SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
CUBIST PHARMACEUTICALS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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CUBIST PHARMACEUTICALS, INC.
24 EMILY STREET
CAMBRIDGE, MA 02139
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF CUBIST PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders of
Cubist Pharmaceuticals, Inc. (the "Company") will be held at the Company's
corporate offices, 24 Emily Street, Cambridge, MA 02139, on Monday, May 19,
1997, at 9:00 A.M., local time, for the following purposes:
1. To elect two Class I directors of the Company to hold office for a three
year term and until their successors have been duly elected and
qualified; and
2. To transact such other business as may properly come before the Meeting
or any adjournments or postponements thereof.
The Board of Directors has fixed April 11, 1997 as the record date for the
determination of stockholders entitled to notice of, and to vote at, the 1997
Annual Meeting of Stockholders. Accordingly, only stockholders of record at the
close of business on April 11, 1997 will be entitled to notice of, and to vote
at, such meeting or any adjournments thereof.
By order of the Board of Directors
JUSTIN P. MORREALE
SECRETARY
April 23, 1997
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 COMPLETE, DATE, SIGN AND MAIL THE ACCOMPANYING PROXY
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 ("Common Stock"), of Cubist Pharmaceuticals, Inc. (the
"Company") in connection with the solicitation of proxies on behalf of the Board
of Directors of the Company for use at the Annual Meeting of Stockholders to be
held on May 19, 1997 (the "Meeting"), or at any adjournment or postponement
thereof, pursuant to the accompanying Notice of 1997 Annual Meeting of
Stockholders. The purposes of the Meeting and the matters to be acted upon are
set forth in the accompanying Notice of 1997 Annual Meeting of Stockholders. The
Board of Directors knows of no other business that will come before the Meeting.
This Proxy Statement and proxies for use at the Meeting will be mailed to
stockholders on or about April 23, 1997, and such proxies will be solicited
chiefly by mail, but additional solicitations may be made by telephone or
telegram by the officers or regular employees of the Company. The Company may
enlist the assistance of brokerage houses in soliciting proxies. All
solicitation expenses, including costs of preparing, assembling and mailing
proxy material, will be borne by the Company.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the Meeting and a return envelope for the proxy
are enclosed. Stockholders may revoke the authority granted by their execution
of proxies at any time before their effective exercise by filing with the
Secretary of the Company a written revocation or a duly executed proxy bearing a
later date or by voting in person at the 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 1997 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 11, 1997, are
entitled to notice of, and to vote, at the Meeting or any adjournment or
postponement thereof. The Company had outstanding on April 11, 1997, 9,557,057
shares of Common Stock, each of which is entitled to one vote upon the matters
to be presented at the 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 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 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 the Company to be the beneficial owner of more than 5% of the
issued and outstanding Common Stock as of April 11, 1997 or other date noted
below. As of April 11, 1997, 9,557,057 shares of Common Stock were outstanding.
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP OUTSTANDING SHARES OF
OF BENEFICIAL OWNER OF COMMON STOCK (1) COMMON STOCK OWNED (1)
- ----------------------------------------------------------------- -------------------- ---------------------------
DSV Partners IV.................................................. 1,745,282(2) 18.3%
221 Nassau Street
Princeton, NJ 08542
Interwest Management............................................. 890,104(3) 9.3%
Partners 300 Sandhill Road
Building 3, Suite 255
Menlo Park, CA 94025-7112
Burr, Egan, Deleage & Co......................................... 988,141(4) 10.3%
One Post Office Square
Suite 3800
Boston, MA 02109
Weiss, Peck & Greer, L.L.C....................................... 794,090(5) 8.3%
555 California Street
Suite 4760
San Francisco, CA 94104
Bristol-Myers Squibb Company..................................... 666,666(6) 7.0%
P.O. Box 4000
Princeton, NJ 08543
- ------------------------
(1) The shares owned, and the shares included in the total number of shares
outstanding, have been adjusted, and the percentage owned has been computed,
in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of
1934, as amended, and includes options, to the extent called for by such
rule, with respect to shares of Common Stock that can be exercised within 60
days of April 11, 1997. Except as set forth in the footnotes below, such
shares are beneficially owned with sole investment and sole voting power.
(2) Based upon information provided to the Company by DSV Partners IV ("DSV") as
of February 13, 1997. Includes 1,743,497 shares held by DSV. Also includes
1,785 shares of Common Stock which John K. Clarke has the right to acquire
within 60 days of April 11, 1997 upon the exercise of stock options. Mr.
Clarke, Chairman of the Board of Directors of the Company, is a general
partner of DSV Management. DSV Management is the general partner of DSV and,
as such, shares voting and investment power with respect to the shares owned
by DSV. DSV Management disclaims beneficial ownership of the shares owned by
DSV except to the extent of its proportionate partnership interest in DSV.
(3) Based upon information provided to the Company by Interwest Management
Partners as of March 10, 1997. Includes 883,360 shares held by Interwest
Partners V, L.P. ("Interwest") and 5,852 shares held by Interwest Investors
V. Also includes 892 shares of Common Stock which Arnold Oronsky has the
right to acquire within 60 days of April 11, 1997 upon the exercise of stock
options. Mr. Oronsky, a
2
consultant to the Company, is a general partner of Interwest Management
Partners V. Interwest Management Partners V is the general partner of
Interwest and as such Interwest Management Partners V shares voting and
investment power with respect to the shares owned by Interwest. Interwest
Management Partners V disclaims beneficial ownership of the shares owned by
Interwest except to the extent of its proportionate direct partnership
interests in Interwest.
(4) Based upon information provided to the Company by Burr, Egan, Deleage & Co.
as of March 3, 1997. Includes 976,098 shares held by Alta V Limited
Partnership ("Alta") and 10,258 shares held by Customs House Partners. Also
includes 1,785 shares of Common Stock which Terrance G. McGuire has the
right to acquire within 60 days of April 11, 1997 upon the exercise of stock
options. Mr. McGuire, a director of the Company, is a general partner of
Alta V Management Partners, L.P. Alta V Management Partners, L.P. is the
general partner of Alta and as such shares voting and investment power with
respect to the shares owned by Alta. Alta V Management Partners, L.P.
disclaims beneficial ownership of the shares owned by Alta except to the
extent of its proportionate partnership interest in Alta.
(5) Based upon information provided to the Company by Weiss, Peck & Greer,
L.L.C. as of February 18, 1997. Includes 421,190 shares held by WPG
Enterprise Fund, L.P. ("WPG Enterprise"), 304,404 shares held by WPG Venture
Associates II, L.P. ("WPG Venture") and 66,711 shares held by Weiss, Peck &
Greer Venture Associates II (Overseas), L.P. ("WPG Overseas" and together
with WPG Enterprise and WPG Venture, the "WPG Group"). Also includes 1,785
shares of Common Stock which Ellen M. Feeney has the right to acquire within
60 days of April 11, 1997 upon the exercise of stock options. Ms. Feeney, a
director of the Company, is a general partner of WPG Ventures Partners II,
L.P. WPG Venture Partners II, L.P. is the general partner of WPG Enterprise
and WPG Venture is the investment adviser of WPG Overseas. In such
capacities, WPG Venture Partners II, L.P. shares voting and investment
control with respect to the shares owned by the WPG Group. WPG Venture
Partners II, L.P. disclaims beneficial ownership of the shares owned by the
WPG Group except to the extent of its proportionate partnership interest in
each of the partnerships in the WPG Group. Ms. Feeney is a general partner
of WPG Ventures Partners II, L.P.
(6) Based upon information provided to the Company by Bristol-Myers Squibb
Company as of March 11 1997.
3
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 time their terms of office expire and
until their successors have been duly elected and qualified.
The term of office of each of Ms. Feeney and Mr. McGuire, the Class I
directors of the Company, will expire at the Meeting. The Board of Directors has
nominated Ms. Feeney and Mr. McGuire (the "Nominees") for reelection as Class I
directors of the Company to hold office until the annual meeting of stockholders
to be held in 2000 and until their respective successors have been duly elected
and qualified. In the event either 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
either of the Nominees will be unable or unwilling to serve.
The affirmative vote of a plurality of the shares of Common Stock present at
the Meeting, in person or by proxy, is required for the election of the Class I
directors.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 1 TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
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 the directors of the Company (including the Nominees for
reelection as Class I directors at the Meeting), their ages, their position(s)
with the Company, 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 employment of each over at least the last five years, and other
directorships, if any, of each are shown below.
DIRECTOR TERM CLASS OF
NAME AGE POSITION(S) HELD SINCE EXPIRES DIRECTOR
- ----------------------------------------------- --- ----------------------------- ----------- ----------- -------------
Scott M. Rocklage, Ph.D........................ 42 President, Chief Executive 1994 1999 III
Officer and Director
John K. Clarke................................. 43 Chairman of the Board 1992 1999 III
of Directors
Paul R. Schimmel, Ph.D......................... 56 Director 1992 1999 III
Barry Bloom, Ph.D.............................. 68 Director 1993 1998 II
George Conrades................................ 57 Director 1996 1998 II
Julius Rebek, Jr., Ph.D........................ 52 Director 1992 1998 II
Ellen M. Feeney................................ 37 Director 1993 1997 I
Terrance G. McGuire............................ 40 Director 1993 1997 I
4
DR. ROCKLAGE has served as President and Chief Executive Officer and as a
member of the Board of Directors of the Company since July 1994. 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 Salutar, Inc., a diagnostic imaging company and was responsible for
designing and implementing research and development programs that resulted in
three drug products in human clinical trials, including the approved drug
Omniscan. 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 a founder of the Company and has served as Chairman of the
Board of Directors since its incorporation. From May 1992 to June 1994, Mr.
Clarke served as acting President and Chief Executive Officer of the Company.
Since 1982, he has been a general partner of DSV Management in Princeton, New
Jersey, the general partner of DSV Partners IV ("DSV"). He is a founder and
director of Alkermes, Inc. and Chrysalis International Corp., biotechnology
companies. 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 a scientific founder of the Company and has served as a
director of the Company since its incorporation. Since 1967, he has served as a
Professor of Biochemistry and Biophysics at the Massachusetts Institute of
Technology and since 1992, he has been the John D. and Catherine T. MacArthur
Professor of Biochemistry and Biophysics. 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., biotechnology companies. 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 director of the Company 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, Southern New
England Telecommunications Corporation, Catalytica Fine Chemicals, Inc., a
chemical manufacturer and supplier, 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. CONRADES has served as a director of the Company since June 1996. Since
1994, he has served as President and Chief Executive Officer of BBN corporation,
a corporation providing Internet services and research and development and he
has served as Chairman since 1995. From 1961 to 1992, Mr. Conrades served in
various positions at IBM, including Senior Vice President, Corporate Marketing
and Services. He is a member of the Board of Directors of Westinghouse, Inc. and
CRA Managed Care, Inc. Mr. Conrades received his B.A. in Physics and Mathematics
from Ohio Wesleyan University and his M.B.A. from the University of Chicago.
DR. REBEK is a scientific founder of the Company and has served as a
director of the Company since its incorporation. Since July 1996, he has served
as the Director of the Institute for Chemical Biology at The Scripps Research
Institute. From 1989 to June 1996, Dr. Rebek served as Professor of Chemistry at
the Massachusetts Institute of Technology, and from 1991 to June 1996, he served
as the Camille Dreyfus
5
Professor of Chemistry. Dr. Rebek is an expert in synthetic organic chemistry,
molecular recognition and combinatorial chemistry. He is a member of the
National Academy of Sciences and the American Academy of Arts and Sciences. Dr.
Rebek serves on the Scientific Advisory Board of Procept, Inc., a biotechnology
company. He is also a Founding Member of the Scientific Advisory Board of Darwin
Molecular, Inc., a genomics company. Dr. Rebek received his B.S. in Chemistry
from the University of Kansas and his Ph.D. in Chemistry from the Massachusetts
Institute of Technology.
MS. FEENEY has served as a director of the Company since September 1993.
Since 1991, she has served as a principal of Weiss, Peck & Greer, L.L.C., and
since 1989, she has been a General Partner of WPG Venture Partners II, L.P., the
general partner of WPG Enterprise Fund, L.P. ("WPG Enterprise"), Weiss, Peck &
Greer Venture Associates II, L.P. ("WPG Venture") and WPG Venture Advisers,
L.P., the adviser of Weiss, Peck & Greer Venture Associates II (Overseas), L.P.
("WPG Overseas"). Ms. Feeney is a director of Heartstream, Inc., a medical
device company, and several private health care companies. Ms. Feeney received
her B.S. in Biology and Philosophy from Duke University and her M.S. in Human
Genetics from the University of California, Davis.
MR. MCGUIRE has served as a director of the Company since September 1993.
Since 1995, he has been a Founding General Partner of Polaris Venture Partners,
and since 1989, has served as a general partner of Beta Partners Limited
Partnership, each of which is a venture capital firm. Since 1992, he has served
as a general partner of Alta V Management Partners L.P., which is the general
partner of Alta V Limited Partnership ("Alta"), a fund associated with Burr,
Egan, Deleage & Co. He is a director of Integ, Inc., a diagnostic company, and
several private health care companies. Mr. McGuire received his B.S. in Physics
and Economics from Hobart College, his M.S. in Engineering from Dartmouth
College and his M.B.A. from the Harvard Business School.
OWNERSHIP OF EQUITY SECURITIES BY MANAGEMENT
The table below sets forth information as of April 11, 1997, as reported to
the Company, with respect to the beneficial ownership of the Common Stock of the
Company by each director and each named executive officer, and by all directors
and executive officers as a group.
AMOUNT AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNERSHIP OUTSTANDING SHARES OF
NAME OF COMMON STOCK (1) COMMON STOCK OWNED (1)
- ----------------------------------------------------------------- -------------------- -------------------------
Scott M. Rocklage, Ph.D.......................................... 266,942(2) 2.77%
Francis P. Tally, M.D............................................ 92,872(3) .97%
Arthur F. Kluge, Ph.D............................................ 22,782(4) .24%
Thomas A. Shea................................................... 13,941(5) .14%
John K. Clarke................................................... 1,745,282(6) 18.14%
Paul R. Schimmel, Ph.D........................................... 291,783(7) 3.03%
Julius Rebek, Jr., Ph.D.......................................... 229,926(8) 2.39%
Ellen M. Feeney.................................................. 794,090(9) 8.25%
Terrance G. McGuire.............................................. 988,141(10) 10.27%
Barry Bloom, Ph.D................................................ 11,605(11) .12%
George Conrades.................................................. 1,785(12) .02%
All directors and executive
officers as a group
(11 persons)................................................... 4,459,149(13) 46.34%
6
- ------------------------
(1) Except as set forth in the footnotes below, each stockholder has sole
investment and voting power with respect to the shares beneficially owned.
Includes options with respect to shares of Common Stock that can be
exercised within 60 days of April 11, 1997.
(2) Includes 29,319 shares of Common Stock which Dr. Rocklage has the right to
acquire within 60 days of April 11, 1997 upon the exercise of stock options.
(3) Includes 15 shares of Common Stock which Dr. Tally has the right to acquire
within 60 days of April 11, 1997 upon the exercise of stock options.
(4) Includes 6,532 shares of Common Stock which Dr. Kluge has the right to
acquire within 60 days of April 11, 1997 upon the exercise of stock options.
(5) Includes 6,799 shares of Common Stock which Mr. Shea has the right to
acquire within 60 days of April 11, 1997 upon the exercise of stock options.
(6) Includes 1,743,497 shares held by DSV. Also Includes 1,785 shares of Common
Stock which Mr. Clarke has the right to acquire within 60 days of April 11,
1997 upon the exercise of stock options. Mr. Clarke, Chairman of the Board
of Directors of the Company, is a general partner of DSV Management, the
general partner of DSV. Mr. Clarke shares voting and investment power with
respect to the shares owned by DSV. Mr. Clarke disclaims beneficial
ownership of the shares held by DSV except to the extent of his
proportionate partnership interest therein.
(7) Includes 6,070 shares of Common Stock which Dr. Schimmel has the right to
acquire within 60 days of April 11, 1997 upon the exercise of stock options
and warrants and 65,714 shares held by the Paul R. Schimmel Profit-Sharing
Plan.
(8) Includes 6,070 shares of Common Stock which Dr. Rebek has the right to
acquire within 60 days of April 11, 1997 upon the exercise of stock options
and warrants and 3,857 shares held by the Julius Rebek, Jr. Retirement Plan,
over which Dr. Rebek has sole voting power and beneficial ownership. Also
includes 21,999 shares owned by Dr. Rebek's wife and 53,571 shares owned by
the Julius Rebek, Jr. Family Trust. Dr. Rebek disclaims beneficial ownership
of all shares owned by his wife and the Julius Rebek, Jr. Family Trust.
(9) Includes of shares held by the WPG Group. Also includes 1,785 shares of
Common Stock which Ms. Feeney has the right to acquire within 60 days of
April 11, 1997 upon the exercise of stock options. Ms. Feeney, a director of
the Company, is a general partner of WPG Venture Partners II L.P., the
general partner of WPG Enterprise and WPG Venture and the adviser to WPG
Overseas. Ms. Feeney shares voting and investment control with respect to
the shares owned by the WPG Group. Ms. Feeney disclaims beneficial ownership
of the shares held by the WPG Group except to the extent of her
proportionate partnership interest therein.
(10) Includes of shares held by Alta. Also includes 1,785 shares of Common Stock
which Mr. McGuire has the right to acquire within 60 days of April 11, 1997
upon the exercise of stock options. Mr. McGuire, a director of the Company,
is a general partner of Alta V Management Partners, L.P., the general
partner of Alta. Mr. McGuire shares voting and investment control with
respect to the shares owned by Alta. Mr. McGuire disclaims beneficial
ownership of the shares held by Alta except to the extent of his
proportionate partnership interest therein.
(11) Includes 4,463 shares of Common Stock which Dr. Bloom has the right to
acquire within 60 days of April 11, 1997 upon the exercise of stock options.
7
(12) Includes 1,785 shares of Common Stock which Mr. Conrades has the right to
acquire within 60 days of April 11, 1997 upon the exercise of stock options.
(13) Includes 66,408 shares of Common Stock which all directors and executive
officers have the right to acquire within 60 days of April 11, 1997 upon the
exercise of stock options.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors has an Audit Committee, which met one time during the
1996 fiscal year. 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 the Company's 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 the Company's system of internal
controls and the responses to management letters issued by the independent
auditors. The members of the Audit Committee during the 1996 fiscal year were
Dr. Barry Bloom, Ms. Ellen Feeney and Mr. Terrance McGuire.
The Board of Directors has a Compensation Committee, which met two times
during the 1996 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 the Corporation's 1993 Amended and Restated
Stock Option Plan (the "1993 Stock Option Plan"), pursuant to the terms of such
plan. The members of the Compensation Committee during the 1996 fiscal year were
Mr. John K. Clarke, Mr. George Conrades and Ms. Ellen Feeney.
During the 1996 fiscal year, the Board of Directors held five 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 a director who is a full-time officer of the Company; he
receives no additional compensation for serving on the Board of Directors or its
committees. No other director is a full-time officer of the Company. In 1996,
the Company paid $5,000 to Dr. Bloom in connection with attendance at meetings
of the Board of Directors. No other director received compensation during the
Company's 1996 fiscal year for his or her service on the Board of Directors or
any committee thereof, except that in May and June of 1996, the Company granted
to each non-employee director a nonstatutory stock option exercisable for 7,142
shares at an exercise price of $1.96 and $5.95, respectively. In 1997, Dr. Bloom
and Mr. Conrades 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
Company's 1997 fiscal year for his or her service on the Board of Directors or
any committee thereof.
Pursuant to the 1993 Stock Option Plan, upon first joining the Board of
Directors, each director who is not an officer or employee of the Company is
granted automatically a stock option exercisable for 7,000 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 700 shares of Common Stock at fair market value.
8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below sets forth certain compensation information for the fiscal
years ended December 31, 1996, 1995 and 1994 with respect to the Company's Chief
Executive Officer and those other executive officers of the Company whose 1996
total annual compensation exceeded $100,000 (the "Named Executive Officers").
LONG-TERM COMPENSATION
AWARDS
----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND ----------------------- STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) AWARDS($) OPTIONS(#) COMPENSATION($)
- ---------------------------------------- ---- ------------ -------- --------- ---------- ---------------
Scott M. Rocklage....................... 1996 $206,539 $ 65,000 -- 96,038 $31,514(2)
President, Chief 1995 $180,434 $ 50,000 11,878(3) 14,285 $29,659(2)
Executive Officer and Director 1994 $ 90,865(4) -- -- 188,121 --
Francis P. Tally (3).................... 1996 $220,000 $ 11,770 -- 245 --
Vice President; 1995 $165,280(5) -- 92,857(6) -- --
Drug Development and Medical Affairs 1994 -- -- -- -- --
Arthur F. Kluge (3)..................... 1996 $150,770 -- -- 14,530 --
Vice President 1995 $ 25,962(7) -- -- 61,428 --
Chemistry 1994 -- -- -- -- --
- ------------------------
(1) Salary includes amounts deferred pursuant to the Company's 401(k) Plan.
(2) All other compensation includes (i) the forgiveness of $24,442 of principal
and accrued interest owed by Dr. Rocklage, (ii) long-term disability
insurance premiums paid by the Company and (iii) the Company's matching
contributions under the Company's 401(k) Plan.
(3) The value of these shares at December 31, 1996 was approximately $72,753.
This value has been determined based on the last reported sales price of the
Company's Common Stock on the NASDAQ-NMS on December 31, 1996, the last
trading date in the Company's 1996 fiscal year, of $6.125.
(4) Reflects compensation from June 20, 1994 to December 31, 1994. Dr.
Rocklage's employment commenced on June 20, 1994.
(5) Reflects compensation from March 27, 1995 to December 31, 1995. Dr. Tally's
employment commenced on March 27, 1995.
(6) The value of these shares at December 31, 1996 was approximately $568,749.
This value has been determined based on the last reported sales price of the
Company's Common Stock on the NASDAQ-NMS on December 31, 1996 of $6.125.
(7) Reflects compensation from October 23, 1995 to December 31, 1995. Dr.
Kluge's employment commenced on October 23, 1995.
9
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding grants of stock options
under the 1993 Stock Option Plan to the Named Executive Officers during the
fiscal year ended December 31, 1996.
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 1996 PRICE DATE VALUE(2)
- --------------------------------------------------- ----------- --------------- ----------- ----------- -----------
Scott M. Rocklage.................................. 95,793 29.35% $ 1.96 5/28/06 $ 42,426
245 .08% $ 6.00 12/13/06 962
Francis P. Tally................................... 245 .08% $ 6.00 12/13/06 962
Arthur F. Kluge.................................... 14,285 4.37% $ 1.96 5/28/06 6,300
245 .08% $ 6.00 12/13/06 962
- ------------------------
(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 the
Company. 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 the Company 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
-- .86; dividend yield -- 0%; the average life of the options -- 4 years;
risk-free interest rate -- yield to maturity of 10-year treasury note at
grant date -- 6.09%. 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, 1996, and the unexercised
stock options held at the end of such fiscal year by the Named Executive
Officers.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1996 DECEMBER 31, 1996(1)
-------------------------- --------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- --------------- ------------- ----------- ------------- ----------- -------------
Scott M. Rocklage................. -- $ -- 15,545 94,778 $ 70,244 $ 411,730
Francis P. Tally.................. -- -- -- 245 -- $ 31
Arthur F. Kluge................... 16,250 91,331 893 58,815 $ 3,720 $ 314,924
- ------------------------
(1) Based on the difference between the exercise price of each option and the
last reported sales price of the Company's Common Stock on the NASDAQ-NMS on
December 31, 1996 of $6.125.
10
EXECUTIVE EMPLOYMENT AGREEMENTS
Dr. Rocklage, the Company's President and Chief Executive Officer, is
employed pursuant to an employment agreement with the Company, dated June 20,
1994 (the "Employment Agreement"). Under the terms of the Employment Agreement,
Dr. Rocklage's annual base salary was set at $150,000 subject to annual review
and increase by the Company's Board of Directors, and he is entitled to a
performance bonus upon the Company's achievement of certain milestones for such
year that have been mutually agreed upon by Dr. Rocklage and the Board of
Directors prior to the commencement of such fiscal year. Dr. Rocklage received a
base salary in 1996 of $206,539 and a performance bonus of $65,000. Dr.
Rocklage's employment with the Company may be terminated by the Company 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 by the Company of Dr. Rocklage's employment without cause, Dr.
Rocklage is entitled to severance pay in an amount equal to three months of his
then current annual base salary.
None of the Company's other executive officers has entered into an
employment agreement with the Company.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE OFFICER COMPENSATION
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company's compensation philosophy is that executive officer compensation
should reflect the value created and protected for stockholders, while
furthering the Company's 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,
the Company's executive officer compensation package consists of three primary
components: base salary, annual bonuses and grants of stock options.
In evaluating its executive officers' performance, the Company generally
follows the process outlined below:
- Prior to or shortly after the beginning of each fiscal year, the Company
sets goals and objectives which are reviewed with, and ultimately approved
by, the full Board of Directors. Dr. Rocklage reports to the Board on the
Company's progress toward the achievement of these goals and objectives
throughout the year at Board meetings and at other times as necessary.
- Twice a year, generally in June and December, the Compensation Committee
meets with Dr. Rocklage to appraise his personal goals and objectives in
leading the Company and the Company's goals and objectives and measure
performance against these goals and objectives. His compensation package
is then set accordingly.
- In December of each year, Dr. Rocklage evaluates the performance of the
remainder of the Company's executive officers against their goals and
objectives set the prior year and recommends an annual base salary and/or
bonus to the Compensation Committee.
11
COMPENSATION FOR FISCAL 1996
CHIEF EXECUTIVE OFFICER COMPENSATION
In July 1996, the Compensation Committee set Dr. Rocklage's current annual
base salary at $225,000. This increase represented a $40,000 increase or 22%
over the prior year's base salary. Actual base salary compensation for Dr.
Rocklage in calendar 1996 was $206,539. The Committee performed a comprehensive
review of the compensation paid to chief executive officers in other companies
and concluded that this increase moves Dr. Rocklage into the range of base
salaries paid to chief executive officers of comparable companies.
In July 1996, the Compensation Committee determined that Dr. Rocklage
achieved the major milestone objectives of the previous year and awarded Dr.
Rocklage a bonus accordingly. Actual bonus granted to Dr. Rocklage in calendar
1996 was $65,000 and stock options to purchase 96,038 shares. In addition, the
Committee established $100,000 as the total performance bonus potential amount
for 1996-1997. In December 1996, the Committee awarded Dr. Rocklage $35,000,
which was paid in January 1997, in bonus and set an additional $60,000 as the
potential bonus amount payable upon achievement of goals by June 1997.
REPORT ON EXECUTIVE COMPENSATION
In December 1996, Dr. Rocklage recommended and the Committee accepted base
salary increases for the executive staff ranging from 5% to 20.5%. 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 authorized one bonus in the amount of $11,000 in
lieu of a salary increase to one executive.
The executive officers' stock options awarded to executive officers' other
than Dr. Rocklage during the year amounted to 31,448 common shares.
CONCLUSION
The Compensation Committee believes that the total 1996-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
George Conrades
Ellen Feeney
12
CORPORATE PERFORMANCE GRAPH
The following graph compares the performance of the Company's Common Stock
to the Nasdaq Stock Market (U.S. Companies) Index and to the Nasdaq
Biotechnology Index for the period beginning October 25, 1996 (the date the
Company's Common Stock began trading on the Nasdaq National Market) and ended
December 31, 1996. The comparison assumes $100 was invested on October 25, 1996
in the Company'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
LEGEND
Total Returns
Symbol for:
Cubist Nasdaq Composite NASDAQ Biotechnology Index
10/25/96 100 100 100
12/31/96 102 106 100
- - Cubist 10/25/96 100
12/31/96 102
- - Nasdaq Composite 10/25/96 100
12/31/96 106
- - Nasdaq Biotechnology 10/25/96 100
Index 12/31/96 100
13
CERTAIN TRANSACTIONS
In May 1996, the Company granted to certain of its officers stock options
under the Plan exercisable for an aggregate of 126,507 shares of Common Stock at
an exercise price of $1.96 per share, and the Company granted to certain of its
directors stock options exercisable for an aggregate of 42,857 shares of Common
Stock at an exercise price of $1.96 per share.
In June 1996, the Company sold a total of 2,816,902 shares of Series D
Convertible Preferred Stock (convertible into 402,414 shares of Common Stock),
at a purchase price of $1.42 per share ($9.94 per share on an as-converted
basis), to Bristol-Myers Squibb. In addition, in October 1996, the Company
issued 264,252 shares of Common Stock to Bristol-Myers Squibb pursuant to
certain antidilution rights of Bristol-Myers Squibb.
In June 1996, the Company granted George Conrades, a director of the
Company, a stock option exercisable for 7,142 shares of Common Stock at an
exercise price of $5.95 per share.
In July 1996, the Company and Dr. Rocklage entered into an Amendment to
Promissory Note, whereby the "Maturity Date" on that certain Promissory Note
issued by Dr. Rocklage to the Company was extended from July 21, 1996 to July
21, 1997.
In October 1996, the Company sold a total of 550,000 shares of Common Stock
at a purchase price of $6.00 per share to DSV, Interwest, Interwest Investors V,
Alta, Customs House Partners and the WPG Group in connection with the Company's
initial public offering.
In December 1996, the Company granted stock options to certain employees and
officers of the Company exercisable for approximately 28,959 shares of Common
Stock. The grants were made under the Company's Amended and Restated 1993 Stock
Option Plan. The exercise prices of the stock options ranged from $1.96 per
share to $6.00 per share. These grants were made in reliance upon Rule 701 under
the Securities Act.
For a description of certain transactions and certain employment and other
arrangements between the Company 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, the
Company'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 the Company is required to report in this proxy statement
any failure to file by these dates during 1996. 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.
STOCKHOLDER PROPOSALS
All stockholder proposals that are intended to be presented at the 1998
Annual Meeting of Stockholders of the Company must be received by the Company
not later than December 4, 1997, for inclusion in the Board of Directors' proxy
statement and form of proxy relating to the Meeting.
14
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
Meeting. However, if any other business properly comes before the Meeting, it is
the intention of the persons named in the enclosed proxy to vote on such matters
in accordance with their judgment.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the meeting and will be afforded the opportunity to make a statement if they so
desire and to respond to appropriate questions.
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 Meeting,
please sign the proxy and return it in the enclosed envelope.
15
1596PS97
CUBIST PHARMACEUTICALS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
1997 ANNUAL MEETING OF STOCKHOLDERS ON MAY 19, 1997
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
1997 Annual Meeting of Stockholders of CUBIST PHARMACEUTICALS, INC. to be
held on May 19, 1997 (including any adjournments or postponements thereof),
with all the powers the undersigned would possess if personally present, as
specified on the ballot below on the election of directors 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.
ELECTION OF DIRECTORS:
Nominees for Class I Directors:
Ellen M. Feeney and Terrance G. McGuire
Instruction:
To withhold authority to vote for any individual nominee, write that
nominee's name in the space provided below.
__ FOR all nominees listed above (except as withheld in the space below)
__________________________
__ WITHHOLD AUTHORITY (to vote for nominee listed above)
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.
-2-
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.
The undersigned hereby acknowledge(s)
receipt of a copy of the accompanying
Notice of 1997 Annual Meeting of
Stockholders and related Proxy
Statement
Date:______________, 1997
Please
Sign
Here:_________________________
______________________________
(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.)