SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
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Check the appropriate box:
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/ / CONFIDENTIAL, FOR USE BY THE COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
CUBIST PHARMACEUTICALS, INC.
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CUBIST PHARMACEUTICALS, INC.
24 EMILY STREET
CAMBRIDGE, MA 02139
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF CUBIST PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Stockholders of
Cubist Pharmaceuticals, Inc. will be held at our corporate offices, 125 Sidney
Street, Cambridge, MA 02139, on Thursday, June 7, 2001, at 9:00 A.M., local
time, for the following purposes:
1. To elect three Class II directors to hold office for a three-year term
and until their successors have been duly elected and qualified;
2. To transact such other business as may properly come before the annual
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed April 9, 2001 as the record date for the
determination of stockholders entitled to notice of, and to vote at, the 2001
Annual Meeting of Stockholders. Accordingly, only stockholders of record at the
close of business on April 9, 2001 will be entitled to notice of, and to vote
at, such meeting or any adjournments thereof.
To ensure your representation at the meeting, however, you are urged to vote
by proxy by following one of these steps as promptly as possible:
(a) Complete, date, sign and return the enclosed proxy card (a
postage-prepaid envelope is enclosed for that purpose); or
(b) Vote via the Internet (see instructions on the enclosed proxy card);
or
(c) Vote via telephone (toll-free) in the United States or Canada (see
instructions on the enclosed proxy card).
The Internet and telephone voting procedures are designed to authenticate
shareholders' identities, to allow shareholders to vote their shares and to
confirm that their instructions have been properly recorded. Specific
instructions to be followed by any registered shareholder interested in voting
via the Internet or telephone are set forth in the proxy card and must be
completed by 6 p.m. on June 6, 2001. Your shares cannot be voted unless you
date, sign, and return the enclosed proxy card, vote via the Internet or
telephone or attend the annual meeting in person. Regardless of the number of
shares you own, your careful consideration of, and vote on, the matters before
the shareholders is important.
By order of the Board of Directors
JUSTIN P. MORREALE
SECRETARY
April 18, 2001
NOTE: THE BOARD OF DIRECTORS SOLICITS THE EXECUTION AND PROMPT RETURN OF THE
ACCOMPANYING PROXY. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING, PLEASE VOTE VIA THE INTERNET OR TELEPHONE OR COMPLETE, DATE, SIGN
AND MAIL THE ACCOMPANYING PROXY CARD AND PROMPTLY RETURN IT IN THE
PRE-ADDRESSED ENVELOPE PROVIDED FOR THAT PURPOSE. IF YOU ATTEND THE
MEETING, YOU MAY WITHDRAW ANY PROXY GIVEN BY YOU AND VOTE YOUR SHARES IN
PERSON.
CUBIST PHARMACEUTICALS, INC.
24 EMILY STREET
CAMBRIDGE, MA 02139
------------------------
PROXY STATEMENT
------------------------
GENERAL INFORMATION
PROXY SOLICITATION
This proxy statement is furnished to the holders of the common stock, $.001
par value per share, of Cubist Pharmaceuticals, Inc. in connection with the
solicitation of proxies on behalf of our Board of Directors for use at the
annual meeting of stockholders to be held on June 7, 2001, or at any adjournment
or postponement of the meeting, pursuant to the accompanying Notice of 2001
Annual Meeting of Stockholders. The purposes of the annual meeting and the
matters to be acted upon are set forth in the accompanying Notice of 2001 Annual
Meeting of Stockholders. The Board of Directors knows of no other business that
will come before the annual meeting.
This proxy statement and proxies for use at the meeting will be first mailed
to stockholders on or about April 23, 2001 and such proxies will be solicited
chiefly by mail, but additional solicitations may be made by telephone or
telegram by our officers or regular employees. We may enlist the assistance of
brokerage houses in soliciting proxies. We shall bear all solicitation expenses,
including costs of preparing, assembling and mailing proxy material.
REVOCABILITY AND VOTING OF PROXY
Registered shareholders can vote their shares via (1) a toll-free telephone
call from the U.S. or Canada, or (2) the Internet or (3) by mailing their signed
proxy card. The telephone and Internet voting procedures are designed to
authenticate shareholders' identities, to allow shareholders to vote their
shares and to confirm that their instructions have been properly recorded. We
have been advised by counsel that the procedures that have been put in place are
consistent with the requirements of applicable law. Specific instructions to be
followed by any registered shareholder interested in voting via telephone or the
Internet are set forth on the enclosed proxy card.
Stockholders may revoke the authority granted by their execution of proxies
at any time before the effective exercise of such authority by filing with our
Secretary a written revocation or a duly executed proxy bearing a later date or
by voting in person at the annual meeting. Shares represented by executed and
unrevoked proxies will be voted in accordance with the choice or instructions
specified thereon. If no specifications are given, the proxies intend to vote
the shares represented thereby to approve Proposal No. 1 as set forth in the
accompanying Notice of 2001 Annual Meeting of Stockholders and in accordance
with their best judgment on any other matters that may properly come before the
Meeting.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record at the close of business on April 9, 2001, are
entitled to notice of, and to vote, at the annual meeting or any adjournment or
postponement thereof. We had outstanding on April 9, 2001, 27,964,298 shares of
common stock, each of which is entitled to one vote upon the matters to be
presented at the annual meeting. The presence, in person or by proxy, of a
majority of the issued and outstanding shares of common stock will constitute a
quorum for the transaction of business at the annual
meeting. Votes withheld from any nominee, abstentions and broker "non-votes" are
counted as present or represented for purposes of determining the presence or
absence of a quorum for the new annual meeting. A broker "non-vote" occurs when
a nominee holding shares for a beneficial owner does not vote on one or more
proposals because the nominee does not have discretionary voting power and has
not received instructions from the beneficial owner. Abstentions are included in
the number of shares present or represented and voting on each matter. Broker
"non-votes" are not so included.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to each
person known to us to be the beneficial owner of more than 5% of the issued and
outstanding common stock as of April 15, 2001 or other date noted below. As of
April 9, 2001, 27,964,298 shares of common stock were outstanding.
NUMBER OF SHARES
BENEFICIALLY OWNED PERCENTAGE
----------------------------------- OF SHARES
OUTSTANDING RIGHT TO TOTAL BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES ACQUIRE NUMBER OWNED
- ------------------------------------------------- ----------- --------- --------- ------------
Deutsche Bank A.G................................ 1,551,500 -- 1,551,500 5.5%
Taunusanlange 12
D-60325 Frankfurt am Main
Federal Republic of Germany
Sofinov Societe Financiere....................... 1,029,823 1,111,111 2,140,934 7.7%
D'Innovation Inc.
1981 Avenue McGill College
7e etage
Montreal, Quebec H3A 3C7
Wells Fargo and Company.......................... 1,480,820 -- 1,480,820 5.3%
420 Montgomery Street
San Francisco, CA 94104
- ------------------------
With respect to the foregoing table, you should note that:
- - Beneficial ownership is determined in accordance with the rules and
regulations of the SEC. In computing the number of shares beneficially owned
by a person and the percentage ownership of that person, shares of common
stock subject to options held by that person that are currently exercisable or
exercisable within 60 days of April 15, 2001 are deemed outstanding. These
shares, however, are not deemed outstanding for the purposes of computing the
percentage ownership of any other person. Except as indicated above and
pursuant to the applicable community property laws, each stockholder named in
the table has sole voting and investment power with respect to the shares set
forth opposite such stockholder's name. Shares included in the table under
"Right to Acquire" represent shares subject to outstanding common stock
purchase warrants currently exercisable.
- - The shares attributable to Deutsche Bank A.G. includes 1,477,300 shares held
by Deutsche Fonds Holding GmbH and shares held by the following subsidiaries
of Deutsche Bank A.G. and Deutsche Fonds Holding GmbH: DWS Investment GmbH,
Deutsche Vermogensbildungsgesellschaft mbh, DWS Investment Management S.A.
Luxemburg, Deutsche Asset Management Investmentgesellschaft GmbH and Deutsche
Asset Management International GmbH. Deutsche Bank A.G. has shared voting and
2
investment power with respect to the shares owned by Deutsche Fonds Holding
GmbH and its and Deutsche Bank A.G.'s subsidiaries.
- - Sofinov Societe Financiere D'Innovation Inc. is a wholly owned subsidiary of
Caisse De Depot et Placement du Quebec. Because of such relationship, Caisse
is the indirect beneficial owner of the shares attributable to Sofinov and may
be deemed to beneficially own all of the shares owned by Sofinov.
- - The shares attributable to entities affiliated with Wells Fargo & Company
includes shares held by Peregrine Capital Management, Inc., Wells Capital
Management, Inc., Wells Fargo Bank, N.A. and Wells Fargo Bank Minnesota, N.A.,
each being a subsidiary of Wells Fargo & Company and therefore Wells Fargo &
Company has voting and investment power with respect to the shares owned by
each of the listed subsidiaries.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
The Board of Directors is divided into three classes, with one class of
directors elected each year at the annual meeting of stockholders for a
three-year term of office. All directors of a class hold their positions until
the annual meeting of stockholders at which their terms of office expire and
until their successors have been duly elected and qualified.
The term of office of the Class II directors will expire at the annual
meeting. The Board of Directors has nominated Susan B. Bayh, Barry Bloom, Ph.D.,
and Walter Maupay, for reelection as Class II directors to hold office until the
annual meeting of stockholders to be held in 2004 and until their respective
successors have been duly elected and qualified. In the event any of the
nominees shall be unable or unwilling to serve as a director, discretionary
authority is reserved to vote for a substitute or substitutes. The Board of
Directors has no reason to believe that any of the nominees will be unable or
unwilling to serve. Proxies cannot be voted for any persons other than the
nominees.
The affirmative vote of a plurality of the shares of common stock present at
the annual meeting, in person or by proxy, is required for the election of the
Class II directors. Unless authority to do so is withheld, the persons named in
each proxy will vote the shares represented thereby "FOR" the election of the
nominees.
INFORMATION AS TO DIRECTORS AND NOMINEES FOR DIRECTOR
The names of our directors (including the nominees for reelection as
Class II directors at the annual meeting), their ages, their position(s) with
Cubist, the year in which each first became a director, the expiration of the
term of office of each, the class of director of each, the principal occupation
and
3
employment of each over at least the last five years, and other directorships,
if any, of each are listed below.
DIRECTOR TERM CLASS OF
NAME AGE POSITION(S) HELD SINCE EXPIRES DIRECTOR
- ---- -------- ------------------------------ -------- -------- --------
Scott M. Rocklage, Ph.D....... 46 Chairman of the Board of 1994 2002 III
Directors and Chief Executive
Officer
John K. Clarke................ 47 Director 1992 2002 III
Paul R. Schimmel, Ph.D........ 60 Director 1992 2002 III
Barry Bloom, Ph.D............. 72 Director 1993 2001 II
Walter Maupay................. 62 Director 1999 2001 II
Susan B. Bayh................. 41 Director 2000 2001 II
David W. Martin, Jr., M.D..... 60 Director 1997 2003 I
John Zabriskie, Ph.D.......... 61 Director 1999 2003 I
DR. ROCKLAGE was elected Chairman of the Board of Directors in March 2000.
Dr. Rocklage has served as our Chief Executive Officer and as a member of the
board of directors since July 1994. He served as our President from July 1994
until March 2001. From 1990 to 1994, Dr. Rocklage served as President and Chief
Executive Officer of Nycomed Salutar, Inc., a diagnostic imaging company. From
1992 to 1994, he also served as President and Chief Executive Officer and
Chairman of Nycomed Interventional, Inc., a medical device company. From 1986 to
1990, he served in various positions at Nycomed Salutar, Inc. and was
responsible for designing and implementing research and development programs
that resulted in three drug products in human clinical trials, including the
approved drugs Omniscan and Teslascan. Dr. Rocklage received his B.S. in
Chemistry from the University of California, Berkeley and his Ph.D. in Chemistry
from the Massachusetts Institute of Technology.
MR. CLARKE is one of our founders and served as Chairman of the Board of
Directors from our incorporation to March 2000. Mr. Clarke has served as one of
our directors since our incorporation. From 1992 to 1994, Mr. Clarke served as
our acting President and Chief Executive Officer. Since 1982, he has been a
general partner of DSV Management in Princeton, New Jersey, the general partner
of DSV Partners IV. He is a founder and director of Alkermes, Inc. and a
director of VISICU, Inc., Parkstone Medical Information Systems, Inc.,
MedContrax, Inc., Molecular Mining, Inc. and TechRx, Inc. Mr. Clarke is the
Managing General Partner for Cardinal Partners, founded in 1997. Mr. Clarke
received his B.A. in Biology and Economics from Harvard College and his M.B.A.
from The Wharton School of the University of Pennsylvania.
DR. SCHIMMEL is one of our scientific founders and has served as one of our
directors since our incorporation. From 1967 to 1998, Dr. Schimmel served as a
Professor of Biochemistry and Biophysics at the Massachusetts Institute of
Technology and as the John D. and Catherine T. MacArthur Professor of
Biochemistry and Biophysics at the Massachusetts Institute of Technology from
1992 to 1997. He has been a Professor and member of the Skaggs Institute for
Chemical Biology of the Scripps Research Institute since 1997. Dr. Schimmel is
an expert in molecular biology, protein translation and aminoacyl-tRNA
synthetases. He is a member of the National Academy of Sciences and the American
Academy of Arts and Sciences. Dr. Schimmel was a founder and is a director of
Repligen Corporation and Alkermes, Inc., each
4
a biotechnology company. Dr. Schimmel received his A.B. in Pre-Medicine from
Ohio Wesleyan University and his Ph.D. in Biochemistry from the Massachusetts
Institute of Technology.
DR. BLOOM has served as a one of our directors since September 1993.
Dr. Bloom has more than 40 years experience in the pharmaceutical industry. From
1952 to 1993, Dr. Bloom served in various positions at Pfizer Inc., including
Executive Vice President of Research & Development. He is a director of Vertex
Pharmaceuticals, Inc. and Neurogen Corp., biotechnology companies; Microbia, a
biotechnology company; and Incyte Pharmaceuticals, Inc., a genomics company.
Dr. Bloom received his S.B. in Chemistry and his Ph.D. in Organic Chemistry from
the Massachusetts Institute of Technology.
MR. MAUPAY has served as one of our directors since June 1999. Since 1988,
Mr. Maupay has served as President of Calgon Vestal Laboratories, a division of
Merck & Co., Inc. until January 1995, when it was sold to Bristol-Myers Squibb.
Since June 1995, Mr. Maupay has also served as Group Executive of Calgon Vestal
Laboratories after the sale to Bristol-Myers Squibb. From 1984 to 1988
Mr. Maupay served as Vice-President, Healthcare at Calgon Vestal Laboratories.
Mr. Maupay is a director of Life Medical Sciences, Inc., a medical device
company, Kensey Nash Corporation, a medical device company, Neshaminy Golf
Club, Inc. and Warwick Golf Farm. Mr. Maupay received his Bachelor of Science in
Pharmacy from Temple University and his M.B.A. from Lehigh University.
MS. BAYH has served as one of our directors since June 2000. From 1994 to
present, Ms. Bayh has served as the Commissioner of the International Joint
Commission (IJC), a bi-national organization between the United States and
Canada focusing on environmental issues of the Great Lakes. Ms. Bayh served as
an attorney in Eli Lilly's Pharmaceutical Division handling federal regulatory
issues for marketing and medical clients from 1989 to 1994 and, from 1984 until
1989, Ms. Bayh practiced law, focusing on litigation, utility and corporate law,
and antitrust. She is also a director of Anthem, Inc., (a Blue Cross/Blue Shield
company), Corvas International, Inc., a biotechnology company, Emmis
Communications, and Golden State Foods. Ms. Bayh has a B.A. from the University
of California at Berkeley and a J.D. from the University of Southern California
Law Center.
DR. MARTIN has served as one of our directors since October 1997. Since
July 1997, Dr. Martin has served as President, Chief Executive Officer and a
founder of Eos Biotechnology, Inc. Dr. Martin was a Professor of Medicine,
Professor of Biochemistry and an Investigator of the Howard Hughes Medical
Institute at the University of California San Francisco until 1983 when he
became the first Vice President and subsequently Senior Vice President of
Research and Development at Genentech, Inc., a position he held until 1990. He
was Executive Vice President of DuPont Merck Pharmaceutical Company from 1991
through 1993 and then returned to California in 1994 where he was Senior
Vice-President of Chiron Corp., a biotechnology company, and President of Chiron
Therapeutics. In May 1995, he assumed the position of President and Chief
Executive Officer of Lynx Therapeutics, Inc., a biotechnology company, and
served until November 1996. Dr. Martin is also a Director of Varian Medical
Systems, Inc., a medical equipment and software supplier, and of Talik, Inc., a
biopharmaceutical development company.
DR. ZABRISKIE has served as one of our directors since June 1999. From
July 1997 to July 2000, Dr. Zabriskie has served as Chairman of the Board of NEN
Life Science Products, Inc., a laboratory supply company. From July 1997 to
December 1999, Dr. Zabriskie also served as President and Chief Executive
Officer of NEN Life Science Products, Inc. From November 1995 to January 1997,
he was President and Chief Executive Officer of Pharmacia & Upjohn. From 1994 to
November 1995, he served as President, Chief Executive Officer and Chairman of
Upjohn Co.
5
OWNERSHIP OF EQUITY SECURITIES BY MANAGEMENT
The table below sets forth information as of March 6, 2001, as reported to
us, with respect to the beneficial ownership of the common stock by each
director and each named executive officer, and by all directors and executive
officers as a group. Beneficial ownership is determined in accordance with the
rules and regulations of the SEC. In computing the number of shares beneficially
owned by a person and the percentage ownership of that person, shares of common
stock subject to options held by that person that are currently exercisable or
exercisable within 60 days of April 15, 2001 are deemed outstanding. These
shares, however, are not deemed outstanding for the purposes of computing the
percentage ownership of any other person. Except as indicated below and pursuant
to applicable community property laws, each stockholder named in the table has
sole voting and investment power with respect to the shares set forth opposite
such stockholder's name. Shares included below under "Right to Acquire"
represent shares subject to outstanding stock options currently exercisable or
exercisable within 60 days of April 15, 2001.
NUMBER OF SHARES
BENEFICIALLY OWNED PERCENTAGE
---------------------------------- OF SHARES
OUTSTANDING RIGHT TO TOTAL BENEFICIALLY
NAME SHARES ACQUIRE NUMBER OWNED
- ---- ----------- -------- --------- ------------
Scott M. Rocklage, Ph.D............................ 237,360 223,124 460,484 *
Francis P. Tally, M.D.............................. 85,607 35,847 121,454 *
Alan D. Watson, Ph.D, M.B.A........................ 88,875 10,624 99,499 *
Thomas A. Shea, M.B.A.............................. 31,847 16,356 48,203 *
Michael F. DeBruin, M.D............................ -- 38,125 38,125 *
Dennis D. Keith, Ph.D.............................. 22,116 98,436 120,552 *
Frederick B. Oleson, Jr.,D.Sc...................... 51,874 42,500 94,374 *
George H. Shimer, Jr., Ph.D........................ -- 24,999 24,999 *
Thomas J. Slater................................... -- 43,000 43,000 *
Robert J. McCormack, Ph.D.......................... -- 25,937 25,937 *
Julian M. Davies, Ph.D............................. 4,797 8,379 13,176 *
John K. Clarke..................................... 74,863 21,663 96,526 *
Paul R. Schimmel, Ph.D............................. 295,713 21,663 317,376 *
Barry Bloom, Ph.D.................................. 21,426 15,008 36,434 *
David W. Martin, Jr., M.D.......................... -- 20,000 20,000 *
Susan B. Bayh...................................... 4,000 3,750 7,750 *
Walter Maupay...................................... 6,000 16,500 22,500 *
John Zabriskie, Ph.D............................... 8,187 12,313 20,500 *
All directors and executive officers as a group
(18 persons)..................................... 932,665 678,224 1,610,889 5.8%
- ------------------------
* Less than 1% of the issued and outstanding shares of Common Stock.
- - Dr. Keith holds a portion of his shares with joint voting and investment power
with Dr. Jo-Linda L. Keith.
- - A portion of the shares attributable to Dr. Schimmel are held by the Paul R.
Schimmel Profit-Sharing Plan.
6
- - Mr. Maupay does not have sole voting and investment power with respect to a
portion of his shares.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
REPORT OF THE AUDIT COMMITTEE
The Board of Directors has an Audit Committee consisting of three directors.
All of the members of the Committee are "independent" of our Company and
management, as that term is defined in the National Association of Securities
Dealers listing standards.
The functions of the Audit Committee include (1) making recommendations to
the Board of Directors with respect to the engagement of the independent
auditors; (2) reviewing the audit plans developed by the independent auditors
for the annual audit of our books and records and the results of such audit; (3)
reviewing the annual financial statements; (4) reviewing the professional
services provided by the independent auditors and the auditors' independence;
and (5) reviewing the adequacy of our system of internal controls and the
responses to management letters issued by the independent auditors.
In fulfilling its oversight responsibilities, the Committee reviewed the
audited financial statements with management and the independent auditors. The
Committee discussed with the independent auditors the matters to be discussed by
Statement of Auditing Standards No. 61. In addition, the Committee received from
the independent auditors, written disclosure and the letter required by
Independence Standards Board Standard No. 1. The Committee also discussed with
the independent auditors the auditors' independence from management and the
company, including the matters covered by the written disclosures and letter
provided by the independent auditors.
The Committee discussed with the Company's independent auditors the overall
scope and plans for their audits. The Committee meets with the independent
auditors, with and without management present, to discuss the results of their
examinations, their evaluations of the Company, the internal controls, and the
overall quality of the financial reporting. The Committee held two meetings
during fiscal year 2000.
Based on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board approved, that the audited
financial statements be included in the Annual Report on Form 10-K for the year
ended December 31, 2000 for filing with the Securities and Exchange Commission.
The Board of Directors has adopted a written charter for the Audit
Committee. A copy of that charter is included as "Appendix A" to this proxy
statement.
April 11, 2001
Dr. John Zabriskie
Dr. Barry Bloom
Dr. Paul R. Schimmel
COMPENSATION COMMITTEE
The Board of Directors has a Compensation Committee, which met one time
during the 2000 fiscal year. The Compensation Committee's principal functions
are to review and approve salary plans and bonus awards, as well as other forms
of compensation, and to administer our 1993 Amended and Restated Stock Option
Plan and the 2000 Nonstatutory Stock Option Plan, pursuant to the terms of such
plans. The
7
members of the Compensation Committee during the 2000 fiscal year were
Mr. John K. Clarke, Dr. David Martin and Mr. Walter Maupay. Dr. Martin became a
member of the Compensation Committee as of December 15, 2000.
During the 2000 fiscal year, the Board of Directors held four meetings. Each
director attended more than seventy-five percent (75%) of the Board meetings,
and the meetings of Board committees on which he or she served.
COMPENSATION OF DIRECTORS
Dr. Rocklage is Chairman of the Board of Directors and one of our full-time
officers; he receives no additional compensation for serving on the Board of
Directors or its committees. No other director is a full-time officer. We paid
$1,000 to Ms. Bayh, Dr. Bloom, Dr. Martin, Mr. Maupay and Dr. Zabriskie, each
for each meeting of the Board of Directors they attended and each were
reimbursed for expenses in connection with their attendance. No other director
received cash compensation during the 2000 fiscal year for his or her service on
the Board of Directors or any committee thereof. In 2001, Ms. Bayh, Dr. Bloom,
Dr. Martin, Mr. Maupay and Dr. Zabriskie will receive a fee of $1,000 for each
Board meeting attended and will be reimbursed for expenses incurred in
connection with their attendance. No other director will receive cash
compensation during the 2001 fiscal year for his or her service on the Board of
Directors or any committee thereof.
Pursuant to our stock option plan, upon first joining the Board of
Directors, each director who is not one of our officers or employees is granted
automatically a stock option exercisable for 15,000 shares of common stock at
fair market value, and each time that he or she is serving as a director on the
business day immediately following an annual meeting of stockholders, such
director is automatically granted on such business day a stock option
exercisable for 10,000 shares of common stock at fair market value.
Pursuant to a consulting agreement, Dr. Schimmel received $48,000, for
consulting services during 2000.
8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below sets forth compensation information for the fiscal years
ended December 31, 2000, 1999 and 1998 with respect to our Chief Executive
Officer and the four executive officers with the highest compensation whose 2000
total annual compensation exceeded $100,000.
LONG-TERM
COMPENSATION AWARDS
----------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES ALL OTHER
NAME AND -------------------------- STOCK UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) AWARDS($) OPTIONS(#) ($)(2)
- ------------------------------------ -------- ------------ -------- --------------- ---------- ------------
Scott M. Rocklage, Ph.D. ........... 2000 $323,500 $ --(3) $ -- 75,000 $ 7,623
Chief Executive Officer and 1999 $284,100 $185,000 $ -- 85,000 $ 8,858
Chairman(4) 1998 $249,423 $ 73,500 $ -- 175,000 $ 7,966
Francis P. Tally, MD ............... 2000 $247,236 $ 26,648 $ -- 25,000 $16,856
Executive Vice President 1999 $233,263 $ 34,040 $ -- 41,500 $16,067
Scientific Affairs 1998 $220,500 $ 40,000 $ -- 65,398 $ 8,757
Michael F. DeBruin, M.D. ........... 2000 $189,744 $ 9,250 $ -- 50,000 $ 8,599
Vice President 1999 $ 61,942(5) $ 9,250(5) $ -- 50,000 $ 221(5)
Clinical Research 1998 $ -- $ -- $ -- -- $ --
Dennis D. Keith, Ph.D. ............. 2000 $168,000 $ 13,440 $ -- 5,000 $ 8,599
Vice President 1999 $167,723 $ 15,000 $ -- 15,000 $ 7,901
Drug Discovery 1998 $160,500 $ -- $ -- 35,000 $ --
Alan D. Watson, Ph.D. .............. 2000 $205,128 $ 11,667 $ -- 5,000 $ 8,135
Senior Vice President 1999 $ 53,846(6) $ -- $ -- 125,000 $ 211(6)
Corporate Development 1998 $ -- $ -- $ -- -- $ --
- ------------------------
(1) Salary includes amounts deferred pursuant to our 401(k) Plan.
(2) All other compensation includes (i) long-term disability insurance premiums
paid by Cubist and (ii) Cubist's matching contributions under our 401(k)
Plan.
(3) Dr. Rocklage received a bonus of $212,500 relating to 2000 performance,
however the bonus was paid in January 2001.
(4) Dr. Rocklage was appointed Chairman of the Board of Directors on March 3,
2000.
(5) Reflects compensation from September 8, 1999 to December 31, 1999.
Dr. DeBruin's employment began on September 8, 1999.
(6) Reflects compensation from September 13, 1999 to December 31, 1999.
Dr. Watson's employment began on September 13, 1999.
9
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding grants of stock options
under our 1993 Stock Option Plan to the named executive officers during the
fiscal year ended December 31, 2000.
NUMBER OF PERCENT
SECURITIES OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE GRANT DATE
GRANTED EMPLOYEES IN OR BASE EXPIRATION PRESENT
NAME (SHARES)(1) FISCAL 2000 PRICE DATE VALUE(2)
- ---- ----------- ------------ -------- ---------- ----------
Scott M. Rocklage, Ph.D................. 70,000 5.3% $11.625 9/18/2010 $620,970
5,000 0.4% $11.625 1/1/2010 $239,754
Francis P. Tally, MD.................... 25,000 1.9% $11.625 1/1/2010 $221,775
Michael F. DeBruin, M.D................. 50,000 3.8% $11.625 1/1/2010 $443,550
Dennis D. Keith, Ph.D................... 5,000 0.4% $11.625 1/1/2010 $ 44,355
Alan D. Watson, Ph.D.................... 5,000 0.4% $11.625 1/1/2010 $ 44,355
- ------------------------
(1) Each option is exercisable in 16 equal quarterly installments, and has a
maximum term of 10 years from the date of grant, subject to earlier
termination in the event of the optionee's cessation of service with Cubist.
The options are exercisable during the holder's lifetime only by the holder
and they are exercisable by the holder only while the holder is an employee
of Cubist and for certain limited periods of time thereafter in the event of
termination of employment.
(2) Based on the Black-Scholes pricing model suggested by the Securities and
Exchange Commission. The estimated values under that model are based on
arbitrary assumptions as to variables such as stock price volatility,
projected future dividend yield and interest rates, discounted for lack of
marketability and potential forfeiture due to vesting schedule. The
estimated values above use the following significant assumptions:
volatility--87%; dividend yield--0%; the average life of the options--7
years; risk-free interest rate--yield to maturity of 10-year treasury note
at grant date--6.2%. The actual value, if any, an executive may realize will
depend on the excess of the stock price over the exercise price on the date
the option is exercised. There is no assurance that the value realized by an
executive will be at or near the value estimated using a modified
Black-Scholes model.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the stock options
exercised during the fiscal year ended December 31, 2000, and the unexercised
stock options held at the end of such fiscal year by the named executive
officers.
10
NAMED EXECUTIVE OFFICERS.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
DECEMBER 31, 2000 DECEMBER 31, 2000(1)
SHARES ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- ----------- ------------- ----------- -------------
Scott M. Rocklage, Ph.D...... 0 $ 0 216,874 153,126 $5,303,836 $3,496,468
Francis P. Tally, MD......... 0 $ 0 34,910 54,827 $ 786,964 $1,259,091
Michael F. DeBruin, M.D...... 0 $ 0 37,500 62,500 $ 684,375 $1,128,125
Dennis D. Keith, Ph.D........ 0 $ 0 97,499 32,501 $2,265,136 $ 780,334
Alan D. Watson, Ph.D......... 30,000 $1,726,890 9,374 73,751 $ 218,534 $1,782,404
- ------------------------
(1) Based on the difference between the exercise price of each option and the
last reported sales price of our common stock on the NASDAQ-NMS on
December 29, 2000 of $29.00.
EXECUTIVE EMPLOYMENT AGREEMENTS
Dr. Rocklage, our Chairman of the Board of Directors and Chief Executive
Officer, is employed pursuant to an employment agreement, dated June 20, 1994.
Under the terms of that agreement, Dr. Rocklage's annual base salary was set at
$175,000 subject to annual review and increase by the Board of Directors, and he
is entitled to a performance bonus upon our achievement of certain milestones
for each fiscal year that have been mutually agreed upon by Dr. Rocklage and the
Board of Directors prior to the commencement of that particular fiscal year.
Dr. Rocklage received a base salary in 2000 of $323,500 and a performance bonus
of $212,500 paid in January 2001. We can terminate Dr. Rocklage's employment at
any time by giving written notice of termination and may be terminated by
Dr. Rocklage at any time upon thirty days' written notice of termination. Upon
any termination of Dr. Rocklage's employment by us without cause, Dr. Rocklage
is entitled to severance pay in an amount equal to twenty-four months of his
then current annual base salary.
None of our other executive officers has entered into an employment
agreement.
11
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE OFFICER COMPENSATION
COMPENSATION PHILOSOPHY AND OBJECTIVES
Our compensation philosophy for executive officer compensation is to reflect
the value created and protected for shareholders, while furthering our short,
and long-term strategic goals and values by aligning compensation with business
objectives and individual performance. Short and long-term compensation should
motivate and reward high levels of performance and are geared to attract and
retain qualified executive officers. Accordingly, our executive officer
compensation consists of three primary components intended to further our
overall compensation philosophy to achieve our compensation objectives. The
components include: base salary, annual bonuses and grants of stock options.
In evaluating our executive officer's performance, we generally follow the
process outlined below:
- Prior to or shortly after the beginning of each fiscal year, we set goals
and objectives, which are reviewed with, and ultimately approved by, the
full Board of Directors. Dr. Rocklage reports to the Board on Cubist's
progress toward the achievement of these goals and objectives throughout
the year at Board meetings and at other times as necessary.
- Once a year, generally in December, the Compensation Committee meets with
Dr. Rocklage. This meeting is a comprehensive review of goals and
objectives achieved during the year along with a review of Dr. Rocklage's
full compensation package against compensation packages of Chief Executive
Officers in similar companies. Dr. Rocklage's compensation is then set
accordingly for the next fiscal year.
- In December of each year, Dr. Rocklage evaluates the performance of the
remainder of Cubist's executive officers against their goals and
objectives set the prior year and recommends an annual base salary, stock
option grant and bonus to the Compensation Committee commensurate with
performance.
COMPENSATION FOR FISCAL 2000
CHIEF EXECUTIVE OFFICER COMPENSATION
In December 2000, the Compensation Committee set Dr. Rocklage's annual base
salary at $375,000 effective on January 1, 2001. This increase represented a
$50,000 increase or 15.3% over the prior years base salary. The Compensation
Committee performed a comprehensive review of the compensation paid to chief
executive officers in other companies and has concluded this increase positions
Dr. Rocklage fairly within the range of base salaries paid to other chief
executive officers of comparable companies.
In December 2000, the Compensation Committee awarded Dr. Rocklage $212,500
in bonus funds and set an additional $225,000 as the potential bonus amount
payable upon achievement of goals for 2001.
In December 2000, the Compensation Committee authorized a company-wide
distribution of stock options to employees based on performance. Dr. Rocklage's
stock options awarded relating to this distribution amounted to 100,000 common
shares.
12
REPORT ON EXECUTIVE COMPENSATION
In December 2000, Dr. Rocklage recommended and the Compensation Committee
accepted base salary increases for the executive staff ranging from 5% to 17%.
The increases were determined after reviewing performance against goals and
objectives set for the year and also against salaries of similar positions in
comparable companies.
The Compensation Committee also authorized bonuses in the amount of $249,341
for Cubist's ten executive officers, excluding Dr. Rocklage.
In December 2000, the Compensation Committee authorized a company-wide
distribution of stock options to employees based on performance. The executive
officer's stock options awards relating to this distribution amounted to 210,000
common shares, excluding Dr. Rocklage.
CONCLUSION
The Compensation Committee believes that the total 2001-related compensation
of the Chief Executive Officer and each of the executive officers, as described
above, is fair and is within the range of compensation for executive officers in
similar positions at comparable companies.
COMPENSATION COMMITTEE
John Clarke
Dr. David Martin
Walter Maupay
April 11, 2001
13
CORPORATE PERFORMANCE GRAPH
The following graph compares the performance of our common stock to the
Nasdaq Stock Market (U.S. Companies) Index and to the Nasdaq Pharmaceutical
Index since December 31, 1996. The comparison assumes $100 was invested on
December 31, 1996 in Cubist's common stock and in each of the foregoing indices
and assumes reinvestment of dividends.
CORPORATE PERFORMANCE GRAPH
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CUBIST NASDAQ STOCK NASDAQ
PHARMACEUTICALS, INC. MARKET (U.S.) PHARMACEUTICAL
12/96 $100 $100 $100
12/97 $95 $122 $103
12/98 $62 $173 $132
12/99 $314 $321 $247
12/00 $473 $193 $308
14
CERTAIN TRANSACTIONS
On September 25, 1999, in consideration for the performance of services by
Alan Watson, our Senior Vice President, Corporate Development, we issued to
Dr. Watson 50,000 restricted shares of common stock, at a purchase price of
$10.125 per share, the fair market value of the common stock as determined by
the board of directors. Dr. Watson purchased the shares by executing a
promissory note in the amount of $506,250 with a 4% annual interest rate. This
note is secured by the 50,000 shares of common stock. The principal and interest
on the promissory note will be forgiven in three equal installments subject to
his continued employment. The first installment occurred on September 25, 2000.
The remaining installments shall occur on September 25, 2001, and September 25,
2002 subject to his continued employment.
On September 18, 2000, we accepted a promissory note of $250,000 from Scott
Rocklage, our Chairman and Chief Executive Officer. This note has an annual
interest rate of 6.15% and is due on March 31, 2002. In the event the note is
repaid prior to December 31, 2001, no interest will be charged.
We have adopted a policy, that all transactions between Cubist and its
officers, directors and affiliates must (i) be approved by a majority of those
members of our Board of Directors that are not parties, directly or indirectly
through affiliates, to such transactions and (ii) be on terms no less favorable
to Cubist than could be obtained from unrelated third parties.
For a description of certain transactions and certain employment and other
arrangements between Cubist and certain of its directors and executive officers,
see "Compensation of Directors" and "Executive Employment Agreements."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended,
Cubist's directors, its executive (and certain other) officers, and any persons
holding more than ten percent of the common stock are required to report their
ownership of the common stock and any changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and we are required to report in this proxy statement any
failure to file by these dates during 2000. To our knowledge, all of these
filing requirements were satisfied by its directors, officers and ten percent
holders. In making these statements, the Company has relied upon the written
representations of its directors, officers and its ten percent holders and
copies of the reports that they have filed with the Commission.
15
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed PricewaterhouseCoopers LLP, who have
served as Cubist's auditors since 1993, to examine the financial statements of
Cubist for the fiscal year 2001. In addition to audit services,
PricewaterhouseCoopers LLP also provided certain non-audit services to Cubist in
2000. The Audit Committee has considered whether the provision of these
additional services is compatible with maintaining the independence of
PricewaterhouseCoopers LLP. The following table sets forth the fees incurred by
Cubist for the services of PricewaterhouseCoopers LLP in 2000.
FINANCIAL INFORMATION SYSTEMS
AUDIT FEES DESIGN AND IMPLEMENTATION FEES ALL OTHER FEES
- ---------- ------------------------------ --------------
$97,197 $0 $174,967*
- ------------------------
* Consists primarily of fees in connection with the acquisition of TerraGen
Discovery Inc. and expenses associated with various financings.
Cubist expects that representatives of PricewaterhouseCoopers will be
present at the annual meeting, and will be given the opportunity to make a
statement if they desire to do so and to respond to appropriate questions.
STOCKHOLDER PROPOSALS
All stockholder proposals that are intended to be presented at the 2002
Annual Meeting of Stockholders of Cubist must be received by Cubist no later
than December 31, 2001, for inclusion in the Board of Directors' proxy statement
and form of proxy relating to the annual meeting.
OTHER BUSINESS
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the annual meeting and will have the opportunity to make a statement if they
desire to do so and to respond to appropriate questions.
The Board of Directors knows of no other business to be acted upon at the
annual meeting. However, if any other business properly comes before the annual
meeting, it is the intention of the persons named in the enclosed proxy to vote
on such matters in accordance with their judgment.
The prompt return of your proxy will be appreciated and helpful in obtaining
the necessary vote. Therefore, whether or not you expect to attend the annual
meeting, please sign the proxy and return it in the enclosed envelope, or vote
by telephone or on the Internet by following the instructions on the enclosed
proxy card.
16
APPENDIX A
CUBIST PHARMACEUTICALS, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
There shall be a committee of the Board of Directors to be known as the
audit committee (the "Audit Committee"). The Audit Committee shall be composed
of directors who are not officers or employees of the corporation or its
subsidiaries and are free of any relationship that, in the opinion of the board
of directors, would interfere with their exercise of independent judgment as a
committee member. At least three members of the Audit Committee shall be
conversant with the terms and terminology of finance, of which at least one
member shall have accounting or related financial management expertise.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the corporate Directors in
fulfilling their responsibility to the stockholders, potential stockholders, and
investment community relating to corporate accounting, reporting practices of
the corporation, and the quality and integrity of the financial reports of the
corporation. In so doing, it is the responsibility of the Audit Committee to
maintain free and open means of communication between the Directors, the
independent auditors, and the financial management of the corporation.
Independent auditors of the corporation shall be primarily accountable to the
Audit Committee.
MEETINGS
The Audit Committee shall meet at least two times annually. The Audit
Committee shall meet periodically with management and the independent
accountants, in separate executive sessions, to discuss any matters that the
Audit Committee or either of these groups believes should be discussed
privately. The Audit Committee may meet by telephone and may delegate specific
functions to one or more of its members.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the directors and stockholders that the
corporate accounting and reporting practices of the corporation are in
accordance with all requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
1. Review and recommend to the directors the independent auditors, after
considering their independence and effectiveness, to be selected to
audit the financial statements of the corporation and its divisions and
subsidiaries and receive from any potential auditor a written statement
of all relationships of the auditor to the corporation.
2. Meet with the independent auditors, with and separately from financial
management of the corporation, to review the scope of the proposed audit
for the current year and the audit
A-1
procedures to be utilized, and at the conclusion thereof review such
audit, including any comments or recommendations of the independent
auditors.
3. Obtain satisfaction that the audit fee is appropriate and that the
corporation will receive a complete and comprehensive audit for such
fee.
4. Review with independent auditors and the corporation's financial and
accounting personnel the adequacy and effectiveness of the accounting
and financial controls of the corporation, and elicit any
recommendations for the improvement of such internal control procedures
or particular areas where new or more detailed controls or procedures
are desirable. Particular emphasis should be given to the adequacy of
such internal controls to expose any payments, transactions, or
procedures that might be deemed illegal or otherwise improper.
5. Review the financial statements contained in the annual report to
stockholders and quarterly reports on Form 10-Q, prior to their
issuance, with management and the independent auditors to determine that
the independent auditors are satisfied with the disclosure and content
of the financial statements to be presented to the stockholders. Any
changes in accounting principles should be reviewed.
6. Review separately with each of management and the independent auditors
any significant disputes between management and the independent auditors
that arose in connection with the preparation of the financial
statements.
7. Provide sufficient opportunity for the independent auditors to meet with
the members of the Audit Committee without members of management
present. Among the items to be discussed in these meetings are the
independent auditors' evaluation of the corporation's financial,
accounting, and auditing personnel, and the cooperation that the
independent auditors received during the course of the audit.
8. Review the corporation's compliance with law and significant corporate
policies, including its code of conduct.
9. Review accounting and financial human resources and succession planning
within the corporation.
10. Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
11. Review and update this Charter periodically, at least annually, as
conditions dictate.
12. Prepare a committee report to the stockholders.
A-2
[FORM OF PROXY CARD]
CUBIST PHARMACEUTICALS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR
2001 ANNUAL MEETING OF STOCKHOLDERS ON JUNE 7, 2001
The undersigned hereby appoints Scott M. Rocklage and Justin P.
Morreale and each of them proxies, each with power of substitution, to vote at
the 2001 Annual Meeting of Stockholders of CUBIST PHARMACEUTICALS, INC. to be
held on June 7, 2001 (including any adjournments or postponements thereof), with
all the powers the undersigned would possess if personally present, as specified
on the ballot on the reverse side on the matters listed on the reverse side and,
in accordance with their discretion, on any other business that may come before
the meeting, and revokes all proxies previously given by the undersigned with
respect to the shares covered hereby.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE STOCKHOLDER. IF NO CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE NOMINEES OF THE BOARD OF DIRECTORS AND UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING IN THE APPOINTED
PROXIES' DISCRETION.
- ------------ -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------ -----------
-2-
BY TELEPHONE
- ------------
It's fast, convenient, and immediate! Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683)
FOLLOW THESE FOUR EASY STEPS:
- -----------------------------
1. Read the accompanying Proxy Statement and Proxy Card.
2. Call the toll-free number 1-877-PRX-VOTE (1-877-779-8683)
3. Enter your 14-digit Voter Control Number located on your Proxy Card
above your name.
4. Follow the recorded instructions.
YOUR VOTE IS IMPORTANT! CALL 1-877-PRX-VOTE ANYTIME!
VOTE BY INTERNET
- ----------------
It's fast, convenient, and your vote is immediately confirmed and posted.
FOLLOW THESE FOUR EASY STEPS:
- -----------------------------
1. Read the accompanying Proxy Statement and Proxy Card.
2. Go to the website: http://www.eproxyvote.com/cbst
3. Enter your 14-digit Voter Control Number located on your Proxy Card
above your name
4. Follow the recorded instructions.
YOUR VOTE IS IMPORTANT! GO TO HTTP://WWW.EPROXYVOTE.COM/CBST
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
1. Class II Directors
Nominees: Susan B. Bayh
Barry Bloom
Walter Maupay
/_/ FOR all nominees listed above /_/ WITHHELD from all nominees
/_/ For all nominees except as noted above
The undersigned hereby acknowledge(s) receipt of a copy of the
accompanying Notice of 2001 Annual Meeting of Stockholders and related Proxy
Statement.
Please date, sign as name appears below, and return this proxy in the
enclosed envelope, whether or not you expect to attend the meeting. You may
nevertheless vote in person if you do attend.
Executors, administrators, trustees, custodians, etc. should indicate
capacity in which signing. When stock is held in the name of more than one
person, each person should sign the proxy.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT /_/
Date: ___________________ , 2001
Please
Sign
Here: ___________________________