UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.)

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230 THIRD AVENUE

WALTHAM, MASSACHUSETTS 02451

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON WEDNESDAY, JUNE 14, 2006

 

TO OUR STOCKHOLDERS:

 

Please take notice that the 2006 Annual Meeting of stockholders of OXiGENE, Inc., a Delaware corporation, will be held on Wednesday, June 14, 2006, at 8:00 a.m., local time, at the Benjamin Hotel, located at 125 East 50th Street, New York, NY 10022, for the following purposes:

 

1. To elect eight members to the Board of Directors to hold office until the 2007 annual meeting of stockholders and until their successors are duly elected and qualified; and

 

2. To transact such other business as may be properly brought before the Annual Meeting and any adjournments thereof.

 

The Board of Directors has fixed the close of business on April 21, 2006 as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting and at any adjournments thereof. A list of stockholders of record will be available at the meeting and, during the 10 days prior to the meeting, at the office of the Secretary at the above address.

 

All stockholders are cordially invited to attend the Annual Meeting. Whether you plan to attend the Annual Meeting or not, you are requested to complete, sign, date and return the enclosed proxy card as soon as possible in accordance with the instructions on the proxy card. A pre-addressed, postage prepaid return envelope is enclosed for your convenience.

 

BY ORDER OF THE BOARD OF DIRECTORS

 

 

Frederick W. Driscoll
President and Chief Executive Officer

 

April 28, 2006

 

230 THIRD AVENUE

WALTHAM, MASSACHUSETTS 02451

(781) 547-5900

 

PROXY STATEMENT

 

ANNUAL MEETING OF STOCKHOLDERS

WEDNESDAY, JUNE 14, 2006

 

We have sent you this proxy statement and the enclosed proxy card because our Board of Directors is soliciting your proxy to vote at the 2006 Annual Meeting of stockholders and any adjournments of the Annual Meeting. This Proxy Statement summarizes the information you need to know to vote at the Annual Meeting. You do not need to attend the Annual Meeting to vote your shares. Instead, you may vote your shares by marking, signing, dating and returning the enclosed proxy card. This Proxy Statement and the proxy card were first mailed to stockholders on or about May 12, 2006.

 

Who Can Vote.  Record holders of our common stock at the close of business on the record date, April 21, 2006, may vote at the Annual Meeting. On the record date, approximately 90 record holders held 28,037,497 shares of our outstanding common stock. Holders of common stock are entitled to one vote per share on all matters to be voted on by stockholders.

 

How You Can Vote.  You can only vote your shares if you are either present in person or represented by proxy at the Annual Meeting. Whether you plan to attend the Annual Meeting or not, we urge you to complete, sign and date the enclosed proxy card and to return it promptly in the envelope provided. Returning the proxy card will not affect your right to attend the Annual Meeting and vote. If you properly fill in your proxy card and send it to us in time, the “proxy” (one of the individuals named on the proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, the proxy will vote your shares as recommended by the Board of Directors.

 

Recommendation of the Board of Directors.  The Board of Directors recommends that you vote “FOR” the election of the eight (8) director nominees.

 

If any other matter is properly presented, the proxyholders will vote your shares in accordance with their best judgment. At the time this Proxy Statement was printed, we knew of no matters that needed to be acted on at the Annual Meeting, other than those discussed in this Proxy Statement.

 

Revocation of Proxies.  If you return your proxy card, you may revoke your proxy at any time before it is exercised. You may revoke your proxy in any one of the following ways:

 

 

Voting in Person.  If you plan to attend the Annual Meeting and vote in person, we will give you a ballot when you arrive. However, if your shares are held in the name of your broker, bank or other nominee, you must bring an account statement or letter from the nominee indicating that you were the beneficial owner of the shares on April 21, 2006, the record date for determining who is entitled to vote.

Required Votes.  The vote that is required for approval of the proposal is as follows:

 

 

Broker Non-Votes, Withholdings and Abstentions.

 

 

Quorum.  The presence, in person or by proxy, of the holders of a majority of the outstanding shares of our common stock is necessary to constitute a quorum at the Annual Meeting. Votes of stockholders of record who are present at the meeting in person or by proxy, abstentions, and broker non-votes are counted for purposes of determining whether a quorum exists.

 

Throughout this Proxy Statement, the terms “OXiGENE,” “WE,” “US,” “OUR” or “COMPANY” mean OXiGENE, Inc.

 

PROPOSAL 1 — ELECTION OF DIRECTORS

 

Information concerning the nominees for election to the Board of Directors is set forth below. Each nominee for election to the Board of Directors has consented to being named as a nominee and has agreed to serve if elected. If elected, each director would serve for a one-year term, expiring at the 2007 annual meeting of stockholders and until his successor is elected. We will vote your shares as you specify on your proxy card. If you sign, date and return the proxy card but do not specify how you want your shares voted, we will vote them FOR the election of the nominees listed below. If unforeseen circumstances (such as death or disability) make it necessary for the Board of Directors to substitute another person for any of the nominees, we will vote your shares FOR that other person. If we do not name a substitute nominee, the size of the Board of Directors will be reduced. We are not aware of any circumstances that would render any nominee for director unavailable.

 

Our Board of Directors currently consists of eight members, including five members who are “Non-Employee Directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended. Under our by-laws, the number of members of our Board of Directors is fixed from time to time by the Board of Directors, and directors serve in office until the next annual meeting of stockholders and until their successors have been elected and qualified. The Board of Directors has set the size of the Board of Directors at eight, effective as of the Annual Meeting, and nominated Messrs. Joel-Tomas Citron, David Chaplin, Richard Chin, Frederick W. Driscoll, Arthur B. Laffer, Per-Olof Söderberg, William N. Shiebler and J. Richard Zecher for election at the Annual Meeting. The eight nominees include five members who would qualify as independent directors under the rules of the Nasdaq Stock Market, Inc. A plurality of the shares voted affirmatively at the Annual Meeting is required to elect each nominee as a director.

 

Each nominee for election to the Board of Directors is currently serving as a director. The following information with respect to each nominee has been furnished to us by that nominee. The ages of the nominees are as of March 31, 2006. We currently employ Messrs. Citron, Chaplin and Driscoll.

 

 

 

UNLESS A STOCKHOLDER INDICATES OTHERWISE, EACH RETURNED PROXY WILL BE VOTED “FOR” THE ELECTION TO THE BOARD OF DIRECTORS OF EACH OF THE EIGHT NOMINEES NAMED ABOVE.

 

BOARD AND COMMITTEE MEETINGS

 

During 2005, the Board of Directors held five meetings. In addition, the Board of Directors has established three committees whose functions and current members are noted below. The Audit Committee, the Compensation Committee and the Nominating and Governance Committee (collectively, the “Board Committees”) are committees of the Board of Directors and consist solely of members of the Board of Directors. The Board Committees met a total of six times in 2005. Each incumbent director attended 75% or more of the aggregate number of meetings of the Board of Directors and Board Committees on which he served during 2005. The Board has also adopted a policy under which each member of the Board is required to make every effort to attend each annual meeting of our stockholders. Six directors attended our Annual Meeting of stockholders in 2005.

 

Our Board has determined that the following members of the Board qualify as independent under the definition promulgated by the Nasdaq Stock Market: Messrs. Arthur B. Laffer, Richard Chin, William N. Shiebler, Per-Olof Söderberg and J. Richard Zecher.

 

Audit Committee.  The Audit Committee consists of Messrs. William N. Shiebler, Per-Olof Söderberg, J. Richard Zecher and Arthur B. Laffer (Chairman). During 2005, the Audit Committee held five meetings. Our Audit Committee has the authority to retain and terminate the services of our independent registered public accounting firm, reviews annual financial statements, considers matters relating to accounting policy and internal controls and reviews the scope of annual audits. The Board has determined that Dr. Laffer is an “audit committee financial expert,” as the Securities and Exchange Commission has defined that term in Item 401 of Regulation S-K. The Board of Directors has adopted a charter for the Audit Committee, which is reviewed and reassessed annually by the Audit Committee.

 

Securities and Exchange Commission rules require that we disclose our compliance with Nasdaq Stock Market (“Nasdaq”) listing standards regarding the independence of our Audit Committee members and inclusion in the Audit Committee of any non-independent director. Currently, all of our Audit Committee members are independent as defined under Nasdaq listing standards. Please also see the Audit Committee Report set forth on page 12 of this Proxy Statement.

 

Compensation Committee.  The Compensation Committee consists of Messrs. Arthur B. Laffer (Chairman), William N. Shiebler and J. Richard Zecher. During 2005, the Compensation Committee held one meeting. The Compensation Committee makes recommendations to the Board of Directors regarding the compensation philosophy and compensation guidelines for our executives, the role and performance of our executive officers, appropriate compensation levels for our Chief Executive Officer, which are determined without the Chief Executive Officer present, and other executives based on a comparative review of compensation practices of similarly situated businesses. The Compensation Committee also makes recommendations to the Board regarding the design and implementation of our compensation plans and the establishment of criteria and the approval of performance results relative to our incentive plans. Please also see the Report of Compensation Committee on Executive Compensation, set forth on pages 8-10 of this Proxy Statement. All members of the Compensation Committee qualify as independent under the definition promulgated by Nasdaq.

 

Nominating and Governance Committee.  The Nominating and Governance Committee consists of Messrs. William N. Shiebler (Chairman), Per-Olof Söderberg and Arthur B. Laffer. During 2005, the Nominating and Governance Committee did not meet. This committee’s role is to make recommendations to the full Board as to the size and composition of the Board and to make recommendations as to particular nominees. All members of the Nominating and Governance Committee qualify as independent under the definition promulgated by Nasdaq. The Nominating and Governance Committee may consider candidates recommended by stockholders, as well as from other sources, such as current directors or officers, third-party search firms or other appropriate sources. For all potential candidates, the Nominating and Governance Committee may consider all factors it deems relevant, such as a candidate’s personal integrity and sound judgment, business and professional skills and experience, independence, knowledge of the industry in which we operate, possible conflicts of interest, diversity, the extent to which the candidate would fill a present need on the Board, and concern for the long-term interests of the stockholders. In general, persons recommended by

stockholders will be considered on the same basis as candidates from other sources. If a stockholder wishes to nominate a candidate to be considered for election as a director at the 2007 Annual Meeting of stockholders using the procedures set forth in the Company’s By-laws, it must follow the procedures described below in “Stockholder Proposals and Nominations for Director.” If a stockholder wishes simply to propose a candidate for consideration as a nominee by the Nominating and Governance Committee, it should submit any pertinent information regarding the candidate to the Chairman of the Nominating and Governance Committee by mail at OXiGENE, Inc., 230 Third Avenue, Waltham, Massachusetts 02451. A copy of the Nominating and Governance Committee charter is publicly available on our website at www.oxigene.com.

 

Shareholder Communications to the Board

 

Generally, shareholders who have questions or concerns should contact our Investor Relations department at 781-547-5900. However, any shareholders who wish to address questions regarding our business directly with the Board of Directors, or any individual director, should submit his or her questions to the appropriate director using the contact information and instructions for this purpose set forth on the Company’s website at www.oxigene.com.

 

COMPENSATION OF DIRECTORS

 

Fees.  Prior to fiscal 2003, directors received no cash compensation for serving on our Board of Directors or committees thereof. In July 2003, our directors adopted a director compensation plan. Under this plan, non-employee directors receive an annual retainer of $25,000 plus $1,500 for attendance at each Board meeting. In addition, each Board Committee chairman receives an annual retainer of $7,500, and each Committee member receives $1,000 for attendance at each Committee meeting. In lieu of the fees described above, Mr. Joel Citron, the Chairman of our Board of Directors, receives $200,000 plus expenses annually under his employment agreement. A detailed description of Mr. Citron’s employment agreement is provided on page 16 of this Proxy Statement.

 

Equity Incentives.  Under the terms of our 2005 Stock Plan, directors may be granted shares of common stock, stock-based awards and/or stock options to purchase shares of common stock. In 2005, each of our directors received a grant of restricted stock. Each of Messrs. Chin, Laffer, Söderberg, Shiebler and Zecher received 40,000 shares of our restricted common stock; and each of Messrs. Citron, Chaplin and Driscoll received 80,000 shares of our restricted common stock. These shares have full voting rights and are eligible for dividends should they be declared. The restricted stock agreements contain lapsing repurchase rights under which a portion of the shares granted would be forfeited to the Company should the director no longer serve in his capacity as a director prior to the end of the four year vesting term.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires our directors and executive officers, and persons who own more than 10% of our common stock to file with the Securities and Exchange Commission and us initial reports of beneficial ownership and reports of changes in beneficial ownership of common stock and other of our equity securities. For these purposes, the term “other equity securities” would include options granted under our 2005 Stock Plan. To our knowledge, based solely on a review of the forms and written representations received by us from our Section 16 reporting persons, during the fiscal year ended December 31, 2005 all Section 16(a) filing requirements applicable to the reporting persons were properly and timely satisfied, except that one report, covering one transaction, was filed late by Dr. Chin.

 

EXECUTIVE OFFICERS OF THE COMPANY

 

See above for biographical information pertaining to Joel-Tomas Citron, our Chairman, David Chaplin, our Vice Chairman, Chief Scientific Officer and Head of Research and Development, and Frederick W. Driscoll, our President and Chief Executive Officer.

Scott Young, 44, was appointed Chief Operating Officer in March 2004. Mr. Young served as OXiGENE’s Vice President of Clinical and Regulatory Affairs from January 2002 until March 2004. In addition, since 1999 Mr. Young has served as OXiGENE’s designated regulatory representative to the U.S. Food and Drug Administration and international pharmaceutical regulatory bodies. Prior to joining OXiGENE in 1997, Mr. Young was the principal project manager and regulatory representative for a partnership between Genzyme Corp. and Diacrin, Inc. in the development of xenotransplantation therapy to treat Parkinson’s disease. Mr. Young also has served in several roles at RepliGen Corp. and as a process development scientist at Genetics Institute, now part of Wyeth-Ayerst. Mr. Young holds a Bachelor of Science degree in biochemistry from the University of Massachusetts at Amherst and a Master’s degree in public health from Harvard University.

 

James B. Murphy, 49, was appointed Chief Financial Officer in March 2004. From 2001 until May 2003, Mr. Murphy was Vice President of Finance for Whatman Inc., of Marlborough, Massachusetts, a subsidiary of U.K.-based Whatman plc (LSE: WHM), a publicly traded manufacturer of filtration and separation products for the pharmaceutical industry. From 1994 through 2001, Mr. Murphy worked at HemaSure (NASDAQ: HMSR), a spin-off of Sepracor, Inc., serving as the company’s Senior Vice President of Finance and Administration, and later as Senior Vice President and Chief Financial Officer. From 1990 to 1994, he was Corporate Controller at Sepracor (NASDAQ: SEPR), a diversified pharmaceutical, medical device and biotechnology products company based in Marlborough, Massachusetts. Mr. Murphy holds a B.A. in economics and accounting from the College of the Holy Cross and is registered as a Certified Public Accountant.

 

REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

 

Introduction

 

Three of our directors, Messrs. Arthur B. Laffer, William N. Shiebler and J. Richard Zecher, constitute the Compensation Committee. Each of Messrs. Laffer, Shiebler and Zecher is a non-employee director. The Compensation Committee, among other things, is responsible for making recommendations to the Board of Directors with respect to:

 

(1) the compensation philosophy and compensation guidelines for our executives;

 

(2) the role and performance of each of our executive officers, especially as these affect compensation;

 

(3) appropriate compensation levels for our Chief Executive Officer and other executives based on a comparative review of compensation practices of similarly situated businesses; and

 

(4) the design and implementation of our compensation plans and the establishment of criteria and the approval of performance results relative to our incentive plans.

 

An important consideration in respect of all these criteria is our overriding desire to retain cash and to compensate our executives in stock, which we also believe has the effect of aligning their interests with the interests of our stockholders. As a practical matter, the Compensation Committee sets and administers all compensation of our management directors, Messrs. Citron, Chaplin and Driscoll, since none of Messrs. Citron, Chaplin or Driscoll participate in deliberations regarding, or vote on, their respective compensation matters. The Board of Directors did not modify or reject any action or recommendation of the Compensation Committee regarding compensation for the 2005 fiscal year.

 

This report sets out the Compensation Committee’s executive compensation philosophy and objectives, describes the components of the executive compensation program and describes the basis on which 2005 executive compensation determinations were made with respect to our executive officers, including those named in the Summary Compensation Table on page 15 of this Proxy Statement.

Compensation Philosophy and Objectives

 

It is our policy to maintain a flexible managerial and compensation structure so that we may continue to meet our evolving and changing supervisory needs, while tightly controlling our overhead expenses, as our business progresses. As part of this policy, we provide a compensation package that is intended to focus executive behavior on the fulfillment of annual and long-term business objectives, and to create a sense of ownership in the Company that causes executive decisions to be aligned with the best interests of our stockholders. We also recognize that competition in our markets is strong both for obtaining and retaining high quality executives and key employees, and that we must meet the standards of the marketplace if we are to fulfill our managerial and employee goals.

 

In 2005, total cash remuneration arrangements with our executive officers amounted to approximately $1,323,300. Our policy has been, and continues to be, to maintain a relatively small number of executives and other employees and to rely as much as possible on consultants and independent contractors for research and development efforts, as well as pre-clinical and clinical trials.

 

Compensation Program Components

 

Consistent with our executive compensation objectives, compensation for our senior managers consists of two elements: an annual base salary and long-term incentive compensation.

 

Annual Base Salary.  Base salaries for executive officers are determined with reference to a salary range for each position. Salary ranges are determined by evaluating a particular employee’s position and comparing it with what are believed to be representative prevailing norms for similar positions in similarly sized companies. Within this salary range, an executive’s initial salary level is determined largely through the Compensation Committee’s judgment based on its members’ experience. Salaries are determined at a level to attract, motivate and retain superior executives. We determine annual salary adjustments based on OXiGENE’s performance, the individual executive’s contribution to that performance, prevailing norms and our knowledge and experience.

 

Long-Term Incentive Compensation.  Long-term incentive compensation is provided by granting options to purchase shares of common stock or restricted stock under our 2005 Stock Plan. In considering awards, the Compensation Committee takes into account such factors as prevailing norms for the ratio of options outstanding to total shares outstanding, the relative influence each executive is expected to have on the building of stockholder value over the long term, and the amount, vesting and expiration dates of each executive’s outstanding options. We look at each executive’s total compensation package and, taking into account our desire to minimize cash outlays as a matter of policy based on fiscal prudence, we expect our executives and key employees to look at the incentive compensation component as being the predominant feature of their overall compensation package.

 

Consultants’ Compensation.  We continue to rely to a great extent on consultants, including, among others, the members of our Scientific Advisory Board and our Clinical Trial Advisory Board, in the areas of research and development, clinical trials and clinical trial management and marketing. We believe that, at least presently, it is less expensive and more efficient to engage consultants rather than to expand our overhead by hiring individuals for these positions. In order to retain their motivation and long-term commitment, and in order to conserve cash, from time to time these consultants will be granted options under our 2005 Stock Plan.

 

Other.  Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), disallows a tax deduction to public companies for certain compensation in excess of $1 million paid to each of the Company’s President and Chief Executive Officer and its other most highly compensated executive officers. The Company does not believe that Section 162(m) will generally have an effect on the Company because of the current and anticipated compensation levels of its executive officers, including the President and Chief Executive Officer. However, the Compensation Committee intends to periodically review the potential consequences of Section 162(m) and may structure the annual cash incentive awards under the Company’s annual incentive plan to comply with certain exemptions available under Section 162(m) for certain performance-based compensation.

The Company’s 2005 Stock Plan is currently structured to comply with such exemptions so that stock options and other awards under that plan to its executive officers will be tax deductible under Section 162(m).

 

President and Chief Executive Officer Compensation

 

In general, the Compensation Committee reviews and fixes the base salary of the President and Chief Executive Officer based on comparable competitive compensation data, as well as the Compensation Committee’s assessment of such officer’s past performance and its expectations as to such officer’s future contributions to the Company’s leadership. Currently, the President and Chief Executive Officer’s base salary is $325,000. There have been no increases in his base salary since July 2003.

 

The Company achieved several milestones in 2004 and 2005, including: the successful completion of a number of Phase I and II clinical trials in oncology which led to regulatory clearance to proceed with later stage trials; regulatory clearance for a first-ever trial using its Vascular Disrupting Agent, CA4P, in combination with Avastin; progress in the Company’s development of its ortho-quinone pro-drug candidate, OXi4503; and successful completion of both two direct placement financings and a fully marketed follow-on offering that raised approximately $66 million in gross proceeds combined. In recognition of the President and Chief Executive Officer’s leadership in the achievement of these corporate milestones and his contributions to the Company, the President and Chief Executive Officer was awarded a bonus in the amount of $40,000 in 2004 and $80,000 in 2005.

 

RESPECTFULLY SUBMITTED,

 

THE COMPENSATION COMMITTEE

 

Arthur B. Laffer, Chairman
William N. Shiebler
J. Richard Zecher

 

AUDIT FEES

 

The following table presents fees for professional audit services rendered by Ernst & Young LLP for the audit of the Company’s annual financial statements for the years ended December 31, 2005 and December 31, 2004, and fees billed for other services rendered by Ernst & Young LLP during those periods.

 

 

 

 

Policy on Audit Committee Pre-Approval of Audit and Permissible
Non-audit Services of Independent Registered Public Accounting Firm

 

Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm.

 

Prior to engagement of the independent registered public accounting firm for the next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.

 

1. Audit services include audit work performed in the preparation and audit of the annual financial statements, fees for the audit of the effectiveness of the Company’s system of internal control over financial reporting, as well as the audit of management’s assessment of the effectiveness thereof, review of quarterly financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, such as the provision of consents and comfort letters in connection with the filing of registration statements.

 

2. Audit-Related services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.

 

3. Tax services consist principally of assistance with tax compliance and reporting, as well as certain tax planning consultations.

 

4. Other Fees are those associated with services not captured in the other categories. The Company generally does not request such services from the independent auditor.

 

Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted, and the Audit Committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public accounting firm.

 

The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

 

AUDIT COMMITTEE REPORT

 

The members of the Audit Committee, which is comprised of four directors, have been appointed by the Board of Directors. The current members of the Committee are Messrs. William N. Shiebler, Per-Olof Söderberg, J. Richard Zecher, and Arthur B. Laffer (Chairman). All members of our Audit Committee meet the independence and experience requirements of the Nasdaq National Market. The Audit Committee is governed by a charter that has been adopted by the Board of Directors and is reviewed and reassessed annually by the Audit Committee.

 

This Audit Committee Report does not constitute soliciting material and shall not be deemed filed or incorporated by reference into any other filings of ours under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or subject to Regulation 14A or 14C under the Exchange Act, except as specifically provided under the Exchange Act, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically request that this Audit Committee Report be treated as soliciting material or specifically incorporates this Audit Committee Report by reference therein.

 

The Audit Committee reviews the scope and timing of the independent registered public accounting firm’s audit and other services, and their report on our financial statements, the effectiveness of internal control over financial reporting and management’s assessment of internal control over financial reporting following completion of their audits. The Audit Committee also makes annual recommendations to the Board of Directors regarding the appointment of independent registered public accounting firms for the ensuing year.

 

Management is responsible for the preparation of our financial statements and the independent registered public accounting firm has the responsibility for the examination of those statements. The Audit Committee reviewed our audited financial statements for the year ended December 31, 2005 and met with both management and our external accountants to discuss those financial statements. Management and the independent registered public accounting firm has represented to the Audit Committee that the financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee also considered taxation matters and other areas of oversight relating to the financial reporting and audit process that the Audit Committee deemed appropriate.

 

The Audit Committee has received from the independent registered public accounting firm their written disclosure and letter regarding their independence from us as required by Independence Standards Board Standard No. 1, as may be modified or supplemented, and has discussed with the independent registered public accounting firm their independence. The Audit Committee also discussed with the independent registered public accounting firm any matters required to be discussed by Statement on Auditing Standards No. 61, as may be modified or supplemented.

 

Based upon the reviews and discussions described in this Audit Committee Report, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2005 for filing with the Securities and Exchange Commission.

 

RESPECTFULLY SUBMITTED,

 

THE AUDIT COMMITTEE

 

Arthur B. Laffer, Chairman
William N. Shiebler
Per-Olof Söderberg
J. Richard Zecher

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following tables set forth certain information with respect to the beneficial ownership of our common stock as of March 2, 2006, for (a) each of the executive officers named in the Summary Compensation Table on page 15 of this Proxy Statement, (b) each of our directors and director nominees, (c) all of our current directors and executive officers as a group and (d) each stockholder known by us to own beneficially more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to the securities. We deem shares of common stock that may be acquired by an individual or group within 60 days of March 2, 2006 pursuant to the exercise of options or warrants to be outstanding for the purpose of computing the percentage ownership of such individual or group, but such shares are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the tables. Except as indicated in footnotes to these tables, we believe that the stockholders named in these tables have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them based on information provided to us by these stockholders. Percentage of ownership is based on 28,037,497 shares of common stock outstanding on March 2, 2006.

 

 

 

 

As of March 31, 2006, the following is the only entity (other than our employees as a group) known to us to be the beneficial owner of more than 5% of our outstanding common stock.

 

 

The determination that there were no other persons, entities or groups known to us to beneficially own more than 5% of our outstanding common stock was based on a review of all statements filed with respect to us since the beginning of the past fiscal year with the Securities and Exchange Commission pursuant to Section 13(d) or 13(g) of the Exchange Act.

 

EXECUTIVE COMPENSATION

 

The following Summary Compensation Table sets forth summary information as to compensation received by our Chief Executive Officer and each of the three other most highly compensated executive officers who received total salary and bonus of at least $100,000 during fiscal 2005 (collectively, the “named executive officers”) for services rendered to us in all capacities during the three fiscal years ended December 31, 2005.

 

SUMMARY COMPENSATION TABLE

 

 

 

 

EMPLOYMENT AGREEMENTS

 

Employment Agreement with Frederick W. Driscoll.  In October 2000, we entered into an employment agreement with Mr. Driscoll. Mr. Driscoll became our President of Operations and Finance in October 2000 and was appointed President and Chief Executive Officer in June 2002. Pursuant to the agreement, Mr. Driscoll currently receives a base salary of $325,000 per year. We may terminate the agreement on six months’ prior notice, and Mr. Driscoll may terminate the agreement on six months’ prior notice. We may also terminate the agreement prior to the end of its term for “cause” as defined in the agreement.

 

Employment Agreement with David Chaplin.  In July 2000, we entered into an employment agreement with Dr. Chaplin, our Chief Scientific Officer and Head of Research and Development. Pursuant to the agreement, Dr. Chaplin currently receives a base salary of $205,000 per year. In addition, Dr. Chaplin currently receives a consulting fee of $120,000 per year paid in equal quarterly installments. We may terminate the employment agreement on six months’ prior notice, and Dr. Chaplin may terminate the agreement on six

months’ prior notice. We may also terminate the agreement prior to the end of its term for “cause” as defined in the agreement.

 

Employment Agreement with James B. Murphy.  In February 2004, we entered into an employment agreement with Mr. Murphy, our Vice President and Chief Financial Officer. Pursuant to the agreement, Mr. Murphy currently receives a base salary of $220,000 per year. We may terminate the agreement on thirty days’ prior notice, and Mr. Murphy may also terminate the agreement on thirty days’ prior notice. We may also terminate the agreement prior to the end of its term for “cause” as defined in the agreement.

 

Employment Agreement with Scott Young.  In January 2002, we entered into an employment agreement with Mr. Young, our Chief Operating Officer. Pursuant to the agreement, Mr. Young currently receives a base salary of $240,000 per year. We may terminate the agreement subject to all provisions of the agreement, and Mr. Young may terminate the agreement on thirty days’ prior notice. We may also terminate the agreement prior to the end of its term and without prior notice for “cause” as defined in the agreement.

 

Employment Agreement with Joel-Tomas Citron.  In January 2002, we entered into an employment agreement with Mr. Citron, our Chairman of the Board. The agreement had an original term of two years, and, in July 2003, its term was extended until January 2, 2006. Pursuant to the agreement, Mr. Citron currently receives base compensation in the amount of $200,000 per year plus an additional $48,000 per year as reimbursement for the cost of medical and health insurance and secretarial services incurred by Mr. Citron. The agreement sets forth the parameters of a bonus program which bonus, if earned, is payable in shares of our common stock. We may terminate the agreement prior to the end of its term for “cause” as defined in the agreement, and Mr. Citron may terminate the agreement on thirty days’ prior notice. We will extend the term of Mr. Citron’s agreement to January 2, 2008 effective as of January 2, 2006.

 

Pursuant to the agreements with Dr. Chaplin and Messrs. Driscoll, Murphy and Young, in the event of the termination of the executive officer’s employment following a change in control of the Company, as such term is defined in the agreements, each executive officer may be entitled to receive a payment of twelve months’ base salary plus any salary owed to the executive but unpaid as of the date of termination.

 

STOCK OPTION GRANTS IN OUR LAST FISCAL YEAR

 

No stock options were granted to the named executive officers in fiscal 2005.

 

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

 

The following table sets forth, as of December 31, 2005, the number of unexercised options held by each named executive officer and the aggregate value thereof based on the closing sale price of our common stock on the Nasdaq National Market System of $3.97 on December 31, 2005.

 

 

 

 

EQUITY COMPENSATION PLAN INFORMATION

 

The following table provides certain aggregate information with respect to all of the Company’s equity compensation plans in effect as of December 31, 2005.

 

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Our Audit Committee reviews and approves in advance all related-party transactions.

 

David Chaplin Consulting Agreement.  In April 2001, we entered into a consulting agreement with David Chaplin Consultants Ltd., a company organized under the laws of the United Kingdom, of which David Chaplin, our Chief Scientific Officer and Head of Research and Development, is the sole shareholder. Pursuant to the agreement, we pay David Chaplin Consultants Ltd. consulting fees. Such consulting fees equaled $120,000 each in the fiscal years ended December 31, 2005, 2004 and 2003 and are included in the Summary Compensation Table above as Salary.

 

Per-Olof Söderberg Promissory Note.  On November 13, 2000, Mr. Söderberg exercised an option to purchase shares of restricted common stock via a promissory note to OXiGENE in the amount of $145,000. The principal amount outstanding under the promissory note accrues interest at a rate of 5.6% per year. The shares of restricted common stock have been pledged to us as security for payment of the obligations under the promissory note. As of March 31, 2006, the amount outstanding under the promissory note was $188,700. The principal amount, together with accrued interest on the principal amount, is to be repaid on November 13, 2006.

 

On June 29, 2005, Mr. Söderberg surrendered 10,856 shares of restricted common stock to us in satisfaction of his obligations under a promissory note dated as of September 1, 1999.

 

PERFORMANCE GRAPH

 

The following graph compares the annual percentage change in our cumulative total stockholder return on our common stock during a period commencing on December 31, 2000 and ending on December 31, 2005 (as measured by dividing (i) the sum of (A) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (B) the difference between our share price at the end and the beginning of the measurement period; by (ii) our share price at the beginning of the measurement period) with the cumulative total return of Standard & Poor’s Midcap 400 Index and the Nasdaq Biotechnology Index during such period. In prior years we have compared the total stockholder return of our common stock to the Standard & Poor’s 400 Biotechnology Index. We believe that the Nasdaq Biotechnology Index is a more representative index for comparison with our stock return performance. We have not paid any dividends on our common stock, and we do not include dividends in the representation of our performance. The stock price performance on the graph below does not necessarily indicate future price performance.

 

 

EXPENSES OF SOLICITATION

 

We will bear the costs of soliciting proxies from our stockholders. We will make this solicitation by mail, and our directors, officers and employees may also solicit proxies by telephone or in person, for which they will receive no compensation other than their regular compensation as directors, officers or employees. Arrangements will also be made with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy materials to beneficial owners of our voting securities. We will reimburse these brokerage firms, custodians, nominees and fiduciaries for reasonable out-of-pocket expenses that are incurred by them.

 

CODE OF CONDUCT AND ETHICS

 

We have adopted a code of conduct and ethics that applies to all of our employees, including our Chief Executive Officer and Chief Financial Officer. The text of the code of conduct and ethics has been filed as an exhibit to our Annual Report on Form 10-K. Disclosure regarding any amendments to, or waivers from provisions of the code of conduct and ethics that apply to our directors, principal executive and financial officers will be included in a Current Report on Form 8-K within four business days following the date of the

amendment or waiver, unless website posting of such amendments or waivers is then permitted by the rules of The Nasdaq Stock Market, Inc.

 

STOCKHOLDER PROPOSALS AND NOMINATIONS FOR DIRECTOR

 

Your eligibility as a stockholder to submit proposals and director nominations, the proper subjects of such proposals and other issues governing stockholder proposals and director nominations are regulated by the rules adopted under Section 14 of the Exchange Act. To be considered for inclusion in the proxy statement relating to our annual meeting of stockholders to be held in 2007 stockholder proposals and nominations must be received no later than January 12, 2007. If we do not receive notice of any matter to be considered for presentation at the annual meeting, although not to be included in the Proxy Statement, between February 26, 2007 and March 28, 2007 management proxies may confer discretionary authority to vote on the matters presented at the annual meeting by a stockholder in accordance with Rule 14a-4 under the Exchange Act. All stockholder proposals should be marked for the attention of The President, OXiGENE, Inc., 230 Third Avenue, Waltham, Massachusetts 02451.

 

OTHER MATTERS

 

The Board of Directors knows of no other business that will be presented at the Annual Meeting. If any other business is properly brought before the Annual Meeting, it is intended that proxies in the enclosed form will be voted in accordance with the judgment of the persons voting the proxies.

 

ANNUAL REPORT

 

A copy of our Annual Report to Stockholders for the fiscal year ended December 31, 2005 is being provided to each of our stockholders with this Proxy Statement. Additional copies may be obtained without charge by writing to OXiGENE, Inc., 230 Third Avenue, Waltham, Massachusetts 02451, Attention: Investor Relations.

 

Waltham, MA

April 28, 2006

ANNUAL MEETING OF STOCKHOLDERS OF

OXiGENE, INC.

230 Third Avenue
Waltham, MA 02451

June 14, 2006

Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.

ê Please detach along perforated line and mail in the envelope provided. ê

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x

1. Election of Directors:

o		FOR ALL NOMINEES
o		WITHHOLD AUTHORITY FOR ALL NOMINEES
o		FOR ALL EXCEPT (See instructions below)

NOMINEES:
O Joel-Tomas Citron
O David Chaplin, Ph.D.
O Richard Chin, M.D.
O Frederick W. Driscoll
O Arthur B. Laffer
O William N. Shiebler
O Per-Olof Söderberg
O J. Richard Zecher

 

INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: l

To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. o

Signature of Stockholder

Date:

Signature of Stockholder

Date:

Note:		Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

OXiGENE, INC.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON JUNE 14, 2006

The undersigned hereby appoints Frederick W. Driscoll and James B. Murphy, and each of them (with full power to act alone), proxies, with full power of substitution, to vote all shares of common stock of OXiGENE, Inc., a Delaware corporation (the “Company”), owned by the undersigned at the 2006 Annual Meeting of Stockholders of the Company to be held at the Benjamin Hotel at 125 East 50^th Street, New York, NY 10022, on June 14, 2006, at 8:00 a.m., local time, and at any and all adjournments or postponements thereof.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED AND, IF NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED, WILL BE VOTED FOR THE ELECTION OF THE NAMED NOMINEES AND APPROVAL OF THE PROPOSALS SET FORTH IN THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS. IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS OF THE MEETING.

THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND THE PROXY STATEMENT FURNISHED HEREWITH.

PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE. YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE TAKING OF A VOTE ON THE MATTERS HEREIN.

(Continued and to be signed on reverse side.)

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