SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EPIX Medical, Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of Securities to which transaction applies:
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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 fee is calculated and state how it was determined):
-------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------
5) Total fee paid:
-------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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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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<PAGE>
EPIX MEDICAL, INC.
71 Rogers Street
Cambridge, Massachusetts 02142
(617) 499-1400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1998
Notice is hereby given that the 1998 Annual Meeting of Stockholders of
EPIX Medical, Inc., a Delaware corporation (the "Company"), will be held on
Tuesday, May 12, 1998, at 9:30 a.m. at Le Meridien Hotel, 250 Franklin Street,
Boston, Massachusetts, to consider and act upon the following matters:
1. To elect one (1) member of the Board of Directors.
2. To approve an amendment to the Company's Amended and Restated 1992
Equity Incentive Plan to increase the number of shares of the Company's
common stock as to which awards may be granted under such plan by 250,000
shares.
3. To approve amendments to the Company's 1996 Director Stock Option Plan
to increase the size of the grant awarded to a director upon election or
reelection from 6,666 shares of the Company's common stock to 15,000
shares, to change the vesting schedule of such grants from five years to
three years and to increase the number of shares of the Company's common
stock as to which awards may be granted under such plan by 33,334 shares.
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only stockholders of record at the close of business on April 1, 1998 will be
entitled to vote at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THEREFORE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOUR PROXY
WILL NOT BE USED.
By order of the Board of Directors,
MICHAEL D. WEBB
Secretary
Cambridge, Massachusetts
April 21, 1998
<PAGE>
EPIX MEDICAL, INC.
71 Rogers Street
Cambridge, Massachusetts 02142
(617) 499-1400
----------------
PROXY STATEMENT
----------------
GENERAL INFORMATION
This Proxy Statement, with the enclosed proxy card, is being furnished on
behalf of the Board of Directors of EPIX Medical, Inc. (the "Company") for use
at the Company's 1998 Annual Meeting of Stockholders to be held on Tuesday, May
12, 1998 at 9:30 a.m. at Le Meridien Hotel, 250 Franklin Street, Boston,
Massachusetts, and at any adjournments thereof (the "Meeting").
When the proxy card of a stockholder is duly executed and returned, the
shares represented thereby will be voted in accordance with the voting
instructions given on the proxy by the stockholder. If no such voting
instructions are given on a proxy card with respect to one or more proposals,
the shares represented by that proxy card will be voted, with respect to the
election of directors, for the nominees named herein, and with respect to other
proposals, in accordance with the recommendations of the Board. Stockholders
may revoke their proxies at any time prior to any vote at the Meeting by
written notice of revocation to the Secretary of the Company at or before the
Meeting, by submission of a duly executed proxy card bearing a later date or by
voting in person by ballot at the Meeting.
This Proxy Statement and the enclosed proxy card are first being mailed or
otherwise furnished to all stockholders of the Company entitled to notice of
and to vote at the Meeting on or about April 21, 1998.
VOTING SECURITIES AND VOTES REQUIRED
Holders of the Company's common stock, $0.01 par value per share ("Common
Stock"), of record on the books of the Company at the close of business on
April 1, 1998 (the "Record Date") are entitled to notice of and to vote at the
Meeting. On the Record Date, there were 11,274,054 shares of Common Stock
issued and outstanding, each of which entitles the holder to one vote on each
matter submitted to a vote at the Meeting.
The presence, in person or by proxy, of the holders of a majority of the
Company's Common Stock entitled to vote at the Meeting is necessary to
constitute a quorum at the Meeting. Pursuant to the Delaware General
Corporation Law and the Company's Restated Certificate of Incorporation and
Amended and Restated By-laws (the "By-laws"), the directors are elected by a
plurality of the votes properly cast at the Meeting. Abstentions, votes
withheld and broker non-votes will not be treated as votes cast for this
purpose and will not affect the outcome of the election. A "broker non-vote"
occurs when a registered broker holding a customer's shares in the name of the
broker has not received voting instructions on a matter from the customer and
is barred by applicable rules from exercising discretionary authority to vote
on the matter and so indicates on the proxy.
The affirmative vote of the holders of a majority of the shares of Common
Stock present, or represented, and entitled to vote is required to approve the
proposed amendments to the Company's Amended and Restated 1992 Equity Incentive
Plan (the "Equity Plan") and the Company's 1996 Director Stock Option Plan (the
"Director Plan"). Broker non-votes will not be counted as present, or
represented, and entitled to vote for these purposes and, therefore, will not
affect the outcome of the vote. Abstentions will be counted as present, or
represented, and entitled to vote and, accordingly, will have the effect of
negative votes.
<PAGE>
SHARE OWNERSHIP
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of March 31, 1998 by (i)
each person known by the Company to own beneficially 5% or more of the Common
Stock, (ii) each Named Executive Officer (as defined in "Executive
Compensation" below), (iii) each director of the Company and (iv) all current
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned (1)
-------------------------
Shares Percent
----------- -----------
<S> <C> <C>
Bessemer Venture Partners III L.P. .................... 1,596,999 14.15%
and certain related persons (2)
Bessemer Venture Partners
1025 Old Country Road
Suite 205
Westbury, NY 11590
Accel IV L.P. and certain related persons (3) ......... 1,559,801 13.82%
428 University Avenue
Palo Alto, CA 94301
Daiichi Radioisotope Laboratories, Ltd. (4) ........... 578,885 5.13%
17-10, Kyobashi 1-chome Chuo-ku
Tokyo, 104 Japan
Randall B. Lauffer, Ph.D. (5) ......................... 1,076,664 9.55%
Michael D. Webb (6) ................................... 224,719 1.98%
James E. Smith, Ph.D. (7) ............................. 91,332 *
E. Kent Yucel, M.D. (8) ............................... 70,933 *
Stephen C. Knight, M.D. (9) ........................... 43,093 *
Christopher F.O. Gabrieli (10) ........................ 1,701,126 15.10%
Luke B. Evnin, Ph.D. (11) ............................. 1,559,801 13.82%
Stanley T. Crooke, M.D., Ph.D. (12) ................... 21,041 *
All current executive officers and directors as a group
(10 persons) (13) .................................... 4,881,379 41.70%
</TABLE>
- ----------------
* Indicates less than 1%.
(1) The persons and entities named in the table have sole voting and
investment power with respect to the shares beneficially owned by them,
except as noted below. Share numbers include shares of Common Stock
issuable pursuant to the outstanding options and warrants that may be
exercised within the 60-day period following March 31, 1998.
(2) Includes 31,052 shares held by persons associated with Bessemer Securities
Corporation, the parent of the limited partner of Bessemer Venture
Partners III L.P. ("BVP"), as to which BVP has the power to vote and as to
which BVP and Deer III & Co. LLC ("Deer"), the general partner of BVP,
disclaim beneficial ownership, and 27,094 shares held by BVP III Special
Situations L.P. ("BVP SS"), as to which Deer, as the general partner of
BVP SS, has voting and investment control and as to which BVP disclaims
beneficial ownership and Deer disclaims beneficial ownership except to the
extent of its partnership interest in BVP SS. Also includes a warrant to
purchase 13,333 shares exercisable within the 60-day period following
March 31, 1998 held by Bessemer Venture Partners III L.P. Does not include
189,331 shares held by members of Deer and persons associated with such
members of Deer.
(3) Consists of the following shares and warrants exercisable within the
60-day period following March 31, 1998: 1,440,897 shares and a warrant to
purchase 12,213 shares held by Accel IV L.P.; 58,200 shares and a warrant
to
2
<PAGE>
purchase 493 shares held by Accel Investors '93 L.P. and 29,885 shares and
a warrant to purchase 253 shares held by Accel Keiretsu L.P. Also includes
17,860 shares owned by Luke B. Evnin. Does not include 9,435 shares and a
warrant to purchase 80 shares held by Prosper Partners and 34,604 shares
and a warrant to purchase 293 shares held by Ellmore C. Patterson Partners.
Also, does not include 111,880 shares held by persons associated with Accel
IV LP., Accel Investors '93 L.P. and Accel Keiretsu L.P. Accel IV
Associates L.P. is the General Partner of Accel IV L.P. and has voting and
investment control over the shares held by Accel IV L.P. Arthur C.
Patterson, James R. Swartz, James W. Breyer, Paul H. Klingenstein, Luke B.
Evnin, Eugene D. Hill, III, G. Carter Sednaoui and the Swartz Family
Partnership L.P. are the General Partners of Accel IV Associates L.P.
Messrs. Patterson, Swartz, Klingenstein, Breyer, Evnin and Sednaoui are the
General Partners of Accel Investors '93 L.P. and have voting and investment
control over shares held by Accel Investors '93 L.P. Mr. Patterson is the
sole General Partner of Ellmore C. Patterson Partners and has voting and
investment control over shares held by Ellmore C. Patterson Partners. Accel
Partners & Co. L.P. is the General Partner of Accel Keiretsu L.P. and has
voting and investment control over shares held by Accel Keiretsu L.P.
Messrs. Patterson and Swartz are the co-owners and partners of Accel
Partners & Co. L.P. Messrs. Klingenstein and Sednaoui are the
attorneys-in-fact for Prosper Partners and disclaim beneficial ownership of
shares held by Prosper Partners.
(4) Junzo Okuda, President and Chief Executive Officer of Daiichi Radioisotope
Laboratories, Ltd., has voting and investment control over these shares.
(5) Includes 46,666 shares held by Dr. Lauffer's wife and 16,000 shares held
in a trust for the benefit of Dr. Lauffer's children as to which Dr.
Lauffer disclaims beneficial ownership. Also includes 716,760 shares held
by a trust for the benefit of Dr. Lauffer as to which shares Dr. Lauffer
has voting and investment control.
(6) Includes 99,553 shares subject to options exercisable within the 60-day
period following March 31, 1998.
(7) Includes 82,332 shares subject to options exercisable within the 60-day
period following March 31, 1998.
(8) Includes 67,933 shares subject to options exercisable within the 60-day
period following March 31, 1998.
(9) Includes 41,665 shares subject to options exercisable within the 60-day
period following March 31, 1998.
(10) See footnote (2) above. Mr. Gabrieli disclaims beneficial ownership of
these shares except to the extent of his proportionate pecuniary interest
therein or with respect to shares held in his name.
(11) See footnote (3) above. Dr. Evnin disclaims beneficial ownership of these
shares except to the extent of his proportionate pecuniary interest in
shares held by Accel IV L.P. and Accel Investors '93 L.P. or with respect
to shares held in his name.
(12) Consists of 21,041 shares subject to options exercisable within the 60 day
period following March 31, 1998.
(13) See footnotes (2), (3) and (5)-(12) above. Includes an additional 92,670
shares subject to options exercisable within the 60-day period following
March 31, 1998.
3
<PAGE>
PROPOSAL 1:
ELECTION OF DIRECTORS
In accordance with Section 2 of Article II of the By-laws, the Board has
fixed the number of directors to
constitute the full Board for the ensuing year at five. At the Meeting, one
Class II director will be elected to hold office for three years until his/her
respective successor is duly elected and qualified. The Board has nominated
Stanley T. Crooke for election for a term of office expiring in 2001. The
nominee is currently a director of the Company and has consented to be
nominated and to serve if elected. In the event the nominee shall be unable to
serve as a director, the shares represented by the proxy will be voted for the
person, if any, who is designated by the Board to replace the nominee. In the
event that a vacancy occurs during the year, such vacancy may be filled by the
Board for the remainder of the full term.
The following table contains certain information about nominees for
election to the Board of Directors andeach other person whose term of office as
a director will continue after the Meeting.
<TABLE>
<CAPTION>
Present
Director Term
Name and Age Business Experience and Other Directorships Since Expires
- --------------------------------- ------------------------------------------------------- ---------- --------
<S> <C> <C> <C>
Nominees for Directors:
Class II Director
Stanley T. Crooke, M.D., Ph.D.* Dr. Crooke has served as Chairman and Chief 1996 1998
(age 53) Executive Officer of Isis Pharmaceuticals Inc., a
pharmaceuticals company, since January 1989. Dr.
Crooke serves on the boards of directors of
GeneMedicine, Inc., Sibia Neuroscience, Inc. and the
Biotechnology Industry Organization.
Continuing Directors:
Class I Directors
Luke B. Evnin, Ph.D.*# Dr. Evnin is currently a Managing Director of MPM 1994 2000
(age 34) Asset Management LLC, an investment firm
specializing in biomedical companies. Previously, Dr.
Evnin was a General Partner at Accel Partners, a
venture capital firm, where he was involved in the
firm's biomedical investing activities since September
1990. He remains a General Partner of Accel IV, L.P.
and Accel V, L.P. He currently serves on the boards of
directors of several private companies.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Present
Director Term
Name and Age Business Experience and Other Directorships Since Expires
- ----------------------------- ----------------------------------------------------------- ---------- --------
<S> <C> <C> <C>
Randall B. Lauffer, Ph.D. Dr. Lauffer, the Chief Scientific Officer of the 1988 2000
(age 40) Company, founded the Company in November 1988
and served as Chief Executive Officer of the Company
until December 1994, as Chairman of the Board until
October 1996 and as Secretary until November 1996.
From November 1983 to March 1992, Dr. Lauffer was
a member of the faculty of Harvard Medical School,
serving most recently as Assistant Professor of
Radiology from 1987 to 1992. During this time he was
also Director of the NMR Contrast Media Laboratory
at Massachusetts General Hospital as well as an NIH
Postdoctoral Fellow and an NIH New Investigator.
Class III Directors
Christopher F.O. Gabrieli*# Mr. Gabrieli is Chairman of the Board of the Company. 1994 1999
(age 38) Since September 1986, Mr. Gabrieli has been a
General Partner at Deer II & Co., Deer III & Co. and
Deer IV & Co., the General Partners of Bessemer
Venture Partners II L.P., Bessemer Venture Partners III
L.P. and Bessemer Venture Partners IV L.P., affiliated
venture capital partnerships, where he is responsible
for the firm's venture capital investment activities in
healthcare and the life sciences. He is a director of Isis
Pharmaceuticals, Inc., where he was a co-founder,
Opta Food Ingredients, Inc. and several privately held
health care companies.
Michael D. Webb Mr. Webb has served as President and Chief Executive 1994 1999
(age 39) Officer of the Company since December 1994 and as
Secretary of the Company since November 1996. Mr.
Webb worked for Ciba-Corning Diagnostics, Inc., a
medical instrumentation and diagnostic products
company, from April 1989 to December 1994, most
recently as Senior Vice President, Worldwide
Marketing and Strategic Planning. From 1984 to 1989,
Mr. Webb was a senior consultant specializing in
healthcare and life sciences at Booz, Allen &
Hamilton, Inc., a consulting firm.
</TABLE>
- --------------------
* Member of the Compensation Committee.
# Member of the Audit Committee.
5
<PAGE>
During the year ended December 31, 1997, the Board held five meetings.
Each of the directors attended all of the Board meetings and meetings of
committees of the Board of which he was a member. In addition, from time to
time, the members of the Board of Directors and its committees may act by
unanimous written consent pursuant to Delaware law in lieu of a meeting.
The Audit Committee, which currently consists of Dr. Evnin and Mr.
Gabrieli, reviews with the Company's independent accountants the scope of the
annual audit, discusses the adequacy of internal accounting controls and
procedures, and performs general oversight with respect to the accounting
principles applied in the financial reporting of the Company. The Audit
Committee met once in 1997.
The Compensation Committee currently consists of Drs. Crooke and Evnin and
Mr. Gabrieli. The Compensation Committee's functions are to recommend to the
full Board the amount, nature and method of payment of compensation of all
executive officers and certain other key employees and consultants of the
Company and to administer the Company's equity incentive, stock option and
stock purchase plans. The Compensation Committee met twice in 1997.
Director Compensation
Directors currently receive no compensation for their service on the Board
of Directors, except pursuant to the Director Plan. All of the directors who
are not employees of the Company (the "Eligible Directors") are currently
eligible to participate in the Director Plan. There are 66,666 shares of Common
Stock reserved for issuance under the Director Plan. Upon the election or
reelection of an Eligible Director, such director is automatically granted an
option to purchase 6,666 shares of Common Stock. Each Eligible Director
continuing in office after each annual meeting of stockholders is also
automatically granted an option to purchase 6,666 shares of Common Stock.
Options become exercisable with respect to 1,333 shares on each anniversary
date of grant for a period of five years, provided that the optionee is still a
director of the Company at the opening of business on such date. Each option
has a term of ten years. The exercise price for each option is equal to the
last sale price for the Common Stock on the business day immediately preceding
the date of grant, as reported on the Nasdaq National Market. The exercise
price may be paid in cash, shares of Common Stock or a combination of both. The
Board of Directors has voted to amend the Director Plan, as described below
under the caption "Proposal 3."
EXECUTIVE COMPENSATION
The Compensation Committee Report on Executive Compensation and the tables
set forth below provide information about the compensation of executive
officers of the Company.
Compensation Committee Report on
Executive Compensation
The Compensation Committee (the "Committee"), which currently consists of
Mr. Christopher F.O. Gabrieli and Drs. Luke B. Evnin and Stanley T. Crooke, is
responsible for the administration of the Company's compensation program for
the executive officers of the Company, including the Chief Executive Officer
and the other executive officers named in the summary compensation table below.
The Company's compensation programs are designed to provide a competitive level
of total compensation which, at the Company's present stage of development, is
heavily weighted toward equity incentive compensation linked to the Company's
performance. This program includes base salary and both annual and long-term
incentive compensation.
Compensation Philosophy
The design and implementation of the Company's executive compensation
programs are based on a series of guiding principles derived from the Company's
values, business strategy and management requirements. These principles may be
summarized as follows:
6
<PAGE>
[bullet] attract, motivate and retain high caliber individuals who are
responsible for leading the Company in achieving or exceeding
corporation goals and to increase total return to stockholders;
[bullet] provide a total compensation program where a significant portion of
compensation is linked to the achievement of individual performance
objectives as well as both short-term and long-term Company
performance;
[bullet] align the financial interests of the management team with those of
the Company and its stockholders; and
[bullet] emphasize reward for performance at the individual, team and Company
levels.
Base Salary
Each fiscal year, the Committee establishes base salaries for individual
executive officers based upon (i) industry and peer group surveys prepared by
independent consultants, (ii) the responsibilities, scope and complexity of
each position, (iii) the individual's tenure in the position and (iv)
performance judgments as to each individual's past and expected future
contributions. The performance of the companies surveyed is not considered by
the Committee. The Chief Executive Officer recommends the base salary amount
for each officer other than himself. The Committee then reviews with the Chief
Executive Officer and approves, with appropriate modifications, an annual base
salary plan for the Company's executive officers other than the Chief Executive
Officer.
In general, the Committee reviews and fixes the base salary of the Chief
Executive Officer based on comparable competitive compensation data as well as
the Committee's assessment of such officer's past performance and its
expectations as to such officer's future contributions in leading the Company.
For 1997, the Chief Executive Officer's base salary remained the same as his
base salary in 1995 and 1996, $175,000, reflecting the Company's compensation
philosophy of emphasizing equity incentive compensation.
Annual Bonus
Until 1998, the Company did not have a formal cash short-term incentive
plan and generally did not pay cash bonuses to its executive officers except on
a discretionary basis. Beginning in 1998, the Company's executive officers are
eligible for an annual cash bonus payable in 1999, which is based primarily on
achievement of Company and individual performance objectives that are
established at the beginning of each year. After the completion of the year,
the Committee will review the attainment of corporate and individual objectives
and will award bonuses based on the extent to which corporate objectives were
met or exceeded and individual contributions to overall Company performance.
The Company achieved several milestones in 1997, including: the completion
of a Phase I clinical trial for MS-325; the commencement of Phase II clinical
trials for MS-325 in the United States; the filing of a Registration Statement
on Form S-1 with the Securities and Exchange Commission in connection with the
Company's initial public offering; the filing of a Registration Statement on
Form S-1 with the Securities and Exchange Commission in connection with the
Company's follow-on public offering; and the formation of a strategic alliance
with Dyax Corp. to develop novel contrast imaging agents for the diagnosis of
severe blood clots in the lungs and legs. In recognition of the Chief Executive
Officer's leadership in the achievement of these corporate milestones and his
contributions to the Company, the Chief Executive Officer was awarded a bonus
in the amount of $65,625.
Equity-Based Long-Term Incentive Compensation
Long-term incentives for the Company's employees are provided through
stock option grants under the Equity Plan which are generally provided through
initial stock option grants at the date of hire and periodic additional grants.
The option grants are intended to motivate the executive officers to improve
long-term Company performance and to align the financial interests of the
management team with those of the Company and its stockholders. Awards take
into account each officer's scope of responsibility and specific assignments,
strategic and operational goals applicable to the officer, anticipated
performance and contributions of the officer and competitive market data for
similar positions. Options are granted with an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant. The
7
<PAGE>
standard vesting schedule provides that a portion of the shares subject to each
option vest and become exercisable annually over a five-year period. Certain
options granted under the Equity Plan, including some of the options granted to
the Named Executive Officers, are subject to different vesting schedules,
including schedules that are based on the achievement of certain milestone
events determined by the Committee.
In 1997, the Chief Executive Officer received options to purchase 83,000
shares of Common Stock at an exercise price of $8.75 per share. As to shares
subject to these options, 41,500 vest upon the earlier of (i) fifty percent of
the patient enrollment of the Phase III Radiology trial for MS-325 or an
equivalent product or (ii) August 14, 2006, and 41,500 vest upon the earlier of
(i) FDA approval of MS-325 or an equivalent product or (ii) August 14, 2006.
Compensation Deductibility
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") on the Company's
compensation programs. Section 162(m) of the Code limits a publicly held
company's tax deduction for compensation paid to the chief executive officer
and the other four most highly paid officers. Generally, amounts paid in excess
of $1.0 million to a covered executive in any year cannot be deducted. Certain
performance based compensation that has been approved by stockholders is not
subject to the limit. The Company's policy is to qualify its executive
officers' compensation for deductibility under applicable tax laws to the
extent reasonable. The Committee will continue to assess the impact of Section
162(m) of the Code on its compensation practices and determine what further
action, if any, is appropriate.
By the EPIX Medical, Inc.
Compensation Committee,
STANLEY T. CROOKE
LUKE B. EVNIN
CHRISTOPHER F.O. GABRIELI
8
<PAGE>
Comparative Stock Performance Graph
The following graph shows the cumulative stockholder return of the
Company's Common Stock from January 30, 1997 (the first trading day for the
Company's Common Stock) through December 31, 1997 as compared with that of the
Nasdaq (U.S. Companies) Index and the Nasdaq Pharmaceutical Stocks Index. The
graph assumes the investment of $100 in the Company's Common Stock and each of
the comparison groups on January 30, 1997 and assumes the reinvestment of
dividends. The Company has never declared a dividend on the Common Stock of the
Company. The stock price performance depicted in the graph below is not
necessarily indicative of future price performance.
Comparison of Cumulative Total Return Among EPIX Medical, Inc.,
Nasdaq (U.S. Companies) Index and Nasdaq Pharmaceutical Stocks Index
[LINE CHART]
<TABLE>
<CAPTION>
1/30/97 3/31/97 6/30/97 9/30/97 12/31/97
<S> <C> <C> <C> <C> <C>
EPIX Medical, Inc. $ 100.00 $ 94.64 $ 114.29 $ 171.43 $ 185.71
Nasdaq Stock Market (U.S.) $ 100.00 $ 88.98 $ 105.29 $ 123.10 $ 115.47
Nasdaq Pharm. Stocks $ 100.00 $ 88.29 $ 95.32 $ 106.92 $ 96.00
</TABLE>
9
<PAGE>
The following table sets forth certain compensation information for the
Chief Executive Officer of the Company and the four other most highly
compensated executive officers of the Company whose salary and bonus for the
year ended December 31, 1997 exceeded $100,000 (together, the "Named Executive
Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------------- -------------
Securities
Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($)(1) Options (#) Compensation $
- ----------------------------------- ------ ------------------ -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Michael D. Webb ................... 1997 175,000 65,625 83,000 850(2)
President and Chief 1996 175,000 65,000 83,333 --
Executive Officer 1995 175,000 -- -- 30,000(3)
James E. Smith, Ph.D. ............. 1997 185,000 46,250 28,000 62,477(4)
Executive Vice President, 1996 192,615(6) 63,000 139,999 --
Research and Development (5) 1995 82,238(7) -- -- --
E. Kent Yucel, M.D. ............... 1997 175,000 -- 27,000 35,000(9)
Senior Vice President and 1996 132,637(10) 8,750 133,333 --
Chief Medical Officer (8) 1995 1,500(11) -- 10,666 --
Randall B. Lauffer, Ph.D. ......... 1997 160,000 32,000 28,000 1,180(12)
Chief Scientific Officer 1996 160,000 -- -- 1,100(12)
1995 158,367 -- -- 1,100(12)
Stephen C. Knight, M.D. ........... 1997 160,000 40,000 27,000 --
Senior Vice President, 1996 80,000 -- 133,333 30,000(3)
Corporate Development,
Strategy and Finance(13)
</TABLE>
- --------------------
(1) Bonuses were earned in the year indicated and are generally paid in the
subsequent year.
(2) Consists of life insurance premiums paid by the Company on behalf of Mr.
Webb on a policy for the benefit of Mr. Webb.
(3) Consists of payment made in connection with the commencement of employment
with the Company.
(4) Consists of housing expenses reimbursed to Dr. Smith in connection with
his maintaining a residence within close proximity of the Company.
(5) Dr. Smith became an employee of the Company in February 1996. Prior
thereto, he was engaged as a consultant to the Company.
(6) Includes compensation in the amount of $37,200 paid by the Company for
consulting services.
(7) Consists of compensation paid by the Company for consulting services.
(8) Dr. Yucel became an employee of the Company in June 1996. Prior thereto,
he was engaged as a consultant to the Company.
10
<PAGE>
(9) Consists of compensation paid by the Company in lieu of lost clinical
practice revenue.
(10) Includes compensation in the amount of $59,720 paid by the Company for
consulting services.
(11) Consists of compensation paid by the Company for consulting services.
(12) Consists of life insurance premiums paid by the Company on behalf of Dr.
Lauffer on a policy for the benefit of Dr. Lauffer.
(13) Dr. Knight became an employee of the Company in July 1996.
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1997 by the Company to the
Named Executive Officers.
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
Individual Grant
------------------------------------------------------------------
Potential Realizable
Value at Assumed Annual
Number of Percent of Rates of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Exercise or Option Term (1)
Options Employees in Base Price Expiration ----------------------
Name Granted (#) Fiscal Year (%) ($/share) Date 5% ($) 10% ($)
- ---------------------------------- ----------------- ----------------- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Webb .................. 3,314(2) 0.65 8.75 8/14/07 18,236 46,215
79,686(3) 15.63 8.75 8/14/07 438,498 1,111,241
James E. Smith, Ph.D ............. 19,840(4) 3.89 8.75 8/14/07 109,176 276,674
8,160(5) 1.60 8.75 8/14/07 44,903 113,793
E. Kent Yucel, M.D. .............. 5,713(6) 1.12 8.75 8/14/07 31,438 79,669
21,287(7) 4.18 8.75 8/14/07 117,139 296,852
Randall B. Lauffer, Ph.D ......... 11,428(8) 2.24 8.75 8/14/07 62,886 159,366
16,572(8) 3.25 8.75 8/14/07 91,193 231,101
Stephen C. Knight, M.D. .......... 2,856(9) 0.56 8.75 8/14/07 15,716 39,828
24,144(10) 4.74 8.75 8/14/07 132,860 336,694
</TABLE>
- --------------------
(1) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, in the price of the underlying Common Stock. No gain to the optionees
is possible without an increase in price of the underlying Common Stock,
which will benefit all stockholders proportionately.
(2) The option becomes exercisable as to 286 shares covered by such option
upon the earlier of (i) fifty percent of the patient enrollment of the
Phase III Radiology trial for MS-325 or an equivalent product or (ii)
August 14, 2006, and as to 3,028 shares covered by such option upon the
earlier of (i) FDA approval of MS-325 or an equivalent product or (ii)
August 14, 2006.
(3) The option becomes exercisable as to 41,214 shares covered by such option
upon the earlier of (i) fifty percent of the patient enrollment of the
Phase III Radiology trial for MS-325 or an equivalent product or (ii)
August 14, 2006, and as to 38,472 shares upon the earlier of (i) FDA
approval of MS-325 or an equivalent product or (ii) August 14, 2006.
(4) The option becomes exercisable as to 9,920 shares covered by such option
upon the earlier of (i) fifty percent of the patient enrollment of the
Phase III Radiology trial for MS-325 or an equivalent product or (ii)
August 14, 2006, and 9,920 shares upon the earlier of (i) FDA approval of
MS-325 or an equivalent product or (ii) August 14, 2006.
11
<PAGE>
(5) The option becomes exercisable as to 4,080 shares covered by such option
upon the earlier of (i) fifty percent of the patient enrollment of the
Phase III Radiology trial for MS-325 or an equivalent product or (ii)
August 14, 2006, and 4,080 shares upon the earlier of (i) FDA approval of
MS-325 or an equivalent product or (ii) August 14, 2006.
(6) The option becomes exercisable as to 2,856 shares upon the earlier of (i)
fifty percent of the patient enrollment of the Phase III Radiology trial
for MS-325 or an equivalent product or (ii) August 14, 2006, and 2,857
shares upon the earlier of (i) FDA approval of MS-325 or an equivalent
product or (ii) August 14, 2006.
(7) The option becomes exercisable as to 10,644 shares upon the earlier of (i)
fifty percent of the patient enrollment of the Phase III Radiology trial
for MS-325 or an equivalent product or (ii) August 14, 2006, and 10,643
shares upon the earlier of (i) FDA approval of MS-325 or an equivalent
product or (ii) August 14, 2006.
(8) The option becomes exercisable upon the earlier of (i) successful
completion of Phase I of a new product candidate or (ii) August 14, 2006.
(9) The option becomes exercisable in full upon the earlier of (i) FDA
approval of MS-325 or an equivalent product or (ii) August 14, 2006.
(10) The option becomes exercisable as to 13,500 shares upon the earlier of (i)
fifty percent of the patient enrollment of the Phase III Radiology trial
for MS-325 or an equivalent product or (ii) August 14, 2006, and as to
10,644 shares upon the earlier of (i) FDA approval of MS-325 or an
equivalent product or (ii) August 14, 2006.
Aggregated Option Exercises In Last Fiscal Year And
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying
Unexercised Value of Unexercised
Options at In-The-Money Options
Shares Fiscal Year-End (#) at Fiscal Year-End ($)(1)
Acquired on Value --------------------------- --------------------------
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------------------------- -------------- -------------- --------------------------- --------------------------
<S> <C> <C> <C> <C>
Michael D. Webb .................. 7,500 47,221 150,553/272,081 1,888,853/2,325,306
James E. Smith, Ph.D. ............ 9,000 82,575 66,332/92,667 733,845/832,569
E. Kent Yucel, M.D. .............. 3,000 20,250 67,933/100,066 593,108/759,331
Randall B. Lauffer Ph.D. ......... -- -- 0/28,000 0/119,000
Stephen C. Knight, M.D. .......... -- -- 33,332/127,001 283,332/964,759
</TABLE>
- --------------------
(1) Based on the difference between the fair market value of the underlying
shares of Common Stock on December 31, 1997 at $13.00 a share and the
option exercise price.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Drs. Crooke and Evnin and
Mr. Gabrieli. Dr. Evnin was a General Partner of Accel Partners, a venture
capital firm and a principal stockholder of the Company. Dr. Evnin resigned
from such position in 1997 and assumed the position of Managing Director of MPM
Asset Management LLC. Dr. Evnin remains a General Partner of Accel IV, L.P. and
Accel V, L.P. Mr. Gabrieli is a General Partner of Deer II & Co., the General
Partner of Bessemer Venture Partners III L.P., a principal stockholder of the
Company. See "Stock Ownership" and "Certain Transactions."
CERTAIN TRANSACTIONS
In June, 1995 and April 1996, the Company made two loans to Dr. Lauffer
each in the principal amount of $50,000 and bearing interest at the rate of
7.31% and 6.51% per annum, respectively (the Applicable Federal Rate for long
term
12
<PAGE>
loans announced for such month) and each secured by a pledge of 14,814 shares
of the Company's Common Stock held by Dr. Lauffer. As of March 31, 1998, the
outstanding principal amounts on these loans plus accrued interest were $60,774
and $56,682, respectively. In May 1996, the Company made a loan to Dr. Lauffer
in the principal amount of $180,000 bearing interest at the rate of 6.83% per
annum (the Applicable Federal Rate for long term loans announced for May 1996)
and secured by a pledge of 44,444 shares of the Company's Common Stock held by
Dr. Lauffer. As of March 31, 1998, the outstanding principal amount on this
loan plus accrued interest was $203,227. Each of these loans is subject to
acceleration upon the voluntary termination of Dr. Lauffer's employment, among
other events.
In February 1997, Bessemer Venture Partners III L.P. and certain persons
and entities related to Bessemer Venture Partners III L.P. and Accel IV L.P.
purchased an aggregate amount of 344,740 shares of the Company's Common Stock
in connection with the Company's initial public offering on the same terms as
sales to other investors in the offering at the initial public offering price
per share of $7.00.
In November 1997, Dr. Lauffer sold an aggregate amount of 120,000 shares
of the Company's Common Stock in connection with the Company's follow-on
offering on the same terms as sales to other investors in the offering at the
follow-on offering price per share of $10.00.
PROPOSAL 2:
AMENDMENTS TO AMENDED AND RESTATED 1992 EQUITY INCENTIVE PLAN
General
The Equity Plan was originally adopted by the Company in July 1992. The
Equity Plan was subsequently amended and restated, and the aggregate number of
shares of Common Stock reserved for issuance thereunder is currently 2,099,901
shares (including shares subject to options already granted and shares issued
pursuant to options already exercised). The Equity Plan is designed to provide
the Company flexibility in awarding equity incentives by providing for multiple
types of incentives that may be awarded. The purpose of the Equity Plan is to
attract and retain key employees of and consultants to the Company and to
enable them to participate in the long-term growth of the Company.
Amendment
In March 1998, the Board of Directors voted, subject to stockholder
approval, to amend the Equity Plan to increase the aggregate number of shares
of Common Stock available thereunder by an additional 250,000 shares to an
aggregate of 2,349,901 shares, subject to adjustment for stock-splits and
similar capital changes. The Company believes that this increase is necessary
and appropriate to enable the Company to attract and retain the quality of
employees and consultants whose services are considered essential to the
Company's future progress, to encourage such employees' and consultants'
ownership in the Company and to provide them with an incentive to remain as
employees or consultants of the Company.
Administration and Eligibility
The Equity Plan provides for the grant of stock options (incentive and
nonstatutory), stock appreciation rights, performance shares, restricted stock
or stock units for the purchase of shares of Common Stock. Awards under the
Equity Plan can be granted to officers, employees and other individuals as
determined by the Compensation Committee, each of whose members is a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"). The Compensation
Committee administers the Equity Plan, except as described below in which the
entire Board administers the Equity Plan, and selects the participants and
establishes the terms and conditions of each option or other equity right
granted under the Equity Plan, including the exercise price, the number of
shares subject to options or other equity rights and the time at which such
options become exercisable. The Compensation Committee has adopted guidelines
for the number of options awarded to each new employee of the Company, other
than executive officers. The guidelines may be changed by the Compensation
Committee at any time. Subject to certain limitations the Compensation
Committee may delegate to one or more executive officers of the Company the
power to make awards to participants who are not subject to Section 16 of the
Exchange Act. The Compensation
13
<PAGE>
Committee has authorized the Chief Executive Officer to grant options to
purchase up to 20,000 shares of Common Stock each to such participants. In
order to comply with the requirements of Rule 16b-3 under the Exchange Act,
grants of awards made in 1998 under the Equity Plan to participants who are
subject to Section 16 of the Exchange Act are made by the entire Board of
Directors.
The exercise price of all "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Code granted under the Equity Plan must be at
least equal to the fair market value of the option shares on the date of grant.
The term of any ISO granted under the Equity Plan may not exceed ten years. The
Company's standard vesting schedule provides that a portion of the shares
subject to each option vest and become exercisable yearly over a five-year
period. Certain options granted under the Equity Plan, including some of the
options granted to the Named Executive Officers, are subject to different
vesting schedules, including schedules that are based on the achievement of
certain milestone events. See "Executive Compensation--Compensation Committee
Report on Executive Compensation--Stock Options and "--Option Grants in Last
Fiscal Year."
As of March 31, 1998, approximately 56 employees were eligible to
participate in the Equity Plan. The closing price of the Company's Common Stock
as reported on the Nasdaq National Market on March 31, 1998 was $13.188.
Equity Plan Activity
As of March 31, 1998, options to purchase an aggregate of 2,081,487 shares
of Common Stock had been granted under the Equity Plan, of which options to
purchase 76,937 shares had been cancelled. Options to purchase 327,758 shares
had been exercised as of such date. As of such date, 345,351 shares remained
available for the granting of awards under the Equity Plan, including the
250,000 shares added by the amendment for which stockholder approval is being
requested. No stock appreciation rights or awards other than option grants have
been granted under the Equity Plan to date.
Federal Income Tax Consequences Relating to Stock Options
Incentive Stock Options. An optionee does not realize taxable income upon
the grant or exercise of an ISO under the Equity Plan. If no disposition of
shares issued to an optionee pursuant to the exercise of an ISO is made by the
optionee within two years from the date of grant or within one year from the
date of exercise, then (a) upon sale of such shares, any amount realized in
excess of the option price (the amount paid for the shares) is taxed to the
optionee as mid-term or long-term capital gain and any loss sustained will be a
mid-term or long-term capital loss and (b) no deduction is allowed to the
Company for Federal income tax purposes. The exercise of ISOs gives rise to an
adjustment in computing alternative minimum taxable income that may result in
alternative minimum tax liability for the optionee.
If shares of Common Stock acquired upon the exercise of an ISO are
disposed of prior to the expiration of the two-year and one-year holding
periods described above (a "disqualifying disposition") then (a) the optionee
realizes ordinary income in the year of disposition in an amount equal to the
excess (if any) of the fair market value of the shares at exercise (or, if
less, the amount realized on a sale of such shares) over the option price
thereof and (b) the Company is entitled to deduct such amount. Any further gain
realized is taxed as a short-term, mid-term or long-term capital gain and does
not result in any deduction to the Company. A disqualifying disposition in the
year of exercise will generally avoid the alternative minimum tax consequences
of the exercise of an ISO.
Nonstatutory Stock Options. No income is realized by the optionee at the
time a nonstatutory option is granted. Upon exercise, (a) ordinary income is
realized by the optionee in an amount equal to the difference between the
option price and the fair market value of the shares on the date of exercise
and (b) the Company receives a tax deduction for the same amount. Upon
disposition of the shares, appreciation or depreciation after the date of
exercise is treated as a short-term, mid-term or long-term capital gain or loss
and will not result in any deduction by the Company.
Votes Required
The affirmative vote of the holders of a majority of the shares of Common
Stock present, or represented, and entitled to vote at the Meeting is required
for the approval of the proposed amendment to the Equity Plan.
14
<PAGE>
Board Recommendation
The Board of Directors of the Company believes that the amendment to the
Equity Plan is in the best interest of the Company and its stockholders and
recommends a vote FOR the proposal to approve the amendment to the Equity Plan.
PROPOSAL 3:
AMENDMENTS TO 1996 DIRECTOR STOCK OPTION PLAN
General
The purpose of the Director Plan is to attract and retain qualified
persons, who are not also officers or employees of the Company, to serve as
directors of the Company and to encourage stock ownership in the Company by
such directors so as to provide additional incentives to promote the Company's
success. The Director Plan currently authorizes the grant of nonstatutory stock
options for the purchase of a maximum of 66,666 shares of Common Stock, subject
to adjustment for stock splits and similar capital changes, to Eligible
Directors as defined below.
All non-employee directors of the Company ("Eligible Directors") are
eligible to participate in the Director Plan. Currently, three of the Company's
five directors are eligible to participate in the Director Plan.
In March 1998, the Board of Directors approved an increase in the size of
each grant under the Director Plan, from 6,666 shares of Common Stock for each
term to which a director is elected to 15,000 shares for each term. In
addition, the Board of Directors approved a change in the vesting schedule from
20% of the grant vesting on each of the first five anniversaries from the date
of grant to 33 1/3% of the grant vesting on each of the first three
anniversaries from the date of grant. The Board determined that the total value
of the compensation package granted to directors, as a whole, is lower than
that of director packages implemented by comparable companies. The members of
the Board of Directors of the Company do not currently receive any cash
compensation for their service on the Board of Directors. It was determined
that stock option grants are more attractive to potential directors than cash,
are more readily available to the Company and will better further the goal of
attracting and retaining qualified persons to be members of the Board of
Directors of the Company. As a result of the increased grant size, the Board
anticipated a need to increase the number of shares reserved for issuance under
the Director Plan. For a description of the Director Plan, see "Election of
Directors--Director Compensation."
Amendments
The Board of Directors has voted, subject to approval of the stockholders,
to (i) increase the size of each director grant from 6,666 shares of Common
Stock to 15,000 shares for each term, (ii) change the vesting of such grants
from five years to three years, and (iii) increase the number of shares of
Common Stock that may be subject to grants under the Director Plan by 33,334
shares to an aggregate of 100,000 shares, subject to adjustment for stock
splits and similar capital changes. This proposed amendment is intended to
ensure that a sufficient number of shares of Common Stock are available to be
issued to Eligible Directors in the future.
Director Plan Activity
As of March 31, 1998, options to purchase an aggregate of 6,666 shares of
Common Stock have been granted under the Director Plan, none of which have been
cancelled, leaving 60,000 shares available for future grants.
Federal Income Tax Consequences Relating to Director Plan Options
Options granted under the Director Plan are nonstatutory stock options. No
income is realized by the director at the time a nonstatutory option is
granted. Upon exercise, (a) ordinary income is realized by the director in an
amount equal to the difference between the option price and the fair market
value of the shares on the date of exercise and (b) the Company receives a tax
deduction for the same amount. Upon disposition of the shares, appreciation or
depreciation after the date of exercise is treated as a short-term, mid-term or
long term capital gain or loss and will not result in any deduction by the
Company.
15
<PAGE>
Votes Required
The affirmative vote of the holders of a majority in interest of the
Common Stock present, or represented, and entitled to vote at the Meeting is
required to approve the proposed amendment to the Director Plan.
Board Recommendation
The Board of Directors of the Company believes that the proposed
amendments to the Director Plan are in the best interest of the Company and its
stockholders and recommends a vote FOR the proposal to approve the Amendments
to the Director Plan.
SECURITIES EXCHANGE ACT REPORTING
The Company's executive officers and directors are required under Section
16(a) of the Exchange Act to file reports of ownership of Company securities
and changes in ownership with the Securities and Exchange Commission. Copies of
those reports must also be furnished to the Company.
Based solely on a review of the copies of reports furnished to the Company
and written representations that no other reports were required, the Company
believes that during 1997 the executive officers and directors of the Company
complied with all applicable Section 16(a) filing requirements, except that Dr.
Crooke, a director of the Company, reported in a Form 4 filed on November 3,
1997, the sale of 11,041 shares of Common Stock for which a Form 4 was due on
September 10, 1997; Mr. Webb, an executive officer and director of the Company,
reported in a Form 5 filed on February 4, 1998, the exercise of an option for
7,500 shares of Common Stock, for which a Form 4 was due on April 10, 1997;
Stephen Knight, an executive officer of the Company, reported in a Form 5 filed
on February 4, 1998 the purchase of 1,428 shares of Common Stock, for which a
Form 4 was due on February 10, 1997; and James Smith, an executive officer of
the Company, reported in a Form 5 filed on February 4, 1998 the exercise of an
option for 9,000 shares of Common Stock, for which a Form 4 was due on December
10, 1997.
INFORMATION CONCERNING AUDITORS
The firm of Ernst & Young LLP, independent auditors, audited the Company's
financial statements for the year ended December 31, 1997. The Board of
Directors has appointed Ernst & Young LLP to serve as the Company's independent
auditors for the fiscal year ending December 31, 1998. Representatives of Ernst
& Young LLP are expected to be present at the Meeting to respond to appropriate
questions and will be given the opportunity to make a statement should they
desire to do so.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
In order to be considered for inclusion in the Company's proxy materials
for the 1999 Annual Meeting of Stockholders, stockholder nominations of persons
for election to the Board and proposals of business to be considered by the
stockholders must be received by the Company no later than December 1, 1998.
Proposals should be sent to the attention of the Secretary at the Company's
offices at 71 Rogers Street, Cambridge, Massachusetts 02142.
ADVANCE NOTICE PROVISIONS FOR
STOCKHOLDER PROPOSALS AND NOMINATIONS
The By-laws provide that in order for a stockholder to bring business
before or propose director nominations at an annual meeting, the stockholder
must give written notice to the Secretary of the Company not less than 50 days
nor more than 75 days prior to the meeting. The notice must contain specified
information about the proposed business or each nominee and the stockholder
making the proposal or nomination. If less than 65 days notice or prior public
disclosure of the date of the annual meeting is given or made to stockholders,
the notice given by the stockholder must be received not later than the 15th
day following the day on which the notice of such annual meeting date was
mailed or public disclosure made, whichever first occurs.
16
<PAGE>
EXPENSES OF SOLICITATION
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company.
Proxies may be solicited by directors, officers or regular employees of the
Company by mail, by telephone, in person or otherwise. No such person will
receive additional compensation for such solicitation. In addition, the Company
will request banks, brokers and other custodians, nominees and fiduciaries to
forward proxy material to the beneficial owners of Common Stock and to obtain
voting instructions from such beneficial owners. The Company will reimburse
such firms for their reasonable expenses in forwarding proxy materials and
obtaining voting instructions.
OTHER MATTERS
The Meeting is called for the purposes set forth in the notice. The Board
of Directors does not know of any matter for action by the stockholders at the
Meeting other than the matters described in the notice. However, the enclosed
proxy confers discretionary authority on the persons named therein with respect
to matters which are not known to the directors at the date of printing hereof
and which may properly come before the Meeting. It is the intention of the
persons named in the proxy to vote in accordance with their best judgment on
any such matter.
Copies of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 as filed with the Securities and Exchange Commission
are available to stockholders upon written request addressed to the President
at the Company's offices at 71 Rogers Street, Cambridge, Massachusetts 02142.
Whether or not you intend to be present at the Meeting, you are urged to
fill out, sign, date and return the enclosed proxy at your earliest
convenience.
17
<PAGE>
EPX10 5 DETACH HERE
PROXY
EPIX MEDICAL, INC.
71 Rogers Street, Cambridge, Massachusetts 02142
PROXY FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
May 12, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby appoint Michael D. Webb, Jeffrey R. Lentz and
William T. Whelan, and each of them acting singly, the attorneys and proxies of
the undersigned, with full power of substitution, with all the powers which
the undersigned would possess if personally present, to vote all of the shares
of capital stock of EPIX Medical, Inc. (the "Company") that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be held
at Le Meridien Hotel, 250 Franklin Street, Boston, Massachusetts on Tuesday,
May 12, 1998 at 9:30 a.m., and at any and all adjournments thereof, hereby
acknowledging receipt of the Proxy Statement for such meeting and revoking any
proxy heretofore given with respect to such shares.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER(S). IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3. IN THEIR DISCRETION, THE PROXIES ARE ALSO
AUTHORIZED TO VOTE UPON SUCH MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
- -------------- --------------
| SEE REVERSE | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SEE REVERSE |
| SIDE | | SIDE |
- --------------- ---------------
<PAGE>
EPX10 4 DETACH HERE
[X] Please mark ---
votes as in |
this example. |
1. Proposal to elect director.
Nominee: Stanley T. Crooke, M.D.
FOR WITHHELD
MARK HERE
[ ] [ ] FOR ADDRESS [ ]
CHANGE AND
NOTE BELOW
2. Proposal to amend the Company's
Amended and Restated 1992 Equity
Incentive Plan to increase the FOR AGAINST ABSTAIN
aggregate number of shares of the [ ] [ ] [ ]
Company's common stock as to which
awards may be granted under such plan
by 250,000 shares.
3. Proposal to amend the Company's
1996 Director Stock Option Plan to
increase the size of each director's FOR AGAINST ABSTAIN
option grant to 15,000 shares of the [ ] [ ] [ ]
Company's common stock, to have all
such option grants granted under
the plan to vest over a 3 year
period and to increase the aggregate
number of shares as to which option
grants may be granted by 33,334
shares.
PLEASE SIGN, DATE AND MAIL THIS PROXY TODAY.
Please sign exactly as name appears on stock certificate. When
shares are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature: Date:
----------------------------- -----------
Signature: Date:
----------------------------- -----------
EPIX MEDICAL, INC.
Amended and Restated 1992 Incentive Plan
----------------------------------------
Section 1. Purpose
-------
The purpose of the EPIX Medical, Inc. Amended and Restated 1992
Incentive Plan (the "Plan") is to attract and retain key employees and
consultants to provide an incentive for them to assist the Company to achieve
long-range performance goals and to enable them to participate in the long-term
growth of the Company.
Section 2. Definitions
-----------
"Affiliate" means any business entity in which the Company owns
directly or indirectly 50% or more of the total combined voting power or has a
significant financial interest as determined by the Committee.
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock or Stock Unit awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means one or more committees each comprised of not less
than two members of the Board appointed by the Board to administer the Plan or a
specified portion thereof. If a Committee is authorized to grant Options to a
Reporting Person or a "covered employee" within the meaning of Section 162(m) of
the Code, each member shall be a "Non-Employee Director" or the equivalent
within the meaning of Rule 16b-3 under the Exchange Act or an "outside director"
or the equivalent within the meaning of Section 162(m) of the Code,
respectively.
"Common Stock" or "Stock" means the Common Stock, $.01 par value per
share, of the Company.
"Company" means EPIX Medical, Inc.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, Designated Beneficiary
shall mean the Participant's estate.
<PAGE>
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Committee
in good faith or in the manner established by the Committee from time to time.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant under Section 6 which is not intended to
be an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock
Option.
"Participant" means a person selected by the Committee to receive an
Award under the Plan.
"Performance Cycle" or "Cycle" means the period of time selected by the
Committee during which performance is measured for the purpose of determining
the extent to which an award of Performance Shares has been earned.
"Performance Shares" mean shares of Common Stock which may be earned by
the achievement of performance goals awarded to a Participant under Section 8.
"Restricted Period" means the period of time selected by the Committee
during which an award of Restricted Stock may be forfeited to the Company.
"Restricted Stock" means shares of Common Stock subject to forfeiture
awarded to a Participant under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess
in value of shares of Common Stock over the exercise price awarded to a
Participant under Section 7.
"Stock Unit" means an award of Common Stock or units that are valued in
whole or in part by reference to, or otherwise based on, the value of Common
Stock, awarded to a Participant under Section 10.
Section 3. Administration
--------------
The Plan shall be administered by the Committee, provided that the
Board may in any instance perform any of the functions of the Committee. The
Committee shall have authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it shall
from time to time consider advisable, and to interpret the provisions of the
Plan. The Committee's decisions shall be final and binding. To the extent
2
<PAGE>
permitted by applicable law, the Committee may delegate to one or more executive
officers of the Company the power to grant Awards to Participants who are not
Reporting Persons or covered employees and all determinations under the Plan
with respect thereto, provided that the Committee shall fix the maximum amount
of such Awards for all such Participants and a maximum for any one Participant.
Section 4. Eligibility
-----------
All employees (including part-time employees), and in the case of
Awards other than Incentive Stock Options, directors and consultants of the
Company or any Affiliate capable of contributing significantly to the successful
performance of the Company, other than a person who has irrevocably elected not
to be eligible, are eligible to be Participants in the Plan.
Section 5. Stock Available for Awards
--------------------------
(a) Subject to adjustment under subsection (b) below, Awards may be
made under the Plan for up to 2,099,901 shares of Common Stock. If any Award
expires or is terminated unexercised or is forfeited without the Participant
having had the benefits of ownership (other than voting rights), the shares
subject to such Award, to the extent of such expiration, termination or
forfeiture, shall again be available for award under the Plan. Common Stock
issued through the assumption or substitution of outstanding grants from an
acquired company shall not reduce the shares available for Awards under the
Plan. Shares issued under the Plan may consist in whole or in part of authorized
but unissued shares or treasury shares.
(b) In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below fair market value, or other similar
transaction affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Committee, subject, in the case of Incentive
Stock Options, to any limitation required under the Code, shall equitably adjust
any or all of (i) the number and kind of shares in respect of which Awards may
be made under the Plan, (ii) the number and kind of shares subject to
outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Committee
may make provision for a cash payment with respect to an outstanding Award,
provided that the number of shares subject to any Award shall always be a whole
number.
(c) Subject to adjustment under subsection (b), no Participant may
receive an Award
3
<PAGE>
which would result in such Participant having received, during the fiscal year
of the Company in which the Award is made, Awards for more than an aggregate of
300,000 shares of Common Stock.
Section 6. Stock Options
-------------
(a) General.
(i) Subject to the provisions of the Plan, the Committee may
award Incentive Stock Options and Nonstatutory Stock Options and determine the
number of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder. See subsection (b) below.
(ii) The Committee shall establish the option price at the
time each Option is awarded. In the case of Incentive Stock Options, such price
shall not be less than 100% of the Fair Market Value of the Common Stock on the
date of award.
(iii) Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee may specify in the
applicable Award or thereafter. The Committee may impose such conditions with
respect to the exercise of Options, including conditions relating to applicable
federal or state securities laws, as it considers necessary or advisable.
(iv) No shares shall be delivered pursuant to any exercise of
an Option until payment in full of the option price therefor is received by the
Company. Such payment may be made in whole or in part in cash or, to the extent
permitted by the Committee at or after the award of the Option, by delivery of a
note or shares of Common Stock owned by the optionee, or by retaining shares
otherwise issuable under the Plan, valued at their Fair Market Value on the date
of delivery, or such other lawful consideration as the Committee may determine.
(b) Incentive Stock Options.
Options granted under the Plan which are intended to be
Incentive Stock Options shall be subject to the following additional terms and
conditions:
(i) All Incentive Stock Options granted under the Plan shall,
at the time of grant, be specifically designated as such in the option agreement
covering such Incentive Stock Options. The Option exercise period shall not
exceed ten years from the date of grant.
(ii) If any employee to whom an Incentive Stock Option is to
be granted under the Plan is, at the time of the grant of such option, the owner
of stock possessing more than
4
<PAGE>
10% of the total combined voting power of all classes of stock of the Company
(after taking into account the attribution of stock ownership rules of Section
424(d) of the Code), then the following special provisions shall be applicable
to the Incentive Stock Option granted to such individual:
(x) The purchase price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than
110% of the Fair Market Value of one share of Common Stock at
the time of grant; and
(y) The option exercise period shall not exceed five
years from the date of grant.
(iii) For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate Fair Market Value (determined as of
the respective date or dates of grant) of more than $100,000.
Section 7. Stock Appreciation Rights
-------------------------
(a) Subject to the provisions of the Plan, the Committee may award SARs
in tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option. SARs in tandem with an Option shall terminate to the
extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised. SARs granted in
tandem with Options shall have an exercise price of not less than the exercise
price of the related Option.
(b) An SAR related to an Option which can only be exercised during
limited periods following a change in control of the Company may entitle the
Participant to receive an amount based upon the highest price paid or offered
for Common Stock in any transaction relating to the change in control or paid
during the thirty-day period immediately preceding the occurrence of the change
in control in any transaction reported in any stock market in which the Common
Stock is usually traded.
Section 8. Performance Shares
------------------
(a) Subject to the provisions of the Plan, the Committee may award
Performance Shares and determine the number of such shares for each Performance
Cycle and the duration of each Performance Cycle. There may be more than one
Performance Cycle in existence at any one time, and the duration of Performance
Cycles may differ from each other. The payment value of Performance Shares shall
be equal to the Fair Market Value of the Common Stock on
5
<PAGE>
the date the Performance Shares are earned or, in the discretion of the
Committee, on the date the Committee determines that the Performance Shares have
been earned.
(b) The Committee shall establish performance goals for each Cycle, for
the purpose of determining the extent to which Performance Shares awarded for
such Cycle are earned, on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. During any Cycle, the
Committee may adjust the performance goals for such Cycle as it deems equitable
in recognition of unusual or non-recurring events affecting the Company, changes
in applicable tax laws or accounting principles, or such other factors as the
Committee may determine.
(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares which have been
earned on the basis of performance in relation to the established performance
goals. The payment values of earned Performance Shares shall be distributed to
the Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable thereafter. The Committee shall determine,
at or after the time of award, whether payment values will be settled in whole
or in part in cash or other property, including Common Stock or Awards.
Section 9. Restricted Stock
----------------
(a) Subject to the provisions of the Plan, the Committee may award
shares of Restricted Stock and determine the duration of the Restricted Period
during which, and the conditions under which, the shares may be forfeited to the
Company and the other terms and conditions of such Awards. Shares of Restricted
Stock shall be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Shares of Restricted Stock shall be evidenced in such
manner as the Committee may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and unless otherwise determined by the Committee, deposited by the Participant,
together with a stock power endorsed in blank, with the Company. At the
expiration of the Restricted Period, the Company shall deliver such certificates
to the Participant or if the Participant has died, to the Participant's
Designated Beneficiary.
Section 10. Stock Units
-----------
(a) Subject to the provisions of the Plan, the Committee may award
Stock Units subject to such terms, restrictions, conditions, performance
criteria, vesting requirements and payment rules as the Committee shall
determine.
6
<PAGE>
(b) Shares of Common Stock awarded in connection with a Stock Unit
Award shall be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
Section 11. General Provisions Applicable to Awards
---------------------------------------
(a) Documentation. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or comply with applicable tax and regulatory
laws and accounting principles.
(b) Committee Discretion. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type of
Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of award or at any time thereafter.
(c) Settlement. The Committee shall determine whether Awards are
settled in whole or in part in cash, Common Stock, other securities of the
Company, Awards or other property. The Committee may permit a Participant to
defer all or any portion of a payment under the Plan, including the crediting of
interest on deferred amounts denominated in cash and dividend equivalents on
amounts denominated in Common Stock.
(d) Dividends and Cash Awards. In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest, and (ii)
cash payments in lieu of or in addition to an Award.
(e) Termination of Employment. The Committee shall determine the effect
on an Award of the disability, death, retirement or other termination of
employment of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may receive payment of an Award or exercise rights thereunder.
(f) Change in Control. In order to preserve a Participant's rights
under an Award in the event of a change in control of the Company (as defined by
the Committee), the Committee in its discretion may, at the time an Award is
made or at any time thereafter, take one or more of the following actions: (i)
provide for the acceleration of any time period relating to the exercise or
realization of the Award, (ii) provide for the purchase of the Award upon the
Participant's request for an amount of cash or other property that could have
been received upon the exercise or realization of the Award had the Award been
currently exercisable or payable, (iii) adjust the terms of the Award in a
manner determined by the Committee to reflect the
7
<PAGE>
change in control, (iv) cause the Award to be assumed, or new rights substituted
therefor, by another entity, or (v) make such other provision as the Committee
may consider equitable and in the best interests of the Company.
(g) Withholding Taxes. The Participant shall pay to the Company, or
make provision satisfactory to the Committee for payment of, any taxes required
by law to be withheld in respect of Awards under the Plan no later than the date
of the event creating the tax liability. The Company and its Affiliates may, to
the extent permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to the Participant. In the Committee's discretion, the
Participant may pay any taxes due with respect to an Award in whole or in part
in shares of Common Stock, including shares retained from the Award creating the
tax obligation, valued at their Fair Market Value on the date of retention or
delivery.
(h) Foreign Nationals. Awards may be made to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.
(i) Amendment of Award. The Committee may amend, modify or terminate
any outstanding Award, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization and converting
an Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
Section 12. Miscellaneous
-------------
(a) No Right To Employment. No person shall have any claim or right to
be granted an Award, and the grant of an Award shall not be construed as giving
a Participant the right to continued employment. The Company expressly reserves
the right at any time to dismiss a Participant free from any liability or claim
under the Plan, except as expressly provided in the applicable Award.
(b) No Rights As Shareholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a shareholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the holder thereof. A Participant to whom
Common Stock is awarded shall be considered the holder of the Stock at the time
of the Award except as otherwise provided in the applicable Award.
(c) Effective Date. The 1992 Equity Incentive Plan became effective on
July 10, 1992. Subject to the approval of the stockholders of the Company, this
Amended and Restated 1992 Equity Incentive Plan will be effective on November
___, 1996. Prior to such approval, Awards may be made under the Plan expressly
subject to such approval.
8
<PAGE>
(d) Amendment of Plan. The Committee may amend, suspend or terminate
the Plan or any portion thereof at any time, subject to any shareholder approval
that the Committee determines to be necessary or advisable.
(e) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.
9
EPIX MEDICAL, INC.
1996 Director Stock Option Plan
-------------------------------
1. Purpose.
--------
This 1996 Director Stock Option Plan (the "Plan") governs options to
purchase Common Stock, $.01 par value per share (the "Common Stock"), of EPIX
Medical, Inc. (the "Company") granted by the Company to members of the Board of
Directors of the Company who are not also officers or employees of the Company.
The purpose of the Plan is to attract and retain qualified persons to serve as
Directors of the Company and to encourage ownership of the Common Stock of the
Company by such Directors.
2. Administration.
---------------
Grants of stock options under the Plan shall be automatic as provided
in Section 8. However, all questions of interpretation of the Plan or of any
options granted hereunder shall be determined by the Board of Directors of the
Company (the "Board"). Any and all powers of the Board under the Plan may be
exercised by a committee consisting of one or more Directors appointed by the
Board.
3. Eligibility.
------------
Members of the Board who are not also officers or employees of the
Company shall be eligible to participate in the Plan.
4. Shares Subject to the Plan.
---------------------------
Options may be granted under the Plan in respect of a maximum of
100,000 shares of Common Stock, subject to adjustment as provided in Section 5
below. Shares to be issued upon the exercise of options granted under the Plan
may be either authorized but unissued shares or shares held by the Company in
its treasury. Whenever options under the Plan lapse or terminate or otherwise
become unexercisable, the shares of Common Stock which were available for such
options shall again be available for the grant of options under the Plan. The
Company shall at all times while the Plan is in force reserve such number of
shares of Common Stock as will be sufficient to satisfy the requirements of the
Plan.
<PAGE>
5. Adjustment of Number of Option Shares.
--------------------------------------
In the event of a stock dividend, split-up, combination or
reclassification of shares, recapitalization or other similar capital change
relating to the Company's Common Stock, the maximum aggregate number and kind of
shares or securities of the Company as to which options may be granted under
this Plan and as to which options then outstanding shall be exercisable, and the
option price of such options shall be appropriately adjusted so that the
proportionate number of shares or other securities as to which options may be
granted and the proportionate interest of holders of outstanding options shall
be maintained as before the occurrence of such event.
In the event of any reorganization, consolidation or merger to which
the Company is a party and in which the Company does not survive, or upon the
dissolution or liquidation of the Company, all outstanding options shall
terminate; provided, however, that (i) in the event of the liquidation or
dissolution of the Company, or in the event of any such reorganization,
consolidation or merger in which the Company does not survive and with respect
to which the resulting or surviving corporation does not assume such outstanding
option or issue a substitute option therefor, such option shall be exercisable
in full, without regard to any installment restrictions on exercise imposed
pursuant to this Plan or any Option Agreement, during such period preceding the
effective date of such liquidation, dissolution, reorganization, consolidation
or merger (unless such option is terminated earlier by its terms) as may be
specified by the Board; and (ii) in the event of any such reorganization,
consolidation or merger, the Board may, in its good faith discretion, arrange to
have the resulting or surviving corporation assume such outstanding option or
issue a substitute option therefor.
No fraction of a share shall be purchasable or deliverable upon
exercise of an option, but, in the event any adjustment hereunder of the number
of shares covered by the option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest smaller whole number of
shares.
6. Non-Statutory Stock Options.
----------------------------
All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
7. Form of Option Agreements.
--------------------------
Options shall be granted hereunder pursuant to the terms of Option
Agreements which shall be substantially in the form of the attached Exhibit A or
in such other form as the Board may from time to time determine.
8. Grant of Options and Option Terms.
----------------------------------
Automatic Grant of Options. Options to purchase Common Stock shall
automatically be granted as follows:
(i) Commencing after the closing of the initial public
offering of the Company's Common Stock, each non-employee director of
the Company thereafter elected or
- 2 -
<PAGE>
reelected to the Board of Directors shall, upon his or her election or
reelection, automatically be granted options to purchase 10,000 shares
of Common Stock; and
(ii) Immediately following the annual meeting of stockholders
each year, each non-employee director of the Company continuing in
office after such meeting shall automatically be granted options to
purchase 10,000 shares of Common Stock.
No options shall be granted hereunder after ten years from the date on which
this Plan was initially approved and adopted by the Board.
Date of Grant. The "Date of Grant" for options granted under this Plan
shall be (i) the date of the respective director's election, for each grant
pursuant to clause (i) of the preceding paragraph and (ii) the date of the
respective annual meeting of stockholders, for each grant pursuant to clause
(ii) of the preceding paragraph.
Option Price. The option price for each option granted under this Plan
shall be the current fair market value of a share of Common Stock of the Company
as determined by the Board of Directors in good faith, provided that if the
Company's Common Stock is then quoted on the National Association of Securities
Dealers Automated Quotations National Market ("Nasdaq") or traded on any other
exchange, then the current fair market value of a share of Common Stock of the
Company shall be the closing price for the Company's Common Stock as reported by
Nasdaq, or the principal exchange on which the Company's Common Stock is then
traded, on the last trading day prior to the Date of Grant.
Term of Option. The term of each option granted under the Plan shall be
ten years from the Date of Grant.
Period of Exercise. Options granted under the Plan shall become
exercisable in five equal installments on each of the first, second, third,
fourth and fifth anniversaries of the Date of Grant if and only if the option
holder is a member of the Board at the opening of business on that anniversary
date. Directors holding exercisable options under the Plan who cease to serve as
members of the Board of the Company for any reason other than death may, for a
period of seven months following the date of cessation of service, exercise the
rights they had under such options at the time they ceased being a Director. Any
rights that have not yet become exercisable shall terminate upon cessation of
membership on the Board. Upon the death of a Director, those entitled to do so
under the Director's will or the laws of descent and distribution shall have the
right, at any time within twelve months after the date of death, to exercise in
whole or in part any rights which were available to the Director at the time of
his death. The rights of the option holder may be exercised by the holder's
guardian or legal representative in the case of disability and by the
beneficiary designated by the holder in writing delivered to the Company or, if
none has been designated, by the holder's estate or his or her transferee on
death in accordance with this Plan, in the case of death. Options granted under
the Plan shall terminate, and no rights thereunder may be exercised, after the
expiration of the applicable exercise period. Notwithstanding the foregoing
provisions, no rights under any options may be exercised after the expiration of
ten years from their Date of Grant.
- 3 -
<PAGE>
Method of Exercise and Payment. Each exercise of an option hereunder
may be effected only by giving written notice, in the manner provided in Section
12 hereof, of intent to exercise the option, specifying the number of shares as
to which the option is being exercised, and accompanied by full payment of the
option price for the number of shares then being acquired. Such payment shall be
made in cash, by certified or bank check payable to the order of the Company,
credit to the Company's account at a financial or brokerage institution on the
date of exercise or a payment commitment of such an institution acceptable to
the Company, or if the option so provides, (i) in shares of Common Stock having
an aggregate Fair Market Value, at the time of such payment, equal to the total
option price for the number of shares of Common Stock for which payment is then
being made, or (ii) partly in cash or by certified or bank check payable to the
order of the Company and the balance in shares of Common Stock having an
aggregate Fair Market Value, at the time of such payment, equal to the
difference between the total option price for the number of shares of Common
Stock for which payment is then being made and the amount of the payment in cash
or by certified or bank check. Shares of Common Stock surrendered in payment of
all or part of the option price shall have been held by the person exercising
the option free of restrictions imposed by the Company for at least six months
unless otherwise permitted by the Board. For purposes hereof, the "Fair Market
Value" of the Common Stock shall be the current fair market value of a share of
Common Stock of the Common Stock of the Company as determined by the Board of
Directors in good faith, provided that if the Company's Common Stock is then
quoted on Nasdaq or traded on any other exchange, then the Fair Market Value
shall be the closing price for the Company's Common Stock as reported by Nasdaq,
or the principal exchange on which the Company's Common Stock is then traded,
for the business day immediately preceding the option exercise date.
Receipt by the Company of such notice and payment shall, for purposes
of this Plan, constitute exercise of the option or a part thereof. Within twenty
(20) days thereafter, the Company shall deliver or cause to be delivered to the
optionee a certificate or certificates for the number of shares of Common Stock
then being purchased by the optionee. Such shares shall be fully paid and
non-assessable. If any law or applicable regulation of the Securities and
Exchange Commission or other public regulatory authority (including, but not
limited to, a stock exchange) shall require the Company or the optionee (i) to
register or qualify, under the Securities Act of 1933, as amended (the
"Securities Act"), any similar federal statute then in force or any state law
regulating the sale of securities, any shares of Common Stock covered by an
option with respect to which notice of intent to exercise shall have been
delivered to the Company or (ii) to take any other action in connection with
such shares before issuance thereof may be effected, then the delivery of the
certificate or certificates for such shares shall be postponed until completion
of the necessary action, which the Company shall take in good faith and without
delay. All such action shall be taken by the Company at its own expense.
To the extent determined necessary by counsel to the Company to comply
with any applicable law, the Company may require an individual exercising an
option to represent that his purchase of shares of Common Stock pursuant to such
exercise is for his own account, for investment and without a view to resale or
distribution, and that he will not sell or otherwise dispose of any such shares
except pursuant to (i) an effective registration statement covering such
transaction filed with the Securities and Exchange Commission and in compliance
with all of the applicable provisions of the Securities Act, and the rules and
regulations thereunder, or (ii) an opinion of Company counsel that such
registration is not required.
- 4 -
<PAGE>
Non-transferability. Options granted under the Plan shall not be
transferable by the holder thereof otherwise than by will or the laws of descent
and distribution or by such other means as may be permitted by Rule 16b-3 (or
any successor provision) under the Securities Exchange Act of 1934, as amended
("Rule 16b-3").
9. Limitation of Rights.
---------------------
No Right to Continue as a Director. Neither the Plan, nor the granting
of an option or any other action taken pursuant to the Plan, shall constitute an
agreement or understanding, express or implied, that the Company will retain an
optionee as a Director for any period of time or at any particular rate of
compensation.
No Stockholders' Rights for Options. Directors shall have no rights as
stockholders with respect to the shares covered by their options until the date
they exercise such options and pay the option price to the Company, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such option is exercised and paid for.
10. Stockholder Approval.
---------------------
The Plan is subject to approval by the stockholders of the Company by
the affirmative vote of the holders of a majority of the shares of voting
capital stock present or represented and entitled to vote at a meeting of the
Company's stockholders. In the event such approval is not obtained, all options
granted under this Plan shall be void and without effect.
11. Amendment or Termination.
-------------------------
The Board may amend or terminate this Plan at any time subject to any
stockholder approval that the Board deems necessary.
12. Notices.
--------
Any communication or notice required or permitted to be given under
this Plan shall be in writing and mailed by registered or certified mail or
delivered in hand, if to the Company, to its Vice President, Finance and
Administration at EPIX Medical, Inc., 71 Rogers Street, Cambridge, Massachusetts
02142-0118 and, if to an optionee, to such address as the optionee shall last
have furnished to the Company.
- 5 -
<PAGE>
13. Governing Law.
--------------
The Plan shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts.
As adopted by the Board of Directors on November
___, 1996
As approved by the Stockholders on November __,
1996
- 6 -
<PAGE>
EXHIBIT A
---------
1996 DSO - _______ ________ Shares
EPIX MEDICAL, INC.
1996 Director Stock Option Plan
Non-statutory Stock Option Agreement
_______________ __, 199_
EPIX Medical, Inc. (the "Company"), a Delaware corporation, hereby
grants to the person named below an option to purchase shares of Common Stock,
$.01 par value per share of the Company (the "Option") under and subject to the
Company's 1996 Director Stock Option Plan (the "Plan") exercisable only on the
following terms and conditions and those set forth on the reverse side of this
Agreement:
Name of Optionee:
Address:
Social Security No.
Option Price:
Date of Grant:
Exercisability Schedule:
at any time on or after the first anniversary of the date hereof, as to
_________ shares,
at any time on or after the second anniversary of the date hereof, as to
_________ additional shares,
at any time on or after the third anniversary of the date hereof, as to
_________ additional shares,
at any time on or after the fourth anniversary of the date hereof, as to
_________ additional shares,
at any time on or after the fifth anniversary of the date hereof, as to
_________ additional shares,
provided that this Optionee is a member of the Board of Directors of the Company
(the "Board") at the opening of business on the date described above and
provided that this Option may not be exercised as to any shares after the
expiration of ten years from the date hereof.
By signing this Stock Option Agreement and returning on signed copy of
to the Company, the Optionee accepts the Option described herein on the terms
and conditions set forth herein or in the plan.
EPIX MEDICAL INC. Accepted and agreed to:
By: ____________________ _______________________
Title: Optionee
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EPIX MEDICAL, INC.
1996 Director Stock Option Plan Terms and Conditions
1. This Option may be exercised from time to time in accordance with
the exercisability Schedule for up to the aggregate number of shares specified
herein, but in no event for the purchase of other than full shares; provided,
however, that this Option may not be exercised as to any shares after the
expiration of ten years from the date hereof. Written notice of exercise shall
be delivered to the Company specifying the number of shares with respect to
which the Option is being exercised. Not later than twenty days after the date
of the delivery of such notice the Company will deliver to the Optionee a
certificate for the number of shares with respect to which the Option is being
exercised against payment therefor in cash or by check, credit to the Company's
account at a financial or brokerage institution on the date of exercise or a
payment commitment of such an institution acceptable to the Company or by shares
of the Company's Common Stock, valued at their fair market value as of the date
of exercise as determined as provided in the Plan, or in any combination of
cash, check and shares of Common Stock. Shares of Common Stock surrendered in
payment of the option price shall have been held by the person exercising the
option free of restrictions imposed by the Company for at least six months
unless otherwise permitted by the Board.
2. The Optionee shall not be deemed, for any purpose, to have any
rights whatever in respect of shares to which the Option shall not have been
exercised and payment made as aforesaid. The Optionee shall not be deemed to
have any rights to continued service as director by virtue of the grant of this
Option.
3. In the event of stock dividend, split-up, combination or
reclassification of shares, recapitalization or other similar capital change
relating to the Common Stock, the maximum aggregate number and kind of shares of
securities of the Company subject to this Option and the exercise price of this
Option shall be appropriately adjusted by the Board (whose determination shall
be conclusive) so that the proportionate number of shares or other securities
subject to this Option and the proportionate interest of the Optionholder shall
be maintained as before the occurrence of such event.
4. In the event of any reorganization, consolidation or merger to which
the Company is a party and in which the Company does not survive, or upon the
dissolution or liquidation of the Company, this option, to the extent
outstanding and unexercised, shall terminate; provided, however, that (i) in the
event of the liquidation of dissolution of the Company, or in the event of any
such reorganization, consolidation or merger in which the Company does not
survive and with respect to which the resulting or surviving corporation does
not assume such outstanding option or issue a substitute option herefor, this
option shall be exercisable in full, without regard to any installment
restrictions on exercise imposed pursuant to the Plan or this Option Agreement,
during such period preceding the effective date of such liquidation,
dissolution, reorganization, consolidation or merger (unless this option is
terminated earlier by its terms) as may be specified by the Board; and (ii) in
the event of any such reorganization, consolidation or merger, the Board may, in
its good faith discretion, arrange to have the resulting or surviving
corporation assume this option, to the extent outstanding and unexercised, or
issue a substitute option therefor.
5. This Option is not transferable by the Optionee otherwise than by
will or the laws of descent and distribution or by such other means as may be
permitted by Rule 16b-3 (or any successor provision) under the Securities
Exchange Act of 1934, as amended. This Option is exercisable during the
Optionee's lifetime only by the Optionee, provided that this Option may be
exercised by the Optionholder's guardian or legal representative in the case of
disability and by the beneficiary designated by the Optionholder in writing
delivered to the Company, or, if none has been designated, by the Optionholder's
estate or his or her transferee on death in accordance with this Section, in the
case of death.
6. If the Optionee ceases to serve as a member of the Board for any
reason other than death, the Optionee may, for a period of seven months
following such cessation of service, exercise the rights which the Optionee had
hereunder at the time the Optionee ceased being a director. Upon the death of
the Optionee, those entitled to do so shall have the right, at any time within
twelve months after the date of death (subject to the prior expiration of the
Option exercise period), to exercise in whole or in part any rights which were
available to the Optionee at the time of the Optionee's death. This Option shall
terminate after the expiration of the applicable exercise period.
Notwithstanding the foregoing provisions of this Section 6, no rights under this
Option may be exercised after the expiration of ten years from the date hereof.
7. It shall be a condition to the Optionee's right to purchase shares
of Common Stock hereunder that the Company may, in its discretion, require (a)
that the shares of Common Stock reserved for issue upon the exercise of this
Option shall have been duly listed, upon official notice of issuance, upon any
national securities exchange on which the Company's Common Stock may then be
listed, (b) that either (i) a Registration Statement under the Securities Act of
1933, as amended, with respect to said shares shall be in effect, or (ii) in the
opinion of counsel for the Company the proposed purchase shall be exempt from
registration under said Act and the Optionee shall have made such undertakings
and agreements with the Company as the Company may reasonably require, and (c)
that such other steps, if any, as counsel for the Company shall deem necessary
to comply with any law, rule or regulation applicable to the issue of such
shares by the Company shall have been taken by the Company or the Optionee, or
both. The certificates representing the shares purchased under this Option may
contain such legends as counsel for the Company shall deem necessary to comply
with any applicable law, rule or regulation.
8. Any exercise of this Option is conditioned upon the payment, if the
Company so requests, by the Optionee or such other person who may be entitled to
exercise this Option in accordance with the terms hereof, of all state and
federal taxes imposed upon the exercise of this Option and the issue to the
Optionee of the shares covered hereby.
9. This Option shall not be treated as an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended.
10. This Option is issued pursuant to the terms of the Plan. This
Certificate does not set forth all of the terms and conditions of the Plan,
which are incorporated herein by reference. Capitalized terms used and not
otherwise defined herein have the meanings given to them in the Plan. Copies of
the Plan may be obtained upon written request without charge from the Company.
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