<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
- ------- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
- -------- THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission file number 0-21794
-------
GENZYME TRANSGENICS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3186494
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Five Mountain Road, Framingham, Massachusetts 01701
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(508) 620-9700
- -------------------------------------------------------------------------------
Registrant's telephone number, including area code
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X . No .
---------- ----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at July 31, 1998
----- ----------------------------
<S> <C>
Common Stock, $0.01 par value 18,259,946
</TABLE>
<PAGE>
GENZYME TRANSGENICS CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE #
------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1 - Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
June 28, 1998 and December 28, 1997..........................................3
Condensed Consolidated Statements of Operations for
the Three Months and Six Months Ended June 28, 1998 and
June 29, 1997................................................................4
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 28, 1998
and June 29, 1997............................................................5
Notes to Unaudited Condensed Consolidated
Financial Statements.........................................................6
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations................................8
PART II. OTHER INFORMATION
ITEM 4
Submission of Matters to a Vote of Security Holders ........................10
ITEM 6
Exhibits and Reports on Form 8-K............................................11
SIGNATURES..................................................................12
EXHIBIT INDEX...............................................................13
</TABLE>
<PAGE>
GENZYME TRANSGENICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
June 28, December 28,
1998 1997
---------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,691 $ 6,383
Accounts receivable, net 6,566 10,517
Unbilled contract revenue 8,290 6,069
Other current assets 1,790 1,431
-------- --------
Total current assets 27,337 24,400
Net property, plant and equipment 28,790 26,297
Costs in excess of net assets acquired, net 18,977 19,532
Investment in Joint Venture (Note 3) (1,724) --
Other assets 772 751
-------- --------
$ 74,152 $ 70,980
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,222 $ 2,091
Accounts payable - Genzyme Corporation 2,004 3,364
Revolving line of credit -- 6,000
Revolving line of credit - Genzyme Corporation- -- 6,000
Accrued expenses 6,851 7,900
Advance payments 6,397 5,568
Current portion of long-term debt 2,632 1,900
-------- --------
Total current liabilities 20,106 32,823
Long-term debt, net of current portion 8,764 9,862
Deferred lease obligation 712 613
Other liabilities 154 304
-------- --------
Total liabilities 29,736 43,602
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized, 20,000 shares
issued and outstanding at June 28, 1998 (Note 5) -- --
Common stock, $.01 par value; 24,000,000 shares authorized; 18,258,873 and
17,403,406 shares issued and outstanding (Note 5)
at June 28, 1998 and December 28, 1997, respectively 183 174
Capital in excess of par value - preferred stock (Note 5) 18,813 --
Capital in excess of par value - common stock 62,623 54,478
Accumulated deficit (37,203) (27,274)
-------- --------
Total stockholders' equity 44,416 27,378
-------- --------
$ 74,152 $ 70,980
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GENZYME TRANSGENICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
--------------------- ---------------------
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Revenues
Services $ 12,200 $ 11,404 $ 23,388 $ 22,545
Sponsored research and development 2,213 4,190 4,776 7,983
----- ----- ----- -----
14,413 15,594 28,164 30,528
Costs and operating expenses:
Services 10,292 9,308 20,213 18,695
Research and development
Sponsored 2,291 3,211 4,132 5,231
Internal 1,563 1,008 3,402 1,835
Selling, general and administrative 4,200 3,561 8,086 7,154
Equity in loss of Joint Ventures (Note 3) 860 220 1,724 531
-------- -------- -------- --------
19,206 17,308 37,557 33,446
-------- -------- -------- --------
Loss from operations (4,793) (1,714) (9,393) (2,918)
Other income (expense):
Interest income 98 62 110 92
Interest expense (299) (233) (756) (417)
Other income 100 -- 100 --
-------- -------- -------- --------
Loss from operations before income taxes (4,894) (1,885) (9,939) (3,243)
Provision (benefit) for income taxes -- 5 (10) 25
-------- -------- -------- --------
Net loss $ (4,894) $ (1,890) $ (9,929) $ (3,268)
Dividend to preferred shareholders (Note 5) -- -- (1,156) --
-------- -------- -------- --------
Net loss available to common shareholders $ (4,894) $ (1,890) $(11,085) (3,268)
-------- -------- -------- --------
-------- -------- -------- --------
Net loss per common share (basic and diluted) $ (0.27) $ (0.11) $ (0.63) $ (0.19)
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of shares
outstanding (basic and diluted) 17,844 17,212 17,655 17,177
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
GENZYME TRANSGENICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended
----------------------
June 28, June 29,
1998 1997
---------- --------
<S> <C> <C>
Cash flows for operating activities:
Net loss $ (9,929) $ (3,268)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 2,399 2,029
Equity in loss of Joint Ventures 1,724 531
Changes in assets and liabilities, net of effects from
purchase of subsidiaries:
Accounts receivable and unbilled contract revenue 1,647 (895)
Other current assets 224 296
Accounts payable 131 (1,252)
Accounts payable - Genzyme Corporation (1,360) 1,191
Accrued expenses (646) 693
Advance payments 329 1,025
-------- --------
Net cash provided by (used in) operating activities (5,481) 350
Cash flows for investing activities:
Purchase of property, plant and equipment (3,613) (4,911)
Investment in Joint Venture- (528)
Other assets (77) (299)
-------- --------
Net cash used in investing activities (3,690) (5,738)
Cash flows from financing activities:
Net proceeds from the issuance of common stock 6,423 --
Net proceeds from employee stock purchase plan 700 370
Net proceeds from the exercise of stock options 445 228
Net proceeds from preferred stock offering 19,000 --
Proceeds from long-term debt -- 4,869
Repayment of long-term debt (1,038) (2,366)
Net borrowings under revolving line of credit (6,000) --
Net borrowings under revolving line of credit - Genzyme Corporation (6,000) --
Other long-term liabilities (51) (210)
-------- --------
Net cash provided by (used in) financing activities 13,479 2,891
-------- --------
Net increase (decrease) in cash and cash equivalents 4,308 (2,497)
Cash and cash equivalents at beginning of the period 6,383 8,894
-------- --------
Cash and cash equivalents at end of period $ 10,691 $ 6,397
-------- --------
-------- --------
Noncash Activities:
Property acquired under capital leases $ 668 $ 381
Receipt of stock for Accounts Receivable and Advance Payment 583 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
GENZYME TRANSGENICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
1. Basis of Presentation:
These unaudited condensed consolidated financial statements should be read
in conjunction with the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1997 and the financial statements and footnotes
included therein. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
Securities and Exchange Commission rules and regulations.
Per share information is based upon the weighted average number of shares
of Common Stock outstanding during the period.
The financial statements for the six months ended June 28, 1998 and June
29, 1997 are unaudited but include, in the Company's opinion, all
adjustments (consisting only of normally recurring accruals) necessary for
a fair presentation of the results for the periods presented.
2. Accounting Policies:
The accounting policies underlying the quarterly financial statements are
those set forth in Note 2 of the financial statements included in the
Company's Annual Report on Form 10- K for the year ended December 28, 1997.
The common stock equivalents of the Company consisted of warrants, stock
options, stock to be issued under the 401-K savings plan and convertible
preferred stock. The Company was in a net loss position at June 28, 1998
and June 29, 1997, therefore 4 million and 2.2 million common share
equivalents, respectively, were not used to compute diluted loss per share,
as the effect was antidilutive.
3. Joint Ventures:
On January 1, 1998, a definitive collaboration agreement for the ATIII LLC
joint venture ("ATIII LLC") between the Company and Genzyme Corporation
("Genzyme") was executed. Under the terms of the agreement, Genzyme and
the Company will provide 70% and 30%, respectively, of the first
$33 million of development costs under this program. The Company's
funding obligation will commence in the second half of 1998. Development
costs in excess of $33 million will be funded equally by the partners.
The Company and Genzyme will also make capital contributions to ATIII LLC
sufficient to pay 50% each of all new facility costs to be incurred. In
addition to the funding, both partners will contribute manufacturing,
marketing and other resources to ATIII LLC at cost and will share profits
from product sales equally. The agreement covers all territories other
than Asia and may include milestone payments from Genzyme to the Company
after the product has been approved by the United States Food and Drug
Administration.
6
<PAGE>
In 1997, the Company incurred losses on the joint venture with Sumitomo
Metal Industries ("SMIG JV").
4. Primedica Corporation:
In February 1998, the Company announced that it had reorganized its
contract research business under the new name, Primedica Corporation, to
provide a unified identity and a dedicated structure for further growth of
its contract research organization ("CRO") operations.
5. Private Placement:
In March 1998, the Company completed a private placement of $20 million of
Series A Convertible Preferred Stock (the "Preferred Stock") to three
institutional investors. The Preferred Stock carries a $1,000 face value
per share, and is subject to mandatory redemption, if not previously
converted, in three years. Such redemption may be in the form of cash or
stock, at the Company's option. The Preferred Stock may be converted
immediately into the Company's common stock at a price of $14.55 per share
through December 20, 1998. Thereafter, it may be converted into common
stock at a per share price equal to the lower of $14.55 or the average of
any five closing bid prices over the twenty days prior to conversion.
Dividends will only accrue if the holders are unable to convert their
Preferred Stock into common stock in certain circumstances. In connection
with the financing, warrants to purchase 450,000 shares of the Company's
common stock were issued. Each warrant has a four year term and an exercise
price of $15.1563 per share. Because the Preferred Stock could be converted
into common stock immediately, the warrants, valued at approximately $1.2
million, were recognized as a dividend payment to preferred shareholders
during the first quarter of 1998. As a result of this financing, the amount
available under the line of credit in the Convertible Debt and Development
Funding Agreement with Genzyme has decreased from approximately $8.3
million to $6.4 million.
In May 1998, the Company completed a private placement of 603,300 shares of
common stock at $10.80 per share in a registered direct offering to a
single purchaser.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended June 28, 1998 and June 29, 1997
Total revenues for the three-month period ending June 28, 1998 were $14.4
million, compared with $15.6 million in the comparable period of 1997, a
decrease of $1.2 million or 8%. Service revenues increased to $12.2 million in
the second quarter of 1998 from $11.4 million in the second quarter of 1997, an
increase of $800,000 or 7%. Research and development revenues decreased to $2.2
million in the second quarter of 1998 from $4.2 million in the second quarter of
1997, a decrease of $2 million or 48%. The decrease reflects the impact on
revenue of the establishment, in January 1998, of the joint venture ("ATIII
LLC") for the development of recombinant human antithrombin III ("AT-III") with
Genzyme Corporation ("Genzyme"). Had the AT-III program been structured on the
same basis during the second quarter of 1998 as during the same quarter in 1997,
transgenic research revenues for the second quarter of 1998 would have been
approximately the same as for the second quarter of 1997.
Cost of services for the second quarter of 1998 were $10.3 million compared
to $9.3 million in the comparable period of 1997, an increase of $1 million
or 11% due to the timing of study performance within the respective quarters
and increased service revenues. Sponsored research and development expenses
decreased to $2.3 million in the second quarter of 1998 from $3.2 million in
the second quarter of 1997, a decrease of $900,000 or 28%. The decrease is
due to impact of the formation of ATIII LLC. In 1997, the full cost of the
AT-III development program, including subcontractor costs, was reflected by
the Company as sponsored research and development expense and, to the extent
that the program was funded, as sponsored research and development revenue.
With the formation of the ATIII LLC in 1998, all funding and subcontractor
costs are recorded directly by the ATIII LLC. Costs incurred by the Company
for the AT-III development program are being funded by the ATIII LLC and,
therefore, only these costs are being recorded equally as sponsored research
and development revenue and sponsored research and development expense. Had
the AT-III development program been structured on the same basis during the
second quarter of 1998 as during the same quarter in 1997, the sponsored
research and development expenses would have increased by approximately $1
million over the expenses reported in the second quarter in 1997. Internal
research and development expenses increased to $1.6 million in the second
quarter of 1998 from $1 million in the second quarter of 1997, an increase of
$600,000 or 60%. The increase is due to increased work on the cancer vaccine
program and an increase in the number of internal research programs.
Gross profit for the second quarter of 1998 amounted to $1.8 million versus $3.1
million in the second quarter of 1997. Gross profit on services for the second
quarter of 1998 was $1.9 million, a gross margin of 16%, versus $2.1 million, a
gross margin of 18%, in the second quarter of 1997. The decrease in gross margin
is due to timing of study performance within the respective quarters.
8
<PAGE>
Selling, general and administrative ("SG&A") expenses increased to $4.2 million
in the second quarter of 1998 from $3.6 million in the second quarter of 1997,
an increase of $600,000 or 17%. The increase is due to the increased marketing
effort for Primedica and to the addition of administrative personnel required to
support the growth in transgenic research and development programs.
Interest income increased to $98,000 in the second quarter of 1998, from $62,000
in the second quarter of 1997, due to an increase in funds available for
investment as a result of proceeds received from the preferred stock offering in
the first quarter and the sale of common stock in a registered direct offering
to a single purchaser in the second quarter. Interest expense increased to
$299,000 in the second quarter of 1998 from $233,000 in the second quarter of
1997 due to higher borrowings in 1998.
The Company recognized $860,000 of Joint Venture losses incurred on ATIII LLC
during the second quarter of 1998. In the second quarter of 1997, the Company
incurred $220,000 of Joint Venture losses on the Sumitomo Metal Industries joint
venture ("SMIG JV").
Six months ended June 28, 1998 and June 29, 1997
Total revenues for the six-month period ending June 28, 1998 were $28.2 million,
compared with $30.5 million in the comparable period of 1997, a decrease of $2.3
million or 8%. Service revenues increased to $23.4 million during the first six
months of 1998 from $22.5 million in the comparable period of 1997, an increase
of $900,000 or 4%. Research and development revenues decreased to $4.8 million
during the first six months of 1998 from $8 million in the comparable period of
1997, a decrease of $3.2 million or 40%. The decrease reflects the impact on
revenue of the establishment, in January 1998, of ATIII LLC with Genzyme. Had
the AT-III program been structured on the same basis during the during the first
six months of 1998 as the comparable period of 1997, transgenic research
revenues for the first six months of 1998 would have been approximately the same
as the comparable period of 1997.
Cost of services during the first six months of 1998 were $20.2 million
compared to $18.7 million in the comparable period of 1997, an increase of
$1.5 million or 8% due to the timing of study performance within the
respective quarters and increased service revenues. Sponsored research and
development expenses decreased to $4.1 million in the first six months of
1998 from $5.2 million in the comparable period of 1997, a decrease of $1.1
million or 21%. The decrease is due to impact of the formation of ATIII LLC.
In 1997, the full cost of the AT-III development program, including
subcontractor costs, was reflected by the Company as sponsored research and
development expense and, to the extent that the program was funded, as
sponsored research and development revenue. With the formation of the ATIII
LLC in 1998, all funding and subcontractor costs are recorded directly by the
ATIII LLC. Costs incurred by the Company for the AT-III development program
are being funded by the ATIII LLC and, therefore, only these costs are being
recorded equally as sponsored research and development revenue and sponsored
research and development expense. Had the AT-III development program been
structured on the same basis during the first six months of 1998 as during
the comparable period of 1997, the sponsored research and development
expenses would
9
<PAGE>
have increased by approximately $2.4 million over the comparable period of 1997.
Internal research and development expenses increased to $3.4 million in the
first six months of 1998 from $1.8 million in the comparable period of 1997, an
increase of $1.6 million or 89%. The increase is due to increased work on the
cancer vaccine program and an increase in the number of internal research
programs.
Gross profit for the first six months of 1998 amounted to $3.8 million versus
$6.6 million in the comparable period of 1997. Gross profit on services for the
first six months of 1998 was $3.2 million, a gross margin of 14%, versus $3.8
million, a gross margin of 17%, in the comparable period of 1997. The decrease
in gross margin is due to timing of study performance within the respective
quarters, and to increased revenue recognized on contracts signed in the first
quarter of 1997 for which costs had been previously been incurred.
SG&A expenses increased to $8.1 million in the first six months of 1998 from
$7.2 million in the comparable period of 1997, an increase of $900,000 or 13%.
The increase is due to the increased marketing effort for Primedica and to the
addition of administrative personnel required to support the growth in
transgenic research and development programs.
Interest income increased to $110,000 in the first six months of 1998, from
$92,000 in the comparable period of 1997, due to an increase in funds available
for investment as a result of proceeds received from the preferred stock
offering in the first quarter and the sale of common stock in a registered
direct offering in the second quarter. Interest expense increased to $756,000 in
the first six months of 1998 from $417,000 in the comparable period of 1997 due
to higher borrowings in 1998.
The Company recognized $1.7 million of Joint Venture losses incurred on ATIII
LLC during the first six months of 1998. In the first six months of 1997, the
Company incurred $531,000 of Joint Venture losses on the SMIG JV.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $10.7 million at June 28, 1998.
During the first six months of 1998, the Company had a $4.3 million net increase
in cash. Sources of funds during the period included net proceeds of $19 million
from the issuance of preferred stock, proceeds of $6.4 million from the issuance
of common stock and $1.1 million of proceeds received from employee stock
purchase and stock option plans. Cash inflows were offset by $5.5 million of
cash used in operations (due primarily to the net loss of $9.9 million offset by
a decrease in non-cash working capital of $325,000 and $4.1 million of non-cash
charges), $3.6 million invested in capital equipment, further expansion of the
transgenic production facility and the expansion of the laboratory facilities,
$12 million used to pay down the revolving lines of credit and $1 million used
to pay down long-term debt.
The Company had working capital of $7.2 million at June 28, 1998 compared to a
deficit of $8.4 million at December 30, 1997. As of June 28, 1998 the Company
had approximately $6.4 million available under the Genzyme Credit Line, $6
million available
10
<PAGE>
under a line of credit with a commercial bank and $2.3 million was available
under various capital lease lines. Under the Company's 1998 operating plan,
existing cash balances along with funds available under the bank and lease lines
and the Genzyme Credit Line are expected to be sufficient to fund the Company
through June 30, 1999.
Management's current expectations regarding the sufficiency of the Company's
cash resources are forward-looking statements, and the Company's cash
requirements may vary materially from such expectations. Such forward-looking
statements are dependent on several factors, including the results of the
Company's testing services business, the ability of the Company to enter into
any transgenic research and development collaborations in the future and the
terms of such collaborations, the results of research and development and
preclinical and clinical testing, competitive and technological advances,
regulatory requirements and the continuing availability of financing at
acceptable terms. If the Company experiences increased losses, the Company may
have to seek additional financing through collaborative arrangements or from
public or private sales of its securities, including equity securities. There
can be no assurance that additional funding will be available on terms
acceptable to the Company, if at all. If additional financing cannot be obtained
on acceptable terms, to continue its operations the Company could be forced to
delay, scale back or eliminate certain of its research and development programs
or to enter into license agreements with third parties for the commercialization
of technologies or products that the Company would otherwise undertake itself.
Impact of Year 2000
Certain companies may face problems if the computer processors and software
upon which they directly or indirectly rely are unable to process data values
correctly upon the turn of the millenium ("Year 2000"). Such a system failure
and corruption of data of the Company or its customers or suppliers could
disrupt the Company's operations, including, among other things, a temporary
inability to process transactions or engage in other business activities or
to receive information or services from suppliers. The Company has appointed
a Year 2000 project team to conduct a full assessment of the potential impact
of the Year 2000 on the Company's business and operations, from the
perspective of Year 2000 compliance of both its internal and its customers'
and suppliers' systems. The Company currently anticipates completing its
evaluation of its business critical systems by the Fall of 1998. Any
necessary system conversions and other corrective actions are targeted for
completion by Spring of 1999. While the Company does not believe that the
cost associated with addressing the Year 2000 issue will be material to the
Company's financial condition, business, liquidity or results of operations,
the Company's assessment of the matter is ongoing and there can be no
assurance that the Year 2000 issue or the costs of addressing it will not
have a material impact on the Company's financial condition, business,
liquidity or results of operations.
11
<PAGE>
PART II
ITEM 4: Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on May 27, 1998, the Company's
stockholders voted as follows:
(a) To reelect each of the following nominees to the Board of Directors for
a three-year term:
<TABLE>
<CAPTION>
Nominee Total Vote "FOR" Total Vote Withheld
- ---------------- ---------------- -------------------
<S> <C> <C>
Robert W. Baldridg 15,400,348 84,525
James A. Geraghty 15,765,696 79,177
Henri A. Termeer 15,766,061 78,812
</TABLE>
The terms in office of Henry E. Blair, Francis J. Bullock, Alan E. Smith and
Alan W. Tuck continued after the meeting.
(b) To amend the Company's 1993 Equity Incentive Plan to increase the
number of shares of the Common Stock of the Company that may be subject
to awards under the Plan from 2,515,000 shares to 3,015,000 shares.
Total Vote for the Proposal 15,409,397
Total Vote Against the Prop 384,747
Abstentions 50,728
(c) To amend the Company's 1993 Director Stock Option Plan to increase the
number of shares of the Common Stock of the Company that may be subject
to awards under the Plan from 100,000 shares to 200,000 shares.
Total Vote for the Proposal 15,351,452
Total Vote Against the Prop 431,111
Abstentions 62,310
12
<PAGE>
ITEM 6: Exhibits and Reports on From 8-K
(a) Exhibits
See the Exhibit Index immediately following the signature page.
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter ended June 28,
1998.
13
<PAGE>
GENZYME TRANSGENICS CORPORATION AND SUBSIDIARY
FORM 10-Q
JUNE 28, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: August 10, 1998 GENZYME TRANSGENICS CORPORATION
BY: /s/ John B. Green
------------------------------
John B. Green
Duly Authorized Officer,
Vice President and
Chief Financial Officer
14
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
10.1 Employment Agreement dated as of July 1, 1998 between the Company and
Dr. Sandra Nusinoff Lehrman.
10.2 1993 Equity Incentive Plan, as amended through May 27, 1998.
10.3 1993 Director Stock Plan, as amended through May 27, 1998.
27 Financial Data Schedule.
15
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
(Sandra Nusinoff Lehrman, M.D.)
This Employment Agreement ("Agreement"), effective as of July 1, 1998,
by and between Genzyme Transgenics Corporation (together with its affiliates and
subsidiaries, "GTC"), a Massachusetts corporation with its principal offices at
Five Mountain Road, Framingham, Massachusetts 01701 and Sandra Nusinoff Lehrman,
M.D. (the "Executive") residing at 60 Watch Hill, East Greenwhich, Rhode Island.
GTC desires to employ the Executive as President and Chief Executive
Officer of GTC for the period and upon the terms and conditions hereinafter set
forth.
Executive desires to serve in such capacities for such period and upon
such terms.
Accordingly, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF EXECUTIVE.
1.1. Employment. Subject to the terms and conditions of this Agreement,
GTC agrees to employ Executive as President and Chief Executive Officer of GTC.
Executive shall have such responsibilities and shall perform such specific
duties as are commensurate with such positions, and as may reasonably be
assigned to the Executive from time to time by the Board of Directors of GTC,
for the period commencing on the date hereof until terminated as herein
provided. Executive hereby accepts such employment.
1.2. Board Membership. The Company shall elect the Executive as a
member of the Board of Directors of the Company with a term expiring at the
annual meeting of stockholders of the Company to be held in 2000. Subject to the
Executive's continued employment with the Company, the Company will nominate the
Executive for re-election at such annual meeting of stockholders.
SECTION 2. COMPENSATION. For all services to be rendered by Executive
to GTC during the term of this Agreement, GTC shall pay to, and provide the
Executive with, the following compensation and benefits:
2.1. Base Salary and Bonus. For the period from the date hereof until
December 31, 1998, GTC shall pay to Executive (i) a base salary of not less than
$260,000 per year, pro rated for such portion of a year and payable in
substantially equal biweekly installments in accordance with GTC practice as in
effect from time to time, and (ii) in addition to the initial bonus described in
Section 2.2 below, incentive and compensatory bonuses, if any, as may be awarded
from time to time by GTC's Compensation Committee; provided the bonus
opportunity for Executive's services for the calendar year 1999 shall not be
less than 40% of her base salary for such year and shall be payable during the
first quarter of the year 2000. With respect to subsequent periods during the
term of this Agreement, GTC will review Executive's base salary and bonus from
time to time and may make adjustments to such base salary and determine such
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bonus based upon, among other factors: (a) Executive's performance, (b) GTC's
performance, (c) changes in costs of living, (d) changes in Executive's
responsibilities, and (e) the benefit to GTC of Executive's efforts on its
behalf; provided that Executive's base salary shall not be less than $260,000
per year during the term of this Agreement and the first such review shall occur
not later than January 1999.
2.2. Initial Bonus. GTC shall pay an initial bonus to the Executive in
the amount of $52,000, $26,000 of which shall be payable upon Executive's
commencement of employment and the remaining $26,000 of which shall be payable
on January 2, 1999.
2.3. Initial and Subsequent Option Grants. GTC has authorized the grant
to the Executive of options to purchase 150,000 shares of GTC's Common Stock at
a price per share equal to the opening price of such Common Stock on the date
Executive commences employment with GTC, exercisable as to 30,000 shares
immediately and as to 30,000 shares on each of the next four anniversary date of
the date of commencement of employment. Such options shall be exercisable for
ten years following the date of grant, subject to early termination in the event
of termination of Executive's employment in accordance with the Company's 1993
Equity Incentive Plan (the "Plan"). GTC may, from time to time, grant Executive
stock options under GTC's stock option plans. Options granted to the Executive
shall be incentive stock options ("ISOs") to the maximum extent permitted by
law. GTC represents that the Plan complies with the requirements for an
incentive stock option plan under Section 422 of the Internal Revenue Code of
1986, as amended. In the event that options are granted to Executive in an
amount greater than the maximum permitted by such Section 422 to obtain ISO
treatment, GTC will work together in cooperation with the Executive to designate
certain options as ISOs and certain options and non-qualified stock options.
2.4. Participation in Benefit Plans. Executive shall be entitled to
immediate participation in all employee benefit plans or programs of GTC,
subject only to such eligibility requirements as are required by law or the
written provisions of any such plans or programs. GTC shall provide life
insurance in an amount equal to twice the Executive's annual base salary,
payable to beneficiaries identified by the Executive or in the absence of
designation, to her estate. GTC does not guarantee the adoption or continuance
of any particular employee benefit or stock plan or other program during the
term of this Agreement, and Executive's participation in any such plan or
program shall be subject to the provisions, rules and regulations applicable
thereto. Executive shall be entitled to paid vacation each year in accordance
with applicable GTC policy. Health and dental plans shall cover Executive and
her dependents as they do for other GTC executives. Such health and dental plans
comply with ERISA and COBRA to the extent applicable. Under current health
insurance policies, such COBRA rights will commence on termination of the period
over which severance payments are made under Section 4.2.
2.5. Relocation and Other Expenses.
(a) GTC shall reimburse Executive for all ordinary and
necessary business expenses incurred in the performance of Executive's duties
under this Agreement, provided that Executive accounts properly for such
expenses to GTC in accordance with the general corporate policies of GTC and in
accordance with the requirements of the Internal Revenue Service regulations
relating to substantiation of expenses.
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(b) GTC shall reimburse Executive for her actual out-of-pocket
expenses in connection with Executive's relocation of her residence to
Massachusetts; provided (i) such expenses must be incurred not later than 30
months after the Executive's commencement of employment with GTC and (ii) GTC
shall have no obligation to reimburse relocation expenses in excess of $35,000.
To the extent the Executive incurs federal or state tax liability in connection
with her receipt of such relocation reimbursement, GTC shall provide Executive
with a "gross-up" payment to cover such tax liability.
SECTION 3. CONFIDENTIAL INFORMATION AND NON-COMPETITION AGREEMENTS. As
a condition to GTC's obligations hereunder, the Executive will execute a
confidentiality agreement pertaining to the intellectual property and
confidential information of GTC and GTC's standard form of a non-competition
agreement for executive officers and key employees.
The obligations of Executive under this section and the agreements
referenced in the preceding paragraph shall survive termination of this
Agreement for any reason.
SECTION 4. TERMINATION AND SEVERANCE PAYMENT.
4.1. Termination. The employment of the Executive by GTC may be
terminated as follows:
(a) Executive's employment hereunder shall terminate upon
Executive's death or inability, by reason of physical or mental impairment, to
perform substantially all of Executive's duties as contemplated herein for a
continuous period of 120 days or more;
(b) Executive's employment hereunder may be terminated by GTC
or Executive without Cause (as hereinafter defined);
(c) Executive's employment hereunder may be terminated by GTC
in the event of Executive's breach of any material duty or obligation hereunder,
or intentional or grossly negligent conduct that is materially injurious to GTC,
as reasonably determined by GTC's Board of Directors, or willful failure to
follow the reasonable directions of GTC's Board of Directors (any such event
herein to be referred to as "Cause"), provided that GTC shall give written
notice of the conduct alleged to give Cause for termination and Executive shall
have 90 days to remedy the same; and
(d) Executive's employment hereunder may be terminated by
Executive within twenty-four months after the occurrence of any one of the
following (each, a "Change of Control"):
(i) the acquisition (A) by any "person" (as such
term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934) or
(B) by Genzyme Corporation from any party of an amount of GTC's Common Stock so
that it holds or controls 50% or more of GTC's Common Stock;
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(ii) a merger or similar combination after which 49%
or more of the voting stock of the surviving corporation is held by persons who
were not stockholders of GTC immediately prior to such merger or combination;
(iii) the election by the stockholders of GTC of
20% or more of the directors of GTC other than pursuant to nomination by GTC's
management; or
(iv) the sale by GTC of all or substantially all of
its assets or business.
4.2 Severance Payment; Benefits.
(a) Termination Events Resulting in Severance Payments.
In the event of the termination of the Executive's employment:
(i) by GTC under Section 4.1(b), or
(ii) by Executive under Section 4.1(d),
then GTC shall make severance payment(s) to Executive equal to (A) twenty-four
(24) months of the Executive's base salary (the "Base Salary Payment") at the
time of such termination and (B) an amount equal to the Executive's maximum
incentive bonus that would next be payable to her and would otherwise be due to
Executive if such termination had not occurred and the maximum amount of such
bonus had been fully earned, pro rated on the basis of the number of days that
have elapsed between the beginning of the bonus period in which such termination
occurs and the termination date. Such severance amounts shall be together
payable in equal installments over such 24 month period in the event Executive's
employment is terminated by GTC under Section 4.1(b) other than in a Change of
Control. In the event of a Change of Control if Executive's employment is
terminated by GTC in contemplation thereof or within 24 months thereafter
pursuant to Section 4.1(b) or if Executive's employment is terminated by
Executive under Section 4.1(d), such severance amounts shall be together payable
in a lump sum within ten (10) days after the termination date. No severance
shall be payable in the event that Executive's employment is terminated pursuant
to Section 4.1(a) or (c), or by Executive pursuant to Section 4.1(b).
(b) Benefits. Executive's coverage under GTC's life, health
and dental insurance plans will remain in effect and Executive will be entitled
to continue to participate in GTC's retirement plans, all at GTC's expense,
during the period following termination that has the duration of the time period
used to determine the Base Salary Payment, unless Executive notifies GTC in
writing that such coverage is no longer necessary. If, because of limitations
required by third parties or imposed by law, Executive cannot be provided such
benefits through GTC's plans, then GTC will provide Executive with substantially
equivalent benefits on an aggregate basis, at its expense.
4.3 Accelerated Vesting of Options Upon a Change of Control. If this
Agreement is terminated by Executive pursuant to Section 4.1(d) or if GTC
terminates the Employee without Cause in contemplation of or within 24 months
after a Change in Control, any options then held by Executive to purchase shares
of the Common Stock of GTC which options are then subject to vesting, shall,
notwithstanding any contrary provision in the agreement or plan pursuant to
which
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such options had been granted, be fully vested and exercisable on the date
immediately preceding the effective date of such termination for the duration of
the term of such options as if such termination of employment had not occurred.
SECTION 5. MISCELLANEOUS.
5.1 Assignment. This Agreement may not be assigned, in whole or in
part, by any party without the prior written consent of the other party, except
that GTC may, without the consent of Executive, assign its rights and
obligations under this Agreement to any corporation, firm or other business
entity with or into which GTC may merge or consolidate, or to which GTC may sell
or transfer all or substantially all of its assets, or of which 50% or more of
the equity investment and of the voting control is owned, directly or
indirectly, by, or is under common ownership with, GTC. After any such
assignment by GTC, GTC shall be discharged from all further liability hereunder
and such assignee shall have all the rights and obligations of GTC under this
Agreement.
5.2 Notices. All notices, requests, demands and other communications to
be given pursuant to this Agreement shall be in writing and shall be deemed to
have been duly given if delivered by hand or mailed by registered or certified
mail, return receipt requested, postage prepaid, to the addresses set forth at
the beginning of this Agreement or such other address as a party shall have
designated by notice in writing to the other party, provided that notice of any
change in address must actually have been received to be effective hereunder.
5.3 Integration. This Agreement is the entire agreement of the parties
with respect to the subject matter hereof and supersedes any prior agreement or
understanding relating to Executive's employment with or compensation by GTC.
This Agreement may not be amended, supplemented or otherwise modified except by
a writing signed by Executive and GTC.
5.4 Binding Effect. Subject to Section 5.1, this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their successors,
assigns, heirs and personal representatives.
5.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and shall together
constitute one and the same instrument.
5.6 Severability. If any provision hereof shall, for any reason, be
held to be invalid or unenforceable in any respect, such invalidity or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid or unenforceable provision had not been
included herein. If any provision hereof shall for any reason be held by a court
to be excessively broad as to duration, geographical scope, activity or subject
matter, it shall be construed by limiting and reducing it to make it enforceable
to the extent compatible with applicable law as then in effect.
5.7 Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts, without regard to its conflict of law provisions.
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Agreement as of the date first written above.
EXECUTIVE
/s/ Sandra Nusinoff Lehrman, M.D.
---------------------------------------------
Sandra Nusinoff Lehrman, M.D.
GENZYME TRANSGENICS CORPORATION
By: /s/ John B. Green
------------------------------------------
John B. Green
Vice President
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EXHIBIT 10.2
1. Adopted by the Board of Directors on May 1, 1993; Approved by the
stockholders on June 25, 1993.
2. Amended by the Board of Directors on September 24, 1993 (No stockholder
approval required).
3. Amended by the Board of Directors on October 24, 1994, March 17, 1995 and
April 6, 1995; Approved by the stockholders on May 19, 1995.
4. Amended by the Board of Directors on March 13, 1996; Approved by the
stockholders on May 15, 1996.
5. Amended by the Board of Directors on March 3, 1997; Approved by the
stockholders on May 28, 1997.
6. As amended by the Board of Directors on March 4, 1998; Appoved by the
stockholders on May 27, 1998.
GENZYME TRANSGENICS CORPORATION
1993 Equity Incentive Plan
Section 1. Purpose
The purpose of the Genzyme Transgenics Corporation 1993 Equity
Incentive Plan (the "Plan") is to attract and retain key employees and
consultants to provide an incentive for them to assist the Company to achieve
long-range performance goals, and to enable them to participate in the long-term
growth of the Company.
Section 2. Definitions
"Affiliate" means any business entity in which the Company owns
directly or indirectly 50% or more of the total combined voting power or has a
significant financial interest as determined by the Committee.
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock or Stock Unit awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means either any one of one or more committees of the Board
appointed by the Board to administer the Plan, the members of which are
"Non-Employee Directors" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, or any successor provision (the "Rule") to the
extent necessary to comply with the Rule.
"Common Stock" or "Stock" means the Common Stock, $0.01 par value, of
the Company.
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"Company" means Genzyme Transgenics Corporation.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, designated Beneficiary
shall mean the Participant's estate.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Committee
in good faith or in the manner established by the Committee from time to time.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant under Section 6 which is not intended to
be an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock
Option.
"Participant" means a person selected by the Committee to receive an
Award under the Plan.
"Performance Cycle" or "Cycle" means the period of time selected by the
Committee during which performance is measured for the purpose of determining
the extent to which an award of Performance Shares has been earned.
"Performance Shares" mean shares of Common Stock which may be earned by
the achievement of performance goals awarded to a Participant under Section 8.
"Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time selected by the Committee
during which an award of Restricted Stock may be forfeited to the Company.
"Restricted Stock" means shares of Common Stock subject to forfeiture
awarded to a Participant under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess
in value of shares of Common Stock over the exercise price awarded to a
Participant under Section 7.
"Stock Unit" means an award of Common Stock or units that are valued in
whole or in part by reference to, or otherwise based on, the value of Common
Stock, awarded to a Participant under Section 10.
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Section 3. Administration
The Plan shall be administered by the Committee. The Committee shall
have authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing the operation of the Plan as it shall from time to time
consider advisable, and to interpret the provisions of the Plan. The Committee's
decisions shall be final and binding. To the extent permitted by applicable law,
the Committee may delegate to one or more executive officers of the Company the
power to make Awards to Participants who are not Reporting Persons and all
determinations under the Plan with respect thereto, provided that the Committee
shall fix the maximum amount of such Awards for the group and a maximum for any
one Participant.
Section 4. Eligibility
All employees, and in the case of Awards other than Incentive Stock
Options, consultants of the Company or any Affiliate capable of contributing
significantly to the successful performance of the Company, other than a person
who has irrevocably elected not to be eligible, are eligible to be Participants
in the Plan.
Section 5. Stock Available for Awards
(a) Subject to adjustment under subsection (b), Awards may be made
under the Plan for up to 3,015,000(1) shares of Common Stock. If any Award in
respect of shares of Common Stock expires or is terminated unexercised or is
forfeited for any reason or settled in a manner that results in fewer shares
outstanding than were initially awarded, including without limitation the
surrender of shares in payment for the Award or any tax obligation thereon, the
shares subject to such Award or so surrendered, as the case may be, to the
extent of such expiration, termination, forfeiture or decrease, shall again be
available for award under the Plan, subject, however, in the case of Incentive
Stock Options, to any limitation required under the Code. Common Stock issued
through the assumption or substitution of outstanding grants from an acquired
company shall not reduce the shares available for Awards under the Plan. Shares
issued under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares.
(b) In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below fair market value, or other similar
transaction affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Committee,
- -------------------
(1) This number includes 224,350 shares reserved for issuance upon the
exercise of outstanding options to purchase shares of common stock of TSI
Corporation, which options were assumed by the Company in October 1994 in
connection with the Company's acquisition of TSI Corporation.
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subject, in the case of Incentive Stock Options, to any limitation required
under the Code, shall equitably adjust any or all of (i) the number and kind of
shares in respect of which Awards may be made under the Plan, (ii) the number
and kind of shares subject to outstanding Awards, and (iii) the award, exercise
or conversion price with respect to any of the foregoing, and if considered
appropriate, the Committee may make provision for a cash payment with respect to
an outstanding Award, provided that the number of shares subject to any Award
shall always be a whole number.
Section 6. Stock Options
(a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Nonstatutory Stock Options and determine the number
of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder.
(b) The Committee shall establish the option price at the time each
Option is awarded, which price shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of award.
(c) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may specify in the applicable Award or
thereafter. The Committee may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or, to the extent permitted
by the Committee at or after the award of the Option, by delivery of a note or
shares of Common Stock owned by the optionee, including Restricted Stock, valued
at their Fair Market Value on the date of delivery, or such other lawful
consideration as the Committee may determine.
(e) The Committee may provide for the automatic award of an Option upon
the delivery of shares to the Company in payment of an Option for up to the
number of shares so delivered.
Section 7. Stock Appreciation Rights
(a) Subject to the provisions of the Plan, the Committee may award SARs
in tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option. SARs in tandem with an Option shall terminate to the
extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised. SARs shall have an
exercise price of not less than the Fair Market Value of the Common Stock on the
date of award, or in the case of SARs in tandem with Options, the exercise price
of the related Option.
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(b) An SAR related to an Option which can only be exercised during
limited periods following a change in control of the Company, may entitle the
Participant to receive an amount based upon the highest price paid or offered
for Common Stock in any transaction relating to the change in control or paid
during the thirty-day period immediately preceding the occurrence of the change
in control in any transaction reported in the stock market in which the Common
Stock is normally traded.
Section 8. Performance Shares
(a) Subject to the provisions of the Plan, the Committee may award
Performance Shares and determine the number of such shares for each Performance
Cycle and the duration of each Performance Cycle. There may be more than one
Performance Cycle in existence at any one time, and the duration of Performance
Cycles may differ from each other. The payment value of Performance Shares shall
be equal to the Fair Market Value of the Common Stock on the date the
Performance Shares are earned or, in the discretion of the Committee, on the
date the Committee determines that the Performance Shares have been earned.
(b) The Committee shall establish performance goals for each Cycle, for
the purpose of determining the extent to which Performance Shares awarded for
such Cycle are earned, on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. During any Cycle, the
Committee may adjust the performance goals for such Cycle as it deems equitable
in recognition of unusual or non-recurring events affecting the Company, changes
in applicable tax laws or accounting principles, or such other factors as the
Committee may determine.
(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares which have been
earned on the basis of performance in relation to the established performance
goals. The payment values of earned Performance Shares shall be distributed to
the Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable thereafter. The Committee shall determine,
at or after the time of award, whether payment values will be settled in whole
or in part in cash or other property, including Common Stock or Awards.
Section 9. Restricted Stock
(a) Subject to the provisions of the Plan, the Committee may award
shares of Restricted Stock and determine the duration of the Restricted Period
during which, and the conditions under which, the shares may be forfeited to the
Company and the other terms and conditions of such Awards. Shares of Restricted
Stock shall be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Shares of Restricted Stock shall be evidenced in such
manner as the Committee may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of
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the Participant and unless otherwise determined by the Committee, deposited by
the Participant, together with a stock power endorsed in blank, with the
Company. At the expiration of the Restricted Period, the Company shall deliver
such certificates to the Participant or if the Participant has died, to the
Participant's Designated Beneficiary.
Section 10. Stock Units
(a) Subject to the provisions of the Plan, the Committee may award
Stock Units subject to such terms, restrictions, conditions, performance
criteria, vesting requirements and payment rules as the Committee shall
determine.
(b) Shares of Common Stock awarded in connection with a Stock Unit
Award shall be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
Section 11. General Provisions Applicable to Awards
(a) Limitations on Transferability. Options shall not be transferable
by the recipient other than by will or the laws of descent and distribution and
are exercisable during such person's lifetime only by such person or by such
person's guardian or legal representative; provided that the Committee may in
its discretion waive such restriction in any case.
(b) Documentation. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or comply with applicable tax and regulatory
laws and accounting principles.
(c) Committee Discretion. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type of
Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of award or at any time thereafter.
(d) Settlement. The Committee shall determine whether Awards are
settled in whole or in part in cash, Common Stock, other securities of the
Company, Awards or other property. The Committee may permit a Participant to
defer all or any portion of a payment under the Plan, including the crediting of
interest on deferred amounts denominated in cash and dividend equivalents on
amounts denominated in Common Stock.
(e) Dividends and Cash Awards In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest, and (ii)
cash payments in lieu of or in addition to an Award.
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(f) Termination of Employment. The Committee shall determine the effect
on an Award of the disability, death, retirement or other termination of
employment of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may receive payment of an Award or exercise rights thereunder.
(g) Change in Control. In order to preserve a Participant's rights
under an Award in the event of a change in control of the Company, the Committee
in its discretion may, at the time an Award is made or at any time thereafter,
take one or more of the following actions: (i) provide for the acceleration of
any time period relating to the exercise or realization of the Award, (ii)
provide for the purchase of the Award upon the Participant's request for an
amount of cash or other property that could have been received upon the exercise
or realization of the Award had the Award been currently exercisable or payable,
(iii) adjust the terms of the Award in a manner determined by the Committee to
reflect the change in control, (iv) cause the Award to be assumed, or new rights
substituted therefor, by another entity, or (v) make such other provision as the
Committee may consider equitable and in the best interests of the Company.
(h) Withholding. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Options under the Plan no later than the date
of the event creating the tax liability. The Company and its Affiliates may, to
the extent permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to the Participant. In the Committee's discretion, the
Participant may pay any taxes due with respect to an Option in whole or in part
in shares of Common Stock, including shares retained from the Option creating
the tax obligation, valued at their Fair Market Value on the date of retention
or delivery.
(i) Foreign Nationals. Awards may be made to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.
(j) Amendment of Award. The Committee may amend, modify or terminate
any outstanding Award, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization and converting
an Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
Section 12. Miscellaneous
(a) Limitation on Number of Shares Granted. Notwithstanding any other
provision of the Plan, the aggregate number of shares of Common Stock subject to
Options and SARs that may be granted within any fiscal year to any one Eligible
Person under the Plan shall not exceed that number of shares equal to 20% of the
total number of shares reserved for issuance under the Plan, except for grants
to new hires during the fiscal year of hiring which shall not exceed that
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number of shares equal to 30% of the total number of shares reserved for
issuance under the Plan.
(b) No Right To Employment. No person shall have any claim or right to
be granted an Award, and the grant of an Award shall not be construed as giving
a Participant the right to continued employment. The Company expressly reserves
the right at any time to dismiss a Participant free from any liability or claim
under the Plan, except as expressly provided in the applicable Award.
(c) No Rights As Shareholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a shareholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the holder thereof. A Participant to whom
Common Stock is awarded shall be considered the holder of the Stock at the time
of the Award except as otherwise provided in the applicable Award.
(d) Effective Date. Subject to the approval of the shareholders of the
Company, the Plan shall be effective on May 1, 1993. Prior to such approval,
Awards may be made under the Plan expressly subject to such approval.
(e) Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that no amendment shall be
made without shareholder approval if such approval is necessary to comply with
any applicable tax or regulatory requirement.
(f) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.
8
<PAGE>
EXHIBIT 10.3
1. As adopted by the Board of Directors on May 11, 1993 and approved by the
stockholders on June 25, 1993.
2. As amended by the Board of Directors on March 3, 1997, and approved by the
stockholders on May 28, 1997.
3. As amended by the Board of Directors on May 28, 1997 (no stockholder
approval required).
4. As amended by the Board of Directors on March 4, 1998 and approved by the
stockholders on May 27, 1998.
GENZYME TRANSGENICS CORPORATION
1993 Director Stock Option Plan
The purpose of this 1993 Director Stock Option Plan (the "Plan") of
Genzyme Transgenics Corporation (the "Company") is to attract and retain highly
qualified non-employee directors of the Company and to encourage ownership of
stock of the Company by such Directors so as to provide additional incentives to
promote the success of the Company.
1. Administration of the Plan.
Grants of stock options under the Plan shall be automatic as provided
in Section 6. However, all questions of interpretation with respect to the Plan
and options granted under it shall be determined by the Board of Directors of
the Company (the "Board") or by a committee consisting of one or more directors
appointed by the Board and such determination shall be final and binding upon
all persons having an interest in the Plan.
2. Persons Eligible to Participate in the Plan.
All directors of the Company who are not employees of the Company or of
any subsidiary of the Company shall be eligible to participate in the Plan,
unless such director irrevocably elects not to participate on or after May 29,
1997.
3. Shares Subject to the Plan.
(a) The aggregate number of shares of the Company's Common Stock which
may be optioned under this Plan is 200,000 shares. Shares issued under the Plan
may consist in whole or in part of authorized but unissued shares or treasury
shares.
(b) In the event of a stock dividend, split-up, combination or
reclassification of shares, recapitalization or other similar capital change
relating to the Company's Common Stock, the maximum aggregate number and kind of
shares or securities of the Company as to which options may be granted under
this Plan and as to which options then outstanding shall be exercisable, and the
option price of such options shall be appropriately adjusted so that the
proportionate number of shares or other securities as to which options may be
granted and the proportionate interest of holders of outstanding options shall
be maintained as before the occurrence of such event.
1
<PAGE>
(c) In the event of a consolidation or merger of the Company with
another corporation where the Company's stockholders do not own a majority in
interest of the surviving or resulting corporation, or the sale or exchange of
all or substantially all of the assets of the Company, or a reorganization or
liquidation of the Company, any deferred exercise period shall be automatically
accelerated and each holder of an outstanding option shall be entitled to
receive upon exercise and payment in accordance with the terms of the option the
same shares, securities or property as he would have been entitled to receive
upon the occurrence of such event if he had been, immediately prior to such
event, the holder of the number of shares of Common Stock purchasable under his
or her option; provided, however, that in lieu of the foregoing the Board may
upon written notice to each holder of an outstanding option or right under the
Plan, provide that such option or right shall terminate on a date not less than
20 days after the date of such notice unless theretofore exercised.
(d) Whenever options under this Plan lapse or terminate or otherwise
become unexercisable the shares of Common Stock which were subject to such
options may again be subjected to options under this Plan. The Company shall at
all times while this Plan is in force reserve such number of shares of Common
Stock as will be sufficient to satisfy the requirements of this Plan.
4. Non-Statutory Stock Options.
All options granted under this Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
5. Form of Options.
Options granted hereunder shall be in such form as the Board or any
committee appointed pursuant to Section 1 above may from time to time determine.
6. Grant of Options and Option Terms.
(a) Automatic Grant of Options. Upon the election or re-election of an
eligible director under this Plan, such director shall automatically be granted
an option to purchase 5,000 shares of Common Stock for each year of the term of
office to which he or she is elected. If such director is elected on a date
other than the date of an annual meeting of stockholders (whether elected by the
Board or the stockholders and whether to fill a vacancy or otherwise), such
director shall automatically be granted options to purchase 5,000 shares of
Common Stock for each year or portion thereof of the term of office to which he
or she is elected. At the 1998 annual meeting of stockholders, any eligible
director who is not being elected or re-elected at such annual meeting shall
automatically be granted an option to purchase 3,000 shares of Common Stock for
each year in such director's remaining term of office. No options shall be
granted hereunder after ten years from the date on which this Plan was initially
approved and adopted by the Board.
2
<PAGE>
(b) Date of Grant. The "Date of Grant" for options granted under this
Plan shall be the date of election or re-election as a director or in certain
cases, the 1998 annual meeting of stockholders, as the case may be.
(c) Option Price. The option price for each option granted under this
Plan shall be the current fair market value of a share of Common Stock of the
Company as determined (i) prior to date on which the Company becomes subject to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), by the
Board in good faith or in the manner established by the Board from time to time,
and (ii) on or after the date on which the Company is subject to the Exchange
Act, by the last sale price for the Company's Common Stock as reported by the
National Association of Securities Dealers Automated Quotations National Market
System for the business day immediately preceding the Date of Grant.
(d) Term of Option. The term of each option granted under this Plan
shall be ten years from the Date of Grant.
(e) Exercisability of Options. Options granted under this Plan to a
director on election or re-election shall become exercisable with respect to
5,000 shares on the Date of Grant and on each annual meeting of stockholders of
the Company following the Date of Grant if and only if the option holder is a
member of the Board at the opening of business on that date (e.g., an option to
purchase 15,000 shares of Common Stock granted at the 1998 annual meeting would
become exercisable with respect to 5,000 shares at each of the 1998, 1999 and
2000 annual meetings). Options granted at the 1998 annual meeting of
stockholders to directors not being elected or re-elected at such meeting shall
become exercisable with respect to 3,000 shares on the Date of Grant and with
respect to grants for 6,000 shares, also on the 1999 annual meeting of
stockholders of the Company, if and only if the option holder is a member of the
Board at the opening of business on that date.
(f) General Exercise Terms. Directors holding exercisable options under
this Plan who cease to serve as members of the Board may, during their lifetime,
exercise the rights they had under such options at the time they ceased being a
director for the full unexpired term of such option. Any rights that have not
yet become exercisable shall terminate upon cessation of membership on the
Board. Upon the death of a director, those entitled to do so shall have the
right, at any time within twelve months after the date of death, to exercise in
whole or in part any rights which were available to the director at the time of
his or her death. The rights of the option holder may be exercised by the
holder's guardian or legal representative in the case of disability and by the
beneficiary designated by the holder in writing delivered to the Company or, if
none has been designated, by the holder's estate or his or her transferee on
death in accordance with this Plan, in the case of death. Options granted under
the Plan shall terminate, and no rights thereunder may be exercised, after the
expiration of the applicable exercise period. Notwithstanding the foregoing
provisions of this section, no rights under any options may be exercised after
the expiration of ten years from their Date of Grant.
(g) Method of Exercise and Payment. Options may be exercised only by
written notice to the Company at its head office accompanied by payment of the
full option price for the shares of Common Stock as to which they are exercised.
The option price shall be paid in cash or by check or in shares of Common Stock
of the Company, or in any combination thereof. Shares of
3
<PAGE>
Common Stock surrendered in payment of the option price shall have been held by
the person exercising the option for at least six months, unless otherwise
permitted by the Board. The value of shares delivered in payment of the option
price shall be their fair market value, as determined in accordance with Section
6(c) above, as of the date of exercise. Upon receipt of such notice and payment,
the Company shall promptly issue and deliver to the optionee (or other person
entitled to exercise the option) a certificate or certificates for the number of
shares as to which the exercise is made.
(h) Limitations on Transferability. Options granted under this Plan
shall not be transferable by the recipient other than by will or the laws of
descent and distribution and are exercisable during such person's lifetime only
by such person or by such person's guardian or legal representative, provided
the Board or any committee appointed by the Board may in its discretion waive
such restriction in any case.
7. Limitation of Rights.
(a) No Right to Continue as a Director. Neither the Plan, nor the
granting of an option or any other action taken pursuant to the Plan, shall
constitute an agreement or understanding, express or implied, that the Company
will retain an option holder as a director for any period of time or at any
particular rate of compensation.
(b) No Stockholders' Rights for Options. A director shall have no
rights as a stockholder with respect to the shares covered by options until the
date the director exercises such options and pays the option price to the
Company, and no adjustment will be made for dividends or other rights for which
the record date is prior to the date such option is exercised and paid for.
8. Amendment or Termination.
The Board may amend or terminate this Plan at any time. The Board may
amend or modify any outstanding option in any respect, provided that the
optionee's consent to such action shall be required unless the Board determines
that the action, taking into account any relative action, would not materially
and adversely affect the optionee.
9. Stockholder Approval.
This Plan was approved by the Stockholders on June 25, 1993 and the
amendments approved by the Board of Directors on March 3, 1997 and any further
amendments hereto shall be subject to stockholder approval to the extent (i)
required by law, (ii) required by Nasdaq or stock exchange listing requirements,
as determined by the Board of Directors, or (iii) as desirable, as determined by
the Board of Directors, to comply with Rule 16b-3 under the Securities Exchange
Act of 1934, as amended. In the event any approval is not obtained, all options
granted under this Plan after such further amendment shall be void and without
effect.
10. Governing Law.
This Plan shall be governed by and interpreted in accordance with the
laws of the Commonwealth of Massachusetts.
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENZYME
TRANSGENICS CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> JUN-28-1998
<CASH> 10,691
<SECURITIES> 0
<RECEIVABLES> 7,003
<ALLOWANCES> 437
<INVENTORY> 11
<CURRENT-ASSETS> 27,337
<PP&E> 37,187
<DEPRECIATION> 8,397
<TOTAL-ASSETS> 74,152
<CURRENT-LIABILITIES> 20,106
<BONDS> 8,764
0
0
<COMMON> 183
<OTHER-SE> 44,233
<TOTAL-LIABILITY-AND-EQUITY> 74,152
<SALES> 28,164
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<CGS> 27,747
<TOTAL-COSTS> 37,557
<OTHER-EXPENSES> (100)
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<INTEREST-EXPENSE> 646
<INCOME-PRETAX> (9,939)
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<NET-INCOME> (11,085)
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