<PAGE>
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
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
VERTEX PHARMACEUTICALS INCORPORATED
- --------------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
April 11, 2000
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Vertex Pharmaceuticals Incorporated to be held on Tuesday, May 23, 2000, at
9:30 a.m. at the Company's headquarters at 130 Waverly Street, Cambridge,
Massachusetts.
The accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement describe the matters that will be presented at the meeting.
Regardless of the number of shares of Common Stock you may own, your votes
are important. YOU ARE URGED TO VOTE, SIGN, DATE AND MAIL THE ENCLOSED PROXY
CARD PROMPTLY, whether or not you plan to attend the meeting in person. This
will ensure your proper representation at the meeting.
Thank you for giving these materials your careful consideration.
Sincerely,
[SIGNATURE]
JOSHUA BOGER
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
VERTEX PHARMACEUTICALS INCORPORATED, 130 WAVERLY STREET,
CAMBRIDGE, MASSACHUSETTS 02139-4242
TELEPHONE (617) 577-6000, FAX (617) 577-6680
<PAGE>
VERTEX PHARMACEUTICALS INCORPORATED
130 WAVERLY STREET
CAMBRIDGE, MA 02139-4242
(617) 577-6000
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 23, 2000
Notice is hereby given that the 2000 Annual Meeting of Stockholders of
Vertex Pharmaceuticals Incorporated (the "Company") will be held on Tuesday,
May 23, 2000, at 9:30 a.m. at the Company's headquarters, 130 Waverly Street,
Cambridge, Massachusetts, for the following purposes:
(1) To elect two (2) directors to the class of directors whose term expires
in 2003;
(2) To approve the appointment of independent accountants for the year
ending December 31, 2000; and
(3) To consider and act upon such other business as may properly come before
the meeting.
Please refer to the accompanying Proxy Statement for more complete
information concerning the matters to be acted upon at the meeting.
Holders of record of the Company's Common Stock at the close of business on
March 27, 2000, the record date for the meeting, are entitled to vote at the
Annual Meeting and at any adjournments of the Annual Meeting. All stockholders
are invited to attend the meeting in person.
HOLDERS OF RECORD OF COMMON STOCK AS OF THE RECORD DATE ARE URGED TO VOTE, SIGN,
DATE, AND RETURN THEIR PROXIES IN THE ENCLOSED ENVELOPE. NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES. HOLDERS OF RECORD OF COMMON STOCK AS OF
THE RECORD DATE WHO DO ATTEND THE MEETING AND WISH TO VOTE IN PERSON MAY REVOKE
THEIR PROXIES.
BY ORDER OF THE BOARD OF DIRECTORS
RICHARD H. ALDRICH
CLERK
April 11, 2000
<PAGE>
VERTEX PHARMACEUTICALS INCORPORATED
130 WAVERLY STREET
CAMBRIDGE, MA 02139-4242
(617) 577-6000
------------------------
PROXY STATEMENT
FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2000
This Proxy Statement, with the enclosed proxy card, is being furnished to
stockholders of Vertex Pharmaceuticals Incorporated ("Vertex" or the "Company"),
a Massachusetts corporation, in connection with the solicitation by the
Company's Board of Directors (the "Board") of proxies to be voted at the
Company's 2000 Annual Meeting of Stockholders to be held on May 23, 2000 at
9:30 a.m. at the Company's headquarters, 130 Waverly Street, Cambridge,
Massachusetts, and at any adjournments thereof (the "Meeting").
This Proxy Statement and the enclosed proxy card are first being mailed or
otherwise furnished to stockholders of the Company on or about April 11, 2000.
The Annual Report to Stockholders for the fiscal year ended December 31, 1999 is
being mailed to the stockholders with this Proxy Statement, but does not
constitute a part hereof.
The Company has retained D. F. King & Co., Inc. to assist in the
solicitation of proxies at an estimated cost of approximately $3,500. Proxies
may also be solicited by regular employees of the Company by mail, by telephone,
in person, or otherwise. Employees will not receive additional compensation for
their solicitation efforts. 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 beneficial owners. The Company will reimburse those firms for
their reasonable expenses in forwarding proxy materials and obtaining voting
instructions.
When a stockholder's proxy card 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, in 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 to the Clerk 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.
VOTING SECURITIES
Holders of Common Stock of record on the books of the Company at the close
of business on March 27, 2000 (the "Record Date") are entitled to notice of and
to vote at the Meeting. At the Record Date, there were issued and outstanding
26,174,132 shares of Common Stock, each of which entitles the holder to one vote
on each matter submitted to a vote at the Meeting.
1
<PAGE>
The proxy card provides space for a stockholder to withhold voting for
either or both nominees for the Board of Directors or to abstain from voting for
any proposal if the stockholder chooses to do so. The holders of a majority of
all shares of Common Stock issued and outstanding and entitled to vote at the
Meeting shall constitute a quorum for the transaction of business. Other than
the election of directors, which requires a plurality of the votes cast in
person or by proxy, each matter to be submitted to the stockholders requires the
affirmative vote of a majority of the votes cast in person or by proxy at the
Meeting. Abstentions and broker non-votes are not counted in determining the
number of votes cast in connection with any voting matter.
PROPOSAL 1:
ELECTION OF DIRECTORS
NOMINEES FOR DIRECTOR AND DIRECTORS CONTINUING IN OFFICE
The By-Laws of the Company provide for a Board consisting of such number of
directors, not less than three nor more than nine, as may be fixed from time to
time by the Board. The Board is divided into three classes, with each class
holding office for a term of three years and the term of office of one class
expiring each year. The Board has fixed the number of directors to constitute
the full Board for the ensuing year at seven, two of whom are to be elected at
the Meeting for a term expiring at the 2003 Annual Meeting, two whose terms
expire at the 2002 Annual Meeting, and three whose terms expire at the 2001
Annual Meeting.
Barry M. Bloom, a director of the Company since 1994, and Bruce I. Sachs, a
director since 1998, represent the class of directors whose term expires at the
Meeting. The Board has nominated Dr. Bloom and Mr. Sachs for election to the
class of directors whose term will expire in 2003.
Shares represented by proxies will be voted for the election as directors of
Dr. Bloom and Mr. Sachs unless otherwise specified in the proxy. If either of
the nominees for election to the Board should, for any reason not now
anticipated, not be available to serve as such, proxies will be voted for such
other candidate as may be designated by the Board unless the Board reduces the
number of directors. The Board has no reason to believe that Dr. Bloom or
Mr. Sachs will be unable to serve if elected.
The table below sets forth certain information with respect to the nominees
for election to the Board of Directors and those directors whose terms of office
will continue after the Meeting.
<TABLE>
<CAPTION>
EXPIRATION OF
FIRST PRESENT OR
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND OTHER ELECTED PROPOSED
NAME AND AGE BUSINESS AFFILIATIONS DIRECTOR TERM OF OFFICE
- ------------ --------------------------------------------------- -------- --------------
<S> <C> <C> <C>
Barry M. Bloom, Ph.D., 71 (1) (3) Formerly with Pfizer Inc., as Executive Vice 1994 2003
President of Research and Development from 1992 to
1993, Senior Vice President from 1990 to 1992, Vice
President from 1971 to 1990, and a Director since
1973. Also a Director of Catalytica
Pharmaceuticals, Cubist Pharmaceuticals, Inc.,
Incyte Genomics Inc., Neurogen Corp. and Microbia
Incorporated.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXPIRATION OF
FIRST PRESENT OR
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND OTHER ELECTED PROPOSED
NAME AND AGE BUSINESS AFFILIATIONS DIRECTOR TERM OF OFFICE
- ------------ --------------------------------------------------- -------- --------------
<S> <C> <C> <C>
Bruce I. Sachs, 40 (2) General Partner at Charles River Ventures. From 1998 2003
1998 to 1999, Executive Vice President and General
Manager, Ascend Communications, Inc. From 1997
until 1998, President and CEO of Stratus Computer,
Inc. From 1995 to 1997, Executive Vice President/
General Manager of the Internet Telecom Business
Group at Bay Networks, Inc. From 1993 to 1995,
President and Chief Executive Officer at Xylogics,
Inc. Also a Director of Media 100 Inc.
Roger W. Brimblecombe, Chairman of Vanguard Medica Ltd. since 1991 and 1993 2002
Ph.D., D.Sc., 70 (1) Non-Executive Chairman of Oxford Asymmetry
International plc since 1997. Various Vice
Presidential posts in SmithKline & French
Laboratories research and development organization
between 1979 and 1990. Also a Director of Ontogeny,
Inc. and several other companies located in Europe.
Donald R. Conklin, 63 (2) (3) Executive Vice President of Schering-Plough Corp. 1994 2002
from 1986 to 1996; retired from Schering-Plough at
the end of 1996. Also a Director of AlfaCell Inc.
and BioTransplant Inc.
Joshua S. Boger, Ph.D., 48 A founder of the Company and its President and 1989 2001
Chief Scientific Officer from its inception in 1989
until May 1992, when he became President and Chief
Executive Officer. In 1997 Dr. Boger became
Chairman, President and Chief Executive Officer.
From 1987 to 1989, Senior Director of Basic
Chemistry at Merck Sharp & Dohme Research
Laboratories. Also a Director of Millennium
Pharmaceuticals Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EXPIRATION OF
FIRST PRESENT OR
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND OTHER ELECTED PROPOSED
NAME AND AGE BUSINESS AFFILIATIONS DIRECTOR TERM OF OFFICE
- ------------ --------------------------------------------------- -------- --------------
<S> <C> <C> <C>
Charles A. Sanders, M.D., 67 (2) Retired in 1994 as Chief Executive Officer and in 1996 2001
1995 as Chairman of Glaxo Inc. From 1990 to 1995 a
member of the Board of Glaxo plc. From 1981 to
1989, held a number of positions at the Squibb
Corporation, including that of Vice Chairman. Has
served on the Boards of Merrill Lynch and Co.,
Reynolds Metals Co. and Morton International Inc.;
currently a Director of Biopure Corporation,
Genentech, Inc., Kendle International Inc.,
Magainin Pharmaceuticals Inc., Pharmacopeia Inc.,
Scios, Inc., Staffmark Inc., and Trimeris Inc.
Elaine S. Ullian, 52 (1) President and Chief Executive Officer of Boston 1997 2001
Medical Center since 1996. From 1994 to 1996,
President and Chief Executive Officer of Boston
University Medical Center Hospital. From 1987 to
1994, President and Chief Executive Officer of
Faulkner Hospital. Also a Director of
Hologics Inc.
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Nominating Committee.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 1999, the Board held four meetings. Each
of the incumbent directors attended at least 75% of the Board meetings and
meetings of committees of the Board of which he or she was a member.
The Compensation Committee's functions are to recommend to the full Board
the amount, character, 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 stock and option plans and Employee Stock Purchase
Plan. Barry M. Bloom, Roger W. Brimblecombe and Elaine S. Ullian are the members
of the Compensation Committee, which held one meeting during 1999.
The Audit Committee, which includes Donald R. Conklin, Bruce I. Sachs, and
Charles A. Sanders, met twice during that 1999, to discuss the adequacy of
internal accounting controls and procedures, and to perform general oversight
with respect to the accounting principles applied in the financial reporting of
the Company. It also reviewed with the Company's independent accountants the
results of the annual audit.
4
<PAGE>
The Nominating Committee, which includes Barry M. Bloom and Donald R.
Conklin, did not meet during 1999.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS. A PLURALITY OF THE VOTES
CAST IN PERSON OR BY PROXY AT THE MEETING IS REQUIRED TO ELECT EACH NOMINEE AS
DIRECTOR.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of
the Company's Common Stock as of March 27, 2000, by (i) each person known to the
Company to be the beneficial owner of more than 5% of the Company's Common Stock
on that date, (ii) each director, (iii) each executive officer named in the
Summary Compensation Table below, and (iv) all directors and current executive
officers as a group.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
NAME AND ADDRESS BENEFICIALLY OWNED(1) OF TOTAL
- ---------------- --------------------- ----------
<S> <C> <C>
Wellington Management Company LLP........................... 3,184,700(2) 12.2%
75 State Street
Boston, MA 02109
Trimark Financial Corporation............................... 2,056,300(3) 7.9%
One First Canadian Place
Suite 5600, P.O. Box 487
Toronto, Ontario M5X 1E5
Canada
Vanguard Specialized Funds-................................. 1,927,700(4) 7.4%
Vanguard Health Care Fund
P.O. Box 2600
Valley Forge, PA 19482
Barry M. Bloom.............................................. 32,500(5) *
Joshua S. Boger............................................. 1,014,581(5)(6)(7) 3.8%
Roger W. Brimblecombe....................................... 22,500(5) *
Donald R. Conklin........................................... 35,500(5) *
Bruce I. Sachs.............................................. 31,250(5) *
Charles A. Sanders.......................................... 26,125(5) *
Elaine S. Ullian............................................ 21,550(5) *
Richard H. Aldrich.......................................... 331,290(5)(7) 1.3%
Thomas G. Auchincloss, Jr................................... 68,242(5)(7) *
Iain P. M. Buchanan......................................... 90,734(5)(7) *
Vicki L. Sato............................................... 381,037(5)(7) 1.4%
All directors and executive officers as a group (13
persons).................................................. 2,087,112(8) 7.6%
</TABLE>
- ------------------------
* Less than 1%
(1) Beneficial ownership of shares for purposes hereof, as determined in
accordance with applicable Securities and Exchange Commission rules,
includes shares of Common Stock as to which a person
5
<PAGE>
has or shares voting power and/or investment (including dispositive) power.
Information with respect to persons other than directors and executive
officers is based solely upon Schedules 13G filed with the Securities and
Exchange Commission as of December 31, 1999.
(2) Wellington Management Company LLP has shared dispositive power as to
3,184,700 shares and shared voting power as to 1,023,900 of those shares.
Includes shares owned of record by Vanguard Health Care Fund (see Note 4
below.)
(3) Trimark Financial Corporation has sole voting and dispositive power as to
these shares.
(4) Vanguard Specialized Funds-Vanguard Health Care Fund has sole voting power
and shared dispositive power as to these shares.
(5) Includes shares which may be acquired upon the exercise of options
exercisable within 60 days after March 27, 2000, as follows: Dr. Bloom,
22,500 shares; Dr. Boger, 516,774 shares; Dr. Brimblecombe, 22,500 shares;
Mr. Conklin, 22,500 shares; Mr. Sachs, 11,250 shares; Dr. Sanders, 23,125
shares; Ms. Ullian, 21,250 shares; Mr. Aldrich, 268,024 shares;
Mr. Auchincloss, 59,974 shares; Mr. Buchanan, 90,586 shares; and Dr. Sato,
372,036 shares.
(6) Includes 103,750 shares held in trusts for the benefit of Dr. Boger's
children. Dr. Boger disclaims beneficial ownership of such shares.
(7) Includes shares held in the Company's 401(k) Plan, as follows: Dr. Boger,
3,457 shares; Mr. Aldrich, 2,691 shares; Mr. Auchincloss, 678 shares; and
Dr. Sato, 2,269 shares.
(8) Includes an aggregate of 1,461,955 shares which may be acquired upon the
exercise of options exercisable on or within 60 days after March 27, 2000
and an aggregate of 9,462 shares held in the Company's 401(k) Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors, officers, and persons
who are beneficial owners of more than ten percent of the Company's Common Stock
to file with the Securities and Exchange Commission (the "Commission") reports
of their ownership of the Company's securities and of changes in that ownership.
To the Company's knowledge, based upon a review of copies of reports filed with
the Commission with respect to the fiscal year ended December 31, 1999, all
reports required to be filed under Section 16(a) by the Company's directors and
officers and persons who were beneficial owners of more than ten percent of the
Company's Common Stock were timely filed.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation earned during the fiscal years ended December 31, 1999, 1998, and
1997 by the Company's Chief Executive Officer and by each person who was one of
the Company's other four most highly compensated executive officers during 1999
(the Chief Executive Officer together with such other persons being hereinafter
referred to as the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
---------------------
ANNUAL COMPENSATION SECURITIES UNDERLYING
------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (# OF SHARES) COMPENSATION
- --------------------------- -------- -------- -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Joshua S. Boger,.................... 1999 $389,584 $ 88,000 87,000 $19,872(1)
Chairman, President and 1998 $371,020 $ 92,800 100,000 $ 8,979
Chief Executive Officer 1997 $350,012 $105,000 100,000 $ 8,654
Vicki L. Sato,...................... 1999 $311,844 $ 77,961 62,250 $ 6,938(2)
Senior Vice President of Research 1998 $294,190 $ 88,300 65,000 $ 7,469
and Development and 1997 $277,524 $ 70,000 65,000 $ 7,094
Chief Scientific Officer
Richard H. Aldrich,................. 1999 $266,734 $ 53,347 57,000 $ 6,977(2)
Senior Vice President and 1998 $256,464 $ 64,200 60,000 $ 7,485
Chief Business Officer 1997 $231,036 $ 70,000 60,000 $ 7,081
Iain P. M. Buchanan,................ 1999 $213,516 $ 21,793 12,250 $21,352(3)
Vice President of European 1998 $205,470 $ 30,650 17,600 $20,547
Operations 1997 $191,877 $ 10,020 17,000 $19,188
Thomas G. Auchincloss, Jr.,......... 1999 $157,300 $ 15,730 8,500 $ 5,190(2)
Vice President of Finance and 1998 $151,242 $ 7,600 14,400 $ 6,538
Treasurer 1997 $130,364 $ 16,500 17,000 $ 6,420
</TABLE>
- ------------------------
(1) Includes $7,472 representing the value of the Company's matching
contributions under the Company's 401(k) Savings Plan and $12,400
representing certain insurance premiums paid by the Company on Dr. Boger's
behalf during 1999.
(2) Represents the value of the Company's matching contributions under the
Company's 401(k) Savings Plan.
(3) Represents the Company's contribution to Mr. Buchanan's personal pension
scheme account.
7
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table provides certain information with respect to options
under the Company's 1996 Stock and Option Plan granted to each of the Named
Executive Officers during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------- POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM (2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ---------------------------
NAME GRANTED(1) FISCAL YEAR PRICES DATES 5% 10%
- ---- ---------- ------------ -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Joshua S. Boger...................... 87,000 6.61% $26.22 12/1/09 1,434,100 3,634,005
Vicki L. Sato........................ 62,250 4.73% $26.22 12/1/09 1,026,123 2,600,193
Richard H. Aldrich................... 57,000 4.33% $26.22 12/1/09 939,583 2,380,900
Iain P. M. Buchanan.................. 12,250 .93% $26.22 12/1/09 201,928 511,685
Thomas G. Auchincloss, Jr............ 8,500 .66% $26.22 12/1/09 140,113 355,046
</TABLE>
- ------------------------
(1) Options vest in twenty equal quarterly installments from the date of grant.
(2) As required by rules of the Securities and Exchange Commission, potential
values stated are on the prescribed assumption that the Company's Common
Stock will appreciate in value from the date of grant to the end of the
option term at annualized rates of 5% and 10%. These hypothesized values are
not intended to forecast possible future appreciation, if any, in the
Company's Common Stock.
FISCAL YEAR-END OPTION VALUES
The following table provides certain information with respect to the options
to purchase Common Stock held by the Named Executive Officers at December 31,
1999. No options were exercised by such persons during 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT FISCAL YEAR-END FISCAL YEAR-END
--------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Joshua S. Boger..................... 492,425 284,575 8,141,114 2,549,926
Vicki L. Sato....................... 364,675 197,575 6,422,636 1,780,424
Richard H. Aldrich.................. 271,425 185,575 4,185,279 1,656,486
Iain P. M. Buchanan................. 86,745 45,105 1,529,157 406,623
Thomas G. Auchincloss, Jr........... 63,605 38,295 1,028,197 345,858
</TABLE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has employment agreements with Dr. Boger, Dr. Sato, Mr. Aldrich
and Mr. Buchanan pursuant to which they are entitled to receive compensation as
determined by the Compensation Committee of the Board of Directors and will be
eligible to receive the benefits generally made available to executives of the
Company. The agreements with Dr. Boger, Dr. Sato and Mr. Aldrich require
18 months' notice in the event of termination by the Company without cause, and
may be terminated upon six months notice by the executive. Mr. Buchanan's
agreement requires six months' notice for termination by either
8
<PAGE>
the Company or Mr. Buchanan. In the event of certain terminations after a change
in control of the Company, the agreements also provide for a lump sum payment of
three years' salary and bonus, payable within ten days after the date of
termination, acceleration of all outstanding stock options, and continuation of
certain employee benefits for a period of three years after the date of
termination. The agreements also contain noncompetition provisions.
All outstanding options granted under the Company's 1991 Stock Option Plan
and 1994 and 1996 Stock and Option Plans provide that, in the event of certain
changes in control of the Company, either appropriate provision for the
continuation of all then outstanding options must be made, or the vesting of
such options will be accelerated and they will become fully exercisable
immediately prior to such change in control.
COMPENSATION OF DIRECTORS
During 1999, the Company paid a retainer of $8,000 per year, plus $2,000 for
each Board meeting attended and $250 for each Committee meeting attended (and an
additional $250 if the Committee meeting is not held on the same day as a
meeting of the full Board), to non-employee directors. In addition, under the
1996 Stock and Option Plan, each non-employee director, upon initial election or
appointment to the Board, receives a non-qualified option to purchase 20,000
shares of Common Stock at an exercise price equal to the then fair market value
thereof. Such options vest quarterly over a four-year period from the date of
grant, based on continued service on the Board. Each non-employee director in
office on June 1 of any year also receives a non-qualified option to purchase
5,000 shares of Common Stock under the 1996 Stock and Option Plan, exercisable
immediately at a price equal to 100% of the fair market value per share of the
Company's Common Stock on the date of grant.
REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"). With the
oversight of the Committee, the Company has developed and implemented
compensation policies with the objectives of attracting and retaining top
quality management and encouraging them to contribute to the Company's growth,
while also adhering to a policy of keeping the Company's personnel costs
reasonable in relation to those of comparable companies and in relation to the
Company's other expenditures for its drug discovery and development programs.
For 1999, compensation paid to each of the Named Executive Officers consisted of
base salary, a cash bonus and long-term compensation in the form of stock
options.
The Committee's recommendations as to compensation for all employees of the
Company, including the Named Executive Officers, are subject to approval by the
full Board of Directors of the Company. Vertex's Chief Executive Officer,
Dr. Joshua S. Boger, does not participate in discussions of his compensation
between the Compensation Committee and the full Board, nor does he participate
in the full Board's vote on the Committee's recommendations as to his
compensation.
BASE SALARIES
Base salaries for 1999 were determined by the Committee in late 1998. Salary
increases over 1998 salary levels were based on the Committee's subjective
evaluation of the individual Named Executive Officers' performance in 1998 and
its estimation of the salaries being offered to senior executives at
9
<PAGE>
companies with which Vertex competes in hiring and retaining qualified
executives and key scientists. In addition, the Committee considered the results
of the 1998 BIOTECHNOLOGY COMPENSATION SURVEY, a survey conducted by Radford
Associates (the "Radford Survey"). The Radford Survey included companies in the
biotechnology industry which voluntarily participated in the survey. In its
determination of compensation levels, the Committee did not consider the Nasdaq
Pharmaceuticals Stocks Index, included in the Performance Graph below. That
index tracks the stock performance of approximately 250 companies with stock
quoted on Nasdaq, which are selected according to the broad Standard Industrial
Classification category "Drugs," and which include many categories of companies
with which Vertex does not generally compete for services of executives.
The Committee believed that the 1999 raises approved for the Named Executive
Officers were generally comparable to the average raises that year for
executives of competing companies. These raises were intended to reflect the
Committee's judgment that Vertex's over all performance in 1998 was very good.
The Committee believed that setting salary levels in the middle range of those
offered by competing companies would allow for the possibility of significant
additional cash bonuses based on 1999 individual and Company performance. In
determining base salaries for Dr. Boger, Dr. Sato and Mr. Aldrich, it was the
Committee's intention that such incentive cash bonus and stock option bonus
opportunities represent a larger proportion of their total compensation, as
compared with other Company employees.
CASH BONUSES
At the end of 1999, cash bonuses were awarded to the Named Executive
Officers, as well as to other Company employees who were deemed to have made
substantial contributions to the attainment of those accomplishments judged to
be most important to the Company in 1999. The amounts of the cash bonuses
awarded to Dr. Boger, Mr. Aldrich and Dr. Sato were approximately 20% to 25% of
their respective 1999 base salaries, reflecting the Committee's determination
that a significant proportion of the compensation of those three senior
executives should be performance-based, as discussed above. The amounts of the
Named Executive Officers' bonuses reflected the Committee's determination that
the Company made substantial progress during 1999, including obtaining market
recognition of the value of Vertex's drug pipeline, advancing three drug
candidates into Phase II clinical trials, and execution of new strategic
collaborative agreements relating to Vertex's compound VX-740 and its caspase
inhibitor research program. It was the Committee's judgment that each of such
officers made significant contributions within his or her area of responsibility
to the Company's performance during the year.
STOCK OPTIONS
Stock options under the Company's stock and option plans have been granted
to employees, including executive officers, to create a link between
compensation and stockholder return, and to enable executive officers and other
employees to develop and maintain a significant stock ownership position in the
Company which will vest over time and act as an incentive for the employee to
remain with the Company.
During 1999, each of the Named Executive Officers was granted ten-year
options under the 1996 Stock and Option Plan to purchase a significant number of
shares of Common Stock, ranging from 8,500 to 87,000 shares, vesting in
quarterly installments over a five-year period. In each case, the option
exercise price was the average of the high and low market prices on the date of
grant. The aggregate amounts of these option awards were based on an evaluation
of individual contributions to the Company's success in 1999. Although the
Committee did not perform any comprehensive survey of equity compensation at
peer group companies, the Committee believed that, compared to the total number
of shares outstanding, the
10
<PAGE>
total number of options granted to its employees, including the Named Executive
Officers, as a group, was within the range of the option grants awarded by other
companies with which the Company competes to attract and retain employees.
CHIEF EXECUTIVE OFFICER COMPENSATION
Dr. Boger's 1999 base salary of $389,584 represented an increase of
approximately 5% over his 1998 salary, indicating the Committee's evaluation of
Dr. Boger's performance as very good. The Committee believed that Dr. Boger's
resulting 1999 salary was near the middle of the range of base salaries paid to
chief executive officers of comparable companies. The Committee set the 1999
base salary at this level in order to provide opportunities for significant
incentive cash bonuses based on individual and Company performance.
The Committee's, and the full Board of Directors', subjective view of
Dr. Boger has consistently been that he is an outstanding scientist who has also
demonstrated exceptional ability to guide the Company and to manage well not
only the Company's scientific programs but its strategic business efforts as
well. This subjective view has been supported objectively in Dr. Boger's success
during 1999 in obtaining market recognition of the value of Vertex's drug
pipeline, advancing the clinical status of Vertex's drug candidates, and
execution of new strategic collaborative agreements, as described above. The
amounts of Dr. Boger's 1999 cash bonus (approximately 23% of his 1999 salary)
and stock option award, for the purchase of a total of 87,000 shares of Common
Stock, were determined in accordance with the foregoing factors, among others,
none of which was weighted more heavily than any other. In setting the size of
Dr. Boger's option award, the Committee also considered its judgment that
Dr. Boger's scientific and management leadership is very important to the
Company, and that it was therefore advisable for him to maintain a substantial
unvested option position, in order to continue his incentive to remain with the
Company.
INTERNAL REVENUE CODE LIMITATION ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code, enacted in 1993, limits to
$1,000,000 per executive the amount of compensation paid in tax years after 1993
to the Company's Chief Executive Officer or any of the Company's other four most
highly compensated executive officers which may be deducted for corporate tax
purposes. Qualified performance-based compensation is not included in the
$1,000,000 limit. The Company believes that its 1994 and 1996 Stock and Option
Plans will qualify as performance-based compensation plans.
Submitted by the Compensation Committee
Barry M. Bloom
Roger W. Brimblecombe
Elaine S. Ullian
11
<PAGE>
PERFORMANCE GRAPH
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VERTEX PHARMACEUTICALS INCORPORATED NASDAQ STOCK MARKET (US) NASDAQ PHARM. MARKET
<S> <C> <C> <C>
Dec-94 $100 $100 $100
Dec-95 $177 $141 $183
Dec-96 $268 $174 $184
Dec-97 $220 $213 $190
Dec-98 $198 $300 $242
Dec-99 $233 $542 $452
</TABLE>
PROPOSAL 2:
APPROVAL OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed PricewaterhouseCoopers LLP as the
Company's independent accountants for the 2000 fiscal year.
PricewaterhouseCoopers LLP has served as the Company's independent accountants
since 1989. Representatives of PricewaterhouseCoopers LLP will be present at the
Meeting to respond to questions and will be given the opportunity to make a
statement should they desire to do so.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF
THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE CURRENT FISCAL YEAR. A MAJORITY OF THE VOTES CAST IN PERSON
OR BY PROXY AT THE MEETING IS REQUIRED FOR SUCH APPROVAL. IF THE APPOINTMENT IS
NOT APPROVED, THE BOARD WILL SELECT OTHER INDEPENDENT ACCOUNTANTS.
12
<PAGE>
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.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
In order to be considered for inclusion in the Proxy Statement for the
Company's 2001 Annual Meeting of Stockholders, stockholder proposals must be
received by the Company no later than December 12, 2000. Proposals should be
sent to the attention of the Clerk at the Company's offices at 130 Waverly
Street, Cambridge, MA 02139-4242.
If a shareholder notifies the Company after February 23, 2001 of an intent
to present a proposal at the Company's 2001 Annual Meeting (and for any reason
the proposal is voted upon at that Annual Meeting), the Company's proxy holders
will have the right to exercise discretionary voting authority with respect to
the proposal, if presented at the meeting, without including information
regarding the proposal in its proxy materials.
Stockholder nominations for election to the Board at the 2001 Annual Meeting
of Stockholders may be submitted to the Clerk of the Company and must include
(i) the name and address of the stockholder who intends to make the nomination
and of the person or persons to be nominated; (ii) a representation that the
stockholder is a holder of record of stock of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (iv) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Commission; and (v) the consent of each nominee to serve as a director of
the Company if so elected.
By order of the Board of Directors
Richard H. Aldrich
CLERK
April 11, 2000
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<PAGE>
1071-PS-2000
<PAGE>
VERTEX PHARMACEUTICALS INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS - MAY 23, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby constitute and appoint Joshua S. Boger and
Richard H. Aldrich, or either one of them, the attorney(s) of the undersigned,
with full power of substitution, with all the powers which the undersigned would
possess if personally present, to vote all stock of Vertex Pharmaceuticals
Incorporated which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Vertex Pharmaceuticals Incorporated to be held at 130 Waverly
Street, Cambridge, Massachusetts, on Tuesday, May 23, 2000 at 9:30 A.M. and at
any adjournment thereof, hereby acknowledging receipt of the Proxy Statement for
such meeting and revoking all previous proxies.
This Proxy, when properly executed, will be voted as directed. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSALS LISTED ON THE
REVERSE SIDE AND, IN THE CASE OF OTHER MATTERS THAT LEGALLY COME BEFORE THE
MEETING, AS SAID ATTORNEY(S) MAY DEEM ADVISABLE.
(Continued and to be signed on reverse side)
SEE REVERSE SIDE
<PAGE>
PLEASE VOTE, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
1. Election of two (2) directors to the class of directors whose term expires in
2003.
Nominees: Barry M. Bloom and Bruce I. Sachs
[__] For [__] Withheld
- ------------------------------------------------
For both nominees except as noted above
2. Approval of the appointment of
PricewaterhouseCoopers LLP as independent
accountants.
[__] For [__] Against [__] Abstain
Mark here for address Mark here if you plan
change and note at left [__] to attend the meeting [__]
Please sign name exactly as name appears. When
signing in a fiduciary capacity, please give
full title. Co-fiduciaries and joint owners
should each sign.
Signature: _______________________ Date: ______
Signature: _______________________ Date: ______
