SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
THE MEDICINES COMPANY
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement
if Other Than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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THE MEDICINES COMPANY
5 SYLVAN WAY, SUITE 200
PARSIPPANY, NEW JERSEY 07054
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 30, 2002
You are hereby notified that the 2002 annual meeting of stockholders of The
Medicines Company will be held at the offices of Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts 02109, on Thursday, May 30, 2002, at 10:00 a.m.,
local time, for the purpose of considering and voting upon the following
matters:
1. To elect three class 2 directors for terms to expire at the 2005
annual meeting of stockholders.
2. To increase the number of shares of common stock authorized for
issuance under our 1998 stock incentive plan from 4,368,259 to 6,118,259
shares.
3. To ratify the appointment by the board of directors of Ernst &
Young LLP as our independent auditors for the year ending December 31,
2002.
4. To transact such other business as may properly come before the
meeting.
The above items of business are more fully described in the proxy statement
accompanying this notice. The board of directors has no knowledge of any other
business to be transacted at the annual meeting or at any adjournment thereof.
The board of directors has fixed the close of business on Monday, April 15,
2002 as the record date for the determination of stockholders entitled to notice
of and to vote at the annual meeting and any adjournment thereof. A list of our
stockholders entitled to notice of and to vote at the annual meeting will be
available for examination by any stockholder, for any purpose germane to the
meeting, during ordinary business hours for ten days prior to the meeting at the
offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109 and
at the time and place of the annual meeting.
A copy of our annual report to stockholders for the year ended December 31,
2001, which contains audited consolidated financial statements and other
information of interest to stockholders, accompanies this notice of annual
meeting and the enclosed proxy statement.
By order of the Board of Directors,
Steven H. Koehler, Secretary
April 29, 2002
Parsippany, New Jersey
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
THE MEDICINES COMPANY
5 SYLVAN WAY, SUITE 200
PARSIPPANY, NEW JERSEY 07054
PROXY STATEMENT
2002 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 30, 2002
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF
PROXIES BY THE BOARD OF DIRECTORS OF THE MEDICINES COMPANY, FOR USE AT THE 2002
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON THURSDAY, MAY 30, 2002, AT 10:00
A.M., LOCAL TIME, AT THE OFFICES OF HALE AND DORR LLP, 60 STATE STREET, BOSTON,
MASSACHUSETTS 02109, AND AT ANY ADJOURNMENT THEREOF.
All proxies will be voted in accordance with the stockholders'
instructions, and, if no choice is specified, the proxies will be voted in favor
of the matters set forth in the accompanying notice of meeting. A stockholder
may revoke a proxy at any time before its exercise by delivery of a written
revocation to our corporate secretary. Attendance at the annual meeting will not
in itself be deemed to revoke a proxy unless the stockholder affirmatively
revokes the proxy.
VOTING SECURITIES
On April 15, 2002, the record date for the determination of stockholders
entitled to notice of and to vote at the meeting, there were issued and
outstanding and entitled to vote 34,774,970 shares of common stock. Each share
entitles the record holder thereof to one vote on each matter presented at the
meeting.
VOTES REQUIRED
The holders of a majority of the shares of common stock issued and
outstanding and entitled to vote at the meeting will constitute a quorum for the
transaction of business at the annual meeting. Shares of common stock present in
person or represented by proxy, including shares that abstain or do not vote
with respect to one or more of the matters presented at the meeting, will be
counted for purposes of determining whether a quorum exists at the meeting.
The affirmative vote of the holders of a plurality of the shares of common
stock voting is required for the election of a director (Proposal 1). The
affirmative vote of the holders of a majority of the shares of common stock
voting on the matter is required for approval of the proposed increase in
authorized shares under our 1998 stock incentive plan (Proposal 2) and for the
ratification of the appointment of Ernst & Young LLP as our independent auditors
for the year ending December 31, 2002 (Proposal 3).
Shares held by stockholders who abstain from voting as to a particular
election or matter, and shares held in "street name" by brokers or nominees who
indicate on their proxies that they do not have discretionary authority to vote
such shares as to a particular election or matter, will not be counted as votes
in favor of a nominee for election or such matter, and also will not be counted
as shares voting at such election or on such matter. Accordingly, abstentions
and "broker non-votes" will have no effect on the voting of each election or
matter that requires the affirmative vote of a plurality or majority of the
shares voting at the election or on the matter.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY AND THE
ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 2001 ARE BEING
MAILED TO STOCKHOLDERS ON OR ABOUT APRIL 29, 2002. A COPY OF THE ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001, AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, INCLUDING FINANCIAL STATEMENTS BUT EXCLUDING EXHIBITS,
WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN REQUEST. PLEASE
ADDRESS ALL SUCH REQUESTS TO THE MEDICINES COMPANY, ONE CAMBRIDGE CENTER,
CAMBRIDGE, MASSACHUSETTS 02142, ATTENTION: INVESTOR RELATIONS. EXHIBITS WILL BE
PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
PRINCIPAL STOCKHOLDERS
The following table presents information with respect to the beneficial
ownership of our common stock as of January 31, 2002 by:
- each person, or group of affiliated persons, who is known by us to
beneficially own five percent or more of our outstanding common stock;
- each of the individuals listed in the summary compensation table below;
- each of our current directors; and
- all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, or SEC. These rules generally attribute
beneficial ownership of securities to persons who possess sole or shared voting
power or investment power with respect to those securities and include shares of
common stock issuable upon exercise of stock options or warrants that are
immediately exercisable or exercisable within 60 days. Unless otherwise
indicated, the persons or entities identified in this table have sole voting and
investment power with respect to all shares shown as beneficially owned by them,
subject to applicable community property laws.
Percentage ownership calculations are based on 34,614,834 shares of common
stock outstanding as of January 31, 2002. Any shares that may be acquired upon
the exercise of stock options or warrants prior to April 1, 2002 are deemed to
be outstanding for the purpose of calculating the percentage of the outstanding
common stock owned by such person or entity. These shares, however, are not
considered outstanding when computing the percentage ownership of any other
person or entity.
SHARES ISSUABLE
PURSUANT TO
OPTIONS AND/OR
SHARES WARRANTS TOTAL SHARES
BENEFICIALLY EXERCISABLE PRIOR BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED TO APRIL 1, 2002 OWNED PERCENTAGE
------------------------ ------------ ----------------- ------------ ----------
5% STOCKHOLDERS
Warburg, Pincus Ventures, L.P.(1)........ 9,379,446 1,275,810 10,655,256 29.7%
Biotech Growth S.A.(2)................... 5,204,837 675,925 5,880,762 16.7%
Alta Partners(3)......................... 2,293,474 287,951 2,581,425 7.4%
PharmaBio Development Inc.(4)............ 1,896,245 282,385 2,178,630 6.2%
T. Rowe Price Associates, Inc.(5)........ 1,962,500 -- 1,962,500 5.7%
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
Clive A. Meanwell........................ 548,693 296,936 845,629 2.4%
David M. Stack........................... 5,000 136,389 141,389 *
Peyton J. Marshall(6).................... 261,420 160,096 421,516 1.2%
Thomas P. Quinn.......................... -- 106,746 106,746 *
John W. Villiger(7)...................... 209,466 51,527 260,993 *
Glenn P. Sblendorio(8)................... 6,283 80,700 86,983 *
Leonard Bell............................. -- 8,255 8,255 *
Stewart J. Hen........................... -- 6,980 6,980 *
M. Fazle Husain(9)....................... 1,361,034 301,773 1,662,807 4.8%
T. Scott Johnson......................... 96,079 15,307 111,386 *
2
SHARES ISSUABLE
PURSUANT TO
OPTIONS AND/OR
SHARES WARRANTS TOTAL SHARES
BENEFICIALLY EXERCISABLE PRIOR BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED TO APRIL 1, 2002 OWNED PERCENTAGE
------------------------ ------------ ----------------- ------------ ----------
Armin M. Kessler(10)..................... 37,914 47,830 85,744 *
Nicholas J. Lowcock(11).................. 9,379,446 1,283,623 10,663,069 29.7%
James E. Thomas.......................... 35,000 8,255 43,255 *
All directors and executive officers as a
group (15 persons)..................... 11,984,151 2,630,845 14,614,996 39.2%
---------------
* Represents less than one percent of outstanding shares of common stock
(1) Consists of shares with respect to which Warburg, Pincus Ventures, L.P.,
Warburg, Pincus & Co. and Warburg Pincus LLC share ownership and voting and
dispositive power. Warburg, Pincus Ventures, L.P. is managed by Warburg
Pincus LLC. Lionel I. Pincus is the managing partner of Warburg, Pincus &
Co. and the managing member of Warburg Pincus LLC and may be deemed to
control both entities. The members of Warburg Pincus LLC are substantially
the same as the partners of Warburg, Pincus & Co. The address of the
Warburg, Pincus entities is 466 Lexington Avenue, New York, New York 10017.
(2) Consists of shares owned directly by Biotech Growth S.A. with respect to
which BB Biotech AG and Biotech Growth S.A. share voting and dispositive
power. Biotech Growth S.A. is a wholly owned subsidiary of BB Biotech AG.
The address of Biotech Growth S.A. is Calle 53, Urbanizacion Obarrio, Torre
Swiss Bank, Piso 16, Panama City, Zona 1, Republic of Panama. This
information is based on a Schedule 13G filed by BB Biotech AG on behalf of
Biotech Growth S.A. with the SEC on February 14, 2001.
(3) Includes 1,425,594 shares and warrants to purchase 178,987 shares held by
Alta BioPharma Partners L.P., 814,149 shares and warrants to purchase
102,218 shares held by The Medicines Company Chase Partners (Alta Bio) LLC
and 53,731 shares and warrants to purchase 6,746 shares held by Alta
Embarcadero BioPharma Partners, LLC. Alta Partners provides investment
advisory services to several venture capital funds, including Alta
BioPharma Partners L.P., The Medicines Company Chase Partners (Alta Bio)
LLC and Alta Embarcadero BioPharma Partners, LLC. The respective general
partners and managing members of Alta BioPharma Partners, L.P., The
Medicines Company Chase Partners (Alta Bio) LLC and Alta Embarcadero
BioPharma Partners, LLC exercise sole voting and investment power with
respect to the shares owned by them. Certain principals of Alta Partners
are managing directors of Alta BioPharma Management Partners, LLC and
Alta/Chase Management Partners, LLC (which is the general partner of Alta
BioPharma Partners, L.P. and the managing members of The Medicines Company
Chase Partners (Alta Bio) LLC). As managing directors, they may be deemed
to share voting and investment power with respect to the shares held by
Alta BioPharma Partners, L.P. and The Medicines Company Chase Partners
(Alta Bio) LLC. Such principals disclaim beneficial ownership of all such
shares held by Alta BioPharma Partners, L.P. and The Medicines Company
Chase Partners (Alta Bio) LLC, except to the extent of their proportionate
pecuniary interests therein. The address of Alta Partners is One
Embarcadero Center, Suite 4050, San Francisco, California 94111. This
information is based on Amendment No. 1 to Schedule 13G filed by Alta
Partners and its affiliates with the SEC on February 1, 2002.
(4) Includes 1,896,245 shares held by PharmaBio Development Inc., a wholly
owned subsidiary of Quintiles Transnational Corp., and warrants to purchase
282,385 shares held by Quintiles Transnational Corp. The address of
PharmaBio Development Inc. is c/o Quintiles Transnational Corp., 4709
Creekstone Drive, Suite 200, Durham, North Carolina 27703. This information
is based on Amendment No. 1 to Schedule 13G filed by Quintiles
Transnational Corp. and PharmaBio Development Inc. with the SEC on February
14, 2002.
(5) Includes shares owned by various individual and institutional investors for
which T. Rowe Price Associates, Inc. ("Price Associates") serves as
investment advisor with power to direct investments
3
and/or sole power to vote the shares. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such shares; however, Price Associates
expressly disclaims that it is, in fact, the beneficial owner of such
shares. This information is based on a Schedule 13G filed by Price
Associates with the SEC on February 11, 2002. The address of Price
Associates is 100 E. Pratt Street, Baltimore, Maryland 21202.
(6) Includes 58,400 shares held in custody for the benefit of Dr. Marshall's
minor children.
(7) Includes 209,465 shares and warrants to purchase 3,378 shares held in trust
for the benefit of members of the Villiger family.
(8) Includes 283 shares held by Mr. Sblendorio's minor children.
(9) Includes 1,186,894 shares and warrants to purchase 263,399 shares owned
directly by Morgan Stanley Venture Partners III, L.P., 113,956 shares and
warrants to purchase 25,288 shares owned directly by Morgan Stanley Venture
Investors III, L.P., and 51,924 shares and warrants to purchase 11,523
shares owned directly by The Morgan Stanley Venture Partners Entrepreneur
Fund, L.P. (collectively, the "Funds"). Mr. Husain is a managing member of
Morgan Stanley Venture Partners III, L.L.C., which is the general partner
of each of the Funds. Mr. Husain disclaims beneficial ownership of the
shares held by the Funds, except to the extent of his pecuniary interest
therein. The address of Mr. Husain is in care of Morgan Stanley Venture
Partners, 1221 Avenue of the Americas, New York, New York 10020.
(10) Includes 3,000 shares held by Dr. Kessler's wife.
(11) Includes 9,379,446 shares and warrants to purchase 1,275,810 shares held by
Warburg, Pincus Ventures, L.P. Mr. Lowcock is a Managing Director and
member of Warburg Pincus LLC. All shares indicated as owned by Mr. Lowcock
are included because of his affiliation with the Warburg, Pincus entities,
and Mr. Lowcock disclaims beneficial ownership of all of the shares owned
by the Warburg, Pincus entities.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Our board of directors is divided into three classes and currently consists
of three class 1 directors (David M. Stack, Stuart J. Hen and T. Scott Johnson),
three class 2 directors (M. Fazle Husain, Nicholas J. Lowcock and Clive A.
Meanwell) and three class 3 directors (Leonard Bell, Armin Kessler and James E.
Thomas). 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 2004, 2002 and 2003,
respectively, and until their respective successors are elected and qualified.
Pursuant to the terms of a stockholders' voting agreement that we entered
with certain of our stockholders in connection with the sale of shares of
preferred stock prior to our initial public offering, Warburg, Pincus is
entitled to nominate two individuals to serve as directors. Messrs. Lowcock and
Hen currently serve on our board of directors as nominees of Warburg, Pincus.
The persons named in the enclosed proxy card will vote to elect M. Fazle
Husain, Nicholas J. Lowcock and Clive A. Meanwell as class 2 directors, unless
the proxy is marked otherwise. The proxy card may not be voted for more than
three directors. Each class 2 director will be elected to hold office until the
2005 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 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. THE BOARD OF DIRECTORS RECOMMENDS
THE ELECTION OF MESSRS. HUSAIN AND LOWCOCK AND DR. MEANWELL AS CLASS 2
DIRECTORS.
DIRECTOR NOMINEES
Set forth below are the names of each nominee for class 2 director, the
year in which each first became a director, their ages as of April 1, 2002,
their positions and offices with us, their principal occupations and
4
business experience during the past five years and the names of other public
companies for which they serve as a director.
M. FAZLE HUSAIN, M.B.A.
A Director since 1998
Age: 37
M. Fazle Husain has been a director since September 1998. Since 1991, Mr.
Husain has been employed by Morgan Stanley & Co. Incorporated, an investment
banking firm, and is currently an Executive Director. Mr. Husain is also a
managing member of Morgan Stanley Venture Partners III, L.L.C. Mr. Husain
focuses primarily on investments in the health care industry, including health
care services, medical technology and health care information technology. He
currently also serves as a director of Allscripts Healthcare Solutions, Inc.,
Healthstream, Inc. and Cross Country, Inc. Mr. Husain received his Sc.B. degree
in chemical engineering from Brown University and his M.B.A. from the Harvard
Graduate School of Business Administration.
NICHOLAS J. LOWCOCK, M.B.A.
A Director since 2000
Age: 38
Nicholas J. Lowcock has been a director since December 2000, and he
previously served as a director from September 1996 until December 1998. Mr.
Lowcock has served as a Managing Director of Warburg Pincus LLC, a venture
capital firm, since January 2000. Mr. Lowcock has been a member of Warburg
Pincus LLC since 1994 and previously served as a Vice President. From 1992 to
1994, Mr. Lowcock was a consultant with the Boston Consulting Group. Mr. Lowcock
currently also serves as a director of Eurand B.V., Leciva Pharmaceutical
Holdings B.V., PharmaIdea B.V., Strakan Ltd. and Aspect Educational Holdings
Ltd. Mr. Lowcock is also a director of Project Hope U.K., a charity devoted to
improving healthcare in developing nations. Mr. Lowcock received an M.B.A. from
The Wharton School of the University of Pennsylvania and a B.A. in Experimental
Psychology from Oxford University.
CLIVE A. MEANWELL, M.D.
A Director since 1996
Age: 44
Clive A. Meanwell has been a director since the inception of our company in
July 1996 and has served as our Executive Chairman since September 2001. From
1996 to September 2001, Dr. Meanwell served as our Chief Executive Officer and
President. 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, Worldwide
Drug Regulatory Affairs, from 1991 to 1992 and Director of Product Development
from 1986 to 1991. Dr. Meanwell was also a member of Hoffmann-La Roche's
pharmaceutical division operating board, its research and development board and
its portfolio management committee. During his tenure as Director of Product
Development, Dr. Meanwell had responsibility at Hoffmann-La Roche for the
development and launch of Neupogen. During his tenure as Vice President,
Worldwide Drug Regulatory Affairs, he had management responsibility for the
regulatory approval of eight new products and nine significant line extensions
of products. Dr. Meanwell also led an initiative at Hoffmann-La Roche to
reengineer the drug development process with the goal of cutting the time and
cost of drug development. Dr. Meanwell received his M.D. and Ph.D. from the
University of Birmingham, United Kingdom.
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, 2002,
their positions and offices with us, their principal occupations and business
experience during the past five years and the names of other public companies of
which they serve as a director.
5
DIRECTORS WHOSE TERMS EXPIRE IN 2003 (CLASS 3 DIRECTORS)
LEONARD BELL, M.D.
A Director since 2000
Age: 43
Leonard Bell has been a director since May 2000. From January 1992 to March
2002, Dr. Bell served as the President and Chief Executive Officer, Secretary
and Treasurer of Alexion Pharmaceuticals, Inc., a pharmaceutical company. Since
March 2002, Dr. Bell has served as the Chief Executive Officer, Secretary and
Treasurer of Alexion Pharmaceuticals, Inc. Since 1993, Dr. Bell has served as an
Adjunct Assistant Professor of Medicine and Pathology at the Yale University
School of Medicine. From 1991 to 1992, Dr. Bell was an Assistant Professor of
Medicine and Pathology and co-Director of the Program in Vascular Biology at the
Yale University School of Medicine. From 1990 to 1992, Dr. Bell was an attending
physician at the Yale-New Haven Hospital and an Assistant Professor in the
Department of Internal Medicine at the Yale University School of Medicine. Dr.
Bell was the recipient of the Physician Scientist Award from the National
Institutes of Health and Grant-in-Aid from the American Heart Association. Dr.
Bell is the recipient of various honors and awards from academic and
professional organizations and his work has resulted in more than 45 scientific
publications, invited presentations and patent applications. Dr. Bell is an
invited Member of the State of Connecticut Governor's Council on Economic
Competitiveness and Technology and a director of Connecticut United for Research
Excellence, Inc. He also served as a director of the Biotechnology Research and
Development Corporation from 1993 to 1997. Dr. Bell currently also serves as a
director of Alexion Pharmaceuticals, Inc. Dr. Bell received his A.B. from Brown
University and M.D. from the Yale University School of Medicine.
ARMIN M. KESSLER, Dh.c.
A Director since 1998
Age: 64
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., Basel, United States and Japan (now
Novartis Pharma A.G.) and, most recently, at Hoffmann-La Roche, Basel where he
was Chief Operating Officer and Head of the Pharmaceutical Division until 1995.
Dr. Kessler has served as a director of Hoffmann-La Roche, Syntex Corporation
and Genentech, Inc., and Dr. Kessler currently also serves as a director of
Neotherapeutics, Inc. 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.
JAMES E. THOMAS, M.Sc.
A Director since 1996
Age: 41
James E. Thomas has been a director since September 1996. Since March 2001,
Mr. Thomas has served as Managing Partner of Thomas, McNerney & Partners, LLC, a
health care private equity investment fund. From 1989 to June 2000, Mr. Thomas
served in various capacities, including from 1994 to 2000, as a Partner, at E.M.
Warburg, Pincus & Co., LLC, a venture capital firm. From 1984 to 1989, Mr.
Thomas was a Vice President of Goldman Sachs International, an investment
banking firm, in London. Mr. Thomas currently also serves as a director of
Transkaryotic Therapies, Inc. and Wright Medical Group. Mr. Thomas received his
B.Sc. in finance and economics from the Wharton School at the University of
Pennsylvania and his M.Sc. in economics from the London School of Economics.
6
DIRECTORS WHOSE TERMS EXPIRE IN 2004 (CLASS 1 DIRECTORS)
DAVID M. STACK
A Director since 2001
Age: 50
David M. Stack has been our President and Chief Executive Officer and a
director since September 2001. From April 2000 to September 2001, Mr. Stack
served as a Senior Vice President. From October 1999 to September 2001, Mr.
Stack also served as President and General Partner of Stack Pharmaceuticals,
Inc., a commercialization, marketing and strategy consulting firm serving
healthcare companies, and as a Senior Advisor to the Chief Executive Officer of
Innovex Inc., a contract pharmaceutical organization. Mr. Stack served as
President and General Manager of Innovex Inc. from May 1995 to December 1999.
Mr. Stack currently also serves as a director of Bio-Imaging Technologies, Inc.
Mr. Stack received his B.S. in biology from Siena College and his B.S. in
pharmacy from Albany College of Pharmacy.
STEWART J. HEN, M.B.A., M.S.
A Director since 2001
Age: 35
Stewart J. Hen has been a director since February 2001. Since May 2000, Mr.
Hen has been a Vice President of Warburg Pincus LLC, a venture capital firm. Mr.
Hen focuses on investments in the emerging life sciences area, including
biotechnology, specialty pharmaceuticals, drug delivery and diagnostics. From
1996 to May 2000, Mr. Hen was a consultant at McKinsey & Company, a consulting
firm, where he advised pharmaceutical and biotechnology companies on a range of
strategic management issues. Mr. Hen served at Merck & Company, a pharmaceutical
company, from 1991 to 1994 in manufacturing operations. Mr. Hen currently also
serves as a director of Synaptic Pharmaceuticals Corp. and Triangle
Pharmaceuticals Inc. Mr. Hen received an M.B.A. from The Wharton School of the
University of Pennsylvania, an M.S. in chemical engineering from the
Massachusetts Institute of Technology and a B.S. in chemical engineering from
the University of Delaware.
T. SCOTT JOHNSON, M.D.
A Director since 1996
Age: 54
T. Scott Johnson has been a director since September 1996. In July 1999,
Dr. Johnson founded JSB Partners, L.P., an investment bank focusing on mergers
and acquisitions, private financings and corporate alliances within the health
care sector. From July 1992 to June 1999, Dr. Johnson served as a founder and
managing director of MPM Capital, L.P., a venture capital firm. Dr. Johnson
received both his B.A. and M.D. from the University of Alabama.
BOARD AND COMMITTEE MEETINGS
The board of directors met 14 times during 2001, including regular, special
and telephone meetings, and acted by unanimous written consent on one occasion.
Except for Dr. Bell, each director who served as a director throughout 2001
attended at least 75% of the total number of board meetings held during 2001 and
at least 75% of the total number of meetings held by all board committees on
which he served (during the period in which he was a member of such committees).
Drs. Dennis Gillings and Anders Hove, who ceased serving as directors during
2001, attended less than 75% of the total number of board meetings held during
the respective period in which each was a director, and Dr. Hove attended less
than 75% of the total number of meetings held by the audit committee (during the
period in which he was a member of such committee).
The board of directors has an audit committee and a compensation committee.
There is no standing nominating committee of the board of directors.
7
Audit Committee
Drs. Johnson and Kessler and Mr. Husain currently serve on the audit
committee. The audit committee assists our board of directors in fulfilling its
oversight responsibilities by:
- reviewing the effectiveness of the auditors during the annual audit;
- reviewing the adequacy of financial statement disclosures;
- discussing our internal control policies and procedures; and
- considering and recommending our independent auditors.
The audit committee met five times during 2001. The audit committee has
recommended that Ernst & Young LLP be appointed as our independent auditors for
the year ending December 31, 2002.
Compensation Committee
Dr. Kessler and Messrs. Lowcock and Thomas currently serve on the
compensation committee. The compensation committee is responsible for
establishing compensation policies and levels with respect to our executive
officers, including our chief executive officer. The compensation committee also
administers our 1998 stock incentive plan, 2000 employee stock purchase plan,
2000 outside director stock option plan and 2001 non-officer, non-director
employee stock incentive plan, and grants stock options to our executive
officers. The compensation committee met six times during 2001.
DIRECTORS
Fees and Expenses
Generally, we pay our non-employee directors $2,500 for each face-to-face
meeting of the board of directors that they attend and $500 for each telephonic
meeting in which they participate. The chairman of the compensation committee
receives $1,000 for each face-to-face committee meeting he attends and $500 for
each telephonic committee meeting in which he participates. Mr. Lowcock, the
chairman of the compensation committee, waived all such fees during 2001. We
also reimburse all directors for customary and reasonable expenses incurred in
attending board and board committee meetings.
In addition, we grant our non-employee directors stock options under our
2000 outside director stock option plan, and we may grant our non-employee
directors stock options and other equity awards under our 1998 stock incentive
plan. During 2001, we granted the following non-qualified stock options to our
non-employee directors:
- In February 2001, we granted Mr. Hen an option under our 2000 outside
director plan to purchase 20,000 shares of common stock at an exercise
price of $14.875 per share.
- In May 2001, we granted each of Drs. Bell, Johnson and Kessler, and
Messrs. Hen, Husain, Lowcock and Thomas an option under our 2000 outside
director plan to purchase 7,500 shares of common stock at an exercise
price of $13.80 per share.
Each of the above options vests in 48 equal monthly installments commencing
one month after the date of grant.
2000 Outside Director Stock Option Plan
The director plan was adopted by our board of directors on May 15, 2000.
Under the director plan, our non-employee directors are eligible to receive
non-statutory options to purchase shares of common stock. A total of 250,000
shares of common stock may be issued upon the exercise of options granted under
the plan, and as of December 31, 2001, options to purchase 92,500 shares of
common stock were outstanding under the plan.
8
Under the director plan, each non-employee director is granted an option to
purchase 20,000 shares of common stock on the date of his or her initial
election to our board of directors. In addition, non-employee directors receive
annual grants, on the date of the annual meeting of stockholders, of options to
purchase 7,500 shares of common stock.
All options granted under the director plan vest in 48 equal monthly
installments commencing one month after the date of grant and have an exercise
price per share equal to the closing sale price of our common stock on The
Nasdaq National Market(R) on the date of grant. An optionee may exercise his or
her option only while he or she is a director and for one year after he or she
ceases to be a director. Unexercised options expire ten years after the date of
grant. Options granted under the director plan are not transferable or
assignable other than by will or the laws of descent and distribution and expire
upon an acquisition event, which is defined to mean (1) any merger or
consolidation which results in our stockholders prior to the transaction holding
less than a majority of the voting power of the combined or acquiring entity
immediately after the transaction, (2) any sale of all or substantially all of
our assets or (3) our complete liquidation.
EXECUTIVE COMPENSATION
Compensation Earned
The following summarizes the compensation earned during the years ended
December 31, 1999, 2000 and 2001 by our chief executive officers and our four
other most highly compensated executive officers who were serving as executive
officers on December 31, 2001, to whom we refer as our named executive officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION(1) SECURITIES
---------------------- OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) OPTIONS
--------------------------- ---- --------- --------- --------------- ------------
Clive A. Meanwell..................... 2001 $300,000 $50,000 $770 15,000
Executive Chairman(3) 2000 250,000 85,000 852 424,781
1999 200,000 -- 840 --
David M. Stack........................ 2001 $197,917 $40,000 $516 215,000
President and Chief Executive
Officer(4) 2000 112,500 45,000 320 227,500
Peyton J. Marshall.................... 2001 $200,000 $35,000 $555 15,000
Former Senior Vice President and 2000 200,000 70,000 511 271,446
Chief Financial Officer(5) 1999 150,000 -- 504 --
Thomas P. Quinn....................... 2001 $210,000 $10,000 $540 119,000
Former Senior Vice President(6) 2000 130,833 50,000 320 191,000
John W. Villiger...................... 2001 $195,000 $25,000 -- 15,000
Vice President 2000 195,000 60,000 -- 188,591
1999 195,000 -- -- --
Glenn P. Sblendorio................... 2001 $185,000 $30,000 $515 15,000
Former Senior Vice President(7) 2000 89,061 30,000 203 202,680
---------------
(1) Perquisites for the named executive officers did not exceed the lesser of
$50,000 or 10% of total salary and bonus for the respective fiscal years and
accordingly have been omitted in accordance with SEC rules.
(2) Represents premiums paid by us under our group life insurance policy.
(3) Dr. Meanwell served as President and Chief Executive Officer from July 1996
to September 2001 and currently serves as our Executive Chairman.
(4) Mr. Stack became our President and Chief Executive Officer in September
2001.
9
(5) Dr. Marshall served as our Chief Financial Officer from October 1997 to
April 2002 and as a Senior Vice President from January 2000 to April 2002.
(6) Mr. Quinn served as a Senior Vice President from April 2000 to March 2002.
(7) Mr. Sblendorio served as a Senior Vice President from July 2000 to March
2002.
Stock Option Grants
The following table sets forth information regarding the individual grants
of stock options to each of our named executive officers during the fiscal year
ended December 31, 2001. We have never granted any stock appreciation rights.
The potential realizable value is calculated based on the term of the option at
its time of grant, which is ten years. This value is based on assumed rates of
stock appreciation of 5% and 10% compounded annually from the date the options
were granted until their expiration date. These numbers are calculated based on
the requirements of the SEC and do not represent an estimate or projection of
the future price of our common stock. The gains shown are net of the option
exercise price, but do not reflect taxes or other expenses associated with the
exercise. Actual gains, if any, on stock option exercises will depend on the
future performance of our common stock and overall stock market conditions. The
amounts reflected in the following table may not necessarily be achieved.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1)
--------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES PRICE PER EXPIRATION ----------------------------
NAME GRANTED IN 2000 SHARE DATE 5% 10%
---- ---------- ---------- --------- ------------ ------------ ------------
Clive A. Meanwell.................... 15,000 0.7% $10.11 12/10/2011 $ 95,372 $ 241,691
David M. Stack....................... 200,000 10.0 18.10 7/9/2011 2,276,599 5,769,241
15,000 0.7 10.11 12/10/2011 95,372 241,691
Peyton J. Marshall................... 15,000 0.7 10.11 12/10/2011 95,372 241,691
Thomas P. Quinn...................... 109,000 5.4 13.27 5/20/2011 909,652 2,305,237
10,000 0.5 10.11 12/10/2011 63,581 161,127
John W. Villiger..................... 15,000 0.7 10.11 12/10/2011 95,372 241,691
Glenn P. Sblendorio.................. 15,000 0.7% $10.11 12/10/2011 $ 95,372 $ 241,691
---------------
(1) The percentage of total options granted to employees in 2001 is calculated
based on options granted under our 1998 stock incentive plan and 2001
non-officer, non-director employee stock incentive plan.
The exercise price per share of each option was equal to the closing sale
price of our common stock on The Nasdaq National Market(R) on the date of grant,
and each option vests in 48 equal monthly installments commencing one month
following the date of grant. Our 1998 stock incentive plan provides that stock
options which are otherwise unvested may be exercised for restricted stock which
is subject to vesting and a repurchase option.
Our 1998 stock incentive plan provides that in the event of a merger or
other acquisition event, our board of directors will provide that all
outstanding options will be assumed, or equivalent options will be substituted,
by the acquiring or succeeding corporation. If the acquiring or succeeding
corporation does not agree to assume, or substitute for, options outstanding
under the 1998 stock incentive plan, then our board of directors will provide
(1) that all unexercised options will become exercisable in full prior to the
acquisition event and will terminate immediately prior to the consummation of
such acquisition event or (2) for cash payment in exchange for such options.
Our 1998 stock incentive plan also provides that upon the occurrence of a
change in control, as defined in the 1998 stock incentive plan, a participant's
options will become immediately exercisable in full if within one year following
such event, the participant's employment is terminated without cause or is
terminated by the
10
participant due to a change of more than 30 miles in the participant's principal
business location, a material reduction in participant's employment
responsibilities without cause, a material reduction in the participant's salary
or a significant diminution in the participant's responsibilities without his or
her agreement.
Options Holdings
The following table presents information regarding the number and value of
securities underlying unexercised options that were held by each of the named
executive officers above as of December 31, 2001. None of our named executive
officers exercised any stock options during 2001. Amounts shown under the column
"Value of Unexercised In-the-Money Options at Fiscal Year End" are based on the
closing sale price of our common stock on The Nasdaq National Market on December
31, 2001 of $11.59 per share, without taking into account any taxes that may be
payable in connection with the transaction, multiplied by the number of shares
underlying the option, less the exercise price payable for these shares.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
David M. Stack............................... 107,364 335,136 $ 565,743 $ 809,804
Clive A. Meanwell............................ 209,235 271,426 1,612,133 1,585,021
Peyton J. Marshall........................... 122,964 182,462 889,898 999,228
Thomas P. Quinn.............................. 86,459 223,541 439,218 643,280
John W. Villiger............................. 52,313 117,187 279,228 487,572
Glenn P. Sblendorio.......................... 67,095 150,585 $ 316,641 $ 599,604
EXECUTIVE EMPLOYMENT AGREEMENTS
Dr. Meanwell serves as our Executive Chairman 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. If Dr. Meanwell terminates his employment
for good reason, as defined in the agreement, or if we elect to terminate his
employment, Dr. Meanwell will be entitled to three months salary and the same
health, disability and other benefits as were provided during his employment for
a period of three months after the date of his termination or, if prior to the
end of the three-month period, until Dr. Meanwell commences full-time employment
with a new employer. Dr. Meanwell has agreed not to compete with the us during
the term of his employment and for a period of one year after his termination,
unless such termination is at our election or at the election of Dr. Meanwell
for good reason.
Mr. Stack serves as our Chief Executive Officer and President pursuant to
the terms of an employment agreement dated November 1, 2001. 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, Mr. Stack's annual
salary is $265,000, and he is eligible to receive a bonus of up to 40% of his
base salary. If Mr. Stack terminates his employment for good reason, as defined
in the agreement, or if we elect to terminate his employment, Mr. Stack will be
entitled to three months salary and the same health, disability and other
benefits as were provided during this employment for a period of three months
after the date of his termination or, if prior to the end of the three-month
period, until Mr. Stack commences full-time employment with a new employer. Mr.
Stack has agreed not to compete with us during the term of his employment and
for a period of one year after this termination, unless such termination is at
our election or at the election of Mr. Stack for good reason.
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Dr. Marshall served as our Senior Vice President and Chief Financial
Officer pursuant to the terms of an employment agreement dated February 27,
2002. This agreement will expire on May 23, 2003. Pursuant to the terms of the
agreement, Dr. Marshall's annual salary is $200,000, and he is eligible to
receive a bonus of up to 40% of his base salary. If Dr. Marshall terminates his
employment for good reason, as defined in the agreement, Dr. Marshall will be
entitled to three months salary and the same health, disability and other
benefits as were provided during his employment for a period of three months
after the date of his termination or, if prior to the end of the three-month
period, until Dr. Marshall commences full-time employment with a new employer.
After May 23, 2002, Dr. Marshall will not be required to devote his entire
business time to us, he will have the right to terminate his employment with us
upon ten days prior written notice and we will have the right to terminate Dr.
Marshall if he becomes employed by one or more third-parties on a majority-time
basis. If we exercise our right to terminate Dr. Marshall, or if he exercises
his right to voluntarily terminate his employment with us, the vesting of any
stock options held by Dr. Marshall will be accelerated such that such options
will become exercisable to the extent they would have otherwise been exercisable
on May 23, 2003, and Dr. Marshall will serve as a consultant to us until May 23,
2003 in return for consulting fees equal to his current salary plus benefits.
Dr. Marshall has agreed not to compete with us during the term of his
employment.
Mr. Quinn served as one of our vice presidents until March 2002 pursuant to
the terms of an employment agreement dated April 1, 2000, as amended. Pursuant
to the terms of the agreement, Mr. Quinn's annual salary was $190,000, and he
was eligible to receive a bonus of up to 40% of his base salary. Mr. Quinn
terminated his employment with us in March 2002. In consideration for past
services rendered by Mr. Quinn, upon the termination of his employment with us,
we accelerated the vesting of stock options held by Mr. Quinn such that such
options became vested as if his date of termination had been June 30, 2002. Mr.
Quinn has agreed not to compete with us for a period of one year after his
termination.
Dr. Villiger serves as one of our vice presidents pursuant to the terms of
an employment agreement dated March 10, 1997. 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. Villiger's annual compensation is
determined by our board of directors. If Dr. Villiger terminates his employment
for good reason, as defined in the agreement, or if we elect to terminate his
employment, Dr. Villiger will be entitled to three months salary and the same
health, disability and other benefits as were provided during his employment for
a period of three months after the date of his termination or, if prior to the
end of the three-month period, until Dr. Villiger commences full-time employment
with a new employer. Dr. Villiger has agreed not to compete with us during the
term of his employment and for a period of one year after his termination,
unless such termination is at our election or at the election of Dr. Villiger
for good reason.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The audit committee of the board of directors acts under a written charter
first adopted and approved by the board in May 2000. The members of the audit
committee are independent directors, as defined by the audit committee's charter
and the rules of The Nasdaq Stock Market.
The audit committee reviewed The Medicines Company's audited financial
statements for 2001 and discussed these financial statements with the company's
management. The Medicines Company's management is responsible for the financial
reporting process, including its system of internal controls, and for the
preparation of consolidated financial statements in accordance with generally
accepted accounting principles. The Medicines Company's independent auditors are
responsible for performing an independent audit of, and issuing a report on,
those financial statements. The audit committee is responsible for monitoring
and overseeing these processes. The audit committee's oversight does not provide
an independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or policies, or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations.
12
As appropriate, the audit committee reviews and evaluates, and discusses
with management, internal accounting, financial and auditing personnel and the
independent auditors, the following:
- the plan for, and the independent auditors' report on, each audit of The
Medicines Company's financial statements;
- The Medicines Company's financial disclosure documents, including all
financial statements and reports filed with the SEC or sent to
stockholders;
- management's selection, application and disclosure of critical accounting
policies;
- changes in The Medicines Company's accounting practices, principles,
controls or methodologies;
- significant developments or changes in accounting rules applicable to The
Medicines Company; and
- the adequacy of The Medicines Company's internal controls and accounting,
financial and auditing personnel.
The audit committee also reviewed and discussed the audited financial
statements and the matters required by Statement on Auditing Standards 61
(Communication with audit committees) with Ernst & Young LLP, The Medicines
Company's independent auditors. This statement requires The Medicines Company's
independent auditors to discuss with The Medicines Company's audit committee,
among other things, the following:
- methods to account for significant unusual transactions;
- the effect of significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance or
consensus;
- the process used by management in formulating particularly sensitive
accounting estimates and the basis for the auditors' conclusions
regarding the reasonableness of those estimates; and
- disagreements with management over the application of accounting
principles, the basis for management's accounting estimates and the
disclosures in the financial statements.
The Medicines Company's independent auditors also provided the audit
committee with written disclosure and the letter required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees).
Independence Standards Board Standard No. 1 requires auditors annually to
disclose in writing all relationships that in the auditor's professional opinion
may reasonably be thought to bear on independence, confirm their perceived
independence and engage in a discussion of independence. In addition, the audit
committee discussed with The Medicines Company's independent auditors their
independence from The Medicines Company. The audit committee also considered
whether The Medicines Company's independent auditors' provision of certain
other, non-audit related services to The Medicines Company is compatible with
maintaining such auditors' independence. See "Ratification of Independent
Accountants -- All Other Fees."
Based on its discussions with management and the independent auditors, and
its review of the representations and information provided by management and the
independent auditors, 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, 2001. The audit
committee also recommended, subject to stockholder approval, the appointment of
Ernst & Young LLP as The Medicines Company's independent auditors for the year
ending December 31, 2002.
By the Audit Committee of the Board of Directors
M. Fazle Husain
T. Scott Johnson
Armin M. Kessler
13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee consists of Dr. Kessler and Messrs. Lowcock and
Thomas, none of whom ever has been an officer or employee of The Medicines
Company and each of whom served on the compensation committee throughout 2001.
None of our executive officers has served as a director or member of the
compensation committee (or other committee serving an equivalent function) of
any other entity, one of whose executive officers served as one of our directors
or as a member of our compensation committee.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The compensation committee of the board of directors is responsible for
reviewing and establishing compensation policies and practices with respect to
The Medicines Company's executive officers, including the named executive
officers, and setting the compensation for these individuals. The compensation
committee also administers The Medicines Company's stock plans and grants stock
options to our executive officers.
Compensation Philosophy
The compensation committee seeks to achieve three broad goals in connection
with The Medicines Company's executive compensation programs and decisions
regarding individual compensation. First, the compensation committee structures
executive compensation programs in a manner that the committee believes will
enable The Medicines Company to attract and retain key executives. Second, the
compensation committee establishes compensation programs that are designed to
reward executives for the achievement of specified business objectives of The
Medicines Company as a whole and/or the individual executive's particular
business unit. By tying compensation in part to particular goals, the
compensation committee believes that a performance-oriented environment is
created for The Medicines Company's executives. Finally, The Medicines Company's
executive compensation programs are intended to provide executives with an
equity interest in The Medicines Company so as to link a portion of executives'
compensation with the performance of The Medicines Company's common stock.
The compensation programs for The Medicines Company's executives
established by the compensation committee consist of three elements based upon
the goals described above: base salary, annual cash bonus and a stock-based
equity incentive in the form of participation in the 1998 stock incentive plan.
The compensation committee reviews business objectives of The Medicines Company,
assesses overall performance of The Medicines Company with respect to those
business objectives and considers the performance of individual executives
relative to their own specific objectives in the context of The Medicines
Company's performance. Based on the committee's assessment of performance, it
establishes an annual base salary for each executive and designs cash bonus and
stock-based equity incentives for executives as a way to reward good performance
and to incentivize continued improvement in performance.
Compensation in 2001
Base Salary. In establishing base salaries for executives, the
compensation committee considers the compensation of executive officers that
have comparable qualifications, experience and responsibilities at companies in
similar businesses of comparable size and success. The compensation committee
also considers historic salary levels of the individual and the nature of the
individual's responsibilities and compares the individual's base salary with
those of The Medicines Company's other executives. To the extent determined to
be appropriate in establishing base salaries of The Medicines Company's
executives, the compensation committee also considers general economic
conditions, The Medicines Company's financial performance and the individual's
performance.
Dr. Meanwell served as The Medicines Company's President and Chief
Executive Officer from its inception in July 1996 to September 2001. Dr.
Meanwell currently serves as the Executive Chairman and Chairman of the board of
directors. In 2001, Dr. Meanwell received a salary of $300,000. Mr. Stack has
served as the President and Chief Executive Officer since September 2001. The
compensation committee fixed
14
Mr. Stack's annual base salary at $265,000 upon his appointment as President and
Chief Executive Officer. The annual base salary of Mr. Stack and Dr. Meanwell
was based upon analysis of other comparable public companies' chief executive
officer's compensation and performance, the significant accomplishments during
2001 in the commercialization of Angiomax and the successful transition of The
Medicines Company from a private to a public company. Mr. Stack's base salary
for 2002 will be $265,000, and Dr. Meanwell's base salary for 2002 will be
$300,000.
Performance Bonuses. The compensation committee generally structures cash
bonuses by linking them to the achievement of specified company and/or business
unit performance objectives. The amount of the bonus paid, if any, varies among
the executive officers and key managers depending on their success in achieving
individual performance goals and their contribution to the achievement of
corporate performance goals. The compensation committee reviews and assesses
corporate goals and individual performance by executive officers and key
managers. For 2001, and for the forseeable future, U.S. sales of Angiomax was,
and will continue to be, the most important corporate performance criterion.
Other corporate performance criteria that are considered by the compensation
committee include achievements with respect to development milestones, business
development objectives, commercialization goals and other measures of financial
performance, including stock price appreciation. For sales personnel,
achievement of individual performance targets tends to be heavily weighted in
determining bonuses, while for executive officers and other managers,
achievement of corporate objectives tends to be more heavily weighted. Pursuant
to such bonus policy, for 2001, Dr. Meanwell was awarded a cash bonus of
$50,000, Mr. Stack was awarded a cash bonus of $40,000 and Messrs. Marshall,
Quinn, Villiger and Sblendorio were awarded a cash bonus of $35,000, $10,000,
$25,000 and $30,000, respectively. Each bonus was paid in 2002.
Equity-Based Compensation. Stock option grants in 2001 were designed to
link the overall compensation of any executive officers receiving such awards
with his performance, in light of all other current and past compensation
received by such executive officer, including the number and price of options
held by the executive officer. Such grants, as a result of the applicable
vesting arrangements, also serve as a means for The Medicines Company to retain
the services of these individuals. In 2001, Dr. Meanwell was awarded stock
options for the purchase of 15,000 shares of common stock, Mr. Stack was awarded
stock options for the purchase of 215,000 shares of common stock, and Messrs.
Marshall, Quinn, Villiger and Sblendorio received options to purchase 15,000,
119,000, 15,000 and 15,000 shares of common stock, respectively. These option
grants were based on the criteria described above. A portion of Mr. Stack's
options were granted in connection with his appointment as President and Chief
Executive Officer. The exercise price of these options was equal to the closing
sale price for our common stock on the Nasdaq National Market on the date of
grant, and the options vest in 48 equal monthly installments commencing one
month after the date of grant. Vesting of options granted to executive officers
may be accelerated upon a change in control of The Medicines Company and in
other circumstances. For additional information concerning such accelerated
vesting, see "Executive Compensation -- Acceleration of Stock Options."
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a tax deduction to public companies for certain compensation in excess
of $1 million paid to the company's Chief Executive Officer and the four other
most highly compensated executive officers. Certain compensation, including
qualified performance-based compensation, will not be subject to the deduction
limit if certain requirements are met. The compensation committee reviews the
potential effect of Section 162(m) periodically and generally seeks to structure
the long-term incentive compensation granted to The Medicines Company's
executive officers through option issuances under The Medicines Company's plans
in a manner that is intended to avoid disallowance of deductions under Section
162(m). Nevertheless, there can be no assurance that compensation attributable
to awards granted under The Medicines Company's plans will be treated as
qualified performance-based compensation under Section 162(m). In addition, the
compensation committee reserves the right to use its judgment to authorize
compensation payments that may be subject to the limit when the compensation
committee believes such payments are appropriate and in the best interests of
the
15
company and its stockholders, after taking into consideration changing business
conditions and the performance of its employees.
By the Compensation Committee of the Board of Directors
Armin M. Kessler
Nicholas J. Lowcock
James E. Thomas
TRANSACTIONS WITH EXECUTIVE OFFICERS, DIRECTORS AND FIVE PERCENT STOCKHOLDERS
May 2001 Private Placement
In May 2001, we sold the 4,000,000 shares of our common stock in a private
placement at a price per share of $11.00, for a total purchase price of $44.0
million. Of the 4,000,000 shares, 2,720,000 shares were sold to the following
directors, executive officers and five percent stockholders and their
affiliates:
NAME COMMON STOCK PURCHASE PRICE
---- ------------ --------------
Warburg, Pincus Venture Partners, L.P....................... 1,050,000 $11,550,000
T. Rowe Price Associates, Inc............................... 1,000,000 11,000,000
Alta Partners............................................... 450,000 4,950,000
PharmaBio Development Inc................................... 200,000 2,200,000
Clive A. Meanwell........................................... 10,000 110,000
T. Scott Johnson............................................ 5,000 55,000
Glenn P. Sblendorio......................................... 5,000 $ 55,000
CERTAIN RELATIONSHIPS
PharmaBio/Quintiles
In August 1996, we entered into a strategic alliance with one of our
stockholders, PharmaBio Development Inc., a wholly owned subsidiary of Quintiles
Transnational Corp. Under the terms of the strategic alliance agreement,
PharmaBio and any of its affiliates who work on our projects will, at no cost to
us, review and evaluate, jointly with us, development programs we design related
to potential or actual product acquisitions. The purpose of this collaboration
is to optimize the duration, cost, specifications and quality aspects of such
programs. PharmaBio and its affiliates have also agreed to perform other
services with respect to our products, including clinical and non-clinical
development services, project management, project implementation,
pharmacoeconomic services, regulatory affairs and post-marketing surveillance
services and statistical, statistical programming, data processing and data
management services pursuant to work orders agreed to by us and PharmaBio from
time to time. Through December 31, 2001, we had entered into approximately 45
work orders with PharmaBio and had paid PharmaBio a total of $13.4 million. From
January 1, 2001 to April 1, 2002, expenses incurred for such services were
approximately $2.8 million, of which approximately $429,000 was recorded in
accounts payable and accrued expenses at April 1, 2002.
In addition, under the strategic alliance agreement, if PharmaBio and its
affiliates exceed performance milestones agreed upon prior to the initiation of
services under any work order, we are obligated to pay certain bonuses (not to
exceed 10% of the net revenues PharmaBio and its affiliates received for such
services) which, at the option of PharmaBio, may be paid in shares of our common
stock. As of April 1, 2002, performance milestones have been requested and
agreed upon for one work order out of the work orders completed or outstanding,
and no such agreed upon milestones remain outstanding.
Innovex
In January 1997, we entered into a consulting agreement with Innovex, Inc.,
a subsidiary of Quintiles Transnational Corp., which was subsequently superseded
by a consulting agreement executed with Innovex in
16
December 1998. Pursuant to the terms of the agreement, Innovex provides us with
consulting services with respect to pharmaceutical marketing and sales. Since
December 1997, we have also entered into various clinical services agreements
with Innovex pursuant to which Innovex has provided project management, clinical
monitoring, site management, medical monitoring, regulatory affairs, data
management and quality assurance services with respect to clinical trials of
Angiomax. Through December 31, 2001, we had paid Innovex $1.8 million under
these agreements. From January 1, 2001 to April 1, 2002, expenses incurred under
these agreements were approximately $1.8 million, of which approximately $4,000
was recorded in accounts payable and accrued expenses at April 1, 2002. None of
the clinical services agreements is currently outstanding.
In December 2000, we signed a master services agreement and a work order
with Innovex under which Innovex agreed to provide contract sales, marketing and
commercialization services relating to Angiomax. Under the master services
agreement and the Angiomax work order, Innovex was to provide a sales force of
up to 52 representatives, a sales territory management system and operational
support for the launch of Angiomax. We provided the marketing plan and marketing
materials for the sales force and other sales and marketing support and
direction for the sales force. For Innovex services, we agreed to pay a daily
fee for each day worked by the members of the Innovex sales force. We were also
responsible for reimbursing Innovex for expenses incurred in providing its
services and for the incentive compensation paid to the sales force. We had the
right to terminate the work order and the master services agreement at any time
upon 90 days prior written notice and could hire the Innovex sales
representatives. In June 2001, we notified Innovex of our decision to terminate
the agreement and in October, we hired most of the Innovex sales
representatives. Through December 31, 2001, we had paid Innovex $6.9 million
under the master services agreement and work order. From January 1, 2001 to
April 1, 2002, total expenses incurred for services provided by Innovex under
the master services agreement and work order were approximately $5.6 million,
none of which was recorded in accounts payable and accrued expenses at April 1,
2002.
Stack Pharmaceuticals
In April 2000, we entered into an agreement with Stack Pharmaceuticals,
Inc., an entity which was controlled by David Stack, who at the time was one of
our senior vice presidents. Pursuant to the terms of the agreement, which was
amended in August 2000, Stack Pharmaceuticals performed infrastructure services
for us, which included providing office facilities, equipment and supplies, and
such consulting, advisory and related services for us as we agreed from time to
time. For the infrastructure services, we paid Stack Pharmaceuticals a services
fee of $20,100 per month. In November 2001, we terminated our agreement with
Stack Pharmaceuticals when Mr. Stack became our President and Chief Executive
Officer and a director. As part of the termination agreement, we assumed Stack
Pharmaceuticals' facility lease in Parsippany, New Jersey and acquired all of
its furniture and equipment for approximately $70,000. Through December 31,
2001, we had paid Stack Pharmaceuticals a total of $711,000 under these
agreements. From January 1, 2001 to April 1, 2002, total expenses incurred under
these agreements were approximately $711,000, none of which was recorded in
accounts payable and accrued expenses at April 1, 2002. We have no outstanding
obligations to Stack Pharmaceuticals.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and holders of more than ten percent of our common
stock to file with the SEC initial reports of ownership and reports of changes
in ownership of common stock and other equity securities. Based solely on our
review of copies of reports filed by the reporting persons furnished to us, or
written representations from reporting persons, we believe that during 2001, the
reporting persons complied with all Section 16(a) filing requirements.
17
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total stockholder return on our
common stock for the period from August 8, 2000, the date of our initial public
offering, through December 31, 2001 with the cumulative total return on the
Nasdaq Stock Market (U.S.) Index and the Nasdaq Biotechnology Stocks Total
Return Index. The comparison assumes $100.00 was invested on August 8, 2000 in
our common stock and in each of the above indices and assumes reinvestment of
dividends.
[PERFORMANCE GRAPH]
8/8/00 12/31/00 12/31/01
------ -------- --------
The Medicines Company $100 $94.52 $53.44
Nasdaq Biotechnology Stocks Total Return Index $100 $88.43 $74.10
Nasdaq Stock Market (U.S.) Index $100 $63.74 $50.58
In accordance with the rules of the SEC, cumulative total return data for
the common stock is based on the closing sale price of our common stock on the
Nasdaq National Market of $21.69 per share on August 8, 2000, rather than the
initial public offering price of $16.00 per share.
(Cumulative total return data provided by Research Data Group, Inc.)
PROPOSAL 2 -- APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED
SHARES UNDER OUR 1998 STOCK INCENTIVE PLAN
Our board of directors believes that our future success depends, in large
part, upon our ability to maintain a competitive position in attracting,
retaining and motivating key personnel. We adopted the 1998 stock incentive plan
in April 1998 and currently have reserved 4,368,259 shares of common stock for
issuance under the plan. As of April 1, 2002, options to purchase 3,388,525
shares of common stock were outstanding and 480,994 shares of common stock had
been issued upon the exercise of stock options granted under the 1998 stock
incentive plan. As a result, as of April 1, 2002, only 498,740 shares were
available for future option grants under the 1998 stock incentive plan. We
believe that such number of shares, in light of the remaining shares available
for option grants under our 2001 non-officer, non-director employee stock
incentive plan, will be insufficient to satisfy our incentive compensation needs
in the future.
We currently have reserved 1,250,000 shares of common stock for issuance
under our 2001 non-officer, non-director employee stock incentive plan. As of
April 1, 2002, options to purchase 1,073,539 shares of common stock were
outstanding and 24,278 shares had been issued upon the exercise of stock options
granted under the 2001 non-officer, non-director employee stock incentive plan.
As of April 1, 2002, we had 152,183 shares available for future option grants
under the 2001 non-officer, non-director employee stock incentive plan.
18
To ensure that sufficient shares are available for grant under the 1998
stock incentive plan in the future without the expense and delay of conducting a
special stockholder meeting, our board of directors adopted on February 12,
2002, subject to stockholder approval, an increase in the number of shares of
common stock available for issuance under the 1998 stock incentive plan from
4,368,259 to 6,118,259 shares. THE BOARD OF DIRECTORS BELIEVES THAT THIS
INCREASE IS IN THE BEST INTERESTS OF THE MEDICINES COMPANY AND ITS STOCKHOLDERS
AND RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
DESCRIPTION OF THE 1998 STOCK INCENTIVE PLAN
The following is a brief summary of the 1998 stock incentive plan, a copy
of which is attached as Appendix A to this proxy statement. The following
summary is qualified in its entirety by reference to the 1998 stock incentive
plan.
Types of Awards
The 1998 stock incentive plan provides for the grant of incentive stock
options intended to qualify under section 422 of the Internal Revenue Code,
non-statutory stock options, restricted stock awards and other stock-based
awards, including the grant of shares based upon certain conditions, the grant
of securities convertible into common stock and the grant of stock appreciation
rights.
Incentive Stock Options and Non-Statutory Stock Options. Optionees receive
the right to purchase a specified number of shares of common stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. Options may be granted at an
exercise price which may be less than, equal to or greater than the fair market
value of the common stock on the date of grant. Incentive stock options may not
be granted at an exercise price less than 100% of the fair market value of the
common stock on the date of grant, or less than 110% of the fair market value in
the case of incentive stock options granted to optionees holding more than 10%
of our voting power. Options intended to be incentive stock options, but which
fail to meet the requirements for incentive stock option treatment, will be
treated as non-statutory stock options. The 1998 stock incentive plan permits
the following forms of payment of the exercise price of options: (1) payment by
cash or check, (2) except as the board of directors may otherwise provide in an
option agreement, payment in connection with a "cashless exercise" through a
broker, (3) by surrender of shares of common stock that have been owned by the
optionee for at least six months, (4) to the extent permitted by the board of
directors, by delivery of a promissory note or any other lawful consideration or
(5) by any combination of these forms of payment.
Restricted Stock Awards. Restricted stock awards entitle recipients to
acquire shares of common stock, subject to our right to repurchase all or part
of such shares from the recipient in the event that the conditions specified in
the applicable award are not satisfied prior to the end of the applicable
restriction period.
Other Stock-Based Awards. Under the 1998 stock incentive plan, our board
of directors has the right to grant other awards based upon the common stock
having such terms and conditions as the board of directors may determine,
including the grant of shares based upon certain conditions, the grant of
securities convertible into common stock and the grant of stock appreciation
rights.
Eligibility to Receive Awards
Our employees, officers, directors, consultants and advisors, and any
individuals who have accepted an offer for employment, are eligible to be
granted awards under the 1998 stock incentive plan. Incentive stock options may
only be granted to our employees. The maximum number of shares with respect to
which awards may be granted to any participant under the 1998 stock incentive
plan may not exceed 365,000 shares per calendar year.
Plan Benefits
As of April 1, 2002, approximately 151 persons were eligible to receive
awards under the 1998 stock incentive plan, including six executive officers and
seven non-employee directors. The granting of awards
19
under the 1998 stock incentive plan is discretionary, and we cannot now
determine the number or type of awards to be granted in the future to any
particular person or group. The following table summarizes options awarded under
the 1998 stock incentive plan through April 1, 2002 to designated individuals
and groups since the adoption of the 1998 stock incentive plan.
NUMBER OF OPTIONS
NAME AND POSITION GRANTED
----------------- -----------------
Clive A. Meanwell
Executive Chairman........................................ 480,661
David M. Stack
President and Chief Executive Officer..................... 442,500
Peyton J. Marshall
Former Senior Vice President and Chief Financial
Officer................................................... 305,426
Thomas P. Quinn
Former Senior Vice President.............................. 310,000
John W. Villiger
Vice President............................................ 231,149
Glenn P. Sblendorio
Former Senior Vice President.............................. 217,680
M. Fazle Husain............................................. 0
Nicholas J. Lowcock......................................... 0
All current executive officers, as a group.................. 1,640,653
All current directors who are not executive officers, as a
group..................................................... 43,800
Associates of any director, executive officer or director
nominee................................................... 0
All employees who are not executive officers, as a group.... 1,652,643
On April 19, 2002, the last reported sale price of our common stock on the
Nasdaq National Market was $10.71 per share.
Administration
Our board of directors administers the 1998 stock incentive plan. Our board
of directors has the authority to adopt, amend and repeal the administrative
rules, guidelines and practices relating to the 1998 stock incentive plan and to
interpret the provisions of the 1998 stock incentive plan. Pursuant to the terms
of the 1998 stock incentive plan, our board of directors may delegate authority
under the 1998 stock incentive plan to one or more committees or subcommittees
of the board of directors and to our executive officers. Our board of directors
has authorized the compensation committee to administer certain aspects of the
1998 stock incentive plan, including the granting of options to executive
officers, and has authorized Dr. Meanwell to grant options, subject to
limitations set by the board of directors, to newly hired employees.
Subject to any applicable limitations contained in the 1998 stock incentive
plan, the board of directors, the compensation committee, or any other committee
to whom the board of directors delegates authority, as the case may be, selects
the recipients of awards and determines:
- the number of shares of common stock covered by options and the dates
upon which such options become exercisable;
- the exercise price of options;
- the duration of options; and
- the number of shares of common stock subject to any restricted stock or
other stock-based awards and the terms and conditions of such awards,
including conditions for repurchase, issue price and repurchase price.
20
We are required to make those adjustments that our board of directors deems
to be necessary and appropriate to the 1998 stock incentive plan and any
outstanding awards under that plan to reflect stock splits, stock dividends,
recapitalizations, spin-offs and other similar changes in capitalization. The
1998 stock incentive plan also contains provisions addressing the consequences
of an acquisition event and a change-in-control. Upon the occurrence of an
acquisition event, our board of directors will provide that all outstanding
options will be assumed, or equivalent options will be substituted, by the
acquiring or succeeding corporation. If the acquiring or succeeding corporation
does not agree to assume, or substitute for, options outstanding under the 1998
stock incentive plan, then our board of directors will provide (1) that all
unexercised options will become exercisable in full at a specified time prior to
the acquisition event and will terminate immediately prior to the consummation
of such acquisition event or (2) for cash payment in the amount of the spread
between the per share acquisition price and the exercise price of such options.
An acquisition event is defined as (1) any merger or consolidation of us with or
into another entity a result of which our common stock is converted into or
exchanged for the right to receive cash, securities or other property or (2) any
exchange of shares of our common stock for cash, securities or other property
pursuant to a statutory share exchange transaction.
The 1998 stock incentive plan also provides that upon the occurrence of a
change in control event that is not an acquisition event, unless the
participant's option agreement otherwise provides, a participant's options will
become immediately exercisable in full if within one year following such event,
the participant's employment is terminated without cause or is terminated by the
participant due to a change of more than 30 miles in the participant's principal
business location, a material reduction in participant's employment
responsibilities without cause, a material reduction in the participant's salary
or certain significant diminutions in the participant's responsibilities without
his or her agreement.
Change in control is defined as (1) the acquisition of 30% or more of the
combined voting power of our outstanding voting securities by any person other
than us or Warburg, Pincus Ventures, L.P., (2) a merger involving us or a sale
of all or substantially all of our assets, if the merger or asset sale results
in our stockholders prior to the transaction holding less than a majority of the
combined voting power of the continuing or acquiring entity following such
transaction or (3) a majority of the persons constituting our board of directors
is not approved by vote of two-thirds of the directors in office at the time of
such change in the board's composition.
If any award expires or is terminated, surrendered, canceled or forfeited,
the unused shares of common stock covered by such award will again be available
for grant under the 1998 stock incentive plan, subject, however, in the case of
incentive stock options, to any limitations under the Internal Revenue Code.
Amendment or Termination
No award may be made under the 1998 stock incentive plan after April 2008,
but awards previously granted may extend beyond that date. Our board of
directors may at any time amend, suspend or terminate the 1998 stock incentive
plan, except that no award designated as subject to Section 162(m) of the
Internal Revenue Code by our board of directors after the date of such amendment
will become exercisable, realizable or vested, to the extent such amendment was
required to grant such award, unless and until such amendment shall have been
approved by the our stockholders.
FEDERAL INCOME TAX CONSEQUENCES
The following generally summarizes the United States federal income tax
consequences that generally will arise with respect to awards granted under the
1998 stock incentive plan. This summary is based on the tax laws in effect as of
the date of this proxy statement. Changes to these laws could alter the tax
consequences described below.
Incentive Stock Options. A participant will not have income upon the grant
of an incentive stock option. Also, except as described below, a participant
will not have income upon exercise of an incentive stock option if the
participant has been employed by us or any corporate parent or majority-owned
corporate subsidiary of us at all times beginning with the option grant date and
ending three months before the date the participant
21
exercises the option. If the participant has not been so employed during that
time, then the participant will be taxed as described below under "Nonstatutory
Stock Options." The exercise of an incentive stock option may subject the
participant to the alternative minimum tax.
A participant will have income upon the sale of the stock acquired under an
incentive stock option at a profit (if sales proceeds exceed the exercise
price). The type of income will depend on when the participant sells the stock.
If a participant sells the stock more than two years after the option was
granted and more than one year after the option was exercised, then all of the
profit will be long-term capital gain. If a participant sells the stock prior to
satisfying these waiting periods, then the participant will have engaged in a
disqualifying disposition and a portion of the profit will be ordinary income
and a portion may be capital gain. This capital gain will be long-term if the
participant has held the stock for more than one year and otherwise will be
short-term. If a participant sells the stock at a loss (sales proceeds are less
than the exercise price), then the loss will be a capital loss. This capital
loss will be long-term if the participant held the stock for more than one year
and otherwise will be short-term.
Nonstatutory Stock Options. A participant will not have income upon the
grant of a nonstatutory stock option. A participant will have compensation
income upon the exercise of a nonstatutory stock option equal to the value of
the stock on the day the participant exercised the option less the exercise
price. Upon sale of the stock, the participant will have capital gain or loss
equal to the difference between the sales proceeds and the value of the stock on
the day the option was exercised. 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.
Restricted Stock. A participant will not have income upon the grant of
restricted stock unless an election under Section 83(b) of the Internal Revenue
Code is made within 30 days of the date of grant. If a timely 83(b) election is
made, then a participant will have compensation income equal to the value of the
stock less the purchase price. When the stock is sold, the participant will have
capital gain or loss equal to the difference between the sales proceeds and the
value of the stock on the date of grant. If the participant does not make an
83(b) election, then when the stock vests the participant will have compensation
income equal to the value of the stock on the vesting date less the purchase
price. When the stock is sold, the participant will have capital gain or loss
equal to the sales proceeds less the value of the stock on the vesting date. Any
capital gain or loss will be long-term if the participant held the stock for
more than one year and otherwise will be short-term.
Tax Consequences to Us. There will be no tax consequences to us except
that we will be entitled to a deduction when a participant has compensation
income. Any such deduction will be subject to the limitations of Section 162(m)
of the Internal Revenue Code.
PROPOSAL 3 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The board of directors, on the recommendation of its audit committee, has
appointed the firm of Ernst & Young LLP as our independent auditors for the year
ending December 31, 2002. Ernst & Young LLP has been our independent auditors
since our inception in 1996. Although stockholder approval of the board of
director's appointment of Ernst & Young LLP is not required by law, the board of
directors believes that it is advisable to give stockholders an opportunity to
ratify this appointment. If this proposal is not approved at the meeting, the
board of directors will reconsider this appointment.
Representatives of Ernst & Young LLP are expected 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
from stockholders. THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.
INDEPENDENT AUDITORS FEES AND OTHER MATTERS
Audit Fees
Ernst & Young LLP billed us an aggregate of $183,000 in fees and expenses
for professional services rendered in connection with the audit of our financial
statements for the year ended December 31, 2001 and
22
the reviews of the financial statements included in each of our quarterly
reports on Form 10-Q during the year ended December 31, 2001.
Financial Information Systems Design and Implementation Fees
Ernst & Young LLP did not perform any professional services rendered to us
in connection with financial information systems design or implementation, the
operation of our information system or the management of our local area network
during the year ended December 31, 2001.
All Other Fees
Ernst & Young LLP billed us an aggregate of $247,300 in fees and expenses
for audit-related and other services, primarily for tax advisory and compliance
services, fees for services in connection with SEC registration statements and
fees for services for statutory audits in foreign jurisdictions and accounting
consultation, rendered to us for the year ended December 31, 2001.
STOCKHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2003 annual
meeting of stockholders must be submitted to the secretary of The Medicines
Company at its offices, 5 Sylvan Way, Suite 200, Parsippany, New Jersey 08540,
no later than December 30, 2002 in order to be considered for inclusion in the
proxy statement relating to that meeting.
If a stockholder wishes to present a proposal before the 2003 annual
meeting, but does not wish to have the proposal considered for inclusion in the
proxy statement and proxy card, such stockholder must also give written notice
to the secretary at the address noted above. The secretary must receive such
notice not less than 60 days nor more than 90 days prior to May 30, 2003;
provided that, in the event that the date of the 2003 annual meeting is prior to
May 10, 2003 or after July 30, 2003, a stockholder's notice must be received no
earlier than the 90th day prior to the 2003 annual meeting and no later than the
close of business on the later of the 60th day prior to the 2003 annual meeting
and the 10th day following the date on which notice of the date of the meeting
was mailed or public disclosure was made, whichever occurs first. If a
stockholder fails to provide timely notice of a proposal to be presented at the
2003 annual meeting, the proxies designated by the board of directors will have
discretionary authority to vote on any such proposal.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
Some banks, brokers and other nominee 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 or annual report may have been
sent to multiple stockholders in your household. We will promptly deliver a
separate copy of either document to you if you call or write us at the following
address or phone number: The Medicines Company, One Cambridge Center, Cambridge,
Massachusetts 02142, Attention: Investor Relations, (617) 225-9099. If you would
like to receive separate copies of the annual report and proxy statement 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.
OTHER MATTERS
Our board of directors does not know of any other matters which may come
before the annual meeting. If any other matters are properly presented to the
annual meeting, however the persons named in the accompanying proxy intend to
vote, or otherwise act, in accordance with their judgment on such matters.
We will bear the costs of solicitating proxies. In addition to
solicitations by mail, our directors, officers and regular employees, without
additional remuneration, may solicit proxies by telephone, telecopy, personal
interviews, and other means. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting
23
material to the owners of stock held in their names, and we will reimburse them
for their out-of-pocket expenses in connection with this distribution.
THE BOARD HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
AFTER DELIVERY OF WRITTEN REVOCATION OF THEIR PROXY TO THE CORPORATE SECRETARY.
By Order of the Board of Directors,
Steven H. Koehler, Secretary
April 29, 2002
24
APPENDIX A
1998 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this 1998 Stock Incentive Plan (the "Plan") of The Medicines
Company, a Delaware corporation (the "Company"), is to advance the interests of
the Company's stockholders by enhancing the Company's ability to attract, retain
and motivate persons who make (or are expected to make) important contributions
to the Company by providing such persons with equity ownership opportunities and
performance-based incentives and thereby better aligning the interests of such
persons with those of the Company's stockholders. Except where the context
otherwise requires, the term "Company" shall include any present or future
subsidiary corporations of The Medicines Company as defined in Section 424(f) of
the Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder (the "Code").
2. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors and any individuals who have accepted an offer for employment, are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant".
3. ADMINISTRATION, DELEGATION
(a) Administration by Board of Directors. The Plan will be administered by
the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
(b) Delegation to Executive Officers. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.
(c) Appointment of Committees. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). If and when the common
stock, $0.001 par value per share, of the Company (the "Common Stock") is
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Board shall appoint one such Committee of not less than two members,
each member of which shall be an "outside director" within the meaning of
Section 162(m) of the Code and a "non-employee director" as defined in Rule
16b-3 promulgated under the Exchange Act. All references in the Plan to the
"Board" shall mean the Board or a Committee of the Board or the executive
officer referred to in Section 3(b) of this Plan, to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.
4. STOCK AVAILABLE FOR AWARDS
(a) Number of Shares. Subject to adjustment under Section 8, Awards may be
made under the Plan for up to 4,368,259 shares of Common Stock. If any Award
expires or is terminated, surrendered or canceled without having been fully
exercised or is forfeited in whole or in part or results in any Common Stock not
A-1
being issued, the unused Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan, subject, however, in the case
of Incentive Stock Options (as hereinafter defined), to any limitation required
under the Code. Shares issued under the Plan may consist, in whole or in part,
of authorized but unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 4(c), for
Awards granted after the Common Stock is registered under the Exchange Act, the
maximum number of shares of Common Stock with respect to which an Award may be
granted to any Participant under the Plan shall be 365,000 per calendar year.
The per-Participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
(c) Adjustment to Common Stock. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding Option, (iii) the repurchase price per
security subject to each outstanding Restricted Stock Award, and (iv) the terms
of each other outstanding stock-based Award shall be appropriately adjusted by
the Company (or substituted Awards may be made, if applicable) to the extent the
Board shall determine, in good faith, that such an adjustment (or substitution)
is necessary and appropriate. If this Section 4(c) applies and Section 8(c) also
applies to any event, Section 8(c) shall be applicable to such event, and this
Section 4(c) shall not be applicable.
5. STOCK OPTIONS
(a) General. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.
(d) Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
(e) Exercise of Option. Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise provide
in an option agreement, delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price, or delivery by the Participant
to the Company of a copy of irrevocable and unconditional instructions to a
creditworthy broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price;
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(3) at such times as the Common Stock is registered under the Exchange
Act, delivery of shares of Common Stock owned by the Participant valued at
their fair market value as determined by (or in a manner approved by) the
Board in good faith ("Fair Market Value"), which Common Stock was owned by
the Participant at least six months prior to such delivery;
(4) to the extent permitted by the Board, in its sole discretion, (A)
by delivery of a promissory note of the Participant to the Company on terms
determined by the Board or (B) by payment of such other lawful
consideration as the Board may determine; or
(5) any combination of the above permitted forms of payment.
6. RESTRICTED STOCK
(a) Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
8. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS
(a) Changes in Capitalization. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding Award shall
be appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 8(a)
applies and Section 8(c) also applies to any event, Section 8(c) shall be
applicable to such event, and this Section 8(a) shall not be applicable.
(b) Liquidation or Dissolution. In the event of a proposed liquidation or
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent
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exercised before such effective date. The Board may specify the effect of a
liquidation or dissolution on any Restricted Stock Award or other Award granted
under the Plan at the time of the grant of such Award.
(c) Acquisition and Change in Control Events
(1) Definitions
(a) An "Acquisition Event" shall mean:
(i) any merger or consolidation of the Company with or into
another entity as a result of which the Common Stock is
converted into or exchanged for the right to receive cash,
securities or other property; or
(ii) any exchange of shares of the Company for cash, securities
or other property pursuant to a statutory share exchange
transaction.
(b) A "Change in Control Event" shall mean:
(i) any sale or transfer of all or substantially all of the
assets of the Company to another corporation or entity, any
merger, consolidation or reorganization of the Company into
or with another corporation or entity, with the result that,
upon conclusion of the transaction, the voting securities of
the Company immediately prior thereto do not represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of the
continuing or surviving entity of such consolidation, merger
or reorganization; or
(ii) following the date on which the Company becomes subject to
the periodic reporting requirements under Section 13 of the
Exchange Act, a disclosure that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act), other than (A) any shareholder who,
prior to the Company becoming subject to such reporting
requirements of Section 13 of the Exchange Act, previously
held at least 30% of the combined voting power of
outstanding voting securities of the Company, (B) the
Company or (C) any corporation owned directly or indirectly
by the stockholders of the Company in substantially the
same proportion as their ownership of stock of the Company,
becomes the beneficial owner as the term "beneficial owner"
is defined under Rule 13d-3 or any successor rule or
regulation thereto under the Exchange Act) of securities
representing 30% or more of the combined voting power of
the then outstanding voting securities of the Company; or
(iii) such time as individuals who as of the date of the initial
adoption of this Plan constitute the Board of Directors of
the Company, and any new director (other than a director
designated by a person who has entered into an agreement
with the Company to effect any transaction described in
clause (i) or (ii) of this section) whose election by the
Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
of the directors then still in office who were either
directors at the beginning of the period or whose election
or whose nomination for election was previously so
approved, cease for any reason to constitute a majority of
the Board of Directors.
(c) "Cause" shall mean (i) conviction of any felony or any crime
involving moral turpitude or dishonesty; (ii) participation in a
fraud or act of dishonesty against the Company (or, if
applicable, a successor corporation to the Company); (iii)
willful and material breach of the Company's policies (or, if
applicable, a successor corporation to the Company); (iv)
intentional and material damage to the Company's property (or, if
applicable, a successor corporation to the company); or (v)
material breach of the Participant's confidentiality obligations
or duties under the Participant's non-disclosure, non-competi-
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tion or other similar agreement with the Company (or, if
applicable, a successor corporation to the Company).
(d) "Termination Event" shall mean the termination of the
Participant's employment (i) by the Company or the acquiring or
succeeding corporation without Cause; (ii) as a result of his
death or disability (within the meaning of Section 22(4)(3) of
the Code); or (iii) by the Participant upon written notice given
promptly after the Company's or the acquiring or succeeding
corporation's taking any of the following actions, which actions
shall not have been cured within a 30-day period following such
notice: (A) the principal place of the performance of the
Participant's responsibilities (the "Principal Location") is
changed to a location outside of a 30 mile radius from the
Principal Location immediately prior to the Change in Control
Event; (B) there is a material reduction in the Participant's
responsibilities without Cause; (C) there is a material reduction
in the Participant's salary; or (D) there is a significant
diminution in the scope of the Participant's responsibilities
without the Participant's agreement (excluding increases in
responsibility and sideways moves to jobs with similar
descriptions).
(2) Effect on Options
(a) Acquisition Event. Upon the occurrence of an Acquisition Event
(regardless of whether such event also constitutes a Change in
Control Event), or the execution by the Company of any agreement
with respect to an Acquisition Event (regardless of whether such
event will result in a Change in Control Event), the Board shall
provide that all outstanding Options shall be assumed, or
equivalent options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof); provided that
(i) any options substituted for Incentive Stock Options shall
satisfy, in the determination of the Board, the requirements of
Section 424(a) of the Code and (ii) if such Acquisition Event
also constitutes a Change in Control Event, except to the extent
specifically provided to the contrary in the instrument
evidencing any Option or any other agreement between a
Participant and the Company, such assumed or substituted options
shall become immediately exercisable in full if, on or prior to
the first anniversary of the date of the consummation of the
Change in Control Event, a Termination Event occurs.
Notwithstanding the foregoing, if the acquiring or
succeeding corporation (or an affiliate thereof) does not agree
to assume, or substitute for, such Options, then the Board shall
(x) upon written notice to the Participants, provide that all
then unexercised Options will become exercisable in full as of a
specified time (the "Acceleration Time") prior to the Acquisition
Event and will terminate immediately prior to the consummation of
such Acquisition Event, except to the extent exercised by the
Participants before the consummation of such Acquisition Event,
and/or (y) in the event of an Acquisition Event under the terms
of which holders of Common Stock will receive upon consummation
thereof a cash payment for each share of Common Stock surrendered
pursuant to such Acquisition Event (the "Acquisition Price"),
provide that all outstanding Options shall terminate upon
consummation of such Acquisition Event and each Participant shall
receive, in exchange therefor, a cash payment equal to the amount
(if any) by which (A) the Acquisition Price multiplied by the
number of shares of Common Stock subject to such outstanding
Options (whether or not then exercisable), exceeds (B) the
aggregate exercise price of such Options.
(b) Change in Control Event that is not an Acquisition
Event. Following the occurrence of a Change in Control Event
that does not also constitute an Acquisition Event, except to the
extent specifically provided to the contrary in the instrument
evidencing any Option or any other agreement between a
Participant and the Company, each such Option shall become
immediately exercisable in full if, on or prior to the first
anniversary of the date of the consummation of the Change in
Control Event, a Termination Event occurs.
A-5
(3) Effect on Restricted Stock Awards
(a) Acquisition Event that is not a Change in Control Event. Upon
the occurrence of an Acquisition Event that is not a Change in
Control Event, the repurchase and other rights of the Company
under each outstanding Restricted Stock Award shall inure to the
benefit of the Company's successor and shall apply to the cash,
securities or other property which the Common Stock was converted
into or exchanged for pursuant to such Acquisition Event in the
same manner and to the same extent as they applied to the Common
Stock subject to such Restricted Stock Award.
(b) Change in Control Event. Upon the occurrence of a Change in
Control Event (regardless of whether such event also constitutes
an Acquisition Event), except to the extent specifically provided
to the contrary in the instrument evidencing any Restricted Stock
Award or any other agreement between a Participant and the
Company, each such Restricted Stock Award shall immediately
become free from all conditions or restrictions if, on or prior
to the first anniversary of the date of the consummation of the
Change in Control Event, a Termination Event occurs.
(4) Effect on Other Awards
(a) Acquisition Event that is not a Change in Control Event. The
Board shall specify the effect of an Acquisition Event that is
not a Change in Control Event on any other Award granted under
the Plan at the time of the grant of such Award.
(b) Change in Control Event. Upon the occurrence of a Change in
Control Event (regardless of whether such event also constitutes
an Acquisition Event), except to the extent specifically provided
to the contrary in the instrument evidencing any Award or any
other agreement between a Participant and the Company, each such
Award shall immediately become fully exercisable, realizable,
vested or free from conditions or restrictions if, on or prior to
the first anniversary of the date of the consummation of the
Change in Control Event, a Termination Event occurs
9. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) Transferability of Awards. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) Documentation. Each Award under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine. Each Award may
contain terms and conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each Award
may be made alone or in addition or in relation to any other Award. The terms of
each Award need not be identical, and the Board need not treat Participants
uniformly.
(d) Termination of Status. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, Participants may satisfy such tax obligations in whole or
in part by delivery of shares of Common Stock, including shares retained from
the Award creating the tax obligation, valued at their Fair Market
A-6
Value. The Company may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to a Participant.
(f) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) Acceleration. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of restrictions in full or in part or that any other Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.
10. MISCELLANEOUS
(a) No Right To Employment or Other Status. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
(c) Effective Date and Term of Plan. The Plan shall become effective on
the date on which it is adopted by the Board. No Awards shall be granted under
the Plan after the completion of ten years from the earlier of (i) the date on
which the Plan was adopted by the Board or (ii) the date the Plan was approved
by the Company's stockholders, but Awards previously granted may extend beyond
that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time.
(e) Governing Law. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
A-7
PROXY
THE MEDICINES COMPANY
5 Sylvan Way, Suite 200
Parsippany, New Jersey 07054
Annual Meeting of Stockholders To Be Held May 30, 2002
This Proxy Is Solicited on Behalf of The Board Of Directors
The undersigned hereby appoint(s) Clive A. Meanwell, David M. Stack and
Peyton J. Marshall, and each of them, attorneys or attorney of the undersigned,
with power of substitution in them and each of them, for and in the name(s) of
the undersigned to attend the Annual Meeting of Stockholders (the "Meeting") of
The Medicines Company (the "Company") to be held at the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, at 10:00 a.m. (local time),
on Thursday, May 30, 2002, and any adjourned sessions thereof, and there to vote
and act upon the following matters in respect of shares of common stock of the
Company that the undersigned would be entitled to vote or act upon, with all
powers the undersigned would possess if personally present. Each of the
following matters is proposed by the Company.
In their discretion, the proxies are authorized to vote on such other
matters as may properly come before the meeting or any adjournment thereof.
SEE REVERSE CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
Please mark your
votes as indicated in [X]
this example
2. Approve an increase in the number FOR AGAINST ABSTAIN
of shares of common stock authorized
1. Election of Class 2 Directors. for issuance under the 1998 Stock
Incentive Plan from 4,368,259 to [ ] [ ] [ ]
Nominees: M. Fazle Husain, Nicholas J. 6,118,259 shares.
Lowcock and Clive A. Meanwell
3. Ratify the appointment of Ernst &
Young LLP as the Company's [ ] [ ] [ ]
Independent accountants.
FOR (all nominees WITHHELD MARK HERE IF YOU PLAN
except as marked
below) TO ATTEND THE MEETING [ ]
[ ] [ ]
(Instructions: To withhold MARK HERE FOR ADDRESS THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS
authority to vote for any CHANGE AND NOTE DIRECTED BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH
individual nominee, write RESPECT TO ANY OF THE PROPOSALS SPECIFIED ABOVE, THIS PROXY
that nominee's name in the BELOW [ ] WILL BE VOTED "FOR" SUCH PROPOSAL.
space provided below.)
Attendance of the undersigned at the meeting or at any adjourned
session thereof will not be deemed to revoke this proxy unless the
undersigned shall affirmatively indicate thereat the intention of
the undersigned to vote said shares in person. If the undersigned
hold(s) any of the shares of the Company in a fiduciary, custodial
or joint capacity or capacities, this proxy is signed by the
undersigned in every such capacity as well as individually.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE. The signature(s) on this proxy should
correspond exactly with the stockholder's name as printed to the
left. In the case of joint tenants, co-executors or co-trustees,
both should sign.
Signature(s)_______________________________________________Date________________
Note: When signing as attorney, executor, administrator, trustee, guardian or
other fiduciary, please give your full title as such.