SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
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[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SEQUENOM, INC
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(Name of Registrant as Specified In Its Charter)
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SEQUENOM, INC.
3595 John Hopkins Court
San Diego, California 92121
(858) 202-9000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 1, 2001
To The Stockholders of Sequenom, Inc.:
Notice is Hereby Given that the Annual Meeting of Stockholders of Sequenom,
Inc., a Delaware corporation (the "Company"), will be held on Friday, June 1,
2001 at 10:00 a.m. local time at the offices of the Company located at 3595
John Hopkins Court, San Diego, California 92121 for the following purposes:
1. To elect two directors to hold office until the 2004 Annual Meeting of
Stockholders.
2. To ratify the selection of Ernst & Young LLP as independent auditors
of the Company for its fiscal year ending December 31, 2001.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 23, 2001, as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ Stephen L. Zaniboni
----------------------------
Senior Vice President, Chief
Financial Officer and Secretary
San Diego, California
May 2, 2001
All stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please complete, date, sign
and return the enclosed proxy as promptly as possible in order to ensure
your representation at the meeting. A return envelope (which is postage
prepaid if mailed in the United States) is enclosed for that purpose. Even
if you have given your proxy, you may still vote in person if you attend the
meeting. Please note, however, that if your shares are held of record by a
broker, bank or other nominee and you wish to vote at the meeting, you must
obtain from the record holder a proxy issued in your name.
SEQUENOM, INC.
3595 John Hopkins Court
San Diego, California 92121
(858) 202-9000
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
June 1, 2001
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Sequenom, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on June 1, 2001 at 10:00 a.m. local time
(the "Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at 3595 John Hopkins Court, San Diego,
California 92121. The Company intends to mail this proxy statement and
accompanying proxy card on or about May 2, 2001, to all stockholders entitled
to vote at the Annual Meeting.
Solicitation
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or
other regular employees for such services.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of business on April 23,
2001 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 23, 2001 the Company had outstanding and entitled
to vote 24,346,644 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual
Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter
has been approved.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 3595
John Hopkins Court, San Diego, California 92121, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
1
Stockholder Proposals
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2002 annual
meeting of stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission ("SEC") is January 2, 2002. Stockholders wishing to submit
proposals or director nominations that are not to be included in such proxy
statement and proxy must also do so by January 2, 2002. Stockholders are
advised to review the Company's Bylaws, which contain additional requirements
with respect to advance notice of stockholder proposals and director
nominations.
2
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Board of Directors shall be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board
may be filled only by persons elected by a majority of the remaining
directors. A director elected by the Board to fill a vacancy (including a
vacancy created by an increase in the number of directors) shall serve for the
remainder of the full term of the class of directors in which the vacancy
occurred and until such director's successor is elected and qualified.
The Board of Directors is presently composed of six members. At the Annual
Meeting, the term of office of the two current Class I Directors shall expire.
The nominees for election to this class are currently directors of the
Company. If elected at the Annual Meeting, each nominee would serve until the
2004 annual meeting and until his successor is elected and has qualified, or
until such director's earlier death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented
by executed proxies will be voted, if authority to do so is not withheld, for
the election of the two nominees named below. In the event that any nominee
should be unavailable for election as a result of an unexpected occurrence,
such shares will be voted for the election of such substitute nominee as
management may propose. The persons nominated for election have agreed to
serve if elected, and management has no reason to believe that the nominees
will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
Nominees for Election for a Three-year Term Expiring at the 2004 Annual
Meeting
Class I Directors
Kris Venkat, Ph.D.
Kris Venkat, Ph. D., 54, joined the Company as a member of its board of
directors in February 2001. Dr. Venkat currently serves as Chairman and CEO of
Sundari Enterprises, Inc. During 2000, Dr. Venkat served as a consultant to
the Company. From 1992 to 2000, he served as Chairman and CEO of Phyton Inc.
He also served as Chairman and Managing Director of Phyton GmbH in Germany
from 1993 to 2000. Prior to joining Phyton Inc., Dr. Venkat served as
President and CEO of Genmap, Inc. and held various positions at H.J. Heinz
Company and Merck & Co. Dr. Venkat has participated as a founder, board
member, and advisor in a number of high technology start-up companies. He
currently serves as Chairman of Transvivo, Inc., Morphchem Inc., Automated
Cell, Inc., Sentinel Biosystems LLC, Juelich Enzyme Products GmbH and Accentua
Pharma AG. Dr. Venkat was an advisor to the government of India on
biotechnology development from 1988 to 1997 and since 1979 has been a visiting
Professor of Biochemical Engineering at Rutgers University and has held
various faculty positions. Dr. Venkat earned his Ph.D. in chemical and
biochemical engineering from Rutgers University.
Antonius Schuh, Ph.D.
Antonius Schuh, Ph.D., 37, was appointed President, Chief Executive Officer
and a director of the Company in May 2000. Dr. Schuh joined the Company's
German subsidiary as Managing Director in December 1996 and was promoted to
the Company's Executive Vice President, Business Development and Marketing, in
1998 when he moved to the Company's headquarters in San Diego, California.
From 1993 until joining the Company, Dr. Schuh was with Helm AG, an
international pharma/chemical trading and distribution corporation. While at
Helm AG, he established and headed the Pharma Business Development Group and
the associated technical and
3
regulatory affairs department. Prior to that, from 1992 to 1993, he was with
Fisons Pharmaceuticals. Dr. Schuh is a co-founder of BIOND, Heidelberg, a
board member of Austrian Orphan Pharmaceuticals AG, Vienna, and an advisor to
Juelich Enzyme Products, Juelich, Federal Republic Germany. Dr. Schuh earned
his Ph.D. in pharmaceutical chemistry from the University of Bonn, in Germany.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
Directors Continuing in Office Until the 2002 Annual Meeting
Class II Directors
Ernst-Gunter Afting, Ph.D., M.D.
Ernst-Gunter Afting, Ph.D., M.D., 58, has served as a director of the
Company since 1996. Since 1995, Dr. Afting has served as President of the
National Research Center for Environment and Health, GSF, a governmental
science research center in Munich. From 1993 to 1995, he served as President
and Chief Executive Officer of Roussel UCLAF, Paris. He also headed the
pharmaceutical division of Hoechst Group and was Chairman of the Divisional
Pharmaceutical Board of Hoechst. He was a member of the advisory committee on
Science and Technology to the German Chancellor Kohl from 1996 to 1997 and
since 1996 has been a member of the German National Advisory Committee on
Health Research to the State Secretaries of Science, Technology and Health.
Dr. Afting has been a member of the medical faculty at the University of
Goettingen since 1985. He earned a Ph.D. and an M.D. in Chemistry from the
University of Freiburg/Breisgau.
John E. Lucas
John E. Lucas, 69, has served as a director of the Company since 1998. Since
1999, Mr. Lucas has served as Chairman and CEO of EpiCept Corporation which
develops topical pain control products. He has also served as an industry
advisor to TVM Techno Venture Management since 1996. From 1996 to 2000, Mr.
Lucas served as a management consultant to six biomedical companies. From 1994
to 1996, he was Founder, President and CEO of American Scientific Resources,
Inc. From 1991 to 1994, he held the positions of President, CEO and Chairman
at Oxigene, Inc. and held similar positions from 1963 to 1991 at Luconex, Mast
ImmunoSystems, Xoma, Millipore Ventures, Chemetrics and Oxford Laboratories.
Mr. Lucas serves as a Director of VitaResc AG and EpiCept Corporation. Mr.
Lucas earned an MBA from Harvard University.
Directors Continuing in Office Until the 2003 Annual Meeting
Class III Directors
Charles R. Cantor, Ph.D.
Charles R. Cantor, Ph.D., 57, joined the Company as Chief Scientific Officer
and Chairman of the scientific advisory board in August 1998. In May 2000, Dr.
Cantor was appointed to the Company's board of directors. From 1992 until
joining the Company, Dr. Cantor served as the chair of, and as a professor in
the department of biomedical engineering and biophysics, and Director of the
Center for Advanced Biotechnology at Boston University. Prior to that time,
Dr. Cantor held positions at Columbia University and the University of
California, Berkeley. He was also Director of the Human Genome Center of the
Department of Energy at Lawrence Berkeley Laboratory. Dr. Cantor published the
first textbook on genomics: The Science and Technology of the Human Genome
Project and remains active in the Human Genome Project through his membership
in a number of the project's advisory committees and review boards. He is a
scientific advisor to ten biotech and life science companies and two venture
capital firms. He is also a member of the National Academy of Sciences. Dr.
Cantor earned his Ph.D. from the University of California, Berkeley.
Helmut Schuhsler, Ph.D.
Helmut Schuhsler, Ph.D., 40, has served as the Chairman of the Board of
Directors since 1996. Since 1998, Dr. Schuhsler has served as a managing
partner at TVM Techno Venture Management, a German and U.S.
4
venture capital firm. He has been with TVM since 1990 and has been responsible
for over 25 healthcare investments of the firm. He is currently a member of
the board of directors of several biotechnology and instrumentation companies,
including Medigene AG and GPC Biotech. Dr. Schuhsler earned a Ph.D. in the
Social and Economic Sciences from the University of Economics in Vienna.
Board Committees and Meetings
During the fiscal year ended December 31, 2000 the Board of Directors held
six meetings. The Board has an Audit Committee, a Compensation Committee and a
Nominating Committee.
The Audit Committee meets with the Company's independent auditors to review
the results of the annual audit and discuss the financial statements; reviews
the Company's quarterly financial results; recommends to the Board the
independent auditors to be retained; oversees the independence of the
independent auditors; evaluates the independent auditors' performance; and
receives and considers the independent auditors' comments as to internal
controls, adequacy of staff and management performance and procedures in
connection with the audit and financial reporting. The Audit Committee is
composed of three directors: Dr. Afting, Mr. Lucas, and Dr. Schuhsler. During
2000, the members of the Audit Committee reviewed all of the Company's
quarterly financial statements before their release to the public. The Audit
Committee did not formally meet during 2000. In February 2001, the Audit
Committee met to review the Company's financial statements that were included
in the Company's form 10-K for the year ended December 31, 2000. The members
of the Company's Audit Committee are independent (as independence is defined
in Rule 4200(a)(15) of the NASD listing standards). The Audit Committee has
adopted a written Audit Committee Charter that is attached hereto as Appendix
A.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants
under the Company's stock option plans and otherwise determines compensation
levels and performs such other functions regarding compensation as the Board
may delegate. The Compensation Committee is composed of two outside directors:
Dr. Schuhsler and Mr. Lucas. It met two times during 2000. The Compensation
Committee has adopted a written Compensation Committee Charter that is
attached hereto as Appendix B.
The Nominating Committee interviews, evaluates, nominates and recommends
individuals for membership on the Company's Board of Directors and committees
thereof and nominates specific individuals to be elected as officers of the
Company by the Board of Directors. No procedure has been established for the
consideration of nominees recommended by stockholders. The Nominating
Committee is composed of three non-employee directors: Dr. Afting, Mr. Lucas,
and Dr. Schuhsler. The Nominating Committee was established in February 2001.
During the fiscal year ended December 31, 2000, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the
committees on which he served, held during the period for which he was a
director or committee member, respectively.
Report of the Audit Committee of the Board of Directors
The Audit Committee of the Company (the "Committee") is composed of three
independent directors and operates under a written charter adopted by the
Board of Directors (Appendix A). The members of the Committee are Dr. Ernst-
Gunter Afting, John E. Lucas, and Dr. Helmut Schuhsler. The Committee
recommends to the Board of Directors, subject to stockholder ratification, the
selection of the Company's independent accountants.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Committee's responsibility is to monitor and oversee these
processes.
5
In this context, the Committee has met and held discussions with management
and the independent accountants. Management represented to the Committee that
the Company's financial statements were prepared in accordance with generally
accepted accounting principles, and the Committee has reviewed and discussed
the financial statements with management and the independent accountants. The
Committee discussed with the independent accountants matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
The Company's independent accountants also provided to the Committee the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent accountants that firm's independence.
Based on the Committee's discussion with management and the independent
accountants and the Committee's review of the representation of management and
the report of the independent accountants to the Committee, the Committee
recommended that the Board of Directors include the audited financial
statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 filed with the Securities and Exchange Commission.
Audit Committee
Dr. Ernst-Gunter Afting
John E. Lucas
Dr. Helmut Schuhsler
6
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 2001 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since 1997. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Audit Committee and the
Board will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee and the Board in their discretion
may direct the appointment of different independent auditors at any time
during the year if they determine that such a change would be in the best
interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in
determining whether this matter has been approved.
Audit Fees. During the fiscal year ended December 31, 2000, the aggregate
fees billed by Ernst & Young LLP for the audit of the Company's financial
statements for such fiscal year and for the reviews of the Company's interim
financial statements was $95,066.
Financial Information Systems Design and Implementation Fees. During the
fiscal year ended December 31, 2000, the Company did not incur any fees
related to information technology consulting provided by Ernst & Young LLP.
All Other Fees. During the fiscal year ended December 31, 2000, the
aggregate fees billed by Ernst & Young LLP for professional services other
than audit and information technology consulting fees was $364,550.
The Audit Committee has determined the rendering of the information
technology consulting fees and all other non-audit services by Ernst & Young
LLP is compatible with maintaining the auditor's independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
7
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 31, 2001 by: (i) each director; (ii)
each of the executive officers named in the Summary Compensation Table; (iii)
all executive officers and directors of the Company as a group; and (iv) all
those known by the Company to be beneficial owners of more than five percent
of its Common Stock.
Beneficial ownership has been determined in accordance with Rule 13d-3 under
the Exchange Act. Under this rule, certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share the
power to vote or the power to dispose of the shares). In addition, shares are
deemed to be beneficially owned by a person if the person has the right to
acquire shares (for example, upon exercise of an option or warrant) within
sixty (60) days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of shares is
deemed to include the amount of shares beneficially owned by such person (and
only such person) by reason of such acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in the following table
does not necessarily reflect the person's actual voting power at any
particular date.
Beneficial Ownership(1)
--------------------------
Number of Percent of
Beneficial Owner Shares Total
- ---------------- ------------- ------------
Directors and Executive Officers**
Helmut Schuhsler, Ph.D.(2)......................... 2,219,664 9.04%
Hubert Koster, Ph.D................................ 1,858,003 7.57%
Ernst-Gunter Afting, Ph.D., M.D.................... 106,748 *
John E. Lucas(3)................................... 51,535 *
Kris Venkat, Ph.D.(4).............................. 22,885 *
Antonius Schuh, Ph.D.(5)........................... 371,625 1.51%
Stephen L. Zaniboni(6)............................. 283,027 1.15%
Charles R. Cantor, Ph.D.(7)........................ 378,924 1.54%
Andreas Braun, Ph.D., M.D.(8)...................... 241,326 *
Delbert F. Foit, Jr.(9)............................ 115,127 *
All directors and executive officers as a group (10
persons).......................................... 5,648,864 23.02%
Five Percent Stockholders
Funds affiliated with TVM Techno Venture
Management(10).................................... 2,134,184 8.70%
Wellington Management Company, LLP(11)............. 1,579,900 6.44%
- --------
* Less than one percent.
** These beneficial owners can be reached at Sequenom, Inc., 3595 John
Hopkins Court, San Diego, California 92121.
(1) This table is based upon information supplied by officers, directors
and principal stockholders and Schedules 13D and 13G, if any, filed
with the SEC. To our knowledge, except as indicated in the footnotes to
this table and pursuant to applicable community property laws, the
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by
them. Applicable percentages are based on 24,346,174 shares outstanding
on March 31, 2001, adjusted as required by rules promulgated by the
SEC.
(2) Reflects 85,480 shares of common stock held of record by Dr. Schuhsler
and 2,134,184 shares held by entities affiliated with TVM Techno
Venture Management GmbH ("TVM Techno GmbH"). Dr. Schuhsler is the
managing partner of TVM Techno GmbH and disclaims ownership of the
shares beneficially held by the fund and its affiliates, except to the
extent of his pecuniary interest therein.
(3) Reflects 50,385 shares of common stock held of record by Mr. Lucas and
1,150 shares beneficially owned by Mr. Lucas and held of record by
persons related to Mr. Lucas.
8
(4) Includes 20,000 shares of common stock underlying options which are
currently exercisable but subject to our right to repurchase.
(5) Includes 45,625 shares of common stock underlying options. Also includes
62,750 shares that are subject to our right to repurchase.
(6) Includes 124,290 shares held of record by Mr. Zaniboni and 138,112 shares
beneficially owned by Mr. Zaniboni and held of record by trusts related
to Mr. Zaniboni. Also includes 20,625 shares of common stock underlying
options and 74,219 shares that are subject to our right to repurchase.
(7) Includes 17,813 shares of common stock underlying options. Also includes
48,333 shares that are subject to our right to repurchase.
(8) Includes 20,625 shares of common stock underlying options. Also includes
84,792 shares that are subject to our right to purchase.
(9) Includes 40,369 shares held of record by Mr. Foit, of which 8,055 are
subject to our right of repurchase, and 2,570 shares beneficially owned
by Mr. Foit and held of record by Mr. Foit's wife. Also includes 72,188
shares of common stock underlying options, of which 15,972 are currently
exercisable but subject to our right to repurchase.
(10) Represents 538,461 shares owned by TVM Medical Ventures GmbH and Company
KG ("TVM Medical"); 316,899 shares owned by TVM Techno Venture
Enterprises No. II L.P. ("TVM Techno"); 211,267 shares owned by TVM
Intertech L.P. ("TVM Intertech"); 387,832 shares owned by TVM Eurotech
L.P. ("TVM Eurotech"); 679,725 shares owned by TVM Zweite Beteiligung-
U.S. L.P. ("TVM Zweite"). Mr. Schuhsler, a director of the Company, is:
(a) a managing director of TVM Techno GmbH, (b) a member of the Board of
Management of TVM Medical, and (c) a managing member of TVM Management
LLC, the General Partner of TVM Techno Venture Management L.P. which is a
general partner of TVM Techno, TVM Intertech, TVM Eurotech and TVM Zweite
(collectively, the "TVM Entities"). Dr. Schuhsler disclaims beneficial
ownership of all shares issued or issuable to the foregoing entities,
except to the extent of his pecuniary interest therein, but exercises
shared voting and investment power with respect to some of these shares.
All of the TVM Entities disclaim group attribution. The address for TVM
Techno GmbH is 101 Arch Street, Suite 1950, Boston, MA 02110.
(11) Reflects 1,579,900 shares beneficially owned by Wellington Management
Company, LLP ("WMC") and held of record by investment advisory clients of
WMC. Of the 1,579,900 shares beneficially owned, WMC has shared voting
and investment power over 607,100 and 1,579,900 shares, respectively. The
address for WMC is 75 State Street, Boston, MA 02109.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 2000, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that one
report, covering an aggregate of three transactions, was filed late by funds
affiliated with TVM Techno Venture Management GmbH and one report, covering
one transaction, was filed late by Peter Reinisch, a former director of the
Company.
9
EXECUTIVE COMPENSATION
Compensation of Directors
Directors currently receive no cash compensation from the Company for their
services as members of the Board or for attendance at committee meetings. All
directors are eligible for reimbursement for their expenses incurred in
connection with attendance at Board meetings in accordance with Company
policy. Each non-employee director of the Company receives stock option grants
under the 1999 Stock Incentive Plan (the "1999 Plan"). Options granted under
the 1999 Plan to non-employee directors are intended by the Company not to
qualify as incentive stock options under the Code.
Option grants to non-employee directors under the 1999 Plan are non-
discretionary. On the date of the annual meeting of stockholders each year,
each member of the Company's Board of Directors who is not an employee of the
Company and has served as a non-employee director for at least six months is
automatically granted under the 1999 Plan, without any further action by the
Company, the Board of Directors or the stockholders of the Company, an option
to purchase 3,000 shares of Common Stock of the Company. These options become
fully exercisable upon the optionee's completion of one year of continuous
service as a non-employee director, measured from the grant date. After
January 31, 2000, each director who is elected for the first time to be a non-
employee director of the Company is automatically granted under the 1999 Plan,
without any further action by the Company, the Board of Directors or the
stockholders of the Company, an option to purchase 15,000 shares upon the date
of initial election to the Board of Directors, whether by the Board or
stockholders of the Company, provided the individual has not previously been
employed as an employee by the Company or any parent or subsidiary
corporation. These options may not be exercised until the date upon which such
optionee has provided one year of continuous service as a non-employee
director following the date of grant of such option, whereupon such option
shall become exercisable as to one-third of the option shares. The remaining
option shares become exercisable in two equal annual installments upon the
completion of each additional year of service as a non-employee board member.
The exercise price of options granted to non-employee directors under the
1999 Plan is 100% of the fair market value of the Common Stock subject to the
option on the date of the option grant. The term of the options granted to
non-employee directors under the 1999 Plan is ten years. The 1999 Plan will
terminate on November 6, 2009, unless earlier terminated by the Board. In the
event of a merger of the Company with or into another corporation or a
consolidation, acquisition of assets or other change-in-control transaction
involving the Company, the vesting of each option will accelerate and the
option will terminate if not exercised prior to the consummation of the
transaction.
During the last fiscal year, the Company did not grant any stock options to
non-employee directors of the Company as compensation for their services as
members of the Board or for attendance at committee meetings.
In September 2000, the Company entered into a consulting agreement with Dr.
Venkat. Pursuant to the agreement, Dr. Venkat must provide the Company with a
minimum of five days of consulting services per calendar quarter. In
consideration for Dr. Venkat's services, the agreement provides for an annual
fee of $40,000. In addition, Dr. Venkat is eligible to receive non-qualified
stock options at the Board's discretion. During 2000, Dr. Venkat received
$10,000 in consulting fees and 20,000 non-qualified stock options in
consideration for consulting services performed for the Company.
During the last fiscal year, the Company paid $2,500 and $4,000 to Dr.
Afting and Mr. Lucas, respectively, for consulting services performed pursuant
to consulting arrangements with the Company.
10
Compensation of Executive Officers
Summary of Compensation
The following table shows for the fiscal years ended December 31, 1998, 1999
and 2000, compensation awarded or paid to, or earned by, the Company's Chief
Executive Officer and its other four most highly compensated executive
officers at December 31, 2000 (the "Named Executive Officers").
In accordance with the rules of the SEC, the compensation described in this
table does not include medical, group life insurance or other benefits which
are available generally to all of our salaried employees and certain
perquisites and other personal benefits received which do not exceed the
lesser of $50,000 or 10% of any officer's salary and bonus disclosed in this
table.
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards/
------------------------------ Securities
Other Annual Underlying All Other
Name and Principal Salary Bonus Compensation Options Compensation
Position Year ($) ($) ($) (#) ($)
- ------------------ ---- -------- -------- ------------ ------------ ------------
Hubert Koster........... 1998 $252,000 $ 10,000 $99,166(2) 255,000 --
Former President and 1999 279,334 10,000 -- 155,000 $ 450,688(3)
Chief Executive
Officer(1) 2000 132,083 -- -- 200,000 2,321,781(4)
Antonius Schuh.......... 1998 150,426 10,000 -- 130,000 --
President and Chief 1999 187,223 10,000 -- 50,000 23,126(3)
Executive Officer(5) 2000 265,883 110,000 -- 186,000 551,926(6)
Stephen L. Zaniboni..... 1998 132,500 10,000 -- 140,000 --
Senior Vice President, 1999 185,208 10,000 -- 50,000 17,084(3)
Chief Financial Officer 2000 234,508 35,000 -- 86,000 469,964(6)
and Secretary
Charles R. Cantor....... 1999 180,000 21,000 30,000(7) 100,000 207,200(3)
Chief Scientific
Officer 2000 246,250 46,000 -- 65,000 699,252(6)
Andreas Braun........... 1998 136,000 10,000 -- 50,000 --
Chief Medical Officer 1999 145,917 10,000 -- 130,000 --
2000 197,191 60,000 -- 86,000 556,016(6)
Delbert F. Foit, Jr..... 1999(8) 126,000 7,432 -- 100,000 --
Chief Operating Officer 2000 210,721 10,000 -- 47,000 28,500(9)
- --------
(1) Dr. Koster resigned as President and Chief Executive Officer in May 2000.
(2) Other annual compensation for Dr. Koster includes, for 1998, $94,266 paid
in connection with his relocation to our corporate headquarters in San
Diego from Hamburg, Germany, $3,900 for use of a company automobile and
$1,000 paid in connection with various tax services.
(3) Represents income from the exercise of non-qualified stock options in
1999.
(4) Other compensation for Dr. Koster includes, for 2000, $1,507,348 related
to the Company's forgiveness, in February 2000, of an aggregate of $3.8
million in loans granted to certain executive officers in 1999 and 2000
related to their exercise of stock options and $814,433 in severance
payments made to Dr. Koster in connection with his resignation as the
Company's President and Chief Executive Officer in May 2000. This
$2,321,781 amount does not include a $720,400 compensation charge that the
Company recognized during 2000 related to the acceleration of the vesting
of 40,000 of Dr. Koster's stock options in connection with his resignation
in May 2000. See "Employment and Severance Agreements" and "Certain
Transactions."
11
(5) Dr. Schuh was promoted to the position of President and Chief Executive
Officer in May 2000. He previously served as the Company's Executive Vice
President, Business Development and Marketing and Chief Business Officer.
(6) Represents income from the Company's forgiveness, in February 2000, of an
aggregate of $3.8 million in loans granted to certain executive officers
in 1999 and 2000 related to their exercise of stock options. See "Certain
Transactions."
(7) Other annual compensation for Dr. Cantor during 1999 represents payment
for his services as chief of the Company's scientific advisory board.
(8) Mr. Foit joined the Company as Chief Operating Officer in April 1999.
(9) Other compensation for Mr. Foit includes, for 2000, $25,000 paid in
connection with his relocation to our corporate headquarters in San Diego
and $3,500 paid in connection with various housing and living expenses.
12
STOCK OPTION GRANTS AND EXERCISES
The Company has granted options to its executive officers under its 1994
Stock Plan, 1998 Stock Option/Stock Issuance Plan, and the 1999 Plan
(collectively, the "Plans"). As of December 31, 2000, options to purchase a
total of 1,360,952 shares were outstanding under the Plans and options to
purchase 1,853,666 shares remained available for grant under the 1999 Plan.
The following tables show for the fiscal year ended December 31, 2000,
certain information regarding options granted to, exercised by, and held at
year-end by, the Named Executive Officers:
Option Grants in Last Fiscal Year
Individual Grants
-------------------------------------------
Percent of
Total
Number of Options Potential Realizable Value at
Securities Granted to Assumed Annual Rates of
Underlying Employees Exercise Stock Price Appreciation for
Options in Fiscal or Base Option Term(1)
Granted Year Price Expiration ------------------------------
Name (#) (%)(4) ($/Sh) Date 5% ($) 10% ($)
---- ---------- ---------- -------- ---------- -------------- ---------------
Hubert Koster........... 0
Antonius Schuh.......... 36,000(2) 4% 95.38 02/04/10 2,159,423 5,472,402
150,000(3) 16% 28.31 07/31/10 2,670,601 6,767,827
Stephen L. Zaniboni..... 36,000(2) 4% 95.38 2/04/10 2,159,423 5,472,402
50,000(3) 5% 28.31 7/31/10 890,200 3,671,442
Charles R. Cantor....... 45,000(2) 5% 95.38 2/04/10 2,699,279 6,840,502
20,000(3) 2% 28.31 7/31/10 356,080 902,377
Andreas Braun........... 36,000(2) 4% 95.38 2/04/10 2,159,423 5,472,402
50,000(3) 5% 28.31 7/31/10 890,200 2,255,942
Delbert F. Foit, Jr. ... 27,000(2) 3% 95.38 2/04/10 1,619,567 6,113,361
20,000(3) 2% 28.31 7/31/10 356,080 902,377
- --------
(1) The potential realizable value is based on the term of the option at the
time of grant (ten years). Assumed stock price appreciation of 5% and 10%
is used pursuant to rules promulgated by the SEC. The potential realizable
value is calculated by assuming that the stock price on the date of grant
appreciates at the indicated rate, for the entire term of the option and
that the option is exercised and sold on the last day of its term at the
appreciated price. No gain to the optionee is possible unless the stock
price increases over the option term.
(2) The options granted become exercisable on a monthly basis following the
date of grant at the rate of 1/48th of the shares subject to the option
per month for four years. The options expire ten years from the date of
grant, or earlier upon termination of employment. Upon a change of control
of the Company, all unvested stock options become fully exercisable.
(3) Upon achievement of each of three performance-based milestones established
by the Compensation Committee, 33 1/3% of the options granted become
exercisable. Otherwise, the options granted become exercisable on a
monthly basis following the date of grant at the rate of 1/48th of the
shares subject to the option per month for four years. The options expire
ten years from the date of grant, or earlier upon termination of
employment. Upon a change of control of the Company, all unvested stock
options shall become fully exercisable.
(4) Based on 925,000 options granted to employees and directors of, and
consultants to, the Company during the fiscal year ended December 31,
2000.
13
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 at
Shares Options at 12/31/2000 FY-End
Acquired Value (#) ($)(1)
on Exercise Realized ------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
Hubert Koster........... 0 0 0 0 -- --
Antonius Schuh.......... 0 0 18,750 167,250 -- --
Stephen L. Zaniboni..... 0 0 12,708 73,292 -- --
Charles R. Cantor....... 0 0 11,458 53,542 -- --
Andreas Braun........... 130,000 0 12,708 73,292 -- --
Delbert F. Foit, Jr. ... 15,000 0 67,708 39,292 $660,000 --
- --------
(1) Based on the fair market value of the Company's Common Stock at December
31, 2000 ($14.00) per share less the exercise price payable for such
options.
14
EMPLOYMENT AND SEVERANCE AGREEMENTS
In May 2000, the Company and Dr. Koster entered into a Settlement Agreement
which resulted in the voluntarily termination of Dr. Koster's employment with
the Company. The Settlement Agreement provides for a lump sum severance
payment of $550,000 and monthly payments of $30,000, as well as monthly lease
payments on Dr. Koster's company car, for one year or until he commences full-
time employment with another employer. During the period he receives monthly
severance payments, Dr. Koster will provide the Company with consulting
services. In connection with the Settlement Agreement, the vesting of some
stock options held by Dr. Koster was accelerated.
Dr. Schuh's employment agreement with the Company provides for an annual
salary of $300,000, subject to periodic increases by the Board of Directors at
its discretion, and a signing bonus of $100,000. Dr. Schuh is also entitled to
receive an annual non-discretionary bonus of $10,000 and an annual
performance-based bonus subject to the Board's approval. In connection with
his employment, Dr. Schuh has been granted options to purchase an aggregate of
516,000 shares of Company Common Stock under the Plans. Dr. Schuh has
exercised a portion of these options. If Dr. Schuh's employment is terminated
without cause, Dr. Schuh will be entitled to receive all employee benefits and
his annual salary in periodic payments, until he secures full-time employment
with another company or until one year has elapsed after termination,
whichever is earlier.
Mr. Zaniboni's employment agreement with the Company provides for an annual
salary of $250,000, subject to periodic increases by the Board of Directors at
its discretion. Mr. Zaniboni is also entitled to receive an annual non-
discretionary bonus of $10,000 and an annual performance-based bonus subject
to the Board's discretion. In connection with his employment, Mr. Zaniboni was
granted options to purchase an aggregate of 346,000 shares of Company Common
Stock under the Plans. Mr. Zaniboni has exercised a portion of these options.
If Mr. Zaniboni's employment is terminated without cause, Mr. Zaniboni will be
entitled to receive all employee benefits and his annual salary in periodic
payments, until he secures full-time employment with another company or until
six months have elapsed after termination, whichever is earlier.
Dr. Cantor's employment agreement with the Company provides for an annual
salary of $180,000, which was subsequently increased by the Board of Directors
to $260,000. The Company has agreed to reimburse Dr. Cantor for the costs
associated with up to 12 visits per year to Boston University. Dr. Cantor is
required to make such trips in connection with his leave of absence from the
university. In connection with his employment, Dr. Cantor was granted options
to purchase an aggregate of 416,000 shares of Company Common Stock under the
Plans. Dr. Cantor has exercised a portion of these options. If Dr. Cantor's
employment is terminated without cause, Dr. Cantor will be entitled to receive
all employee benefits and his annual salary in periodic payments, until he
secures full-time employment with another company or until six months have
elapsed after termination, whichever is earlier.
Dr. Braun's employment agreement with the Company provides for an annual
salary of $220,000, subject to periodic increases by the Board of Directors at
its discretion. Dr. Braun is also entitled to receive an annual non-
discretionary bonus of $10,000 and an annual performance-based bonus subject
to the Board's approval. In connection with his employment, Dr. Braun was
granted options to purchase an aggregate of 336,000 shares of Company Common
Stock under the Plans. Dr. Braun has exercised a portion of these options. If
Dr. Braun's employment is terminated without cause, Dr. Braun will be entitled
to receive all employee benefits and his annual salary in periodic payments,
until he secures full-time employment with another company or until six months
have elapsed after termination, whichever is earlier.
Mr. Foit's employment agreement with the Company provides for an annual
salary of $220,000, subject to periodic increases by the Board of Directors at
its discretion. Mr. Foit is also entitled to receive an annual non-
discretionary bonus of $10,000 and an annual performance-based bonus subject
to the Board's approval. In connection with his employment, Mr. Foit was
granted options to purchase an aggregate of 147,000 shares of Company Common
Stock under the Plans. Mr. Foit has exercised a portion of these options. If
Mr. Foit's employment is terminated without cause, Mr. Foit will be entitled
to receive all employee benefits and his annual salary in periodic payments,
until he secures full-time employment with another company or until six months
have elapsed after termination, whichever is earlier.
15
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
Compensation Committee Report(1)
The Compensation Committee of the Board of Directors (the "Committee") is
currently composed of Dr. Helmut Schuhsler and John E. Lucas, neither of whom
are currently officers or employees of the Company. The Committee is
responsible for establishing the Company's compensation programs for all
employees, including executives. The Committee annually evaluates the
performance, and determines the compensation, of the Chief Executive Officer
("CEO") and the other executive officers of the Company based upon a mix of
the achievement of corporate goals, individual performance and comparisons
with other biotechnology companies. The CEO and the other executive officers
were not present during the discussion of their compensation.
Compensation Philosophy
The primary goal of the compensation program is to align compensation with
business objectives and performance. The Company's aim is to attract, retain
and reward executive officers and other key employees who contribute to the
long-term success of the Company and to motivate those individuals to enhance
long-term stockholder value. To establish this relationship between executive
compensation and creation of stockholder value, the Board of Directors has
adopted a total compensation package comprised of base salary, bonus and stock
option awards, with a bias toward stock options to emphasize the link between
executive incentives and the creation of shareholder value as measured by the
equity markets. Key elements of this philosophy are:
. The Company pays competitively with biotechnology companies with which
the Company competes for talent.
. The Company maintains annual incentive opportunities sufficient to
provide motivation to achieve specific operating goals and to generate
rewards that bring total compensation to competitive levels.
. The Company provides significant equity-based incentives for executives
and other key employees to ensure that they are motivated over the
long-term to respond to the Company's business challenges and
opportunities as owners and not just as employees.
Base Salary
The Committee annually reviews each executive officer's base salary. Among
the factors taken into consideration are (1) individual and corporate
performance, (2) levels of responsibility, (3) prior experience, (4) breadth
of knowledge of the industry, and (5) competitive pay practices. Consistent
with this policy, the Committee considered the 2000 base salary for all
executive officers and adopted an average merit increase in base salary for
2000 of 10% and, in order to raise the level of compensation to the mid-range
of compensation for comparable biotechnology companies, an average market
adjustment to base salary for 2000 of 24.9% for all executive officers for an
aggregate average increase in base salary of 34.9% for all executive officers
(except Antonius Schuh who received greater increases due to his promotion to
President and CEO from Chief Business Officer).
Bonus
The Company believes that executive performance may be maximized via a
system of annual incentive awards. The actual incentive awards earned depend
on the extent to which the Company and individual performance objectives are
achieved. During each fiscal year, the Compensation Committee reviews and
- --------
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC and is not to be incorporated by reference in any
filing of the Company under the Securities Act of 1933, as amended (the
"1933 Act"), or the 1934 Act whether made before or after the date of this
Proxy Statement and irrespective of any general incorporation language
therein.
16
approves the annual performance objectives for the Company and the individual
officers. The Company's objectives typically consist of specific operating,
strategic and financial goals that are considered to be critical to the
Company's overall goal: building stockholder value. For fiscal year 2000, the
Compensation Committee determined that the primary goals in building
stockholder value were:
. Achieving the Company's 2000 revenue goal;
. Entering into significant collaboration agreements with a leading
genomic company and a leading pharmaceutical/life science company;
. Completion of the Company's initial public offering; and
. Appreciation of the Company's stock price as compared with other
companies in its sector.
For 2000, the Committee set a range of 4% to 30% of salary for executive
officer discretionary bonuses. Within that range, the Committee set the bonus
for each executive officer based on the Company's achievement of its goals and
the Committee's subjective evaluation of the individual's performance. In the
past several years, based upon the Company's degree of achievement of then
specified corporate goals, the Company has consistently paid bonuses to
executive officers.
Long Term Incentives
The Company's long-term incentive program consists of the Plans. The Plans
utilize vesting periods (generally four years) to encourage key employees to
continue in the employ of the Company. Through option grants, executives
receive significant equity incentives to build long-term stockholder value.
The exercise price of options granted under the Plans generally is 100% of
fair market value of the underlying stock on the date of grant. Employees
receive value from these grants only if the Company's Common Stock appreciates
over the long-term. The size of option grants is determined based on
competitive practices at leading companies in the biotechnology industry and
the Company's philosophy of significantly linking executive compensation with
stockholder interests.
In fiscal year 2000, the Company issued certain of its executive officers
stock options with accelerated vesting provisions. Upon the achievement of
each specified corporate goal established by the Compensation Committee,
33 1/3% of the options vest. Otherwise, the options vest in equal monthly
installments over a period of four years.
Other Compensation
In the prior fiscal year, the Company loaned an aggregate of approximately
$3.8 million to certain of its executive officers, including the Company's
CEO, under the terms of promissory notes and stock pledge agreements, whereby
the executive officers pledged shares of Company Common Stock issued upon the
exercise of options to purchase such common stock. These loans were used by
the executive officers in connection with the exercise of such options to
acquire the underlying shares of common stock. In February 2000, following the
completion of the Company's successful initial public offering, the Board of
Directors approved the forgiveness of the remaining principal amount of such
loans, plus any accrued interest.
Chief Executive Officer Compensation
The Committee uses the same procedures described above for the other
executive officers in setting the annual salary, bonus and stock option awards
for the Company's CEO. In May 2000, Dr. Hubert Koster resigned as the
Company's President and CEO. Prior to his resignation, Dr. Koster's base
salary was set at $350,000. Dr. Koster's base salary reflected the Board's
subjective assessment of (1) his performance, (2) his skills in relation to
other CEOs in the Company's industry, (3) the Board's confidence in his
ability to lead the Company's continued development, and (4) the Board's
assessment of the Company's performance. In May 2000, Dr. Antonius Schuh was
promoted to the position of CEO. In connection with this promotion, Dr.
Schuh's base
17
salary was increased to $300,000 and he received a signing bonus of $100,000.
Dr. Schuh's base salary reflects the Board's subjective assessment of those
factors detailed above.
In awarding stock options, the Committee considers the CEO's performance,
overall contribution to the Company, retention, the number of unvested options
and the total number of options to be granted. Dr. Antonius Schuh was granted
150,000 stock options in 2000 in connection with his promotion to the position
of President and CEO.
Upon Dr. Schuh's promotion to CEO, in May 2000, the Committee set a target
bonus of up to $150,000, payable upon Dr. Schuh's completion of one year of
service as the Company's CEO. As discussed above, the CEO's actual bonus is
dependent on the Company's achieving certain performance goals set by the
Committee and the Committee's subjective evaluation of his performance.
Compared to other comparable biotechnology companies surveyed by the Company,
the CEO's base salary, stock options, and discretionary cash bonus are in the
mid-range.
Certain Tax Considerations
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of not more than $1 million of
compensation paid to certain executive officers in a taxable year.
Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code.
The Board of Directors has not established a formal policy for determining
which forms of incentive compensation awarded to executive officers shall be
designed to qualify as "performance based compensation."
Compensation Committee
John E. Lucas
Dr. Helmut Schuhsler
18
Performance Measurement Comparison(1)
The following graph compares the cumulative total stockholder return on the
Company's Common Stock between February 1, 2000 (the date the Company's Common
Stock commenced public trading) and December 31, 2000 with the cumulative
total return of (i) the Nasdaq Stock Market (U.S.) ("Nasdaq") and (ii) the
Nasdaq Biotechnology Index (the "Nasdaq Biotech"), over the same period. This
graph assumes the investment of $100.00 on February 1, 2000 in the Company's
Common Stock, the Nasdaq and the Nasdaq Biotech, and assumes the reinvestment
of dividends, if any.
Comparison of Cumulative Total Return on Investment(2)
[GRAPH]
Cummulative Total Return
-------------------------------------------------
2/1/00 3/00 6/00 9/00 12/00
SEQUENOM, INC. 100.00 151.44 174.52 162.02 53.85
NASDAQ STOCK MARKET (U.S) 100.00 113.31 98.51 90.65 60.69
NASDAQ BIOTECHNOLOGY 100.00 105.09 116.65 126.08 103.96
- --------
(1) This Section is not "soliciting material," is not deemed "filed" with
the SEC and is not to be incorporated by reference in any filing of the
Company under the 1933 Act or the 1934 Act whether made before or after
the date hereof and irrespective of any general incorporation language
in any such filing.
(2) The Nasdaq Biotechnology Index is calculated using an equal-dollar
weighing methodology.
19
CERTAIN TRANSACTIONS
The Company has entered into employment agreements with certain of its
officers. See "Employment and Severance Agreements."
The Company has entered into consulting arrangements with certain of its
directors. See "Executive Compensation--Compensation of Directors."
In 2000, the Company loaned an aggregate of approximately $3.8 million to
certain of its executive officers under the terms of promissory notes and
stock pledge agreements, whereby the executive officers pledged shares of
Company Common Stock issued upon the exercise of options to purchase such
common stock. These loans were used by the executive officers upon the
exercise of such options to acquire the underlying shares of common stock. In
February 2000, the Board of Directors approved the forgiveness of the
remaining principal amount of such loans, plus any accrued interest, as
follows: $1,507,348 to Dr. Koster, $699,252 to Dr. Cantor, $551,926 to Dr.
Schuh, $469,964 to Mr. Zaniboni, and $556,016 to Dr. Braun. In November 2000,
the Company loaned an aggregate of $595,686 to certain of these officers
related to the individual tax liability associated with such loan forgiveness.
Each loan is secured by common stock of the Company. The principal amount of
the loans, plus any accrued interest, is due on the earlier of December 31,
2001 or within ten days after the closing of a secondary offering in which the
executive officers are permitted to sell shares of Company stock. The
executive officers to whom the Company made these loans and the principal
terms of the loans are shown in the following table:
Approximate
Amount interest
outstanding at rate per
Executive Officer Position March 31, 2001 annum
----------------- -------- -------------- -----------
Antonius Schuh.............. President and Chief $209,442 6.25%
Executive Officer
Stephen L. Zaniboni......... Senior Vice President, 178,887 6.25%
Chief Financial Officer
and Secretary
Andreas Braun............... Chief Medical Officer 219,768 6.25%
Dr. Cantor is named as an inventor on a number of patents which the Company
has licensed from Boston University. If the Company commercializes technology
under these patents and is required to make royalty payments to Boston
University under the license arrangements, Dr. Cantor could receive additional
compensation from Boston University. In addition, the Company funds research
at Boston University; however, Dr. Cantor receives no direct compensation from
Boston University as a result of this funding.
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided
for therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party
by reason of his position as a director, officer or other agent of the
Company, and otherwise to the full extent permitted under Delaware law and the
Company's Bylaws.
20
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ Stephen L. Zaniboni
-----------------------------------
Senior Vice President, Chief
Financial Officer and Secretary
May 2, 2001
21
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
of the Board of Directors of
SEQUENOM, INC.
I. Organization
This charter governs the operations of the audit committee. The committee
shall review and reassess the charter at least annually and obtain the
approval of the board of directors. The committee shall be appointed by the
board of directors and shall comprise at least three directors, each of whom
are independent of management and the Company. Members of the committee shall
be considered independent if they have no relationship that may interfere with
the exercise of their independence from management and the Company. All
committee members shall be financially literate, or shall become financially
literate within a reasonable period of time after appointment to the
committee, and at least one member shall have accounting or related financial
management expertise.
II. Statement of Policy
The audit committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the stockholders, potential
stockholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company's financial statements, and the legal
compliance and ethics programs as established by management and the board. In
so doing, it is the responsibility of the committee to maintain free and open
communication between the committee, independent auditors, the internal
auditors and management of the Company. In discharging its oversight role, the
committee is empowered to investigate any matter brought to its attention with
full access to all books, records, facilities, and personnel of the Company
and the power to retain outside counsel, or other experts for this purpose.
III. Responsibilities and Processes
The primary responsibility of the audit committee is to oversee the
Company's financial reporting process on behalf of the board and report the
results of their activities to the board. Management is responsible for
preparing the Company's financial statements, and the independent auditors are
responsible for auditing those financial statements. The committee in carrying
out its responsibilities believes its policies and procedures should remain
flexible, in order to best react to changing conditions and circumstances. The
committee should take the appropriate actions to set the overall corporate
"tone" for quality financial reporting, sound business risk practices, and
ethical behavior.
The following shall be the principal recurring processes of the audit
committee in carrying out its oversight responsibilities. The processes are
set forth as a guide with the understanding that the committee may supplement
them as appropriate.
. The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the board and the audit committee, as representatives of
the Company's stockholders. The committee shall have the ultimate
authority and responsibility to evaluate and, where appropriate,
replace the independent auditors. The committee shall discuss with the
auditors their independence from management and the Company and the
matters included in the written disclosures required by the
Independence Standards Board. Annually, the committee shall review and
recommend to the board the selection of the Company's independent
auditors, subject to stockholders' approval.
. The committee shall discuss with the internal auditors and the
independent auditors the overall scope and plans for their respective
audits including the adequacy of staffing and compensation. Also, the
i.
committee shall discuss with management, the internal auditors, and the
independent auditors the adequacy and effectiveness of the accounting
and financial controls, including the Company's system to monitor and
manage business risk, and legal and ethical compliance programs.
Further, the committee shall meet separately with the internal auditors
and the independent auditors, with and without management present, to
discuss the results of their examinations.
. The committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the committee by the independent
auditors under generally accepted auditing standards. The chair of the
committee may represent the entire committee for the purposes of this
review.
. The committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report
on Form 10-K (or the annual report to stockholders if distributed prior
to the filing of Form 10-K), including their judgment about the
quality, not just acceptability, of accounting principles, the
reasonableness of significant judgments, and the clarity of the
disclosures in the financial statements. Also, the committee shall
discuss the results of the annual audit and any other matters required
to be communicated to the committee by the independent auditors under
generally accepted auditing standards.
ii.
APPENDIX B
CHARTER OF THE COMPENSATION COMMITTEE
of the Board of Directors of
SEQUENOM, INC.
The Compensation Committee of the Board of Directors of Sequenom, Inc., a
Delaware corporation (the "Company"), shall consist of at least two members of
the Board of Directors and shall be charged with the following functions:
1. To take any and all actions which may be taken by the Board of
Directors of the Company with respect to fixing the compensation level
of officers and employees of the Company, including but not limited to
the development of compensation policies that will attract and retain
the highest quality executives, that will clearly articulate the
relationship of corporate performance to executive compensation and
that will reward executives for the Company's progress.
2. To propose the adoption, amendment, and termination of stock option
plans, stock appreciation rights plans, pension and profit sharing
plans, stock bonus plans, stock purchase plans, bonus plans, deferred
compensation plans, and other similar programs ("Compensation Plans").
3. To grant rights, participation and interests in Compensation Plans to
eligible participants.
4. To review and approve such other compensation matters as the Board of
Directors or the Chief Executive Officer of the Company wishes to have
the Compensation Committee approve.
5. To prepare a report to be filed with the Company's proxy or information
statement which shall disclose the compensation policies applicable to
the Company's executive officers.
6. To perform such additional functions and have such additional powers as
may from time to time be expressly delegated to the Compensation
Committee by the Board of Directors.
7. To report to the Board of Directors from time to time, or whenever it
shall be called upon to do so.
8. To prepare and distribute to each director of the Company minutes of
each meeting of the Compensation Committee promptly after such meeting.
9. To delegate any of the foregoing functions and powers to the Chief
Executive Officer of the Company or any other officer or employee of
the Company if, in the exercise of its judgment, the Compensation
Committee determines that such delegation is necessary or appropriate,
unless such delegation would be contrary to (a) the intent of the Board
of Directors as expressly set forth in its resolutions, (b) the Bylaws
or Certificate of Incorporation of the Company, or (c) the Delaware
General Corporation Law.
10. To perform such other functions and have such other powers as may be
necessary or convenient in the efficient discharge of the foregoing.
The operation of the Compensation Committee shall be subject to the Bylaws
as in effect from time to time and Section 141 of the Delaware General
Corporation Law.
i.
APPENDIX C
SEQUENOM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 1, 2001
The undersigned hereby appoints Antonius Schuh, Ph.D. and Stephen L.
Zaniboni, and each of them, as attorneys and proxies of the undersigned, with
full power of substitution, to vote all of the shares of stock of Sequenom, Inc.
(the "Company") which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders of the Company to be held at the offices of the Company
located at 3595 John Hopkins Court, San Diego, California 92121 on Friday, June
1, 2001 at 10:00 a.m. local time, and at any and all postponements,
continuations and adjournments thereof, with all powers that the undersigned
would possess if personally present, upon and in respect of the following
matters and in accordance with the following instructions, with discretionary
authority as to any and all other matters that may properly come before the
meeting.
Unless a contrary direction is indicated, this Proxy will be voted for all
nominees listed in Proposal 1 and for Proposal 2, as more specifically described
in the Proxy Statement. If specific instructions are indicated, this Proxy will
be voted in accordance therewith.
- ---------------------------------detach here------------------------------------
Management recommends a vote for the nominees for director listed below.
Proposal 1:
To elect two directors to hold office until the 2004 Annual Meeting of
Stockholders.
[_] For all nominees listed below [_] Withhold Authority to
(except as marked to the contrary vote for all nominees
below). listed below.
Nominees: Kris Venkat, Ph.D. and Antonius Schuh, Ph.D.
To withhold authority to vote for any nominee(s) write such nominee(s)' name(s)
below:
- --------------------------------------------------------------------------------
(Continued on other side)
(Continued from other side)
Management recommends a vote for Proposal 2.
Proposal 2: To ratify selection of Ernst & Young LLP as independent auditors
of the Company for its fiscal year ending December 31, 2001.
[_] For [_] Against [_] Abstain
Dated __________________ _______________________________________________
_______________________________________________
SIGNATURE(S)
Please sign exactly as your name appears hereon.
If the stock is registered in the names of two or
more persons, each should sign. Executors,
administrators, trustees, guardians and attorneys-
in-fact should add their titles. If signer is a
corporation, please give full corporate name and
have a duly authorized officer sign, stating
title. If signer is a partnership, please sign in
the partnership's name by an authorized person.
Please vote, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States.