlying All Other
Name and Principal Position Year Salary Bonus Options (#) Compensation
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
James A.Geraghty 1996 $197,500 $79,250 32,103 $ 4,002 (2)
Chief Executive Officer 1995 $175,000 $65,275 60,000 $ 14,235 (1)
1994 $155,846 $38,000 17,250 $ 0
Peter H. Glick 1996 $135,000 $25,313 12,720 $ 4,668 (2)
VP, Marketing and 1995 $119,808 $20,774 20,000 $ 3,594 (2)
Business Development 1994 $30,192 $35,000 25,000 $ 2,979 (2)
John B. Green 1996 $135,000 $29,531 12,720 $ 4,007 (2)
VP, Chief Financial 1995 $122,635 $14,367 25,000 $ 3,548 (2)
Officer 1994 $ 28,000 $35,000 20,000 $ 2,925 (2)
Harry M. Meade 1996 $126,000 $31,500 12,720 $ 2,177 (2)
VP, Transgenics Research 1995 $120,000 $22,038 20,000 $ 697 (2)
1994 $109,735 $20,000 6,000 $ 1,372 (2)
==============================================================================================================
</TABLE>
(1) The reported amount includes employer contributions of $741 under the
Genzyme Transgenics Corporation 401(k) Plan and relocation expenses of
$13,494.
(2) The reported amount represents employer contributions under the Genzyme
Transgenics Corporation 401(k) Plan.
-12-
<PAGE>
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
Individual Grants
- -------------------------------------------------------------------------------------
Number of Percent of Weighted Potential realizable value at assumed
securities total options Average annual rates of stock
underlying granted to Exercise or price appreciation for option
options employees in base price Expiration term (1)
Name granted(#) fiscal year ($/share) date 0%($) 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
James A. Geraghty 32,103 (2) 6.4% 7.29 (2) 0 147,181 372,985
Peter H. Glick 12,270 (3) 2.5% 7.45 (3) 0 57,488 145,687
John B. Green 12,720 (3) 2.5% 7.45 (3) 0 57,488 145,687
Harry M. Meade 12,720 (3) 2.5% 7.45 (3) 0 57,488 145,687
All stockholders -- -- -- -- 0 79,528,357 201,540,470
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, in the price of the underlying Common Stock. No gain to the optionees
is possible without an increase in price of the Common Stock, which will
benefit all shareholders proportionately. In order to realize the potential
values set forth in the 5% and 10% columns of this table, the per share
price of the Common Stock would have to be approximately 63% and 159% above
the respective weighted average exercise or base price shown. The amount
shown for all stockholders reflects the potential value to all stockholders
if the price of the Common Stock appreciates at such rates over the term of
the options, assuming a purchase in 1996 at the total weighted average
exercise price of all options described above ($7.37).
(2) Represents two option grants: (a) a grant covering 13,853 shares at a price
of $8.875 per share, exercisable with respect to 20% of the underlying
shares on the date of grant and an additional 20% of the underlying shares
on each of the next four anniversaries of the date of grant, which option
expires on May 15, 2006; and (b) a grant covering 18,250 shares at a price
of $6.08 per share, fully exercisable on September 13, 2005, subject to
acceleration upon the attainment of an average closing price of the
Company's Common Stock, over any thirty consecutive trading days, in excess
of any of (i) $9.12 prior to March 31, 1997, (ii) $13.68 prior to March 31,
1998, (iii) $20.52 prior to March 31, 1999, (iv) $30.78 prior to March 31,
2000, or (v) $46.17 prior to March 31, 2001, which option expires on March
13, 2006.
(3) Represents two option grants: (a) a grant covering 6,220 shares at a price
of $8.875 per share, exercisable with respect to 20% of the underlying
shares on the date of grant and an additional 20% of the underlying shares
on each of the next four anniversaries of the date of grant, which option
expires on May 15, 2006; and (b) a grant covering 6,500 shares at a price of
$6.08 per share, fully exercisable on September 13, 2005, subject to
acceleration upon the attainment of an average closing price of the
Company's Common Stock, over any thirty consecutive trading days, in excess
of any of (i) $9.12 prior to March 31, 1997, (ii) $13.68 prior to March 31,
1998, (iii) $20.52 prior to March 31, 1999, (iv) $30.78 prior to March 31,
2000, or (v) $46.17 prior to March 31, 2001, which option expires on March
13, 2006.
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<PAGE>
Aggregated Option Exercises In Last Fiscal Year And
Fiscal Year-End Option Value
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money
Options at Options at
Shares Fiscal Year-End (#) Fiscal Year-End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable (1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James A. Geraghty 0 0 134,121 / 74,232 144,113 / 66,075
Peter H. Glick 0 0 33,424 / 29,596 90,750 / 50,500
John B. Green 0 0 38,564 / 34,556 74,000 / 66,000
Harry M. Meade 0 0 48,844 / 29,876 42,000 / 18,000
=====================================================================================================
</TABLE>
(1) Based on the difference between the option exercise price and the closing
price of the underlying Common Stock on December 27, 1996 as reported by the
Nasdaq National Market System, which closing price was $6.00.
EXECUTIVE EMPLOYMENT AGREEMENTS
James A. Geraghty. Under the terms of an Employment Agreement between Mr.
Geraghty and the Company, Mr. Geraghty's annual base salary, which has been set
at $234,000 for the 1997 calendar year, will be no less than $190,000 per annum.
He is also eligible to receive performance and incentive bonuses as determined
by the Company's Compensation Committee, which has set his maximum cash bonus
for 1997 at 40% of such base salary.
Peter H. Glick. Under the terms of an Employment Agreement between Mr. Glick
and the Company, Mr. Glick's annual base salary, which has been set at $154,000
for the 1997 calendar year, will be no less than $135,000 per annum. He is also
eligible to receive performance and incentive bonuses as determined by the
Company's Compensation Committee, which has set his maximum cash bonus for 1997
at 25% of such base salary.
John B. Green. Under the terms of an Employment Agreement between Mr. Green
and the Company, Mr. Green's annual base salary, which has been set at $150,000
for the 1997 calendar year, will be no less than $135,000 per annum. He is also
eligible to receive performance and incentive bonuses as determined by the
Company's Compensation Committee, which has set his maximum cash bonus for 1997
at 25% of such base salary.
Harry M. Meade. Under the terms of an Employment Agreement between Dr. Meade
and the Company, Dr. Meade's annual base salary, which has been set at $156,000
for the 1997 calendar year, will be no less than $126,000 per annum. Under the
agreement, he is also eligible to receive bonuses based on individual and
Company performance, and the Company's Compensation Committee has established a
maximum bonus for 1997 equal to 25% of such base salary.
Each of the foregoing agreements will remain in effect until terminated in
accordance with its terms. In the event that the Company terminates any of the
foregoing employees without cause or if any of such employees terminates his
agreement upon a "change of control" of the Company, as such term is defined in
each of the employment agreements, such employee will immediately be paid the
maximum bonus for the year
-14-
<PAGE>
of termination, prorated on the basis of the portion of the year completed, and
will continue to receive his then current base salary for a severance period. In
the case of Mr. Geraghty, the severance period is two years. In the case of Mr.
Green, the severance period in the event of a "change of control" is two years
and otherwise is one year. In the cases of Mr. Glick and Dr. Meade, the
severance period is one year. If any of the foregoing employees terminates his
agreement upon a change of control, such severance payments will be reduced by
income which such employee derives during the relevant severance period from a
subsequent employer. In any case in which the Company must pay severance upon a
change of control, outstanding stock options held by the affected employee which
are not then exercisable shall immediately become exercisable.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Three members of the Company's Board of Directors serve as directors
and/or executive officers of Genzyme; Mr. Termeer is Chairman of the Board,
President and Chief Executive Officer, Mr. Blair is a director and Dr. Smith is
an executive officer. In connection with and following the Company's initial
public offering in July 1993, the Company entered into various agreements with
Genzyme which are summarized below. In 1996, the Company paid Genzyme an
aggregate of $3.8 million and received an aggregate of $75,000 from Genzyme
pursuant to the research and development agreement, the services agreement and
the lease agreement described below.
Technology Transfer Agreement. Under the Technology Transfer Agreement
dated May 1, 1993, Genzyme transferred substantially all of its transgenic
assets and liabilities to GTC, including its ownership interest in SMI Genzyme
Ltd., a joint venture between Genzyme and Sumitomo Metal Industries Ltd. (the
"Joint Venture") assigned its relevant contracts and licensed to the Company
technology owned or controlled by it and relating to the production of
recombinant proteins in the milk of transgenic animals (the "Field") and the
purification of proteins produced in that matter. The license is worldwide and
royalty free as to Genzyme, although GTC is obligated to Genzyme's licensors for
any royalties due them. As long as Genzyme owns less than 50% of GTC, Genzyme
may use the transferred technology, or any other technology it subsequently
acquires relating to the Field, without any royalty obligation to the Company,
provided Genzyme may not offer transgenic production services to third parties.
Research & Development Agreement. Pursuant to the R&D Agreement, Genzyme
and GTC agreed, until May 1, 1998, to provide research and development services
to the other relating, in the case of GTC, to transgenic production of
recombinant proteins and, in the case of Genzyme, to the purification of such
proteins. Each company receives payments from the other equal to the performing
party's fully allocated cost of such services, which can be no less than 80% of
the annual budgets established by the parties under the R&D Agreement, plus, in
most cases, a fee equal to 10% of such costs.
Services Agreement. Under a services agreement between GTC and Genzyme
(the "Services Agreement"), GTC pays Genzyme a fixed monthly fee for basic
laboratory and administrative support services provided by Genzyme. The monthly
fee is adjusted annually, based on the services to be provided and changes in
Genzyme's cost of providing the services. The Services Agreement is
self-renewing annually and may be terminated upon 90 days notice by either party
to the other party.
Lease. GTC leases a portion of Genzyme's facilities in Framingham,
Massachusetts (the "Lease"). GTC paid Genzyme $178,000 under the Lease in 1996.
The Company and Genzyme have also entered into the following agreements.
AT-III Development Funding. Under the Convertible Debt and Funding
Agreement dated March 29, 1996, as amended (the "Convertible Debt Agreement"),
Genzyme has agreed to fund transgenic AT-III
-15-
<PAGE>
development through the second quarter of 1997 in exchange for co-marketing
rights to AT-III in all territories other than Asia. Such marketing rights will
terminate if a further agreement is not executed by the parties prior to June
30, 1997.
Convertible Debt Agreement. Under the Convertible Debt Agreement, Genzyme
also agreed to provide a revolving line of credit in the amount of $10 million.
As of December 29, 1996, $1,673,000 of debt had been converted into 219,565
shares of Common Stock, leaving $8,327,000 available on the revolving line of
credit, which expires on March 31, 1998. As of December 29, 1996, there was no
balance outstanding on the line of credit.
Credit Line Guaranty, Term Loan Guaranty and Lien. The Company obtained a
credit line in July 1995 and a term loan in December 1995 with a commercial
bank, each secured by Genzyme's guaranty of the Company's obligations thereunder
(up to $9.8 million at December 29, 1996). The Company has agreed to reimburse
Genzyme for any liability Genzyme may incur under such guaranty and has granted
Genzyme a first lien on all of the Company's assets to secure such obligation.
PROPOSAL TO AMEND THE 1993 EMPLOYEE STOCK PURCHASE PLAN
General
The Company's 1993 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in May 1993 and approved by Genzyme as the
sole stockholder of the Company in June 1993. The purpose of the Purchase Plan
is to provide full-time employees of the Company an opportunity to purchase
shares of Common Stock on favorable terms.
A total of 300,000 shares of Common Stock were originally reserved for
issuance under the Purchase Plan, subject to adjustment for stock splits and
similar capital changes. As of April 8, 1997, 520 employees were eligible to
participate in the Purchase Plan and 314,262 shares had been purchased under the
plan. The closing price of the Company's Common Stock on April 8, 1997, as
reported by the Nasdaq National Market System, was $8.266.
Proposed Amendment to the 1993 Employee Stock Purchase Plan
The Board of Directors has voted, subject to the approval of the
stockholders, to increase the aggregate number of shares of Common Stock
issuable under the Purchase Plan from 300,000 to 900,000, subject to adjustment
for stock splits and similar capital changes, to ensure that a sufficient number
of shares are available to be issued to eligible employees under the Purchase
Plan.
Grant of Rights and Administration of the Plan
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. Rights to purchase shares of Common Stock
under the plan are granted at the discretion of the Company's Board of
Directors, which, through an administrator, determines the frequency and
duration of individual offerings under the plan and the date(s) when stock may
be purchased. Eligible employees participate voluntarily and may withdraw from
any offering at any time before stock is purchased. Participation terminates
automatically upon termination of employment for any reason. The purchase price
per share of Common Stock in an offering is 85% of the lower of its fair market
value on the first day of an offering period, or the applicable exercise date
and may be paid through regular payroll deductions, lump sum cash payments or a
combination of both, as determined by the Board of Directors. The Purchase Plan
terminates on May 1, 2003.
-16-
<PAGE>
In accordance with Section 423 of the Code, no employee may subscribe for
shares under the Purchase Plan if, immediately after having subscribed, the
employee would own 5% or more of the voting power or of the value of all classes
of stock of the Company (including stock which may be purchased through
subscriptions under the Purchase Plan or any other plans) nor may an employee
buy more than $25,000 worth of stock (determined by the fair market value of the
Common Stock at the time the offering begins) through the plan in any calendar
year. The plan provides that no employee may allocate more than 15%, or such
lesser percentage as the Board of Directors may fix, of the employee's annual
rate of compensation to the purchase of stock through the Purchase Plan.
Federal Income Tax Consequences Relating to Employee Stock Purchase Plan
Participants do not realize taxable income at the commencement of an
offering or at the time shares are purchased under the Purchase Plan.
If no disposition of shares purchased under the Purchase Plan is made by
the participant within two years from the offering commencement date or within
one year from the purchase date, then (a) upon sale of such shares, 15% of the
fair market value of the stock at the commencement of the offering period (or,
if less, the amount realized on sale of such shares in excess of the purchase
price) is taxed to the participant as ordinary income with any additional gain
taxed as a long-term capital gain and any loss sustained is treated as a
long-term capital loss and (b) no deduction is allowed to the Company for
Federal income tax purposes.
If the participant dies at any time while owning shares purchased under
the Purchase Plan, then (a) 15% of the fair market value of the stock at the
commencement of the offering period (or, if less, the fair market value of such
shares on the date of death in excess of the purchase price) is taxed to the
participant as ordinary income in the year of death and (b) no deduction is
allowed to the Company for Federal income tax purposes.
If shares of Common Stock purchased under the Purchase Plan are disposed
of prior to the expiration of the two-year and one-year holding periods
described above, then (a) the participant realizes ordinary income in the year
of disposition in an amount equal to the excess of the fair market value of the
shares on the date of purchase over the purchase price thereof, and (b) the
Company is entitled to deduct such amount. Any further gain or loss is treated
as a short-term or long-term capital gain or loss and will not result in any
deduction by the Company.
Vote Required
The affirmative vote by the holders of a majority of the shares present,
or represented, and entitled to vote at the meeting is required to approve the
amendment to the Purchase Plan. Broker non-votes will not be counted as present
or represented for this purpose. Abstentions will be counted as present and
entitled to vote and, accordingly, will have the effect of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL TO AMEND THE 1993 EQUITY INCENTIVE PLAN
General
The Equity Plan was adopted by the Board of Directors in May 1993 and
approved by Genzyme as the sole stockholder of the Company in June 1993. The
purpose of the Equity Plan is to attract and retain key employees and
consultants of the Company and its affiliates. The Equity Plan provides for the
grant of stock
-17-
<PAGE>
options (incentive and nonstatutory), stock appreciation rights, performance
shares, restricted stock and stock units (the "Awards") to employees and
consultants of the Company and its affiliates ("Eligible Persons").
Currently, Awards may be made under the Equity Plan for up to a total of
2,015,000 shares of Common Stock, subject to adjustment for stock splits and
similar capital changes. In addition, options to purchase an aggregate of
224,350 shares of Common Stock (the "Assumed Options") were granted as a result
of the Company's assumption of outstanding options to purchase shares of TSI
Common Stock in connection with the October 1994 acquisition of TSI by the
Company. Options may be granted under the Equity Plan through the assumption or
substitution of outstanding grants from an acquired company without reducing the
number of shares available for award under the Equity Plan.
As of April 8, 1997, 520 employees were eligible to participate in the
Equity Plan and options to purchase an aggregate of 1,864,054 shares of Common
Stock had been granted, excluding the Assumed Options. Of these, options to
purchase 242,380 shares had been cancelled, options to purchase 121,624 had been
exercised and options to purchase an aggregate of 1,500,050 shares remained
outstanding, leaving only 393,326 shares available for new Awards under the
Equity Plan. No stock appreciation rights, performance shares, restricted stock,
stock units or other stock-based awards have been granted under the Equity Plan.
The closing price of the Company's Common Stock on April 8, 1997, as reported by
the Nasdaq National Market System, was $8.266.
Administration and Eligibility
Awards are made by the Compensation Committee which has been designated by
the Board of Directors to administer the Equity Plan. The Compensation Committee
may delegate to one or more officers the power to make awards under the Equity
Plan to persons other than officers of the Company who are subject to the
reporting requirements of Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act").
Awards under the Equity Plan are granted at the discretion of the
Compensation Committee, which determines the recipients and establishes the
terms and conditions of each award, including the exercise price, the form of
payment of the exercise price, the number of shares subject to options or other
equity rights and the time at which such options become exercisable. However,
the exercise price of any stock option granted under the Equity Plan may not be
less than the fair market value of the Common Stock on the date of grant.
The Compensation Committee has adopted guidelines for the number of annual
and new hire options awarded to employees of the Company, other than employees
who are subject to Section 16 of the Exchange Act. These guidelines are based on
the salary grade of the employee and provide for the grant of incentive stock
options at fair market value on the date of grant. The Compensation Committee
has delegated to the President the power to make awards under the Equity Plan,
in amounts consistent with the guidelines, to employees that are not subject to
Section 16 of the Exchange Act. The guidelines may be changed by the
Compensation Committee at any time.
Proposed Amendment to the 1993 Equity Incentive Plan
The Board of Directors has voted, subject to approval of the stockholders,
to increase the number of shares of Common Stock that may be subject to Awards
under the Equity Plan by 500,000 shares (the "Additional Shares") to an
aggregate of 2,515,000 shares, subject to adjustment for stock splits and
similar capital changes. This proposed amendment is intended to ensure that a
sufficient number of shares of Common Stock are available to be issued to
Eligible Persons in the future.
-18-
<PAGE>
Federal Income Tax Consequences Relating to Stock Options
Incentive Stock Options. An optionee does not realize taxable income upon
the grant or exercise of an incentive stock option ("ISO") under the Equity
Plan.
If no disposition of shares issued to an optionee pursuant to the exercise
of an ISO is made by the optionee within two years from the date of grant or
within one year from the date of exercise, then (a) upon sale of such shares,
any amount realized in excess of the option price (the amount paid for the
shares) is taxed to the optionee as long-term capital gain and any loss
sustained will be a long-term capital loss and (b) no deduction is allowed to
the Company for Federal income tax purposes. The exercise of ISOs gives rise to
an adjustment in computing alternative minimum taxable income that may result in
alternative minimum tax liability for the optionee.
If shares of Common Stock acquired upon the exercise of an ISO are
disposed of prior to the expiration of the two-year and one-year holding periods
described above (a "disqualifying disposition") then (a) the optionee realizes
ordinary income in the year of disposition in an amount equal to the excess (if
any) of the fair market value of the shares at exercise (or, if less, the amount
realized on a sale of such shares) over the option price thereof and (b) the
Company is entitled to deduct such amount. Any further gain realized is taxed as
a short-term or long-term capital gain and does not result in any deduction to
the Company. A disqualifying disposition in the year of exercise will generally
avoid the alternative minimum tax consequences of the exercise of an ISO.
Nonstatutory Stock Options. No income is realized by the optionee at the
time a nonstatutory option is granted. Upon exercise, (a) ordinary income is
realized by the optionee in an amount equal to the difference between the option
price and the fair market value of the shares on the date of exercise and (b)
the Company receives a tax deduction for the same amount. Upon disposition of
the shares, appreciation or depreciation after the date of exercise is treated
as a short-term or long-term capital gain or loss and will not result in any
deduction by the Company.
Vote Required
The affirmative vote by the holders of a majority of the shares present,
or represented by proxy, and entitled to vote at the meeting is required to
approve the amendment to the Equity Plan. Broker non-votes will not be counted
as present or represented for this purpose. Abstentions will be counted as
present and entitled to vote and, accordingly, will have the effect of a
negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL TO AMEND THE 1993 DIRECTOR STOCK OPTION PLAN
General
The purpose of the Company's 1993 Director Stock Option Plan (the
"Director Plan") is to attract and retain qualified persons, who are not also
officers or employees of the Company, to serve as directors of the Company and
to encourage stock ownership in the Company by such directors so as to provide
additional incentives to promote the Company's success. The Director Plan
currently authorizes the grant of nonstatutory stock options for the purchase of
a maximum of 50,000 shares of Common Stock, subject to adjustment for stock
splits and similar capital changes, to Eligible Directors as defined below. As
of the date hereof, options
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<PAGE>
to purchase an aggregate of 50,000 shares of Common Stock have been granted
under the Director Plan, leaving no shares available for future grants.
All non-employee directors of the Company ("Eligible Directors") are
eligible to participate in the Director Plan, except Mr. Termeer, who has
irrevocably elected not to participate. Currently, five of the Company's seven
directors are eligible to participate in the Director Plan.
For a description of the Director Plan, see "Election of
Directors-Director Compensation."
Proposed Amendment to the 1993 Director Stock Option Plan
The Board of Directors has voted, subject to approval of the stockholders,
to increase the number of shares of Common Stock that may be subject to grants
under the Director Plan by 50,000 shares to an aggregate of 100,000 shares,
subject to adjustment for stock splits and similar capital changes. This
proposed amendment is intended to ensure that a sufficient number of shares of
Common Stock are available to be issued to Eligible Directors in the future.
Federal Income Tax Consequences Relating to Director Plan Options
Options granted under the Director Plan are nonstatutory stock options. No
income is realized by the director at the time a nonstatutory option is granted.
Upon exercise, (a) ordinary income is realized by the director in an amount
equal to the difference between the option price and the fair market value of
the shares on the date of exercise and (b) the Company receives a tax deduction
for the same amount. Upon disposition of the shares, appreciation or
depreciation after the date of exercise is treated as a short-term or long-term
capital gain or loss and will not result in any deduction by Genzyme.
Vote Required
The affirmative vote of the holders of a majority in interest of the
Common Stock present, or represented by proxy, and entitled to vote at the
meeting is required to approve the proposed amendment to the Director Plan.
Broker non-votes will not be counted as present or represented for this purpose.
Abstentions will be counted as present and entitled to vote and, accordingly,
will have the effect of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
PROPOSAL TO AMEND THE COMPANY'S RESTATED ARTICLES OF ORGANIZATION
Proposed Amendment
The Board of Directors of the Company has adopted, subject to stockholder
approval, an amendment to Article III of the Company's Restated Articles of
Organization to increase the total number of shares of Common Stock that the
Company is authorized to issue from 24,000,000 shares to 40,000,000 shares. As
of April 1, 1997, as adjusted to reflect the proposed increases in reserves
under the Purchase Plan, the Equity Plan and the Director Plan, the Company had
17,198,532 shares of Common Stock outstanding, 1,893,376 shares reserved for
issuance (but not issued) under the Equity Plan, 50,000 shares reserved for
issuance (but not issued) under the Director Plan, 10,000 shares subject to
non-plan options, and 190,600 shares subject to outstanding common stock
purchase warrants.
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<PAGE>
The Board of Directors therefore believes the proposed amendment is
advisable to ensure that there will be an adequate number of authorized and
unissued shares for future equity financing arrangements, acquisitions, stock
splits and other events.
Vote Required
The affirmative vote of a majority or shares outstanding and entitled to
vote at the meeting is required to approve the proposed amendment to the
Company's Restated Articles of Organization. Broker non-votes and abstentions
will have the effect of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
CERTAIN TRANSACTIONS
Directors Termeer, Blair and Smith are also directors and/or executive
officers of Genzyme. The Company and Genzyme are involved in a number of
financial and business transactions with one another. See "Compensation
Committee Interlocks and Insider Participation."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and reports of changes
in ownership of Common Stock. Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) reports they file.
To the Company's knowledge, based solely on the review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 29, 1996, all
Section 16(a) filing requirements applicable to ten percent stockholders known
to the Company were complied with and all Section 16(a) filing requirements
applicable to its officers and directors were complied with, except that one
report of a transaction by Genzyme Corporation was not filed in a timely
fashion.
INFORMATION CONCERNING INDEPENDENT ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P., independent accountants, examined the
Company's financial statements for the year ending December 29, 1996. The Board
of Directors has appointed Coopers & Lybrand L.L.P. to serve as the Company's
auditors for its fiscal year ending December 28, 1997. Representatives of
Coopers & Lybrand L.L.P. are expected to attend the annual meeting to respond to
appropriate questions and will have the opportunity to make a statement if they
desire.
DEADLINE FOR STOCKHOLDER PROPOSALS
In order for a stockholder proposal to be considered for inclusion in the
Company's proxy materials for the 1998 annual meeting of stockholders, it must
be received by the Company at Five Mountain Road, Framingham, Massachusetts
01701, Attention: John B. Green, no later than December 29, 1997.
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<PAGE>
ADVANCE NOTICE PROVISIONS FOR
STOCKHOLDER PROPOSALS AND NOMINATIONS
The by-laws of the Company provide that, in order for a stockholder to
bring business before or propose director nominations at an annual meeting, the
stockholder must give written notice to the Chairman of the Board, President,
Treasurer or Clerk of the Company not less than 50 days nor more than 75 days
prior to the meeting. The notice must contain specified information about the
proposed business or each nominee, and the stockholder making the proposal or
nomination. If the annual meeting is scheduled for a date other than the third
Thursday in May and notice thereof is mailed to stockholders or publicly
disclosed less than 65 days in advance, the notice given by the stockholder must
be received not later than the 15th day following the day on which the notice of
such annual meeting date was mailed or public disclosure made, whichever first
occurs.
EXPENSES OF SOLICITATION
The Company will bear the cost of the solicitation of proxies, including
the charges and expenses of brokerage firms and others of forwarding
solicitation material to beneficial owners of stock. In addition to the use of
mails, proxies may be solicited by officers and employees of the Company, in
person or by telephone.
OTHER MATTERS
The Board of Directors does not know of any business to come before the
meeting other than the matters described in the notice. If other business is
properly presented for consideration at the meeting, the enclosed proxy
authorizes the persons named therein to vote the shares in their discretion.
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