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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:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
MiniMed Inc.
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Name of Registrant as Specified In Its Charter
Registrant
- --------------------------------------------------------------------------------
Name of Person(s) Filing Proxy
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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 is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PROXY
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MINIMED INC.
18000 Devonshire Street
Northridge, California 91325
April 30, 2001
Dear Stockholders:
It is my pleasure to invite you to attend the 2001 Annual Meeting of
Stockholders of MiniMed Inc., which will be held on Thursday, June 7, 2001,
beginning at 10:00 a.m. (PDT), at the Performing Arts Center at California State
University, Northridge, 18111 Nordhoff Street, Northridge, California 91330. The
Performing Arts Center is located on Zelzah Avenue between Prairie and Plummer
Streets in Northridge, California. For your convenience, a map is enclosed with
this Proxy Statement. Detailed information about the Meeting and the items on
which the Stockholders will act is described in the accompanying Notice of
Annual Meeting and Proxy Statement. Also included is a Proxy Card with an
accompanying postage paid return envelope. IT IS IMPORTANT THAT YOU VOTE YOUR
SHARES WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. I urge you to carefully
review the Proxy Statement and to vote your choices on the enclosed Proxy Card.
Please sign, date and return your Proxy Card in the envelope provided as soon as
possible. If you do attend the Meeting, your Proxy can be revoked at your
request in the event you wish to vote in person.
I look forward to seeing you at the Meeting.
Sincerely,
/s/ Alfred E. Mann
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Alfred E. Mann
Executive Chairman
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 7, 2001
MiniMed Inc. (the "Company" or "MiniMed") will hold its Annual Meeting of
Stockholders on June 7, 2001, at 10:00 a.m., Pacific Daylight Time, at the
Performing Arts Center at California State University, Northridge, 18111
Nordhoff Street, Northridge, California 91330. The Performing Arts Center is
located on Zelzah Avenue between Prairie and Plummer Streets in Northridge,
California. The Annual Meeting will be held for the following purposes:
1. To elect three (3) Class 2 Directors to serve as directors for
three-year terms. Such Class 2 Directors shall serve until the 2004 Annual
Meeting of Stockholders or until their respective successors are elected
and qualified. The Board of Directors intends to nominate the three persons
identified in the accompanying Proxy Statement as Class 2 Directors;
2. To amend the Company's Certificate of Incorporation to increase the
Company's authorized capital stock as summarized in the attached Proxy
Statement;
3. To ratify the appointment of Deloitte & Touche LLP as auditors for
the fiscal year ending December 28, 2001; and
4. To act upon other matters that may properly come before the Meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed April 13, 2001, as the Record Date for
determining the Stockholders entitled to receive notice of and to vote at the
Annual Meeting, or any adjournment or postponement thereof.
Alfred E. Mann and Eric S. Kentor have been appointed as Proxy Holders,
with full rights of substitution, for the holders of MiniMed Inc. common stock.
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
By order of the Board of Directors
/s/ Eric S. Kentor
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Eric S. Kentor
Senior Vice President, General Counsel and
Secretary
April 30, 2001
Northridge, California
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 7, 2001
INTRODUCTION
As a Stockholder of MiniMed Inc., you have a right to vote on certain
matters affecting the Company. This Proxy Statement discusses the proposals the
Stockholders will vote on at this year's Annual Meeting. Please read this Proxy
Statement carefully because it contains important information for you to
consider when deciding how to vote. Your vote is important.
In this Proxy Statement, we refer to MiniMed Inc. as the "Company",
"MiniMed", or "We". We also refer to this Proxy Statement, the Proxy Card and
our 2000 Annual Report as the "proxy materials."
The Board of Directors, which we also refer to as the Board, is sending
proxy materials to you and all other Stockholders on or about April 30, 2001.
The Board is asking you to vote your shares by completing and returning the
enclosed Proxy Card.
Unless we state otherwise, all information in this Proxy Statement
concerning Company common stock reflects the stock dividend distributed to
Stockholders of record on August 18, 2000.
QUESTIONS AND ANSWERS
Q: WHO CAN VOTE AT THE ANNUAL MEETING?
A: Stockholders who owned Company common stock as of close of business on
April 13, 2001 may attend and vote at the Annual Meeting which we also refer to
as the "Meeting." Each Stockholder is entitled to one vote per share owned of
record on that date. There were 64,664,116 shares of Company common stock
outstanding as of close of business on April 13, 2001.
Q: WHY AM I RECEIVING THIS PROXY STATEMENT?
A: The Company is soliciting a proxy to vote your shares at the Annual
Meeting. This Proxy Statement describes proposals on which we would like you, as
a Stockholder, to vote. It also gives you information on these proposals, as
well as other information, so that you can make an informed decision.
Q: WHAT IS THE PROXY CARD?
A: The Proxy Card enables you to appoint Alfred E. Mann and Eric S. Kentor
as your representatives at the Annual Meeting. By completing and returning the
Proxy Card, you are authorizing Mr. Mann and Mr. Kentor to vote your shares at
the Meeting, as you have instructed them on the Proxy Card. This allows you to
have your shares voted whether or not you attend the Meeting. Even if you plan
to attend the Meeting, it is a good idea to complete and return your Proxy Card
before the date of the Meeting just in case your plans change. If a proposal
comes up for vote at the Meeting that is not on the Proxy Card, Mr. Mann and Mr.
Kentor will vote your shares, under your proxy, according to their best
judgment. Mr. Mann and Mr. Kentor will each have the right to vote your shares.
They do not have to act jointly. Also, either of them can substitute another
person to vote your shares.
Q: WHAT AM I VOTING ON?
A: We are asking you to vote on:
- the election of three Class 2 Directors for three-year terms or until
their respective successors are elected and qualified;
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- amending the Company's Certificate of Incorporation to increase the
Company's authorized capital stock as summarized in this Proxy
Statement;
- the ratification of the appointment of Deloitte & Touche LLP as the
Company's auditors for the fiscal year ending December 28, 2001; and
- any other matter which may be properly raised at the Meeting.
We do not presently know of any other business which may come before the
Meeting.
Q: HOW DO I VOTE?
A: YOU MAY AUTHORIZE THE PROXY HOLDERS TO VOTE FOR YOU. You do this by
completing and signing your Proxy Card and mailing it in the enclosed, prepaid
and addressed envelope. If you mark your voting instructions on the Proxy Card,
your shares will be voted as you instruct. If you sign and mail in your Proxy
Card but you do not mark your voting instructions on the Proxy Card, your shares
will be voted FOR the three named nominees for directors, FOR amending the
Company's Certificate of Incorporation to increase the Company's authorized
capital stock and FOR the ratification of Deloitte & Touche LLP as the Company's
auditors for the fiscal year ending December 28, 2001.
YOU MAY VOTE IN PERSON. We will pass out written ballots to anyone who
wants to vote at the Meeting. However, if the shares are not held in your name,
you must request a proxy from the registered holder. Typically shares purchased
through a stockbroker are held in the name of an entity designated by the
brokerage firm, which is referred to as a "street name." These shares cannot be
voted without a proxy obtained from your broker.
Q: HOW MANY SHARES MUST BE PRESENT TO HOLD THE MEETING?
A: To hold the Meeting and conduct business, a majority of the Company's
outstanding shares as of April 13, 2001 must be present at the Meeting. This is
called a quorum. Shares are counted as present at the Meeting if the Stockholder
either:
- is present and votes in person at the Meeting;
- has properly submitted a Proxy Card; or
- share are held in street name as described above and the brokerage
firm has submitted a proxy.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
A: It probably means that you have multiple accounts holding MiniMed common
stock at the transfer agent or with stockbrokers. Please complete and return all
Proxy Cards to ensure that all your shares are voted.
Q: WHAT IF I CHANGE MY MIND AFTER I RETURN MY PROXY?
A: You may revoke your proxy and change your vote at any time before the
polls close at the Meeting. You may do this by:
- prior to the Meeting, signing a written notice of your intent to
revoke your proxy and delivering it to Mr. Eric Kentor, MiniMed's
Corporate Secretary, at 18000 Devonshire Street, Northridge,
California 91325; or
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- signing another Proxy Card with a later date and delivering it to the
Corporate Secretary at or before the Meeting.
Your attendance at the Annual Meeting will not automatically result in the
revocation of a proxy previously delivered.
Q: WILL MY SHARES BE VOTED IF I DO NOT RETURN MY PROXY CARD?
A: If your shares are held in street name, your brokerage firm, under
certain circumstances, may vote your shares. Brokerage firms have authority
under New York and American Stock Exchange rules to vote a customer's shares on
some "routine" matters in absence of instructions from the customer. Our
proposals to elect three (3) Class 2 Directors and to ratify Deloitte & Touche
LLP as our auditors for the fiscal year ending December 28, 2001, are considered
routine matters. If you do not give a proxy to vote your shares, your brokerage
firm may either:
- vote your shares on these routine matters; or
- leave your shares unvoted.
When a brokerage firm submits a proxy with respect to its customers'
shares, these shares are counted to determine if a quorum exists to conduct
business at the Meeting.
A brokerage firm cannot vote customers' unvoted shares on non-routine
matters (so called "broker non-votes"). In such situations, the affected shares
will be counted for purposes of determining the presence or absence of a quorum
for the transaction of business, but will not be included in the vote totals and
will not be counted as entitled to vote for purposes of determining whether a
non-routine matter has been approved. On matters requiring affirmative vote of
the holders of a majority of shares present at the meeting and entitled to vote,
the shares subject to broker non-votes are treated as shares not entitled to
vote. This reduces the number of shares required for approval but also reduces
the number of shares constituting a majority. However, on matters requiring the
affirmative vote of all of the outstanding shares, like the approval of the
proposed amendment to the Company Certificate of Incorporation, broker non-votes
have the same effect as a negative vote.
We encourage you to provide instructions to your brokerage firm so that
your shares will be voted on all matters at the Meeting.
Q: HOW MANY VOTES MUST THE NOMINEES HAVE TO BE ELECTED AS DIRECTORS?
A: We use the phrase "yes vote" to mean a vote for a proposal. For Class 2
Directors, the three nominees receiving the highest number of yes votes will be
elected as Directors. This number is called a plurality.
Q: HOW MANY VOTES ARE REQUIRED TO RATIFY DELOITTE & TOUCHE LLP AS THE
COMPANY'S AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 28, 2001?
A: In order to ratify Deloitte & Touche LLP as the Company's auditors for
the fiscal year ending December 28, 2001, the yes vote of a majority of shares
present or represented by proxy and entitled to vote is required
Q: HOW MANY VOTES ARE REQUIRED TO APPROVE THE AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES
OF CAPITAL STOCK?
A: In order for the proposal to amend the Company's Certificate of
Incorporation to increase the authorized number of shares of capital stock to be
approved, a yes vote of more than fifty percent (50%) of the Company's
outstanding shares is required.
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Q: HOW ARE VOTES COUNTED?
A: You may vote either "for," "withhold authority" or "against" each
nominee for Director. You may vote "for," "against" or "abstain" on the proposal
to amend the Company's Certificate of Incorporation and the proposal to ratify
the appointment of Deloitte and Touche LLP as the Company's auditors for the
fiscal year ending December 28, 2001. If you withhold authority to vote for any
nominee or you abstain on the approval of the amendment to the Certificate of
Incorporation or the ratification of the appointment of Deloitte & Touche LLP,
your vote will be voted neither for nor against but will have the same effect as
a negative vote. If you give your proxy without voting instructions, your proxy
will be voted for the three nominees for election as Directors designated by the
Board of Directors and for the amendment to the Certificate of Incorporation and
the ratification of the appointment of Deloitte & Touche LLP. Voting results are
tabulated and certified by our transfer agent, Computershare, formerly known as
Harris Trust Company of California.
Q: WHERE DO I FIND THE VOTING RESULTS OF THE MEETING?
A: We will announce preliminary voting results at the Annual Meeting. We
will publish the final results in our quarterly report on Form 10-Q for the
second quarter of 2001. We will file that report with the Securities and
Exchange Commission, which we call the SEC, on or about August 13, 2001. You can
get a copy of this report after it is filed by contacting our Investor Relations
Department at (818) 362-5958 or by contacting the SEC at (800) SEC-0330 for the
location of its nearest public reference room. You can also get a copy on the
Internet through the SEC's electronic data system called EDGAR at www.sec.gov.
Q: WHO PAYS FOR THE SOLICITATION OF THE PROXIES?
A: The Company is paying the costs associated with the distribution and
solicitation of the proxies. The costs associated with the solicitation of
proxies include but are not limited to expenses for the preparation, assembly
and mailing of this Proxy Statement, the Proxy Card, the Annual Report to
Stockholders and any additional material furnished to Stockholders. Proxies may
be solicited by Directors, officers and regular employees of the Company
personally or by mail, telephone or telegraph without the payment of additional
compensation. Copies of solicitation material will be furnished to brokerage
houses, fiduciaries and custodians that hold shares of common stock of record
for beneficial owners for the purpose of forwarding such materials to such
beneficial owners. As a part of this process, the Company reimburses brokers,
nominees, fiduciaries and other custodians for their reasonable fees and
expenses in forwarding proxy materials to stockholders. The Company does not, at
this time, intend to hire anyone to solicit proxies on its behalf.
YOUR VOTE IS IMPORTANT AND YOU ARE ENCOURAGED TO COMPLETE, SIGN AND RETURN
YOUR PROXY CARD PROMPTLY SO THAT YOUR SHARES CAN BE REPRESENTED.
PROPOSALS TO BE VOTED ON
PROPOSAL 1-- NOMINATION AND ELECTION OF CLASS 2 DIRECTORS
Pursuant to the Company's Certificate of Incorporation and Bylaws, the
Board of Directors of the Company is divided into three classes: Class 1, Class
2 and Class 3. The following table details the current composition of each class
of Directors and the respective expiration dates for the term of each member of
the Board of Directors:
TERM TO EXPIRE AT ANNUAL
CLASS 1 DIRECTORS MEETING IN
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David Chernof, M.D. 2003
Carolyne Kahle Davis 2003
John C. Villforth 2003
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CLASS 2 DIRECTORS
- -----------------
William R. Grant 2001
David H. MacCallum 2001
Thomas R. Testman 2001
CLASS 3 DIRECTORS
- -----------------
Alfred E. Mann 2002
Terrance H. Gregg 2002
Jay S. Skyler, M.D. 2002
As the term of Class 2 Directors is set to expire at the 2001 Annual
Meeting, the Board of Directors has approved three nominees to serve as Class 2
Directors. The Bylaws of the Company require the three nominees receiving the
highest number of yes votes to be elected as Directors. Stockholders eligible to
vote at the Annual Meeting have one vote per share and do not have cumulative
voting rights with respect to the election of Directors. Shares represented by
Proxies marked "withhold authority" for one or more nominees will be counted as
negative votes.
CLASS 2 DIRECTOR NOMINEES
The Class 2 Director nominees were proposed by the Organization and
Compensation Committee of the Board of Directors, which serves as a nominating
committee, and approved by the Board. If any of the Class 2 Director nominees
should decline or be unable to act as a Director, the persons named in the Proxy
will vote in accordance with their best judgment with respect to alternative
candidates. The Company knows of no reason why the nominees would not be
available for election or, if elected, would not be able to serve.
The three nominees of the Board of Directors to serve as Class 2 Directors
are as follows:
William R. Grant, age 76, has been a Director of the Company since June
1994. He has served as managing General Partner and Chairman of Galen
Associates, a venture capital firm, since 1989. Previously, Mr. Grant served as
President and Vice Chairman of Smith Barney Inc., President and Chairman of
Mac-Kay Shields Financial Corporation, and Vice Chairman of SmithKline Beecham.
Currently, Mr. Grant serves on the boards of Allergan, Inc. a health care
company providing eye care and specialty pharmaceutical products, Ocular
Sciences, Inc., a manufacturer of contact lenses, Vasogen, Inc., a developer of
immune modulation therapies for treatment of various diseases, Massey Energy,
Inc., a coal company, and Quest Diagnostics, Inc., a diagnostic testing company.
Mr. Grant is a Trustee of the Mary Flagler Cary Charitable Trust and is a member
of the General Electric Pension Advisory Emeritus Board. Mr. Grant is Chairman
of the Organization and Compensation Committee of the Board.
David H. MacCallum, age 63, has been a Director of the Company since July
1994. In May 1999, he joined Salomon Smith Barney, a subsidiary of Citigroup,
Inc., a major financial institution, where Mr. MacCallum serves as the Global
Head of Health Care Investment Banking. Previously, Mr. MacCallum served as
Executive Vice President of ING Baring Furman Selz LLC, an investment banking
and financial services firm, from April 1998 to May 1999. Prior to that he was
the Managing Director, Investment Banking, for UBS Securities LLC, an investment
banking and financial services firm, from May 1994 to April 1998. Mr. MacCallum
served as Co-Head of Investment Banking of Hambrecht & Quist from 1991 to 1994.
Prior to 1991, Mr. MacCallum was a Managing Director of Hambrecht & Quist. He is
also a Director of Advanced Bionics Corporation, which we call ABC, a privately
held medical device company. Mr. MacCallum is a member of the Organization and
Compensation Committee of the Board.
Thomas R. Testman, age 64, has been a Director of the Company since July
1994. Mr. Testman retired from his position as Managing Partner with Ernst &
Young, an international auditing, accounting and consulting services firm, in
October 1992 after 30 years of continuous service. During his tenure he held the
position of National Director of Management Consulting Services, served on the
operating committee of the firm from 1976 to 1980, was Western Regional Director
of Consulting Health Care Services and managed area audit and tax practices.
From February 1998 to June 1998, Mr. Testman served as the interim Chief
Executive for Techniclone Corp., a cancer treatment developer. He also formerly
served as a director of Nichols Institute, a publicly-held laboratory company
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laboratory company that was sold to Corning, Inc. in 1994. He currently serves
on the board of directors of Chromavision Medical Systems, Inc., a medical
device manufacturer, and Specialty Laboratories, Inc., a reference laboratory,
in addition to serving as a director of several privately held health care
companies. Mr. Testman is Chairman of the Audit Committee of the Board.
THE BOARD OF DIRECTORS RECOMMENDS A YES VOTE FOR EACH NAMED NOMINEE.
OTHER DIRECTORS
The other directors of the Company whose terms do not expire this year are
as follows:
CURRENT CONTINUING CLASS 1 DIRECTORS
(TERM EXPIRES 2003)
David Chernof, M.D., age 65, has been a Director of the Company since July
1994. Since January 1999, Dr. Chernof has been President of DCHC - Health Care
Consultants, a health care consulting firm. Previously, he has served as Chief
Medical Officer of LA Care Healthplan, a health maintenance organization, from
October 1996 through December 1998. Previously, Dr. Chernof was an independent
medical and health care services consultant. From 1991 to July 1995, Dr. Chernof
served as the Senior Vice President and Corporate Medical Director of Blue Cross
of California, where he was responsible for medical policies, physician
relations, utilization and quality monitoring programs and technology
assessment. Dr. Chernof was a member of the Blue Cross of California Board of
Directors from 1987 to 1991 and was in private practice from 1968 to 1991. Dr.
Chernof is a member of the Audit Committee of the Board. In 2000, Dr. Chernof
was appointed to the faculty of the School of Policy, Planning and Development
at the University of Southern California as a Senior Fellow.
Carolyne Kahle Davis, Ph.D., age 69, has been a Director of the Company
since May 1997. Dr. Davis currently serves as an independent business advisor to
numerous companies. Dr. Davis served as National and International Health Care
Advisor to Ernst & Young, LLP, an international auditing, accounting and
consulting firm from October 1985 until her retirement in April 1997. From March
1981 until August 1985, Dr. Davis served as Administrator of the Health Care
Financing Administration, a sub-cabinet position reporting to the Secretary of
Health and Human Services. The Health Care Financing Administration is the
agency responsible for the Medicare and Medicaid programs. Previously, Dr. Davis
served as Associate Vice President for Academic Affairs at the University of
Michigan, and Dean of the University of Michigan School of Nursing. Dr. Davis
currently serves on the boards of Beckman Instruments, Inc., a provider of
systems which simplify and automate laboratory processes, Beverly Enterprises,
Inc., a provider of post-acute care healthcare services and The Prudential
Insurance Company of America, an insurance company. She is also a member of the
Institute for Medicine. Dr. Davis is a member of the Audit Committee of the
Board.
John C. Villforth, age 70, has been a Director of the Company since May
1996. He has served since September 1990 as President and Executive Director of
the Food and Drug Law Institute, a non-profit organization whose mission is to
increase knowledge about the laws and regulations pertaining to foods, drugs,
cosmetics, medical devices and biological products. Prior to 1990 and for 29
years, Mr. Villforth was a Commissioned Officer in the U.S. Public Health
Service in the Department of Health and Human Services, the last 19 years of
which he was assigned to the Food and Drug Administration. Mr. Villforth retired
from the Public Health Service in August 1990 with the rank of Assistant Surgeon
General (Rear Admiral). During his tenure, he held the positions of Director,
Center for Devices and Radiological Health of the Food and Drug Administration,
which we call the FDA, (1982-1990); Director, Bureau of Radiological Health of
the FDA (1969-1982); and Chief Engineer, U.S. Public Health Service (1985-1990),
among other positions. Mr. Villforth currently serves on the board of Vasogen,
Inc., a developer of immune modulation therapies for treatment of various
diseases, and previously served on the boards of Target Therapeutics, Inc.
(subsequently acquired by Boston Scientific Corporation), a medical device
company, from 1992 to April 1997, and BRI International (subsequently acquired
by Quintiles Transnational Corp.), a contract research organization for the
biotechnology, pharmaceutical and medical devices industries, from 1992 to 1997.
Mr. Villforth is a member of the Organization and Compensation Committee.
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CURRENT CONTINUING CLASS 3 DIRECTORS
(TERM EXPIRES 2002)
Alfred E. Mann, age 75, is presently the Executive Chairman of the Company,
has served as Chairman of the Board and CEO of the Company since its
incorporation and was President until 1994 and from October 1995 until October
1996. As Executive Chairman of the Company, Mr. Mann currently shares the Office
of the Chief Executive with Terrance H. Gregg. Until March 1994, Mr. Mann served
as the Chairman of the Board of the General Partner of MiniMed Technologies
Limited, a California limited partnership, which we call MMTL, a predecessor of
the Company which was also engaged in the design, manufacture and marketing of
hospital intravenous pumps and electrostimulation devices primarily for
restoration of hearing for the deaf. Mr. Mann has also served as Chairman of ABC
since 1994 and as its CEO from 1994 to February 1996. ABC is the successor to
the electrostimulation business segment of MMTL. From 1985 to September 1992,
Mr. Mann was also President and CEO of Siemens-Pacesetter, Inc., a manufacturer
and distributor of cardiac pacemakers. Mr. Mann founded, and from 1972 until
1985 was Chairman of the Board and CEO of Pacesetter Systems, Inc., a
predecessor of Siemens-Pacesetter, Inc. Prior to 1972, he was President of
Spectrolab, an electro-optical and aerospace systems company, and Heliotek, a
semiconductor and electro-optical components manufacturer, which companies Mr.
Mann founded in 1956 and 1960, respectively, and which were sold to Textron Inc.
in 1960. Mr. Mann is currently Chairman of the Board of Trustees of the Alfred
E. Mann Foundation, a medical research foundation. Mr. Mann is also the founder
and Chairman, of Medical Research Group, Inc., which we call MRG, which conducts
research and development activities relating to medical devices. Mr. Mann is
also the Chairman of Quallion, LLC, a company involved in the research of
medical device components, Second Sight LLC, a company devoted to developing
prosthesis to provide sight to patients blinded with outer retinal
degenerations, AlleCure Corporation, a biopharmaceutical company, and CTL
Immunotherapies Corp., a biopharmaceutical company. He is also a director of
Pharmaceutical Discovery Corporation, a pharmaceutical company. Since March
1998, Mr. Mann has served as a Trustee for the University of Southern
California. Mr. Mann holds a B.A. and an M.S. degree in physics from the
University of California, Los Angeles.
Terrance H. Gregg, age 52, has been a Director of the Company since August
1998. As President and Chief Operating Officer of the Company, he shares the
Office of the Chief Executive with Executive Chairman, Alfred E. Mann. Mr. Gregg
was promoted to President and Chief Operating Officer in October 1996. Mr. Gregg
joined the Company as Vice President of Regulatory Affairs and Clinical Research
in September 1994 and in February was promoted to Executive Vice President,
Operations. Mr. Gregg currently serves as Chairman of the Health Advisory Board
of the School of Policy, Planning and Development at the University of Southern
California, and as an Advisory Council Member of the San Fernando Valley
Economic Research Center at the California State University Northridge. Mr.
Gregg serves on the Boards of Ocular Sciences, Inc., a manufacturer of contact
lenses, Vasogen, Inc., a developer of immune modulation therapies for treatment
of various diseases, and Hemotherapies, Inc., a privately held company. Prior to
employment with the Company, Mr. Gregg spent the preceding nine years as Vice
President of Governmental Affairs for Ioptex Research, the ophthalmic surgical
products subsidiary of Smith & Nephew, plc. Prior to joining Ioptex Research,
Mr. Gregg was responsible for Regulatory Affairs, Clinical Research and Quality
Assurance for divisions of Allergan, Inc., a pharmaceutical company. Mr. Gregg
earned a Bachelor of Science degree in zoology from Colorado State University in
1971.
Jay S. Skyler, M.D., age 54 has served as a Director of the Company since
August, 2000. Prior to his election to the Board of Directors, Dr. Skyler was
the Chairman of the Medical Advisory Board of the Company from 1992-2000. Dr.
Skyler has been a Professor of Medicine, Pediatrics & Psychology at the
University of Miami in Miami, Florida since 1985. Dr. Skyler has been the
Co-director of Behavioral Medicine Research Center at the University of Miami
since 1986 and the Director of Operations Coordinating Center, NIDDK Diabetes
Prevention Trial - Type 1 Diabetes, since 1993. Dr. Skyler has authored numerous
research and review articles, many of which focus on insulin pump therapy and
other aspects and outcomes of intensive management of diabetes. Dr. Skyler also
serves on the Board of Directors of Amylin Pharmaceuticals, Inc., a company
engaged in the discovery and development of potential drug candidates for the
treatment of metabolic disorders. Dr. Skyler earned a Bachelor of Science degree
in science from Pennsylvania State University in 1967 and an M.D. degree from
Jefferson Medical College in 1969.
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COMPENSATION OF DIRECTORS
Non-employee Directors receive an annual retainer of $8,000, payable
quarterly, and meeting fees of $1,000 per Meeting of the Board of Directors and
$500 per Meeting of a committee of the Board of Directors. For meetings convened
via telephone, non-employee Directors are compensated at the rate of $500 per
Board meeting and $250 per committee meeting. Directors are entitled to defer
all or part of such cash compensation until their retirement or other
termination from the Board, or other predetermined dates. Deferred amounts
either accrue interest at a fixed rate or are credited to units which are
converted into shares of MiniMed common stock upon distribution. Directors are
also reimbursed for out-of-pocket expenses incurred in connection with
attendance at Board and Committee meetings. Directors who are employees of the
Company receive no compensation for service as members of the Board.
Non-employee Directors are each granted options to purchase 5,000 shares of
MiniMed common stock upon election to the Board, with additional grants of
options to purchase 5,000 shares on June 1 of each successive year that the
Director serves on the Board, each at an exercise price equal to the fair market
value of the common stock on the date of grant. Such options vest over a three
year period.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 1, 1998, the Company sold assets and transferred technology
related to its implantable pump program to MRG and entered into a series of
related transactions. MRG was founded by Alfred E. Mann, founder, Executive
Chairman and the largest stockholder of MiniMed. Mr. Mann continues to hold a
substantial equity interest in MRG. As part of the transaction to transfer this
technology, the Company acquired an option to purchase worldwide exclusive
marketing rights to a long-term glucose sensor being developed by MRG, for a
$30.0 million exercise price and retained the exclusive marketing rights to the
implantable pump product line for diabetes and certain other medical conditions.
Under these initial arrangements, the Company was obligated to make mandatory
purchases of implantable pumps from MRG through 2001 and additional purchases of
implantable products in subsequent periods to retain its exclusivity.
In February 2001, the Company restructured its agreements with MRG and
exercised its option for the worldwide marketing rights to MRG's long-term
glucose sensor.
Under the restructured agreements with MRG, the Company made a $30.0
million equity investment in MRG in March, 2001. The Company's resulting
ownership position in MRG is approximately 8.0%. Additionally, the Company is
required to make mandatory minimum purchases of implantable pump units from MRG
over the next four years in the following amounts based on current prices:
2001....................................... $ 1,980,000
2002....................................... 3,240,000
2003....................................... 4,860,000
2004....................................... 7,020,000
-----------
Total............................ $17,100,000
===========
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The Company has accrued $3,285,000 as of December 29, 2000, related to
implantable pump purchase commitments in excess of expected usage during the
four-year period. In addition to these mandatory purchase commitments, in order
to maintain its exclusive marketing rights on implantable pumps for periods
subsequent to 2002 the Company is required to pay license fees of $12.5 million
to MRG related to achievement of development milestones for future products for
the treatment of diabetes, which products are in the early stages of
development. Furthermore, the Company is required to pay additional fees of up
to $12 million in periods subsequent to 2002, which amount will be reduced to
the extent the Company purchases implantable pumps in excess of the minimum
purchase requirements. In the event that the Company fails to satisfy the
minimum purchase commitments in 2003 or 2004 or fails to make the required
license fee payments, MRG has the right to repurchase all of the Company's
distribution rights to MRG products for $60.0 million, or purchase distribution
rights to MRG's next generation implantable pump for $7.5 million. In addition,
MRG has the right to terminate the exclusive nature of this Company's
distribution rights if the Company fails to meet continuing minimum purchase
requirements after 2004. MRG has agreed to supplement the Company's funding of
the development of the special insulin used in the implantable system and to
fund a greater portion of the clinical trials of the long-term glucose sensor.
The Company has also agreed that its exclusive marketing rights to the
implantable pump are limited to the treatment of diabetes and not any other
medical condition.
The Company leases a portion of its facility in Sylmar, California to Mr.
Mann. Under the terms of the lease, the amount of space being leased is 23,400
square feet with a monthly rent of $8,424 per month for the lease term, which
expires in 2001. Pursuant to the terms of the lease, Mr. Mann is also
responsible for paying for tenant improvements made to the facilities in the
amount of $4,050 per month over the balance of the term (which includes an
interest factor of 7.5%). The lease may be terminated by either party upon 90
days notice prior to the end of any calendar year. If the lease is terminated by
Mr. Mann, he will be obligated to continue to repay the Company for the tenant
improvements until such time as the Company occupies and utilizes the space. The
Company believes that the terms of the lease reflect the fair rental value of
the space. A portion of that space has been subleased by Mr. Mann to MRG, and a
portion has been made available to the Alfred E. Mann Foundation, a medical
research foundation founded by Mr. Mann, at no charge. In 2000, the Company
leased an additional 3,620 square feet and 5,930 square feet, in the same
facility to AlleCure Corporation and ABC, respectively, on a short-term basis at
a rate of $1.10 per square foot. Mr. Mann has a substantial financial interest
in each of these companies. All such leases are on terms the Company believes to
be equal to at least fair market terms to the Company.
In 1998, the Company entered into a Letter Agreement with CTL
Immunotherapies Corp., which we call CTL, regarding a potential strategic
alliance. CTL is a biopharmaceutical company involved in the development of
proprietary compounds for the treatment of certain targeted medical conditions,
including certain forms of cancer. The Letter Agreement addresses certain
initial activities involving MiniMed and CTL and contemplates a longer term
strategic relationship. Pursuant to the Letter Agreement MiniMed (1) hired
certain technical personnel to support the project (who have since become
employees of CTL), (2) provided certain laboratory space for the CTL project,
(3) purchased certain capital equipment which is used in connection with the CTL
project, (4) provided certain MiniMed products for use in connection with
clinical trial activities, and (5) provided ancillary support to CTL in its
development efforts. The costs associated with personnel, supplies, materials
and related expenses incurred by MiniMed in connection with the CTL project are
reimbursed to MiniMed by CTL. The amount of these expenses for 2000 was
approximately $1,240, all of which has been reimbursed. MiniMed, CTL and Maersk
Medical A/S, which we call Maersk, also executed a Cooperation Agreement in
September 2000 whereby MiniMed, in conjunction with Maersk, provides CTL with
certain limited support in development of infusion sets for CTL's therapies.
Pursuant to this agreement, CTL will develop infusion sets exclusively with
MiniMed.
MiniMed and CTL expect to finalize a Definitive Agreement relating to a
strategic alliance, which is anticipated to relate to the development of therapy
systems involving selected CTL compounds and MiniMed's medication infusion
systems. The parties anticipate that the Definitive Mr. Mann has acquired a
substantial ownership position in CTL. Agreement will contain provisions similar
to those contained in the Letter Agreement. To the extent therapies utilizing
CTL compounds which are appropriate for infusion delivery are successfully
developed, the parties anticipate that the Definitive Agreement will provide
that MiniMed shall be the exclusive provider of infusion devices and supplies on
terms to be negotiated.
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COMPANY STOCK PERFORMANCE
The following graph summarizes cumulative total stockholder return data
(assuming reinvestment of dividends) for the period commencing on December 29,
1995 through December 29, 2000. The graph assumes that $100 was invested on
December 29, 1995 (i) in the common stock of the Company, (ii) in the Mid-Cap
400 Index and (iii) in the Standard & Poor's Health Care (Medical Products and
Supplies) 500 Index. The stock price performance on the following graph is not
necessarily indicative of future stock price performance.
[GRAPHIC OMITTED]
BASE YEARS ENDING
PERIOD ------------------------------------------------------
COMPANY / INDEX DEC-95 DEC-96 DEC-97 DEC-98 DEC-99 DEC-00
- -------------------------------------------------------------------------------------------------------
MINIMED INC 100 257.98 311.01 838.02 1172.00 1344.99
S&P MIDCAP 400 INDEX 100 119.20 157.65 187.77 215.41 253.12
HLTH CARE(MED PDS&SUPP)-500 100 114.77 143.09 206.25 191.03 275.56
ACTIVITIES OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held ten (10) meetings during 2000, and its standing
committees also met from time to time to address matters within their respective
areas of responsibility. Each member of the Board of Directors was present for
at least seventy five percent (75%) or more of the total number of meetings of
the Board of Directors and the total meetings held by all committees of the
Board of Directors on which he or she served.
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COMMITTEES OF THE BOARD
The standing committees of the Board consist of an Audit Committee and an
Organization and Compensation Committee.
Audit Committee
During 1999 the Audit Committee proposed, and the Board of Directors
approved, a new Charter revising the Charter initially proposed and adopted in
1996. A copy of the new Charter is attached hereto at Appendix A. The Audit
Committee may only consist of independent Directors unless the Board of
Directors determines, under limited and exceptional circumstances, that
membership on the Audit Committee by one Director who is not independent is
required by the best interests of the Company and its Stockholders and the
nature of that Director's relationships that make him or her not independent is
disclosed in the next annual Proxy Statement. The Board of Directors has
determined that all present members of the Audit Committee are independent
within the meaning of the applicable listing standard of the National
Association of Securities Dealers, Inc. Furthermore, the Audit Committee may
only consist of independent Directors (as described in the Charter) who are, or
undertake to become, sufficiently conversant with financial matters in order to
fulfill such Directors' obligations as members of the Audit Committee. The
principal duties of the Audit Committee are to provide assistance to the Board
of Directors in fulfilling its responsibility to Stockholders, potential
Stockholders and the investment community relating to the Company's financial
reporting practices. The responsibilities of the Audit Committee include (i)
reviewing the annual financial statements of the Company; (ii) reviewing the
quarterly and annual financial results of the operations of the Company; (iii)
reviewing the scope of the plan of annual audit, related fees and results of
audits; (iv) reviewing any material changes to the Company's accounting and
financial reporting practices; (v) reviewing the Company's risk management
strategies; (vi) reviewing the Company's cash management and investment policy;
(vii) recommending to the Board the retention or replacement of the independent
accountants; (viii) reviewing periodically the adequacy of the Company's
accounting, financial and internal audit organizations; (ix) reviewing for
adequacy the Company's policies regarding related party transactions and similar
matters; and (x) acting upon other matters relative to accounting or financial
matters that the Audit Committee or the Board deems appropriate. In doing so, it
is the Audit Committee's responsibility to maintain free and open means of
communication among Directors, the Company's independent accountants,
management, the internal personnel and financial managers of the Company. The
current members of the Audit Committee are Mr. Testman (Chairman), Dr. Davis and
Dr. Chernof. The Audit Committee regularly meets privately with the Company's
independent auditors, outside of the presence of any Company officers or other
personnel. The Audit Committee held five (5) meetings during fiscal year 2000.
REPORT OF THE MINIMED INC.
AUDIT COMMITTEE
The Audit Committee reports to and acts on behalf of the Board of Directors
by providing oversight of the financial management, independent auditors and
financial reporting procedures of the Company. The Company's management is
responsible for preparing the Company's financial statements and the independent
auditors are responsible for auditing those financial statements. The Audit
Committee is responsible for overseeing the conduct of these activities by the
Company's management and the independent auditors.
In this context, the Audit Committee has met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the consolidated financial statements with
management and the independent auditors.
The Audit Committee has discussed with the independent auditors matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committees). In addition, the independent
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auditors provided to the Audit Committee the written disclosures required by
Independent Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and the Audit Committee and the independent auditors have discussed
the auditors' independence from the Company and its management, including the
matters in those written disclosures. Additionally, the Audit Committee
considered the non-audit services provided by the independent auditors,
including tax consulting services, employee benefits services, and services
relating to the management and administration of government grants, and the
Audit Committee considered the fees and costs billed and expected to be billed
by the independent auditors for those services. The Committee has discussed with
management the procedures for selection of consultants and the related
competitive bidding practices and fully considered whether those services
provided by the independent auditors are compatible with maintaining auditor
independence.
The Committee has discussed with the Company's independent auditors, with
and without management present, their evaluations of the Company's internal
accounting controls and the overall quality of the Company's financial
reporting, including the Company's plans to add an internal audit function.
In concluding that Deloitte & Touche is independent, the Audit Committee
considered, among other factors, whether the provision of nonaudit services (as
described below) provided by Deloitte & Touche were compatible with maintaining
their independence.
Deloitte & Touche LLP Fees:
Audit Fees. The aggregate fees billed by Deloitte & Touche LLP for
professional services rendered for the audit of the Company's annual financial
statements for the year ended December 29, 2000 and for the reviews of the
financial statements included in the Company's Forms 10-Q for that year was
approximately $239,995.
All Other Fees. The aggregate fees billed by Deloitte & Touche LLP for all
other services not referred to above, including tax services, for the year ended
December 29, 2000 was approximately $122,298.
In reliance on the reviews and discussions with management and the
independent auditors referred to above, the Audit Committee recommended to the
Board of Directors on March 15, 2001, and the Board has approved, the inclusion
of the audited financial statements in the Company's Annual Report on Form 10-K
for the fiscal year ended December 29, 2000, for filing with SEC. The Audit
Committee also recommended to the Board of Directors, and the Board has
approved, subject to stockholder ratification, the selection of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year ending
December 28, 2001.
Thomas R. Testman - Chairman
Carolyne Kahle Davis, Ph.D.
David Chernof, M.D.
Organization and Compensation Committee
The Organization and Compensation Committee may only consist of independent
directors who are not current or former employees of the Company. The primary
responsibilities of the Organization and Compensation Committee are to review
and approve significant changes to the Company's organizational structure,
monitor and evaluate the performance of the Company's executive officers, review
and approve the Company's management succession and changes, and review and
approve compensation levels and incentive programs for the executive officers of
the Company. The Organization and Compensation Committee also performs the
functions of a typical nominating committee including reviewing qualifications
of potential candidates for election as Directors of the Company from whatever
sources obtained and making recommendations to the Board with respect to
nominees. The Committee also establishes establishing criteria to evaluate
Director performance, and recommend assignments of Directors to committees of
the Board. The current members of the Organization and Compensation
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Committee are Mr. Grant (Chairman), Mr. MacCallum and Mr. Villforth. The
Organization and Compensation Committee held four (4) meetings during fiscal
year 2000, and also adopted resolutions by unanimous written consent of the
members. A report of the Organization and Compensation Committee with respect to
executive compensation matters appears below.
REPORT OF THE MINIMED INC.
ORGANIZATION AND COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
OVERALL POLICY
The MiniMed Organization and Compensation Committee of the Board of
Directors is composed entirely of independent, non-employee Directors. In
fulfilling its obligations, the Organization and Compensation Committee reviews
and approves corporate organizational structure; monitors the performance of
executive officers; evaluates members of the Office of the Chief Executive;
reviews and approves management succession and changes; establishes compensation
levels and incentive programs for executive officers; and approves Directors'
compensation. In order to assist the Organization and Compensation Committee
with the discharge of its obligations, during 2000 it retained the services of
SCA Consulting to advise it relative to the competitive position of the
Company's compensation levels and practices for the Company's executive
officers.
In establishing the Company's executive compensation program, the
Organization and Compensation Committee takes into account current market data
and compensation trends for comparable companies, gauges achievement of
corporate and individual objectives, and considers the overall effectiveness of
the program. The Organization and Compensation Committee bases the compensation
program on the following principles:
o The compensation program has three elements: basic annual salary, annual
incentive awards, and stock options.
o Executives' interest in the business should be linked to the interests and
benefits received by the Company's Stockholders.
o Compensation levels for executive officers are benchmarked to market
information from general industry surveys, additional surveys conducted by
outside consultants and from proxy materials of other similar companies.
Peer group information is developed on the basis of industry (medical
products/research companies), revenues, profits and other similar criteria.
In 2000, the peer group was selected from among companies deemed to be
comparable to the Company. Accordingly, companies selected include those
(i) whose securities are publicly traded, (ii) with high market
capitalization relative to revenues and (iii) with a record of high growth
and high performance.
o Compensation is tied to performance. A significant part of the total
compensation opportunity is in the form of an annual incentive bonus award,
to be earned only if specific financial goals are met and value is created
for stockholders. Likewise, award amounts are based upon the achievement of
specific financial goals, as well as upon individual accomplishments.
In considering compensation levels in earlier years, the Organization and
Compensation Committee had historically targeted compensation levels for Company
executive officers at the median of peer group companies. Beginning in 1999, the
Organization and Compensation Committee acknowledged that the Company had
experienced significant success during the prior years, as measured by a variety
of criteria. The Organization and Compensation Committee identified the
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continuing retention of the executive officers as a key goal, and endeavored to
increase the base salary of the executive officers annually, on an incremental
basis over successive years, in order to assure appropriate pay for performance.
This trend commenced in 1999 and continued to be applied in 2000.
The compensation program for the executive officers is described below.
BASE SALARY: Competitive base salaries are determined for each executive
based on a review of the salaries in the selected group of peer companies and
similar survey data. In conjunction with the competitive data, actual salaries
are established based on executive roles and responsibilities, position titles,
and the skills, experience and performance of individual executives.
ANNUAL INCENTIVES: For the 2000 fiscal year, annual bonus consideration was
based upon an annual incentive plan for executives, the general terms of which
previously were approved by the Organization and Compensation Committee and the
particular 2000 performance goals were approved in early 2000. The purpose of
the plan is to (i) provide competitive pay in order to attract and retain
qualified executives, (ii) provide incentive to meet MiniMed financial and
individual/functional objectives, (iii) reward managers who significantly impact
financial performance, (iv) encourage teamwork and (v) encourage adherence to
the corporate culture of the Company. The plan provides for bonus awards based
upon the achievement of predetermined Company revenue and earnings per share
objectives and individual performance objectives. The Company believes that the
achievement of the objectives create additional value for stockholders.
STOCK OPTIONS: The Company's long-term incentive program consists entirely
of stock options granted at 100% of fair market value which generally vest over
a five-year period, although the stock option awards granted in recent years for
the Executive Chairman and the President vest over three years. The number of
options granted to individual executives is based on a combination of factors,
including competitive market practice, executive roles and responsibilities,
performance assessments and prior stock option grant levels. The Organization
and Compensation Committee believes that stock options are a key ingredient in
linking executive interests to Stockholder interests and represent the primary
capital accumulation opportunity for executives. Therefore, significant stock
option grants are critical to retain, attract, and motivate qualified
executives.
2000 COMPENSATION FOR THE EXECUTIVE CHAIRMAN AND THE PRESIDENT: In
determining the 2000 salary and annual incentive award for the Executive
Chairman and the President, the Organization and Compensation Committee
considered all aspects of Company and individual performance. The primary
evaluation criteria, similar to the criteria applied to the CEO performance
review in prior years, included leadership, strategic planning, financial
results, succession planning, strategic partnering, and external and Board
relations.
Previously, the Organization and Compensation Committee had determined that
compensation for the Company's Chief Executive had been below peer companies.
Accordingly, commencing in 1999, the Organization and Compensation Committee
began to increase the relative compensation for the Company's Chief Executive to
better reflect the results of operations and shareholder return for the Company.
As planned by the Organization and Compensation Committee, this trend continued
in 2000.
The leadership of Mr. Mann and Mr. Gregg enabled the Company to achieve
significant financial results in 2000, while continuing to invest heavily in
future opportunities for the Company. For fiscal year 2000 the Company's sales
increased 39% and net income grew 65% (excluding the effect of a gain on an
investment position). Pursuant to the Company's executive incentive bonus plan,
Mr. Mann and Mr. Gregg would have been eligible to receive a bonus equal to
approximately 50% and 45% of their respective base salaries in recognition of
such performance. However, all of the executive officers of the Company,
including Mr. Mann and Mr. Gregg, voluntarily elected to forego consideration of
bonus awards for fiscal year 2000, which would have been paid in the first
quarter of 2001. This decision was reached because, although the Company
achieved record sales and earnings performance in fiscal year 2000, results
failed to achieve increased consensus expectations of financial analysts.
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Mr. Mann and Mr. Gregg each were granted options to purchase 200,000 shares
of common stock on February 25, 2000 with term of eight years, an exercise price
of $43.25 per share and a vesting period of three years. This amount provides
long-term incentive opportunity at the median of competitive practice, tied
directly to stockholder value creation. The grant of options reflects the
two-for-one stock dividend distributed on August 18, 2000 to stockholders of
record as of August 2, 2000.
OMNIBUS BUDGET RECONCILIATION ACT (IRC SECTION 162(m)): The Organization
and Compensation Committee periodically reviews the implication of Section
162(m) of the Internal Revenue Code of 1986, as amended, regarding the
deductibility of executive compensation for the Chief Executive of the Company
and next four most highly compensated executive officers. Compensation paid in
1998 for any single executive did not exceed the limits of Section 162(m) and
was therefore fully deductible by the Company. The Organization and Compensation
Committee will continue to monitor the implications of Section 162(m) for
executive compensation programs.
William R. Grant - Chairman
David H. MacCallum
John C. Villforth
EXECUTIVE OFFICERS OF THE COMPANY
The Company's executive officers are generally appointed annually by the
Board of Directors for a one year term and serve at the pleasure of the Board.
As of April 30, 2001, the Company's executive officers are:
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
Alfred E. Mann..................... 75 Executive Chairman, and Member, Office of the Chief Executive
Terrance H. Gregg.................. 52 President and Chief Operating Officer, and Member, Office of
the Chief Executive
Stephen A. Bowman.................. 56 Senior Vice President, Sales and Marketing
Eric S. Kentor..................... 42 Senior Vice President, General Counsel and Secretary
David Morley....................... 54 Senior Vice President, Operations
Kevin R. Sayer..................... 43 Senior Vice President, Finance and Chief Financial Officer
Steven M. Schultz ................. 39 Senior Vice President, Human Resources and Customer Service,
Assistant General Counsel
Kevin Wells........................ 38 Senior Vice President, Research and Development
The following is information with respect to the Company's executive
officers who are not members of the Board.
STEPHEN A. BOWMAN joined the Company as Senior Vice President, Sales and
Marketing in March 1999. Prior to joining the Company, Mr. Bowman served as Vice
President, International Sales and Marketing of Sulzer Intermedics, Inc., a
manufacturer and distributor of implantable and disposable medical products,
where he served as Vice President - International Sales and Marketing from
October 1992 until March 1999 and as Vice President - Worldwide Marketing from
May 1992 to October 1992. Mr. Bowman served as Director - Western Region at
Sulzer Intermedics from May 1991 to May 1992. Previously, from November 1989 to
April 1991, Mr. Bowman was General Manager of Biotronik, Inc. a manufacturer and
distributor of implantable medical products. Prior to joining Biotronik,
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Mr. Bowman held various positions with Medtronic, Inc., Johnson & Johnson and
Del Monte Sales. Mr. Bowman earned a B.A. degree in Marketing from San Diego
State University in 1968.
ERIC S. KENTOR was promoted to Senior Vice President in February 1996. Mr.
Kentor joined the Company in May 1995 as Vice President, General Counsel and
Secretary. Prior to joining the Company, Mr. Kentor was Vice President, Legal
Services, of Health Net, which at the time was California's second largest
health maintenance organization, where he held various positions beginning in
March 1994. From March 1994 until May 1995, Mr. Kentor also served as Executive
Counsel of Health Net's parent corporation, Health Systems International, Inc.
Previously, from 1987 until 1994, Mr. Kentor practiced with the law firm of
McDermott, Will & Emery, where he was elected partner in 1992. Mr. Kentor
received a J.D. degree from the UCLA School of Law in 1986.
DAVID MORLEY joined the Company as Senior Vice President, Operations in
January 1998. Prior to joining the Company, Mr. Morley served as Executive Vice
President of Operations at St. Jude Medical, Inc., a manufacturer of cardiac
pacemakers and related products. At St. Jude Medical, Mr. Morley was responsible
for all manufacturing and quality activities at facilities in California,
Arizona, South Carolina and Sweden. Mr. Morley received a B.A. from Duquesne
University in 1968, an M.A. from the University of Pittsburgh in 1970 and an
M.B.A. from California State University Northridge.
KEVIN R. SAYER was promoted to Senior Vice President, Finance, in February
1996. Mr. Sayer joined the Company in May 1994 as Vice President, Finance and
Chief Financial Officer. Prior to joining the Company, Mr. Sayer spent the
previous 11 years with Ernst & Young LLP, where he specialized in providing
auditing, accounting and consulting services to high growth companies, primarily
in the health care and high technology industry segments. Mr. Sayer received a
B.S. in accounting from Brigham Young University in 1981 and received a Masters
degree in accounting/information systems from Brigham Young University in 1983.
STEVEN M. SCHULTZ joined the Company in July 1998 as Vice President, Human
Resources and Assistant General Counsel. In June 2000, Mr. Schultz was promoted
to Senior Vice President, Human Resources and Assistant General Counsel and, in
October 2000, Mr. Schultz also assumed responsibility for Customer Service. From
1988 until he joined the Company, Mr. Schultz practiced with the law firm of
Gibson, Dunn & Crutcher LLP, where he was elected partner in 1995. Throughout
his law practice, Mr. Schultz specialized in employment law, representing
employers. Previously, Mr. Schultz served a one-year judicial clerkship with the
Honorable Stephen V. Wilson of the United States District Court for the Central
District of California. Mr. Schultz earned his J.D. degree from UCLA School of
Law in 1987.
KEVIN WELLS was promoted to Senior Vice President, Research and Development
in August 2000. Mr. Wells joined the Company in January, 1999 as Vice President,
Analytical Products, and was promoted to Vice President, and Chief Information
Officer in September 1999. Prior to joining the Company, Mr. Wells served as
Vice President, Software Engineering at Disney Online. From 1994 until 1998, Mr.
Wells held a number of positions within the high technology divisions of The
Walt Disney Company, including Director of Marketing and Director of Customer
Service. Prior to joining Disney, Mr. Wells held a variety of engineering and
marketing positions with startup companies in Silicon Valley. Mr. Wells earned a
B.S. in Physics, an M.S. in Electrical Engineering, and an M.B.A. degree from
Stanford University in 1984, 1985, and 1990 respectively.
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EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth, for the year ended December 29, 2000, the
compensation paid by the Company to Mr. Mann and Mr. Gregg, and each of the
other four most highly compensated executive officers of the Company who
received salary and bonuses in excess of $100,000 during 2000, for all services
rendered in all capacities in which they serve. We refer to such individuals
collectively as the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation earned by the Named
Executive Officers during the fiscal years 2000, 1999 and 1998.
Long-Term
Annual Compensation Compensation
------------------------------------------------ -------------
Other All
Annual Securities Other
Salary Bonus Compensation Underlying Other
Name and Principal Position: ($) ($) ($) Options (#) Compensation ($)
- ---------------------------- ------ ----- ------------ ---------- ----------------
Alfred E. Mann 2000 398,462 -- (1) -- 200,000 507 (2)
Executive Chairman 1999 322,404 259,200 (3) -- 200,000 507 (4)
Member, Office of Chief 1998 274,231 173,757 (5) -- 0 3,300 (6)
Executive
Terrance H. Gregg 2000 387,500 -- (1) -- 200,000 3,655 (7)
Director, President and 1999 298,943 204,750 (3) -- 200,000 3,406 (8)
Chief Operating Officer 1998 233,769 124,031 (5) -- 0 3,626 (9)
Member, Office of Chief
Executive
David Morley 2000 249,039 -- (1) -- 70,000 4,915 (10)
Senior Vice President, 1999 210,961 121,500 (3) -- 80,000 4,155 (11)
Operations 1998 161,539 (12) 82,688 (5) -- 120,000 2,393 (13)
Eric S. Kentor 2000 248,846 -- (1) -- 70,000 4,031 (14)
Senior Vice President, General 1999 201,730 118,800 (3) -- 60,000 3,058 (15)
Counsel and Secretary 1998 164,539 77,963 (5) -- 0 2,313 (16)
Kevin R. Sayer 2000 248,461 -- (1) -- 70,000 3,166 (17)
Senior Vice President, Finance 1999 193,828 113,400 (3) -- 60,000 2,233 (18)
and Chief Financial Officer 1998 156,631 74,183 (5) -- 0 3,537 (19)
Stephen A. Bowman 2000 199,039 -- (1) 30,944 (20) 60,000 3,442 (21)
Senior Vice President Sales 1999 128,747 (22) 94,500 (3) 89,588 (23) 120,000 1,458 (24)
and Marketing 1998 -- -- -- --
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(1) All Named Executive Officers earned and were entitled to cash bonuses for
2000 in accordance with (1) the Company's bonus plan. However, all Named
Executive Officers voluntarily declined to accept their respective cash
bonus.
(2) Consists of a service award of $507.
(3) Consists of performance bonuses accrued by the Company in 1999 but paid, at
the election of the Company, in 2000.
(4) Consists of a service award of $507.
(5) Consists of performance bonuses accrued by the Company in 1998 but paid, at
the election of the Company, in 1999.
(6) Consists of a matching contribution of $3,300 to a 401(k) plan.
(7) Consists of a service award of $195 and a matching contribution of $3,500
to a 401(k) plan.
(8) Consists of a service award of $101 and a matching contribution of $3,305
to a 401(k) plan.
(9) Consists of a matching contribution of $1,034 to a 401(k) plan and a term
life insurance premium of $2,592.
(10) Consists of a matching contribution of $3,500 to a 401(k) plan and a term
life insurance premium of $1,415.
(11) Consists of a matching contribution of $3,311 to a 401(k) plan and a term
life insurance premium of $844.
(12) Mr. Morley became employed by the Company on January 19, 1998.
(13) Consists of a term life insurance premium of $2,393.
(14) Consists of a matching contribution of $3,281 to a 401(k) plan, a term life
insurance premium of $595, and a service award of $155.
(15) Consists of a matching contribution of $2,693 to a 401(k) plan and a term
life insurance premium of $365.
(16) Consists of a matching contribution of $1,733 to a 401(k) plan and a term
life insurance premium of $580.
(17) Consists of a matching contribution of $2,412 to a 401(k) plan, a term life
insurance premium of $599, and a service award of $155.
(18) Consists of a service award of $101, matching contribution of $1,780 to a
401(k) plan and a term life insurance premium of $352.
(19) Consists of a matching contribution of $2,686 to a 401(k) plan and a term
life insurance premium of $851.
(20) Consists of an auto allowance of $16,717, housing allowance of $18,100,
medical expenses of $3,339 and enhanced long term disability premium of
$2,788.
(21) Consists of a matching contribution of $1,925 to a 401(k) plan and a term
life insurance premium of $1,517.
(22) Mr. Bowman became employed by the Company in March 1999.
(23) Consists of expenses for relocation in the amount of $58,927, an auto
allowance of $13,759, a housing allowance of 12,600, medical expenses of
$1,514, and enhanced long term disability premium of $2,788.
(24) Consists of a matching contribution of $1,458 to a 401(k) plan.
18
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OPTION GRANTS IN 2000
The following table summarizes option grants in 2000 to the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS GRANTED EXERCISE OR APPRECIATION FOR
UNDERLYING TO BASE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME: GRANTED (#)(1) FISCAL YEAR ($/SHARE)(1) DATE 5% ($) 10%($)
- ----- -------------- -------------- ------------- ---------- ------------- -------------
Alfred E. Mann 200,000 11.25% 43.50 2/25/08 4,152,000 9,934,000
Terrance H. Gregg 200,000 11.25% 43.50 2/25/08 4,152,000 9,934,000
David Morley 70,000 3.94% 43.50 2/25/08 1,453,200 3,476,900
Eric S. Kentor 70,000 3.94% 43.50 2/25/08 1,453,200 3,476,900
Kevin R. Sayer 70,000 3.94% 43.50 2/25/08 1,453,200 3,476,900
Stephen A. Bowman 60,000 3.38% 43.50 2/25/08 1,245,600 2,980,200
- -------
(1) All options granted in 2000 were non-qualified stock options granted
pursuant to the MiniMed Inc. Third Amended and Restated 1994 Stock Incentive
Plan, which we call the 1994 Plan. All grants in 2000 had exercise prices equal
to fair market value, as defined in the 1994 Plan. With the exception of the
options granted to Messrs. Mann and Gregg, all grants become exercisable over a
five year period with 20% becoming exercisable on each anniversary of such grant
until fully vested. The grants to Messrs. Mann and Gregg become exercisable over
a three year period with 33.3% becoming exercisable on each anniversary of such
grant until fully vested. All share amounts have been adjusted to reflect a
2-for-1 stock dividend which was distributed on August 18, 2000.
(2) The potential gains shown are net of the exercise price and do not
include the effect of any taxes associated with exercise. The amounts shown are
for the assumed rates of appreciation only and may not necessarily be realized.
Actual gains, if any, on stock option exercises depend on the future performance
of the Company's common stock, continued employment of the optionee through the
term of the option and other factors.
STOCK OPTIONS
The Company has outstanding options to purchase shares of MiniMed common
stock, including options granted under the 1994 Plan and options granted by
MMTL, predecessor to the Company, pursuant to its 1992 Amended and Restated
Stock Plan, which we call the MMTL Plan. Options granted under the MMTL Plan
were assumed by the Company and became exercisable to purchase shares of common
stock of the Company. Under the MMTL Plan, options to purchase 3,921,800 shares
of common stock of the Company were granted. No additional options will be
granted under the MMTL Plan. As of March 30, 2001, under the MMTL Plan, options
to purchase 104,900 shares of common stock remained outstanding, and options to
purchase 3,419,132 shares had been exercised. Under the 1994 Plan, as of March
30, 2001, options to purchase 12,814,928 shares of common stock have been
granted, of which options representing 3,030,418 shares have been exercised and
options representing 8,985,910 shares of common stock remain outstanding. Also,
as of March 30, 2001, 2,983,672 shares of common stock remained available for
future grants under the 1994 Plan of which 798,000 options had been previously
canceled and made available for future grants.
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23
The following table sets forth certain information with respect to the
unexercised options to purchase common stock of the Company held by the Named
Executive Officers as of December 29, 2000 and options exercised by the Named
Executive Officers in the fiscal year ended December 29, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY OPTIONS
SHARES ACQUIRED UNEXERCISED OPTIONS AT 12/29/00 (#) AT 12/29/00 ($)1
ON VALUE ----------------------------------- ------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
Alfred E. Mann -- -- 1,154,667 365,333 42,431,699 3,989,484
Terrance H. Gregg 170,000 9,204,618 322,667 461,333 10,424,740 7,131,480
Eric S. Kentor 140,000 7,464,393 122,000 170,000 4,195,681 2,795,870
David Morley 40,000 1,324,886 0 206,000 0 3,672,743
Kevin R. Sayer 120,000 6,201,658 88,000 156,000 2,937,745 2,297,558
Stephen A. Bowman 40,000 1,265,149 0 132,000 0 1,491,746
- ---------
(1) Based on the closing price of $42.0312 on The Nasdaq National Stock Market
on December 29, 2000.
CHANGE OF CONTROL AGREEMENTS
The outstanding options to purchase shares of common stock of the Company
will become exercisable in full in the event of a "change in control" of the
Company unless the Board of Directors elects to include a provision in any award
expressly providing that such acceleration does not apply. "Change in control"
under these plans is defined as (i) the acquisition by any person of 50% or more
of the combined voting power of the Company's outstanding voting securities;
(ii) the sale, lease or other disposition of all or substantially all of the
Company's assets, such as by merger, consolidation or otherwise; or (iii) the
dissolution or liquidation of the Company. The Organization and Compensation
Committee may also, in its discretion, accelerate the exercisability or vesting
of any Award (as defined in the 1994 Plan) in accordance with the administration
of the 1994 Plan.
In 1999, the Company entered into agreements with Messrs. Mann, Gregg,
Kentor, Morley and Sayer, providing for severance benefits to such officers in
the event of termination of their employment in connection with a change of
control of the Company occurring prior to March 1, 2001, the two-year
anniversary of such agreements. These agreements were renewed for an additional
two-year period effective March 1, 2001. In August 1999, the Company entered
into a similar agreement with Mr. Bowman in the event of termination of his
employment in connection with a change of control of the company occurring prior
to August 2001. Messrs. Schultz and Wells entered into similar agreements with
the Company in August 2000, and October 2000, respectively. The severance
benefits are payable if the Company terminates the employment of an officer
without cause or the officer voluntarily terminates his employment for good
reason (generally consisting of adverse changes in responsibilities,
compensation, benefits or location of work place) within two years after a
change of control or three months prior to and in connection with, or in
anticipation of, such a change. The benefits are also payable if the officer
voluntarily terminates his employment for any reason within 30 days after the
expiration of one year after a change of control.
In these agreements, "Change of control" is defined to mean:
20
24
o the acquisition of beneficial ownership of 30% or more of the
outstanding shares of voting stock of the Company by any person,
entity or group, subject to certain exceptions including acquisitions
by Mr. Mann and acquisitions of shares beneficially owned by him as a
result of his death or transfers during his lifetime to
o charities or members of his family or certain entities in which
charities or members of his family have a majority of the beneficial
interest;
o any change in the directors of the Company after which a majority of
the directors consist of persons who (i) were not serving as directors
when the severance benefit agreements were entered into or (ii) were
selected for election by stockholders, or elected to fill vacancies on
the Board, by directors referred to in clause (i) or were themselves
selected or nominated as described in this clause (ii);
o a sale of all or substantially all of the Company's assets or a
merger, consolidation or reorganization of the Company unless the
holders of the outstanding voting shares of the Company immediately
before any such transaction own at least 70% of the outstanding voting
shares of the Company or a successor company immediately after the
transaction; or
o a liquidation of the Company.
The severance benefits generally consist of a lump sum payment equal to two
times the officer's annual base salary and two times his average annual bonus
determined over the three prior years (subject to certain exceptions), a
prorated portion of the bonus for the year of termination, continuation of
Company life, health and disability insurance for two years or until any earlier
date when other full time employment is obtained providing health plan benefits
without an exclusion for pre-existing conditions, continuation of the use of a
Company car for one year or until any earlier date when other full time
employment is obtained and acceleration of the date when outstanding stock
options become exercisable. The benefits (other than acceleration of the vesting
dates of stock options) are subject to reduction to avoid the taxes and loss of
deductions associated with "excess parachute payments" under the Internal
Revenue Code.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is a tabulation indicating those persons or groups who are
known to the Company to have been beneficial owners of at least 5% of the
outstanding shares of common stock of the Company as of December 29, 2000. The
following information is based on reports on Schedules 13D or 13G filed with the
Securities and Exchange Commission or other information deemed to be reliable by
the Company.
NAME AND ADDRESS SHARES BENEFICIALLY
OF BENEFICIAL OWNERS OWNED PERCENT OF CLASS
- -------------------- ------------------ ----------------
Alfred E. Mann................................ 17,877,077 (1) 27.14%
18000 Devonshire Street
Northridge, California 91325
FMR
Corp.......................................... 3,884,900 (2) 6.021%
82 Devonshire Street
Boston, Massachusetts 02109
- -------
(1) Includes 1,320,001 shares which Mr. Mann has the right to purchase under
outstanding stock options which are exercisable or become exercisable
within 60 days of December 29, 2000. Also includes 621,000 shares owned by
the Alfred E. Mann Foundation, which we call the Foundation, of which Mr.
Mann is a trustee. As a trustee, Mr. Mann shares voting and investment
power with respect to the shares owned by the Foundation. Mr. Mann
21
25
disclaims any beneficial interest in the shares owned by the Foundation.
All share amounts have been adjusted to reflect a 2-for-1 stock dividend
which was distributed on August 18, 2000.
(2) As reported by FMR Corp. and Edward C. Johnson, III and Abigail P. Johnson
in their joint Schedule 13G incorporating information as of December 31,
2000 and filed on February 14, 2001 with the Securities and Exchange
Commission. Pursuant to the schedule (a) Fidelity Management & Research
Company, which we call Fidelity, a wholly-owned subsidiary of FMR Corp., is
the beneficial owner of 3,880,900 shares or 6.015% of the common stock of
the Company; (b) Members of the Edward C. Johnson, III family own
approximately 49% of the voting power of FMR Corp. with Edward C. Johnson,
III owning 12% and Abigail P. Johnson owning 24.5% of the aggregate
outstanding voting stock of FMR Corp.; (c) Edward C. Johnson, III and FMR
Corp. have sole power to dispose of the 3,880,900 shares; (d) FMR Corp's
Board of Trustees has the power to vote or direct the vote of the shares
owned; (e) Fidelity Management Trust Company, a wholly-owned subsidiary of
FMR Corp., is the beneficial owner of 4,000 shares or 0.006% of the common
stock outstanding of the Company; (f) Edward C. Johnson, III and FMR Corp.,
through its control of Fidelity Management Trust Company, has sole
dispositive power and sole power to vote or direct the voting of 4,000
shares of the common stock of the Company; and (g) Strategic Advisors,
Inc., a wholly-owned subsidiary of FMR Corp., is an investment advisor to
individuals and as such FMR Corp's beneficial ownership may include shares
beneficially owned through Strategic Advisors, Inc.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 2001, the number of shares
of common stock beneficially owned by each of the current Directors of the
Company, including the three nominees to serve as Directors of the Company, by
each Named Executive Officer, by all directors and executive officers as a group
and the percentage those shares represent of the total number of shares of
common stock of the Company outstanding as of that date. Unless otherwise
indicated, all persons named as beneficial owners of common stock have sole
voting and investment power with respect to such common stock.
NAME OF INDIVIDUAL OR AMOUNT OF SHARES
NUMBER OF PERSONS IN GROUP BENEFICIALLY OWNED(1) PERCENTAGE OF CLASS
- -------------------------- --------------------- -------------------
Alfred E. Mann................................... 17,877,077 (2) 27.11%
David Chernof, M.D............................... 15,000 *
Carolyne Kahle Davis ............................ 27,232 *
William R. Grant................................. 0 *
Terrance H. Gregg................................ 503,105 *
David H. MacCallum............................... 53,492 *
Jay S. Skyler, M.D............................... 29,000 *
Thomas R. Testman................................ 38,500 *
John C. Villforth................................ 62,500 *
Eric S. Kentor................................... 176,427 *
David Morley..................................... 55,356 *
Kevin R. Sayer................................... 128,000 *
Stephen A. Bowman ............................... 36,000 *
All Directors and Executive Officers as a group
(15 persons)................................. 19,026,921 27.52%
- -------
* The amount shown is less than 1% of the outstanding shares of common stock.
22
26
(1) Includes the following numbers of shares which the executive officer or
Director has the right to purchase under outstanding stock options which
are exercisable or become exercisable within 60 days of March 1, 2001: Mr.
Mann - 1,320,001, Mr. MacCallum - 46,500, Mr. Testman - 32,500, Mr. Gregg -
500,001, Mr. Kentor - 170,000, Mr. Sayer - 128,000, Mr. Villforth - 62,500,
Dr. Davis - 27,232, Dr. Chernof - 2,500, Mr. Morley - 54,000, Mr. Bowman -
36,000, all directors and executive officers as a group (15 persons) -
2,401,234.
(2) Includes 621,000 shares beneficially owned by the Foundation of which Mr.
Mann is a trustee. As a trustee, Mr. Mann shares voting and investment
power with respect to the shares beneficially owned by the Foundation. Mr.
Mann disclaims any beneficial interest in the shares owned by the
Foundation.
In addition to the foregoing beneficial ownership amounts, the directors
listed below elected to defer all or a portion of their annual retainer and
meeting fees. These amounts will be applied to the purchase of units which are
equivalent to shares of the Company's common stock. As of March 1, 2001, such
amounts constitute units converting into the following number of shares of the
Company's common stock:
COMMON SHARE
NAME STOCK UNITS
- ---- -----------
Carolyne K. Davis................................................. 1,891.47
William R. Grant.................................................. 8,195.98
David H. MacCallum................................................ 4,601.46
Jay S. Skyler, M.D. .............................................. 199.78
Thomas R. Testman................................................. 12,513.83
John C. Villforth................................................. 6,475.42
PROPOSAL 2 -- AMENDMENT TO CERTIFICATE OF INCORPORATION OF THE
COMPANY TO INCREASE AUTHORIZED CAPITAL STOCK
As of March 30, 2001, there were 64,664,116 shares (as adjusted for the
two-for-one stock split payable to stockholders of record on August 18, 2000) of
Common Stock issued and outstanding (exclusive of treasury shares) and
15,836,896 shares (as adjusted) of Common Stock were reserved for issuance in
connection with all of the Company's stock plans. The Board of Directors
proposes that Stockholders authorize an amendment of the Company's Certificate
of Incorporation to increase the number of authorized shares of common stock
from 100,000,000 to 200,000,000 shares and to increase the number of authorized
shares of Preferred Stock from 10,000,000 to 20,000,000 shares. The par value of
the Common Stock would remain at $0.01 per share. This would replenish the
authorized shares available for issuance and provide substantial additional
shares of both Common and Preferred Stock for future issuance. Although these
additional shares would provide further flexibility, there are no present plans
for their use. The Board of Directors recommends that such increase in the
number of authorized shares of Common and Preferred Stock be approved by the
Stockholders.
23
27
The proposed amendment to the Restated Certificate of Incorporation will be
effected by deleting the introductory paragraph of Article IV of the Company's
Restated Certificate of Incorporation, as amended, and substituting a new
introductory paragraph that reads in full as follows:
"ARTICLE IV
AUTHORIZED CAPITAL STOCK
The total number of shares of all classes of stock which the corporation
shall have the authority to issue shall be 220,000,000 shares, consisting of
200,000,000 shares of Common Stock, with a par value of one cent ($.01) per
share and 20,000,000 shares of Preferred Stock, with a par value of $.01 per
share (the "Preferred Stock")."
The Board of Directors is of the opinion that the proposed increase in the
number of authorized shares of common stock is in the best interest of the
Company and its Stockholders. The Board of Directors believes that the Company
should have sufficient authorized but unissued shares for issuance in connection
with stock splits and stock dividends, implementation of employee benefit plans,
offer of shares for cash, acquisitions of other businesses, and other proper
business purposes. In many such situations prompt action may be required which
would not permit seeking stockholder approval to authorize additional shares for
the specific transaction on a timely basis.
The additional shares of Common and Preferred Stock sought by the amendment
will be available for issuance without further action by Stockholders, unless
such action is required by applicable law or the rules of any stock exchange or
system of automated quotations on which the Company's securities may be listed.
The Nasdaq National Market requires specific stockholder approval as a
prerequisite to listing shares in several instances, including an acquisition
where the present or potential issuance of shares could result in an increase of
20% or more in the number of shares of common stock outstanding.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 3 -- RATIFICATION OF SELECTION
OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of Directors has
selected Deloitte & Touche LLP to audit the consolidated financial statements of
the Company and its subsidiaries for the fiscal year ending December 28, 2001.
Deloitte & Touche LLP served in this capacity for the year ending December 29,
2000. Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting and will be available to respond to appropriate questions of
stockholders and to make a statement if they desire.
The Board of Directors is submitting the approval of Deloitte & Touche LLP
to the Stockholders as a matter of good corporate practice, although it is not
required to do so. Should the Stockholders fail to provide such ratification,
the Board of Directors will reconsider its approval of Deloitte & Touche LLP as
the Company's independent public accountants for the year ending December 28,
2001. Even if the selection is ratified, the Board of Directors, in its
discretion, may direct the appointment of a new independent accounting firm at
any time during the fiscal year if the Board of Directors believes that such a
change would be in the best interests of the Company and its Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A YES VOTE FOR PROPOSAL 3.
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REQUIREMENTS AND PROCEDURES FOR SUBMISSION
OF PROXY PROPOSALS AND NOMINATIONS
OF DIRECTORS BY STOCKHOLDERS
Nominations for the Board of Directors: The Company expects to hold its
2002 Annual Meeting on June 6, 2002, although the Company retains the right to
change this date, as it may determine. The Organization and Compensation
Committee will consider nominees for Director recommended by Stockholders if the
recommendations are submitted in sufficient time to allow for such
consideration. Any such recommendation should be submitted to the Secretary of
the Company at the Company's headquarters. Stockholders may nominate Directors
for election in accordance with the Company's Bylaws. The Company's Bylaws
provide that written notice of proposed Stockholder nominations for the election
of Directors at the 2002 Annual Meeting of Stockholders must be received at the
principal executive office of the Company not less than 90 days nor more than
120 days prior to the meeting, or between March 8, 2002 and February 6, 2002, as
currently scheduled. If, however, less than 100 days' notice or public
disclosure of the date of the meeting is given to Stockholders, the notice must
be received no later than the close of business on the tenth day following the
day on which the notice of the date of the Annual Meeting was mailed or public
disclosure was made. Notice to the Company from a Stockholder who proposes to
nominate a person for election as a Director must satisfy the requirements of
the Securities and Exchange Commission and the Company's Bylaws. Stockholders
wishing to nominate persons should contact the Company's Secretary at 18000
Devonshire Street, Northridge, California 91325.
Proposals: Any Stockholder who intends to present a proposal to be included
in the Company's proxy materials to be considered for action at the 2002 Annual
Meeting of Stockholders must satisfy the requirements of the Securities and
Exchange Commission, and the proposal must be received by the Secretary of the
Company on or before December 31, 2001, for review and consideration for
inclusion in the Company's Proxy Statement and Proxy Card relating to that
Meeting.
The Chairman of the Annual Meeting may decline to allow the transaction of
any business or the consideration of any nomination not properly presented in
accordance with these requirements. The requirements with respect to nominations
of persons for Director do not affect the deadline for submitting Stockholder
proposals for inclusion in the Proxy Statement, nor do they apply to questions a
Stockholder may wish to ask the meeting. If the Company changes the date of the
2002 Annual Meeting of Stockholders, Stockholders will be notified in accordance
with the Company's Bylaws.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
for consideration at the Annual Meeting. If other matters are properly brought
before the Meeting, however, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
By order of the Board of Directors,
/s/ Eric S. Kentor
--------------------------------------
Eric S. Kentor
Senior Vice President, General Counsel
and Secretary
April 30, 2001
25
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APPENDIX A
MINIMED INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Charter
ORGANIZATION
The Audit Committee (the "Committee") of MiniMed Inc. (the "Company") shall
consist of independent directors,1 who shall be appointed annually by the Board.
Each member of the Committee shall be "financially literate,"2 or become
financially literate within a reasonable period of time after appointment to the
Committee.
The Committee shall hold at least two regularly scheduled meetings per year
for general Committee purposes, and shall meet to review the Company's results
of operations prior the public release of such results each fiscal quarter. The
Committee also may hold such additional special meetings as it deems
appropriate. The Chairman of the Committee shall approve the agenda for each
Meeting.
The Corporate Secretary shall keep minutes of all meetings.
The Committee shall submit the minutes of all meetings to the Board and
report to the Board after each Meeting.
OBJECTIVES AND RESPONSIBILITIES
The Committee shall provide assistance to the Company's Board of Directors
in fulfilling its responsibility to shareholders, potential shareholders, and
the investment community relating to the Company's financial reporting
practices. In doing so it is the responsibility of the Committee to maintain
free and open means of communication among the directors, the independent
accountants, management, and internal audit personnel and the financial
management of the Company. The Committee shall:
= Review, prior to the release of the Annual Report to Shareholders, the
financial statements to be contained in the report and determine that
the Independent Accountants are satisfied with the disclosure and
content of such financial statements.
= Review prior to its public release quarterly and annual financial
results of operations of the Company.
= Review the scope of the plan of annual audit and the related fees, and
results of any recently completed audit.
= Review periodically for appropriateness the Company's cash management
and investment policy.
= Review periodically for adequacy and compliance the Company's Code of
Business Conduct and other Company policies regarding related party
transactions and similar matters.
= Review periodically for adequacy and appropriateness the Company's
risk management strategy for each significant business unit.
30
= Review periodically the Company's procedures to monitor compliance
with loan and indenture covenants and restrictions.
= Review any material changes to the Company's accounting and financial
reporting practices.
= Review with the independent accountants and with the Company's
financial, accounting and internal audit personnel the adequacy and
effectiveness of the accounting, financial and operational controls of
the Company, and elicit any recommendation for the improvement of
internal control procedures or particular areas where new or more
detailed controls or procedures are desirable. The Committee should
meet with the Company's independent accountants, the Company's
financial management and any internal audit personnel in separate
executive sessions to discuss any matters that the Committee or any of
these separate constituents believe should be discussed privately with
the Committee.
= Review the scope of other services to be performed by the independent
accountants.
= Recommend to the Board the retention or replacement of the independent
accountants.
= Review periodically the adequacy of the Company's accounting,
financial and internal audit organizations, including the adequacy of
the Company's staff and succession planning for the Company's
executive personnel responsible for financial management.
= The Committee shall have the authority to conduct or authorize the
investigation into any matters within the Committee's scope of
responsibilities. In this regard, the Committee is empowered to retain
independent counsel, accountants or others to assist in the conduct of
any investigation.
= Review, consider and/or act upon on other matters relative to any
accounting or financial matter that the Committee or the Board, in its
discretion, deems appropriate.
The Committee shall provide sufficient opportunity for the independent
accountants to meet with members of the Committee without members of management
present. These meetings are intended to foster open discussions of the
independent accountants' evaluation of the Company's financial and accounting
organizations as well as any other matters the Committee or the independent
accountants consider appropriate.
The independent accountants and the chief financial officer and the
internal auditor shall have free access to the Committee without first clearing
with senior management.
The Committee may rely on the findings and opinions of the independent
accountants and management with respect to the above and any other matters
relating to the preparation, completeness and accuracy of the Company's
financial statements.
- --------------------------------------------------------------------------------
1 Members of the Committee shall be considered independent if they have no
relationship to the Company that may interfere with the exercise of their
independence from management and the Company. Examples of such relationships
include, but are not limited to, the following:
o a director being employed by the Company or any of its affiliates for the
current year or any of the past five years;
o a director accepting any compensation from the Company or any of its
affiliates other than compensation for Board services or benefits under a
tax-qualified retirement plan;
o a director being a member of the immediate family of an individual who is,
or has been in any of the past five years, employed by the Company or any
of its affiliates as an executive officer;
o a director being a partner in, or a controlling shareholder or an executive
officer of, any for-profit business organization to which the Company made,
or from which the Company received, payments that are or have been
significant to the Company or business organization in any of the past five
years;
2
31
o a director being employed as an executive of another company where any of
the Company's executive serves on the company's compensation committee.
o a director who has one or more of these relationships may be appointed to
the Committee, if the Board, under exceptional and limited circumstances,
determines that membership on the Committee by the individual is required
by the best interests of the Company and its shareholders, and the Board
discloses, in the next annual proxy statement subsequent to such
determination, the nature of the relationship.
2 Financial "literacy" signifies the ability to read and understand fundamental
financial statements, including the Company's balance sheet, income statement,
and cash flow statement. Directors who have limited familiarity with finance can
achieve such "literacy" through company-sponsored training programs.
32
PROXY PROXY
MINIMED INC.
18000 DEVONSHIRE STREET
NORTHRIDGE, CALIFORNIA 91325
PROXY FOR THE JUNE 7, 2001 ANNUAL MEETING OF
STOCKHOLDERS THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS OF MINIMED INC.
The undersigned stockholder of MiniMed Inc. ("MiniMed") hereby appoints
Alfred E. Mann and Eric S. Kentor, and each of them, the lawful proxies of the
undersigned, each with the power of substitution, to vote as designated below
all the shares of Common Stock of MiniMed held of record by the undersigned on
April 13, 2001 at the Annual Meeting of Stockholders to be held on June 7, 2001
or any and all adjournments or postponements thereof.
IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR EACH OF
THE NOMINEES FOR CLASS 2 DIRECTOR, FOR THE PROPOSAL TO RATIFY THE APPOINTMENT OF
AUDITORS, FOR THE PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION, AND IN THE
DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE ANNUAL MEETING OF STOCKHOLDERS.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
1. ELECTION OF CLASS 2 DIRECTORS
William R. Grant [ ] FOR
David H. MacCallum [ ] WITHHOLD
Thomas R. Testman [ ] FOR ALL EXCEPT
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(Except nominee(s) written above)
2. RATIFICATION TO AMEND CERTIFICATE [ ] FOR
OF INCORPORATION TO INCREASE [ ] AGAINST
AUTHORIZED CAPITAL STOCK [ ] ABSTAIN
3. RATIFICATION OF APPOINTMENT [ ] FOR
OF DELOITTE & TOUCHE LLP AS AUDITORS [ ] AGAINST
[ ] ABSTAIN
DATED:
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SIGNATURE(S)
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Please sign as shares are owned, and date
this proxy. If a joint account, each
joint owner must sign. If signing for a
corporation or partnership or as agent,
attorney or fiduciary, indicate the
capacity in which you are signing.