<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement[_]Confidential, for Use of the
[X]Definitive Proxy Statement Commission Only (as Permitted
by Rule 14a-6(e)(2))
[_]Definitive Additional Materials
[_]Soliciting Material
Pursuant to Rule 14a-
11(c) or Rule 14a-12
TARGETED GENETICS 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.
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
================================================================================
PER UNIT PRICE
OR OTHER
TITLE OF UNDERLYING
EACH CLASS AGGREGATE VALUE OF PROPOSED
OF NUMBER OF TRANSACTION MAXIMUM
SECURITIES SECURITIES TO COMPUTED AGGREGATE
TO WHICH WHICH PURSUANT TO VALUE
TRANSACTION TRANSACTION EXCHANGE ACT OF TOTAL FEE
APPLIES: APPLIES: RULE 0-11: TRANSACTION: PAID:
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
================================================================================
</TABLE>
[_]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.
Amount Previously Paid: __________________
Filing Party: ___________________
Form, Schedule orRegistration Statement Date Filed: ___________________
No. ______________________________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[LOGO OF TARGETED GENETICS CORPORATION]
March 30, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of Targeted Genetics Corporation ("Targeted Genetics"),
which will be held on Tuesday, May 5, 1998, at 9:00 a.m., local time, at the
Company's headquarters, located at 1100 Olive Way, Suite 100, Seattle,
Washington.
At the Annual Meeting, you will be asked to consider and vote upon a
proposal to amend the Targeted Genetics 1992 Restated Stock Option Plan (the
"Option Plan") to increase the number of shares of common stock issuable under
the Option Plan and to elect two directors to Targeted Genetics' Board of
Directors.
TARGETED GENETICS' BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
AMENDMENT TO THE OPTION PLAN AND "FOR" THE ELECTION OF THE NOMINEES FOR
DIRECTOR.
You should read carefully the accompanying Notice of Annual Meeting of
Shareholders and the Proxy Statement for additional related information.
Whether or not you plan to attend the Annual Meeting, please complete, sign
and date the enclosed proxy card and return it promptly in the enclosed
postage-prepaid envelope. Your stock will be voted in accordance with the
instructions you have given in your proxy. If you attend the Annual Meeting,
you may vote in person if you wish, even though you previously have returned
your proxy card. Your prompt cooperation will be greatly appreciated.
Sincerely,
/s/ H. Stewart Parker
H. Stewart Parker
President and Chief Executive Officer
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
<PAGE>
TARGETED GENETICS CORPORATION
1100 OLIVE WAY, SUITE 100
SEATTLE, WASHINGTON 98101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 1998
TO THE SHAREHOLDERS OF TARGETED GENETICS CORPORATION:
The Annual Meeting of Shareholders (the "Annual Meeting") of Targeted
Genetics Corporation, a Washington corporation ("Targeted Genetics"), will be
held on Tuesday, May 5, 1998, at 9:00 a.m., local time, at the Company's
headquarters, located at 1100 Olive Way, Suite 100, Seattle, Washington, for
the following purposes:
1. To consider and vote upon a proposal to amend the Targeted Genetics
1992 Restated Stock Option Plan (the "Option Plan") to increase the number
of shares of Targeted Genetics common stock, par value $.01 per share (the
"Common Stock"), issuable under the plan.
2. To elect two Class 1 directors to Targeted Genetics' Board of
Directors to hold office until the third annual meeting of shareholders
following such election and until their successors are elected and
qualified.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Only holders of record of shares of Common Stock at the close of business on
March 6, 1998, the record date for the Annual Meeting, are entitled to notice
of and to vote at the Annual Meeting and any adjournments or postponements
thereof.
The affirmative vote of the holders of shares representing a majority of the
total votes cast, in person or by proxy, at the Annual Meeting is required to
approve the amendment of the Option Plan. The directors elected will be the
two candidates receiving the greatest number of votes cast, in person or by
proxy, at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE. YOUR STOCK WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS YOU HAVE GIVEN IN YOUR PROXY. YOUR PROXY MAY BE REVOKED AT ANY
TIME BEFORE IT IS VOTED BY SIGNING AND RETURNING A LATER-DATED PROXY WITH
RESPECT TO THE SAME SHARES, BY FILING WITH THE SECRETARY OF TARGETED GENETICS
A WRITTEN REVOCATION BEARING A LATER DATE OR BY ATTENDING AND VOTING IN PERSON
AT THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ James A. Johnson
James A. Johnson
Secretary
Seattle, Washington
March 30, 1998
<PAGE>
TARGETED GENETICS CORPORATION
----------------
PROXY STATEMENT
This Proxy Statement is being furnished to holders of shares of common
stock, par value $.01 per share (the "Common Stock"), of Targeted Genetics
Corporation, a Washington corporation ("Targeted Genetics" or the "Company"),
in connection with the solicitation of proxies by Targeted Genetics' Board of
Directors (the "Board") for use at the 1998 Annual Meeting of Shareholders to
be held on Tuesday, May 5, 1998, at the Company's headquarters, located at
1100 Olive Way, Suite 100, Seattle, Washington, commencing at 9:00 a.m., local
time, and at any adjournments or postponements thereof (the "Annual Meeting").
The approximate date of the mailing of this Proxy Statement and the
accompanying proxy is March 30, 1998.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the Annual Meeting, shareholders of record of Targeted Genetics as of the
close of business on March 6, 1998 will consider and vote upon (i) a proposal
to amend the Targeted Genetics 1992 Restated Stock Option Plan (the "Option
Plan") to increase the number of shares of Common Stock issuable under the
plan by 500,000 from 2,000,000 to 2,500,000; (ii) the election of two Class 1
directors to the Board to hold office until the third annual meeting of
shareholders following such election and until their successors are elected
and qualified; and (iii) such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
THE BOARD HAS APPROVED THE AMENDMENT TO THE OPTION PLAN AND RECOMMENDS THAT
TARGETED GENETICS SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE
OPTION PLAN AND "FOR" ELECTION OF THE NOMINEES FOR DIRECTOR. See "AMENDMENT OF
THE OPTION PLAN" and "ELECTION OF DIRECTORS."
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED
The close of business on March 6, 1998 (the "Record Date") has been fixed as
the record date for determining the holders of shares of Common Stock who are
entitled to notice of and to vote at the Annual Meeting. As of the Record
Date, there were 20,216,714 shares of Common Stock outstanding and entitled to
vote. The holders of record on the Record Date of shares of Common Stock are
entitled to one vote per share of Common Stock. The presence, in person or by
proxy, of the holders of shares representing a majority of the voting power of
the shares of Common Stock entitled to vote is necessary to constitute a
quorum for the transaction of business at the Annual Meeting.
The affirmative vote of the holders of shares representing a majority of the
total votes cast, in person or by proxy, is required to approve the amendment
of the Option Plan. The directors elected at the Annual Meeting will be the
two candidates receiving the greatest number of votes cast by the holders of
shares of Common Stock present, in person or by proxy, at the Annual Meeting.
Holders of shares of Common Stock are not entitled to cumulate votes in the
election of directors. As of the Record Date, directors and executive officers
of Targeted Genetics and their affiliates may be deemed to be the beneficial
owners of approximately 12% of the outstanding voting shares of Common Stock.
Each of the directors and executive officers of Targeted Genetics plans to
vote or direct the vote of all shares of Common Stock over which he or she has
voting control in favor of the election of the nominees for director.
Abstention from voting and broker nonvotes will have no effect on any of the
proposals currently intended to be voted on at the Annual Meeting since they
will not represent votes cast at the Annual Meeting for the purpose of voting
on such proposals.
<PAGE>
PROXIES
Shares of Common Stock represented by properly executed proxies received at
or prior to the Annual Meeting that have not been revoked will be voted at the
Annual Meeting in accordance with the instructions contained therein. Shares
of Common Stock represented by properly executed proxies for which no
instruction is given will be voted "FOR" approval of the amendment to the
Option Plan and "FOR" the election of the nominees for director. Targeted
Genetics shareholders are requested to complete, sign, date and return
promptly the enclosed proxy card in the postage-prepaid envelope provided for
this purpose to ensure that their shares are voted. A shareholder may revoke a
proxy by submitting at any time prior to the vote on the approval of the
amendment to the Option Plan and the election of the nominees for director a
later-dated proxy with respect to the same shares, by delivering written
notice of revocation to the Secretary of Targeted Genetics at any time prior
to such vote or by attending the Annual Meeting and voting in person. Mere
attendance at the Annual Meeting will not in and of itself revoke a proxy.
If the Annual Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Annual Meeting all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the Annual Meeting (except for any proxies that have theretofore effectively
been revoked or withdrawn), notwithstanding that they may have been
effectively voted on the same or any other matter at a previous meeting.
PROXY SOLICITATION
Targeted Genetics will bear the cost of soliciting proxies from its
shareholders. In addition to solicitation by mail, directors, officers and
employees of Targeted Genetics may solicit proxies by telephone, telegram or
otherwise. Such directors, officers and employees of Targeted Genetics will
not be additionally compensated for such solicitation, but may be reimbursed
for out-of-pocket expenses incurred in connection therewith. Brokerage firms,
fiduciaries and other custodians who forward soliciting material to the
beneficial owners of shares of Common Stock held of record by them will be
reimbursed for their reasonable expenses incurred in forwarding such material.
AMENDMENT OF THE OPTION PLAN
PROPOSED AMENDMENT
The Board recommends the adoption of an amendment to the Option Plan (the
"Amendment") that increases the number of shares of Common Stock issuable
under the plan by 500,000 from 2,000,000 to 2,500,000 shares. On January 30,
1998, the Board unanimously approved the Amendment subject to approval of the
Amendment by Targeted Genetics' shareholders at the Annual Meeting. A copy of
the amended Option Plan will be furnished by Targeted Genetics to any
shareholder upon written request to the Secretary of Targeted Genetics.
The Board believes that the Amendment is necessary to attract and retain the
services of experienced and knowledgeable employees in a competitive
biotechnology industry where its competitors utilize various stock option and
equity participation plans to attract such individuals. The principal features
of the Option Plan are described below.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
ADOPTION OF THE AMENDMENT TO THE OPTION PLAN.
DESCRIPTION OF THE OPTION PLAN
The Option Plan currently provides for the grant of options to acquire a
maximum of 2,000,000 shares of Common Stock. As of March 6, 1998, options to
purchase 143,900 shares of Common Stock granted under the Option Plan had been
exercised, options to purchase 1,660,369 shares of Common Stock were
outstanding and
2
<PAGE>
options to purchase 195,731 shares of Common Stock remained available for
grant. The outstanding options were held by 90 individuals and were
exercisable at a weighted average exercise price of $2.47 per share.
Outstanding options to purchase an aggregate of 735,530 shares were held by
executive officers as a group, outstanding options to purchase an aggregate of
36,000 shares were held by non-employee directors and outstanding options to
purchase an aggregate of 872,839 shares were held by employees who are not
officers or directors of the Company. Options granted in 1997 to each of the
Company's executive officers are set forth under "EXECUTIVE COMPENSATION--
Option Exercises and Year-End Values."
The Option Plan permits the granting of incentive stock options ("ISOs") to
employees or nonqualified stock options ("NSOs") to employees, directors,
officers, agents, consultants and independent contractors (any such person, an
"Optionee") at the discretion of the administrator of the Option Plan (the
"Plan Administrator"). The Compensation Committee of the Board of Directors is
currently the Plan Administrator. Subject to the terms of the Option Plan, the
Plan Administrator determines the terms and conditions of options granted
under the Option Plan, including the exercise price. The maximum number of
shares with respect to which an option or options may be granted to any
Optionee in any taxable year may not exceed 200,000 shares. Additionally, the
Option Plan provides that the Plan Administrator must act in good faith to
establish an exercise price for options granted under the Option Plan that is
not less than the fair market value per share at the date of grant. Each
option must expire within 10 years of the date of grant. However, if ISOs are
granted to persons owning more than 10% of the voting stock of the Company,
the Option Plan provides that the exercise price shall not be less than 110%
of the fair market value per share at the date of grant and that the ISOs'
term shall not exceed five years. NSOs generally expire 10 years from the date
of grant. Unless otherwise provided by the Plan Administrator, options granted
under the Option Plan vest at a rate of 20% per year over a five-year period.
During an Optionee's lifetime, an option is exercisable only by the
Optionee, and no option may be transferred by the Optionee other than by will
or the laws of descent or distribution or, in the case of NSOs, pursuant to a
qualified domestic relations order (as defined in the Internal Revenue Code of
1986, as amended (the "Code")); provided, however, that to the extent
permitted by Section 422 of the Code, the Plan Administrator may permit a
recipient of an option to transfer such option or designate, by giving written
notice to the Plan Administrator, a person who may exercise the option after
such Optionee's death. An Optionee whose relationship with the Company or any
related corporation ceases for any reason (other than termination for cause,
death or total disability, as such terms are defined in the Option Plan) may
exercise, in the three-month period following such cessation (unless such
options terminate or expire sooner by their terms), or such longer period as
determined by the Plan Administrator, that portion of the Optionee's options
that is exercisable at the time of such cessation. In the event the Optionee
is terminated for cause, the options terminate upon the Company's discovery of
such cause. In the event the Optionee dies or becomes totally disabled, the
options vested as of the date of death or total disability may be exercised
prior to the earlier of the option's specified expiration date or one year
from the date of the Optionee's death or disability.
Any vested and exercisable option granted under the Option Plan may be
exercised in whole or in part at any time during the option period by giving
written notice, signed by the person exercising the option, to the Company
stating the number of shares with respect to which the option is being
exercised, accompanied by payment in full of the option exercise price for the
shares to be purchased; provided, however, that no less than 20% of the shares
purchasable under the option (or the remaining shares purchasable under the
option if less than 20%) may be purchased upon any exercise. Payment of the
option exercise price may be made in cash, bank certified or cashier's check
or personal check (unless in a particular case the Plan Administrator
determines not to accept a personal check) or, to the extent permitted by the
Plan Administrator and applicable laws and regulations, by (i) delivery to the
Company of shares of Common Stock already owned by the Optionee for at least
six months (or any shorter period necessary to avoid a charge to the Company's
earnings for financial accounting purposes) and having an aggregate fair
market value on the date of exercise equal to the option exercise price, (ii)
delivery of a full recourse promissory note (with terms specified by the Plan
Administrator), (iii) delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to promptly
3
<PAGE>
deliver to the Company the amount of sale or loan proceeds to pay the option
exercise price and any federal, state or local withholding tax obligations, or
(iv) such other method of payment as the Plan Administrator shall determine at
any time prior to exercise.
In the event of a Change of Control (as defined in the Option Plan), except
as otherwise provided in the instrument that evidences the option, each option
that is at the time outstanding shall automatically accelerate so that such
option shall, immediately prior to the specified effective date for the Change
in Control, become 100% vested, except that such acceleration will not occur
if, in the opinion of the Company's accountants, it would render unavailable
"pooling of interest" accounting for a Change in Control that would otherwise
qualify for such accounting treatment. Such option shall not so accelerate,
however, if and to the extent that (a) such option is, in connection with the
Change in Control, either to be assumed by the successor corporation or parent
thereof (the "Successor Corporation") or to be replaced with a comparable
award for the purchase of shares of the capital stock of the Successor
Corporation or (b) such option is to be replaced with a cash incentive program
of the Successor Corporation that preserves the spread existing at the time of
the Change in Control and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option. The determination of
comparability under clause (a) above shall be made by the Plan Administrator,
and its determination shall be conclusive and binding. All such options shall
terminate and cease to remain outstanding immediately following the
consummation of the Change in Control, except to the extent assumed by the
Successor Corporation. Any such options that are assumed or replaced in the
Change in Control and do not otherwise accelerate at that time shall be
accelerated in the event the Optionee's employment or services should
subsequently terminate within two years following such Change in Control,
unless such employment or services are terminated by the Successor Corporation
for Cause or by the Optionee voluntarily without Good Reason (as defined in
the Option Plan). A "Change of Control" is defined in the Option Plan to
include certain changes in the composition of the Board, certain significant
acquisitions of outstanding shares of Common Stock, and approval by the
Company's shareholders of (i) a complete liquidation or dissolution of the
Company, (ii) certain mergers or other reorganizations involving significant
changes in ownership, or (iii) certain sales or other dispositions of all or
substantially all of the Company's assets.
The Board has the power to amend, suspend or terminate the Option Plan,
provided that to the extent required for compliance with Section 422 of the
Code or any applicable law or regulation, the Company's shareholders must
approve any amendment that will (i) increase the number of shares reserved for
issuance under the Option Plan, (ii) modify the class of participants eligible
for participation in the Option Plan, or (iii) otherwise require shareholder
approval under any applicable law or regulation. Unless sooner terminated by
the Board of Directors, the Option Plan terminates on January 21, 2002.
On March 6, 1998, the last reported sales price of the Common Stock as
reported on the Nasdaq National Market was $1.75 per share.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of participation in the Option Plan. The discussion is general in
nature and does not address issues related to the tax circumstances of any
particular Optionee. The discussion is based on federal income tax laws in
effect on the date hereof and is, therefore, subject to possible future
changes in law. The discussion does not address state, local or foreign
consequences. Each Optionee is advised to consult with his or her own tax
advisor for particular United States federal, as well as state, local and
foreign, tax advice.
There are no tax consequences to the Company or the Optionee upon the grant
of an NSO under the Option Plan. Upon exercise of an NSO, the Optionee
recognizes ordinary income equal to the difference between the exercise price
of the shares and the fair market value of the shares on the date of exercise;
this income is subject to income and payroll tax withholding and reporting.
The Company is entitled to a tax deduction equal to the income recognized by
the Optionee, provided that the deduction is not otherwise disallowed by the
Code.
4
<PAGE>
Upon grant or exercise of an ISO, an Optionee does not recognize taxable
income, except that the excess of the fair market value of the shares at the
time of exercise (with adjustments in certain instances) over the option price
will be alternative minimum taxable income for purposes of calculating the
Optionee's alternative minimum tax, if any. An option loses its status as an
ISO and becomes an NSO if the Optionee exercises the ISO (i) more than three
months after the Optionee terminates employment or retires for reasons other
than death or disability or (ii) more than one year after the Optionee
terminates employment because of disability. If an Optionee does not make a
"disqualifying disposition" (defined below) of shares received upon the
exercise of an ISO, the gain, if any, upon a subsequent sale of such shares
(i.e., the excess of the proceeds received over the option price) will be
capital gain. This capital gain will be "mid-term" capital gain taxable at a
top marginal rate of 28% if the shares are sold within 18 months following the
exercise of the ISO and "long-term" capital gain taxable at a top rate of 20%
if the shares are sold more than 18 months after the exercise of the ISO.
For shares acquired through exercise of an ISO, a "disqualifying
disposition" is a transfer of the shares (i) within two years after the grant
of the ISO or (ii) within one year after the transfer of the shares to the
Optionee pursuant to the ISO's exercise. If the Optionee makes a disqualifying
disposition, the Optionee generally will recognize income in the year of the
disqualifying disposition equal to the excess of the amount received for the
shares over the option price. Of that income, the excess of the lesser of (a)
the fair market value of the shares at the time the ISO was exercised and (b)
if the disqualifying disposition resulted from a sale to an unrelated party,
the sales proceeds, over the option price will be ordinary income and the
balance, if any, will be short-term, mid-term or long-term capital gain
depending on how long the shares were held following the exercise of the ISO.
While it may be reconsidering this matter, the last stated position of the
Internal Revenue Service is that no withholding of income or payroll taxes is
required with respect to compensation income recognized on a disqualifying
disposition of an option. However, this compensation income is subject to
payroll reporting.
The Company is entitled to a deduction with respect to an ISO only if a
disqualifying disposition occurs. In that event, the deduction would be equal
to the ordinary income, if any, recognized by the Optionee upon disposition of
the shares, provided that the deduction is not otherwise disallowed under the
Code.
5
<PAGE>
ELECTION OF DIRECTORS
In accordance with the Amended and Restated Bylaws of Targeted Genetics (the
"Bylaws"), the Board shall be composed of not less than one nor more than nine
directors. At present, there are eight directors, each of whom is placed into
one of three classes such that, to the extent possible, there is an equal
number of directors in each class. At the first election of directors to the
classified Board, which took place in 1994, each Class 1 director was elected
to serve a one-year term, each Class 2 director was elected to serve a two-
year term and each Class 3 director was elected to serve a three-year term.
After the first election of directors to the classified Board, generally every
director elected to the Board holds office for a term of three years and until
his or her successor is elected and qualified. However, if a director resigns
from the Board prior to the expiration of his or her term, the director
elected or appointed to fill the resulting vacancy may be designated to a
class such that he or she initially must be elected to a shorter term.
At the Annual Meeting, two Class 1 directors are to be elected, each to hold
office for a term of three years. Jack L. Bowman and Jeremy Curnock Cook have
been nominated for election to the Board as Class 1 directors. Donald E.
O'Neill, currently a Class 1 director, has expressed his intent not to stand
for reelection when his term expires on May 5, 1998. Accordingly, the number
of directors will be reduced from eight to seven as of the date of the Annual
Meeting. It is intended that votes will be cast pursuant to the accompanying
proxy for the election of these nominees unless contrary instructions are
received. If any nominee should become unavailable for any reason, it is
intended that votes will be cast for a substitute nominee designated by the
Board. The Board has no reason to believe that any of the nominees named will
be unable to serve if elected.
NOMINEES
Jack L. Bowman (age 65) has been a director of the Company since March 1997.
From 1987 until January 1994, Mr. Bowman was a company group chairman at
Johnson & Johnson, having primary responsibility for a group of companies in
the diagnostic, blood glucose monitoring and pharmaceutical businesses. From
1980 to 1987, Mr. Bowman held various positions at American Cyanamid Company,
most recently as Executive Vice President. Mr. Bowman was a member of the
board of trustees of The Johns Hopkins University and currently serves as a
director of Cell Therapeutics, Inc., Cellegy Pharmaceuticals, Inc., CytRx
Corporation, NeoRx Corporation and Osiris Therapeutics Inc.
Jeremy Curnock Cook (age 49) has been a director of the Company since July
1995 and was elected Chairman of the Board in February 1998. He is a Director
of Rothschild Asset Management Limited and has been responsible for the
Rothschild Bioscience Unit since 1987. Mr. Cook founded the International
Biochemicals Group in 1975, which he subsequently sold to Royal Dutch Shell in
1985, remaining as Managing Director until 1987. He is also a director of Cell
Therapeutics, Inc., Creative BioMolecules Inc., Ribozyme Pharmaceuticals Inc.
and SUGEN, Inc., as well as several public and privately held companies
outside the United States, including International Biotechnology Trust plc
(U.K.). Mr. Cook holds an MA in Natural Sciences from Trinity College Dublin.
CONTINUING DIRECTORS -- TERMS EXPIRE 1999
Stephen A. Duzan (age 56) has been a director of the Company since its
inception in 1989. He is currently Chairman, Chief Executive Officer and a
director of Key Computer Systems, Inc. Mr. Duzan was a co-founder of Immunex
Corporation ("Immunex"), and served as its Chief Executive Officer and as a
director from its formation in 1981 until his retirement in September 1993. He
also served as President of Immunex from 1981 through 1990. He currently
serves on the board of directors of International Biotechnology Trust plc
(U.K.), Ergo Science Corporation and a number of private companies and
nonprofit organizations.
James D. Grant (age 65) has been a director of the Company since February
1993. Mr. Grant served as Chairman and Chief Executive Officer of T Cell
Sciences, Inc. (a biotechnology company) from 1986 to 1992 and as Chairman of
the Board until his retirement in 1997. Previously he was Vice President of
CPC International, Inc. (a multinational food and industrial products company)
from 1972 to 1986. Mr. Grant served
6
<PAGE>
as Deputy Commissioner of the Food and Drug Administration (the "FDA") from
1969 to 1972, and was Vice Chairman of the Advisory Committee on the FDA
("Edwards Committee") from 1990 to 1991. Mr. Grant currently serves on the
Board of Directors of Biocompatibles, Ltd. (U.K.) and International
Biotechnology Trust plc (U.K.).
CONTINUING DIRECTORS -- TERMS EXPIRE 2000
H. Stewart Parker (age 42) managed the formation of Targeted Genetics as a
wholly owned subsidiary of Immunex and has been President, Chief Executive
Officer and a director since the Company's inception in 1989. She served in
various capacities at Immunex from August 1981 through December 1991, most
recently as Vice President, Corporate Development. Ms. Parker also served as
President and a director of Receptech Corporation, a company formed by Immunex
in 1989 to accelerate the development of soluble cytokine receptor products
("Receptech"), from February 1991 to January 1993. She received her B.A. and
M.B.A. from the University of Washington.
Mark Richmond (age 67) has been a director of the Company since July 1996.
He is a business consultant in addition to a Research Fellow of the School of
Public Policy, University College London. From January 1993 until his
retirement in February 1996, Dr. Richmond was employed by Glaxo Wellcome plc
(previously Glaxo plc) and served as Director of Research. Previously, from
October 1990 until December 1993, he was Chairman of the Science and
Engineering Research Council, London. Dr. Richmond received his Ph.D. and
D.Sc. from Cambridge University, England.
Martin P. Sutter (age 42) has been a director of the Company since July
1996. Mr. Sutter has been a General Partner of Essex/Woodlands Health
Ventures, L.P., a venture capital firm, since September 1994. He has also been
the Managing General Partner of The Woodlands Venture Partners, L.P. since
October 1988. Mr. Sutter is currently a member of the Biomedical Advisory
Board of the Houston Advanced Research Center, Chairman of the Board of
Zonagen, Inc. and a director of Aronex Pharmaceuticals, Inc. and a number of
private biomedical companies.
DIRECTOR COMPENSATION
Directors who are employees of Targeted Genetics do not receive any fee for
their services as directors. Directors who are not employees of Targeted
Genetics are compensated pursuant to the Company's 1994 Stock Option Plan for
Nonemployee Directors. Additionally, nonemployee directors are reimbursed for
travel expenses incurred related to attendance at meetings.
COMMITTEES OF THE BOARD AND MEETINGS
Targeted Genetics has established standing committees of the Board,
including Audit, Compensation and Nominating Committees. Each of these
committees is responsible to the full Board, and its activities are therefore
subject to approval of the Board. The functions performed by these committees
can be summarized as follows.
Audit Committee. The Audit Committee reviews the corporate accounting and
reporting practices, internal accounting controls, audit plans and results,
investment policies, and financial reports of Targeted Genetics in order to
ensure that Targeted Genetics' assets are appropriately safeguarded and to
ensure the quality and integrity of its financial records. Additionally, the
Audit Committee recommends to the Board the independent auditors to be
retained by Targeted Genetics. The members of this committee are Jeremy
Curnock Cook and Martin P. Sutter. The Audit Committee met twice, once
telephonically, during 1997.
Compensation Committee. The Compensation Committee establishes salaries,
incentives and other forms of compensation for directors and officers of
Targeted Genetics. This committee also administers Targeted Genetics' various
incentive compensation and benefit plans, including stock option plans, and
recommends the establishment of policies relating to such incentive
compensation and benefit plans. The members of this
7
<PAGE>
committee are Jack L. Bowman, James D. Grant and Donald E. O'Neill. This
committee met six times, once telephonically, during 1997.
Nominating Committee. The Nominating Committee makes recommendations to the
Board concerning the desired qualifications of prospective candidates to fill
vacancies on the Board. The members of this committee are H. Stewart Parker
and James D. Grant. This committee did not meet in 1997. The Nominating
Committee will consider shareholder recommendations for director-nominees that
are submitted in accordance with the procedures established in the Bylaws.
During 1997, there were five meetings of the Board, none of which were held
telephonically. With the exception of Stephen A. Duzan, each of the Company's
directors was in attendance at 75% or more of the total number of Board and
committee meetings held during such director's service on the Board or such
committee, as the case may be.
8
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth the compensation for services rendered during
the fiscal years ended December 31, 1997, 1996 and 1995 for Targeted Genetics'
Chief Executive Officer and its other executive officers whose salary and
bonus exceeded $100,000 for the fiscal year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------------ ------------
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
------------------ ---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
H. Stewart Parker(1)..... 1997 216,000 -- 60,196 2,783
President and Chief 1996 200,000 42,500 35,522 2,783
Executive Officer 1995 165,000 41,250 39,186 235
Barrie J. Carter,
Ph.D.(2)................ 1997 167,000 -- 37,081 3,527
Executive Vice President 1996 154,000 26,180 24,112 9,027
and Director of 1995 140,000 28,000 26,982 6,018
Research and Development
Richard Daifuku, M.D.,
Ph.D.(3)................ 1997 180,000 -- 40,451 15,071
Vice President, Clinical 1996 168,000 21,420 -- 14,783
Affairs 1995 150,974 -- 40,000 65,303
James A. Johnson(4)...... 1997 152,500 -- 33,950 2,783
Vice President, Finance, 1996 141,000 17,978 22,045 2,783
Chief Financial 1995 128,000 19,200 25,038 103
Officer, Treasurer and
Secretary
</TABLE>
- --------
(1) All Other Compensation consists of matching contributions to a 401(k)
savings plan of $2,375 in 1997 and 1996 and excess life insurance premiums
of $408 in 1997 and 1996 and $235 in 1995.
(2) All Other Compensation consists of matching contributions to a 401(k)
savings plan of $2,375 in 1997 and 1996, extinguishment of debt associated
with initial purchases of Common Stock of $5,500 in 1996 and 1995 and
excess life insurance premiums of $1,152 in 1997 and 1996 and $518 in
1995.
(3) Dr. Daifuku began his employment with Targeted Genetics on January 23,
1995. All Other Compensation consists of matching contributions to a
401(k) savings plan of $2,375 in 1997 and 1996, extinguishment of debt
associated with relocation costs of $12,000 in all three years presented,
reimbursement of relocation expenses of $53,079 in 1995 and excess life
insurance premiums of $696, $408 and $224 in 1997, 1996 and 1995,
respectively. Dr. Daifuku's employment with Targeted Genetics terminated
on January 31, 1998.
(4) All Other Compensation consists of matching contributions to a 401(k)
savings plan of $2,375 in 1997 and 1996 and excess life insurance premiums
of $408 in 1997 and 1996 and $103 in 1995.
9
<PAGE>
OPTION GRANTS
The following table sets forth certain information regarding options granted
during the fiscal year ended December 31, 1997 to Targeted Genetics' Chief
Executive Officer and its other executive officers named above in the Summary
Compensation Table.
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT
------------------------------------------------ ASSUMED ANNUAL
PERCENT OF RATES OF STOCK
NUMBER OF TOTAL OPTIONS PRICE
SHARES GRANTED TO APPRECIATE FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM(3)
OPTIONS FISCAL PRICE EXPIRATION ---------------
NAME GRANTED(#)(1) YEAR(%)(1)(2) ($/SHARE) DATE 5%($) 10%($)
- ---- ------------- ------------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
H. Stewart Parker....... 60,196 11.4 4.75 1/14/2007 179,820 455,700
Barrie J. Carter, Ph.D.. 37,081 7.0 4.75 1/14/2007 110,170 280,713
Richard Daifuku, M.D.,
Ph.D................... 40,451 7.7 4.75 1/14/2007 120,837 306,226
James A. Johnson........ 33,950 6.5 4.75 1/14/2007 101,418 257,011
</TABLE>
- --------
(1) Options are granted at the fair market value on the date of grant and
vest over five years with 20% of each grant becoming exercisable
annually beginning on the first anniversary of the date of grant.
Certain changes in control of Targeted Genetics can trigger accelerated
vesting of stock options and rights to related payments.
(2) Options to purchase 526,728 shares of Common Stock were granted by the
Company to its employees during 1997.
(3) The dollar amounts under these columns are the result of calculations at
assumed rates of 5% and 10% and are not intended to forecast future
appreciation. No value will be realized if the stock price does not
exceed the exercise price of the options.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth certain information as of December 31, 1997,
regarding options held by Targeted Genetics' Chief Executive Officer and its
other executive officers named above in the Summary Compensation Table. None
of such individuals exercised any options during the fiscal year ended
December 31, 1997.
AGGREGATED FISCAL 1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
TOTAL NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
H. Stewart Parker.......... 92,778 132,126 83,200 --
Barrie J. Carter, Ph.D..... 39,615 88,560 -- --
Richard Daifuku, M.D.,
Ph.D...................... 16,000 64,451 -- --
James A. Johnson........... 50,424 90,609 3,120 2,080
</TABLE>
- --------
(1) This amount is the aggregate number of the outstanding options
multiplied by the difference between $2.63 (the closing price of the
Common Stock as reported on the Nasdaq National Market on December 31,
1997) and the exercise price of such options.
10
<PAGE>
CHANGE IN CONTROL ARRANGEMENTS
Senior Management Employment Agreements. In October 1996, the Company
entered into Senior Management Employment Agreements with each of Ms. Parker,
Drs. Carter and Daifuku and Mr. Johnson. These agreements provide that upon a
"change in control" (as defined in the agreements) each such executive will be
entitled to receive an annual base salary no less than his or her salary in
effect prior to the change in control and an annual bonus at least equal to
the average of his or her annual bonuses for the three prior years. In
addition, each such executive will be entitled to insurance coverage and other
employee benefits no less favorable than the Company's benefits in effect
prior to the change in control. If during the two-year period after a change
in control any such executive's employment is terminated by the Company for
any reason other than death, disability or "cause" or by the executive for
"good reason" (as such terms are defined in the agreements), such executive
will be entitled to certain additional benefits, including a lump sum payment
equal to one and one-half times (or, in the case of Ms. Parker, two times) the
sum of (i) such executive's annual salary prior to the change in control (or
on the date of termination, if such executive's salary is higher on such date)
and (ii) a percentage of such salary equal to the executive's percentage bonus
for the year prior to the change in control. If no such bonus was paid, or if
the bonus cannot be determined, the applicable percentage will be 10%. In
addition, any such terminated executive will be entitled to payment of an
amount sufficient to compensate such executive for any excise tax, including
interest and penalties, imposed under Section 4999 of the Code and to
continuation of life insurance, disability, health and dental, and other
similar employee benefits for one year following termination. The Senior
Management Employment Agreements may be terminated upon 30 days' prior written
notice; provided, however, that the Company will remain liable for any
obligations arising prior to such termination. Dr. Daifuku's Senior Management
Employment Agreement terminated on January 31, 1998.
Option Plans. The Option Plan contains provisions that could result in the
accelerated vesting of options granted pursuant to such plan in the event of a
Change in Control (as defined in the Option Plan). See "AMENDMENT OF THE
OPTION PLAN--Description of the Option Plan."
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
currently consists of Jack L. Bowman, James D. Grant and Donald E. O'Neill,
all of whom are nonemployee directors. Prior to July 15, 1997, Stephen A.
Duzan served on the Committee. After his resignation from the Committee, the
Board appointed Mr. Bowman to fill the resulting vacancy. After the Annual
Meeting, Mr. O'Neill's service on the Committee will cease and Mark Richmond,
also a nonemployee director, will be appointed to the Committee. The Committee
is responsible for the Company's executive compensation program and for
administering the Company's 1992 Amended and Restated Stock Option Plan (the
"Option Plan"). On an annual basis, the Committee evaluates the performance
and compensation of the Company's executive officers.
The Company's executive compensation philosophy is to pay competitively in
order to attract qualified executive personnel capable of leading the Company
to achievement of its business objectives; retain and motivate these
executives to achieve superior performance; link individual compensation to
individual and company performance; and align executives' financial interests
with those of the Company's shareholders.
The Company's executive compensation program includes the following
components:
. competitive base salaries, targeting the 50th percentile of base
salaries paid by other biotechnology companies of comparable size and
mission with which the Company competes for qualified executives;
. annual bonuses which are structured to encourage executives to focus on
the achievement of important short-term and long-term corporate
objectives; and
. long-term incentives, in the form of stock option grants, which provide
financial rewards on the same basis as those realized by the Company's
shareholders.
Base Salaries. In January 1997, the Committee met to consider the
compensation levels of the Company's executive officers, which were reviewed
in comparison to: (1) Radford Associates' 1996 Biotechnology Compensation
Survey Report, a published survey of salaries paid by 292 companies within the
biotechnology industry, with a subset of data for companies with 51 to 149
employees; (2) an informal survey of reported executive salary information for
30 publicly-held biotechnology companies having total market capitalizations
of less than $150 million; and (3) the salary levels of executives at the
following publicly traded gene therapy companies: Cell Genesys, Inc.,
GeneMedicine, Inc., Somatix Therapy Corporation and Vical Incorporated. The
base salaries of the Company's executive officers were generally determined to
be below the industry survey medians and below the average of salaries paid by
the other public gene therapy companies and therefore below the Committee's
goal for compensating the Company's executives.
The Committee directed an 8% increase in Ms. Parker's base salary to
$216,000. As a result, Ms. Parker's base salary remains significantly below
the 50th percentile of salaries paid to chief executive officers according to
the industry surveys. The Committee believed that this was appropriate,
because the Company did not fully achieve its goals in 1996, particularly with
respect to the completion of a significant collaboration transaction. Dr.
Carter and Mr. Johnson each received increases of approximately 8% in their
base salary, to $167,000 and $152,500, respectively, and Dr. Daifuku received
an increase of approximately 7% to $180,000. Such increases place the base
salaries of such officers in approximately the 50th percentile of salaries
paid to officers in similar positions according to the industry surveys.
Cash Bonuses. Traditional measures of corporate performance, such as
earnings or sales growth, do not apply to development stage biotechnology
companies. The Committee's view is that it is most appropriate to measure
performance of the Company's executive management based on progress toward
achievement of operating goals which are formulated to promote advancement of
key aspects of the Company's business.
In January 1998, the Committee met to evaluate the performance of the
Company's executive management with respect to a series of goals that were set
in early 1997. The goals covered the completion of corporate
12
<PAGE>
collaboration transactions; completion of patient accrual into certain
clinical trials; successful development of certain technology enhancements;
and generation of additional capital investment. The goals related to
completion of corporate collaboration transactions were weighted heavier than
the others, representing approximately 80% of the total. The Committee
concluded that, although certain goals had been met during the year, the
primary goals related to corporate collaborations had not been accomplished.
Accordingly, the Committee concluded that no bonuses would be paid to the
Company's executive officers for 1997. The Committee decided, however, that
this decision would be reviewed at mid-year relative to progress achieved with
respect to corporate collaboration transactions, reductions in operating
expenses and other strategic initiatives in the first half of 1998.
Stock Option Grants. Stock options are granted to provide a long-term
incentive opportunity that is directly linked to increase in shareholder
value. They are granted with an exercise price equal to the market value of
Common Stock on the date of the grant, have a term of ten years, and become
exercisable in 20% annual increments beginning one year after the date of
grant. To encourage stock retention, all options are granted as incentive
stock options to the maximum extent possible under the Code.
As part of the design of the Company's executive compensation program, the
Company has adopted a formula to be used for establishing the number of stock
option grants to be awarded annually to the Company's executives. The formula
is as follows: the number of shares on which options are to be awarded equals
the executive's base salary (multiplied by a factor of 1.25 in the case of Ms.
Parker) divided by the average closing price of the Company's stock over the
twenty trading days ending on the date of the stock option grant. Based on
performance factors, the Committee may adjust the number of options produced
by the formula either upward or downward.
In January 1997, the Committee granted stock options to the Company's
executive officers based on the formula described above, without adjustment.
Ms. Parker, Dr. Carter, Dr. Daifuku and Mr. Johnson received stock options for
60,196 shares, 37,081 shares, 40,451, and 33,950 shares, respectively.
The Committee has not adopted a policy with respect to the application of
Section 162(m) of the Code, which generally imposes an annual corporate
deduction limitation of $1,000,000 on the compensation of certain executive
officers. Pursuant to Section 162(m), compensation above $1,000,000 may be
deducted if it is "performance-based compensation" within the meaning of the
Code. Stock options granted under the Option Plan qualify as "performance-
based compensation".
Compensation Committee
Jack L. Bowman
James D. Grant
Donald E. O'Neill
13
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Common Stock with the cumulative total return of the Nasdaq Stock Market Total
Return Index and the Nasdaq Pharmaceutical Stocks Index, an index of all
companies whose stocks are traded on the Nasdaq Stock Market and whose Primary
Standard Industrial Classification Code Number is 283, Pharmaceutical
Companies. The graph shows the value of $100 invested on May 20, 1994 (the
date of Targeted Genetics' initial public offering) in Targeted Genetics
Common Stock, the Nasdaq Stock Market Total Return Index and the Nasdaq
Pharmaceutical Stocks Index.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG TARGETED GENETICS CORPORATION,
NASDAQ STOCK MARKET TOTAL RETURN INDEX AND NASDAQ PHARMACEUTICAL STOCKS INDEX
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
May 20, Dec. 30, Dec. 29, Dec. 31, Dec. 31,
1994 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Targeted Genetics $100.00 $ 87.50 $ 93.83 $ 75.00 $ 43.83
Nasdaq Stock Market $100.00 $104.43 $147.66 $181.64 $222.99
Nasdaq Pharmaceutical Stocks $100.00 $ 96.53 $176.46 $176.46 $182.67
</TABLE>
14
<PAGE>
PRINCIPAL TARGETED GENETICS SHAREHOLDERS
The following table sets forth, as of March 2, 1998, certain information
with respect to the beneficial ownership of shares of Common Stock by (i) each
person known by Targeted Genetics to own beneficially more than 5% of the
shares of Common Stock, (ii) each director of Targeted Genetics, (iii) each of
Targeted Genetics' executive officers for whom compensation is reported in
this Proxy Statement, and (iv) all directors and executive officers of
Targeted Genetics as a group. Except as otherwise noted, Targeted Genetics
believes that the beneficial owners of the shares of Common Stock listed
below, based on information furnished by such owners, have sole voting and
investment power with respect to such shares.
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OF AMOUNT AND NATURE OF OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------- -------------------- -------
<S> <C> <C>
5% OWNERS:
Immunex Corporation........................... 2,613,122 13.0%
51 University
Street Seattle, WA 98101
State of Wisconsin Investment Board........... 1,662,500 8.2%
121 E. Wilson Street
P.O. Box 7842
Madison, WI 53707
Wellington Management Company................. 1,601,900 7.9%
75 State Street
Boston, MA 02109
International Biotechnology Trust plc ........ 1,450,000 7.2%
c/o Rothschild Asset Management Limited
Five Arrows House
St. Swithin's Lane
London, England EC4N 8NR
DIRECTORS AND EXECUTIVE OFFICERS:
H. Stewart Parker............................. 273,925(1) 1.3%
Barrie J. Carter, Ph.D. ...................... 183,915(2) *
James A. Johnson.............................. 77,631(3) *
Jack L. Bowman................................ -- --
Jeremy Curnock Cook........................... 1,461,667(4) 7.2%
Stephen A. Duzan.............................. 24,264(5) *
James D. Grant................................ 20,000(6) *
Donald E. O'Neill............................. 28,000(7) *
Mark Richmond, Ph.D., D.Sc. .................. 5,000(6) *
Martin P. Sutter.............................. 684,649(8) 3.4%
All directors and executive officers as a 2,759,051(9) 13.4%
group (10 persons)...........................
</TABLE>
- --------
* Less than 1%.
(1) Includes 119,760 shares subject to options that may be exercised within 60
days.
(2) Includes 57,250 shares subject to options that may be exercised within 60
days.
(3) Includes 74,631 shares subject to options that may be exercised within 60
days.
15
<PAGE>
(4) Represents 1,450,000 shares of Common Stock owned by International
Biotechnology Trust plc ("IBT"), an investment trust the shares of which
are traded on the London Stock Exchange, and 11,667 shares subject to
options that may be exercised within 60 days. Mr. Cook is a management
director of Rothschild Asset Management Limited, the investment manager
and secretary of IBT, and thereby has power to direct IBT's investments.
Mr. Cook disclaims beneficial ownership of the securities owned by IBT.
(5) Includes 17,600 shares subject to options that may be exercised within 60
days.
(6) Represents shares subject to options that may be exercised within 60
days.
(7) Includes 20,000 shares subject to options that may be exercised within 60
days.
(8) Represents 220,483 shares of Common Stock owned by The Woodlands Venture
Fund, L.P.; 459,166 shares of Common Stock owned by The Woodlands/Essex
Venture Partners III, L.P.; and 5,000 shares subject to options that may
be exercised within 60 days. Mr. Sutter is (i) a General Partner of The
Woodlands/Essex Management Partners, L.P., which is the General Partner
of The Woodlands/Essex Venture Partners III, L.P., and (ii) the Managing
General Partner of The Woodlands Venture Partners, L.P., which is the
General Partner of The Woodlands Venture Fund, L.P., and thereby has the
power to vote the securities. Although for purposes of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), Mr. Sutter is
deemed to be the beneficial owner of such securities, Mr. Sutter
expressly disclaims that he is, in fact, the beneficial owner of such
securities.
(9) Includes 1,450,000 shares of Common Stock owned by IBT; 220,483 shares of
Common Stock owned by The Woodlands Venture Fund, L.P.; 459,166 shares of
Common Stock owned by The Woodlands/Essex Venture Partners III, L.P.; and
330,908 shares subject to options that may be exercised within 60 days.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Targeted Genetics' officers and
directors, and persons who own more than 10% of a registered class of Targeted
Genetics' equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% shareholders are required by Securities and Exchange
Commission regulations to furnish Targeted Genetics with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no such forms were
required for those persons, Targeted Genetics believes that during calendar
year 1997 all filing requirements applicable to its officers, directors and
greater than 10% shareholders were complied with.
INDEPENDENT AUDITORS
Representatives of Ernst & Young LLP, the Company's independent auditors,
are expected to attend the Annual Meeting and will have an opportunity to make
a statement and to respond to appropriate questions from shareholders.
OTHER BUSINESS
The Board does not intend to present any business at the Annual Meeting
other than as set forth in the accompanying Notice of Annual Meeting of
Shareholders, and has no present knowledge that any others intend to present
business at the Annual Meeting. If, however, other matters requiring the vote
of the shareholders properly come before the Annual Meeting or any adjournment
or postponement thereof, the persons named in the accompanying form of proxy
will have discretionary authority to vote the proxies held by them in
accordance with their judgment as to such matters.
16
<PAGE>
PROPOSALS BY TARGETED GENETICS SHAREHOLDERS
Shareholder proposals intended to be presented at Targeted Genetics' 1999
Annual Meeting of Shareholders must be received by Targeted Genetics not later
than November 30, 1998 for inclusion in the proxy materials for such meeting.
ANNUAL REPORT AND FORM 10-K
Copies of Targeted Genetics' 1997 Annual Report and Form 10-K are being
mailed with this Proxy Statement to each shareholder of record. Targeted
Genetics shareholders not receiving a copy of such Annual Report or Form 10-K
may obtain one without charge by writing or calling Investor Relations,
Targeted Genetics Corporation, 1100 Olive Way, Suite 100, Seattle, Washington
98101, (206) 623-7612.
17
<PAGE>
TARGETED GENETICS CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS - MAY 5, 1998
The undersigned hereby appoint(s) H. Stewart Parker and James A. Johnson
and each of them as proxies, with full power of substitution, to represent and
vote as designated all shares of Common Stock of Targeted Genetics Corporation
held of record by the undersigned on March 6, 1998 at the Annual Meeting of
Shareholders of the Company to be held at the Company's headquarters, located at
1100 Olive Way, Suite 100, Seattle Washington, at 9:00 a.m. on Tuesday, May 5,
1998, with authority to vote upon the matters listed below and with
discretionary authority as to any other matters that may properly come before
the meeting or any adjournment or postponement thereof.
IMPORTANT--PLEASE DATE AND SIGN ON THE OTHER SIDE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
The Board of Directors recommends a vote "FOR" Item 1 and "FOR the Nominees" in
Item 2.
Please mark your votes as indicated [X]
(1) APPROVAL OF AMENDMENT TO 1992 RESTATED STOCK OPTION PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
WITHHOLD
AUTHORITY
(2) ELECTION OF CLASS 1 DIRECTORS FOR the to vote for
NOMINEES: Jack L. Bowman Nominees the Nominees
Jeremy Curnock Cook [ ] [ ]
SHARES REPRESENTED BY THIS WITHHOLD for the following only: (write the
PROXY WILL BE VOTED AS DIRECTED name of the nominee in the space below)
BY THE SHAREHOLDER IN THE SPACE
PROVIDED. IF NO DIRECTION IS ___________________________________________
GIVEN, THIS PROXY WILL BE VOTED unless otherwise directed, all votes will
"FOR" ITEM 1 AND "FOR THE be apportioned equally among those persons
NOMINEES" IN ITEM 2. for whom authority is given to vote
I plan to attend the Annual Meeting [ ]
Please sign exactly as your name appears hereon. Attorneys, trustees, executors
and other fiduciaries acting in a representative capacity should sign their
names and give their titles. An authorized person should sign on behalf of
corporations, partnerships, associations, etc. and give his or her title. If
your shares are held by two or more persons, each person must sign. Receipt of
the notice of meeting and proxy statement is hereby acknowledged.
Date ____ Signature (s) _____________ Date ____ Signature (s) _____________
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
