<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Com-
mission only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
GENZYME TRANSGENICS CORPORATION
FIVE MOUNTAIN ROAD
FRAMINGHAM, MASSACHUSETTS 01701
(508) 620-9700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 25, 1999
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
12:00 p.m. on Tuesday, May 25, 1999 for the following purposes:
1. To elect three directors of the Company to serve until the 2002 Annual
Meeting of Stockholders.
2. 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 375,000 shares.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on April 1,
1999 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,
Lynnette C. Fallon
CLERK
Dated: April 28, 1999
<PAGE>
GENZYME TRANSGENICS CORPORATION
FIVE MOUNTAIN ROAD
FRAMINGHAM, MASSACHUSETTS 01701
TELEPHONE (508) 620-9700
------------------
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 Tuesday, May 25, 1999, and at any adjournments
thereof. The approximate date on which this proxy statement and accompanying
proxy are first being sent or given to stockholders is April 28, 1999.
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.
VOTING SECURITIES AND VOTE REQUIRED
Only stockholders of record at the close of business on April 1, 1999
will be entitled to vote at the meeting. On April 1, 1999, the Company had
outstanding 18,832,764 shares of common stock, $.01 par value (the "Common
Stock"), which is its only outstanding class of voting stock, each share of
which is entitled to one vote.
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.
Directors must be elected by a plurality of the votes properly cast at
the meeting pursuant to the Company's by-laws. The affirmative vote of the
holders of a majority of the shares of Common Stock present or represented at
the Annual Meeting is required to approve the proposed amendment to the
Company's 1993 Equity Incentive Plan.
Dated: April 28, 1999
<PAGE>
SHARE OWNERSHIP
The following table and footnotes set forth certain information
regarding the beneficial ownership of the Company's Common Stock as of April 1,
1999 by (i) persons known by the Company to be beneficial owners of more than 5%
of its Common Stock, (ii) the Chief Executive Officer of the Company and the
four executive officers named in the Summary Compensation Table, (iii) each
director of the Company, and (iv) all current executive officers and directors
of the Company as a group.
The footnotes to the table also include information about the ownership
of common stock of Genzyme Corporation ("Genzyme"), of which the Company is a
less-than-majority owned subsidiary. Genzyme has three series of Common Stock:
General Division Common Stock ("GGD Stock"), Tissue Repair Division common stock
("GTR Stock") and Molecular Oncology Division Common Stock ("GMO Stock").
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)
----------------------
BENEFICIAL OWNER SHARES PERCENT OF CLASS
- ---------------- ------------- ----------------
<S> <C> <C>
Henri A. Termeer.............................................. 7,701,865 (2) 40.8%
c/o Genzyme Corporation
One Kendall Square, Cambridge, MA 02139
Genzyme Corporation........................................... 7,669,365 (3) 40.7%
One Kendall Square, Cambridge, MA 02139
James A. Geraghty............................................. 211,546 (4) *
Peter H. Glick................................................ 99,336 (5) *
John B. Green................................................. 90,926 (6) *
Robert W. Baldridge........................................... 93,075 (7) *
Harry M. Meade................................................ 80,820 (8) *
Sandra Nusinoff Lehrman....................................... 35,616 (9) *
Alan E. Smith................................................. 20,000 (10) *
Francis J. Bullock............................................ 18,000 (11) *
Henry E. Blair................................................ 16,000 (12) *
Alan W. Tuck.................................................. 16,000 (13) *
All current executive officers and directors as a group
(11 persons).................................................. 8,383,184 (14) 43.0%
</TABLE>
* 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 GGD Stock, GTR Stock and GMO 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 23,000 shares subject to stock options currently exercisable
or exercisable within the 60-day period following April 1, 1999. Also
includes 7,669,365 shares beneficially owned by Genzyme, including an
aggregate of 241,000 shares subject to common stock purchase warrants
that are currently exercisable or exercisable within the 60-day period
following April 1, 1999, 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 781,355 shares, 317,448 shares and 71,461 shares of GGD Stock, GTR
Stock and GMO Stock, respectively, which figures include options to
purchase 561,420 shares, 195,189 shares, and 52,080 shares of GGD
Stock, GTR Stock and GMO Stock, respectively, that are currently
exercisable or exercisable within the 60-day period following April 1,
1999. The GGD Stock, GTR Stock and GMO Stock beneficially owned by Mr.
Termeer also includes 1,123 shares, 6,900 shares and 120 shares,
respectively, held by Mr. Termeer's wife, and 8,648 shares of GTR Stock
held in trust for the benefit of Mr. Termeer's son. Mr. Termeer
disclaims beneficial ownership of all shares held by his wife and the
trust. In the aggregate, such ownership represents less than one
percent of the outstanding shares of each of GGD Stock, GTR Stock and
GMO Stock.
(3) Includes 241,000 shares subject to common stock purchase warrants that
are currently exercisable or exercisable within the 60-day period
following April 1, 1999.
(4) Includes 188,332 shares subject to stock options currently exercisable
or exercisable within the 60-day period following April 1, 1999. Mr.
Geraghty also beneficially owns 9,454 shares, 7,369 shares and 1,439
shares of GGD Stock, GTR Stock and GMO Stock, respectively, which
consist of options to purchase 6,332 shares, 7,069 shares and 1,407
shares of GGD Stock, GTR Stock and GMO Stock,, respectively, that are
currently exercisable or exercisable within the 60-day period following
April 1, 1999.
(5) Includes 82,276 shares subject to stock options currently exercisable
or exercisable within the 60-day period following April 1, 1999.
(6) Includes 90,376 shares subject to stock options currently exercisable
or exercisable within the 60-day period following April 1, 1999.
(7) Includes 90,000 shares subject to stock options currently exercisable
or exercisable within the 60-day period following April 1, 1999.
(8) Includes 75,176 shares subject to stock options currently exercisable
or exercisable within the 60-day period following April 1, 1999. Dr.
Meade also beneficially owns 700 shares and 1,126
3
<PAGE>
shares of GGD Stock and GTR Stock, respectively, which consist of
options to purchase such shares that are currently exercisable or
exercisable within the 60-day period following April 1, 1999.
(9) Includes 30,000 shares subject to stock options currently exercisable
or exercisable within the 60-day period following April 1, 1999.
(10) Consists of shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1999. Dr. Smith
also beneficially owns 141,778 shares, 42,368 shares and 17,640 shares
of GGD Stock, GTR Stock and GMO Stock, respectively, which include
options to purchase 141,490 shares, 39,822 shares and 17,618 shares of
GGD Stock, GTR Stock and GMO Stock, respectively, that are currently
exercisable or exercisable within the 60-day period following April 1,
1999.
(11) Consists of shares subject to stock options currently exercisable or
exercisable within the 60-day period following April 1, 1999.
(12) Includes 15,000 shares subject to stock options currently exercisable
or exercisable within the 60-day period following April 1, 1999. Mr.
Blair also beneficially owns 50,600 shares, 21,911 shares and 19,339
shares of GGD Stock, GTR Stock and GMO stock, respectively, which
include options to purchase 25,600 shares, 17,827 shares and 6,638
shares of GGD Stock, GTR Stock and GMO Stock, respectively, that are
currently exercisable or exercisable within the 60-day period following
April 1, 1999.
(13) Consists of 15,000 shares subject to stock options currently
exercisable or exercisable within the 60-day period following April 1,
1999 and 1,000 shares as to which Mr. Tuck shares voting and investment
power with his wife.
(14) Includes 647,160 shares subject to stock options currently exercisable
or exercisable within the 60-day period following April 1, 1999 and
7,669,365 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 983,887 shares, 390,222 shares
and 109,879 shares of GGD Stock, GTR Stock and GMO Stock, respectively,
which figures include options to purchase 735,532 shares, 261,033
shares and 77,743 shares of GGD Stock, GTR Stock and GMO Stock,
respectively, that are currently exercisable or exercisable within the
60-day period following April 1, 1999. Such ownership represents 1.2%
and 1.7% of the outstanding shares of GGD Stock and GTR Stock,
respectively, and less than 1% of GMO Stock.
4
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of directors at eight 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 25, 1999, three directors will be elected to hold
office for a term of three years and until their successors are elected and
qualified. The Board of Directors' nominees, Henry E. Blair, Francis J. Bullock
and Alan W. Tuck, have consented to serve if elected. However, if any such
nominee is unable to serve, proxies will be voted for such other candidate or
candidates as may be nominated by the Board of Directors.
Pursuant to the Company's by-laws, directors must be elected by a
plurality of votes properly cast at a 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.
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING PRESENT
PAST FIVE YEARS DIRECTOR TERM
NAME AND AGE AND OTHER DIRECTORSHIPS SINCE EXPIRES
------------ ----------------------- ----- -------
<S> <C> <C> <C>
*Henry E. Blair Mr. Blair is President, Chief Executive Officer and 1993 1999
Age: 55 Chairman of the Board of Dyax Corp. ("Dyax"), a
privately-held bioseparation, pharmaceutical discovery
and development company, and a consultant to several
companies, including Genzyme. Prior to January 1990,
Mr. Blair was Senior Vice President, Scientific Affairs
of Genzyme. Mr. Blair is also a director of Genzyme and
Celtrix Pharmaceuticals, Inc.
*Francis J. Bullock Dr. Bullock has been a senior consultant with Arthur D. 1994 1999
Age: 62 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.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C> <C>
*Alan W. Tuck Mr. Tuck is Chief Strategic Officer of Organogenesis 1993 1999
Age: 50 Inc., a tissue engineering firm, and a strategic advisor
to Dyax. From September 1996 until July 1997, Mr. Tuck
was Executive Vice President and Chief Strategic Officer
of Biocode, Inc., a privately-held biotechnology company
focused on covert product marking and, from September
1996 until March 1997, was 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. ("T Cell"). Mr. Tuck is also a director
of Apogee Technology, Inc.
Sandra Nusinoff Lehrman Dr. Lehrman has been the President, Chief Executive 1998 2000
Age: 51 Officer and a director of the Company since July 1998.
From July 1996 until July 1997, Dr. Lehrman was
President and Chief Operating Officer of
Cytotherapeutics, Inc., a publicly held
biotechnology company focused on the development
of cell therapy systems and, from July 1995 to
July 1996, was Vice President, Drug Development
of Triangle Pharmaceuticals, a start-up drug
development company focused on new antiviral
medicines for HIV and hepatitis and anti-cancer
drugs. From May 1994 to July 1995, Dr. Lehrman
was International Director, Biotechnology of
Wellcome PLC/Glaxo Wellcome Inc.
Alan E. Smith Dr. Smith has been the Senior Vice President, Research of 1993 2000
Age: 53 Genzyme since August 1989 and its Chief Scientific
Officer since September 1996.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C>
Robert W. Baldridge Mr. Baldridge is Vice Chairman of the Board of Directors 1994 2001
Age: 64 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. Mr. Baldridge
has provided consulting services to the Company
since October 1994 pursuant to a Consulting
Agreement and has served as an independent
financial and management consultant since June
1988.
James A. Geraghty Mr. Geraghty has been Chairman of the Board of Directors 1993 2001
Age: 44 since January 1998. Mr. Geraghty served as President,
Chief Executive Officer and a director of the
Company from its incorporation in February 1993
to July 1998. Since that time, Mr. Geraghty has
served as President, Therapeutics Europe, of
Genzyme.
Henri A. Termeer Mr. Termeer has served as President of Genzyme since 1993 2001
Age: 53 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
Pharmaceuticals, Inc. and Diacrin, Inc., as well
as a trustee of Hambrecht & Quist Healthcare
Investors and Hambrecht & Quist Healthcare
Life Sciences Investors.
</TABLE>
- ------------------------------------
* Indicates a nominee for election as director.
The Board of Directors held eight meetings during fiscal year 1998. One
director, Henri A. Termeer, attended fewer than 75% of the Board of Directors
meetings held in 1998. 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 1998. 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.
7
<PAGE>
DIRECTOR COMPENSATION
DIRECTOR FEES. All directors, other than the Chairman of the Board, 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. The Chairman of the Board, Mr. Geraghty, who is not employed
by the Company, receives $2,000 for each meeting of the Board of Directors that
he attends in person, and $800 for each meeting of the Board of Directors he
attends by telephone conference call.
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"). Under the Director Plan, as amended to date, options 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 Eligible Director
receives an option to purchase 5,000 shares of Common Stock for each year of the
term of office to which the director is elected (normally 15,000 shares for
election to a three-year term of office). Upon the election of an Eligible
Director other than at an annual meeting, such director is automatically granted
an option 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. Options become
exercisable with respect to 5,000 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. Currently, the Eligible Directors are Robert W. Baldridge, Henry
E. Blair, Francis J. Bullock, James A. Geraghty, Alan E. Smith, Henry A. Termeer
and Alan W. Tuck.
In addition, on March 4, 1998, the Director Plan was amended to include
a one-time option grant, effective upon the date of the 1998 Annual Meeting, to
each of the directors not being reelected at such meeting, exercisable for each
remaining year in such director's term of office. As a result, Dr. Smith
received an option for 6,000 shares of Common Stock, and Messrs. Blair and Tuck
and Dr. Bullock each received options for 3,000 shares of Common Stock. In all
cases, options for 3,000 shares were immediately exercisable and 3,000 of Dr.
Smith's options will become exercisable at the 1999 Annual Meeting of
Stockholders.
GERAGHTY COMPENSATION. Mr. Geraghty was Chief Executive Officer during
part of 1998 and his compensation is discussed below under "EXECUTIVE
COMPENSATION." Upon termination of his employment with the Company, Mr. Geraghty
and the Company entered into a Consulting Agreement dated July 1, 1998. Under
this agreement, Mr. Geraghty, will provide part-time consulting services to the
Company for a two-year term ending June 30, 2000 unless earlier terminated by
the Company for cause. Thereafter the term of the Consulting Agreement may be
extended on a year-to-year basis by mutual agreement of the parties. During the
initial consulting term, Mr. Geraghty receives a consulting fee at a daily rate
of $1,200 for 3 days per month, or $43,200 annually. In 1998, Mr. Geraghty
received $18,000 under this Consulting Arrangement.
8
<PAGE>
BALDRIDGE 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 in October 1994. By its terms, such option became fully
exercisable in five installments ending in October 1998, has a term of ten years
and an exercise price of $2.75.
9
<PAGE>
EXECUTIVE COMPENSATION
The Compensation Committee Report set forth below describes the
compensation policies applicable to executive officers and the bases for Dr.
Lehrman'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 December 31, 1993 to January 3, 1999, as compared with that of the
S&P 500 Composite Index and the PricewaterhouseCoopers Biotech Index.
COMPARISON OF THE CUMULATIVE TOTAL RETURN AMONG
GENZYME TRANSGENICS CORPORATION, THE S&P 500 COMPOSITE INDEX
AND THE PRICEWATERHOUSECOOPERS BIOTECH INDEX*
[GRAPH]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97 1/3/99
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GENZYME TRANSGENICS CORPORATION 100 30 65 91 143 83
-------------------------------------------------------------------------------------------------------
S&P 500 COMPOSITE INDEX 100 98 132 159 208 264
-------------------------------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS BIOTECH 100 96 183 210 232 351
INDEX
-------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------
* Assumes $100 invested on December 31, 1993 in Genzyme Transgenics
Corporation Common Stock, the S&P 500 Composite Index and the
PricewaterhouseCoopers Biotech Index, with all dividends, if any, being
reinvested.
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
One of the Company's executive officers during 1998, James A. Geraghty,
President and Chief Executive Officer, resigned as President and Chief Executive
Officer of the Company effective July 1, 1998. At that time, Mr. Geraghty became
a full-time employee of Genzyme and entered into a Consulting Agreement with the
Company under which he continues to serve as Chairman of the Board. See
"Director Compensation."
The Compensation Committee of the Board of Directors determines the
compensation to be paid to 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 six meetings during 1998, is currently composed of Messrs.
Bullock (Chairman), Blair and Tuck. This report is submitted by the Compensation
Committee and addresses the compensation policies for fiscal year 1998 as they
affected Mr. Geraghty and Dr. Lehrman, each in the capacity of President and
Chief Executive Officer during part of 1998, and each of the top three executive
officers other than Mr. Geraghty and Dr. Lehrman whose combined salary and bonus
for fiscal year 1998 exceeded $100,000, named in the following compensation
tables (the "Other Executive Officers").
COMPENSATION PHILOSOPHY
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. The compensation program seeks to
align compensation with the achievement of business objectives and individual
and corporate performance. Bonuses are included to encourage effective
individual performance relative to the Company's current plans and objectives.
Stock option grants are key components of the executive compensation program and
are intended to provide executives with an equity interest in the Company so as
to link a meaningful portion of the compensation of the Company's executives
with the performance of the Company's Common Stock.
In executing its compensation policy, the Company seeks to relate
compensation with the Company's financial performance and business objectives as
well as to reward each executive's achievement of designated targets relating to
the Company's annual and long term performance and individual fulfillment of
responsibilities. While compensation survey data are useful guides for
comparative purposes, the Company believes that a successful compensation
program also requires the application of judgment and subjective determinations
of individual performance, and to that extent the Compensation Committee applies
its judgment in reconciling the program's objectives with the realities of
retaining valued employees.
11
<PAGE>
EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation package for the three Other
Executive Officers 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. Each of the Other Executive Officers has entered into an
employment agreement with the Company (see "Executive Employment Agreements").
The minimum annual base salary set forth in each of the Executive Agreements was
fixed with reference to each executive's salary history and internal and
external equity considerations. At the beginning of each fiscal year, the
Compensation Committee engages in a review of the base salaries paid to the
Other Executive Officers. In 1998, the annual base salary for each of the Other
Executive Officers, was adjusted in light of the executive's prior performance,
tenure and responsibility, as well as independent compensation data.
BONUS COMPENSATION. In fiscal 1998, the Committee established a maximum
bonus opportunity for Mr. Glick equal to 30% of his base salary and for each of
Mr. Green and Dr. Meade equal to 25% of their respective base salaries. Bonuses
are tied directly to the Company's financial performance, and the contribution
of each executive to such performance. Pursuant to the Company's 1998 Executive
Bonus Program adopted by the Committee, 75% of Mr. Glick's 1998 bonus was based
on the quantitative performance of Primedica Corporation, with reference to
Primedica's 1998 revenues, profits and cash flow in comparison to budget. The
remaining 25% of his bonus opportunity was based on qualitative criteria, as
evaluated by the Chief Executive Officer. With respect to the 1998 bonus
opportunities for Mr. Green and Dr. Meade, one-third was based on 1998
company-wide quantitative performance, with reference to revenues and profits in
comparison to budget. The remaining two-thirds of such officers' bonus
opportunities was determined 50% on the basis of qualitative criteria, as
evaluated by the Chief Executive Officer, and 50% on goals criteria, which goals
had been previously agreed upon between the executive and the Chief Executive
Officer.
STOCK OPTIONS. Executive officer compensation also includes long-term
incentives afforded by options to purchase shares of Common Stock. The purposes
of the Company's stock option grant program are to (i) highlight and reinforce
the mutuality of long-term interests between employees and the shareholders and
(ii) to assist in the attraction and retention of important key executives,
managers and individual contributors who are essential to the Company's growth
and development. In May 1998, the Committee approved annual option grants
covering 25,000 shares to each of Mr. Green and Mr. Meade, and a grant covering
30,000 shares to Mr. Glick, as shown in the table below.
CHIEF EXECUTIVE OFFICERS. Mr. Geraghty served as President and Chief
Executive Officer of the Company through July 1, 1998, on which date Dr.
Lehrman became the President and Chief Executive Officer of the Company. The
Compensation Committee established a compensation package for Mr. Geraghty
prior to his departure and for Dr. Lehrman, on her arrival, based on an
analysis of compensation data for comparable executive positions gathered
from surveys prepared by independent compensation consultants.
12
<PAGE>
The Committee established a 1998 base salary of $269,000 for Mr.
Geraghty and a target bonus opportunity of 40% of such base salary. The increase
in Mr. Geraghty's 1998 base salary from his 1997 base compensation resulted from
a determination by the Committee that Mr. Geraghty's salary should be at the
midpoint of a range of Chief Executive Officer salaries in the comparable
companies reviewed by the Committee. In addition, the Committee determined that
the 14% increase in his 1998 base salary over his 1997 base salary was merited
in part by Mr. Geraghty's 1997 performance.
Mr. Geraghty's bonus percentage was fixed at the same percentage of
base salary as it had been in 1997. Given the transitional role of Mr.
Geraghty during 1998, no specified criteria were used to determine the
achievement of his bonus. In March 1999, the Committee awarded Mr. Geraghty a
bonus of $17,000 in respect of his 1998 performance.
In August 1998, the Committee approved an option grant to Mr. Geraghty
to purchase 30,000 shares of the Company's Common Stock. The grant was made in
light of Mr. Geraghty's continuing role as a consultant to the Company.
Dr. Lehrman has an Executive Agreement with the Company that
established a compensation package consisting of a 1998 annual base salary of
$260,000 and an initial bonus of $52,000, which was paid in two equal
installments in July 1988 and January 1999. As part of her employment agreement,
Dr. Lehrman was also granted an option to purchase 150,000 shares of the
Company's Common Stock. The Committee concluded that such a grant was in keeping
with ranges for equity compensation for Chief Executive Officers of similar
companies. The option became exercisable as to 30,000 on the date of grant and
will become exercisable with respect to 30,000 additional shares on each of July
1, 1999, 2000, 2001 and 2002.
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,
Henry E. Blair
Francis J. Bullock
Alan W. Tuck
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<PAGE>
The following tables set forth certain compensation information for
each of the current and former Chief Executive Officers of the Company and the
three Other Executive Officers of the Company, during the fiscal year ended
January 3, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION (2)
- ----------------- ---- ------ ----- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Sandra Nusinoff Lehrman 1998 $130,000 (1) $52,000 150,000 $4,470
Current Chief Executive Officer
--
James A. Geraghty 1998 153,000 17,000 30,000
Former Chief Executive 1997 234,000 84,167 50,000 4,566
Officer 1996 197,500 79,250 32,103 4,002
Peter H. Glick 1998 190,000 21,874 30,000 5,395
President, Primedica 1997 154,000 27,762 25,000 4,658
Corporation 1996 135,000 25,313 12,720 4,668
Harry M. Meade 1998 172,500 25,875 25,000 2,959
VP, Transgenics Research 1997 156,000 39,500 25,000 2,768
1996 126,000 31,500 12,720 2,177
John B. Green 1998 172,400 30,502 25,000 4,728
VP, Chief Financial 1997 150,000 35,808 25,000 3,993
Officer 1996 135,000 29,531 12,720 4,007
</TABLE>
- ------------------------------------
(1) Dr. Lehrman's annual salary of $260,000 for 1998 was prorated for the
portion of the year beginning July 1, 1998 through December 31, 1998.
One half of Dr. Lehrman's bonus of $52,000 was paid in December 1998
and the other half was paid in January 1999.
(2) The reported amounts in this column represent employer contributions
under the Genzyme Transgenics Corporation 401(k) Plan.
14
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER PERCENTAGE OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE 0%($) 5%($) 10%($)
- ---- ----------- ------------- --------- ---------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Sandra Nusinoff 150,000 21.0% 7.750 7/1/08 0 731,090 1,852,726
Lehrman
James A. Geraghty 30,000 4.2% 5.875 8/5/98 0 110,843 280,897
Peter H. Glick 30,000 4.2% 9.125 5/27/08 0 172,160 436,287
Harry M. Meade 25,000 3.5% 9.125 5/27/08 0 143,467 363,572
John B. Green 25,000 3.5% 9.125 5/27/08 0 143,467 363,572
- ----------------------- --------------- --------------- ----------- -------------- --------- ---------- --------------
</TABLE>
(1) The options listed in this column were granted under the Equity Plan
and are 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 such date.
(2) 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 stockholders 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 total weighted average
exercise price of all options described above ($7.9567). The potential
value to all stockholders if the price of the Common Stock appreciates
at rates of 5% and 10% over the term of the options listed above would
be $94,238,120 and $238,817,897, respectively, assuming a purchase of
Common Stock in 1998 at $7.9567 per share.
15
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END (#) FISCAL YEAR-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
---- ------------- ------------ ----------------------- ------------------------
<S> <C> <C> <C> <C>
Sandra Nusinoff Lehrman 0 0 30,000 / 120,000 0 / 0
James A. Geraghty 0 0 159,561 / 79,792 97,031 / 17,250
Harry M. Meade 0 0 61,932/ 45,988 5,750 / 5,750
Peter H. Glick 0 0 68,032 / 49,988 129,875 / 5,750
John B. Green 0 0 76,132 / 46,988 125,750 / 8,625
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the difference between the option exercise price and the
closing price of the underlying Common Stock on January 3, 1999 as
reported by the Nasdaq National Market System, which closing price was
$5.8750.
EXECUTIVE EMPLOYMENT AGREEMENTS
SANDRA NUSINOFF LEHRMAN. Under the terms of the Employment Agreement,
as amended through September 21, 1998, between Dr. Lehrman and the Company, Dr.
Lehrman's minimum annual base salary is set at $260,000. She also received an
initial bonus of $52,000 for the 1998 calendar year one half of which was
payable on December 31, 1998 and the other half in January 1999. Dr. Lehrman is
also eligible to receive performance and incentive bonuses of not less than 40%
of her base salary for 1999.
PETER H. GLICK. Under the terms of the Amended and Restated Employment
Agreement entered into between Mr. Glick and the Company in September 1997, Mr.
Glick's annual base salary, which has been set at $199,500 for the 1999 calendar
year, will be no less than $154,000 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 1999 at 30% of such base
salary.
JOHN B. GREEN. Under the terms of the Amended and Restated Employment
Agreement entered into between Mr. Green and the Company in August 1997, Mr.
Green's annual base salary, which has been set at $181,000 for the 1999 calendar
year, will be no less than $150,000 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 1999 at 25% of such base
salary.
16
<PAGE>
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
$181,000 for the 1999 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 1999 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
or her 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 of termination in one lump sum, prorated on
the basis of the portion of the year completed, and will continue to receive his
or her then current base salary for a severance period. In the case of Dr.
Lehrman, 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 case of Mr. Glick, the severance period in the
event of a disposition by the Company of all or substantially all of its
contract research organization businesses is two years and otherwise is one
year. In the case of Dr. Meade, the severance period is one year. If Dr. Meade
terminates his agreement upon a change of control, his severance payments will
be reduced by income which he derives during such severance period from a
subsequent employer. In any case in which the Company must pay severance upon a
change of control (plus, in the case of Mr. Glick, a disposition of the contract
research organization businesses), outstanding stock options held by the
affected employee which are not then exercisable shall immediately become
exercisable.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 3, 1999, the Company's
Compensation Committee consisted of Dr. Bullock and Messrs. Blair and Tuck.
Mr. Blair is President, Chief Executive Officer and Chairman of the
Board of Dyax and Mr. Tuck is a strategic advisor to Dyax. The Company and Dyax
are parties to an agreement under which Dyax has agreed to develop a
purification media for certain of the Company's products. At January 3, 1999,
the Company had paid Dyax an aggregate of $20,000 pursuant to such agreement.
Four members of the Company's Board of Directors serve as directors
and/or officers of Genzyme; Mr. Termeer is Chairman of the Board, President and
Chief Executive Officer, Mr. Blair is a director, and Dr. Smith and Mr. Geraghty
are officers of Genzyme. 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 1998, the Company paid Genzyme an
aggregate of $3,568,000 million and received an aggregate of $11,000 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
17
<PAGE>
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 AND DEVELOPMENT AGREEMENT. Pursuant to a Research and
Development Agreement dated May 1, 1993 (the "R&D Agreement"), Genzyme and GTC
agreed, until December 31, 1998, which agreement has been extended for a term
currently under negotiation, 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. The parties are continuing under this
agreement and are currently negotiating an extension of the agreement.
SERVICES AGREEMENT. Under a Services Agreement between GTC and Genzyme,
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. GTC paid Genzyme $411,000 under the lease in 1998. This lease
expired in May 1998, at which time the lease automatically renewed for one year
and continues to do so annually until terminated by either party on 90 days
notice.
The Company and Genzyme have also entered into the following
agreements:
AT-III JOINT VENTURE. On January 1, 1998, the Company and Genzyme
executed a definitive collaboration agreement for the ATIII LLC joint venture.
Under the terms of the agreement, Genzyme will provide 70% of the first $33
million of development costs, excluding facility costs, under this program. The
Company will fund the other 30% of these costs. Development costs in excess of
these amounts 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. Under the agreement to establish the joint venture, Genzyme and the
Company were the only members and owned 3.7% and 96.3% interest, respectively.
Under the executed purchase agreement, the Company sold and assigned a 46.3%
ownership interest to Genzyme so that Genzyme and GTC each owned 50% of the
venture. The purchase price includes milestone payments of $12,500,000 from
Genzyme to the Company if and when the product has been approved by the United
States Food and Drug
18
<PAGE>
Administration and certain sales levels have been reached. Profits and losses
are shared according to ownership percentages. These agreements cover all
territories other than Asia.
CONVERTIBLE DEBT AGREEMENT. Under the Amended and Restated Convertible
Debt Agreement dated December 28, 1998 (the "Convertible Debt Agreement"),
Genzyme has agreed to provide to the Company a revolving line of credit in the
amount of $8.3 million, which expires on March 31, 2000 and has an option, at
that date, for the Company to convert the outstanding balance to a three-year
term loan.
CREDIT LINE, TERM LOAN AND LIEN. In December 1998, GTC refinanced then
existing commercial borrowings with another bank in the aggregate amount of
$24.6 million. Both of the newly established loans are guaranteed by Genzyme.
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. In consideration of Genzyme's agreement to
provide these guarantees, the Company issued warrants to purchase 145,000 and
288,000 shares of the Company's Common Stock at prices per share of $2.84 and
$4.875, respectively (the market prices of the Company's Common Stock on the
dates of the respective credit lines) each with a ten-year term.
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 options (incentive and nonstatutory), stock appreciation
rights, performance shares, restricted stock and stock units ("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 3,015,000 shares of Common Stock, subject to adjustment for stock splits and
similar capital changes. In addition, as permitted by the Equity Plan, options
to purchase an aggregate of 224,350 of Common Stock (the "Assumed Options") were
granted under the Equity Plan in addition to the reserved shares as a result of
the Company's assumption of outstanding options to purchase shares of Common
Stock of TSI Corporation ("TSI") 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 1, 1999, 640 employees were eligible to participate in the
Equity Plan and options to purchase an aggregate of 3,179,630 shares of Common
Stock had been granted, excluding the Assumed Options. Of these options, options
to purchase 462,981 shares had been cancelled, options to purchase 324,116 had
been exercised and options to purchase an aggregate of 2,392,533 shares remained
outstanding, leaving only 298,351 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
19
<PAGE>
been granted under the Equity Plan. The closing price of the Company's Common
Stock on April 1, 1999, as reported by the Nasdaq National Market System, was
$3.94.
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,
as amended (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 375,000 shares (the "Additional
Shares") to an aggregate of 3,390,000 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.
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 both within two years from the date
of grant and 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
20
<PAGE>
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 either the two-year or the 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.
CERTAIN TRANSACTIONS
Messrs. Blair, Geraghty, Termeer and Tuck and Dr. Smith are
directors and/or executive officers of Dyax and/or Genzyme. The Company is
involved in various financial and business transactions with Dyax and
Genzyme. 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 regulations to furnish the Company with copies
of all Section 16(a) reports they file.
To the Company's knowledge, based solely on its review of copies of
such reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended
21
<PAGE>
January 3, 1999, 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 (i) one report of one transaction by Dr. Meade was
filed late, (ii) late reports were filed by each of Henry E. Blair, Francis
J. Bullock, Alan E. Smith and Alan W. Tuck, reporting a grant of stock
options to purchase shares of the Company's Common Stock, and (iii) reports
filed by each of Robert W. Baldridge and Henri A. Termeer, reported a lesser
number of stock options actually granted to such person, which reports were
subsequently corrected by amendment.
INFORMATION CONCERNING INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP, independent accountants,
examined the Company's financial statements for the year ended January 3, 1999.
The Board of Directors has appointed PricewaterhouseCoopers LLP to serve as the
Company's auditors for its fiscal year ending January 1, 2000. Representatives
of PricewaterhouseCoopers LLP are expected to attend the annual meeting, to be
available to respond to appropriate questions and will have the opportunity to
make a statement if they desire.
DEADLINE FOR STOCKHOLDER PROPOSALS
The Company's 2000 Annual Meeting of Stockholders will be held on May
24, 2000. In order for a stockholder proposal to be considered for inclusion in
the Company's proxy materials for the 2000 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 30, 1999.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND
NOMINATIONS
In order for a stockholder to bring business before or propose director
nominations at the 2000 Annual Meeting, the stockholder must give written notice
to the Chairman of the Board, President, Treasurer or Clerk of the Company not
later than the close of business on April 4, 2000.
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
solicitations by mail, proxies may be solicited by officers, directors 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.
22
<PAGE>
FORM OF PROXY CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 25, 1999
GENZYME TRANSGENICS CORPORATION
The undersigned stockholder of Genzyme Transgenics Corporation (the
"Company") hereby appoints Sandra Nusinoff Lehrman, John B. Green and Lynnette
C. Fallon, and each of them acting singly, the attorneys and proxies of the
undersigned, with full power of substitution, to vote on behalf of the
undersigned all of the shares of capital stock of the Company that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held on May 25, 1999, and at all adjournments thereof, hereby
revoking any proxy heretofore given with respect to such shares.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO SPECIFICATION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL PROPOSALS. IN THEIR DISCRETION, THE PROXIES ARE ALSO AUTHORIZED
TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
PLEASE SIGN AND MAIL THIS PROXY TODAY Mark here for / /
Address Change
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) and Note on
Reverse
<PAGE>
(REVERSE SIDE OF PROXY CARD)
PLEASE DATE, SIGN AND MAIL YOUR PROXY
CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
GENZYME TRANSGENICS CORPORATION
May 25, 1999
A /X/ Please mark your votes as in this example
WITHHELD
FOR from
all nominees all nominees
1. Proposal to / / / / Nominees: Henry E. Blair
elect Francis J. Bullock
directors. Alan W. Tuck
(INSTRUCTIONS: To withhold authority to vote for
any person, strike a line through the nominee's
name.)
FOR AGAINST ABSTAIN
2. Proposal to amend the 1993
Equity Incentive Plan to / / / / / /
increase the number of
shares covered by the plan.
- ----------------------- ----------- --------------------------- ----------
SIGNATURE DATE: SIGNATURE (IF HELD JOINTLY) DATE:
NOTE: Please sign exactly as name appears on stock certificate. When shares
are held by joint tenants, both should sign. When signing as executor,
administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name
by authorized person.
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APPENDIX
1993 EQUITY INCENTIVE PLAN, AS AMENDED TO DATE
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; APPROVED 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.
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"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.
"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.
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"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.
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.
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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, 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
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(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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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.
(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.
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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 the Participant
and unless otherwise determined by the Committee, deposited by the Participant,
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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.
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(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.
(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
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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 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.
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