<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Sangstat Medical Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which 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> 2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 10, 2000
TO THE STOCKHOLDERS OF SANGSTAT MEDICAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of SangStat
Medical Corporation (the "Company" or "SangStat"), a Delaware corporation, will
be held on July 10, 2000 at 10:00 a.m. local time, at the offices of the
Company, located at 6300 Dumbarton Circle, Fremont, California, 94555, for the
following purposes, as more fully described in the Proxy Statement accompanying
this Notice:
1. To elect directors to serve for one-year terms or until their successors
are elected, unless proposal two (2) is adopted, in which case
directors' terms shall be as presented in such item;
2. To consider a proposal to amend the Certificate of Incorporation to
create a classified board of directors with three classes each to serve
for a term of three years;
3. To consider, approve and ratify an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares
of the Company's Common Stock by 10,000,000 shares, from 25,000,000 to
35,000,000;
4. To consider, approve and ratify the appointment of Deloitte & Touche LLP
as independent auditors of the Company for the fiscal year ending
December 31, 2000; and
5. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Only stockholders of record at the close of business on May 25, 2000 are
entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed Proxy as
promptly as possible in the envelope enclosed for your convenience. Should you
receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to ensure that all
your shares will be voted. You may revoke your proxy at any time prior to the
Annual Meeting. If you attend the Annual Meeting and vote by ballot, your proxy
will be revoked automatically and only your vote at the Annual Meeting will be
counted.
Sincerely,
<TABLE>
<S> <C>
Philippe Pouletty, M.D. Jean-Jacques Bienaime
Chairman of the Board President and Chief Executive Officer
</TABLE>
June 7, 2000
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, AND COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
<PAGE> 3
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROXY STATEMENT............................................. 3
MATTERS TO BE CONSIDERED AT ANNUAL MEETING.................. 4
PROPOSAL ONE -- ELECTION OF DIRECTORS..................... 4
PROPOSAL TWO -- PROPOSAL TO AMEND THE CERTIFICATE OF
INCORPORATION TO ESTABLISH A CLASSIFIED BOARD OF
DIRECTORS.............................................. 6
PROPOSAL THREE -- PROPOSAL TO AMEND THE CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK................................. 8
PROPOSAL FOUR -- RATIFICATION OF INDEPENDENT AUDITORS..... 9
OWNERSHIP OF SECURITIES..................................... 11
EXECUTIVE COMPENSATION AND RELATED INFORMATION.............. 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..... 17
COMPARISON OF STOCKHOLDER RETURN............................ 20
ANNUAL REPORT............................................... 21
OTHER MATTERS............................................... 21
</TABLE>
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SANGSTAT MEDICAL CORPORATION
6300 DUMBARTON CIRCLE
FREMONT, CALIFORNIA 94555
------------------------
PROXY STATEMENT
------------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 10, 2000
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of SangStat Medical Corporation, a Delaware corporation (the "Company"
or "SangStat"), for use at the Annual Meeting of Stockholders to be held on July
10, 2000 (the "Annual Meeting"). The Annual Meeting will be held at 10:00 a.m.
local time, at the offices of the Company located at the address above. These
proxy solicitation materials will be mailed on or about June 7, 2000, to all
stockholders entitled to vote at the Annual Meeting.
VOTING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice and are described in more
detail in this Proxy Statement. On May 25, 2000, the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, 17,909,777 shares of the Company's common stock, $0.001 par value
("Common Stock"), were issued and outstanding. No shares of the Company's
preferred stock were outstanding. Each stockholder is entitled to one vote for
each share of Common Stock held by such stockholder on May 25, 2000. The
Company's By-laws provide that a majority of all shares of the stock entitled to
vote, whether present in person or represented by proxy, shall constitute a
quorum for the transaction of business. Abstentions and broker non-votes are
counted as present for the purpose of determining the presence or absence of a
quorum for the transaction of business at the Annual Meeting. Directors are
elected by a plurality vote. Since votes are cast in favor of or withheld from
each nominee, abstentions will have no effect on the outcome. Amending the
Company's Certificate of Incorporation to establish a classified Board of
Directors and to increase the number of authorized shares of Common Stock by
10,000,000 shares requires the affirmative vote of a majority of the outstanding
stock entitled to vote. Each of the other proposals requires an affirmative vote
of a majority of shares present in person or represented by proxy at the Annual
Meeting and entitled to vote on such proposal; abstentions therefrom will have
the same effect as negative votes, while broker non-votes are not included in
the total number of votes cast on a proposal and therefore will not be counted
for purposes of determining whether a proposal has been approved. All votes will
be tabulated by the inspector of election appointed for the meeting, who will
separately tabulate affirmative and negative votes, abstentions and broker
non-votes.
REVOCABILITY OF PROXIES
You may revoke or change your Proxy at any time before the Annual Meeting
by filing with the Secretary of the Company, at the Company's principal
executive offices, a notice of revocation or another signed Proxy with a later
date. You may also revoke your Proxy by attending the Annual Meeting and voting
in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional solicitation materials furnished to stockholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by a solicitation by
telephone, telegram, or other means by directors, officers or employees. No
additional compensation will be paid to those individuals for any such services.
The Company has engaged Corporate Investors Communications, Inc. ("CIC") to
provide routine advice and services for proxy
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solicitation. CIC will receive a fee of approximately $5,000 for such advice and
services which will be paid by the Company.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
In order for stockholder business to be included in the Company's proxy
statement for a meeting or properly brought before that meeting by a
stockholder, such stockholder must have given timely notice thereof in writing
to the Secretary of the Company. A stockholder proposal to be timely must be
received at the Company's principal executive offices at 6300 Dumbarton Circle,
Fremont, California 94555 no later than February 7, 2001. Inclusion of
stockholder proposals in the Company's proxy statement for a meeting also
requires satisfaction of certain conditions established by the Securities and
Exchange Commission.
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE -- ELECTION OF DIRECTORS
GENERAL
The Board of Directors has selected seven nominees, all of whom are
currently serving as directors of the Company. The names of the persons who are
nominees for director and their positions with the Company as of April 14, 2000
are set forth in the table below. Each person nominated for election has agreed
to serve if elected, and management has no reason to believe that any nominee
will be unavailable to serve. In the event any nominee is unable or declines to
serve as a director at the time of the Annual Meeting, the proxies will be voted
for any nominee who may be designated by the present Board of Directors to fill
the vacancy. Unless otherwise instructed, the proxy holders will vote the
proxies received by them FOR the nominees named below. The seven candidates
receiving the highest number of affirmative votes of the shares represented and
voting on this particular matter at the Annual Meeting will be elected directors
of the Company, to serve their respective terms and until their successors have
been elected and qualified. Each director's term will be one year unless
Proposal Two (2) is adopted, in which case each director's term will be through
their reelection at the annual meeting of stockholders in the year noted below.
<TABLE>
<CAPTION>
CLASS OF DIRECTOR AND
YEAR TERM EXPIRES IF
POSITIONS AND OFFICES HELD DIRECTOR PROPOSAL TWO IS
NOMINEE AGE WITH THE COMPANY SINCE ADOPTED
------- --- -------------------------- -------- ---------------------
<S> <C> <C> <C> <C>
Philippe Pouletty 42 Chairman of the Board 1988 2003 (Class III)
Jean-Jacques Bienaime 46 President, Chief Executive Officer 1999 2003 (Class III)
and Director
Fredric J. Feldman 60 Director 1992 2002 (Class II)
Elizabeth M. Greetham 50 Director 1996 2003 (Class III)
Richard D. Murdock 53 Director 1993 2001 (Class I)
Andrew J. Perlman 52 Director 1992 2002 (Class II)
Vincent R. Worms 47 Director 1991 2001 (Class I)
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS
PHILIPPE POULETTY, M.D., 42, founded SangStat in 1988. Dr. Pouletty served
as the Company's President, CEO and a director of SangStat from 1988 to 1995.
From 1995 to February 1999 he served as Chairman and CEO and is presently the
Chairman. He remains an employee of SangStat and is also currently Chairman and,
since December 1999, President/CEO of DrugAbuse Sciences Inc., a private
specialty pharmaceutical company. He is also a member of the board of Conjuchem,
a private biotechnology company. Before founding SangStat, Dr. Pouletty
co-founded Clonatec, a French biotechnology company, where he was the director
of research from 1984 to 1988. Dr. Pouletty received his M.D. degree from the
University of Paris
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<PAGE> 6
VI and immunology and virology degrees (M.S.) at Institut Pasteur. He was a
post-doctoral fellow at Stanford University in the Department of Medical
Microbiology and Immunology.
JEAN-JACQUES BIENAIME, 46, has been the Company's President and Chief
Operating Officer since June 1998 and became its Chief Executive Officer on
February 1, 1999. He was elected to the Board of Directors in March 1999. From
September 1992 to May 1998 Mr. Bienaime was with Rhone Poulenc Rorer, Inc., a
pharmaceutical company, rising to the position of Senior Vice President,
Corporate Marketing and Business Development. He is currently a member of the
board of Fox Chase Cancer Center and Aerogen Inc. Mr. Bienaime received his
degree in economics from Ecole Superieure de Commerce de Paris in France and a
M.B.A. from The Wharton School, University of Pennsylvania.
FREDRIC J. FELDMAN, PH.D., 60, has been a director since March 1992. He has
been the President of FJF Associates, a consultant to health care venture
capital and emerging companies, since February 1992. From September 1995 to June
1996 he was the Chief Executive Officer of Biex, Inc. a women's healthcare
company. Dr. Feldman returned to his position as Chief Executive Officer of Biex
in 1999. He served as Chief Executive Officer of Oncogenetics, Inc., a cancer
genetics reference laboratory, from 1992 to 1995. He is also a director of Biex,
Inc., OrthoLogic Corporation, Ostex International, Inc. and Premier Laser
Systems, Inc. Dr. Feldman received his Ph.D. in Analytical Chemistry from the
University of Maryland and his B.S. in Chemistry from Brooklyn College of City
University of New York.
ELIZABETH GREETHAM, 50, has been a director since September 1996. She is
currently Chief Financial Officer of DrugAbuse Sciences, Inc., a private
specialty pharmaceutical company, a position she has held since April 1999. From
1992 until March 1999, she held a variety of positions at Weiss, Peck & Greer
Investments, culminating in Portfolio Manager of Life Sciences L.P. Funds,
handling analytical responsibilities for all healthcare investments for
institutional, mutual and high individual net worth accounts. Ms. Greetham also
serves as a director of various pharmaceutical companies, including DrugAbuse
Sciences, Inc., Guilford Pharmaceutical, Inc., CliniChem Development, Inc. and
PathoGenesis Corp. Ms. Greetham received her M.A. with honors in Economics from
Edinburgh University.
RICHARD D. MURDOCK, 53, has been a director since October 1993. Mr. Murdock
has been the President and Chief Executive Officer and a director of Kyphon,
Inc., an orthopedic medical device company, since December 1998. From September
1991 to October 1998, Mr. Murdock served as the Chief Executive Officer and a
director of CellPro, Incorporated, a public biotechnology company. Mr. Murdock
received his B.S. in Zoology from the University of California at Berkeley.
ANDREW J. PERLMAN, M.D., PH.D., 52, has been a director since December
1992. Dr. Perlman has been the Executive Vice President at Tularik, Inc., a
public biotechnology company, since January 1993. From 1987 to 1993, Dr. Perlman
served in various positions at Genentech, Inc., most recently as Senior
Director, Clinical Research. Dr. Perlman received his M.D. and his Ph.D. in
Physiology from New York University.
VINCENT R. WORMS, 47, has been a director since October 1991. Mr. Worms has
been a General Partner of Partech International, a venture capital management
fund, since 1982. Mr. Worms is presently a director of Business Objects and
Informatica. He received his engineering degree from Ecole Polytechnique in
Paris, and his M.S. degree from the Massachusetts Institute of Technology.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE ABOVE NOMINEES.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1999, the Board of Directors held
11 meetings. The Board of Directors has an Audit Committee and a Compensation
Committee. Each of the directors attended or participated in 75% or more of the
aggregate of (i) the total number of meetings of the Board of Directors (held
during the period he or she served) and (ii) the total number of meetings held
by all committees on which he or she served (held during the period he or she
served) during the past fiscal year.
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The Audit Committee currently consists of two directors, Fredric Feldman
and Vincent Worms, and is primarily responsible for approving the services
performed by the Company's independent auditors and reviewing their reports
regarding the Company's accounting practices and systems of internal accounting
controls. The Audit Committee held two (2) meetings during the last fiscal year.
The Compensation Committee currently consists of three directors, Andrew J.
Perlman, Elizabeth Greetham and Vincent Worms, and is primarily responsible for
reviewing and approving the Company's general compensation policies and setting
compensation levels for the Company's executive officers. The Compensation
Committee also has the authority to administer the Company's 1993 Stock Option
Plan (the "1993 Plan") and make option grants thereunder. The Compensation
Committee held one (1) meeting during the last fiscal year.
DIRECTOR COMPENSATION
Effective January 1, 1999, the non-employee directors receive an annual
retainer of $15,000, paid in one (1) installment at the last Board of Directors
meeting of the year. No additional compensation is paid for meeting attendance
or committee membership.
The non-employee directors also receive automatic grants of options to
purchase shares of Common Stock pursuant to the 1996 Non-Employee Directors
Stock Option Plan (the "Directors Plan"). Moreover, the Directors Plan permits
non-employee directors to convert their annual cash retainer into additional
options to purchase shares of Common Stock.
PROPOSAL TWO -- PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO
ESTABLISH A CLASSIFIED BOARD OF DIRECTORS
The Board of Directors is proposing to amend the Company's Certificate of
Incorporation to establish a classified board of directors.
The proposed classified board provides for the directors to be divided into
three "classes," each of which would be elected for staggered terms of three
years after an initial transition period. The classification system of electing
directors may tend to maintain the incumbency of the Board, since only
approximately one-third of the directors would be elected each year. As such, a
classified board generally makes it more difficult for stockholders to change a
majority of the directors. However, a classified board contributes to the
continuity and stability of the Board of Directors and provides for consistent
leadership and policy formulation by the Board. Classification of the Board of
Directors will also enable the Board to more effectively consider any proposed
takeover attempt and, in the event of any such proposal, would generally assist
the Board in negotiating terms that maximize the benefit to SangStat and its
stockholders.
Under this proposed amendment, the Board of Directors would be divided into
three classes, designated Class I, Class II and Class III, and the directors
elected at the Annual Meeting would be placed in the following classes with the
directors in Class I holding office until the annual meeting of stockholders
held in 2001, the directors in Class II holding office until the annual meeting
of stockholders held in 2002, and the directors in Class III holding office
until the annual meeting of stockholders held in 2003:
<TABLE>
<CAPTION>
NOMINEE CLASS TERM EXPIRES
------- ----- ------------
<S> <C> <C>
Philippe Pouletty III 2003
Jean-Jacques Bienaime III 2003
Fredric J. Feldman II 2002
Elizabeth M. Greetham III 2003
Richard D. Murdock I 2001
Andrew J. Perlman II 2002
Vincent R. Worms I 2001
</TABLE>
At each election after the Annual Meeting, the directors elected at that
meeting would serve for succeeding terms of three years. In all cases, the terms
of directors will run until their successors are duly
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<PAGE> 8
elected and qualified or until their earlier resignation, removal from office or
death. Directors appointed to fill vacancies in the Board shall hold office for
a term expiring at the next annual meeting of stockholders at which the term of
office of the class to which such directors have been elected expires. If the
number of directors is changed, any increase or decrease will be apportioned by
the Board of Directors among the classes so as to maintain the number of
directors in each class as nearly equal as possible.
Under Delaware law, unless the Certificate of Incorporation provides
otherwise, a director on a classified board of directors can be removed from
office during his or her term by the stockholders only for cause. The proposed
amendment to the Certificate of Incorporation would not permit a director to be
removed during his or her term for reasons other than for cause.
If this proposed amendment is adopted, unless directors are removed for
cause, it will require at least two annual meetings for stockholders to make a
change in a majority of the Board of Directors. As such, it would be more
difficult for stockholders to effect a change in control of the Board of
Directors, even if the stockholders are seeking that change as a result of
dissatisfaction with the performance of existing directors.
In the event this proposal is not approved, all of the directors will be
elected at each annual meeting. In the event this proposal is approved, Article
SEVENTH of the Certificate of Incorporation will be amended in its entirety to
read as follows:
"SEVENTH: The number of directors of the corporation shall be fixed
from time to time by a Bylaw or amendment thereof duly adopted by the
Board of Directors pursuant to a resolution adopted by a majority of
the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any
such resolution is presented to the Board for adoption). Any director
or the entire Board of Directors may be removed from office by the
stockholders of the corporation only for cause. The directors shall be
divided into three classes with the term of office of the first class
to expire at the first annual meeting of the stockholders following
adoption of this provision, and the term of office of the second class
to expire at the second annual meeting of stockholders held following
the adoption of this provision, and the term of office of the third
class to expire at the third annual meeting of stockholders following
the adoption of this provision. After the directors are divided into
the three classes as set forth in the preceding sentence, all
subsequent elections shall be for a term to expire at each third
succeeding annual meeting of stockholders after such election. All
directors shall hold office until the expiration of the term for which
elected, and until their respective successors are elected, except in
the case of death, resignation, or removal of any director. No
decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director. The newly
created directorships resulting from any increase in the authorized
number of directors or any vacancies on the Board of Directors
resulting from death, resignation or other reason (other than removal
from office for cause by a vote of the stockholders) may be filled by
a majority vote of the Directors then in office, though less than a
quorum. Any vacancies created as a result of removal by the
stockholders of one or more directors for cause shall be filled by a
vote of the stockholders."
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock
outstanding as of the record date is required for approval of this proposal.
Abstentions and broker non-votes will have the same effect as a vote against
this proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO ADOPT A CLASSIFIED
BOARD OF DIRECTORS.
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PROPOSAL THREE -- PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
BACKGROUND
Under Delaware law, the Company may only issue shares of Common Stock to
the extent such shares have been authorized for issuance under the Company's
Certificate of Incorporation ("Certificate"). The Certificate currently
authorizes the issuance by the Company of up to 25,000,000 shares of Common
Stock, $.001 par value. However, as of April 14, 2000, 17,906,677 shares of the
Company's Common Stock were issued and outstanding and 3,899,325 unissued shares
of Common Stock were reserved for issuance under the Company's equity
compensation plans. An additional 500,773 shares of Common Stock are reserved
for issuance upon conversion of an outstanding convertible note and an
additional 50,000 shares are reserved for issuance upon exercise of outstanding
warrants. As a result, 2,643,225 shares of Common Stock are unissued and
unreserved. In order to ensure sufficient shares of Common Stock will be
available to the Company, the Board of Directors on April 27, 2000 approved,
subject to stockholder approval, amending the Company's Certificate of
Incorporation to increase the number of shares of such Common Stock authorized
for issuance from 25,000,000 to 35,000,000.
PURPOSE AND EFFECT OF THE AMENDMENT
The principal purpose of the proposed amendment to the Certificate is to
authorize additional shares of Common Stock which will be available in the event
the Board of Directors determines that it is necessary or appropriate to raise
additional capital through the sale of equity securities, to acquire another
company or its assets, to establish strategic relationships with corporate
partners, to provide equity incentives to employees and officers, to permit
future stock dividends or stock splits, or other corporate purposes. The Board
of Directors has no current intention to split the outstanding Common Stock by
declaring a stock dividend, and the declaration and payment of such a stock
dividend by the Board of Directors would be contingent upon several factors,
including the market price of the Company's Common Stock, the Company's
expectations about future performance, and the Company's beliefs about general
stock market trends. The availability of additional shares of Common Stock is
particularly important in the event that the Board of Directors needs to
undertake any of the foregoing actions on an expedited basis and thus to avoid
the time and expense of seeking stockholder approval in connection with the
contemplated issuance of Common Stock. The Board of Directors has no present
agreement or arrangement to issue any of the shares for which approval is
sought. If the amendment is approved by the stockholders, the Board of Directors
does not intend to solicit further stockholder approval prior to the issuance of
any additional shares of Common Stock, except as may be required by applicable
law.
The increase in authorized Common Stock will not have any immediate effect
on the rights of existing stockholders. However, the Board of Directors will
have the authority to issue authorized Common Stock without requiring future
stockholder approval of such issuances, except as may be required by applicable
law or the Nasdaq National Market. To the extent that additional authorized
shares are issued in the future, they may decrease the existing stockholders'
percentage equity ownership and, depending on the price at which they are
issued, could be dilutive to the existing stockholders. The holders of Common
Stock have no preemptive rights and the Board of Directors has no plans to grant
such rights with respect to any such shares.
The increase in the authorized number of shares of Common Stock and the
subsequent issuance of such shares could have the effect of delaying or
preventing a change in control of the Company without further action by the
stockholders. Shares of authorized and unissued Common Stock could, within the
limits imposed by applicable law, be issued in one or more transactions which
would make a change in control of the Company more difficult, and therefore less
likely. Any such issuance of additional stock could have the effect of diluting
the earnings per share and book value per share of outstanding shares of Common
Stock and such additional shares could be used to dilute the stock ownership or
voting rights of a person seeking to obtain control of the Company.
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<PAGE> 10
The Board of Directors is not currently aware of any attempt to take over
or acquire the Company. While it may be deemed to have potential anti-takeover
effects, the proposed amendment to increase the authorized Common Stock is not
prompted by any specific effort or takeover threat currently perceived by
management.
If the proposed amendment is approved by the stockholders, the Fifth
Article of the Company's Certificate of Incorporation will be amended to read as
follows:
"FIFTH: The corporation is authorized to issue 40,000,000 shares,
35,000,000 of which are designated "Common Stock," $0.001 par value,
and 5,000,000 of which are designated "Preferred Stock," $0.001 par
value. The Board of Directors is hereby authorized to fix or alter the
rights, preferences, privileges and restrictions granted to or imposed
upon any series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or any of
them. The Board of Directors is also authorized to increase or
decrease the number of shares of any series, prior or subsequent to
the issue of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series
shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of such series."
VOTE REQUIRED
The affirmative vote of a majority of the shares of outstanding Common
Stock is required for approval of this proposal. Abstentions and broker
non-votes will be counted as present for purposes of determining if a quorum is
present. Abstentions and broker non-votes will have the same effect as a
negative vote on this proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 25,000,000 TO 35,000,000
SHARES.
PROPOSAL FOUR -- RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Deloitte & Touche LLP,
independent public auditors for the Company during fiscal year 1999, to serve in
the same capacity for the fiscal year ending December 31, 2000, and is asking
the stockholders to ratify this appointment. The affirmative vote of the holders
of a majority of the shares represented by proxy and voting at the Annual
Meeting is required to ratify the selection of Deloitte & Touche LLP.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors in its discretion may direct the appointment of a different
independent auditing firm at any time during the year if the Board of Directors
believes that such a change would be in the best interests of the Company and
its stockholders.
A representative of Deloitte & Touche LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast affirmatively or
negatively at the annual meeting of stockholders at which a quorum representing
a majority of all outstanding shares entitled to vote is present and voting,
either in person or by proxy, is required for approval of this proposal.
Abstentions and broker non-votes will each be counted as present for purposes of
determining the presence of a quorum. Neither abstentions nor broker non-votes
will have any effect on the outcome of the proposal.
9
<PAGE> 11
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP TO SERVE AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
10
<PAGE> 12
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
April 14, 2000 by (i) all persons who are beneficial owners of five percent (5%)
or more of the Company's Common Stock, (ii) each director and nominee for
director, (iii) each person serving during 1999 as the Company's Chief Executive
Officer and the four other most highly paid executive officers as of April 14,
2000, and (iv) all directors and executive officers as a group. Unless otherwise
indicated, each of the stockholders has sole voting and investment power with
respect to the shares beneficially owned, subject to community property laws,
where applicable.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS (AS REQUIRED) OF BENEFICIAL OWNER OWNED(#) OWNED(%)(#)
-------------------------------------------------- ---------------- --------------------
<S> <C> <C>
Capital Guardian Trust..................................... 1,580,000 8.8%
11100 Santa Monica Blvd.
Los Angeles, CA 90025
Merrill Lynch Asset Management............................. 975,000 5.4%
1 Liberty Plaza
New York, NY 10080
Abbott Laboratories(1)..................................... 895,000 5.0%
100 Abbott Park Road
Abbott Park, IL 60064
UBS Asset Management(1).................................... 895,000 5.0%
10 E. 50th Street
New York, NY 10022
Fredric J. Feldman, Ph.D.(2)............................... 49,086 *
Elizabeth Greetham(3)...................................... 34,977 *
Richard D. Murdock(4)...................................... 27,595 *
Andrew J. Perlman, M.D., Ph.D.(5).......................... 38,995 *
Vincent R. Worms(6)........................................ 590,838 3.2%
Jean-Jacques Bienaime(7)................................... 93,825 *
Raymond J. Tesi, M.D.(8)................................... 22,831 *
Ralph Levy(9).............................................. 39,186 *
Mark D. Tolpin, M.D.(10)................................... 8,291 *
David Winter, M.D.(11)..................................... 101,000 *
Philippe Pouletty, M.D.(12)................................ 423,467 2.3%
All directors and officers as a group (18 persons)(13)..... 1,499,656 7.7%
</TABLE>
---------------
* Does not exceed one percent.
(#) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock subject
to options which are currently exercisable or convertible or which will
become exercisable or convertible within sixty (60) days after April 14,
2000 are deemed outstanding for computing the beneficial ownership of the
person holding such option but are not outstanding for computing the
beneficial ownership of any other person. Except as indicated by footnote,
and subject to community property laws where applicable, the persons named
in the table above have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them. The total
number of shares outstanding as of April 14, 2000 used for calculation of
percentages was 17,906,677.
(1) The actual percentage of shares of the Company held by both Abbott
Laboratories and UBS Asset Management is fractionally under 5%.
(2) Includes 13,125 shares held by the Feldman family trust and options to
purchase 35,961 shares granted under our Directors Plan.
11
<PAGE> 13
(3) Represents options to purchase 34,977 shares granted under our Directors
Plan.
(4) Represents options to purchase 27,595 shares granted under our Directors
Plan.
(5) Represents options to purchase 38,995 shares granted under our Directors
Plan.
(6) Includes 549,662 shares held by Partech International Inc. Mr. Worms, a
member of our Board of Directors, may be deemed to share voting and
investment power in such shares arising from his interests in the
aforementioned entity. Mr. Worms disclaims beneficial ownership of such
shares, except to the extent of his interests in the aforementioned entity.
The shares beneficially owned by Mr. Worms include options to purchase
5,374 shares granted under our Directors Plan.
(7) Includes options to purchase 89,825 shares granted under our 1993 Option
Plan.
(8) Represents options to purchase 22,831 shares granted under our 1993 Option
Plan.
(9) Represents options to purchase 39,186 shares granted under our 1993 Option
Plan.
(10) Represents options to purchase 8,291 shares granted under our 1993 Option
Plan. Dr. Tolpin resigned as Senior Vice President, Clinical Development
effective April 14, 2000.
(11) Represents options to purchase 101,000 shares granted under our 1993 Option
Plan.
(12) Represents options to purchase 423,467 shares granted under our 1993 Option
Plan.
(13) Includes options to purchase 897,067 shares granted under our 1993 Option
Plan.
12
<PAGE> 14
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation earned by each person serving as the Company's Chief Executive
Officer and our four other most highly compensated executive officers serving as
such as of the end of the last fiscal year whose salary and bonus for such year
were in excess of $100,000 for services rendered in all capacities to us and our
subsidiaries for the 1999, 1998 and 1997 fiscal years. Such individuals
hereafter will be referred to as the Named Executive Officers. No other
executive officer who would have otherwise been includable in such table on the
basis of salary and bonus earned for the 1999 fiscal year resigned or terminated
employment during that fiscal year.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)
--------------------------- ---- --------- -------- ------------
<S> <C> <C> <C> <C>
Jean-Jacques Bienaime 1999 $280,030 $75,400 45,000
President and 1998 141,056 50,000 301,000
Chief Executive Officer(1) 1997 -- -- --
Raymond J. Tesi, M.D.(2) 1999 184,286 35,291 23,000
Senior Vice President, Medical Affairs 1998 172,424 29,528 1,000
and Strategic Development 1997 110,000 19,965 38,000
Ralph Levy 1999 185,799 29,069 6,000
Senior Vice President, Operations 1998 171,450 24,860 21,000
1997 158,500 19,625 30,666
Mark D. Tolpin, M.D.(3) 1999 157,630 52,379 50,000
Senior Vice President, Clinical 1998 -- -- --
Development 1997 -- -- --
David L. Winter, M.D. 1999 179,369 21,295 --
President and Chief Executive 1998 170,000 33,660 1,000
Officer, Human Organ Sciences, Inc. 1997 170,000 30,600 --
Philippe Pouletty, M.D. 1999 135,677 -- 8,960
Chairman of the Board(1)(4) 1998 310,615 -- 265,184
1997 280,000 71,400 100,000
</TABLE>
---------------
(1) Effective February 1, 1999 Jean-Jacques Bienaime was appointed by the Board
as Chief Executive Officer of the Company, replacing Dr. Pouletty who
resigned as Chief Executive Officer of the Company effective on the same
date. Dr. Pouletty continues to serve as Chairman of the Company.
(2) Dr. Tesi was appointed Senior Vice President, Medical Affairs and Strategic
Development effective August 1, 1999. From May 1, 1997 to July 31, 1999 Dr.
Tesi served as Senior Vice President, Marketing.
(3) Dr. Tolpin joined the Company as Senior Vice President, Clinical Development
effective April 1, 1999 and resigned his position effective April 14, 2000.
Dr. Tolpin's bonus for 1999 includes a hiring bonus of $22,000 in addition
to a performance bonus for the year.
(4) Dr. Pouletty elected to receive his 1998 bonus award in a stock option
rather than in cash. Using the Black-Scholes option pricing model, Dr.
Pouletty's bonus award of $100,000 was calculated to be equivalent to a
stock option for 8,960 shares. This option was granted in 1999 and has been
included as 1999 compensation in the above table. The stock option was fully
vested upon issuance.
13
<PAGE> 15
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows, with respect to the Named Executive Officers,
certain information concerning the grant of stock options in 1999. No stock
appreciation rights were granted during 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENTAGE OF ANNUAL RATES OF STOCK
UNDERLYING TOTAL OPTIONS PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM(4)
GRANTED EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME (#)(1) FISCAL YEAR(2) ($/SH)(3) DATE 5%($) 10%($)
---- ---------- -------------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jean-Jacques Bienaime........... 20,000 3.0 17.25 07/01/09 216,969 549,841
25,000 3.8 24.06 12/09/09 378,319 958,736
Raymond J. Tesi................. 18,000 2.7 12.12 05/04/09 137,256 347,834
5,000 0.8 17.25 07/01/09 54,242 137,460
Ralph Levy...................... 6,000 0.9 17.25 07/01/09 65,091 164,952
Mark D. Tolpin(5)............... 50,000 7.6 13.44 04/01/09 422,617 1,070,995
David Winter.................... --
Philippe Pouletty............... 8,960 1.4 17.37 03/17/09 97,906 248,114
</TABLE>
---------------
(1) Each option will vest in forty-eight successive equal monthly installments
over the optionee's continued service with the Company measured from the
vesting start date, except as follows: the options granted to Mr. Bienaime,
the option to purchase 5,000 shares granted to Dr. Tesi, the option to
purchase 6,000 shares granted to Mr. Levy, one of the options to purchase
25,000 shares granted to Dr. Tolpin and the option granted to Dr. Pouletty.
These options are all on a six year vesting schedule, subject to
acceleration if certain product development and financial milestones are
met, with the exception of the options granted to Dr. Pouletty which vested
immediately upon issuance. Each option is exercisable only with respect to
vested shares.
(2) Based on an aggregate of 658,262 options granted to employees and Board
members in 1999, including options granted to the Named Executive Officers.
(3) The exercise price may be paid in cash, in shares of Common Stock valued at
fair market value on the exercise date, or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The Company may
also finance the option exercise by lending the optionee sufficient funds to
pay the exercise price for the purchased shares and the federal and state
income or employment tax liability incurred by the optionee in connection
with such exercise. The optionee may be permitted, subject to the approval
of the Plan Administrator, to apply a portion of the shares purchased under
the option (or to deliver existing shares of Common Stock) in satisfaction
of such liability.
(4) Potential realizable value is based on the assumption that the price per
share of Common Stock appreciates at the assumed 5% and 10% annual rates of
appreciation (compounded annually) over the option terms. There is no
assurance that those assumed annual rates of stock price appreciation will
actually be realized.
(5) Dr. Tolpin resigned as Senior Vice President, Clinical Development effective
April 14, 2000.
14
<PAGE> 16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning option exercises and
option holdings for the fiscal year ended December 31, 1999 with respect to the
Named Executive Officers. Except as set forth below, no options or stock
appreciation rights were exercised by any such individual during such year, and
no stock appreciation rights were outstanding on December 31, 1999.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS
NUMBER OF SECURITIES AT FY-END($)
VALUE UNDERLYING UNEXERCISED (MARKET PRICE OF SHARES AT
REALIZED($) OPTIONS AT FISCAL FY-END ($29.75) LESS
SHARES (MARKET PRICE YEAR-END(#) EXERCISE PRICE)
ACQUIRED ON AT EXERCISE LESS ------------------------------ ---------------------------
EXERCISE(#) EXERCISE PRICE) EXERCISABLE(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ---------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jean-Jacques
Bienaime............ 0 0 62,735 283,265 $ 414,074 $2,134,988
Raymond J. Tesi....... 0 0 17,830 44,170 194,757 565,494
Ralph Levy............ 27,120 $649,924 61,292 31,874 1,023,880 380,364
Mark D. Tolpin(2)..... 0 0 2,000 48,000 32,628 783,072
David Winter.......... 13,000 206,875 101,000 0 2,422,500 0
Philippe Pouletty..... 25,000 535,689 386,860 118,081 4,816,304 350,063
</TABLE>
---------------
(1) The options are exercisable upon vesting and are not subject to repurchase
by the Company. Exercisable shares represent vested options at December 31,
1999.
(2) Dr. Tolpin resigned as Senior Vice President, Clinical Development effective
April 14, 2000.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT ARRANGEMENTS AND CHANGE IN
CONTROL AGREEMENTS
None of the Company's executive officers have employment agreements with
the Company, and their employment with the Company may be terminated at any time
at the discretion of the Board of Directors. However, the Compensation Committee
of the Board of Directors has authority as Plan Administrator of the Company's
1993 Stock Option Plan to provide for the accelerated vesting of the shares of
Common Stock subject to outstanding options held by the Chief Executive Officer
and the Company's other executive officers, whether granted under that plan or
any predecessor plan, in the event their employment were to be terminated
(whether involuntarily or through a forced resignation) following (i) an
acquisition of the Company by merger or asset sale, or (ii) a hostile takeover
of the Company effected through a successful tender offer for more than 50% of
the Company's outstanding Common Stock or through a change in the majority of
the Board as a result of one or more contested elections for Board membership.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors are as named above in the Compensation Committee Report. No member of
the Committee was at any time during the 1999 fiscal year or at any other time
an officer or employee of the Company.
No current executive officer of the Company served on the board of
directors or compensation committee of any entity that at the same time had one
or more executive officers serving as a member of the Company's Board or
Compensation Committee. Dr. Philippe Pouletty served as the Company's Chief
Executive Officer from 1995 until February 1999, and currently serves as the
Chairman of the Company's Board of Directors. Dr. Pouletty is also the Chief
Executive Officer and Chairman of the Board of Directors of DrugAbuse Sciences,
Inc. Ms. Elizabeth Greetham has served on the Company's Compensation Committee
since September 1996 and has been the Chief Financial Officer and a director of
DrugAbuse Sciences, Inc. since April 1999.
RELATED PARTY TRANSACTIONS
The Company entered into an agreement with Abbott Laboratories in May 1999
for the co-promotion, distribution, and clinical development in the United
States of SangStat's SangCya Oral Solution and a
15
<PAGE> 17
cyclosporine capsule product. Under this agreement the Company will share
marketing and promotional expenses as well as the profits from the co-promotion
of these two products. The agreement ends December 31, 2004 unless both parties
agree to extend it. As part of the agreement, Abbott purchased 895,000 shares of
the Company's Common Stock for approximately $14 million representing a premium
to fair market value of approximately $1.3 million, loaned the Company $16
million and made milestone payments totaling $13.9 million as of December 31,
1999. The loan bears interest at 8.75%, payable annually, and is secured by a
security interest in the United States marketing rights for SangCya Oral
Solution. The loan matures on December 31, 2004, and can be prepaid by the
Company without penalty at any time prior to maturity. As a result of its equity
investment, Abbott now holds approximately five percent (5%) of the Company's
outstanding Common Stock. In connection with this equity investment, the Company
also agreed to register the SangStat shares Abbott purchased upon Abbott's
request after November 15, 2001. Abbott has agreed not to resell any of these
shares prior to December 31, 2001. After this time and until December 31, 2004,
the Company has a right of first refusal on any resales of these shares by
Abbott at the price at which Abbott proposes to sell them. The Company also has
the right to repurchase these shares from Abbott at any time prior to December
31, 2001 at a price equal to twice what Abbott paid for them.
As of December 31, 1999, loans were outstanding to the Company in the
principal amount of $200,000 from Mr. Bienaime, $200,000 from Dr. Tesi and
$30,000 from Dr. Winter, all of whom are executive officers. The Company made
these loans to these officers to provide housing assistance as part of their
relocation packages. The Company made Mr. Bienaime's loan in July 1998, Dr.
Tesi's loan in September 1997 and Dr. Winter's loan in June 1997. Each such loan
is evidenced by a promissory note secured by options to purchase shares of the
Company's Common Stock. Neither Mr. Bienaime, Dr. Tesi nor Dr. Winter has repaid
any principal amounts or interest due on their loans, which are due on July 17,
2001, September 12, 2000 and June 5, 2000, respectively. The annual interest
rates on the loans are as follows: Mr. Bienaime 5.69%, Dr. Tesi 6.0% and Dr.
Winter 5.95%. At December 31, 1999, the aggregate indebtedness of Mr. Bienaime,
Dr. Tesi and Dr. Winter under such loans was $216,883, $228,783 and $34,818,
respectively, including principal and accrued interest. The amounts owed under
these loans as of April 14, 2000 was $220,343, $232,662 and $35,394,
respectively.
All future transactions, including loans, between the Company and its
officers, directors, principal stockholders and their affiliates will be
approved by a majority of the Board, including a majority of the independent and
disinterested directors.
Each director has entered into an indemnification agreement with the
Company. These agreements, among other things, require the Company to indemnify
each director to the fullest extent permitted by Delaware law, including
indemnification for expenses such as attorneys' fees, judgments, fines and
settlement amounts incurred by the director in any action or proceeding,
including any action by or in the right of the Company, arising out of the
person's services as a director, any subsidiary or any other company or
enterprise to which the person provides services at the Company's request.
SECTION 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers, directors and persons who beneficially own more than 10% of our common
stock to file initial reports of ownership and reports of changes in ownership
with the SEC. Such persons are required by SEC regulations to furnish us with
copies of all such Section 16(a) forms filed by them.
Based solely on our review of such forms furnished to us and
representations from certain reporting persons, we believe that all filing
requirements applicable to our executive officers, directors and holders of more
than 10% of our common stock were complied with.
16
<PAGE> 18
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") sets
the compensation of the Chief Executive Officer and the Company's other
executive officers, reviews the design, administration, and effectiveness of
compensation programs for other key executives and approves stock option grants
for all executive officers. The Committee, serving under a charter adopted by
the Board of Directors, is composed entirely of outside directors who have never
served as officers of the Company.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company operates in the extremely competitive and rapidly changing
biotechnology industry. The Committee believes that the compensation programs
for executive officers of the Company should be designed to attract, motivate,
and retain talented executives responsible for the success of the Company and
should be determined within a competitive framework and based on the achievement
of corporate objectives and individual performance. Within this overall
philosophy, the Committee's objectives are to:
- Offer a total compensation program that takes into consideration the
compensation practices of a specifically identified peer group of
companies (the "Peer Companies") located in the same geographic area and
of small to medium market capitalization with which the Company competes
for executive talent;
- Provide annual variable incentive awards that take into account the
Company's performance relative to corporate objectives and the
performance of the Peer Companies and that are also based on the
attainment of personal goals; and
- Align the financial interests of executive officers with those of
stockholders by providing significant equity-based, long-term incentives.
COMPENSATION COMPONENTS AND PROCESS
Each executive officer's compensation package is comprised of three
elements: (i) base salary that is competitive with the compensation levels in
effect at the Peer Companies and based on the Committee's assessment of the
individual's performance; (ii) annual variable performance awards payable in
cash and tied to the Company's attainment of corporate objectives and the
officer's achievement of personal goals; and (iii) long-term stock-based
incentive awards designed to strengthen the mutuality of interests between the
executive officers and the Company's stockholders. As an officer's level of
responsibility and accountability within the Company increases over time, a
greater portion of his or her total compensation is intended to be dependent
upon Company and personal performance and stock price appreciation rather than
upon base salary.
FACTORS
The principal factors taken into account in establishing each executive
officer's compensation package for the 1999 fiscal year are summarized below.
The Committee may, however, apply entirely different factors for future fiscal
years.
Base Salary. The Committee determines the base salary levels for the
executive officers on the basis of the individual's performance, internal
comparability considerations and the base salary levels in effect for comparable
positions at the Peer Companies. The base salary level for executive officers is
currently at or below the median level determined for such individuals on the
basis of the external salary data compiled for the Peer Companies. The number of
companies taken into account as Peer Companies is less than the number of
companies included in the BioCentury 100 Stock Index and the Hambrecht & Quist
Biotechnology Index which are used in the Performance Graph appearing later in
this Proxy Statement for comparative stockholder return purposes. However, the
Committee believes this smaller group of Peer Companies gives a more accurate
indication of the market for executive services in which the Company competes.
17
<PAGE> 19
Salaries are reviewed on an annual basis, and adjustments to each executive
officer's base salary are based upon individual performance and increases in
salary levels at the Peer Companies.
Annual Incentive Compensation. An annual bonus may be earned by each
executive officer based upon the achievement of personal and Company performance
goals. Such goals are established at the commencement of each calendar year and
may vary from year to year. The incentive awards for the 1999 fiscal year were
tied to the achievement of pre-defined personal and corporate performance
targets. The Company performance goals for 1999 (for which 40 - 50% of the
individual's target bonus could be earned) included: (i) financial results; (ii)
achievement of specified sales levels; (iii) completing specified research and
development goals; (iv) licensing a therapeutic product and other business
development goals; and (v) management of litigation. Personal goals are related
to the functional responsibility of each executive officer and his or her
department. The Committee and the Board jointly determine whether or not each
Company performance goal has been achieved. The Committee also determines
whether the Chief Executive Officer has achieved his personal performance goals,
and the Chief Executive Officer similarly reviews the performance goals achieved
by other executive officers and reports his recommendations to the Committee.
Long-Term, Equity-Based Incentive Awards. The goal of the Company's
long-term equity-based incentive awards is to align the interests of executive
officers with those of the stockholders and to provide each executive officer
with a significant incentive to manage the Company from the perspective of an
owner with an equity stake in the business. The Committee determines the size of
long-term, equity-based incentives according to each executive's position within
the Company and sets a level it considers appropriate to create a meaningful
opportunity for stock ownership. In addition, the Committee takes into account
an individual's recent performance, his or her potential for future
responsibility and promotion, comparable awards made to individuals in similar
positions with the Peer Companies, and the number of unvested options held by
each individual at the time of the new grant. The relative weight given to each
of these factors varies among individuals at the Committee's discretion. The
Committee has delegated to the CEO the authority to issue stock option grants in
the amount of 10,000 shares or less without Compensation Committee approval.
During fiscal 1999, option grants were made to Messrs. Bienaime and Levy,
and Drs. Tesi, Tolpin and Pouletty under the Company's 1993 Option Plan. Each
grant allows the officer to acquire shares of the Company's Common Stock at a
fixed price per share (the market price on the grant date) over a specified
period of time. Specifically, the shares subject to each option vest in
forty-eight successive equal monthly installments over the optionee's continued
service with the Company measured from the vesting start date, except as
follows: options to purchase up to 45,000 shares of Common Stock granted to Mr.
Bienaime, the option to purchase up to 5,000 shares of Common Stock granted to
Dr. Tesi, the option to purchase up to 6,000 shares of Common Stock granted to
Mr. Levy, one of the options to purchase up to 25,000 shares of Common Stock
granted to Dr. Tolpin and the option to purchase up to 8,960 shares of Common
Stock granted to Dr. Pouletty. Except for the options granted to Dr. Pouletty,
these options do not vest until the sixth anniversary from date of grant, but
this vesting will be accelerated if certain milestones are met. Dr. Pouletty's
option vested immediately upon issuance because he received his 1998 cash bonus
in the form of a stock option. These options will provide a return only if the
market price of the Company's Common Stock appreciates over the option term and
only to the extent the shares vest.
CEO COMPENSATION
Mr. Bienaime's base salary was established through an evaluation of his
performance and the salary levels in effect for similarly situated chief
executive officers at the Peer Companies. In setting Mr. Bienaime's base salary,
it was the Committee's intent to provide him with a level of stability and
certainty each year and not have this particular component of compensation
affected to any significant degree by Company performance factors.
Mr. Bienaime's 1999 fiscal year incentive compensation did not include any
dollar guarantees. The CEO's bonus is dependent upon the Company achieving the
performance goals outlined above and the Committee's subjective evaluation of
the CEO's performance. Mr. Bienaime received a bonus award during fiscal year
1999 in the amount of $75,400. The option grants made to Mr. Bienaime were in
recognition of his
18
<PAGE> 20
performance and were intended to provide him with a continuing incentive to
remain with the Company and contribute to the Company's success. The options
will be of value to Mr. Bienaime only if the market price of the Company's
Common Stock appreciates over the option term.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
As a result of Section 162(m) of the Internal Revenue Code, which was
enacted into law in 1993, the Company will not be allowed a federal income tax
deduction for compensation paid to certain officers to the extent that
compensation exceeds one million dollars per officer in any one year. This
limitation will apply to all compensation which is not considered to be
performance-based. Compensation that qualifies as performance-based compensation
will not have to be taken into account for purposes of this limitation. The
Company previously obtained stockholder approval to certain amendments to the
1993 Option Plan that were designed to ensure that any compensation deemed paid
in connection with the exercise of stock options granted under that plan would
qualify as performance-based compensation.
The cash compensation paid to the Company's executive officers during
fiscal 1999 did not exceed the one million dollar limit per officer, nor is the
cash compensation to be paid to the Company's executive officers for the 2000
fiscal year expected to reach that level. Because it is very unlikely that the
cash compensation payable to any of the Company's executive officers in the
foreseeable future will approach the one million dollar limitation, the
Committee has decided not to take any action at this time to limit or
restructure the elements of cash compensation payable to the Company's executive
officers. The Committee will reconsider this decision should the individual
compensation of any executive officer ever approach the one million dollar
level.
Compensation Committee
Andrew J. Perlman
Vincent Worms
Elizabeth Greetham
19
<PAGE> 21
COMPARISON OF STOCKHOLDER RETURN
The graph depicted below reflects a comparison of the cumulative total
return (change in stock price plus reinvestment of dividends) of the Company's
Common Stock with the cumulative total returns of the Nasdaq Stock Market Index,
the BioCentury 100 Stock Index and the Hambrecht & Quist Biotechnology Index.(2)
The graph covers the period from December 31, 1994 through the fiscal year ended
December 31, 1999.
The graph assumes that $100 was invested on December 31, 1994 in the
Company's Common Stock and in each index and that all dividends were reinvested.
No cash dividends have been declared on the Company's Common Stock.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG SANGSTAT MEDICAL CORPORATION,
THE NASDAQ US INDEX,
THE HAMBRECHT & QUIST BIOTECHNOLOGY INDEX
AND THE BIOCENTURY 100 STOCK INDEX
EDGAR COMMENT
* $100 invested on 12/31/94 in SangStat stock or in index, including
reinvestment of dividends. NASDAQ US Index incorporates historical edits made
through March 31, 2000. Fiscal year ending December 31.
---------------
(1) The performance graph and all of the material in the Compensation Committee
Report is not deemed filed with the Securities and Exchange Commission, and
is not incorporated by reference to any filing of the Company under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
whether made before or after the date of this Proxy Statement and
irrespective of any general incorporation language in any such filing.
(2) Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
20
<PAGE> 22
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 1999 has been mailed concurrently with this Proxy Statement to all
stockholders entitled to notice of and to vote at the Annual Meeting.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other matters is granted
by the execution of the enclosed Proxy.
By Order of the Board of Directors
Carole L. Nuechterlein
Secretary
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 is available without charge upon written request to:
Corporate Secretary, 6300 Dumbarton Circle, Fremont, California 94555.
21
<PAGE> 23
DETACH HERE
PROXY
SANGSTAT MEDICAL CORPORATION
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 10, 2000
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Jean-Jacques Bienaime and Stephen G. Dance,
and each of them, with full power of substitution, to represent the undersigned
and to vote all of the shares of stock in SangStat Medical Corporation, a
Delaware corporation (the "Company"), which the undersigned is entitled to vote
at the Annual Meeting of Stockholders of the Company to be held at 6300
Dumbarton Circle, Fremont, California 94555 at 10:00 a.m., local time, and at
any adjournment or postponement thereof (i) as hereinafter specified upon the
proposals listed on the reverse side and as more particularly described in the
Proxy Statement of the Company dated June 7, 2000 (the "Proxy Statement"),
receipt of which is hereby acknowledged, and (ii) in their discretion upon such
other matters as may properly come before the meeting.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY
BE REPRESENTED AT THE MEETING.
----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
----------- -----------
<PAGE> 24
DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
--------------------------------------------------------------------------------
A vote FOR the following proposals is recommended by the Board of Directors:
--------------------------------------------------------------------------------
1. To elect the following persons as directors to hold office for either (i) a
one-year term and until their successors are elected and qualified, or (ii)
should proposal two (2) below be approved by the stockholders, the term set
forth beside each nominee's name in the Proxy Statement and until their
successors are elected and qualified:
NOMINEES: (01) Phillippe Pouletty, (02) Jean-Jacques Bienaime,
(03) Frederic J. Feldman, (04) Elizabeth M. Greetham,
(05) Richard D. Murdock, (06) Andrew Perlman,
(07) Vincent R. Worms
FOR [ ] [ ] WITHHELD
[ ]
---------------------------------------
For all nominees, except as noted above
FOR AGAINST ABSTAIN
2. To approve an amendment to the Company's Certificate [ ] [ ] [ ]
of Incorporation to create a classified Board of
Directors with three classes each to serve for a
term of three years, as set forth in the Proxy
Statement.
3. To approve an amendment to the Company's Certificate FOR AGAINST ABSTAIN
of Incorporation to increase the number of authorized [ ] [ ] [ ]
shares of the Company's Common Stock by 10,000,000
shares, from 25,000,000 to 35,000,000.
4. To ratify the appointment of Deloitte & Touche LLP [ ] [ ] [ ]
as independent auditors of the Company for the fiscal
year ending December 31, 2000.
MARK HERE FOR [ ] MARK HERE IF YOU [ ]
ADDRESS CHANGE PLAN TO ATTEND
AND NOTE AT LEFT THE MEETING
PLEASE SIGN HERE. Sign exactly as your name(s)
appears on your stock certificate. If shares of
stock are held of record in the names of two or more
persons or in the name of husband and wife, whether
as joint tenants or otherwise, both or all of such
persons should sign the Proxy. If shares of stock
are held of record by a corporation, the Proxy
should be executed by the President or Vice
President and the Secretary or Assistant Secretary.
Executors or administrators or other fiduciaries who
execute the Proxy for a deceased stockholder should
give their full title. Please date the Proxy.
Signature: Date:
------------------------------------------------ ---------------
Signature: Date:
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