UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

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

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THE MEDICINES COMPANY

(Name of Registrant as Specified In Its Charter)

Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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April 30, 2009

 

To our stockholders:

 

We are pleased to invite you to our 2009 annual meeting of stockholders. The meeting will take place on Thursday, May 28, 2009 at 10:00 a.m., local time, at our principal executive offices, located at 8 Sylvan Way, Parsippany, New Jersey 07054. Annual meetings play an important role in maintaining communications and understanding among our management, board of directors and stockholders, and we hope you will join us.

 

Enclosed with this letter you will find the notice of our 2009 annual meeting of stockholders, which lists the matters to be considered at the meeting, and the proxy statement, which describes the matters listed in the notice and provides other information you may find useful in deciding how to vote. We have also enclosed our annual report to stockholders, which contains our annual report on Form 10-K for the year ended December 31, 2008 as filed with the Securities and Exchange Commission, including our audited consolidated financial statements for 2008, and other information of interest to our stockholders.

 

The ability to have your vote counted at the meeting is an important stockholder right. Regardless of the number of shares you hold, and whether or not you plan to attend the meeting, we hope that you will cast your vote. If you are a stockholder of record, you may vote by mailing the enclosed proxy card in the envelope provided. You will find voting instructions in the proxy statement and on the enclosed proxy card. If your shares are held in “street name” — that is, held for your account by a bank, broker or other holder of record — you will receive instructions from the holder of record that you must follow for your shares to be voted.

 

Thank you for your ongoing support and continued interest in The Medicines Company.

 

 

Sincerely,

 

 

 

CLIVE A. MEANWELL
Chairman and Chief Executive Officer

THE MEDICINES COMPANY
8 Sylvan Way
Parsippany, New Jersey 07054

 

NOTICE OF 2009 ANNUAL MEETING OF STOCKHOLDERS

 

 

By 

 

 

Secretary

 

April 30, 2009
Parsippany, New Jersey

TABLE OF CONTENTS

 

THE MEDICINES COMPANY
8 Sylvan Way
Parsippany, New Jersey 07054

 

PROXY STATEMENT

 

For our Annual Meeting of Stockholders to be held on May 28, 2009

 

The Medicines Company, a Delaware corporation (often referred to as “we” or “us” in this document), is sending you this proxy statement and the enclosed proxy card because our board of directors is soliciting your proxy to vote at our 2009 annual meeting of stockholders. The annual meeting will be held on Thursday, May 28, 2009, at 10:00 a.m., local time, at our principal executive office at 8 Sylvan Way, Parsippany, New Jersey 07054. You may obtain directions to the location of the annual meeting by contacting Investor Relations, 8 Sylvan Way, Parsippany, New Jersey 07054, email: investor.relations@themedco.com. If the annual meeting is adjourned for any reason, then the proxies may be used at any adjournments of the annual meeting.

 

This proxy statement summarizes information about the proposals to be considered at the meeting and other information you may find useful in determining how to vote. The proxy card is the means by which you actually authorize another person to vote your shares in accordance with your instructions.

 

We are mailing this proxy statement and the enclosed proxy card to stockholders on or about April 30, 2009. In this mailing, we are also including a copy of our annual report to stockholders for the year ended December 31, 2008.

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on May 28, 2009: The Proxy Statement and Annual Report are available at http://materials.proxyvote.com/584688.

 

Our annual report on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission and including our audited financial statements, is included in our annual report to stockholders in this mailing and is also available free of charge at our website at www.themedicinescompany.com or through the Securities and Exchange Commission’s (SEC) electronic data system at www.sec.gov. To request a printed copy of our Form 10-K (including exhibits), which we will provide to you free of charge, either: write to Investor Relations, The Medicines Company, 8 Sylvan Way, Parsippany, New Jersey 07054, or email Investor Relations at investor.relations@themedco.com.

 

You may request a copy of the materials relating to our annual meetings of stockholders, including the proxy statement and form of proxy for the 2009 annual meeting and the annual report to stockholders for the fiscal year ended December 31, 2008, at the website listed above or by sending an email to us at investor.relations@themedco.com or by calling (800) 388-1183.

 

Holders of record of our common stock at the close of business on April 3, 2009, the record date for the annual meeting, are entitled to one vote per share on each matter properly brought before the meeting. As of the close of business on April 3, 2009, we had 52,743,274 shares of our common stock outstanding.

 

A list of stockholders entitled to vote will be available at the meeting. In addition, you may contact our Secretary, Paul M. Antinori, at our principal executive office address set forth above, to make arrangements to review a copy of the stockholder list at our principal executive offices, for any purpose germane to the meeting, between the hours of 8:30 A.M. and 5:00 P.M., local time, on any business day from May 18, 2009 up to the time of the meeting.

 

If you are a stockholder of record (meaning that you hold shares in your name in the records of our transfer agent, American Stock Transfer & Trust Company), you may vote your shares at the meeting in person or by proxy:

 

 

The proxy card states the number of shares you are entitled to vote if you are a stockholder of record.

 

If the shares you own are held in “street name” by a bank or brokerage firm, your bank or brokerage firm, as the record holder of your shares, is required to vote your shares according to your instructions. In order to vote your shares, you will need to follow the directions your bank or brokerage firm provides you. Many banks and brokerage firms may solicit voting instructions over the Internet or by telephone.

 

Under applicable stock exchange rules, if you do not give instructions to your bank or brokerage firm, it will still be able to vote your shares with respect to certain “discretionary” items, but will not be allowed to vote your shares with respect to certain “non-discretionary” items. The election of directors (proposal one) and the ratification of the appointment of our independent registered public accounting firm (proposal three) are considered discretionary items under applicable stock exchange rules. The approval of the proposed amendment to our 2000 employee stock purchase plan (proposal two) is a non-discretionary item. Accordingly, if you do not give instructions to your bank or brokerage firm with respect to proposal two, or if your bank or brokerage firm does not exercise its discretionary authority with respect to proposal one or proposal three, your shares will be treated as “broker non-votes” on that particular matter. “Broker non-votes” are shares with respect to which a bank or brokerage firm does not receive voting instructions from the beneficial holder and does not have or exercise discretionary authority in voting on a proposal.

 

Regardless of whether your shares are held in street name, you are welcome to attend the meeting. You may not vote shares held in street name in person at the meeting, however, unless you obtain a proxy, executed in your favor, from the holder of record (i.e., your brokerage firm or bank).

 

If you are a stockholder of record, even if you complete and return a proxy card, you may revoke it at any time before the taking of the vote by taking one of the following actions:

 

 

If you own shares in street name, your bank or brokerage firm should provide you with instructions for changing your vote.

 

In order for business to be conducted at the meeting, a quorum must be present. A quorum consists of the holders of at least 26,367,138 shares, representing a majority of the shares of common stock issued, outstanding and entitled to vote at the meeting.

 

Shares of common stock present in person or represented by proxy (including broker non-votes and shares that abstain or are withheld, or with respect to which no voting instructions are provided for one or more of the matters to be voted upon) will be counted as present for the purpose of determining whether a quorum exists.

 

If a quorum is not present, the meeting will be adjourned until a quorum is obtained.

 

Proposal One — Election of Directors

 

Directors will be elected by a plurality of the votes cast by our stockholders entitled to vote on the election. In other words, the three nominees for director receiving the highest number of votes FOR election will be elected as directors, regardless of whether any of those numbers represents a majority of the votes cast.

 

You may vote FOR all of the nominees, WITHHOLD your vote from all of the nominees or WITHHOLD your vote from any one or more of the nominees.

 

Proposal Two — Approval of an Amendment to Our 2000 Employee Stock Purchase Plan

 

The affirmative vote of the holders of a majority of the shares of common stock present or represented and voting on the matter is needed to approve the proposed amendment to our 2000 employee stock purchase plan to increase from 505,500 shares to 805,500 shares the number of shares of common stock authorized for issuance under such plan.

 

Proposal Three — Ratification of Appointment of Independent Registered Public Accounting Firm

 

The affirmative vote of the holders of a majority of the shares of common stock present or represented and voting on the matter is needed to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2009.

 

Each share of common stock is entitled to one vote. Shares will not be voted in favor of a matter, and will not be counted as voting on a matter (1) if the holder of the shares withholds authority to vote for a particular director nominee or nominees or abstains from voting on a particular matter or (2) if the shares are broker non-votes. As a result, withheld shares, abstentions and broker non-votes will have no effect on the outcome of voting on any of the proposals.

 

Our board of directors recommends that you vote:

 

 

Our board of directors does not know of any other business to be conducted or matters to be voted upon at the meeting. Under our by-laws, the deadline for stockholders to notify us of any proposals or nominations

for director to be presented for action at the annual meeting has passed. If any other matter properly comes before the meeting, the persons named in the proxy card that accompanies this proxy statement will exercise their judgment in deciding how to vote, or otherwise act, at the meeting with respect to that matter.

 

We will bear the costs of soliciting proxies. In addition to solicitations by mail, our directors, officers and regular employees, without additional remuneration, may solicit proxies by telephone, facsimile, email, personal interviews and other means. We have requested brokerage houses, custodians, nominees and fiduciaries to forward copies of the proxy materials to the persons for whom they hold shares and request instructions for voting the shares. We will reimburse the brokerage houses and other persons for their reasonable out-of-pocket expenses in connection with this distribution.

 

If you are interested in submitting a proposal for inclusion in the proxy statement and proxy card for our 2010 annual meeting, you need to follow the procedures outlined in Rule 14a-8 of the Securities Exchange Act of 1934. We must receive your proposal intended for inclusion in the proxy statement at our principal executive offices, 8 Sylvan Way, Parsippany, New Jersey 07054 Attention: Paul M. Antinori, Secretary, no later than December 31, 2009.

 

If you wish to present a proposal at the 2010 annual meeting, but do not wish to have the proposal considered for inclusion in the proxy statement and proxy card, you must give written notice to us at our principal executive office address noted above. Our by-laws specify the information that must be included in any such notice, including a brief description of the business to be brought before the annual meeting and the name of the stockholder proposing such business. We must receive this notice at least 60 days, but not more than 90 days, prior to May 28, 2010. However, if the date of the 2010 annual meeting is prior to April 28, 2010 or after June 28, 2010, we must receive your notice no earlier than the 90th day prior to the 2010 annual meeting and no later than the close of business on the later of (1) the 60th day prior to the 2010 annual meeting and (2) the 10th day following the date on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first. If you fail to provide timely notice of a proposal to be presented at the 2010 annual meeting, the chairman of the meeting may exclude the proposal from being brought before the meeting.

 

If you would like to reduce the costs incurred by The Medicines Company in mailing proxy materials, you can consent to receiving or accessing future proxy statements, form of proxy, annual report or notices of Internet availability electronically via e-mail or the Internet. To sign up for electronic delivery, please contact Investor Relations, 8 Sylvan Way, Parsippany, New Jersey 07054, telephone: (973) 290-6000, email: investor.relations@themedco.com.

 

Some banks, brokers and other record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement and annual report or notice of Internet availability of proxy materials may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of these documents to you if you call or write us at the following address or phone number: The Medicines Company, 8 Sylvan Way, Parsippany, New Jersey 07054, Attention: Investor Relations, (973) 290-6000. In addition, this proxy statement and our annual report are available at http://materials.proxyvote.com/584688. If you would like to receive separate copies of the annual report and proxy statement or notice of Internet availability of proxy materials in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address and phone number.

 

Our board of directors is divided into three classes and currently consists of four class 1 directors (William W. Crouse, T. Scott Johnson, John P. Kelley, and Hiroaki Shigeta), three class 2 directors (Robert J. Hugin, Clive A. Meanwell and Elizabeth H.S. Wyatt) and three class 3 directors (Armin M. Kessler, Robert G. Savage and Melvin K. Spigelman). The term of each class of directors is three years, and the terms of the three classes are staggered so that only one class is elected each year. At each annual meeting of stockholders, directors are elected to serve for a three-year term to succeed the directors of the same class whose terms are then expiring. The class 1, class 2 and class 3 directors were elected to serve until the annual meeting of stockholders to be held in 2010, 2011 and 2009, respectively, and until their respective successors are elected and qualified.

 

Our board of directors, on the recommendation of our nominating and corporate governance committee, has nominated Armin M. Kessler, Robert G. Savage and Melvin K. Spigelman for election as class 3 directors at the annual meeting. The persons named in the enclosed proxy card will vote to elect each of these nominees as a class 3 director, unless the proxy is marked otherwise. Each class 3 director will be elected to hold office until the 2012 annual meeting of stockholders and until his or her successor is elected and qualified. Each of the nominees is presently a director, and each has indicated a willingness to continue to serve as director, if elected. If a nominee becomes unable or unwilling to serve, however, the proxies may be voted for substitute nominees selected by our board of directors.

 

No director or executive officer of ours, or person chosen by us to become a director or executive officer of ours, is related by blood, marriage or adoption to any other director or executive officer of ours, or person chosen by us to become a director or executive officer of ours. No director or executive officer of ours, or any associate of any such director or officer, is a party adverse to us or any of our subsidiaries, or has a material interest adverse to us or any of our subsidiaries, in any legal proceeding.

 

Our board of directors recommends a vote FOR the election of each of the nominees.

 

Director Nominees

 

Set forth below are the names of each nominee for class 3 director, the year in which each first became a director, their ages as of April 1, 2009, their positions and offices with us, if any, their principal occupations and business experience for at least the past five years, the names of other public companies for which they serve as a director and their education.

 

ARMIN M. KESSLER
Age: 71

 

Armin M. Kessler has been a director since October 1998. Dr. Kessler joined us after a 35-year career in the pharmaceutical industry, which included senior management positions at Sandoz Pharma Ltd. (now Novartis Pharma AG) in Switzerland, the United States and Japan and, most recently, at Hoffmann-La Roche, in Basel, Switzerland, where he was Chief Operating Officer and Head of the Pharmaceutical Division until he retired in 1995. Dr. Kessler currently also serves as a director of Gen-Probe Incorporated and Actelion Pharmaceuticals Ltd., a Swiss publicly traded company. Dr. Kessler received degrees in physics and chemistry from the University of Pretoria, a degree in chemical engineering from the University of Cape Town, a law degree from Seton Hall and an honorary doctorate in business administration from the University of Pretoria.

 

ROBERT G. SAVAGE
Age: 55

 

Robert G. Savage has been a director since April 2003. Since May 2003, Mr. Savage has served as President of Strategic Imagery LLC, a consulting company he owns. From February 2002 to April 2003, Mr. Savage was Group Vice President and President for the General Therapeutics and Inflammation Business

of Pharmacia Corporation, a research-based pharmaceutical firm acquired by Pfizer Inc. in April 2003. From September 1996 to January 2002, Mr. Savage held several senior positions with Johnson & Johnson, including Worldwide Chairman for the Pharmaceuticals Group during 2001, Company Group Chairman responsible for the North America pharmaceuticals business from 2000 to 2001, President, Ortho-McNeil Pharmaceuticals from 1998 to 2000 and Vice President Sales & Marketing from 1996 to 1998. Mr. Savage also serves as a director for Noven Pharmaceuticals and EpiCept Corporation. Mr. Savage received a B.S. in biology from Upsala College and an M.B.A. from Rutgers University.

 

MELVIN K. SPIGELMAN
Age: 60

 

Melvin K. Spigelman has been a director since September 2005. Since January 2009, Dr. Spigelman has served as President and Chief Executive Officer of the Global Alliance for TB Drug Development, a non-profit organization which seeks to accelerate the discovery and development of faster-acting and affordable drugs to fight tuberculosis. From June 2003 to January 2009, Dr. Spigelman served as Director of Research and Development of the Global Alliance for TB Drug Development. Before joining the Global Alliance for TB Drug Development, Dr. Spigelman was the President of Hudson-Douglas Ltd, a consulting company, from June 2001 to June 2003. From 2000 to 2001, Dr. Spigelman served as a Vice President, Global Clinical Centers at Knoll Pharmaceuticals, a pharmaceutical unit of BASF Pharma, and from 1992 to 2000, Dr. Spigelman was the Vice President of Research and Development at Knoll. Dr. Spigelman serves as a director of Synergy Pharmaceuticals Inc. Dr. Spigelman received a B.A. in engineering from Brown University and an M.D. from The Mount Sinai School of Medicine.

 

Other Current Directors

 

Set forth below are the names of each of our other current directors, the year in which each first became a director, their ages as of April 1, 2009, their positions and offices with us, if any, their principal occupations and business experience for at least the past five years, the names of other public companies for which they serve as a director and their education.

 

Directors Whose Terms Expire in 2010 (Class 1 Directors)

 

WILLIAM W. CROUSE
Age: 66

 

William W. Crouse has been a director since April 2003. Since January 1994, Mr. Crouse has been a Managing Director of HealthCare Ventures, a venture capital firm with a focus on biotechnology companies. From 1987 to 1993, Mr. Crouse served as Worldwide President of Ortho Diagnostic Systems, a subsidiary of Johnson & Johnson that manufactures diagnostic tests for hospitals, and a Vice President of Johnson & Johnson International. Before joining Johnson & Johnson, Mr. Crouse was a Division Director of DuPont Pharmaceuticals Company, a pharmaceutical firm, where he was responsible for international operations and worldwide commercial development activities. Before joining Dupont, he served as President of Revlon Health Care Group’s companies in Latin America, Canada, and Asia/Pacific. He also held numerous management positions at E.R. Squibb & Sons, a pharmaceutical company. Mr. Crouse is currently the chairman of the board of directors of Uluru, Inc., a specialty pharmaceutical company and is a member of the Boards of Trustees of Lehigh University and the New York Blood Center. Mr. Crouse received a B.S. in finance and economics from Lehigh University and an M.B.A. from Pace University.

 

T. SCOTT JOHNSON
Age: 61

 

T. Scott Johnson has been a director since September 1996. Dr. Johnson is a partner in Gilliam Capital LLC, an investment management company that he founded in June 2007. Since July 1999, Dr. Johnson has also been a partner at JSB Partners, L.P., an investment bank that he founded in 1999, which focuses on mergers and acquisitions, private financings and corporate alliances within the healthcare sector. From

September 1991 to July 1999, Dr. Johnson served as a founder and managing director of MPM Capital, L.P., a venture capital firm. Dr. Johnson received both a B.S. in chemistry and mathematics and an M.D. from the University of Alabama.

 

JOHN P. KELLEY
Age: 55

 

John P. Kelley has been our President and Chief Operating Officer since December 2004 and a director since February 2005. Prior to joining us, Mr. Kelley held a series of positions at Aventis, an international pharmaceutical company. From September 2003 until September 2004, Mr. Kelley served as Senior Vice President, Global Marketing and Medical at Aventis, where he was accountable for worldwide brand management of Aventis’ core strategic brands and managed strategic alliances with partner companies. From September 2002 to September 2003, he served as Senior Vice President, Strategic Risk Officer for Aventis, advising the Management Board and Chief Executive Officer. From January 2000 to September 2002, Mr. Kelley served as Vice President, Head of Strategic Development of Aventis where he was responsible for leading the strategic planning process of the pharmaceutical division of Aventis as well as merger and acquisition activity. Prior to the formation of Aventis, he served as a Vice President, Commercial Director, U.S. at Hoechst Marion Roussel, Inc., a life sciences firm focused on pharmaceuticals and agriculture, from March 1998 through December 1999 and Mr. Kelley served as Vice President of Marketing of Hoechst Marion Roussel from 1995 to 1998. Mr. Kelley also serves as a director for Acorda Therapeutics, Inc. Mr. Kelley received a B.S. in biology from Wilkes University and an M.B.A. from Rockhurst University.

 

HIROAKI SHIGETA
Age: 65

 

Hiroaki Shigeta has been a director since April 2007. Mr. Shigeta served as a consultant to us from July 2006 to December 2007. From January 2005 until June 2006, he served as a consultant to various Japanese pharmaceutical companies. From October 1993 to December 2004, Mr. Shigeta served in a variety of senior management positions with Hoffman-La Roche, Inc. and its affiliates. From January 2003 to December 2004, Mr. Shigeta was the U.S. Head, Far East Relations of Hoffman-La Roche and from June 2002 to April 2003, he was a Member of the Board of Chugai Seiyaku KK, Tokyo, a majority-owned affiliate of Roche Holding of Switzerland. From January 2001 to May 2002, Mr. Shigeta served as Chairman and Representative Director of Nippon Roche KK, a pharmaceutical company and a Japanese affiliate of Roche Holding of Switzerland. From October 1993 to December 2000, Mr. Shigeta was the President and Chief Executive Officer of Nippon Roche KK. Mr. Shigeta received a B.A. in economics from Momoyama Gakuin University in Osaka, Japan and a B.Sc from Haas Business School, University of California at Berkeley.

 

Directors Whose Terms Expire in 2011 (Class 2 Directors)

 

ROBERT J. HUGIN
Age: 54

 

Robert J. Hugin has been a director since April 2003. Since May 2006, Mr. Hugin has served as the President and Chief Operating Officer of Celgene Corporation, a biopharmaceutical company focused on cancer and immunological diseases. From June 1999 to May 2006, Mr. Hugin served as the Senior Vice President and Chief Financial Officer of Celgene. From 1985 to 1999, Mr. Hugin held positions with J.P. Morgan & Co. Inc., an investment banking firm, serving most recently as a Managing Director. Mr. Hugin is a director of Celgene Corporation and Atlantic Health System, Inc. Mr. Hugin received an A.B. from Princeton University and an M.B.A. from the University of Virginia.

 

CLIVE A. MEANWELL
Age: 51

 

Clive Meanwell has been a director since 1996. He has served as our Chief Executive Officer since August 2004, and he served as our President from August 2004 to December 2004, as our Executive Chairman

from September 2001 to August 2004 and as our Chief Executive Officer and President from 1996 to September 2001. From 1995 to 1996, Dr. Meanwell was a Partner and Managing Director at MPM Capital, L.P., a venture capital firm. From 1986 to 1995, Dr. Meanwell held various positions at Hoffmann-La Roche, Inc., a pharmaceutical company, including Senior Vice President from 1992 to 1995, Vice President from 1991 to 1992 and Director of Product Development from 1986 to 1991. Dr. Meanwell also serves as a director of Endo Pharmaceuticals Holdings Inc. Dr. Meanwell received an M.D. and a Ph.D. from the University of Birmingham, United Kingdom.

 

ELIZABETH H.S. WYATT
Age: 61

 

Elizabeth H.S. Wyatt has been a director since March 2005. Prior to her retirement in 2000, Ms. Wyatt held several senior positions at Merck & Co., Inc., a pharmaceutical company, over the course of 20 years, including most recently, Vice President, Corporate Licensing. Previously she had been a consultant and academic administrator, responsible for the Harvard Business School’s first formal marketing of its executive education programs. She also serves as a member of the Board of Sweet Briar College and recently chaired the Search Committee for the next President of Sweet Briar College. Ms. Wyatt received a B.A. from Sweet Briar College, a M.Ed. from Boston University and an M.B.A. from Harvard Business School.

 

On February 11, 2009, our board of directors adopted, subject to stockholder approval, an amendment to our 2000 employee stock purchase plan, which we refer to in this proxy statement as the ESPP, increasing the number of shares of our common stock authorized for issuance under the ESPP from 505,500 shares to 805,500 shares. The ESPP is intended to encourage our employees to become stockholders in our company, to stimulate increased interest in our affairs and success, to afford our employees the opportunity to share in our earnings and growth and to promote systematic savings by them. We believe that our future success depends, in large part, upon our ability to maintain a competitive position in attracting, retaining and motivating key personnel, and we believe that the ability to participate in our ESPP is an attractive feature for our employees and potential employees.

 

Our board of directors originally adopted, and our stockholders approved, the ESPP in August 2000. In 2006, our board of directors adopted, and our shareholders approved, an amendment to the ESPP which increased the shares authorized for issuance under the plan from 255,500 shares to 505,500 shares. As of April 1, 2009, 504,146 shares had been issued under the ESPP. As a result, we had only 1,354 shares available for future issuance as of April 1, 2009.

 

Our board of directors believes the proposed amendment is necessary to assure that we will have a sufficient reserve of common stock available for future purchase under the ESPP.

 

Our board of directors recommends a vote FOR this proposal.

 

Description of the ESPP

 

The following is a brief summary of the ESPP. The following description is only a summary of the material terms of the ESPP. For more information, we refer you to the full text of the ESPP as proposed to be amended, which is included as Appendix I to the electronic copy of this proxy statement filed with the SEC and may be accessed from the SEC’s home page www.sec.gov. In addition, a copy of the ESPP may be obtained from our Secretary.

 

The ESPP permits eligible employees to purchase shares of our common stock at a discount. On the first day of each six-month offering period between March 1 and August 31 and September 1 and the last day of February, each employee who is enrolled in the ESPP will automatically receive an option to purchase on the last day of the offering period the largest whole number of shares of common stock that does not exceed the number determined by multiplying $2,083 by the number of full months in the offering period and dividing the result by the value of a share of common stock on the first day of the offering period. The offering price

of each of the shares purchased in a given offering period is the lower of 85% of the fair market value of a share of common stock on the first or last day of the offering period. If an employee withdraws from participation during an offering period, the amounts contributed to the ESPP are refunded immediately without interest and the employee’s option granted for such offering period automatically terminates.

 

Pursuant to the terms of the ESPP, our board of directors has delegated its authority under the ESPP to its compensation committee. Accordingly, the compensation committee, consisting of independent directors, administers the ESPP. The compensation committee has the authority to interpret all provisions of the ESPP.

 

Generally, employees who have been employed for at least seven days prior to the first day of an offering period are eligible to participate in the ESPP. As of April 1, 2009, approximately 494 employees were eligible to participate in the ESPP, including our five named executive officers. Eligible employees may elect to participate by completing a subscription agreement, filing it with our payroll office and authorizing after-tax payroll deductions from their pay. The payroll deduction may not exceed ten percent of the employee’s gross pay. In addition, no employee can be granted an option under the plan that would (1) result in the employee owning common stock and/or options to purchase common stock making up five percent or more of our outstanding capital stock, or (2) permit such employee to purchase in excess of $25,000 in fair market value (based on the value of the stock on the offering commencement date) of common stock in any given year under the ESPP.

 

All payroll deductions for the ESPP are placed in a general corporate account. No interest accrues on the payroll deductions, and an employee participating in the ESPP may not make any additional payments into the account. Employees may purchase common stock under the ESPP only through payroll deductions.

 

The board of directors may amend the ESPP at any time. However, the ESPP may not be amended in any way that will cause rights issued thereunder to fail to meet the requirements for employee stock purchase plans as defined in Section 423 of the Internal Revenue Code of 1986, as amended, or the code, including stockholder approval if required.

 

The board of directors can terminate the ESPP at any time and will likely terminate the ESPP on the date that participating employees become entitled to purchase an aggregate number of shares greater than the number of shares remaining available for purchase, which would occur if the proposed amendment is not approved at this annual meeting.

 

Participation in the ESPP is discretionary, and participants can contribute up to ten percent of their gross pay, subject to the limitations described above. Additionally, the value of the common stock purchased will vary based on the fair market value of our common stock on the first and last days of the offering period. Accordingly, the dollar value and the number of shares that may be purchased in the future pursuant to the ESPP are not currently determinable.

The table below sets forth information as of April 3, 2009 with regard to participation in the ESPP by the individuals and groups listed below since the adoption of the ESPP.

 

 

 

 

Since its inception, no shares have been purchased under the ESPP by any associate of any current director, nominee or executive officer, and no other person has purchased five percent or more of the total amount of stock issued under the ESPP.

 

On April 27, 2009, the last reported sale price of our common stock on The NASDAQ Global Select Market was $10.55 per share.

 

Federal Income Tax Consequences

 

The following generally summarizes the United States federal income tax consequences that will arise with respect to participation in the ESPP and with respect to the sale of common stock acquired under the plan. This summary is based on the tax laws in effect as of the date of this proxy statement. This summary assumes that the ESPP complies with Section 423 of the code. Changes to these laws could alter the tax consequences described below.

 

Tax Consequences to Participants.  A participant will not have income upon enrolling in the ESPP or upon purchasing stock at the end of an offering.

 

A participant may have both compensation income and a capital gain or loss upon the sale of stock that was acquired under the ESPP. The amount of each type of income and loss will depend on when the participant sells the stock.

 

If the participant sells the stock more than two years after the commencement of the offering during which the stock was purchased and more than one year after the date that the participant purchased the stock, at a profit (the sales proceeds exceed the purchase price), then the participant will have compensation income equal to the lesser of:

 

 

Any excess profit will be long-term capital gain. If the participant sells the stock at a loss (if sales proceeds are less than the purchase price) after satisfying these waiting periods, then the loss will be a long-term capital loss.

 

If the participant sells the stock prior to satisfying these waiting periods, then he or she will have engaged in a disqualifying disposition. Upon a disqualifying disposition, the participant will have compensation income equal to the value of the stock on the day he or she purchased the stock less the purchase price. The participant also will have a capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the day he or she purchased the stock. This capital gain or loss will be long-term if the participant has held the stock for more than one year and otherwise will be short-term.

 

Tax Consequences to the Company.  There will be no tax consequences to us except that we will be entitled to a deduction when a participant has compensation income upon a disqualifying disposition. Any such deduction will be subject to the limitations of Section 162(m) of the code.

 

Our audit committee, consisting of independent members of our board of directors, has appointed the firm of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2009, subject to ratification by our stockholders at the annual meeting. Ernst & Young LLP has been our independent registered public accounting firm since our inception in 1996. If this proposal is not approved at the meeting, our audit committee will reconsider this appointment.

 

We expect representatives of Ernst & Young LLP to be present at the annual meeting. They will have the opportunity to make a statement if they desire to do so and will also be available to respond to appropriate questions.

 

Our board of directors recommends a vote FOR this proposal.

 

The following table sets forth the fees billed to us for the fiscal years ended December 31, 2008 and December 31, 2007 by Ernst & Young LLP:

 

 

 

 

The audit committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to render audit

or non-audit services unless the service is specifically approved in advance by the audit committee or the engagement is entered into pursuant to the pre-approval procedure described below.

 

From time to time, the audit committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount.

 

From time to time, the audit committee may delegate pre-approval authority to a committee member for specified types of services. Any such pre-approval must be reported to the committee at its next scheduled meeting. We did not approve any services provided to us by Ernst & Young LLP in 2008 or 2007 using the “de minimis” exception under the SEC rules.

 

The audit committee reviewed The Medicines Company’s audited financial statements for the year ended December 31, 2008 and discussed these financial statements with the company’s management and Ernst & Young LLP, The Medicines Company’s independent registered public accounting firm for the year ended December 31, 2008. The Medicines Company’s management is primarily responsible for the financial reporting process, including maintaining an adequate system of disclosure controls and procedures and internal control over financial reporting, and for the preparation of consolidated financial statements in accordance with generally accepted accounting principles. The Medicines Company’s independent registered public accounting firm is responsible for performing an independent audit of, and issuing a report on, those financial statements and the effectiveness of internal control over our financial reporting. The audit committee is responsible for providing independent, objective oversight of these processes. The audit committee’s duties and responsibilities do not include conducting audits or accounting reviews.

 

The audit committee also reviewed and discussed the matters required by Statement on Auditing Standards No. 61 as amended (AICPA, Professional Standards, Vol. 1, AU Section 308) (Communication with Audit Committees) with Ernst & Young LLP. This Statement requires Ernst & Young LLP to discuss with The Medicines Company’s audit committee, among other things, the following:

 

 

Ernst & Young LLP provided to the audit committee the written disclosures and the letter required by the current version of Public Company Accounting Oversight Board (PCAOB) Rule 3526 (Communications with Audit Committees concerning Independence), and the audit committee discussed with the independent registered public accounting firm that firm’s independence.

Based on its review of the audited financial statements, discussions with management and the independent registered public accounting firm, and its review of the representations and information provided by management and the independent registered public accounting firm including those described above, the audit committee recommended to the board of directors that the audited financial statements be included in The Medicines Company’s annual report on Form 10-K for the year ended December 31, 2008.

 

By the Audit Committee of the Board of Directors

 

Robert J. Hugin (Chair)

 

T. Scott Johnson

 

Elizabeth H.S. Wyatt

 

The following table presents information we know regarding the beneficial ownership of our common stock as of April 1, 2009 for each person, entity or group of affiliated persons whom we know to beneficially own more than 5% of our common stock. The table also sets forth such information for each of our directors and named executive officers and for our directors and executive officers as a group.

 

Beneficial ownership is determined in accordance with the rules of the SEC. Except as indicated by footnote, to our knowledge, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Options to purchase shares of common stock that are exercisable within 60 days of April 1, 2009 are deemed to be beneficially owned by the person holding such options for the purpose of computing ownership of such person, but are not treated as outstanding for the purpose of computing the ownership of any other person. Percentage beneficially owned is calculated using 52,743,274 shares of common stock outstanding as of April 1, 2009.

 

Unless otherwise indicated in the footnotes, the address of each of the individuals named below is: c/o The Medicines Company, 8 Sylvan Way, Parsippany, New Jersey 07054.

 

 

 

 

We believe that good corporate governance is important to ensure that we are managed for the long-term benefit of our stockholders. In assessing and implementing our corporate governance practices, we have been mindful of the provisions of the Sarbanes-Oxley Act of 2002, the rules of the SEC, and the listing standards of The NASDAQ Stock Market. We expect to continue to review and, when appropriate, further strengthen our corporate governance procedures in the future.

 

We describe below our corporate governance structure and the key corporate governance practices that we have adopted.

 

Our board of directors is responsible for establishing our broad corporate policies and overseeing the management of the company. Our chief executive officer, our president and chief operating officer and our other executive officers are responsible for our day-to-day operations. Our board evaluates our corporate performance and approves, among other things, our corporate strategies and objectives, operating plans, major commitments of corporate resources and significant policies. Our board also evaluates and appoints our executive officers.

 

Our board of directors met 14 times during 2008, including regular, special and telephonic meetings. Each director who served as a director during 2008 attended at least 75% of the aggregate of: (1) the total number of board meetings held during the period of 2008 during which he or she was a director and (2) the

total number of meetings held by all board committees on which he or she served during the period of 2008 during which he or she was a member of such committees.

 

Under the rules of The NASDAQ Stock Market, a director will only qualify as an “independent director” if, in the opinion of our board of directors, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

Our board of directors has determined that none of our directors, except Clive Meanwell and John Kelley, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent director” as defined under Rule 4200(a)(15) of The NASDAQ Stock Market Marketplace Rules. Dr. Meanwell and Mr. Kelley are both employees and are therefore not independent. Only independent directors serve on our standing board committees.

 

Robert Savage has been the lead director of the board of directors since October 2006. As the lead director, Mr. Savage is responsible for:

 

 

Under our corporate governance guidelines, our board of directors is obligated to review this appointment annually.

 

Our board of directors has a standing audit committee, compensation committee and nominating and corporate governance committee. The members of these committees are as follows:

 

 

 

 

Each of the audit committee, compensation committee and nominating and corporate governance committee operates under a charter and each such committee reviews its respective charter at least annually. A current copy of the charters of the audit committee, the compensation committee, and the nominating and corporate governance committee is posted on the corporate governance section of “Investor Relations” on our website, www.themedicinescompany.com.

Audit Committee

 

Our audit committee’s responsibilities include:

 

 

Our board of directors has determined that all of the audit committee members are independent as defined under the rules of The NASDAQ Stock Market, including the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934.

 

Our board of directors has also determined that Robert J. Hugin qualifies as an audit committee financial expert. In deciding whether members of our audit committee qualify as financial experts within the meaning of the SEC regulations and the listing standards of The NASDAQ Stock Market, our board considered the nature and scope of experiences and responsibilities members of our audit committee have previously had with reporting companies. Mr. Hugin, like all members of our audit committee, is an independent director as defined under the rules of The NASDAQ Stock Market, including the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934.

 

The audit committee met seven times during 2008, including regular, special and telephonic meetings.

 

Compensation Committee

 

Our compensation committee’s responsibilities include:

 

 

The compensation committee may form, and delegate authority to, one or more subcommittees as it deems appropriate from time to time under the circumstances.

The compensation committee met 12 times during 2008, including regular, special and telephonic meetings.

 

Information concerning the compensation committee’s processes and procedures regarding director compensation is set forth under “Compensation of Directors” in this proxy statement. Information concerning the compensation committee’s processes and procedures regarding compensation for our named executive officers is set forth under “Compensation Discussion and Analysis” in this proxy statement.

 

Our board of directors has the authority to grant awards and to adopt, amend and repeal the administrative rules, guidelines and practices relating to our Amended and Restated 2004 Stock Incentive Plan, which we refer to in this Proxy Statement as the 2004 plan, and to interpret the provisions of the 2004 plan. Pursuant to the terms of the 2004 plan, our board of directors has delegated its authority under the 2004 plan to its compensation committee. Accordingly, the compensation committee administers the 2004 plan, including granting options and other awards under the 2004 plan. In addition, pursuant to the terms of the 2004 plan, our board of directors has delegated to our officers limited authority to grant stock options to employees without further action by our board of directors or the compensation committee. Our officers are not, however, authorized to grant options:

 

 

In addition, the officers must maintain a list of the options granted pursuant to the delegated authority and report to the compensation committee regarding the options granted, at such times and in such form as the compensation committee may from time to time request. The delegation of authority to the officers is intended to avoid the expense and administrative burden of convening a meeting of the compensation committee in connection with stock option grants to newly hired employees and promoted employees.

 

Except as noted above, the compensation committee generally selects the recipients of awards and, subject to the terms of the 2004 plan, determines:

 

 

Nominating and Corporate Governance Committee

 

The nominating and corporate governance committee identifies individuals qualified to become board members and recommends to the board the persons to be nominated by the board for election as directors at the annual meeting of stockholders. In addition, the nominating and corporate governance committee oversees the evaluation of the board of directors and develops corporate governance principles. Our board of directors has adopted a series of corporate governance guidelines to assist the board in the exercise of its duties and

responsibilities, which is posted on the corporate governance section of “Investor Relations” on our website, www.themedicinescompany.com.

 

The nominating and corporate governance committee met three times in 2008, including regular, special and telephonic meetings.

 

The process followed by our nominating and corporate governance committee to identify and evaluate director candidates includes requests to board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the committee and the board.

 

The nominating and corporate governance committee evaluates director candidates based upon a number of criteria including:

 

 

The nominating and corporate governance committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for a prospective nominee. We believe that the backgrounds and qualifications of our directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow the board to fulfill its responsibilities.

 

Stockholders may recommend individuals to the nominating and corporate governance committee for consideration as potential director candidates. Any such proposals should be forwarded to the nominating and corporate governance committee in writing at our executive offices at 8 Sylvan Way, Parsippany, New Jersey 07054 Attention: Paul M. Antinori, Secretary and should include the following information:

 

 

 

 

Assuming that appropriate biographical and background material has been provided on a timely basis, any recommendations received from stockholders will be evaluated in the same manner as potential nominees proposed by the nominating and corporate governance committee. If our board of directors determines to nominate a stockholder-recommended candidate and recommends his or her election, then his or her name will be included in our proxy card for the next annual meeting.

 

Stockholders also have the right under our by-laws to directly nominate director candidates, without any action or recommendation on the part of the nominating and corporate governance committee or the board, by following the procedures set forth under “Information About The Annual Meeting — How and when may I submit a proposal for the 2010 annual meeting?” in this proxy statement. Candidates nominated by stockholders in accordance with the procedures set forth in our by-laws will not be included in our proxy card for the next annual meeting.

 

We have adopted a written code of business conduct and ethics applicable to all of our directors and employees, including our principal executive officer, our principal financial officer and our controller. The code of business conduct and ethics is available on the corporate governance section of “Investor Relations” on our website, www.themedicinescompany.com.

 

Any waiver of the code of business conduct and ethics for directors or executive officers, or any amendment to the code that applies to directors or executive officers, may only be made by the board of directors. We intend to post on our website, at the address and location specified above, all disclosures that are required by law or The NASDAQ Stock Market listing standards concerning an amendment to, or waiver from, a provision of this code of ethics. To date, no such waivers have been requested or granted.

 

Any stockholder may contact the board of directors or a specified individual director by writing to the attention of the board of directors or a specified individual director and sending such communication to our executive offices at 8 Sylvan Way, Parsippany, New Jersey 07054 Attention: Paul M. Antinori, Secretary. Each communication from a stockholder should include the following information in order to permit stockholder status to be confirmed and to provide an address to forward a response if deemed appropriate:

 

 

Our Secretary will forward all appropriate communications to the board of directors or individual members of the board of directors as specified in the communication.

 

As set forth in our corporate governance guidelines, all directors are expected to attend the annual meeting of stockholders. All of our directors attended the annual meeting of stockholders in 2008.

 

Compensation Program

 

Every two years, our compensation committee reviews and makes recommendations to the board regarding the level of compensation of our non-employee directors. To determine the appropriate level of compensation for our non-employee directors, our compensation committee has historically obtained data from a number of different sources including:

 

 

Our compensation program for non-employee directors consists of a cash component, which includes an annual retainer and meeting and committee fees and is paid on a quarterly basis, and an equity component, which includes stock option grant awards and restricted stock awards. Each of these components is shown in the table below. We do not pay directors who are also our employees any additional compensation for serving on our board.

 

In March 2007, our compensation committee reviewed our board compensation program and recommended modifications to this program to our board of directors. On April 17, 2007, our board of directors, based upon the recommendation of our compensation committee, approved modifications to the cash and equity portions of the compensation program. In evaluating these changes, the committee relied on data from the Radford Survey + Consulting, an AON Consulting Company, and sought to align board cash compensation at or near the 50th percentile of cash compensation paid to directors at companies included in the data from Radford and board equity compensation with a value at or near the 75th percentile of the value of equity compensation paid to directors at the companies included in the data from Radford. Our compensation committee is currently reviewing the compensation payable to our directors and will make a recommendation to the board regarding the level of compensation of our non-employee directors following such review.

 

Cash Compensation

 

The following table describes the cash compensation for each non-employee director. The cash compensation is payable on a quarterly basis.

 

 

In addition, directors are reimbursed for travel and out-of-pocket expenses in connection with their attendance at board meetings.

Equity Compensation

 

Each non-employee director is eligible to receive stock options and shares of restricted stock under our 2004 plan. The following table describes the initial equity compensation and annual equity compensation for each non-employee director, as well as the additional equity compensation to our lead director:

 

 

These options have an exercise price equal to the closing price of our common stock on the NASDAQ Global Select Market on the date of grant and have a ten-year term. All vested options will be exercisable at any time prior to the first anniversary of the date the director ceases to be a director and all unvested options will be forfeited.

 

The following table shows the compensation for fiscal year 2008 for each non-employee director that served as a director during 2008.

 

2008 Director Compensation

 

 

 

 

 

In accordance with our audit committee charter, our audit committee is responsible for reviewing and approving the terms and conditions of all related party transactions.

 

On February 24, 2009, we acquired more than 98% of the outstanding shares of Targanta Therapeutics Corporation, or Targanta, through a tender offer for all outstanding shares of Targanta. On February 25, 2009 we completed our acquisition of Targanta through a short-form merger of one of our subsidiaries with and into Targanta, with Targanta as the surviving entity and wholly owned subsidiary of ours.

 

Targanta stockholders who tendered their shares in the tender offer and whose shares we accepted for payment promptly received the offer consideration consisting of (1) $2.00 per share, net in cash plus (2) the contractual right to receive up to $4.55 per share in contingent cash payments if specified regulatory and commercial milestones are achieved within agreed upon time periods. In the merger, each remaining outstanding share of Targanta common stock was automatically cancelled and converted into the right to receive the same consideration per share paid in the tender offer.

 

The total consideration payable for the shares of Targanta that we acquired in the tender offer and the merger, including fees and expenses, consists of approximately $50 million in cash at closing plus contractual rights to receive up to $95.5 million in the aggregate in contingent cash payments if specified regulatory and commercial milestones are achieved within agreed upon time periods. The terms and conditions of the contingent cash payment rights are set forth in a Contingent Payment Rights Agreement, or CPR Agreement, dated February 24, 2009, entered into by us and American Stock Transfer & Trust Company, as rights agent.

 

William W. Crouse, who serves as one of our directors, was also a director and stockholder of Targanta and served as Chairman of the compensation committee of Targanta’s board of directors. Mr. Crouse recused himself from all board meetings, both ours and Targanta’s, in which the tender offer and merger were discussed. Upon the effectiveness of the merger, Mr. Crouse ceased to be a director of Targanta.

 

In the tender offer, in exchange for the 58,539 shares of Targanta common stock held by him, Mr. Crouse received approximately $117,078 in cash plus the contractual right to receive up to a maximum of approximately $266,352 in contingent cash payments if all of the milestones set forth in the CPR Agreement are achieved within the agreed upon time periods. Pursuant to an agreement between Mr. Crouse and Targanta, Mr. Crouse’s options and warrants for shares of Targanta capital stock terminated immediately prior to the effectiveness of the merger.

 

During 2008, none of the members of our compensation committee was a current or former employee and none had any related person transaction involving us required to be reported under Item 404(a) of Regulation S-K.

 

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement on Schedule 14A.

 

By the Compensation Committee of the Board of Directors

 

Elizabeth H.S. Wyatt (Chair)
Armin M. Kessler
Robert G. Savage

 

The compensation committee of our board of directors oversees our executive compensation program. In this role, the compensation committee reviews and approves all compensation decisions relating to our named executive officers and also reviews recommendations for members of our senior management. The compensation committee also reviews and approves annually our salary, bonus and equity pools in the aggregate for employees below the senior management level.

 

Objectives and Philosophy of Our Executive Compensation Program

 

The primary objectives of the compensation committee with respect to executive compensation are to:

 

 

To achieve these objectives, the compensation committee evaluates our executive compensation program with the goal of setting compensation at levels the committee believes are competitive with those of other companies in our industry and our region that compete with us for executive talent. In addition, our executive compensation program ties a substantial portion of each executive’s overall compensation to key strategic, financial and operational goals such as clinical trial progress, new product indication initiatives, the development of our global organization and our financial and operational performance as measured by metrics such as revenue and profitability. Our executive compensation consists of a base salary, an annual cash incentive and a long-term compensation component, such as stock options and restricted stock grants that vest over time. We believe that the long-term compensation component helps to retain our executives and aligns their interests with those of our stockholders by allowing them to participate in the longer term success of our company as reflected in stock price appreciation.

 

The compensation committee retained the consulting firm Radford Consultants + Survey, an AON Consulting Company, to advise the committee in connection with the committee’s consideration of the appropriate peer group, base salaries, the percentage bonus targets and equity awards for our named executive officers. In addition, for 2009, Radford provided the compensation committee with tally sheets for reference in considering the total compensation package of each named executive officer. The compensation committee consulted with our chief executive officer and other senior executives in determining compensation packages. However, neither our chief executive officer nor any other senior executive was present for the compensation committee executive session when decisions were made regarding compensation for our named executive officers.

 

In making compensation decisions, the compensation committee compares the overall as well as each component of our executive compensation program to that paid by a peer group of publicly traded companies that the committee believes have business life cycles, revenues, market capitalizations, products, research and development investment levels, and number and capabilities of employees that are roughly comparable to ours and against which the committee believes we compete for executive talent. The compensation committee reviews the peer group as necessary to determine whether any adjustments to the composition of the group are needed and as a result, our peer group might change from year to year. The compensation committee works with Radford and our senior management to determine the peer group, and Radford analyzes the executive compensation programs of these companies. The companies included in the peer group considered by the compensation committee in establishing 2008 base salaries and bonus targets were:

 

 

 

In November 2008, the compensation committee, working with Radford and our senior management, adjusted the composition of the peer group to reflect changes to our business and to certain of the companies in the peer group. As a result, the peer group considered by the compensation committee in reviewing cash compensation and making its equity awards for 2008, which it made in February 2009, were:

 

 

 

References in this proxy statement to “our peer group” mean the applicable peer group or peer groups listed above.

 

We compete with many other companies for executive personnel. Accordingly, the compensation committee generally targets base salary and bonus compensation for executives at the 50th percentile of compensation paid to similarly situated executives of the companies in our peer group. In order to underscore the value of ownership of equity compensation as a component of our overall compensation, the compensation committee generally targets equity compensation for executives at the 75th percentile of equity compensation paid to similarly situated executives of the companies in our peer group. The committee may vary these general targets with respect to executives based on the job responsibilities, experience and performance levels of the individuals and our overall company performance. For example, the compensation committee determined, on the advice of Radford, that our chief financial officer’s level of responsibility exceeds that of similarly situated executives of the companies in our peer group, primarily due to his business development and operating responsibilities, and therefore applied a 15% premium to his target compensation compared to chief financial officers of the companies in our peer group.

 

Components of our Executive Compensation Program

 

The primary elements of our executive compensation program are:

 

 

We do not have any formal or informal policy or target for allocating compensation between long-term and short-term compensation, between cash and non-cash compensation or among the different forms of non-cash compensation. Instead, the compensation committee, after reviewing information provided by Radford, determines what it believed to be the appropriate level and mix of the various compensation components within the targeted percentiles for cash and equity compensation.

 

Base Salary

 

The committee uses base salary to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our executives. Base salaries of our named executive officers are reviewed at least annually by the compensation committee, and are adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. Base salaries also may be increased for merit reasons, based on the executive’s success in meeting or exceeding individual performance objectives, promoting our core values and demonstrating leadership abilities. The compensation committee also adjusts base salaries as warranted throughout the year for promotions, market changes or other changes in the scope or breadth of an executive’s role or responsibilities.

 

In establishing base salaries for 2008, the compensation committee considered the survey data of compensation in our peer group, the level of the individual’s responsibility and the individual’s past

performance and experience. As noted above, the committee generally targets executive base salaries at the 50th percentile of salaries for executives in similar positions at companies in our peer group. In considering the base salaries for 2008, the compensation committee agreed that base salary is a function of providing adequate compensation for the responsibilities of the respective positions, and any increase to base salary should be based upon those responsibilities and individual performance in addition to competitive data. In January 2008, the compensation committee approved base salary increases for our named executive officers, which were based on merit reasons for their performance in 2007 as well as market adjustments to more closely align their salaries to the 50th percentile of companies in our peer group.

 

The following table presents each named executive officer’s 2007 and 2008 base salary, the percentile increase in base salary from 2007 to 2008 and each named executive officer’s 2008 base salary variance to the 50th percentile of our peer group:

 

 

 

 

In establishing Dr. Meanwell’s 2008 base salary, the compensation committee recognized Dr. Meanwell’s contributions in the planning, oversight and direction of our competitive, human and financial strategy in 2007. These included our overall operating performance, developing and building our product portfolio, creating and advancing our international business plan, acquiring human talents and developing our employees, and growth in our financial performance and in stockholder value. For 2008, we increased his annual base salary to $588,640, which represented a 4% merit increase. The compensation committee recognized Mr. Kelley’s contributions to increasing stockholder’s long term value by improving our operating capabilities, recruiting strong people, organizing our resources effectively and playing an important role in a variety of strategic projects in 2007. As a result, the committee established Mr. Kelley’s annual base salary for 2008 at $463,500, which consisted of a 3% merit increase. In establishing Mr. Sblendorio’s 2008 base salary, the compensation committee recognized Mr. Sblendorio’s contributions in 2007, including his building of a business development department at our company, his communication efforts with our stockholders, his role in the area of talent acquisition, such as his recruitment of new members to strengthen our finance department, his effective management of resources and his work with Dr. Meanwell to improve our relationship with investment banks. As a result, the committee established Mr. Sblendorio’s annual base salary for 2008 at $421,875, which consisted of a 7% increase for merit reasons and 5.5% increase as a market adjustment. The compensation committee noted Mr. Antinori’s efforts in 2007 to develop and focus our government affairs initiatives, including efforts to restore the term of the principal Angiomax patent, as well as his management of our ongoing legal affairs and increased his annual base salary for 2008 to $346,500, which represented a 5.5% increase for merit reasons and 4.5% increase as a market adjustment. The compensation committee recognized Ms. Newberry’s accomplishments in focusing on key strategic and tactical elements of our human strategy in 2007. As a result, the committee increased Ms. Newberry’s annual base salary for 2008 to $299,250, which represented a 5% increase for merit reasons.

In establishing base salaries for fiscal 2009, our senior management recommended and the compensation committee determined that no merit increases in base salary would be given to any of our employees, including our named executive officers, in recognition of the global economic condition and our 2008 performance. Our employees, including our named executive officers, continue to be eligible for such adjustments for promotions, market changes or other changes in the scope or breadth of their role or responsibilities.

 

Annual Cash Bonus Plan

 

We have an annual cash bonus plan for our named executive officers. The annual cash bonus plan is intended to motivate our named executive officers to work toward the achievement of company strategic, operational and financial goals and individual performance objectives, and to reward our named executive officers when their efforts result in success for us. Bonus targets under the annual cash bonus plan are calculated as a percentage of the applicable named executive officer’s base salary, with targets corresponding to the position of the executive. The bonus target percentages for our named executive officers are based on their respective grade level except for Dr. Meanwell, whose bonus target percentage exceeds that of our other executives at the same grade level. For 2008, Dr. Meanwell’s bonus target percentage increased from 50% to 75% of his base salary to better align his bonus target percentage with those of other chief executive officers in our peer group. Mr. Sblendorio’s bonus target percentage increased from 40% to 50% of his base salary in connection with his elevation in grade level as a result of his additional business development and operating responsibilities. The bonus target percentage for Mr. Kelley remained at 50% of his base salary and the bonus target percentage for each of Mr. Antinori and Ms. Newberry remained at 40% of their respective base salaries.

 

The compensation committee approves corporate goals for each year and determines potential bonus amounts based on achievement of these goals and individual performance goals. Under the annual cash bonus plan, the corporate goals comprise 60% of the total cash bonus and the individual objectives comprise 40% of the total cash bonus. The corporate goals generally conform to the financial metrics contained in the internal business plan adopted by the board of directors relating to revenue, earnings per share and certain operational goals. The compensation committee works with the chief executive officer to develop challenging but achievable goals, which we refer to as stretch corporate goals, which they believe are challenging but can be reasonably achieved over the next year. For 2008, the compensation committee approved the corporate goals and the relative weighting of such corporate goals to be considered in determining payments under the annual cash bonus plan based on achievement of those goals for 2008. The goals that the compensation committee approved for 2008 were:

 

 

Each corporate goal is weighted based upon the priority attributed to such goal by the committee and based on such weighting, each goal is given a corporate goal award value. When the compensation committee approves corporate goals, it also approves minimum, target and maximum levels for such corporate goals. The

committee determines the company bonus factor, which is used in determining payouts under the annual cash bonus plan and the size of annual equity awards, by using such minimum, target and maximum levels and allocating credits for each corporate goal in the following manner:

 

 

Individual objectives are tied to the particular area of expertise of the employee and his or her performance in attaining those objectives. Achievement of these objectives is measured relative to external forces, internal resources utilized and overall individual effort. Except with respect to our chief executive officer and our president and chief operating officer, individual objectives are based on a variety of factors, including the achievement of corporate goals. The individual performance objectives are determined by the executive officer to whom the named executive officer reports. In the case of our chief executive officer and our president and chief operating officer, the individual objectives are reviewed with our lead independent director and the compensation committee and are based on the achievement of corporate goals. For each individual objective, the named executive officers must accomplish at least 80% of each objective to receive a cash bonus payment for such objective. If the named executive officer achieves this threshold, then the individual is eligible to receive a relative portion of the payout ranging from 0% to 150% of the individual’s target award.

 

In February 2009, the compensation committee evaluated our 2008 performance against our 2008 corporate goals approved by the committee. The compensation committee determined that our overall results were positive, when taking into account our completion of certain strategic projects in addition to our established goals. The primary strategic project completed in 2008 was the acquisition of Curacyte Discovery GmbH, which was not contemplated in our 2008 corporate goals. The committee gave credit for this accomplishment when the committee reviewed our 2008 performance against our 2008 corporate goals. In addition, the committee further credited us with the filing of our HORIZONS-AMI clinical trial data in the European Union, which was not anticipated in 2008. The committee determined that we exceeded our goal for Angiomax revenue and our goal related to global expansion, primarily due to our European Union marketing authorization application for ACS being approved two months ahead of our expected schedule. The compensation committee also determined that we partially met our CHAMPION enrollment targets and our earnings per share goal. Finally, the committee determined that we did not meet our Angiomax ACS sNDA submission goal and our Cleviprex sales goal, but the compensation committee awarded us partial credit for the overall Cleviprex goal since we launched Cleviprex in 2008.

 

Based on our overall 2008 performance against our 2008 corporate goals, taking into account our achievement of the additional goals noted above, the compensation committee determined the company bonus factor was 75%. As a result, bonus awards for 2008 were generally lower than for 2007 when our bonus factor was 87.5%. As a result, as shown in the table below, the committee granted cash bonuses for 2008 to the named executive officers that were less than each named executive officer’s bonus target amount.

 

For the 2008 annual cash bonuses, the compensation committee calculated the bonuses for our named executive officers by multiplying the dollar amount of each such officer’s bonus target by the company bonus factor. The result was then allocated 60% for corporate goals and 40% for individual goals. The dollar amount allocated to the named executive officer’s individual goals was then multiplied by such officer’s individual performance rating, and the resulting dollar amount was added to the dollar amount allocated to the corporate goals. See footnote (2) to the table below for an example calculation.

 

Dr. Meanwell’s 2008 salary was $588,640 and his bonus target was 75% of his salary, or $441,480. The compensation committee recognized Dr. Meanwell’s contributions in the planning, oversight and direction of

our competitive, human and financial strategy in 2008. These included our overall operating performance, developing and building our product portfolio, creating and advancing our international business plan, acquiring human talents and developing our employees and growth in our financial performance and in stockholder value. Overall, the compensation committee determined that Dr. Meanwell exceeded performance expectations on his individual performance goals with an individual performance rating of 120%, which was used to determine his 2008 equity award as described below and the compensation committee awarded Dr. Meanwell a bonus payment of $357,599. Dr. Meanwell’s bonus payment equaled 81% of his 2008 bonus target.

 

Mr. Kelley’s 2008 salary was $463,500 and his bonus target was 50% of his salary, or $231,750. The compensation committee recognized Mr. Kelley’s contributions in improving our operating capabilities, recruiting strong people and organizing our resources effectively. The compensation committee also believed that Mr. Kelley had played an important role in a variety of strategic projects, including analysis of European opportunities and options. Overall, the compensation committee determined that Mr. Kelley met performance expectations on his individual performance goals with an individual performance rating of 100%. The compensation committee awarded Mr. Kelley a bonus payment of $173,813. Mr. Kelley’s bonus payment equaled 75% of his 2008 bonus target.

 

Mr. Sblendorio’s 2008 salary was $421,875 and his bonus target was 50% of his salary, or $210,938. The compensation committee recognized Mr. Sblendorio for leading and completing the Curacyte Discovery transaction; his role in the acquisition of Targanta Therapeutics Corporation acquisition (which acquisition was ultimately completed in February 2009), his communication efforts with our stockholders, his role in the area of talent acquisition, such as his recruitment of new members to strengthen our finance and business development departments, his effective management of resources, his leading the evaluations of many business development projects and his work with Dr. Meanwell to improve our relationships with investment banks. In considering Mr. Sblendorio’s bonus payment, the committee also recognized Mr. Sblendorio’s contributions managing our financial programs. Overall, the compensation committee determined that Mr. Sblendorio far exceeded performance expectations on his individual performance goals with an individual performance rating of 120%. The compensation committee used its discretion to award Mr. Sblendorio a bonus of $170,859. Mr. Sblendorio’s bonus payment equaled 81% of his bonus target.

 

Mr. Antinori’s 2008 salary was $346,500 and his bonus target was 40% of his salary, or $138,600. The compensation committee noted Mr. Antinori’s efforts to develop and focus our government affairs initiatives, including efforts to restore the term of the principal Angiomax patent, as well as the management of our ongoing legal affairs and his support of the establishment of our legal entities in the European Union, lifecycle management projects and business development projects. Overall, the compensation committee determined that Mr. Antinori met performance expectations on his individual performance goals with an individual performance rating of 100%. The compensation committee awarded Mr. Antinori a bonus of $103,950, which equaled 75% of his bonus target.

 

Ms. Newberry’s 2008 salary was $299,250 and her bonus target was 40% of her salary, or $119,700. The compensation committee determined that Ms. Newberry did not meet performance expectations on her individual performance goals with an individual performance rating of 0%. The compensation committee awarded Ms. Newberry a bonus of $53,865, which equaled 45% of her bonus target. Ms. Newberry’s employment with us terminated January 2009.

The 2008 salaries, 2008 bonus target percentages and amounts, the adjusted 2008 bonus target reflecting the company’s bonus factor for 2008 and the actual bonus payments for our named executive officers are as follows:

 

 

 

 

Stock Option and Restricted Stock Awards

 

Our equity award program is the primary vehicle for offering long-term incentives to our executives, including our named executive officers. We believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our named executive officers and our stockholders. Equity grants are intended as both a reward for contributing to the long-term success of our company and an incentive for future performance. The vesting feature of our equity grants is intended to further our goal of executive retention by providing an incentive to our named executive officers to remain in our employ during the vesting period. In determining the size of equity grants to our executives, our compensation committee considers comparable equity awards of executives in our peer group, our company-level performance, the applicable executive’s performance, the amount of equity previously awarded to the executive, the vesting schedule of such previous awards and the recommendations of management and consultants to the compensation committee.

 

The compensation committee typically makes initial stock option awards to new executives and annual equity grants as part of our overall compensation program. All equity grants to our named executive officers are approved by the compensation committee.

 

The compensation committee reviews all components of the executive’s compensation when determining annual equity awards to ensure that an executive’s total compensation conforms to our overall philosophy and objectives. The compensation committee has an equity compensation policy for the use of stock options and restricted stock awards. Our equity compensation philosophy is to reward all employees at the 75th percentile of our peer group for equity compensation. However, for 2008, the compensation committee reduced the equity benchmark to the 50th percentile primarily due to our depleted equity pool. In February 2009, the committee decided to grant a mix of 25% options and 75% restricted stock to all employees, including the named executive officers, with the exception of Dr. Meanwell, who received all restricted stock.

In general, our initial option grants to new named executive officers vest over 48 months with 25% of the option vesting 12 months after the named executive officer’s start date and the remainder of the option vesting in 36 equal monthly installments. In 2008, no named executive officer was eligible for an initial option grant. Our annual grants to named executive officers generally vest in 48 equal monthly installments commencing one month after the date of the grant. Vesting and exercise rights cease 90 days after termination of employment except in the case of death or disability.

 

In February 2009, we granted all employees, including the named executive officers, shares of restricted stock as part of their 2008 compensation. We typically grant restricted stock awards at no cost to the employee. Because the shares have a built-in value at the time the restricted stock grants are made, we generally grant significantly fewer shares of restricted stock than the number of shares underlying stock options we would grant for a similar purpose. In 2009, the compensation committee used a valuation method to determine the amount of shares to be granted. This approach was reflected in grants made to named executive officers in February 2009, which related to their respective performances in 2008. Restricted shares vest in annual increments of 25% over a period of four years, commencing on the first anniversary of the date of grant.

 

We do not have any equity ownership guidelines for our named executive officers.

 

Stock awards to our named executive officers are typically granted annually in conjunction with the review of their individual performance. This review typically occurs at the regularly scheduled meeting of the compensation committee held in the first quarter of each year for determination of grants for the previous year. This allows the compensation committee to receive audited financial statements of the previous year prior to making award determinations. Therefore, annual cash bonuses and equity awards relating to performance during 2008 for all of our employees, including our named executive officers, were granted in February 2009. The compensation committee has established a policy of not approving annual equity grants to any employees, including named executive officers, at a time when our company is in possession of material non-public information. We generally time annual stock option and restricted stock grants to named executive officers so that such grants occur three trading days after the release of our financial results for the previous fiscal year.

 

In connection with the annual equity awards to our named executive officers, the compensation committee considered the 75th percentile of our peer group companies in determining a target aggregate value based on the Black-Scholes valuation for the total equity awards for each named executive officer. When determining annual equity awards, the committee used a similar formula to the one used to determine annual cash bonuses. In February 2009, the committee calculated the economic value of the equity awards for each named executive officer by starting with an amount equal to the value of equity compensation at the 50th percentile for similarly situated executives of the companies in our peer group, multiplied by 61%, which reflects both our depleted equity pool and our performance for 2008, multiplied by the officer’s individual performance rating. That amount was then allocated between options and restricted stock as described above. Our 2009 equity awards were granted effective February 20, 2009, which was three trading days after the release of our 2008 financial results.

 

In February 2009, the compensation committee approved the following equity awards to our named executive officers:

 

 

 

 

Because the equity awards made to our named executive officers relating to their respective individual performances in 2008 were granted in 2009, these awards have not been included under the caption, “Information About Our Executive Officers — Compensation of Our Executive Officers.”

 

Benefits and Other Compensation

 

We maintain broad-based benefits that are provided to all employees, including health and dental insurance, life and disability insurance and a 401(k) plan. Named executive officers are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees. We do not match employee contributions to our 401(k) plan.

 

In particular circumstances, we sometimes award cash signing bonuses when executives first join us. Such cash signing bonuses typically must be repaid in full if the executive voluntarily terminates employment with us prior to the first anniversary of the date of hire. Whether a signing bonus is paid and the amount of the bonus is determined on a case-by-case basis under the specific hiring circumstances. For example, we will consider paying signing bonuses to compensate for amounts forfeited by an executive upon terminating prior employment, to assist with relocation expenses or to create additional incentive for an executive to join our company in a position where there is high market demand. For 2008, no named executive officer was eligible for a cash signing bonus.

 

We limit the perquisites that we make available to our named executive officers. Our named executive officers are not entitled to any benefits that are not otherwise available to all of our employees. For example, we do not provide pension arrangements, post-retirement health coverage or similar benefits to our named executive officers or our employees. Similarly, our health and insurance plans are the same for all employees.

 

Severance and Change-of-Control Benefits

 

Pursuant to severance agreements we have entered into with certain executive officers, including our named executive officers, and provisions of our 1998 stock incentive plan and our 2004 plan, our executives are entitled to specified benefits in the event of the termination of their employment under specified circumstances, including termination following a change of control of our company. We have provided more detailed information about these benefits, along with estimates of their value under various circumstances, under the caption “Information About Our Executive Officers — Potential Payments Upon Termination or Change of Control” below.

 

We believe providing these benefits help us compete for executive talent. We believe that our severance and change of control benefits are generally in line with severance packages offered to executives by the companies in our peer group.

 

Our practice in the case of change-of-control benefits has been to structure these as “double trigger” benefits. In other words, the change of control does not itself trigger benefits; rather, benefits are paid only if the employment of the executive is terminated by us or our successor without cause or by the executive for good reason during a one-year period after the change of control. We believe a “double trigger” maximizes stockholder value because it avoids an unintended windfall to executives in the event of a friendly change of control, while still providing executives appropriate incentives to cooperate in negotiating any potential change of control in which they believe they may lose their jobs.

 

Tax and Accounting Considerations

 

The Internal Revenue Service, pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended, generally disallows a tax deduction for compensation in excess of $1.0 million paid to our chief executive officer and to each other officer (other than our chief executive officer and our chief financial officer) whose compensation is required to be reported to our stockholders pursuant to the Exchange Act by reason of being among the three most highly paid executive officers. Certain compensation, including qualified performance-based compensation, will not be subject to the deduction limit if certain requirements are met. We periodically review the potential consequences of Section 162(m) and we generally intend to structure the

performance-based portion of our executive compensation, where feasible, to comply with exemptions in Section 162(m) so that the compensation remains tax deductible to us. However, the compensation committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent.

 

In addition, in determining the size and type of equity awards, the compensation committee also considered the potential impact of FAS 123(R).

 

Below is information about each of our executive officers other than Clive Meanwell, our Chief Executive Officer, and John Kelley, our President and Chief Operating Officer. The information below includes each officer’s age as of April 1, 2009, his or her position with us, the length of time he or she has held each position and his or her business experience for at least the past five years and their education. Similar information for Clive Meanwell and John Kelley, who are also directors, is included under the caption “Proposal One: Election of Class 3 Directors — Other Current Directors”. Our board of directors elects our officers annually, and officers serve until they resign or we or the board terminate their position. There are no family relationships among any of our directors, nominees for director and executive officers.

 

GLENN P. SBLENDORIO
Age: 53

 

Glenn P. Sblendorio has been our Chief Financial Officer and Executive Vice President since March 2006. From November 2005 until he joined us, Mr. Sblendorio served as a consultant to a company in the pharmaceutical industry. Prior to joining us, Mr. Sblendorio was Executive Vice President and Chief Financial Officer of Eyetech Pharmaceuticals, Inc. from February 2002 until it was acquired by OSI Pharmaceuticals, Inc. in November 2005. From July 2000 to February 2002, Mr. Sblendorio served as our Senior Vice President of Business Development. From 1998 to July 2000, Mr. Sblendorio was the Chief Executive Officer and Managing Director of MPM Capital Advisors, LLC, an investment bank specializing in healthcare related transactions. Mr. Sblendorio’s pharmaceutical experience also includes 12 years at Hoffmann-LaRoche, Inc., a pharmaceutical company, in a variety of senior financial positions, including V.P. Finance of Roche Molecular Systems and Head of Finance-Controller for Amgen/Roche Europe. Mr. Sblendorio currently serves as a director of Amicus Therapeutics, Inc., a biopharmaceutical company and Chairman of the Board of NuLens Ltd., a private ophthalmology company. Mr. Sblendorio received his B.B.A. from Pace University and his M.B.A. from Fairleigh Dickinson University.

 

PAUL M. ANTINORI
Age: 55

 

Paul M. Antinori has been our General Counsel since May 2002 and a Senior Vice President since September 2006. He also served as Vice President from August 2004 to August 2006. From March 1998 to April 2002, Mr. Antinori was General Counsel and a consultant to Physician Computer Network, Inc., a healthcare information technology company. Prior to March 1998, Mr. Antinori was a partner at the law firm of Gibbons, Del Deo, Dolan, Griffinger & Vecchione in Newark, New Jersey. Mr. Antinori received his B.A. from Boston College and his J.D. from the University of Virginia School of Law.

 

WILLIAM O’CONNOR
Age: 50

 

William O’Connor is our Chief Accounting Officer. He joined us in April 2006 as our Vice President, Finance and Controller. From April 2000 to February 2006, he was the Vice President of Finance for Eyetech Pharmaceuticals, Inc. From 1996 to April 2000, Mr. O’Connor worked for Trophix Pharmaceuticals, Inc., a biotech company that specialized in pain medications. Mr. O’Connor is a certified public accountant and received a B.S. in accounting from Fairleigh Dickinson University.

KELLI WATSON-PACICCO
Age: 47

 

Kelli Watson-Pacicco has been our Senior Vice President, Global Communications and Human Strategy since November 2007. She also served as Senior Vice President, Human Strategy from January 2007 to November 2007. Prior to January 2007, Ms. Watson-Pacicco held various positions at Pfizer, Inc. over 19 years including Vice President, Strategic Planning for the Global Human Resources function. She also led Human Resources, Strategic Planning and Communications for the Corporate Affairs division and held a variety of positions in the Global Manufacturing Group. Ms. Watson-Pacicco holds a B.A. in sociology/psychology from Hamline University and a M.A. in industrial relations from the University of Minnesota.

 

Summary Compensation

 

The following table presents summary information for the year ended December 31, 2008 for our chief executive officer, our chief financial officer and our three other most highly compensated executive officers who were serving as executive officers as of December 31, 2008. We refer to these five individuals collectively as our “named executive officers.”

 

Summary Compensation Table

 

 

 

Clive Meanwell serves as our Chief Executive Officer pursuant to the terms of an employment agreement dated September 5, 1996. This agreement renews automatically on a yearly basis unless either party provides written notice of non-renewal at least 90 days prior to the expiration of the then-current term. Pursuant to the terms of the agreement, Dr. Meanwell’s annual compensation is determined by our board of directors. Pursuant to a noncompetition agreement, Dr. Meanwell has agreed not to compete with us during the term of his employment and for a period of one year after his termination. Dr. Meanwell is eligible to receive, at the discretion of our board of directors, an annual cash bonus targeted to be 75 percent of his annual base salary, subject to meeting company and personal performance goals.

 

John Kelley serves as our Chief Operating Officer and President pursuant to the terms of a letter agreement dated December 1, 2004. Mr. Kelley’s employment is “at will” and his annual compensation is determined by our board of directors. Mr. Kelley is eligible to receive, at the discretion of our board of directors, an annual cash bonus targeted to be 50 percent of his annual base salary, subject to meeting company and personal performance goals. Pursuant to a noncompetition agreement, Mr. Kelly has agreed not to compete with us during the term of his employment and for a period of one year after his termination.

 

Glenn Sblendorio serves as our Executive Vice President and Chief Financial Officer pursuant to the terms of a letter agreement dated March 3, 2006. Mr. Sblendorio’s employment is “at will” and his annual compensation is determined by our board of directors. In 2007, Mr. Sblendorio was eligible to receive, at the discretion of our board of directors, an annual cash bonus targeted to be 40 percent of his annual base salary, subject to meeting company and personal performance goals. In January 2008, Mr. Sblendorio was elevated a grade level for his performance and, as a result, Mr. Sblendorio is eligible to receive, at the discretion of our board of directors, an annual cash bonus targeted to be 50 percent of his annual base salary, subject to meeting company and personal performance goals. Pursuant to a noncompetition agreement, Mr. Sblendorio has agreed not to compete with us during the term of his employment and for a period of one year after his termination.

 

Paul Antinori serves as our Senior Vice President and General Counsel. Mr. Antinori’s employment is “at will” and his annual compensation is determined by our board of directors. Mr. Antinori is eligible to receive, at the discretion of our board of directors, an annual cash bonus targeted to be 40 percent of his annual base salary, subject to meeting company and personal performance goals. Pursuant to a noncompetition agreement, Mr. Antinori has agreed not to compete with us during the term of his employment and for a period of one year after his termination.

 

Catharine Newberry served as our Senior Vice President for Human Resources and Chief Human Strategy Officer pursuant to the terms of a letter agreement dated December 30, 2005. Ms. Newberry’s employment with us was terminated on January 26, 2009. Pursuant to a noncompetition agreement, Ms. Newberry has agreed not to compete with us for a period of one year after her termination.

 

We have also entered into severance agreements with our current named executive officers as described below.

 

Severance Agreements

 

In November 2008, we entered into amended and restated management severance agreements with certain of our senior officers, including our named executive officers, in order to induce each of these officers to maintain his or her continued commitment to us.

 

The agreements generally provide for severance pay, reimbursement of health care premiums, payment of reasonable outplacement assistance and accelerated stock option vesting in the event that (i) we terminate the officer’s employment without cause, as defined in the agreements, or (ii) the officer terminates his or her employment for good reason, as defined in the agreements. If an officer’s employment is terminated for cause, no benefits are provided to the officer under the agreements. These severance agreements supersede any similar provisions in any employment agreement or letter agreement we previously entered into with the officer.

 

The agreements provide as follows:

 

 

On February 19, 2009, we entered into a severance letter agreement with Catharine Newberry, pursuant to which Ms. Newberry is entitled to receive the following severance benefits:

 

 

 

As part of the severance agreement, Ms. Newberry has also entered into a general release of us, including our affiliates, successors and assigns for all claims through the date of termination of her employment. Ms. Newberry remains subject to the non-compete, non-solicitation, confidentiality and related provisions of her invention and nondisclosure agreement and non-competition and non-solicitation agreement with us.

 

Stock Option Agreements

 

The stock option agreements governing options awarded under our 2004 plan to all of our employees provide for accelerated vesting of 50 percent of an optionholder’s unvested options upon such optionholder’s death or disability (within the meaning of Section 22(e)(3) of the code). All of such optionholder’s vested options are exercisable for a period of one year following the date of the death or disability of the optionholder, provided, that the options have not expired and, in the case of disability, such optionholder has not been terminated for cause.

 

The table below reflects the potential payments and benefits to which the named executive officers would be entitled under the management severance agreements and stock option agreements with our named executive officers if the named executive officer’s employment with us was terminated for cause or due to death or disability or the officer resigned for good reason. The amounts shown in the table below assume that each termination was effective as of December 31, 2008, and that all eligibility requirements under the management severance agreements or stock option agreements were met. The closing price per share of our common stock on the NASDAQ Global Select Market on December 31, 2008 was $14.73.

 

 

 

 

The following table summarizes information regarding restricted stock awards and options granted to each of the named executive officers during the year ended December 31, 2008. Options granted in 2008 to the named executive officers were made under our 2004 plan and become exercisable in 48 equal monthly installments, commencing one month after the vesting commencement date, which is typically the grant date. All options were granted with an exercise price equal to the closing price per share of our common stock on the NASDAQ Global Select Market on the date of grant. The shares of restricted stock were also granted under our 2004 plan and vest in annual increments of 25% over four years commencing on the first anniversary of the date of grant.

 

2008 Grants of Plan-Based Awards

 

 

 

 

Outstanding Equity Awards at 2008 Fiscal Year-end

 

Except as noted in the table below, the options listed in the table below become exercisable in 48 equal monthly installments, commencing one month after the grant date. The options expire ten years after the grant date. The shares of restricted stock vest in annual increments of 25% over four years commencing on the first anniversary of the date of grant.